Public Trust Act – A Public Financing Trial and Tribulation

by Genova Burns LLC

The NY State Legislature and Governor Cuomo enacted a new State budget on April 1, and with it, enabling legislation that includes changes in NY’s campaign finance law. In addition to new independent expenditure disclosure requirements, which we discussed here, the new law includes a this-year-only public financing test program applicable only to the NYS Comptroller’s race.

The State Board of Elections (SBOE) is charged with implementing the new public financing scheme.  But with so little time in advance of this year’s election to adopt the necessary rules and regulations, disclosure forms and software, pre-election review and post-election auditing procedures, many are skeptical that the test program will actually take flight. Indeed, following the urging of public financing proponents,the State Comptroller has indicated that his campaign is opting-out and no other candidate has step forward to participate.

Yet, the new law marks the first time that public campaign financing has been adopted at the state level in New York.  Even with its December 31, 2014 sunset, these provisions offer a new point of departure for future public financing reforms in the Empire State.  Let’s take a look.

Like New York City’s public financing law, candidates for comptroller may “opt-in” to try to qualify for $6 for every $1 raised up to the first $175 from each New York State resident contributor (natural persons only).  Contributions deemed non-matchable include illegal contributions, contributions from minors, and, contributions from registered lobbyists.  The threshold for eligibility for “participating candidates” requires $200,000 in donations that qualify for the match from at least 2,000 donations of $10 to $175.  The maximum amount of public funds payable to each participating candidate is $4 million for the primary and another $4 million for the general.

The law requires reporting of every contribution, loan received and expenditure made and requires the Board of Elections to review each report and advise committees of “relevant questions” regarding compliance with the law and rules issued by the Board and qualifications for receiving matching funds. The law affords committees an opportunity to respond and correct potential violations.

Participating candidates may file more reports on a weekly basis on Fridays “so that their matching funds may be paid at the earliest allowable date.”  The law requires the SBOE to pay matching funds “as soon as practicable” and to verify eligibility for matching funds within four days of receiving a report and pay the committee within two days of eligibility (though no earlier than 30 days after ballot petitions have been filed and not less than 45 days before the primary).

The law requires public financing participants to disclose each “intermediary”, an individual, corporation or other entity which “bundles, causes to be delivered or otherwise delivers any contribution from another person or entity” to a candidate or his committee.  NY Election Law does not otherwise require disclosure of intermediaries.

Public financed campaigns are not subject to spending limits (unlike New York City law).  Restrictions apply to the use of public funds, however, such as prohibitions against use for illegal expenses, political contributions, gifts and legal fees to defend against a formal criminal charge.

The new law sets a limited time period for the SBOE to audit participating campaigns after the election.  Provisions require participants to maintain 3 percent of matching funds for expenditures needed to comply with the post-election audit.

The reform lowers contribution limits for donations to participating candidates to $6,000 per election, which is far below the current statewide election limits of $19,700 and $41,100 for the primary and general elections, respectively.  These current high limits are retained without change for non-publicly-financed candidates and for statewide offices other than comptroller.  A special provision for the retroactive application of the new $6,000 limit would require the segregation and non-use (or return) of contributions over $6,000 raised previously.  As with the reduced limits, the segregation/return requirements are not extended to non-participating candidates or to other state-wide offices.

The law establishes the New York State Campaign Finance Fund, which consists of revenues raised from the abandoned proper fund and names the State Comptroller and the Commissioner of Taxation and Finance as joint custodians.

Putting aside issues of feasibility this year, imagine the re-enactment of these very same provisions in time for the beginning of the next statewide election cycle in January 2015 and their extension to every statewide office, not just comptroller.  Just imagine.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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