Campaign finance reform is an issue that has been building for decades, even centuries.  Money has rightfully been known as the “mother’s milk” of politics.  Over the years, there have been many farsighted New Yorkers advocating reform.  For instance, during the 1907 State of the Union Address, President Theodore Roosevelt stated “The need for collecting large campaign funds would vanish if Congress provided an appropriation for the proper and legitimate expenses of each of the great national parties.”

In 2015, Governor Cuomo signed an ethics law that he claimed “implements the nation’s strongest and most comprehensive disclosure laws for public officials.”  The law included these provisions:

• Public officials have to disclose the nature of any income over $1,000

• There would be a ban on any payment for work involving legislative bills or resolutions pending in the state.

• Any work that paid more than $5,000 would require fuller disclosure.

However, according to the Center for Public Integrity, the law is not at all what it seems:

Its signature measure is a requirement that lawmakers with private practices—lawyers, for instance— disclose the names of clients who pay them or their firms $5,000 or more. The bill makes several exceptions, however, including for clients involved in criminal cases or bankruptcy, and it applies only to new clients beginning December 31, 2015. Legislators can also avoid disclosing names by working on retainer for general advice, a clause that many advocates point to as a massive loophole that could render the new requirement largely meaningless.

As the Center for Public Integrity points out, key reforms were “essentially unaddressed”:

•  A ban or strong limits on outside income

State legislators can still make an unlimited amount of money working on the side.

• Campaign finance reform

Individuals can still give up to $60,800 to statewide candidates per year in New York and up to $150,000 to all candidates and committees combined. Stricter limits and public financing in the form of matching funds as in New York City would even the playing field and prevent a very small group of people from dominating campaign finance.

• The “LLC loophole”

New York campaign finance law treats limited liability companies as individuals rather than corporations.  So each LLC can give $60,800 per year, and there is no limit to how many LLCs a single wealthy donor can create in order to give money.  Therefore, there is really no limit to how much money a single person can donate to state elections.  This is an ideal vehicle for people and corporations that do business with the state to reward or simply seek to influence politicians.

• The “Housekeeping Account loophole”

Political parties can receive unlimited contributions to these accounts to fund their operating expenses.  However, according to Common Cause New York:

Although such accounts are designed for party building, they are routinely used by political parties to obtain contributions from corporations, unions, and wealthy individuals that circumvent the contribution limits on political giving. In so doing, these entities are able to give unlimited sums of cash, which are then used by the parties to directly influence the outcome of elections.

This housekeeping loophole is another way people who do business with the state can influence government decisions on their behalf.

•  Pay-to-play laws

Currently, there are not lower limits on political contributions for companies that receive contracts from the state.

In contrast to the state, New York City has very different and quite successful campaign finance rules which serves as a good model.

Public Financing: What New York City Does

New York City provides money to candidates who accept expenditure limits and enhanced disclosure. According to the Brennan Center for Justice, “the heart of the system, and what sets it apart, is the multiple match—a feature that boosts the impact of small donations by matching up to $175 of each contribution at a six-to-one ratio. By encouraging candidates to engage with voters early in an election campaign, fundraising and voter outreach efforts come together.”

As New York State Comptroller Thomas DiNapoli, has written, “New York City has operated under a voluntary publicly funded system for more than 20 years. While not perfect, it is successful in promoting competition and reducing the influence of private donations…The best place to start cleaning up government is at the beginning: election to office. Public financing allows regular citizens who do not have access to established political fundraising circles the ability to raise money and compete in elections. Matching funds for smaller contributions also forces candidates to focus on grassroots donors.”

In addition to changing how campaigns are financed, a solution for the problem of outside income to state legislators is simply to create a dedicated legislature.

Dedicated Legislature

Outside income is allowed for New York State Senators and Assembly Members because the position is considered “part-time.”  As a result, law firms, public relations firms, and consultants representing special interests can actually place a member of the State Legislature on their payroll.  While the new ethics law will require legislators to disclose total outside income in specified ranges, it will not force disclosure of clients of the legislator’s firm unless they were solicited by the legislator or the legislator is working on the client’s projects, leaving room for immense conflicts of interest.

According to Common Cause, on average, lawmakers (elected before 2014) with outside income make between $47k and $80k, with about around 8% of our elected legislators in both houses make between $100k and 515K.

Although New York legislators are considered part-time because they have access to outside income, compared to the other states, they are considered to have full-time positions because the legislature meets year-round.  In addition, according to the National Conference of State Legislatures, New York is also among the states that have legislators who devote on average 80% of a full time job to their legislative duties.  This data only increases the doubts voters have about legislators who make significant outside money.

What the U.S. Congress Does

The Ethics in Government Act of 1978 made Congress a dedicated legislature by placing a limit of 15% of their salary on the amount of outside earned income, which, at today’s $174,000 a year salary, would be $26,100.

In addition, specific sources of income are prohibited including:

•  affiliating with or being employed by a firm, partnership, association, corporation, or other entity which provides professional services involving a fiduciary relationship (such as legal, accounting, or money management services);

permitting that Member’s, officer’s, or employee’s name to be used by any such firm, partnership, association, corporation, or other entity;

•  practicing a profession which involves a fiduciary relationship;

•  serving as an officer or member of the board of any association, corporation, or other entity; and

•  teaching, without the prior notification and approval.

Sources of income that are allowed to exceed the 15% outside income limit are:

• service with the national guard;
• pensions, annuities, and deferred compensation;
• investments;
• business in which the member or their family has a controlling interest where income is unrelated to any services rendered by the member;
• royalties, fees, and their functional equivalent, from the use or sale of copyright, patent, and similar forms of legally recognized intellectual property rights; and approved teaching.