- New York has richly earned its reputation as one of the most corrupt states in the country, even earning a “D-“ grade in a 2015 State Integrity Investigation.
- One of the two lynchpins for corruption in New York State has been the claim that the state has a “part-time” legislature, so state senators and assemblypersons can earn unlimited outside income, invariably creating conflict of interest issues.
- The other is the incredibly weak campaign finance laws that enable rich donors to pour money into the system without having to account for their donations.
- Governor Cuomo proposed a ten-point plan in January, 2017 which included instituting a voluntary public financing system closing the “LLC loophole.” However, his plan did not pass through the legislature.
There’s nothing in the constitution that relates to campaign finance and a dedicated legislature. A new amendment needs to be added that addresses the following issues:
- To completely eliminate the outside income problem, all legislators should be paid appropriately as dedicated legislators, and they must commit to the same rules on outside income that apply to the United States Congress, which severely limits outside income.
- No contributions can be given from any person or entity that does business with the state.
- There must lower contribution limits instead of the ridiculously high limits now. Contributions should be limited to $5000 per candidate per election. The total can be adjusted for inflation every ten years.
- Perhaps most importantly, a public financing system based on the one used by New York City, which matches every dollar in small donor contributions with six dollars in public funds, must be applied to the whole state.
- “The idea that you can merchandise candidates for high office like breakfast cereal is the ultimate indignity to the democratic process.” Adlai Stevenson, Democratic candidate, 1956.
- “The cleaner solution would be, full-time Legislature, you get one check, no outside income, period.” – Governor Cuomo, Politico, December, 2015.
- “I have not seen the final copy of this, but from what I understand it does sound as though this is more tinkering around the edges, accompanied by some fairly strong and recycled language about how this really solves all the problems,” said Schneiderman, a former state senator. “I do believe that there will be a day that is going to come not before too long when we will enact comprehensive reforms in New York State. It appears that this is not that day.” “Schneiderman on ethics deal: ‘Tinkering around the edges’”
- “The bottom line is that we must change the old ways of raising money in Albany. It’s time for New York State to build a new foundation of public trust by enacting campaign finance reform in time for the next state election.” – Thomas DiNapoli, DiNapoli Op-Ed: New York Should Opt Into Public Financing of Elections.
- “The majority of lawmakers hold outside jobs as lawyers, with either the title “partner” or “of counsel” to a law firm. These thirty-eight legislators who made the majority of their outside income from practicing law made a combined estimated sum of almost $3 million. However, Legislators in the insurance industry make the highest amount of outside income with an average of $140,750.” –Common Cause, Common Cause/NY Compiles a Major Review of Outside Income for NYS Lawmakers
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.
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;
- 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.
Let’s look at two states that have or are in the process of reforming campaign finance by referendum:
The Colorado Campaign Finance Initiative, or Initiative 27, was a constitutional amendment that was approved by the voters in 2002. The measure limited political contributions for candidates, political parties and political committees:
- Individuals can contribute no more than $550 to candidates for Governor or candidates for other statewide offices.
- They can contribute no more than $200 to candidates for the state Senate or House of Representatives.
- Corporations and unions cannot directly contribute to candidates for office, but these groups can make unlimited contributions to ballot measure campaigns.
The language of the initiative was blistering:
Section 1. Purpose and findings
The people of the state of Colorado hereby find and declare that large campaign contributions to political candidates create the potential for corruption and the appearance of corruption; that large campaign contributions made to influence election outcomes allow wealthy individuals, corporations, and special interest groups to exercise a disproportionate level of influence over the political process; that the rising costs of campaigning for political office prevent qualified citizens from running for political office; that because of the use of early voting in Colorado timely notice of independent expenditures is essential for informing the electorate; that in recent years the advent of significant spending on electioneering communications, as defined herein, has frustrated the purpose of existing campaign finance requirements; that independent research has demonstrated that the vast majority of televised electioneering communications goes beyond issue discussion to express electoral advocacy; that political contributions from corporate treasuries are not an indication of popular support for the corporation’s political ideas and can unfairly influence the outcome of Colorado elections; and that the interests of the public are best served by limiting campaign contributions, encouraging voluntary campaign spending limits, providing for full and timely disclosure of campaign contributions, independent expenditures, and funding of electioneering communications, and strong enforcement of campaign finance requirements.
According to Ballotopedia, “While the measure has not been specifically overturned, its provisions limiting corporation and labor union contributions would likely be found unconstitutional after the U.S. Supreme Court ruling in the case of Citizens United v. FEC.”
Given the changes to the composition of the Supreme Court, however, it is now hard to predict the future of cases built on the Citizens United decision.
A constitutional amendment to limit campaign contributions appears on the 2016 ballot. This is actually an attempt to reinstate limits that were repealed by the state legislature nearly a decade ago. According to The Kansas City Star:
The measure would cap donations to candidates at $2,600 per election and to political parties at $25,000. It also would impose other campaign finance restrictions aimed at preventing political committees from obscuring the source of their money.
In November 1994, 74 percent of Missouri voters approved a ballot measure limiting contributions to state candidates. The Republican-led General Assembly repealed contribution limits in 2008, which at the time stood at $1,350 for statewide candidates, $675 for Senate candidates and $325 for House candidates.
[Compensation, allowances and traveling expenses of members]
- 6. Each member of the legislature shall receive for his or her services a like annual salary, to be fixed by law… (Amended by Constitutional Convention of 1938 and approved by vote of the people November 8, 1938; further amended by vote of the people November 4, 1947; November 3, 1964; November 6, 2001.)
“Campaign contributions limit amendment to appear on Missouri ballot,” by Jason Hancock, The Kansas City Star, September 19, 2016.
“Common Cause/NY Compiles a Major Review of Outside Income for NYS Lawmakers,” Common Cause New York, December, 2015.
“Cuomo: ‘No appetite’ for full-time Legislature,” by Jimmy Vielkind, Politico, December 1, 2015.
“DiNapoli Op-Ed: New York Should Opt Into Public Financing of Elections,” Thomas DiNapoli, August 26, 2015.
“Governor Cuomo Announces 35th Proposal of the 2017 State of the State: Restoring the Integrity and Accountability of State Government Through Comprehensive Ethics Reform,” by Andrew Cuomo, NY.gov, January 11, 2017.
“How Corrupt is Your State? All 50 Are Ranked from Most to Least Corrupt,” by Caroline Schaeffer, Independent Journal Review, 2014.
“”Moreland Monday” analysis of soft money housekeeping accounts is ripe for review by Commission,” Common Cause New York, August 19, 2013.
“New York gets D- Grade in 2015 State Integrity Investigation,” by Matt Krupnick, The Center for Public Integrity, November 9, 2015.
“New York lawmakers pass ethics legislation, but critics say the measure falls short,” by Nicholas Kusnetz, The Center for Public Integrity, April 1, 2015.
“Overview of State Laws on Public Financing,” National Conference of State Legislatures, sampled September 27, 2016.
“Schneiderman on ethics deal: ‘Tinkering around the edges’,” by Laura Nahmias, Politico, 03/30/15.
Small Donor Matching Funds: The NYC Election Experience, by Angela Migally, Susan M. Liss, Frederick A. O. (“Fritz”) Schwarz, Jr., September 17, 2010.
“States with a full-time legislature,” Ballotopedia.