1900 M Street, NW, Suite 380 Washington, DC 20036 202-969-8890 TASK FORCE ON PRESIDENTIAL NOMINATION FINANCING Jeffrey Bell Ruth S. Jones J. Kenneth Blackwell Michael J. Malbin William E. Brock Charles T. Manatt Becky Cain Ross Clayton Mulford Anthony Corrado Phil Noble Carol Darr Richard Davis Research Director Donald J. Foley John C. Green i Acknowledgments his report was drafted by Michael J. Malbin, CFI’s Executive Director, John C. Green of Akron University who was also the Task Force’s Research T Director, and Steve Weissman, CFI’s Associate Director for Policy. Background papers were written by Anthony Corrado (Colby College), Nathan Bigelow (University of Maryland) and Clyde Wilcox (Georgetown University). Corrado and Heitor Gouvêa also prepared a database of contributors used extensively in this report. Robert Boatright is the lead scholar for CFI’s tax credit project. Nicholas Turner, Jessica R. John, Alex DeMots and Lowell Schiller provided valuable research assistance. Systems Manager Brendan Glavin prepared the tables and figures with the help of Jonathan Vaupel. Sue Gift of SG Graphics designed the report cover and layout. The Presidential Task Force was supported by grants from The Joyce Foundation, Open Society Institute, The Pew Charitable Trusts and the Smith Richardson Foundation. Conclusions of the Task Force are not necessarily those of the supporting foundations or Trustees of the Campaign Finance Institute. iii Contents Executive Summary .................................................................................... xi Part I: Introduction ..............................................................................1 Chapter 1. Participation, Competition, Engagement .................................... 1 Part II: Improving the Basic Tradeoff – Spending Limits in Return for Public Funds ......................................................... 11 Chapter 2. Spending Limits: Higher – And Prepared For Contingencies.... 13 Old Problems and New ............................................................. 14 Recommendation for the Spending Limit Amount ................... 19 Supplementary Recommendations ............................................ 21 Chapter 3. Broadening The Base:Making $100 Worth $400 with a Three-for-One Match .......................................................... 27 Assessing the 1974 System ........................................................ 28 Fixing the Matching Fund: Recommendations ......................... 33 Additional Recommendations ................................................... 43 Chapter 4. Replenishing The Public Fund .................................................. 47 The Balance Sheet’s Imbalance .................................................. 47 Recommendations for Replenishing the Fund .......................... 54 Part III: Other Recommended Changes ............................................... 59 Chapter 5. Minor Party And Independent Candidates: A Fairer Approach ..... 61 Chapter 6. Replacing Soft Money at National Party Conventions ................ 65 Part IV: Additional Issue ...................................................................... 77 Chapter 7. An Idea for the Future: Federal Tax Credits for Small Contributions ........................................................................... 79 Epilogue: An Historic Opportunity ......................................................... 89 Works Cited............................................................................................... 93 Appendix – Tables ................................................................................... 101 Task Force Members................................................................................ 117 v List of Tables Table 2.1 Spending Limits and Spending Examples per Voting Age Population (VAP), 2000................................................................................................. 20 Table 3.1 Winning Candidates’ Small and Large Donations as a Percentage of Individual Contributions, 1976-2000.......................................................... 30 Table 3.2 Thinning Out the Middle, 2000.................................................................. 31 Table 3.3 Impact BCRA and the Task Force’s Recommendations Would Have Had on Publicly Funded Candidates in 1996 and 2000 ..................... 36 Table 4.1 Financial Status of the Presidential Election Campaign Fund: 1973-2002 ........ 48 Table 4.2 Disbursements from the Presidential Election Campaign Fund, 1976-2000 ..... 49 Table 4.3 Tax Checkoff Participation, 1975-2002 ....................................................... 51 Table 6.1 Contributions to Major Party Presidential Nominating Conventions, Including Host Committees and Municipal Funds, 1980-2004 .................. 69 Table 6.2 2000 Host Committee Expenditures (By Category) .................................... 72 Table 7.1 Likelihood of Giving in Response to the Tax Credit in Ohio ....................... 84 Table 7.2 Ohio’s Contributors, Potential Contributors, and General Public................ 85 Appendix Table A.2.1 Spending Limits, 1974-2004 ..................................................................... 103 Table A.2.2 Spending by Selected Candidates as a Percentage of the Limit, 1976-2000 ..... 104 Table A.3.1 Number of Donors of Different Amounts, By Candidate, 1996-2000 ...... 105 Table A.3.2 Donor Characteristics: Individual Contributors, Tax Checkoff Participants, and the General Public .......................................................... 106 Table A.3.3 Amount of Matching Funds under Various Scenarios ................................ 107 Table A.3.4 Percentage Change in Matching Funds, under Various Scenarios, From Amount Actually Received ............................................................... 108 Table A.3.5 Percentage of Adjusted Receipts from Matching Funds, under Various Scenarios ............................................................................. 109 Table A.3.6 Percentage of Adjusted Receipts from $1000+ Contributors under Various Scenarios ............................................................................. 110 Table A.3.7 Publicly Funded Candidates’ Total Receipts, Individual Contributions, and Matching Funds, 1976-2000 ...................................... 111 Table A.5.1 Ballot Access Requirements in the 50 States............................................... 114 vi List of Figures Figure 2.1 1980 GOP Primary Spending ........................................................................ 16 Figure 2.2 1980 Democratic Primary Spending............................................................... 16 Figure 2.3 2000 GOP Primary Spending ........................................................................ 17 Figure 2.4 2000 Democratic Primary Spending............................................................... 17 Figure 3.1 Winning Candidates’ Large and Small Contributions as a Percentage of All Individual Contributions .................................................... 30 Figure 3.2 Percentage of Donors and Percentage of Money from Donors Who Gave Varying Amounts ............................................................. 31 Figure 4.1 Presidential Election Campaign Fund: Quadrennial Year End Balances, 1976-2000 ...................................................................................................... 48 Figure 4.2 Percentage of Federal Income Tax Returns With Checkoff, 1976-2002.......... 51 Figure 6.1 Major Party Presidential Nominating Contributions: Private Contributions as a Percentage of Federal Grants, 1980-2004 ......................... 69 Figure 7.1 Increased Political Contribution Tax Credit Claims in Canada and Decreased Average Contributions to Canadian Federal Parties, 1975-1996.... 81 Figure 7.2 Percentage of Contributors of Varying Amounts Who Would Have Given Less if They Had Not Known about the Tax Credit ............................. 86 vii Executive Summary ix Executive Summary he current system for financing presidential nominating campaigns is in jeopardy. Since 1974, the federal government has matched the first $250 T that candidates raise from individual donors if the candidates agree, among other things, to limit their spending. But for many candidates, this tradeoff is no longer worthwhile. Accepting spending limits has become too risky and public funding has become less valuable. And to top it off, the whole public funding system faces the threat of insolvency by 2008. In light of these circumstances, the Campaign Finance Institute convened a distinguished Task Force on Presidential Nomination Financing to research the Losing the system system’s strengths and weaknesses and make recommendations for change. To prepare, the Task Force undertook new research to enable it to predict how a variety would be a loss of changes might affect candidates and donors and to estimate the costs of possible for democracy. changes. It also held public hearings in January 2003 to solicit ideas from a wide range of knowledgeable and concerned individuals and organizations. (See www.cfinst.org/presidential/index.html.) Both before and after the hearings, it held long working sessions to consider the issues facing the system and to sift through the evidence. This report is the unanimous result of the Task Force’s efforts The Task Force rejected a “do-nothing” approach out of hand. If the system is not worth returning to its proper functions, the public funds may as well go back to the Treasury. The