‘Democracy dollars’ could pump millions of dollars of public funding into elections

By: - November 1, 2019 3:36 pm

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A proposal to reinvigorate Arizona’s system for publicly funding political campaigns could inject tens of millions of dollars into the state’s elections.

The Fair Elections Act, a wide-ranging citizen initiative that would overhaul Arizona’s voting and election systems, would allow every voter to contribute “democracy dollars” to candidates who run for office using Clean Elections, which provides public funding to candidates who reject traditional fundraising from private donors.

Democracy dollars would work like this: Every registered voter in Arizona gets a set number of certificates worth a certain amount of money, which they could contribute to Clean Elections candidates. Voters could give all of their certificates to one candidate, or divvy them up and give each voucher to a different person.

On paper, voters could have more than a half billion dollars in public funding to contribute to political campaigns. In reality, only a fraction of that money would likely be used.

The amount of revenue that the initiative’s new funding sources could average at least $20 million per election cycle, based on rough estimates by the Arizona Mirror. Campaign spokesman Joel Edman said the Arizonans for Fair Elections believes the revenue the initiative generates would be sufficient to cover the democracy dollars program, as well as other costs.

There are a lot of variables for the Clean Elections Commission to decide in terms of how much money and how many certificates voters would get or each election cycle. 

Under the Fair Elections Act, every voter would receive between $50 and $150 worth of certificates. The certificates must be worth at least $10 but no more than $50 apiece. The total number of certificates provided to each voter could be as low as 2 and as high as 10.

As of July, according to the secretary of state’s most recent voter registration count, there were  3,821,039 registered voters in Arizona. 

If the Clean Elections Commission gives each voter the maximum of $150 in democracy dollars, it would distribute a whopping $573 million worth of certificates. At a minimum, voters would have $191 million in democracy dollars if the commission allocates $50 per voter.

“That big sticker price can look pretty big, but of course that’s not reflective of what the program’s actually going to cost,” Edman said.

Determining how many voters would use their certificates is difficult. But a similar program in Seattle may provide a good indication of what participation will look like.

Seattle gives voters $100 in “democracy vouchers” they can contribute to candidates in the city’s municipal elections. According to Annie Tran, a spokeswoman for the program, only about 37,000 of the nearly 500,000 people who received those vouchers used them in the 2019 city election, the second in which the program has been in use. That’s a participation rate of about 7.8 percent. 

The city mailed out nearly $48 million in vouchers, but set aside only $4.2 million to cover the costs. Voters used about $2.4 million worth of vouchers by the time the candidates all hit their maximum fundraising levels. That means voters, who don’t have to use all $100 worth of vouchers they receive – the Seattle program provides four vouchers worth $25 apiece – spent only 5.1 percent of the voucher dollars that were issued.

Edman expects that participation in the proposed Arizona democracy dollars program would be similar to Seattle’s. If that estimate holds, mean approximately 298,000 Arizona voters would use their certificates. If those voters, like their counterparts in Seattle, used about 5.1 percent of the total certificates issued, the program would cost between $9.7 million and nearly $29.2 million, depending on how much money in certificates Clean Elections allocated for each voter.

However, the Seattle program and the Arizona proposal are structured very differently in terms of how much public funding candidates can take from voters. As a result, an apples-to-apples comparison based on participation and spending rates may not be a realistic way to gauge how much the democracy dollars program would cost.

Not every dollar will be spent

Several other factors would likely limit the amount of money used by the democracy dollars program. 

The initiative includes a cap on how many democracy dollars candidates can accept. Clean Elections provides candidates who qualify for public funding with a lump sum of campaign cash, which varies depending on the office they’re seeking. Under the Fair Elections Act, they could accept democracy dollar money equal to twice the amount of their initial lump sum. 

While Seattle’s program is open to all candidates, the Arizona proposal would only make Clean Elections candidates, who make up a minority of statewide and legislative candidates, would be eligible for certificates. In 2018, only 69 of 245 candidates who were on the ballot for the primary election ran with Clean Elections, the state’s public campaign finance system. 

That was a slight uptick from 2016, and the first time participation hadn’t dropped from the prior election since the U.S. Supreme Court in 2010 eliminated the “matching funds” provision of the Clean Elections program, which gave publicly funded candidates a dollar-for-dollar match when they were outspent by traditionally funded opponents or their allied super PACs. During the height of the matching funds era, the majority of eligible candidates used Clean Elections.

Voters would only be permitted to give certificates to legislative candidates from their own districts, which would further limit the pool of potential recipients. However, the Clean Elections Commission would be authorized to lift that restriction if it’s necessary to ensure that all voters are able to make full use of their certificates.

The Fair Elections Act has several provisions that would likely increase Clean Elections participation, which would expand the list of candidates who are eligible to receive democracy dollars and boost the cost of the program.

More candidates would almost certainly opt to run with Clean Elections due to the enhancements that the initiative would create. In addition to the democracy dollars, which could potentially triple the amount of money that candidates receive in public funding, the Fair Elections Act would increase the lump sum that candidates receive for the primary and general elections.

In addition, the initiative would make traditional fundraising less lucrative by lowering the amount of money that candidates can accept from private individuals and political action committees. Republican lawmakers in 2013 dramatically increased those limits, which had been among the lowest in the country but now stand at $5,200 per election cycle.

Under the Fair Elections Act, statewide candidates could only receive up to $2,500 every four years from an individual, and legislative candidates would be limited to accepting $1,000 from individuals during a two-year election cycle.

You can’t spend money you don’t have

Ultimately, the size of the program would be constrained by how much revenue it has.

The initiative would increase the minimum corporate income tax for companies with more than 50 employees from $50 to $150. The extra $100 would go to the Clean Elections Fund. According to the Arizona Department of Revenue, the minimum tax brought in more than $1.6 million in 2015, the last year for which numbers are available. 

Based on those numbers, the additional $100 the initiative would tack onto that minimum tax would generate about $3.3 million per year for the certificates program, which would be about $6.6 million per election cycle. 

Another source of revenue would be voluntary contributions from taxpayers. The initiative would reinstate two revenue sources that the legislature eliminated in 2012: a check-off box on state income tax forms that let taxpayers get a tax credit if they give $5 to Clean Elections and a dollar-for-dollar tax credit for donations of up to $500 to the Clean Elections Fund.

In 2011, that check-off box generated more than $6.2 million, with another $61,000 coming in from the tax credit. If its reinstatement brought in similar amounts of revenue, that could be more than $12 million additional dollars per election cycle for certificates.

On top of that, Edman noted that the Clean Elections Fund runs a surplus in non-election years, which he expected to provide up to $4 million per election cycle.

Based on those estimates, the revenue sources could generate between $20 million and $23 million per election cycle for the democracy dollars program, which may not be enough to cover the full cost of the program if the commission gave voters the maximum allowable allocation of certificates.

Once the program has been in effect for an election cycle or two, Edman said the commission can use historical data to determine how many democracy dollars it can give to voters without running short on cash. If the revenue is insufficient at first, he said the commission can drawn down from the Clean Elections Fund, which had nearly $27 million at the start of 2019. 

And even if the fund has enough money to cover the full cost of program, the commission may not legally be permitted to spend it. State law imposes a cap on total annual expenditures by the commission, which is based on the number of income tax filers each year. That cap, which is projected to be nearly $21 million for 2019, is generally well above what the commission actually spends, even in election years. 

Legislative staff is currently reviewing the Fair Elections Act for potential legal deficiencies. Once that review is complete, Edman said the campaign may add provisions raising the expenditure cap and allowing the Clean Elections Commission to curtail the program if the fund doesn’t have enough money.

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Jeremy Duda
Jeremy Duda

Associate Editor Jeremy Duda is a Phoenix native and began his career in journalism in 2003 after graduating from the University of Arizona. Prior to joining the Arizona Mirror, he worked at the Arizona Capitol Times, where he spent eight years covering the Governor's Office and two years as editor of the Yellow Sheet Report. Before that, he wrote for the Hobbs News-Sun of Hobbs, NM, and the Daily Herald of Provo, Utah. Jeremy is also the author of the history book “If This Be Treason: the American Rogues and Rebels Who Walked the Line Between Dissent and Betrayal.”