State Regulation of Campaign Finance

The Model State Campaign Finance Law        

Joseph Zimmerman

        Mandatory information disclosure by candidates for elective office, lobbyists and public employees is essential for the protection of the public interest against conflicts-of-interest and other unethical acts. Of particular importance are corrupt practices acts establishing maximum permissible amounts of campaign contributions and expenditures, and requirements for filing of reports by candidates, their election committees and political action committees.         All state corrupt practices acts must conform with the 1976 decision of the Unites States Supreme Court in Buckley v. Valeo that held that the limitations on expenditures by a candidate from personal funds contained in the Federal Election Campaign Act of 1971 were unconstitutional violations of the First Amendment's freedom of expression.
        In 1978, the Court in First National Bank of Boston v. Bellotti invalidated a Massachusetts statute limiting contributions to referenda campaigns by corporations on First Amendment grounds. Hence, candidates are free to spend as much of their own money on their campaigns as they wish, and corporations similarly may expend funds without limit on issue referenda affecting corporate interests.

Model State Campaign Finance Law

        To guide state legislatures in the enactment or amendment for corrupt practices acts, the National Civic League (then the National Municipal League) in 1979 published a Model State Campaign Finance Law which provides for a State Campaign Finance Commission responsible for administering the Law.
        The seven Commission members are appointed by the Governor with the approval of the Senate or Governor's Council for seven-year terms and no more than four members may belong to the same political party. This provision conforms with the Buckley v. Valeo decision holding that there must be a separation of powers for appointments since appointees have regulatory and enforcement powers.
        The Commission is required to investigate the sworn complaints of citizens who subsequently may seek judicial review of any Commission decision. The Law also authorizes the Commission to issue advisory opinions on its own volition at the request of any person relative to his or her duties "in a given factual situation."
        Provided the individual requesting advice on a contemplated action submits accurate information and follows the advisory opinion, the individual is protected against civil and/or criminal penalties in the event he or she is charged with a violation.

Regulatory Provisions

        It is essential that a corrupt practices act defines the term "contribution" very carefully. The Model Law defines a contribution as:

a gift, subscription, advance, deposit of money or anything of value, a payment, a forgiveness of loan, and a payment of a third party made for the purpose of influencing the result of an election. A "contribution" includes that portion of a gift, etc. which exceeds the fair market value of anything received in return.

        Included within the definition are tickets purchased for fund-raising events, discounts or rebates not extended to the general public and the money or property of the candidate used in the campaign. Excluded are voluntary services provided by others.
        A political party, campaign committee, or other committee may not accept contributions or expend funds, according to the Model Law, until a statement of organization, including detailed information on its officers and purposes, is filed with the Commission.
        The statement must include the name and party affiliation of candidates, name of referendum issue the party or committee supports or opposes, a list of bank safety deposit boxes and other information required by the Commission. This provision seeks to prevent concealment of illegal contributions prior to the official organization of a committee and to protect the contributors and the public.
        The campaign contributions report must include:
        • a list of every person or organization who made contributions exceeding $100, including name, home address, business name and address, and fair market value of the contribution;
        • all loans received by a party or committee, name and address of the lender and name and address of any co-signer;
        • a list of all pledges used to obtain a loan or other goods and services containing the amount of each pledge and name, home address, occupation, and business name and address of the pledger;
        • total proceeds from sale of campaign items and total amount of all other contributions not listed in one of the above categories;
        • the total amount of proceeds of ticket sales to every dinner, luncheon, cocktail party, and other fundraising event so long as the contribution per ticket (after expenses are deducted) does not exceed one hundred dollars -- a separate listing is required for each contributor if the amount exceeds $100.
        The Model Law stipulates that the person paying for printed materials, such as billboards and posters, must have his or her name and address included on the materials and the person paying for a radio or television advertisement similarly must have his or her name included in the advertisement.

Need for Model Law Provisions

        The Model Law's provisions are very detailed compared to earlier corrupt practices acts whose provisions were evaded with ease. Limitations on individual campaign contributions differ in accordance with whether a campaign is for a local government or statewide office and make it illegal for an individual to use the name of another person in making a contribution. Any person independently spending more than $100 on behalf of a candidate or a referendum question must register with the Commission and file an expenditure report.
        Campaign contributions by corporations and labor unions are prohibited by the Model Law except for referendum issues allowable by the Supreme Court's 1978 decision. These bodies, however, are allowed to organize and operate political action committees which can contribute to candidates and referenda issue committees.
        Contributions to a candidate by business firms which do business with a government and by public employees labor unions suggest the possibility of quid pro quo arrangements. To address this problem, Congress included in the Federal Election Campaign Act of 1974 a provision making it illegal for a person "knowingly to solicit" a campaign contribution from a government contractor and a second provision forbidding a government contractor to make contributions to political campaigns.

Enforcement of Corrupt Practices Act

        Corrupt practices acts, whether stringent or lax, are effective only to the degree to which they are enforced. Unfortunately, the responsible state commission typically lacks adequate staff and equipment to monitor effectively reports of campaign contributions and expenditures, and to investigate reported violations of the state rules and regulations.
        Candidates and members of party committees seldom are prosecuted for filing incomplete or false reports. Common Cause addresses this problem in its Model Conflict-of-Interest Act by authorizing any citizen to file a sworn complaint with the Ethics commission and granting standing to a citizen to sue in court if the responsible officers refuse to enforce the act.
        Loans to candidates and campaign committees present a particularly difficult regulatory problem. On occasion, bank loans are repaid one or more years after an election by the individual guarantors who often are real estate developers and other businessmen. Loans by individuals to a candidate often are forgiven after the election.
        If the candidate who borrowed the money is elected, the forgiving of a loan can be viewed as an attempt to purchase future favors. If the loan is not forgiven, the elected officer may owe large sums to individuals and/or firms that are regulated by or do business with the government.
        A possible solution to this problem is a requirement that all loans to a candidate or campaign committee be classified as contributions from the maker or guarantor of the loan. The exception would be a loan made by a bank on the same terms as are available to the general public.
        To monitor these and other practices, the Election Finance Commission must be granted broad regulatory authority to curb ingenious attempts to evade existing campaign finance regulations.

        Joseph F. Zimmerman is professor of Political Science in the Graduate School of Public Affairs of the State University of New York at Albany and a former chair of the Section on Representation and Electoral Systems of the American Political Science Association. He co-edited the 1992 book United States Electoral Systems: Their Impact on Women and Minorities and the 1994 book Electoral Systems in Comparative Perspective: Their Impact on Women and Minorities.

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