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FEC Mulls Cures for Presidential Funding System

As Sens. John Kerry (D-Mass.), Joe Lieberman (D-Conn.) and other Democratic hopefuls consider breaking with tradition and rejecting public funds for their 2004 presidential bids, a number of campaign finance experts are floating plans to save the troubled presidential funding system.

“I think it’s clear that the public financing system is no longer consistent with the political and financial realities of running for president in the 21st century,” said Michael Toner, a Republican appointee who sits on the Federal Election Commission.

Toner is trying to rally support from his five fellow commissioners — two other Republicans and three Democrats — for a reform plan he has developed to resuscitate the presidential funding system.

His plan would substantially increase the spending ceilings for candidates who take matching funds, increase the total amount of matching funds a candidate can obtain and double the top match a candidate can receive from $250 to $500.

“This would allow the matching funds system to keep pace with the [Bipartisan Campaign Reform Act’s] doubling of the contribution limits from $1,000 per election to $2,000,” Toner said.

While he questions whether there should be any sort of public financing system at all considering the low percentage of taxpayers who agree to donate part of their federal income tax to the system, the GOP commissioner recommends that the eligibility requirements for matching funds be significantly tightened.

Currently, a candidate must raise $5,000 in individual contributions of $250 or less in 20 states to qualify for matching funds, a standard that has not been altered since 1974.

That means presidential candidates need to raise only 20 contributions of $250 in 20 states to qualify for federal funds. Toner — who previously served as chief counsel to the Republican National Committee and general counsel to President Bush’s 2000 campaign — would raise that threshold tenfold.

“If requirements were increased tenfold to $50,000 in 20 states, that would require candidates to raise $1 million in private contributions across the country before they were entitled to receive public money, which would be a much more meaningful showing,” he explained.

Value in More Voices

Commissioner Scott Thomas, a Democrat who has sat on the FEC since 1986, noted in a recent public presentation that the FEC has recommended changing this threshold for eligibility for years.

He also said the FEC has previously recommended that Congress “specify that a criminal conviction relating to fraud could serve as a disqualification for public funding under certain circumstances.”

But Thomas also pointed out the benefit of encouraging more candidates to participate in the system, noting that candidates such as the Rev. Jesse Jackson (D), Gary Bauer (R), Ralph Nader (Green), Pat Buchanan (Reform) and others “might not have entered or stayed in the presidential fray without public funding.”

“Whether we like the results they helped engineer, we must concede that there is value in hearing their voices,” Thomas said.

Whether Thomas and other campaign finance experts agree with Toner’s approach, the fact that the presidential funding system is on its last legs is widely acknowledged. Declining taxpayer participation, front-loaded primaries and skyrocketing costs of presidential campaigns have all contributed to a serious breakdown in the presidential public financing system.

While the percentage of taxpayers who agreed to contribute to the system by checking a box on their tax return averaged between 25 percent and 30 percent from the mid-1970s through the mid-’80s, the average has hovered around 11 percent to 12 percent in the past four years. The number of taxpayers checking “yes” on their tax returns has declined from about 40 million in 1980 to about 20 million in 2000.

Toner said he believes low participation rates among taxpayers in the check-off system raise serious questions about the legitimacy of even having public financing with such dismal levels of public approval.

That question aside, FEC officials are warning that primary candidates will likely face another delay in getting the full payments of the funds to which they are entitled. In 2000, the shortfall in public funds for presidential candidates meant they received only 50 cents on the dollar in January 2000 when the FEC began making payouts.

In 2004, the resulting delay from the shortfall, according to Thomas, could extend for “several more months” than the delay that occurred in the 2000 cycle.

Spending, Too Early?

But Thomas noted during a recent task force meeting on presidential financing convened by the Campaign Finance Institute that shortfalls are not simply a result of declining check-offs. The problem is exacerbated by the way the Treasury Department sets aside funds that are projected for later payouts to general election candidates and disregards the estimated check-off proceeds.

Thomas noted in his presentation that the FEC has over the past several years recommended that Congress adjust the $3 check-off amount for inflation to keep pace with the payouts from the fund, which are already indexed for inflation.

He also noted the possibility that the Internal Revenue Service could be persuaded to urge individuals to check “yes” on tax publications.

Thomas also raised the question of whether current spending ceilings are at the appropriate level, particularly since there is a trend whereby early primaries cause candidates to exhaust most of their funding, leaving little money to spend between April and August.

In recent years, this trend has contributed to presidential candidates relying on party committees and outside groups to fund issue ads to keep their message alive.

Thomas noted that the campaign of Republican nominee and former Sen. Bob Dole (Kan.) faced this predicament in 1996, when it had spent $29.3 million of its $30.9 million limit by the end of March. As a result, the campaign shifted its staffers to the Republican National Committee’s payroll and relied on about $18 million worth of issue ads.

“As this is a dilemma primarily faced by candidates taking on an incumbent who can save primary campaign resources for the April-to-August lull, the Democrats in 2004 are next likely to have this experience,” Thomas acknowledged.

Leveling the Field

Democracy 21’s Fred Wertheimer, a champion of the recent overhaul of regulations governing House and Senate campaigns, is touting his own reform proposal for the presidential system.

He recommends providing greater public funds for candidates and raising the spending limits, noting the new increased limits on hard-money contributions could end up hurting those who rely on public funding but are running against opponents who do not.

“With the increase in the limit of individual contributions to $2,000, candidates who reject public funding and spending limits now will have an easier time raising larger amounts of private money,” Wertheimer said. “This will worsen the potential competitive disadvantage of publicly financed presidential candidates and increase incentives for candidates to stay out of the public financing system.”

Like Toner, Wertheimer suggests doubling the match of public funds from $250 to $500, but he also would couple that change with a requirement that a candidate who enters the system agrees not to raise individual contributions of more than $500 each. That would mean the bulk of their contributions would be public funds.

He also advocates raising the overall spending limits for presidential primaries from $50 million to $75 million, repealing state-by-state primary spending limits and providing additional public funds to publicly financed candidates facing a privately financed opponent.

Wertheimer also proposes making public funds available to candidates earlier in the process (by July 1 of the year prior to the election), increasing the funds available by raising the taxpayer participation amount and indexing the amount for inflation.

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