Arizona Campaign Finance (First Challenge) - Background

Challenging Coerced Subsidies
for the Political Class:
A First Amendment Lawsuit


Campaign finance reform is one of the hottest issues on the political landscape. Efforts to reform the system through restrictions on campaign contributions have produced their own perverse byproducts, such as increased influence for political action committees, huge indirect "soft money" campaigns, and competitive advantages for wealthy self-financed candidates.

Predictably, some reformers have reacted to those consequences by proposing more, rather than less, government regulation through public financing of campaigns. Knowing that taxpayers are unlikely to consent willingly to subsidize political campaigns, participation in public financing schemes typically is depicted as "voluntary." But few people want to spend their tax dollars to support politicians, leaving the subsidies woefully insufficient. When voluntary support is insufficient-as it inevitably is-public financing schemes turn to coercion.

That is the dirty little secret underlying the so-called Arizona Clean Elections Act, which could prove a harbinger for nationwide public campaign financing efforts. Enacted by a narrow majority of the Arizona electorate in November 1998, the law creates a public financing system for candidates for state offices, accompanied by strict restrictions on campaign contributions and funded partly by a state income tax credit for contributions to the fund. But hidden among the fine print are two other coerced revenue sources: fees imposed upon certain specified lobbyists, and a surcharge on civil and criminal fines. People who incur such costs are forced to subsidize the speech of others.

Whatever one thinks of various campaign finance reform proposals, coerced support of political campaigns strikes at the heart of our First Amendment freedoms. Paramount among the protections of our Bill of Rights is the freedom to engage in political speech-or to refrain from doing so.

In this lawsuit, we challenge provisions of the Arizona Clean Elections Act that compel some individuals, against their will, to pay for the political speech of others. Its resolution could set vital First Amendment parameters for nationwide efforts to regulate and coercively finance political campaigns.

The Challenged Law and the First Amendment Context

The constitutional standards applicable to campaign contributions are set forth primarily in the U.S. Supreme Court's 1976 decision in Buckley v. Valeo.1 The Court recognized that both candidates and contributors have First Amendment free speech rights expressed through campaign spending and contributions. But it upheld some limits (such as a $1,000 campaign contribution limit for federal campaigns) while striking down others (such as the amount candidates can contribute to their own campaigns). The decision produced an array of perverse consequences: the value of a $1,000 campaign contribution has diminished over time, forcing candidates to spend more time raising money; the influence of political action committees and independent "soft money" campaigns have grown; and wealthy self-financed candidates enjoy a marked advantage over those who have to raise their own funds.

In recent years, several courts have struck down limits on campaign contributions and spending. For example, the U.S. Court of Appeals for the Eighth Circuit in 1998 struck down Missouri's $1,000 limit on contributions to state candidates for office holding that the limits violated First Amendment rights and that the state had failed to prove its case that contributions automatically lead to corruption.2 Meanwhile, some "reformers" have responded to the perverse ramifications of existing limits by proposing even more government regulation, including public financing of elections. At the federal level, a three-dollar checkoff on federal income tax forms is used to finance "voluntary" limits and public financing of presidential candidates, but the number of voters who designate a portion of their taxes to political campaigns is paltry and has been on the decline for years. In 1997, only 12.5% of taxpayers checked "yes" on their returns for use by the Presidential Election Campaign Fund as opposed to 28.7% in 1980.3 Further restrictions sponsored by Senators John McCain (R-AZ) and Russell Feingold (D-WI) have failed to secure congressional passage.

Action has moved beyond Congress to the states. In November 1998, a slender majority of the Arizona electorate enacted Proposition 200, which its backers dubbed the "Citizens Clean Election Act." Applicable to all elected state offices, the initiative creates an elaborate new system of public campaign financing, restrictions on campaign contributions and expenditures, extensive new reporting requirements and penalties, and a commission to administer the scheme. At the heart of the initiative is a public financing system that ostensibly is "voluntary" both for candidates and contributors.

To qualify for public financing, candidates must raise a specified number of qualified five dollar contributions from registered voters from their districts within a specified period of time, and must forego additional contributions and adhere to strict spending limits. In return, candidates receive public funding according to formulas set by the initiative. Additional public funds are provided if independent groups campaign in opposition to the candidate. By contrast, nonparticipating candidates are not subject to spending restrictions, but previous limits on campaign contributions are reduced by twenty percent.

The amount of available public financing, however, is limited by the amount of generated revenue. The initiative's sponsors apparently recognized that Arizona voters would never authorize campaign subsidies through taxation. So they emphasized the "voluntary" funding aspect: a five dollar contribution similar to the federal presidential campaign fund check-off or a dollar-for-dollar tax credit, for up to 20 percent of tax liability or $500, whichever is greater, for designations to the fund. In other words, some taxpayers could designate their entire state income tax liability to subsidize political campaigns.

Despite this lavish incentive-much more generous than the federal checkoff-the initiative's sponsors understood that few taxpayers, if given the choice, would designate tax funds for political subsidies, even if it meant no additional tax liability. So they buried within the details of the initiative two compulsory funding sources:

  • first, the law imposes a $100 annual fee on certain lobbyists-but only those who represent for-profit entities or trade associations; and
  • second, it imposes a ten percent surcharge on all civil and criminal judgments, including parking and traffic fines.

Through these mechanisms, individuals are forced to subsidize the political speech of others-a chilling prospect in a free society. These forced subsidies betray the hypocrisy of the initiative's sponsors: purporting to stand for "clean" elections, they hid within a supposedly "voluntary" public campaign finance scheme a system of coerced subsidies.

Much debate exists over the meaning of the First Amendment, but the one point on which all agree is that political speech is at the core of the free-speech guarantee. A bedrock principle of the First Amendment is that the government may not compel anyone to support the speech of someone else. As Thomas Jefferson declared, "[T]o compel a man to furnish contributions of money for the propagation of opinions which he disbelieves, is sinful and tyrannical."4 The U.S. Supreme Court consistently has struck down compelled political speech. For instance, the Court has invalidated the use of mandatory public employee union dues for political purposes, holding that the First Amendment requires "that such expenditures be financed from charges, dues, or assessments paid by employees who do not object to advancing those ideas and who are not coerced into doing so against their will. . . ."5

The lobbyist fees also impermissibly condition the exercise of a constitutional right-the First Amendment right to petition for redress of grievances-upon subsidizing the political speech of others. The state may assess fees upon lobbyists related to administrative costs of registration and other legitimate state regulations, but it may not impose a fee unrelated to such costs. Likewise, the initiative discriminates among lobbyists. Only those representing for-profit entities (such as chambers of commerce or trial lawyers) have to pay, while nonprofit lobbyists (such as labor unions, environmental groups and the League of Women Voters) do not. Such discrimination is forbidden by the First and Fourteenth Amendments.

The initiative's sponsors also picked out another unsuspecting group: people who incur civil and criminal fines, who now have to pay a ten percent surcharge to subsidize politicians. The surcharges also violate the First Amendment prohibition against compelled support of political speech.

Whatever the merits of campaign finance reform and public financing of campaigns, the boundaries clearly must be set by the First Amendment. The clearest of all First Amendment principles is that an individual cannot be forced to support someone else's political beliefs or activities. Proposition 200, with its hidden system of coerced political subsidies, blatantly violates that principle.

The Litigation

Following enactment of Proposition 200, the initiative was challenged by the Arizona Chamber of Commerce and others in a special action in the Arizona Supreme Court on a variety of state and federal constitutional grounds, including the First Amendment. However, the Arizona Supreme Court decided not to grant the special action.6 The Chamber of Commerce has filed a new lawsuit against Proposition 200, alleging state constitutional violations such as separation of powers guarantees, in Maricopa County Superior Court

This lawsuit, by contrast, is filed in federal district court, challenging the coerced contribution components of Proposition 200 under the free-speech and equal protection guarantees of the First and Fourteenth Amendments. Because the coerced subsidy provisions are essential to the financing of the entire campaign finance system, we are asking the U.S. District Court for the District of Arizona to enjoin the proposition in its entirety.

The plaintiffs in the lawsuit all believe that campaign contributions must be truly voluntary and have joined forces to challenge the coerced funding of political speech. Like many other citizens, State Rep. Steve May recently received a parking ticket-and was assessed a ten percent surcharge, which he refused to pay. "While politicians have a constitutionally protected right to free speech, I do not believe they have a constitutional right to make me pay for it," Rep. May argues. "Many politicians in this state espouse philosophies that I find objectionable, and I will not allow my hard-earned money to fund offensive political campaigns."7

Thomas Rice is also liable for an overdue meter in the City of Tempe and objects to a portion of the fine assessed against him going to support political campaigns. Rep. May and Mr. Rice have joined this lawsuit to challenge compelled funding of elections. Tim Lawless, who lobbies on behalf of the Chamber of Commerce, and Rick Lavis, who represents agricultural interests within the state, are united in their belief that the mandatory lobbyist fee violates the First Amendment and have also joined the lawsuit.

The Litigation Team

The Institute for Justice is a nonprofit public interest law firm based in Washington, DC, which litigates in support of individual rights and against the excesses of the regulatory welfare state. The two lead counsel are litigation director Clint Bolick, who among other cases recently helped successfully defend a state income tax credit for contributions to private scholarship funds in the Arizona Supreme Court;8 and senior attorney Scott G. Bullock, who among other cases recently won a major First Amendment decision protecting free speech on the Internet against the Commodity Futures Trading Commission, which sought to license and regulate investment newsletters, software developers, and website operators.9

Local counsel, assisting the case on a pro bono basis, is Patrick Byrne of Snell & Willmer.

For more information, or to arrange an interview with the Institute for Justice and its clients, please contact:
John E. Kramer, Vice President for Communications
Institute for Justice
901 N. Glebe Road, Suite 900
Arlington, VA 22203
Phone: (703) 682-9320 Fax: (703) 682-9321

1. 424 U.S. 1 (1976).

2. Shrink Missouri Gov't PAC v. Adams, 161 F.3d 519 (8th Cir. 1998). On January 25, 1999, the U.S. Supreme Court accepted this case for review, and the case will be heard during the Court's October 1999 term.

3. See Laura R. Vanderkam, "Fewer Tax Form Check-Offs Jeopardize Campaign Funds," The Washington Times, July 19, 1999, p.3.

4. Quoted in Rosenberger v. Rector and Visitors of University of Virginia, 515 U.S. 819, 871 (1995)(Souter, J., dissenting).

5. Abood v. Detroit Board of Education, 431 U.S. 209, 235-36 (1977).

6. The Arizona Chamber of Commerce v. Hull, CV 99-0122SA, relief denied, May 3, 1999.

7. Quoted in Mark Steele, "Clean Elections Act Fosters Deception," Arizona Republic (July 21, 1999), p. 2.

8. Kotterman v. Killian, 193 Ariz. 273, 972 P.2d 606 (1999).

9. Taucher v. Born, 1999 U.S. Dist. LEXIS 9304, (U.S. Dist. D.C., June 21, 1999).

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