or Trut

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is a501(c)(3) nonprot, nonpartisan researchinstitute dedicated to improving public policy debate in North Carolina. Viewpoints expressed by authors do not necessarilyrefect those o the sta or board o the Locke Foundation.

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spot

light

No. 365 – January 14, 2009

axpayer

inancing

n.c. e

lecTions

Clearly unconstitutional after the Supreme Court decision in Davis v. FEC

key acts:• In Jun 2008, h U.s. suprm cour in   lld

Davis v. Federal Elections Commission

ru down  drl lw h pun-ihd congrionl ndid or pnding oo muh o hir own monon hir mpign. Undr h lw, on pronl pnding xdd hrhold lvl, h oppoing ndid w givn undriing dvng.• aording o h cour, h punihmn w  ubnil burdn on hr-ph righ o h l-fnnd ndid nd hr w no ompl-ling inr or hi p o ph rgulion.• Norh crolin’ publi (i..) xpr fnning m or ppll judi-il r nd l counil o s r lo would b unoniuionl. an ronbl inrprion o

Davis

would ld o hi onluion.• a in

Davis,

h N.c. m punih ndid or pnding oo muh.On  ndid who h hon no o p publi unding ( rdiionlndid) pnd bond  hrhold lvl, hn hi opponn who h d-idd o  publi und ( ubidizd ndid) i givn wh r lld“mhing und.” or xmpl, i  rdiionl ndid pnd $5,000bov h hrhold lvl, h ubidizd opponn i providd $5,000  wll.• th burdn o rdiionl ndid i vn wor hn h burdn onh l-fnnd ndid in

Davis

. or xmpl, rdiionl ndidhv limid onrol ovr whhr mhing und r riggrd bupnding b indpndn group, uh  Pac, lo n riggr mhingund or hir opponn.• Norh crolin’ xpr-fnning m lo punih indpndngroup or hir ph bu h n riggr mhing und o h n-did ho group oppo.• Lgilor hould no i idl b nd l Norh crolinin’ ir amnd-mn righ b rmpld on. th xpr-fnnd m hould brpld, or  h vr l  mororium hould b pld on hm.

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orth Carolina has public (i.e., taxpayer) fnancing systems or appellate judicial campaigns

and three Coun-cil o State races (Auditor, Commissioner o Insurance, and Superintendent o Public Instruction).

In June2008, the United States Supreme Court in an opinion called

Davis v. Federal Election Commission

struck amajor blow against such taxpayer-fnanced systems. Any reasonable interpretation o the Court’s opinion would lead to the conclusion that these systems are unconsti-tutional. This

Spotlight

report will provide a brie review o the

Davis

case and explain how this opinion aects NorthCarolina’s taxpayer-fnancing systems o campaigns.

Davis v. FEC

Davis

, a Democratic candidate or the U.S. House o Representatives, Jack Davis, challenged a provision in theBipartisan Campaign Reorm Act o 2002 (McCain-Feingold).

The provision, reerred to as the “Millionaire’s Amend-ment,” sought to penalize excessive personal spending by candidates on their campaigns.

I a Congressional candidate spent personal money beyond a threshold amount, the opposing candidate was ableto gain special advantages. These advantages included higher individual contribution limits (the normal limit was$2,300 — it was increased to $6,900), and the candidate could accept party expenditures without limit (otherwise thelimit was $40,900).

The “sel-fnanced” candidate (the candidate spending beyond a threshold level) thereore was punished or per-sonal spending. As the Court has made clear, restrictions on spending money are equivalent to restricting a candidate’sspeech because money is necessary or political communication.

Davis

, the U.S. Supreme Court ound the penalty imposed on sel-fnanced candidates to be unconstitutional.While the law did not prohibit the sel-fnanced candidate rom spending personal unds (and exercising ree speech),“it imposes an unprecedented penalty on any candidate who robustly exercises that First Amendment right.”

A sel-fnanced candidate “has two choices: abide by a limit on personal expenditures or endure the burden that is placed onthat right by the activation o a scheme o discriminatory contribution limits.”

The Court ound this burden on speech to be substantial and thereore the provision could only be “justifed by acompelling state interest.”

This standard, oten reerred to as strict scrutiny, is extremely difcult to meet.The ederal government argued that the penalties were justifed because they “level electoral opportunities orcandidates o dierent personal wealth.”

This argument, as in past campaign-fnance cases, was strongly rejected bythe Court:The argument that a candidate’s speech may be restricted in order to “level electoral oppor-tunities” has ominous implications because it would permit Congress to arrogate the voters’authority to evaluate the strength o candidates competing or ofce.

The Court thereore ound that leveling or equalizing unds was not a compelling interest that could be used to justiy the Millionaire’s Amendment.

The Court also addressed whether the provision was justifed “by a governmen-tal interest in eliminating corruption or the perception o corruption.”

It ound the Millionaire’s Amendment did notmeet a compelling state interest regarding corruption because personal unding actually “

reduces

the threat o corrup-tion, and thereore [the Millionaire’s Amendment], by discouraging use o personal unds, disserves the anticorruptioninterest.”

Davis

nd Norh crolin’ txpr-inning sm o cmpign

Candidates or appellate judgeships and the three Council o State positions may choose to accept public (i.e.,

taxpayer) fnancing or their campaigns. Those who do (“subsidized candidates”) agree to limit their spending in thegeneral election to the amount o money provided by the government. At the heart o North Carolina’s taxpayer cam-paign fnancing systems are what are called “matching unds.”Candidates who decide against taking taxpayer dollars (“traditional candidates”) are punished in the way thatsel-fnanced Congressional candidates in

Davis

are punished i spending in support o their campaigns exceeds athreshold level. I their opponent is a subsidized candidate, as is highly likely, then once the threshold level has beenexceeded, the subsidized candidate is given “matching unds” to equalize the unding between the candidates.Similar to

Davis

, the traditional candidate is orced to choose between exercising First Amendment rights but atthe same time helping und the opposition, or restricting his speech so the opposition won’t receive government helpwith unding.

North Carolina’s Matching Fund System Is a Greater Burden Than the Millionaire’s Amendment

North Carolina’s system poses an even more signifcant burden on candidates than the burden created by theederal Millionaire’s Amendment. In calculating when the threshold level has been reached, the spending calculatedis not just spending by the candidate alone, but instead the sum o expenditures by the candidate and by independentorganizations, such as nonproft groups with political action committees, who support the candidate or oppose his op-ponents.

1) The problem o limited control.

A traditional candidate does not have complete control over whether matchingunds will be provided to the opposition. The candidate could decide to limit spending so matching unds are not pro-vided, but expenditures by independent organizations could trigger the matching unds anyway.

2) The eects on First Amendment rights o not just candidates, but also o independent groups.

The matching-undsystem, unlike the Millionaire’s Amendment, also violates the First Amendment rights o independent groups, not justcandidates. Independent groups risk being punished or supporting traditional candidates because they may triggermatching unds or the opponent. As a result, groups may decide to restrict their speech out o ear that their supportmay in act hurt their candidate.Their speech is treated dierently solely based on

content

, which generally is a violation o the First Amendment.Independent groups that support the subsidized candidate in a race against a traditional candidate have no such bur-dens on their speech. The only dierence between the groups is whom they decided to support.

3) The automatic guarantee o extra unds to the opposing candidate.

Under the Millionaire’s Amendment, whena sel-fnanced Congressional candidate exceeded the threshold level, contribution levels were increased or the op-posing candidate. Whether the opposition secured additional unds was still up in the air — the unds still had to beraised. In the matching-und system, when a candidate and independent groups exceed the threshold level, additionalunding is automatically provided to the opposition.

4) The potential or absurdity.

By adding a traditional candidate’s expenditures to those by independent organiza-tions to determine when the threshold level has been reached, the matching-und system can lead to absurd results.Table 1 on the ollowing page shows how, or example, both the traditional candidate and the independent groupssupporting the traditional candidate could spend

less

than their counterparts but still trigger matching unds to thesubsidized opponent.Proponents laud taxpayer-fnancing programs when an increased number o candidates accept public fnancing.Given the absurdity o the system and all the punishments candidates risk i they choose not to accept taxpayer fnanc-