The Supreme Court in Buckley v. Valeo ruled that spending limits, including the amount a candidate can spend on his or her own campaign from personal funds (also known as personal fund expenditure limits) are unconstitutional. The Court did, however, uphold a system of spending limits, on the condition that they are voluntarily accepted in exchange for some form of public financing. As a result of these Court rulings, the concept of various incentives toward voluntary compliance with a personal funds expenditure limit has been developed. This report discusses some constitutional issues raised by two such incentives: public subsidies and variable contribution limits

Whitaker, L. Paige

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1 424 U.S. 1, 54 (1976).  For further discussion of the Supreme Court’s holding in Buckley andsubsequent related decisions, see CRS Report RL30669, Campaign Finance Regulation Under(continued...)Congressional Research Service ò The Library of CongressCRS Report for CongressReceived through the CRS WebOrder Code RS20854March 22, 2001Campaign Finance Reform and Incentives toVoluntarily Limit Candidate Spending FromPersonal Funds: Constitutional Issues Raisedby Public Subsidies and Variable ContributionLimitsL. Paige WhitakerLegislative AttorneyAmerican Law DivisionSummaryThe Supreme Court in Buckley v. Valeo ruled that spending limits, including theamount a candidate can spend on his or her own campaign from personal funds (alsoknown as personal fund expenditure limits) are unconstitutional.  The Court did,however, uphold a system of spending limits, on the condition that they are voluntarilyaccepted in exchange for some form of public financing.  As a result of these Courtrulings, the concept of various incentives toward voluntary compliance with a personalfunds expenditure limit has been developed.  This report discusses some constitutionalissues raised by two such incentives:  public subsidies and variable contribution limits.An amendment to S. 27 (McCain/Feingold), SA 115 (Domenici) (approved 70 to30 on March 20, 2001), would raise the limits on contributions to a Senate candidatewhose opponent exceeds a designated level of personal funding in his or her campaign.Origin of Incentives Toward Compliance With Personal FundsExpenditure LimitLegislation to impose mandatory expenditure limits on the amount a candidate canspend on his or her own campaign from personal funds (also known as personal fundexpenditure limits) is unlikely to be upheld as constitutional.  In Buckley v. Valeo, the U.S.Supreme Court expressly ruled that limits on personal expenditures by candidates frompersonal or family resources are unconstitutional.1  Similar to limitations on independentCRS-21 (...continued)the First Amendment: Buckley v. Valeo and its Supreme Court Progeny, by L. Paige Whitaker.2 Id. at 52 (citations omitted).3 Id. at 52-53.4 Id. at 57 n. 65.  Specifically, Buckley upheld the current presidential public financing systemwhereby public subsidies are offered in exchange for spending limits in the primary and generalpresidential elections.  See 424 U.S. at 97-108.5 Id. at 90-93.6 Id. at 57 n. 65.expenditures, the Court found that such restraints impose "a substantial restraint on theability of persons to engage in protected First Amendment expression."2  A candidate hasa First Amendment right to advocate vigorously and tirelessly for his or her own election,according to the Court.  Further, the Court noted, it is particularly important thatcandidates have the "unfettered opportunity" to communicate their views and positions onthe issues in order for the electorate to make an informed vote.3The Buckley Court did, however, uphold a system of voluntary spending limitsconditioned on the acceptance of some form of public financing.4  According to the Court,public financing is within the constitutional powers of Congress to reform the electoralprocess and does not violate any First Amendment rights by abridging, restricting, orcensoring speech, expression, and association, but rather encourages public discussion andparticipation in the electoral process.5  Specifically, the Court held:Congress may engage in public financing of election campaigns and may conditionacceptance of public funds on an agreement by the candidate to abide by specifiedexpenditure limitations.  Just as a candidate may voluntarily limit the size of thecontributions he chooses to accept, he may decide to forgo private fundraising andaccept public funding.6  As a result of these Court rulings in Buckley, the concept of various incentives towardvoluntary compliance with a personal funds expenditure limit has been developed.Public Subsidies (or “Trigger Provisions”) It appears that a proposal providing public subsidies (or the opportunity to raise moremoney) to candidates participating in a personal funds expenditure limit, when theiropponents have exceeded certain levels of spending from personal funds, could be upheldas constitutional so long as the public subsidy incentives (also known as “triggerprovisions”) are not found to coerce candidates into accepting the spending limits.  Wecaution that the Supreme Court has not provided specific guidance as to theconstitutionality of trigger provisions, although the issue has been examined by some lowercourts.For example, in Gable v. Patton, the Sixth Circuit upheld a state trigger provisionwhereby the candidate participating in spending limits can raise money over the spendinglimit and continue to receive matching public funds (in a 2:1 ratio) if the non-participatingCRS-37 142 F.3d 940 (6th Cir. 1998), cert. denied, 525 U.S. 1177 (1999).8 Id. at 949.9 101 F.3d 1544 (8th Cir. 1996), cert. denied, 520 U.S. 1229 (1997).10 Id. at 1547-48.11 Id. at 1550-51.12 Id. at 1551.13 Id. at 1552.14 Buckley, 424 U.S. at 107 n. 146; see also Regan v. Taxation With Representation, 461 U.S.540, 544 (1983) (finding that tax credits and the deductibility for contributions are a form ofgovernment subsidy to the entity receiving the contributions). candidate spends any amount above the limit.  The court acknowledged that due to thetrigger provision, a non-participating candidate receives no relative advantage from thespending limit, while the two-for-one matching public funds subsidy provided to theparticipating candidate assesses “a substantial cost for nonparticipation.”  Further, the courtfound, “there is only a narrow set of circumstances under which a candidate could makea financially rational decision not to participate.”7  Nevertheless,  the court held that thistype of financial pressure is not sufficient coercion to render the spending limit programunconstitutional: “Absent a clearer form of coercion we decline to find that the incentivesinherent in the Trigger provision are different in kind from clearly constitutionalincentives.”8In Rosenstiel v. Rodriguez,9 the Eighth Circuit upheld a Minnesota state statutorytrigger provision under which candidates participating in spending limits in exchange forreceiving public subsidies are released from the limits if opposed by candidates who exceedthe limits.  Further, the statute provides that a participating candidate is then permitted toraise private funds without limit and permitted to keep the public subsidy funds of up to50% of the spending limit.10  The Eighth Circuit found that by allowing the participatingcandidates to be released from the spending limits, the state is simply attempting “to averta powerful disincentive for participation in its public financing scheme,” that is, “a concernof being grossly outspent by a privately financed opponent with no expenditure limit.”11Moreover, in holding that the statute was not coercive, the court determined that itafforded the non-participating candidate “control” over whether and when the participatingopponent candidate would be released from the spending limits and that, therefore, thestatute actually worked “in favor of, rather than to the detriment of, the nonparticipatingcandidate.”12  In fact, the court concluded, the triggering provision at issue created a“choice-increasing framework” that “promotes, rather than detracts from, cherished FirstAmendment values.”13Similarly, it appears that a proposal to offer a tax credit to contributors to candidateswho have complied with a personal funds limit on expenditures could be upheld.  Likereduced postal rates, a tax credit is a form of public subsidy, as it uses funds that wouldotherwise go to the Treasury.14  In Rosenstiel, the Eighth Circuit Court of Appeals alsoupheld a Minnesota state tax refund statutory scheme against a challenge that it was notvoluntary, but coercive.  The court found that a tax refund, when used with other publicCRS-415 101 F.3d at 1551.16 Although the issue was not raised in any case we examine, a challenge to the constitutionalityof variable contribution limits could also include the argument, which merges the two constitutionalstandards of free expression and equal protection, that the government may not discriminatebetween different kinds of messages.  See, e.g., Police Department v. Mosley, 408 U.S. 92 (1972)(ordinance struck down that barred all picketing around a school building except for laborpicketing); Carey v. Brown, 447 U.S. 455 (1980) (same); Niemotko v. Maryland, 340 U.S. 268(1951) (permission to use parks for some groups but not for others).  It could be argued that witha variable contribution limit system, the government is, essentially, favoring speech by onecontributor over the speech of another, depending on the amount of personal fund spending engagedin by each contributor’s preferred candidate.  Moreover, it could also be argued that such a system,by providing incentives to abstain from personal fund spending, results in government disfavoringcandidate spending over other types of spending.  17 4 F.3d 26, 37 n. 13 (1st Cir. 1993).18 Id. at 39.19 Id. at 38.funding to encourage candidates to accept spending limits, was “simply an additional publicsubsidy provided to participating candidates” and was therefore, constitutional.15 Variable Contribution Limits (or “Cap Gap” System)Under certain circumstances, a proposal that allows candidates who agree to spendinglimits from personal funds to accept larger contributions than those who do not participatein such spending limits could pass constitutional muster.  Under such a proposal, thediffering contribution limits are often referred to as “variable contribution limits” and thesystem itself is often referred to as a “cap gap” because it creates a gap between the capson contributions permitted to be made to participating versus non-participating candidates. When a court evaluates the constitutionality of a cap gap provision, it will considerwhether the overall statutory framework providing for spending limits is truly voluntary,as the Supreme Court in Buckley required, or coercive.  While the Supreme Court has notprovided specific guidance as to how to make this determination between voluntary andcoercive, some lower courts have considered the issue.16  For example, the First Circuit inVote Choice, Inc. v. DiStefano upheld a Rhode Island state statute imposing a $1,000 limiton contributions to non-participating candidates, while allowing participating candidatesto accept contributions of up to $2,000 per donor.17  Here, the court recognized that thestatutory scheme was “not in exact balance,” suspecting that “very few campaign financingschemes ever achieve perfect equipoise,” ultimately holding that the law was not unfairlycoercive.  Moreover, the Vote Choice court determined, a statutory framework that merelyprovides candidates with a “voluntary alternative to an otherwise applicable, assuredlyconstitutional, financing option” does not impose a First Amendment burden.18The Vote Choice court cautioned, however, that there is a point where “regulatoryincentives stray beyond the pale, creating disparities so profound that they becomeimpermissibly coercive.”19  That is, if the additional contribution amounts that participatingcandidates may accept are too much larger than the contribution amounts that non-participating candidates may accept, the disparity might render the programCRS-520 Wilkinson v. Jones, 876 F. Supp. 916, 930 (W.D. Ky. 1995) (quoting id. at 38).unconstitutional.  For instance, a Kentucky federal district court invalidated a statestatutory system in which the cap gap, in effect, created a 15-1 disparity in favor of thosewho accepted the spending limits, stating that it was not aware of any case in which adisparity of greater than 2 to 1 was upheld.  Further, the court found that “[w]hile thereneed not be absolute equality between the contribution limits, the disparity must not be sogreat as to ‘destroy the voluntariness of the public-financing system.’”20

Campaign Finance Reform and Incentives to Voluntarily Limit Candidate Spending From Personal Funds: Constitutional Issues Raised by Public Subsidies and Variable Contribution Limits

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Campaign Finance Reform and Incentives to Voluntarily Limit Candidate Spending From Personal Funds: Constitutional Issues Raised by Public Subsidies and Variable Contribution Limits

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