Policy & RESEARCH

Capitol Ideas

CSG Knowledge Center

Research Services

MLC Policy Resolutions

Stateline Midwest

States Perform

policy

Campaign finance in the Midwest: Federal and state court rulings have led to big changes for candidates and contributors alike

by Tim Anderson ~ October 2014 ~ Stateline Midwest »
Nebraska Sen. Scott Lautenbaugh didn’t mince words two years ago when asked about the demise of his state’s 20-year-old law on campaign finance. “Good riddance,” he said after the state Supreme Court overturned the law.
His problems with the old law, then and now, were twofold. First, he says, it had the practical effect of driving money to third parties and away from the candidates themselves.
“With the candidate, there is at least some responsibility for what is being said; you can’t say that so much with third parties,” notes Lautenbaugh, a seven-year veteran of the Unicameral Legislature who will leave office after this year due to term limits.
His second concern was that the law — which provided a public subsidy to Nebraska candidates who agreed to a campaign spending limit and whose opponent exceeded it — violated free-speech protections as well. This same constitutional argument is behind a series of recent U.S. Supreme Court rulings that have reshaped election systems not only in Nebraska, but several other Midwestern states.
As Ian Vandewalker of the Brennan Center for Justice puts it, the nation’s highest court has been on a “deregulatory tear.”
Not all legislators, like Lautenbaugh, are saying “good riddance” to old rules that had sought to “level the playing field” in campaigns or limit spending and contributions.
But nearly everyone can agree that a new era in campaign finance began with the U.S. Supreme Court’s landmark 2010 Citizens United decision. It has continued with rulings such as one earlier this year in McCutcheon v. Federal Elections Commission.
“It’s become pretty universally accepted across the country that states can’t limit independent political spending,” notes Paul Sherman, a senior attorney for the Institute for Justice, a firm that has supported plaintiffs in lawsuits against state campaign-finance laws.
Prior to Citizens United, Iowa, Michigan, Minnesota, Ohio, South Dakota and Wisconsin were among the states that banned independent spending by corporations and unions on behalf of or against candidates for state office. The court’s 2010 ruling made those bans unenforceable.
Nebraska’s Campaign Finance Limitation Act got overturned two years later, soon after the U.S. Supreme Court struck down a similar public-subsidy law in Arizona.
Most recently, during this year’s election cycle, federal judges in two separate cases blocked laws in Minnesota and Wisconsin that set aggregate campaign spending limits — caps on the total amount that contributors could spend in an election cycle (Wisconsin) or how much a candidate could collect, in total, from certain large individual donors or groups (Minnesota).
These state laws are being blocked, and are likely to be overturned for good, because of the U.S. Supreme Court’ McCutcheon decision earlier this year. In that case, justices overturned a federal law that capped total donations made by individual contributors during an election cycle.

Direct spending limits still enforced
With states no longer able to control independent spending, what’s left are laws that limit the contributions that individuals or groups can make directly to candidates. These restrictions on direct contributions have been upheld as a legitimate means of preventing “quid pro quo corruption.”
Most states in the Midwest have some limits in place, and seven states in the region — Iowa, Michigan, Minnesota, North Dakota, Ohio, South Dakota and Wisconsin — outright ban corporations and/or unions from making direct contributions to candidates (see map).
But minus limits on independent spending, does it make sense for states to have limits on the contributions that can be made to the candidates themselves?
Sherman says no.
“If the candidates want to have more control over the narrative of their campaign, the best thing they can do is to raise or eliminate the limits on contributions to themselves,” he says.
Under an Illinois law passed in 2012 (SB 3722), the state’s limits on contributions to candidates are lifted when spending by outside groups on the race reaches a certain threshold. Michigan recently doubled its limits on campaign contributions, while Nebraska sets no limits on direct campaign contributions to candidates.
Vandewalker, though, cautions against a legislative response that further deregulates campaign finance systems.
“There is an imbalance [on laws regulating direct contributions and independent spending], and that imbalance has been created by the Supreme Court,” he says. “But if you’re worried about a special interest spending millions of dollars in an election and influencing things [through independent spending], you should be much more worried about a special interest directly giving millions of dollars to a candidate.”
Even in this Citizens United era, he adds, states have other options.
First, Vandewalker suggests that states strengthen laws that prevent coordination between super PACs and candidates. At the federal level, for example, super PACs and candidates cannot collaborate on a political ad or other campaign expenditure.
Secondly, states can revisit and tighten campaign-finance disclosure laws.
Edwin Bender, executive director of the National Institute on Money in State Politics, recommends that states ask this bottom-line question about their disclosure systems: How easy is it for the everyday person to access quality data on campaign spending and contributions?
In 2013, the institute examined each state’s disclosure rules on independent campaign spending. Most states in the Midwest got failing grades for their reporting requirements, with only Illinois, Ohio and Wisconsin faring well in the national study (see map).
Sherman, however, cautions that disclosure laws also come with “costs” — it can cost individual donors privacy (by having their spending posted online for everyone to see), he says, and add a compliance burden for small grass-roots advocacy groups.

A third option supported by Vandewalker and the Brennan Center is public financing of campaigns.
In the Midwest, Minnesota is currently the lone state in the Midwest with a public-financing system for legislative and gubernatorial candidates. (Michigan provides public funds in the governor’s race.)
This year, close to 89 percent of the candidates running for state office in Minnesota signed a voluntary agreement to abide by spending limits. In return, they are eligible for a public subsidy. The money comes from a general-fund appropriation and a check-off on income and property tax forms (an individual’s tax payment does not increase with the check-off).
But Vandewalker believes the most promising alternative is a system known as “small donor, multiple match.” No state has such a system in place, but New York City uses it. The city publicly matches up to $175 of each contribution to a candidate at a six-to-one ratio. So a relatively small contribution of $175 turns into $1,050 for the candidate.
“In the post-Citizens United world, it’s especially powerful because candidates can continue raising money and respond to outside spending by the other side,” Vandewalker says.
Thus far, though, only the state of New York has given serious consideration to this public-financing model. For now, candidates for office will be running under a system shaped by recent U.S. Supreme Court decisions and state laws that, at least to date, have withstood court scrutiny.