Costs of Public Financing

Everything you ever wanted to know about the potential cost of public financing (but were afraid to ask)

Albany Times Union

Casey Seiler

April 25, 2013

Warning: There will be math.

The basic question: How much would it cost to implement a public financing system for statewide and legislative elections? The Senate Republican conference, which opposes public financing, estimates a cost of $221.5 million for an election cycle that includes governor, attorney general and comptroller as well as legislative contests; extrapolated as a four-year cost by doubling the legislative price tag because of the tighter two-year cycle, that’s $331.1 million.

The Campaign Finance Institute — which describes itself as a “non-partisan, non-profit research institute” and is supportive of public financing — puts the four-year cost between $104 million and $162 million. The CFI’s Michael Malbin came to Albany on Wednesday to take part in a briefing for reporters on its study of the potential costs.

The yawning $169 million gap between the GOP’s figures and the CFI’s most expensive estimate can be explained through the differing methodologies used by the two calculators, both of which are are working from the particulars of the Assembly’s campaign finance proposal as introduced by Speaker Sheldon Silver. The bill grants a 6-to-1 public match to candidates who opt into the system and secure a minimum number of contributions of a certain amount from individual donors; opting in obligates the candidate to a set of contribution limits that also regulates the public matching.

The Republicans’ calculation, provided to the Times Union after the CFI briefing, takes the maximum public contribution and assumes two candidates would be taking full advantage of the system in the general election — so $24 million in taxpayer funds would go to the gubernatorial election, $16 million apiece for the attorney general and comptroller races, $44.1 million for the Senate contests, $45 million for the Assembly. If third-party candidates were in the system, that cost of $145 million would go up.

For primaries, the GOP analysis assumes that a quarter of senators would find themselves in a primary with only one candidate per race receiving public funds (so multiply the maximum public match by 32 for the Senate, 75 for the Assembly). That cost totes up to $76.5 million.

The CFI’s Malbin calls the Senate GOP’s calculation “little more than back of the envelope arithmetic based on incredible assumptions.”

In the interests of full disclosure: I zapped Malbin a copy of the GOP’s figures for his reaction. See his statement below for more criticism of the GOP’s methods; its biggest beef: The idea that two candidates in every general election contest would “max out” on public funds flies in the face of history in New York City, where between 2001 and 2009 only half (51 percent) of candidates managed to earn the maximum matching funds.

Math majors will note that the relationship between “half” and “all” is close to the relationship between CFI’s $162 million and the GOP’s $331.1 million.

The summary release handed out by CFI at the briefing explains its own process at length, but let’s include it here for the sake of clarity:

The CFI analysis assumed that all donors who gave in each election would continue to give the same amounts under the new system – but only up to the new contribution limit. To average the cost between a gubernatorial and midterm election, the analysis includes one election for statewide officials (2010) and two elections for the legislature (2010 and 2012). It then assumed four different scenarios, represented in the table below. The two variables producing the four scenarios have to do with the rules for contested primaries, and the presence or absence of new donors in the system.

The Silver bill would allow higher contribution limits and more public funding for a candidate who is challenged in a primary election than for one who is not. This results in two pairs of scenarios. For one, we assume a status quo in which only the few candidates who were actually challenged in 2010 and 2012 would continue to be challenged under the new system. Under the other scenarios, we assume a substantial increase in primary challenges. By definition, this assumption would mean that the rules were bringing new candidates into the system. Obviously, we have no idea how many these might be. (Many incumbents presumably would still be unchallenged.) If we assume arbitrarily – and generously – that half of the current candidates would face a primary challenge under the new rules, we can estimate the cost by treating all of the existing general election candidates as if they would be covered the under rules for contested primaries. This should produce overly high estimates of the new program’s cost.

Second, any estimate will be sensitive to the number of donors assumed. The table includes two estimates of the number of donors. Under one, we calculate that only the donors who gave in 2010 and 2012 will continue to give under the new system. This produces a low estimate for the cost of public matching funds. The second assumes the program’s incentives successfully bring new donors into the system. To put a dollar figure on this, we make the optimistic assumption that each candidate doubles the number of his/her donors, with each new donor giving $50.

The CFI’s study comes up with different four-year cost numbers based on different scenarios:

  • Assume higher public funding cap for those who actually had two contests (primary and general), with same donors as 2010-2012 (less the lower contribution limit): $104.2 million
  • Assume higher public funding cap for those who actually had two contests (primary and general), BUT each candidate doubles the number of donors, with each new donor giving $50: $132 million
  • If every 2010-2012 general election candidate had a contested primary, with same donors as 2010-2012 (less the lower contribution limit): $121 million
  • If every 2010-2012 general election candidate had a contested primary, BUT each candidate doubles the number of donors, with each new donor giving $50: $162 million

The CFI points out that the least expensive scenario is $1.34 per New Yorker per year; the most pricey scenario shakes out to $2.08.

Here’s GOP spokesman Scott Reif’s statement on CFI’s work:

We think the strategy for those who support using taxpayer dollars to fund political campaigns is pretty clear, and it goes something like this: Vastly underestimate how much taxpayer money would be used to pay for negative TV commercials, mailers and the robocalls people hate, and hope nobody notices. We will put our numbers — which came from a group of well-respected budget professionals who helped craft three consecutive fiscally responsible state budgets that didn’t raise taxes — over their pie-in-the-sky numbers any day.

And for completists, here’s the full CFI’s analysis of the Senate GOP’s accounting:

Mystery solved. New York State’s Senate Republicans on April 24 finally released the background for their “estimated” cost of a public matching fund system in New York State. Their paper presented the cost as being $221.55 million per election cycle.

The one-page sheet was released within hours after Michael J. Malbin, executive director of the Campaign Finance Institute (CFI) and Professor of Political Science at the University at Albany, had briefed reporters in Albany’s Legislative Office Building about the basis for CFI’s cost estimate for the same bill. CFI has estimated that public matching funds would cost between $26 million and $41 million per year over the course of four-years. (A copy of the study containing this estimate is available here.)

What could explain these wildly different cost estimates? It turns out, now that the Senate Republicans’ numbers have seen the light of day, that there is not any real mystery. The Senate Republicans simply assumed that every race for every office in the state would have two candidates drawing the maximum permissible amount of public funds for the general election. In a quarter of the districts, the paper also imagined primary challengers and incumbents getting another dose of maximum public funding.

It is impossible to call this piece of work a “study”. It is little more than back of the envelope arithmetic based on incredible assumptions.

The CFI study was based on a methodology that had previously been through a process of peer review. CFI’s higher estimates assumed that every candidate who ran in 2010 and 2012 doubled the number of his or her donors, with each new donor giving $50 and stimulating $300 in matching funds. It was based on a review of every single donor’s contributions in every one of the state’s races. The process involved hard-slogging research from the bottom up; not assumptions handed out from the top down.

So which approach can withstand the scrutiny? One test might be to look at how many candidates have “maxed out” in New York City, which is the system that the state is thinking about emulating. In the years between 2001 and 2009 (covering all of the city’s elections with multiple matching funds) 51% of the candidates who participated in the voluntary matching fund system raised enough in qualified contributions to be eligible for the maximum public match.

That 51% is obviously well short of 100%. But how does it stack up against CFI’s “bottom up” approach? It turns out that under CFI’s double-your-number-of-donors scenarios, 43% of New York State’s major party Assembly candidates in 2012 had already been counted as if they would have “maxed out” under public matching funds, along with 33% of the State Senate candidates. In addition, the higher rate of hitting the funding cap among city than state candidates reflects the city’s substantially lower public funding cap. In other words, CFI’s bottom-up approach produced results that match up reasonably well with New York City’s historical experience.

“We never looked at the maxing out numbers until the Senate Republicans came out with their paper,” Malbin said. “To assume everyone will max out is a fantasy. The ceilings don’t come into play until the candidates find the new donors. To check the alternative, I felt as if I were in grade school again making sure all the columns and rows added up. It was gratifying to see that the cross-check validated what we have been doing.”

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