BOOSTING THE IMPACT OF SMALL DONORS How Matching Funds Would Reshape the November 2015 2016 Presidential Election Quarter 3 Boosting the Impact of Small Donors Quarter 3, 2015 How Matching Funds Would Reshape the 2016 Presidential Election Dan Smith U.S. PIRG Education Fund Acknowledgements The author thanks Nick Nyhart, President and CEO of the Every Voice Center, Adam Lioz, Counsel and Senior Advisor at Demos, David Rosenfeld, Executive Director of OSPIRG, Abe Scarr, Exec- utive Director of Illinois PIRG, and Tyler Creighton of ReThink Media for reviewing the previous edition of this report and providing thoughtful and informed comments. The author also thanks Cameron McCann, Chris MacKenzie, and Zach Weinstein for their research and editorial assistance. The author bears any responsibility for factual errors. The recommendations are those of U.S. PIRG. The views expressed in this report are those of the author and do not necessarily reflect the views of our funders or those who provided review. 2015 U.S. PIRG. Some Rights Reserved. This work is licensed under a Creative Commons Attribution Non-Commercial No Derivatives 3.0 Unported License. To view the terms of this license, visit www.creativecommons.org/licenses/by-nc-nd/3.0. With public debate around important issues often dominated by special interests pursuing their own narrow agendas, U.S. PIRG Education Fund offers an independent voice that works on behalf of the public interest. U.S. PIRG Education Fund, a 501(c)(3) organization, works to protect consum- ers and promote good government. We investigate problems, craft solutions, educate the public, and offer Americans meaningful opportunities for civic participation. Design and layout: Chris MacKenzie Introduction With more than a year to go for financing, candidates dates to raise money from ev- before voters cast their ballots would be encouraged to en- eryday citizens making small for the next President of the gage a large number of voters contributions? This paper exa- United States, the race among in the political process and mines how the 2016 fundrais- candidates to build the biggest would focus on appealing to a ing picture through the October campaign war chest has al- broad swath of the population Federal Election Commission ready set records. they seek to represent. (FEC) filing deadline would look if a small donor campaign The vast majority of the funds Instead, an analysis by Polit- finance system were in place, raised for the 2016 election ico found that the 67 biggest where small contributions were have come from wealthy do- donors, giving at least $1 mil- matched with limited public nors making contributions ex- lion each, contributed more funds for candidates who agree ponentially larger than most than three times as much as to turn down large contribu- Americans can afford, typically the 508,000 smallest donors tions. to super PACs and other orga- combined, according to July nizations that can legally ac- 2015 filings with the Federal cept donations of any size. Election Commission.1 This report examines how the The New York Times found 2016 presidential race would that fewer than 158 families be reshaped by a public fi- are responsible for nearly half nancing system that amplifies of all early campaign money the voices of small donors in raised in the 2016 presiden- our elections. tial race.2 Under our current This analysis demonstrates system, courting wealthy me- that under such a system, can- ga-donors – who often have didates relying on large donors different priorities and policy would have a powerful incen- preferences than most Ameri- tive to shift their fundraising cans3 – has taken precedence strategy to focus on small do- over appealing to everyday nors, and access to a narrow Americans. It often takes a set of wealthy donors or vast candidate like Donald Trump personal wealth would not de- with vast personal wealth to termine the viability of a presi- stay competitive with the top dential campaign. The 2016 election will likely fundraising candidates with- break all previous campaign out relying on wealthy me- spending records. But more ga-donors. important than the amount of money spent is where that It doesn’t have to be this way. money is coming from. If cam- What if our campaign finance paigns relied on small donors system encouraged candi- Boosting the Impact of Small Donors | 1 Key Findings Amplified Voice for Small Donors Without a small donor matching system, candidates received 39% of their funds from donors giving $200 and less. Under the proposed system, 80% of total funds would come from small donors who give $200 or less and their corresponding matching funds. Direct fundraising challenges super PAC totals Under a small donor matching system, Bernie Sanders, Hillary Clinton, Ben Carson and Ted Cruz would raise significantly more than Right to Rise, the largest Super PAC in the 2016 presidential race, according to the most recent FEC filing. Carson, Cruz take commanding fundraising lead over Bush While Ben Carson and Ted Cruz currently lead the Republican primary in direct fundrais- ing, Jeb Bush remains in a close third, and raises significantly more when super ACP fundraising is taken into account. Under a small donor matching system, Carson and Cruz would outpace Bush in direct fundraising by a factor of four-to-one and would re- main ahead in fundraising even when super PAC funds are factored in. Sanders outraises Clinton by $100 million Bernie Sanders raised 80% of his contributions from small donors giving $200 or less compared to Hillary Clinton’s 18% through September, but was outraised by nearly two- to-one. Under a small donor matching system, Sanders would take a commanding lead over Clinton in fundraising, bringing in $244 million next to Clinton’s $149 million. Christie raises less, Bush fundraising stagnates Chris Christie is the only candidate who would have raised less under a small donor matching system that requires candidates to accept lower contribution limits. Bush’s di- rect fundraising would increase by only 6% under a small donor matching system. Candidates currently depend on large donors Cumulatively, Republican and Democratic candidates are currently raising 61 percent of their direct contributions from donors contributing over $200. Bush, Christie, Kasich, Clin- ton, and O’Malley all have raised more than 50% of their funds from donors contributing $2,700 and over. Boosting the Impact of Small Donors | 2 Creating a People-Powered Campaign Finance System The Supreme Court’s decisions in Citizens could spend their time appealing to the every- United and related cases has shut the door on day constituents they seek to represent. commonsense limits on big money that more closely align with what most Americans can af- The track record of small donor systems is im- ford. However, Congress could immediately en- pressive. For example, New York City’s pro- act a campaign finance system that amplifies gram allowed participating candidates in the the voices of small donors. 2013 city council race to raise 61 percent of their contributions from small donations and 4 Here’s how a small donor empowerment pro- matching funds. That year, 92 percent of can- gram works. Candidates who voluntarily opt didates running in the primary participated in 5 into the program and agree to turn down large the program. contributions receive limited public matching funds for each small contribution they secure. The proven impact of such programs is one rea- Combined with refundable tax credits for small son why other states and localities have started contributions, these programs can encourage adopting them. This November, voters in Maine candidates to raise funds from a broad swath and Seattle passed clean election ballot initia- of their constituents and increase civic partici- tives with strong support, creating and strength- pation. ening small donor empowerment programs that amplify the voice of regular voters while limit- The Government by the People Act (Congress- ing the influence of special interests. Last year, man Sarbanes, H.R. 20, 156 cosponsors) would Montgomery County enacted similar legislation, create this type of system for House elections. creating its own small donor program. The bill would encourage more Americans to participate in the process with a $25 refundable tax credit for small donations and would match contributions of $150 or less with limited pub- lic funds at a six-to-one ratio. To participate in the small donor matching program, candidates would have to limit contributions to $1,000 or less. Under this system, candidates relying on small donors could compete with candidates supported by wealthy donors. Candidates who agree to an even lower contribution limit of $150 per donor would be eligible for a nine-to- Could a small donor program work at the fed- one match for their small contributions. The Fair eral level? An earlier study by U.S. PIRG and Elections Now Act (Senator Durbin, S.1538, 21 Demos surveyed a set of four Republican and cosponsors) would create a similar system for Democratic congressional candidates who Senate elections. Instead of dialing for dollars were outspent by an average of five-to-one by from a narrow set of wealthy donors, candidates their opponents. If a small donor matching pro- Boosting the Impact of Small Donors | 3 gram were in place for those candidates, the ident Barack Obama chose not to participate in four would have closed the fundraising gap by the program in 2008. In 2012, neither major par- an average of 40 percent. While a small donor ty nominee participated. At the same time, the program might not always result in participat- 2008 and 2012 presidential campaigns demon- ing candidates outpacing their big money op- strated that, with the help of new technology ponents, it would give candidates with broad and outreach techniques, campaigns have the grassroots support a much better chance to run capacity to connect with and mobilize a large competitive campaigns.