The Issue in a Nutshell:

The right to freely express views on political candidates and issues is a fundamental First Amendment freedom—and an essential ingredient for healthy political debate and an informed citizenry.  Unfortunately, that right is undermined by so-called “clean elections” schemes that replace traditional political campaigns funded by voluntary citizen donations with a campaign system micromanaged by government bureaucrats and funded by taxpayers.

Arizona is home to one of the nation’s most far-reaching taxpayer-funded elections schemes.  And its experience shows that “clean elections” inevitably mean government rationing of political speech for candidates in the system, candidates outside the system, and independent groups that simply want to make their voices heard in an election.

Indeed, limiting political speech is the whole point of the scheme.  Arizona’s “Clean Elections” law sets strict government caps on how much candidates who participate can spend—and therefore on how much and how effectively they can communicate to citizens.  Worse still, it forces even candidates who refuse taxpayer money—as well as independent citizen groups who wish to support them—to abide by the same caps.  If they don’t, their taxpayer-funded opponents get even more taxpayer money.

In short, a taxpayer-funded campaign system by design means fewer voices and less debate on an issue of vital public importance:  who should be elected to public office.  If the Arizona model spreads, as so-called campaign finance “reformers” hope, our core rights as citizens to speak about politics will give way to government control.

That is why on November 27, 2007, Arizona Treasurer Dean Martin, the Arizona Free Enterprise Club’s Freedom Club PAC and the Arizona Taxpayer Action Committee joined with the Institute for Justice to ask the U.S. District Court for the District of Arizona to vindicate their First Amendment rights and strike down Arizona’s “Clean Elections” scheme.  Martin and IJ’s original lawsuit, filed in 2004, was recently reinstated by the 9th U.S. Circuit Court of Appeals, and now that it returns to federal district court to decide the law’s constitutionality, the two independent groups wish to join the case to ensure the rights of citizen groups to speak freely during political campaigns.

Introduction

America’s Founders drafted the First Amendment to ensure a healthy democracy with robust public debate and meaningful citizen participation in politics.  Arizona’s scheme of taxpayer subsidies for politicians ensures precisely the opposite:  It curbs speech, discourages participation and limits what voters hear about politics.

Narrowly passed by initiative in 1998, the so-called Clean Elections Act imposed on Arizona a scheme of taxpayer-funded campaigns that burdens everyone who runs for state office with extensive regulations.[1]

One of the ways the law curbs speech is by setting government caps on how much money politicians can spend in their campaigns—thereby limiting how much they can speak to voters.  Even politicians who refuse to accept government funding find their ability to speak restricted.  When Arizona Treasurer Dean Martin ran a traditional campaign for office, forgoing taxpayer money and using only funds voluntarily donated by private groups and citizens, he quickly realized it made no sense to raise and spend more than the government cap set for his taxpayer-funded opponent even though he could by law.  Why?  Because all money donated to Martin’s campaign above that limit would trigger more taxpayer subsidies for his government-funded opponent, ensuring she could dramatically outspend him.

Martin was not directly subject to the government cap, but he was forced to abide by it or be drowned out by government funds handed to his opponent.  His right to speak freely was chilled.

The system also chills the speech of independent groups like the Arizona Free Enterprise Club’s Freedom Club PAC and the Arizona Taxpayer Action Committee, both political committees that support candidates who believe in private enterprise and low taxes.  In Arizona, any time an independent group spends money on speech—such as a radio ad—supporting a candidate running with private funds, the taxpayer-funded opponent will get still more public money.  The group’s speech in favor of the candidate they support triggers an outpouring of taxpayer dollars to the candidate they oppose.  Not surprisingly, groups like the Freedom Club PAC and Taxpayer Action Committee now think twice before supporting some candidates—and sometimes choose not to speak at all.

Arizona’s election scheme adds up to less speech from fewer voices and therefore a less robust public debate.  The dirty little secret of Arizona’s law is that it is designed to limit speech:  Government controls the purse strings, so government decides how much speech is “enough” and imposes an extensive web of regulations on all political activity.  But in a free society, the government has no business micromanaging how citizens debate, of all things, who should run the government.

That is why on November 27, 2007, Dean Martin, the Freedom Club PAC and Taxpayer Action Committee joined with the Institute for Justice to ask U.S. District Judge Earl H. Carroll for the opportunity to vindicate their First Amendment rights.  The original lawsuit, filed in 2004 by IJ and Martin, was recently reinstated by the 9th U.S. Circuit Court of Appeals, and now that it returns to Judge Carroll to decide the law’s constitutionality, the two independent groups wish to join the case to ensure the rights of citizen groups to speak freely during political campaigns.

Unfortunately, Arizona’s scheme of taxpayer-funded elections is one of the most far-reaching in the nation—and those who favor greater limits on political speech hope to see it spread.  This case, Martin v. Brewer, can set an important federal precedent against taxpayer-funded campaigns and in favor of our core rights as citizens to speak about politics without government control.

 

Arizona’s Scheme:  Government Rationing of Political Speech

As Arizona’s experience makes clear, taxpayer-funded election campaigns inevitably mean government rationing of political speech for candidates in the system, candidates outside the system, and independent groups that simply want to make their voices heard in an election.

First, candidates in Arizona who fund their campaigns with taxpayer dollars face a host of restrictions.  They must use only public funds, and the government sets the base subsidy candidates receive based on the public office they are running for.[2]  Taxpayer-funded candidates are forbidden from accepting any monetary or in-kind donations from outside sources, such as individuals or groups that support their message.[3]  They may not even spend their own money on their campaigns.  The punishment for exceeding the scheme’s cap on spending by more than 10 percent is removal from office.[4]  The result is that taxpayer-funded candidates have limited resources and, especially for statewide office, will not be able to reach as many voters with their message and ideas.

For example, in the 2006 Treasurer’s race, Dean Martin’s Democratic opponent, Rano Singh Sidhu, accepted public funds and received $121,253 from the government to reach 2,568,401 eligible voters.  Ms. Singh Sidhu had less than five cents to spend to reach each voter—not even enough money to send a one-page letter to each voter.  Considering the cost of designing, printing and mailing campaign brochures, the importance of television and radio ads, plus the costs of traveling the state to meet voters, there is simply no way to run an effective campaign on such a shoestring budget.

Yet, even though accepting taxpayer funds means less money to reach fewer voters, Arizona’s scheme is designed to force all candidates into the system by making it extremely difficult—if not foolish—to run a traditional campaign funded by voluntary donations.  First, the system reduced by 20 percent Arizona’s already low limits on how much individuals and groups may contribute to candidates, making it extremely difficult for privately funded candidates to attract enough funds to run competitive campaigns.[5]

Second, the scheme gives additional subsidies to taxpayer-funded candidates—up to two times the base amount—whenever privately funded candidates raise or spend more than that base amount.[6]  These so-called “equalization” funds effectively force privately funded candidates to abide by the spending limits imposed on their publicly funded opponents—or trigger even more money for their opponents.  Perversely, the harder a privately funded candidate works, the more his or her taxpayer-funded opponent benefits.  Worse still, privately funded candidates who face taxpayer-funded opponents must spend time and resources filing extensive reports on their activities (not required for candidates using taxpayer funds) so the government knows when to pay out equalization funds.[7]

The government’s job should be to ensure equal access to the polls not equal access to campaign money—but that is what equalization funds try to do.  In truly free elections, candidates with a stronger campaign and a more appealing message should enjoy a funding edge, but in Arizona such hard work is rewarded with a government check to their opponents.

Far from encouraging political participation, as proponents claim, Arizona’s scheme actually discourages political speech and association.  Dean Martin’s campaign for Treasurer in 2004 started returning donations once he received contributions equaling his opponent’s base funding amount to avoid triggering even more government money for his opponent.  The equalization payments thus shut down the political activity of ordinary citizens, who were unable to express their support for Martin by contributing to his campaign, and also forced Martin to abide by the public financing scheme’s expenditure limits. 

It is also highly likely that private donations would have dried up anyway once it became known that those donations would trigger matching funds.  Why contribute to a political campaign when your donation will trigger government dollars to the candidate you oppose?  Moreover, if Martin had faced more than one taxpayer-funded opponent, each of those opponents would have received equalization funds—multiplying the government dollars opposed to Martin by several times.  This is Arizona’s version of “equal” or “fair.”

In short, Arizona’s scheme limits the speech of both taxpayer-funded candidates and privately funded candidates and it significantly tilts the playing field toward candidates who run with public money.  The scheme makes it extremely difficult to run a traditional, privately funded campaign against a taxpayer-funded opponent:  Low contribution limits make it hard to raise money, “equalization” funds punish candidates who do manage to raise money, and extensive reporting requirements take time away from fundraising and campaigning. 

Arizona’s elections scheme also smothers the voices of independent groups, such as the Freedom Club PAC and Taxpayer Action Committee, by heaping taxpayer subsidies on their political opponents.  If a group spends money to support a privately funded candidate, the government steps up to the ATM (in this case, Arizona Taxpayers’ Money) and gives equal funding to the taxpayer-funded opponent. 

These equalization payments force the Freedom Club PAC and Taxpayer Action Committee to consider remaining silent in some races.  The simple act of speaking out in favor of a candidate—whose opponent is participating in Arizona’s welfare for politicians program—will trigger government funds to a candidate they wish to see defeated.  Moreover, from the privately financed candidate’s perspective, support from independent groups is actually harmful because the expenditure, made without the candidate’s approval or knowledge, results in government money going directly into the coffers of his or her taxpayer-funded opponents.[8]

 

Why Taxpayer-Funded Election Schemes Are Unconstitutional

The U.S. Supreme Court has consistently ruled that the government may not limit the amount of money candidates and independent groups spend in political campaigns.[9]  As the Court explained, “Being free to engage in unlimited political expression subject to a ceiling on expenditures is like being free to drive an automobile as far and as often as one desires on a single tank of gasoline.”[10]  While the Court has allowed some limits on the amount of money that any one individual or a group can donate to a particular politician, it has struck down contribution limits so unreasonably low that they prevent candidates from raising the resources necessary to run an effective campaign.[11]

Put simply, expenditure limits are strictly unconstitutional, while contribution limits raise significant constitutional issues—and Arizona’s scheme has both.  Therefore, to pass constitutional muster, the system would have to be truly voluntary[12]; the expenditure and contribution limits cannot be indirectly forced upon candidates by forcing them into the system or by forcing them to abide by the limits even if they refuse taxpayer dollars.  The government cannot do indirectly what the Constitution prohibits it from doing directly.  As the 1^st U.S. Circuit Court of Appeals explained, “Coerced compliance with fundraising caps and other eligibility requirements would raise serious, perhaps fatal, objections to a [campaign finance] system.”[13]  Because of Arizona’s equalization payments and other punitive features, its scheme of taxpayer-funded elections is anything but voluntary.

The 8^th Circuit struck down Minnesota’s scheme of paying “equalization” funds to candidates eligible for public subsidies whenever an independent group spent money to advocate the defeat of such candidates.[14]  As the court said, “[B]y advocating a candidate’s defeat . . . via an independent expenditure, the individual, committee, or fund working for the candidate’s defeat instead has . . . given her the wherewithal to increase[] spending—merely by exercising a First Amendment right to make expenditures[.]”[15]  The court found that the independent expenditure match had a chilling effect on political speech.[16]  The court explained its rationale:

The knowledge that a candidate who one does not want to be elected will have her spending limits increased and will receive a public subsidy equal to half the amount of the independent expenditure, as a direct result of that independent expenditure, chills the free exercise of that protected speech.  This “self-censorship” that has occurred even before the state implements the statute’s mandates is no less a burden on speech that is susceptible to constitutional challenge than is direct government censorship.[17]

Concluding that Minnesota’s equalization payments infringed “the most fundamental of rights,” the court struck down the law because the state of Minnesota had no justifiable reason for curbing speech in the North Star state.[18]  Using public funds to drown out the voices of independent groups chills speech in violation of the First Amendment. 

In contrast, the U.S. Courts of Appeal for the 1^st[19] and 6^th Circuits[20] have both upheld public financing laws in Maine, Rhode Island and Kentucky, though only Maine’s law is as far-reaching as Arizona’s scheme.[21]  In upholding Maine’s equalizations scheme, the 1^st Circuit wrongly claimed, “The public funding system in no way limits the quantity of speech one can engage in or the amount of money one can spend in engaging in political speech, nor does it threaten censure or penalty for such expenditures.”[22]  More bizarrely, the 1^st Circuit upheld equalization payments in part based on the reasoning that people do not have a constitutional right to speak free from response.[23]  But the court missed the point.  People do not have a constitutional right to speak free from response—but they do have a right to speak freely without their speech trigging government funds to the very candidate whom they wish to see defeated.  As the 8^th Circuit correctly reasoned, the knowledge that the government subsidy is triggered by your speech “discourage[s] [individuals] from exercising their rights to . . . speak.”[24]

This split of authority between the circuits means that the U.S. Supreme Court must ultimately resolve the constitutionality of taxpayer-funded election schemes and fully vindicate political speech rights.  Recent High Court rulings give First Amendment advocates reason to hope.  As the Court said in a case involving federal campaign finance regulations, “[W]e give the benefit of the doubt to speech, not censorship.”[25]

 

“Clean Elections”:  Many Promises, Little Benefit

The proponents of taxpayer-funded campaigns make grandiose promises about public funding schemes, such as limiting the “corrupting” nature of accepting voluntary donations, increasing the competitiveness of elections, increasing citizen participation, and improving representation for ordinary people.[26]  However, studies have shown that government-funding systems have a negative impact on citizen perceptions of government and citizen participation in government.[27] 

These findings apply to Arizona’s scheme as well.  As one scholar noted, “There is little evidence that [Arizona’s] Clean Elections law has fulfilled its goals.  Instead, it imposes real burdens on political speech and the ability to run for office....  Arizona’s Clean Elections system may actually harm the political process while imposing significant costs on the public.”[28] 

In a comprehensive six-year review of Arizona’s system, this Goldwater Institute study found that since Arizona’s scheme went into effect, incumbency reelection rates remained near 100 percent and that between 2002 and 2004 the number of primary candidates fell substantially.[29]  The system has also had no measurable impact on voter turnout.  These findings undermine any claims of increasing the competitiveness of elections or improving citizen participation by handing out public funds to politicians.  Moreover, the public financing scheme “has not resulted in any increase in minor or third-party participation in politics.”[30] 

Elections are certainly no “cleaner” since the passage of Arizona’s public financing scheme.  Indeed, the Arizona Republic called the first statewide election under Arizona’s taxpayer-funding scheme “undeniably among the ugliest, muddiest ever.”[31]  And why wouldn’t campaigns be uglier and throw more mud when running for office using government funds?  Taxpayer funded candidates are no longer accountable to donors whom they rely on for both political and financial support.  “Freed” from the necessity to find a message and a platform that resonates with donors, politicians can let loose a barrage of negative ads and use whatever means they would like to disparage their opposition.  America used to prize individuals who went out on their own with a message strong enough to attract others to them.  What happened to that proud history?

           

How Did We Get Here?

How did we reach the day when politics anywhere in America is micromanaged by government bureaucrats and paid for by taxpayers?  Arizona’s elections scheme is a far cry from the nation’s early days of pamphleteers and the original whistle-stop tours—voluntary political activity, with no government limits of any kind.

Much of the answer lies in the cost of modern campaigns.  Pamphlets alone won’t reach many voters and there are so many more voters to reach.  Broadcast and print ads, even in small markets, are expensive, and so are events, a paid staff, mailings, polling and other items needed to convince fellow citizens to elect a person to public office.  Especially in national campaigns, the price of speech ads up:  Some observers think the two major parties may each spend $500 million on the 2008 presidential election alone.  To most people that sounds like “too much” money in politics.  But, as one commentator points out, it is about half the amount Americans spend annually on Easter candy.[32]

Nonetheless, to those who favor campaign finance “reform,” all this spending on political speech is not a sign of healthy and extensive democratic debate over who should run the government, but a sign of a “problem” with the “system.”  For at least 30 years, since the first federal law regulating campaign spending was passed,[33] various “solutions” have been tried:  limits on how much people or groups may give to candidates, who may give to candidates, how much candidates may spend, plus extensive reporting requirements and more.  Still, those who want to voice their political support of a candidate with their pocketbook find a way, and the money Americans spend on politics grows.

So-called “clean elections” schemes like Arizona’s are the end result of the various failed efforts to get money out of politics:  Force out voluntary, private support of candidates by replacing it with mandatory taxpayer funds.

 

Taxpayers Financing Campaigns:  The New Wave of Speech Regulation

Currently, only three states—Maine,[34] Arizona[35] and Connecticut[36]—use tax dollars to fund all of their statewide and legislative political campaigns.  However, at least four other states fund the campaigns of politicians running for certain offices:  North Carolina (judicial elections)[37], New Mexico (Public Regulation Commission and, starting in 2008, statewide judicial elections)[38], Vermont (governor and lieutenant governor)[39], and New Jersey (a limited number of legislative races).[40]  Still more states have considered enacting such systems, including Florida, New York, Hawaii, Illinois, Maryland, Minnesota, Washington and Wyoming.[41]  In addition, in three cities, Tucson, Ariz.,[42] Portland, Ore.[43] and Albuquerque, N.M.,[44] municipal taxpayers are forced to fund citywide races.  The idea has even caught on with some members of Congress; in the First Session of the 110th Congress, Senators Durbin and Specter introduced a taxpayer-funding scheme, the “Fair Elections Now Act.”[45]

Despite their popularity among “reformers” and some political elites, it has not been easy to convince voters to enact welfare programs for politicians.  Arizona’s scheme passed by only a one percent margin.  And after having time to observe their neighbors’ public financing scheme in action, California voters in 2006 soundly rejected Initiative 89, which would have imposed taxpayer-funded elections for statewide elections, by 26 percent to 74 percent, or about three-to-one.[46] 

 

Free Speech Gets Its Day In Court

IJ first filed this constitutional challenge to Arizona’s elections scheme in 2004 in Arizona U.S. District Court, arguing that equalization payments chill free speech and compel privately financed candidates to either accept tax subsidies or abide by strict expenditure limits.  IJ initially represented then-Senator Martin as well as other privately financed candidates, and a political action committee, the Association of American Physicians and Surgeons.  The district court dismissed that lawsuit,[47] but IJ appealed to the 9^th Circuit and won the right to proceed with the case.[48]  Now, nearly four years after filing this case to protect fundamental constitutional rights, free speech will finally get its day in court.

 

The Litigation Team

Timothy D. Keller, executive director of the Institute for Justice Arizona Chapter, and William R. Maurer, executive director of the Institute’s Washington Chapter, are lead attorneys for the case.  Keller was part of the litigation team that previously challenged Arizona’s public financing scheme’s funding mechanisms as compelled speech, which resulted in the scheme’s fees imposed on for-profit lobbyists—but not non-profit lobbyists—being struck down as an unconstitutional prior restraint on speech.[49]  Maurer recently achieved a free speech victory over campaign finance regulation before the Washington Supreme Court.

 

Reinforcing and Expanding Free Speech

The Institute for Justice litigates in support of fundamental individual liberties, including free speech.  IJ’s headquarters and state chapters have challenged or are challenging restrictions on political speech across the nation, including:

• San Juan County v. No New Gas Tax,[50] in which the Institute for Justice secured a unanimous opinion from the Washington Supreme Court halting efforts by the government to treat on-air radio commentary about an initiative campaign as “in-kind” contributions subject to regulation under state campaign finance laws.

• Sampson v. Coffman, in which IJ is challenging Colorado’s campaign finance laws in federal court on behalf of six neighbors in Parker North, Colo., sued by political opponents for speaking out against the annexation of their neighborhood to a nearby town.

• Independence Institute v. Coffman, in which IJ represents a Colorado non-profit think tank taken to court for speaking out against two tax-raising referenda.

 

For More Information Contact:

Lisa Knepper, Director of Communications
Institute for Justice
901 N. Glebe Road, Suite 900
Arlington, VA  22203

(703) 682-9320

lknepper@ij.org