Elections: Campaign Finance
of Practical Policy and Legal Issues of Vermont's Campaign Finance
Law - 17 V.S.A. 2801 et. seq.-March 11, 1999
TO: Senate Government Operations / House Local Government Committees
FROM: Secretary of State Deborah L. Markowitz
RE: Review of Practical Policy and Legal Issues of Vermont’s
Campaign Finance Law - 17 V.S.A. 2801 et seq.
DATE: March 11, 1999
I have reviewed Vermont’s new Campaign Finance Law to identify the practical implementation issues that candidates and this office will face, particularly for candidacies for state office in the year 2000. It is my goal to strengthen and clarify the new law so that its policy goals can be achieved. The comments below follow the statutory framework and focus on practical, legal and - in some instances - policy concerns that I hope that your committees will consider this session.
- Issues that could use legislative attention:
1. Issue: Treatment of Expenditures by Candidate in Exploratory Period - §2801(1)(A)
An individual becomes a "candidate" by, among other things, making expenditures of $500.00. According to the new campaign finance law a person cannot qualify for public financing if he or she becomes a candidate in this way before February 15th of the election year. 17 V.S.A. §2853(a),
As a practical matter, individuals considering a statewide race always go through an exploratory period when s/he considers practical and personal matters before making a definite decision about running. During this period the individual who is considering running contacts people around the state to be sure that s/he will have the support necessary to run. This process can begin a year or more before the formal campaign begins, and result in travel and telephone expenses -- charges that can easily exceed $500.00 without much effort. At the reimbursement rate of 31 cents per mile, a potential candidate who made four round trips between Swanton and Brattleboro would trigger her or his official candidacy, disqualifying them from receiving campaign finance grants.
The ambiguity in the finance law as it applies to these incidental but necessary expenditures during the pre-candidacy exploratory period creates a minefield for the best-intentioned candidate. Opponents and the press are likely to challenge a political candidate’s failure to report exploratory expenditures for two reasons: (1) the penalties are severe -- civil fines, criminal liability, and possible disqualification from campaign finance grants; and (2) this could lead to a plethora of complaints filed by political opponents in the waning days of a campaign
I would like to offer candidates clear guidelines. The challenge is to balance the legitimate needs of a potential candidate with the purposes of the statute. An overly strict interpretation of mileage and telephone expenditures during the pre-candidacy period will deter many well-qualified candidates from even considering public office without advancing any statutory objectives.
Suggested Resolution: I ask that you consider amending 17 V.S.A § 2801(1)(A) as follows:
"’Candidate’ means an individual who has taken an affirmative action to become a candidate . . . [by] accepting contributions or making expenditures totaling $500 or more, not counting the individual’s personal telephone and travel expenses." This change would make it clear that an individual who has personal telephone and transportation expenses associated with an exploratory campaign will not trigger a candidacy.
In addition, you could consider exempting a candidate’s personal travel and telephone expenses from the definition of expenses (allowing candidates to choose to count them if they wished to be reimbursed). In the overall picture these are minor expenses in a statewide campaign, and it would further the policy goal of promoting grassroots campaigns. It would also make campaign expense accounting easier for candidates since it is often difficult to separate personal travel and telephone expenses from campaign expenses. The suggested change would be to 17 V.S.A. § 2801(3). "Expenditures means a payment, disbursement, distribution, . . . or anything of value paid or promised to be paid, for the purpose of influencing an election, advocating a position on a public question, or supporting or opposing one or more candidates. For the purpose of this chapter, "expenditures" do not include a candidate’s personal telephone and travel expenses related to the campaign.
- Issue: Two Year General Election Cycle Does Not Recognize Candidate’s Debts or Wind-Down Expenses - § 2801(9).
According to 17 V.S.A. § 2801 (9), a two-year election cycle begins the day after a general election. This creates problems for candidates from the prior election who may want to run in the next election because there are invariably expenses associated with winding down the prior campaign (particularly in state wide races where you have staff), or because fees and bills associated from the prior campaign continue to trickle in for some time after election day. Also, candidates may need to retire the debts of the campaign.
The issue of when the two-year election cycle begins is important because a candidate will not qualify for pubic financing if he or she has spent over $500 in an election cycle prior to February 15th of the election year. In addition, I do not believe that the legislature intended that payment of expenses and contributions to retire a debt associated with the prior election be charged to the next campaign. In light of the strict raising and spending limits it is important to allow candidates to retire debts, or to pay expenses associated with a previous campaign without it counting toward the next campaign cycle.
Suggested Resolution: I suggest that you consider amending 17 V.S.A. § 2801 (9) as follows: "Two year general election cycle means the 24 month period that begins forty-one days after a general election." (When the final report of the campaign is filed by state wide and legislative candidates.)
In the alternative you might consider amending 2801(9) by adding "Expenditures related to a previous campaign and contributions to retire a debt of a previous campaign shall be attributed to the earlier campaign cycle." This would give a candidate longer than the forty days after an election to pay expenses and retire debts.
Note that neither of these amendments would allow a candidate to circumvent the expenditure or contribution limits of the campaign finance law.
- Issue: Limitation on Out-of-State Contributions Needs Fine Tuning - §2805(c).
This provision limits a candidate, party or committee to receiving 25% of contributions from non-residents of Vermont. An implementation problem arises because candidates cannot know at the beginning of a campaign how much he or she will be able to raise by the end of the campaign. Generally more of a candidate’s early contributions come from out-of-state than later contributions because candidates raise seed money from personal friends and family members, who may be from out-of-state. Even if we do not measure the 25% until the end of a campaign the result may be that some candidates will have to fundraise for additional in-state money to offset earlier out-of-state contributions.
Suggested Resolution: I suggest that you consider amending 17 V.S.A. § 2805(c) to read: "A candidate, political party, or political committee shall not accept, in any two year general election cycle, more than 25% of total contributions of the campaign expenditure limitation amount from contributors who are not residents of the state of Vermont or from political committees or parties not organized in the state of Vermont. This would set a definite amount a campaign could not exceed in out-of-state fundraising.
- Issue: Penalties for Minor Violations - §2806(b).
A violator of the law is subject to a $10,000.00 fine for each violation. This is a very severe penalty and does not make it easy to sanction candidates who are late with filings or make incomplete filings.
Suggested Resolution: I suggest that you consider giving this office authority to assess civil penalties for minor violations of the law. This would not prevent the attorney general’s office from bringing action under the other provisions of § 2806. The state of Maine has set penalties at 1% of the amount reported on the campaign finance report, with a 3% penalty for the second offense and a 5% penalty thereafter. If you would like our office could work up some proposals for your consideration.
Note that it also is unclear what constitutes a single violation. For example, should a candidate who overspends by $100 by making ten expenditures to ten vendors be subject to a potential fine of $100,000? Compare this to a person who overspends by making one payment of $20,000 for a late media buy, subject him or her to a potential fine of $10,000.00.)
5. Issue: Related Expenditure Provision Discourages Grassroots Activities
It is my understanding that this new campaign finance law seeks to discourage long media campaigns and encourage grassroots campaigns. A central tool of grassroots campaigns are small "meet the candidate" house parties. These events allow candidates to use volunteers to help get their name and message out (by sending out invitations to friends and neighbors), and it generates additional volunteers (those who actually come often donate small sums of money or volunteer to place lawn signs or work on the campaign.) The current law discourages house parties because it will place an accounting requirement on the volunteer hosts, and the expenses associated with the party will likely be charged as an expense to the candidate.
17 V.S.A. § 2809 (b) requires a candidate to count as an expense to the campaign any expenditure made on behalf of a candidate in excess of $50. Any successful house party will exceed this amount in paper, postage and refreshment costs. This is because experience proves that, at most, 20% of the people invited will come to a social event of this nature. Accordingly, to get 20 people to attend, invitations must be sent to at least100 people.
Because a house party is a related campaign expenditure the host will have to account for all of the expenses associated with the party so that the candidate can include these expenses in his or her campaign finance report. These expenses will count against the candidate’s campaign spending limit. Candidates will be put in a position of having to choose between holding house parties or saving their expenditures for paid media. Note that under prior and existing law these expenditures count as a contribution to the campaign.
Suggested Resolution: I suggest that you consider amending § 2809(c) by raising the amount a person may spend on behalf of a candidate. The previous practice of this office was to advise campaigns that related expenditures under $500 did not have to be counted as an expense of the campaign. This amount would now exceed the contribution limit for some campaigns. Accordingly, I would suggest that you limit the amount to the individual contribution amount or no more than $500. The suggested change to § 2809 would be as follows:
(a) A related campaign expenditure made on a candidate's behalf shall be considered a contribution to the candidate on whose behalf it was made.
(b) A related campaign expenditure made on a candidate's behalf shall be considered an expenditure by the candidate on whose behalf it was made. However, if the expenditure did not exceed [$50.00] the lesser of either the individual contribution limit for the campaign or $500.00, the expenditure shall not be considered an expenditure by the candidate on whose behalf it was made.
- Issue: Related Expenditure Provision Discourages Party Sponsored Meet the Candidate Campaign Events.
An additional provision of the related expenditure law requires a candidate to count as an expense the costs of meet the candidate campaign events put on by a political party or political committee if the event costs more than $100 and if the expenses were for other than refreshments and related supplies. This overlooks the costs of invitations (paper and postage) and/or phone calls, and it does not allow for possible room rental costs.
Suggested Resolution: I again would suggest that you consider raising the expenditure amount to $500 or $1000. You could also expressly limit expenditures to those that are directly related to putting on the event. The suggested change to § 2809 would be as follows:
(d) An expenditure made by a political party or by a political committee that recruits or endorses candidates, that primarily benefits six or fewer candidates who are associated with the political party or political committee making the expenditure, is presumed to be a related expenditure made on behalf of those candidates. An expenditure made by a political party or by a political committee that recruits or endorses candidates, that substantially benefits more than six candidates and facilitates party or political committee functions, voter turnout, platform promotion or organizational capacity shall not be presumed to be a related expenditure made on a candidate's behalf. In addition, an expenditure shall not be considered a "related campaign expenditure made on the candidate's behalf" if all of the following apply:
(1) The expenditures were made in connection with a campaign event whose purpose was to provide a group of voters with the opportunity to meet the candidate personally.
(2) The expenditures were made only for [refreshments and related supplies that were consumed at that event] expenditures directly related to the event.
(3) The amount of the expenditures for the event was less than [$100.00] $500.00.
Note that the Attorney General’s office has suggested that the legislative intent was that these provisions apply to all house parties – not just to events put on by political parties and committees. If this is your intent, I suggest that this provision be clarified to avoid misinterpretation by the courts.
- Issue: Deposits in Non-Interest Bearing Accounts - §2853(b)(2).
According to section 2853(b)(2) all qualifying contributions ($35,000 – for a gubernatorial candidate and $17,000 for a lieutenant gubernatorial candidate) must be kept in a non-interest bearing account. This provision deprives the campaign or the state of interest earnings, giving a windfall to the bank depository. Since any surplus reverts to the Campaign Finance fund, it makes little sense to require that candidate finances be deposited in non-interest bearing accounts. In statewide races, this office has advised that it is appropriate for candidates to establish two accounts, an interest bearing savings and a checking account, making transfers from one to the other, as the campaign requires. We have advised that house candidates use non-interest-bearing accounts to avoid having to get a Federal Tax ID number, particularly since the amount of money involved is generally so small that any possible interest earned would be negligible.
Suggested Resolution: I suggest that you consider allowing qualifying contributions to be held in an interest bearing account in the name of the candidate’s campaign.
8. Identification of Political Advertisements - § 2882
Section 2882 requires all political advertisements to include the name and address of the person or committee that paid for the advertisement, along with the name of the candidate on whose behalf the materials are being published or broadcast. This section goes on to say that "in the case of printed or written matter, the name and address shall be printed or written large enough to be clearly legible, except that this shall not apply to buttons or any written or printed matter attached to or displayed on any motor vehicle." On its face, this statute requires that buttons and bumper stickers include the required identifying information. I am not sure this was intended by the legislature, particularly in light of the fact that, given the size of many lapel stickers and buttons, this information cannot be easily included.
Suggested Resolution: I suggest that you consider exempting lapel stickers, bumper stickers and buttons from the identification requirements.
- Issue: In-Kind Contributions Over $50 Should be Allowed - § 2805(d).
Section 2805 (d) requires all contributions in excess of $50 to be by check. However, a contribution includes "anything of value" such as paper supplies, computers, gift items for auctions and other items that may be given as an in kind contribution to a candidate.
Suggested Resolution: I suggest you consider amending § 2805(d) as follows:
"All cash contributions in excess of $50 shall be by check."
B. Issues We Will Monitor.
The following are issues that this office will monitor, in order to report back to you after the year 2000 elections so that you can judge whether this new law is meeting your policy objectives.
1. Issue: Qualifying Contributions- §2854(b) and §2854(c).
There are three issues that this office will monitor relating to the qualifying contributions that a candidate for governor or lieutenant governor must raise to qualify for public financing:
First, the amount required to be raised, and the numbers of people required to contribute are very large. The question will be whether this is too great a threshold for candidates to reasonably meet, particularly since they may not begin to collect qualifying contributions until after February 15th of the election year.
Second, §2854(b) requires a candidate to collect qualifying contributions from around the state, and limits to 25% the number of contributors that may be from a single county. A challenger, say a state senator running for state office, is known in her county but not statewide. The candidate is prohibited from fully utilizing her local political base in her effort to run and win statewide. Yet this provision clearly makes the challengers job more difficult.
Third, §2854(c) requires that each qualifying contributor sign an acknowledgment of his/her contribution. While this may seem like a modest requirement, it will be a daunting task, particularly for a relatively unknown challenger. Many people resist signing things for all kinds of reasons. They may be willing to contribute, favoring a challenge, but aren’t ready to sign when they consider that an expression of their intention of how they will vote.
2. Issue: Grants: Amount and Timing - § 2855(b)
The allocation of grants between primary and general elections ($75,000/$225,000 for Governor and $25,000/$75,000 for Lt. Governor) may dictate strategy of campaigns and limit primary challenges, particularly against incumbents. Because the candidate who raises the qualifiers can receive the entire campaign finance grant it will encourage candidates to bypass primaries and run as an independent to have access to the full finance grant legally available.
3. Issue: Unlimited Contributions from Candidate and Immediate Family - §2805(f)
Acknowledging the current state of First Amendment law, this provision gives an obvious advantage to the wealthy candidate. We will monitor this provision of the law to assess how it affects candidacies during the 2000 election.
4. Issue: Absence of Inflation Adjustment for Contributions - §2805 and §2842
The federal contribution limit of $1,000.00 has not been adjusted since passage. Its value today is about $300.00 compared to the $1,000.00 when enacted. This makes fund raising significantly more difficult for federal candidates.
Without an inflation adjustment, the same situation will befall Vermont candidates. The Legislature has very little incentive for adjusting contribution amounts even when its failure to do anything reduces the adjusted value of the contribution limits. I suggest this issue be watched and, if necessary, that an inflation adjustment provision be added to the law.
5. Issue: Expenditure Limitation: Impact on Incumbents versus Challengers - §2805(a)
In general, it is likely incumbents, particularly for offices below governor where free media is more available, will benefit by expenditure limitations, especially if they are set so low a challenger can’t pay for the media advertising that has become so essential to a successful campaign. We will monitor this provision, particularly as to Senate and House races, which have become very expensive in the past two election cycles in part due to increased media expenditures.
6. Issue: Campaign Finance Qualification Period - Impact on Organizing - §2851(4)
This provision, along with §2853(a), effectively prohibits campaigning by an individual who wishes to receive finance grants until Feb. 15 of the election year. This may favor the incumbent by stalling a challenger’s efforts and it may also inhibit political discussion and debate. While many citizens object to lengthy campaigns, this criticism essentially applies to lengthy media battles, not the kind of grassroots organizing that not only precedes a challenge to an incumbent but also creates political interest and involvement.
In summary, Vermont’s Campaign Finance law is a significant step to restore the public’s faith in our political process by reducing the influence of big money in elections. However, its fair implementation necessitates certain inconsistencies be resolved before the 2000 election cycle.