A lot is happening in Albany. Unified Democratic control of the governor’s mansion and both houses of the Legislature, coupled with pent-up demand for action – which had been long stymied due to partisan gridlock – has triggered a frenzy of legislative action.
One resurrected issue is campaign finance reform. After years of inaction, the governor and the Legislature agreed to change the way Limited Liability Companies (LLCs) are treated for the purposes of campaign financing. Under the old system, LLCs were handled differently than other businesses. Under longstanding New York law, corporations are capped at making no more than $5,000 in direct campaign contributions in one year. LLCs, on the other hand, have been considered “humans” for the purposes of donating to campaigns and thus could give much, much more. In fact, one real estate developer skillfully used his stable of LLCs to donate millions of dollars to state candidates and parties in a single election cycle.
That system has now been overhauled and LLCs are now treated like corporations. This is a long overdue and significant change, but alone it doesn’t fundamentally change the campaign financing system in New York State.
New York State relies on private donations to fund its political campaigns. Since New York has the highest campaign contribution limits of any state with limits, candidates focus their fundraising on those who can give the most – and those individuals and entities more likely than not have business before the government.
Political campaigns in the United States are typically financed by a relatively small handful of donors. In a recent New York State election cycle, only 6% of candidates’ money came from donors who gave $250 or less. In contrast, 78% came from non-party-organizations (such as PACs) and individuals who gave $1,000 or more. Thus, average people are marginalized in the current system.
New York law has another wrinkle: Every four years those already generous donation limits go up. Last week, they went up again, and now contributions of nearly $70,000 can be lawfully given to the governor. Over $100,000 can be given to the political parties.
Who gives those contributions? A relatively small number of wealthy individuals and special interests seeking to influence the system.
Due to U.S. Supreme Court decisions, little can be done to limit the spending by the wealthy and powerful. However, a voluntary system of public financing can be made available as an alternative to the current “pay-to-play” system.
New York City has such a system of public financing. Candidates who voluntarily choose to participate see their contributions amplified when they raise donations of $250 or less. In those cases, each $1 raised is matched with $8 in public funds.
The highly regarded NYC system has shifted campaign fundraising strategy from relying on a small number of big bucks donors to a system relying on many small dollar donors. It has given candidates a powerful incentive to turn their attention toward small donors. Studies done by the nonpartisan Campaign Finance Institute project that if New York State established a campaign financing system similar to the one in New York City, candidates would be far more likely to reach out to small donors – thus changing the political calculus for candidates.
And here is the big test for Democrats in Albany. For decades they have run for office while embracing public financing proposals. In the Democratically-controlled Assembly, since the late 1970s, public financing legislation has been approved. Governor Cuomo has repeatedly advanced legislation in his budget plans – including again this year. Senate Democrats, when they were the legislative minority, repeatedly called for creation of a public financing system.
It’s show time. The governor has a public financing proposal modeled on New York City in his budget. So far, however, the Legislature’s reactions have been muted. Indeed, there have been rumors that some lawmakers are not so keen to have a plan enacted that would encourage new voter participation and make the electoral system more competitive. Ultimately, the Democratic majorities in both houses will have to approve – or oppose – the governor’s plan by the time the budget is adopted by the end of March.
When that happens, New Yorkers will know for sure if lawmakers are true to their word and if some sanity will come to New York’s notorious campaign finance system.
Blair Horner is executive director of the New York Public Interest Research Group.
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