Inside Story

New York: where political finance never sleeps

The United States isn’t the obvious place to look for ideas about how to clean up political funding. But Graeme Orr found a New York agency that can teach us a lot about timely transparency

Graeme Orr 4 February 2014 2279 words

Donation caps, continuous disclosure and innovative public funding: New York’s model for running an election. Peter Dutton/Flickr


What would a rational system for financing political parties and elections look like? It would have three facets. Timely disclosure of donations, to shine a light on possible graft. Limits on gifts to parties and candidates, to stymie wealthy interests buying favours. And modest public funding tied to expenditure limits, to advance fair competition.

On those metrics, Australia scores nil out of three. We have the Australian Electoral Commission’s annual “disclosure dump,” which doesn’t happen until about seven months after each financial year. We have no caps on the size of donations. And we give the parties $5 per voter in government funding with no strings attached.

New York City is hardly a byword for efficient and clean governance. So it is eye-opening to find a public service here that is at once reliable, democratic, and an pace-setter. This black swan is the New York City Campaign Finance Board, which oversees donation caps, continuous disclosure of campaign finances and an innovative model of public funding.

As its director Amy Loprest puts it, its overarching aim is to “improve the role of citizens in New York elections.” It does this by seeking to educate and empower the public, diminish the political influence of private money and promote electoral competition. On the metrics of a rational system, NYC bats three from three.

American government is complex and multilayered, and not everything works as it should. Visitors to New York first notice this in the city’s labyrinthine and dilapidated subway. Then there is the venerable post office, a chain of bomb shelters with queues snaking out of the door, yet nearly bankrupt for all that. While it’s risky to generalise about such a vast, patchwork land, it’s fair to say that Americans mistrust institutions less out of ideological suspicion than from a self-fulfilling cycle of neglect. On top of their underwhelming experience of everyday services, they live with corruption in the business–politics axis.

Once emblemised in Tammany Hall, such corruption persists. Just look at the unfolding scandal involving the Democratic state senator who, with his business backers, allegedly bribed Republican party bosses to advance that senator’s bid to run as the city’s mayor. Integrity agencies like the Campaign Finance Board work in tougher thickets than their Australian equivalents.

Before diving into the details of New York’s campaign finance scheme, it’s worth taking in the bigger picture of this city. Australian local governments handle rates, roads and rubbish; American cities tackle much more. New York’s mayor and its council run emergency and health services, and public housing and schools, and even maintain the nation’s largest urban university. As its recent ban on e-cigarettes shows, the city has many social and regulatory tendrils.

New York City famously marries five boroughs or sub-cities into a single administrative entity, more like the City of Brisbane than Sydney or Melbourne’s small, CBD-focused councils. It is not an isolated metropolis, and forms the heart of a “tri-state” district almost as populous as Australia. As a regional magnet, many more folk have a stake in NYC’s economy, culture and governance than enjoy its electoral franchise. In size, scope and complexity, this is a city-state, not a city council. So political legitimacy and integrity are big issues.

The Campaign Finance Board oversees fifty-nine elected offices. At the apex is an elected executive made up of the mayor, comptroller (or treasurer), public advocate (uber-ombudsman) and five borough presidents (playing advisory roles). Then there is a legislative council of fifty-one ward-based members. The new mayor, leftist Bill de Blasio, succeeded the term-limited billionaire Michael Bloomberg on 1 January this year, and Democrats so dominate the city that only three Republican councillors survived the recent low-turnout landslide. To Australian eyes, though, electoral politics here seems more candidate-oriented than rigidly party-controlled.

The Campaign Finance Board was founded in 1988 during mayor Ed Koch’s reign, by a referendum amending the city’s charter. This was part of a broader integrity drive, following a series of general corruption scandals. The Board is overseen by five members, two appointed by the mayor, two by the speaker of the council, and one jointly. Neither the mayor nor the speaker can appoint more than one affiliate of the same party. In the American way, then, the risk of partisanship is not ignored, but managed. The outgoing chair, Joe Parkes, was a Jesuit priest and medieval historian; the incoming chair, Rose Gill Hearn, is an anti-corruption prosecutor. The Board enjoys budgetary guarantees that open it to estimates-style questioning by councillors.

Legislation assigns the Board two broad roles. One is to engage electors, by promoting voter registration and education, and so it distributes millions of voter guides, broadcasts candidate videos and holds leadership debates. But as its name suggests, its key remit is to oversee political finances in the primary and general elections for all fifty-nine elected offices. Here, the Board’s powers pivot on two points: disclosure of campaign finances and opt-in public funding.

It is in its comprehensive disclosure system that the Board is a leader ly. To Australians used to only annual or post-election disclosure, the cycle is breathtaking. In the 2013 election year, there were sixteen regular disclosure deadlines. On top of this were daily disclosure obligations during the fortnight before each primary and general election day. (Daily disclosure is triggered when a campaign receives more than $1000 from, or spends more than $20,000 with, a single source.) Electronic disclosure, through a secure, purpose-built system, has been available since 1993.

Such regular and real-time disclosure serves two purposes. One is to reveal who is backing whom and which campaigns are spending big. The other is auditing, so that matching public funding is not rorted and donors don’t game the system. Sizeable media and tech units ensure information is published in various, value-added formats, including full audits of each campaign, maps showing the geographic concentration of donors, and name-and-shame lists of candidates who miss deadlines. The Board’s press office tweets real-time data about each campaign, and in a land with a real diversity of online and newspaper-based political coverage, media interest is insatiable.

The public funding system is a mirepoix of carrots and sticks. In Australia, public funding is a gift to parties that poll well. In New York, turbo-charged matching funding is the order of the day, working as an incentive to generate grassroots donations. If a candidate can meet a threshold of small donations from adult residents, she gets $1050 in public funds for the first $175 from each donor – a six-fold leverage. That single reform, says Amy Loprest, has done more than any other to encourage “small-donor democracy” and encourage candidates to opt-in to public funding.

In return for public funding, candidates must abide by year-round expenditure limits. For mayor, these are $6.4 million for each of the primary and general elections, and $303,000 over the preceding three years. This prevents “permanent campaigns” buying a march on rivals. To balance public and private sources, no candidate, however popular, can receive public funds in excess of 55 per cent of the campaign expenditure limit.

For constitutional reasons, expenditure limits cannot be mandatory. So an Achilles heel is the right to opt-out. Millionaire candidates, like Bloomberg, can self-fund, without any spending limit. Still, in recent cycles, upwards of 80 per cent of candidates have enjoyed public funding. Most of the rest were minnows who did not meet the thresholds, rather than millionaires or Obamaesque fund-raising maestros.

Millionaires and fundraising maestros, in any event, face the same contribution limits and disclosure and auditing rules as other candidates. Contribution limits are tight. The maximum an individual can currently give a mayoral campaign is $4950, and $2750 to a councillor. (These are low, given the cost of living, although a donor may also give to a winner’s inauguration fund.) Corporations and business partnerships have been prohibited from donating altogether, since 1998. Bans on lobbyists and their families followed in 2006. From 2007, “pay-per-play” contributions by individuals with business dealings with the City have been capped to a few hundred dollars per candidate.

Political finance is an issue worldwide, and especially so in the United States. Campaigns need resources, but mixing money and politics risks two types of corruption. Most obvious is the buying of favours. No less important is the systemic corrosion caused by political inequality and unfair competition. No regime is perfect, and erecting elaborate mechanisms creates incentives to game the rules.

The major scandal emerging from the 2013 elections brought down the mayoral campaign of incumbent comptroller, John Liu. Liu’s campaign treasurer and a key fundraiser were imprisoned for conspiracy and attempted fraud involving illegal “nominee” donors. They had tried to channel donations via straw-men, on behalf of others, to circumvent contribution limits and artificially inflate matching public funding. The ruse was uncovered, Liu was stripped of public funding and he ran fourth in the Democratic primary.

Australia could learn much from the city’s campaign finance regime. But before learning the happy lessons, there are a few less positive ones. The regime is hobbled by the opt-in nature of expenditure caps. Disclosure is so tight it drills down to very small donations, which may chill the political freedom of public servants in particular. And, thanks to the Supreme Court’s decision to recognise corporate “free speech” in the Citizen’s United case, uncapped “independent” expenditures now risk dwarfing candidate and party campaigns. In response to that threat, the Board lobbied for and recently won the power to at least disclose real-time spending by such third parties.

The underlying law also reflects inevitable legislative biases. New York is a Democratic oasis, so while corporate bodies are not allowed to donate to candidates, unions and sole traders can. Union contributions are subject to the four-figure cap, but there are many unions in town and they can donate to every member of a bloc of favoured candidates.

Amy Loprest relates how the Board lobbied for a citizen-only donation rule from its inception, arguing from principle and fairness. Its arguments keep falling on deaf legislative ears. (In contrast, the Australian High Court recently struck down as unfair a law allowing four-figure donations from electors but not businesses or unions.) But Loprest also acknowledges a virtuous circle in which incumbents, for over twenty-five years now, have largely supported a scheme that promotes electoral competition against them.

The positive lessons of the New York model are many. The chief one is timely disclosure. In Sinatra’s cliché, the city never sleeps, so neither does its political finance law. Daily disclosure might seem like overkill, if the low cap on donations is respected. But the fact that it works seamlessly shows what is possible in the internet age, making a mockery of the staleness of disclosure in Australia.

Continuous disclosure, especially of high-value donations, is essential in Australia. We won’t fully know what the miners gave the Coalition or the unions gave Labor, in the lead-up to the 2013 national election, until February 2015. South Australia has bitten the bullet and will, from 2015, require immediate reporting of donations over $25,000, plus weekly disclosure of donations over $5000 in the election period. (Queensland had biannual disclosure and the Newman government toyed with monthly reporting, but citing some peculiarly timid advice it is about to revert to annual disclosure.)

Continuous disclosure might not benefit every local government in Australia, especially not towns and shires dominated by independents running part-time candidacies. The New York regime is complex: its online toolbox for campaigners has twenty-five guideline documents; its user-friendly candidate handbook runs to 125 pages. But at the parliamentary level, where electoral politics is full-time and professional, we need full-time and professional disclosure obligations.

The New York City approach to public funding is comprehensive and conditional. Public funding can only be spent on legitimate campaign costs; in Australia it can be used on anything. New York shows that donations can be capped yet campaigns not starved. Campaigns must disclose on time and accurately to earn funding. If not, the Board can levy civil fines or reduce the funding of miscreants. In a typical election year this amounts to over $2 million worth of fines and funding foregone.

The Board also promulgates rules that flesh out its governing legislation, and issues rulings that interpret the law. So while Australian electoral commissions just administer the law, by temperament and power the Board is also a regulator and instigator of reform.

Finally, the Board is a focused and empowered agency. Walk into its unassuming offices just west of Wall Street (where the real money lurks behind pillared edifices) and you might doubt this. But it boasts a staff of one hundred, split roughly equally between campaign finance and voter education. It is not busy running elections, so it can focus on those core jobs, and especially on political finance auditing and enforcement.

In Australia, meanwhile, the will to cap political expenditures and donations has been lacking at the national level, and even where present, in Queensland for instance, is receding. We pay lip service to campaign finance disclosure, but disclosure delayed is disclosure denied. To justify continuing to dish out public funding, we need to reform a system that is nine parts “trust the parties” and one part regulatory teeth. The New York system offers a tighter and more modern model. Certainly it is intricate. But it takes a well-developed spider to catch a highly evolved fly. •