CAMPAIGN FINANCE REFORM AND INCENTIVES TO VOLUNTARILY LIMIT CANDIDATE SPENDING FROM PERSONAL FUNDS: CONSTITUTIONAL ISSUES RAISED BY PUBLIC SUBSIDIES AND VARIABLE CONTRIBUTION LIMITS
CRS Report for Congress
Campaign Finance Reform and Incentives to
Voluntarily Limit Candidate Spending From
Personal Funds: Constitutional Issues Raised
by Public Subsidies and Variable Contribution
Limits
L. Paige Whitaker
Legislative Attorney
American Law Division
Summary
The Supreme Court in Buckley v. Valeo ruled that spending limits, including the
amount a candidate can spend on his or her own campaign from personal funds (also
known as personal fund expenditure limits) are unconstitutional. The Court did,
however, uphold a system of spending limits, on the condition that they are voluntarily
accepted in exchange for some form of public financing. As a result of these Court
rulings, the concept of various incentives toward voluntary compliance with a personal
funds expenditure limit has been developed. This report discusses some constitutional
issues raised by two such incentives: public subsidies and variable contribution limits.
An amendment to S. 27 (McCain/Feingold), SA 115 (Domenici) (approved 70 to
30 on March 20, 2001), would raise the limits on contributions to a Senate candidate
whose opponent exceeds a designated level of personal funding in his or her campaign.
Origin of Incentives Toward Compliance With Personal Funds
Expenditure Limit
Legislation to impose mandatory expenditure limits on the amount a candidate can
spend on his or her own campaign from personal funds (also known as personal fund
expenditure limits) is unlikely to be upheld as constitutional. In Buckley v. Valeo, the U.S.
Supreme Court expressly ruled that limits on personal expenditures by candidates from1
personal or family resources are unconstitutional. Similar to limitations on independent
1 424 U.S. 1, 54 (1976). For further discussion of the Supreme Court’s holding in Buckley and
subsequent related decisions, see CRS Report RL30669, Campaign Finance Regulation Under
(continued...)
Congressional Research Service ˜ The Library of Congress
expenditures, the Court found that such restraints impose "a substantial restraint on the
ability of persons to engage in protected First Amendment expression."2 A candidate has
a First Amendment right to advocate vigorously and tirelessly for his or her own election,
according to the Court. Further, the Court noted, it is particularly important that
candidates have the "unfettered opportunity" to communicate their views and positions on
the issues in order for the electorate to make an informed vote.3
The Buckley Court did, however, uphold a system of voluntary spending limits
conditioned on the acceptance of some form of public financing.4 According to the Court,
public financing is within the constitutional powers of Congress to reform the electoral
process and does not violate any First Amendment rights by abridging, restricting, or
censoring speech, expression, and association, but rather encourages public discussion and
participation in the electoral process.5 Specifically, the Court held:
Congress may engage in public financing of election campaigns and may condition
acceptance of public funds on an agreement by the candidate to abide by specified
expenditure limitations. Just as a candidate may voluntarily limit the size of the
contributions he chooses to accept, he may decide to forgo private fundraising and6
accept public funding.
As a result of these Court rulings in Buckley, the concept of various incentives toward
voluntary compliance with a personal funds expenditure limit has been developed.
Public Subsidies (or “Trigger Provisions”)
It appears that a proposal providing public subsidies (or the opportunity to raise more
money) to candidates participating in a personal funds expenditure limit, when their
opponents have exceeded certain levels of spending from personal funds, could be upheld
as constitutional so long as the public subsidy incentives (also known as “trigger
provisions”) are not found to coerce candidates into accepting the spending limits. We
caution that the Supreme Court has not provided specific guidance as to the
constitutionality of trigger provisions, although the issue has been examined by some
lower courts.
For example, in Gable v. Patton, the Sixth Circuit upheld a state trigger provision
whereby the candidate participating in spending limits can raise money over the spending
limit and continue to receive matching public funds (in a 2:1 ratio) if the non-participating
candidate spends any amount above the limit. The court acknowledged that due to the
1 (...continued)
the First Amendment: Buckley v. Valeo and its Supreme Court Progeny, by L. Paige Whitaker.
2 Id. at 52 (citations omitted).
3 Id. at 52-53.
4 Id. at 57 n. 65. Specifically, Buckley upheld the current presidential public financing system
whereby public subsidies are offered in exchange for spending limits in the primary and general
presidential elections. See 424 U.S. at 97-108.
5 Id. at 90-93.
6 Id. at 57 n. 65.
trigger provision, a non-participating candidate receives no relative advantage from the
spending limit, while the two-for-one matching public funds subsidy provided to the
participating candidate assesses “a substantial cost for nonparticipation.” Further, the
court found, “there is only a narrow set of circumstances under which a candidate could
make a financially rational decision not to participate.”7 Nevertheless, the court held that
this type of financial pressure is not sufficient coercion to render the spending limit
program unconstitutional: “Absent a clearer form of coercion we decline to find that the
incentives inherent in the Trigger provision are different in kind from clearly constitutional
incentives .”8
In Rosenstiel v. Rodriguez,9 the Eighth Circuit upheld a Minnesota state statutory
trigger provision under which candidates participating in spending limits in exchange for
receiving public subsidies are released from the limits if opposed by candidates who
exceed the limits. Further, the statute provides that a participating candidate is then
permitted to raise private funds without limit and permitted to keep the public subsidy
funds of up to 50% of the spending limit.10 The Eighth Circuit found that by allowing the
participating candidates to be released from the spending limits, the state is simply
attempting “to avert a powerful disincentive for participation in its public financing
scheme,” that is, “a concern of being grossly outspent by a privately financed opponent
with no expenditure limit.”11 Moreover, in holding that the statute was not coercive, the
court determined that it afforded the non-participating candidate “control” over whether
and when the participating opponent candidate would be released from the spending limits
and that, therefore, the statute actually worked “in favor of, rather than to the detriment of,
the nonparticipating candidate.”12 In fact, the court concluded, the triggering provision at
issue created a “choice-increasing framework” that “promotes, rather than detracts from,
cherished First Amendment values.”13
Similarly, it appears that a proposal to offer a tax credit to contributors to candidates
who have complied with a personal funds limit on expenditures could be upheld. Like
reduced postal rates, a tax credit is a form of public subsidy, as it uses funds that would
otherwise go to the Treasury.14 In Rosenstiel, the Eighth Circuit Court of Appeals also
upheld a Minnesota state tax refund statutory scheme against a challenge that it was not
voluntary, but coercive. The court found that a tax refund, when used with other public
7 142 F.3d 940 (6th Cir. 1998), cert. denied, 525 U.S. 1177 (1999).
8 Id. at 949.
9 101 F.3d 1544 (8th Cir. 1996), cert. denied, 520 U.S. 1229 (1997).
10 Id. at 1547-48.
11 Id. at 1550-51.
12 Id. at 1551.
13 Id. at 1552.
14 Buckley, 424 U.S. at 107 n. 146; see also Regan v. Taxation With Representation, 461 U.S.
540, 544 (1983) (finding that tax credits and the deductibility for contributions are a form of
government subsidy to the entity receiving the contributions).
funding to encourage candidates to accept spending limits, was “simply an additional
public subsidy provided to participating candidates” and was therefore, constitutional.15
Variable Contribution Limits (or “Cap Gap” System)
Under certain circumstances, a proposal that allows candidates who agree to spending
limits from personal funds to accept larger contributions than those who do not participate
in such spending limits could pass constitutional muster. Under such a proposal, the
differing contribution limits are often referred to as “variable contribution limits” and the
system itself is often referred to as a “cap gap” because it creates a gap between the caps
on contributions permitted to be made to participating versus non-participating candidates.
When a court evaluates the constitutionality of a cap gap provision, it will consider
whether the overall statutory framework providing for spending limits is truly voluntary,
as the Supreme Court in Buckley required, or coercive. While the Supreme Court has not
provided specific guidance as to how to make this determination between voluntary and
coercive, some lower courts have considered the issue.16 For example, the First Circuit
in Vote Choice, Inc. v. DiStefano upheld a Rhode Island state statute imposing a $1,000
limit on contributions to non-participating candidates, while allowing participating
candidates to accept contributions of up to $2,000 per donor.17 Here, the court recognized
that the statutory scheme was “not in exact balance,” suspecting that “very few campaign
financing schemes ever achieve perfect equipoise,” ultimately holding that the law was not
unfairly coercive. Moreover, the Vote Choice court determined, a statutory framework that
merely provides candidates with a “voluntary alternative to an otherwise applicable,
assuredly constitutional, financing option” does not impose a First Amendment burden.18
The Vote Choice court cautioned, however, that there is a point where “regulatory
incentives stray beyond the pale, creating disparities so profound that they become
impermissibly coercive.”19 That is, if the additional contribution amounts that
participating candidates may accept are too much larger than the contribution amounts that
non-participating candidates may accept, the disparity might render the program
15 101 F.3d at 1551.
16 Although the issue was not raised in any case we examine, a challenge to the constitutionality
of variable contribution limits could also include the argument, which merges the two
constitutional standards of free expression and equal protection, that the government may not
discriminate between different kinds of messages. See, e.g., Police Department v. Mosley, 408
U.S. 92 (1972) (ordinance struck down that barred all picketing around a school building except
for labor picketing); Carey v. Brown, 447 U.S. 455 (1980) (same); Niemotko v. Maryland, 340
U.S. 268 (1951) (permission to use parks for some groups but not for others). It could be argued
that with a variable contribution limit system, the government is, essentially, favoring speech by
one contributor over the speech of another, depending on the amount of personal fund spending
engaged in by each contributor’s preferred candidate. Moreover, it could also be argued that such
a system, by providing incentives to abstain from personal fund spending, results in government
disfavoring candidate spending over other types of spending.
17 4 F.3d 26, 37 n. 13 (1st Cir. 1993).
18 Id. at 39.
19 Id. at 38.
unconstitutional. For instance, a Kentucky federal district court invalidated a state
statutory system in which the cap gap, in effect, created a 15-1 disparity in favor of those
who accepted the spending limits, stating that it was not aware of any case in which a
disparity of greater than 2 to 1 was upheld. Further, the court found that “[w]hile there
need not be absolute equality between the contribution limits, the disparity must not be so
great as to ‘destroy the voluntariness of the public-financing system.’”20
20 Wilkinson v. Jones, 876 F. Supp. 916, 930 (W.D. Ky. 1995) (quoting id. at 38).