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Marc Spitzer, Chairman, Arizona Corporation Commission
Susan Lerner, Executive Director, California Clean Money Campaign
In conversation with David Iverson, Exectuive Director, Best Practices in Journalism
David Iverson: Our topic is to explore the possibilities of campaign finance reform and opportunities for a campaign finance reform/clean money movement in California – whether it is possible for California to learn something from Arizona or Maine. Imagine that you want to run for the state Senate in California. Under our current system, you have to raise lots of money from lots of donors, preferably people who have lots of money to give. Under a clean money system, you would still have to raise money – from a lot of people – but only $5 from, say, 1,000 people. If you could find 1,000 people to each give you $5, you would have the opportunity to qualify for a clean money elections fund, which would then support you to the tune of about $200,000 in a primary, $300,000 in a general election. There are many more parts to this, including what happens if you run against someone who wants to spend a lot more and doesn't want to participate in a clean money fund. Let me begin by asking Mr. Spitzer about how he came to be a believer in the clean money system.
Marc Spitzer: The clean elections movement was started in Arizona in 1998 by voter initiative. The Legislature would not support clean elections, so it had to go to the people. I have come to believe that the heart and soul of governance and the flaws in governance, both at the state and federal levels, are directly attributable to a frankly bizarre method by which candidates raise funds to seek office. Barney Frank, who is not in my political party, observed that politicians are the only group in society that are supposed to ask people for money, accept money and then pretend that it doesn't matter.
I took office in 2001 as corporation commissioner; we regulate utilities and securities. We had among the biggest scandals in the history of Wall Street. We had an electricity crisis that started in California but went throughout the country. Enron had gone to state legislatures and state regulatory bodies proposing deregulation of electricity – that was in the interest of Enron, not in the interest of the people. In both circumstances, it was the financing of campaigns that led to these abuses. As a clean elections candidate who accepted only $5 contributions from 2,500 people in Arizona, I was able to say to the Rotary Clubs, to the district gatherings, to the League of Women Voters: I did not accept a dime from any entity or corporation regulated or doing business before my body. I was able to adjudicate those cases based on the merits, not based on financial implications to my political future. Let me tell you about my little epiphany.
In 1994, I was a challenger against an incumbent Democrat. I won the election, and the lobbying groups that supported my opponent now supported me. One group came in, and I said, "According to your legislative scorecard, I only scored 8 percent; you still want to give me your check?" They said, "Your scorecard may only be 8 percent, but your chance of winning the election is 100 percent, so here is the check." In 1997 (I'm a lawyer by training; we have a part-time legislature) off-session I was trying a case. I had witnesses coming in from all over the country. I had a strategic location at the front of a restaurant. In the rear of the restaurant, a fundraiser was being held by one of my colleagues in the House. He was not an able representative; he was a back-bencher. The same lobbyists that passed my table were the same lobbyists who went to all the events; they could not look me in the eye as they passed my table to go to his event. It dawned on me that those lobbyists didn't give a damn about that member of the House any more than they cared about me.
Most people in this country care about governance. I'm seeing some passion, particularly in this election cycle, and that's good, because the mosaic of American democracy is about people with a cause. That's what the Founding Fathers envisioned when they created our system of government. The cause may be conservative, it may be liberal; it may be pro-choice, it may be right-to-life; it may be associated with labor, business; it may be an individual as a realtor, or a schoolteacher who wants to advance a political agenda consistent with the profession – that is within this mosaic of American democracy. But the people who have hijacked our finance system – in Arizona, about 50 contract lobbyists raise virtually all the money; in Washington, D.C., the K Street lobbyists raise the millions of dollars – don't care about the things you care about: philosophy, intelligence, integrity – the matters most Americans vote on. They are making contributions, at a minimum, to buy access and, perhaps, something far more malevolent: the motivation of the donor.
Iverson: A substantial membership of the Legislature, as well as people of statewide office, is composed of people who ran under the clean money system. How have things changed?
Spitzer: We have more diversity in who can run for office. Three incumbents were defeated in the last session: two very powerful Republicans were knocked off by Democrats. Competition is a good thing. These candidates told me they would not have run but for clean elections. More people are running, and a broader universe of people: We had a Republican run, a bus driver (he took out a country club Republican in the primary because he was able to get on the ballot); people of color; people of different views; people of different orientations. Some have won, some have not, but that's up to the voters. There is an increase in turnout, a massive increase: 12 percent between 2002 and 1998. Under the old system I'd be in my office dialing for dollars. I'd spend most of the campaign raising money. Under clean elections, I got my qualifying contributions, and I did it not by hanging out at the country club or sitting on the telephone dialing the wealthy. I went to union halls, to the A.M.E. Church in downtown Phoenix, where a Republican had not been seen in 20 years; I went to places all over Arizona. Under the old system, three zip codes accounted for 90 percent of the campaign contributions. Under clean elections, contributors were spread across the state. There was an energization of the electorate. People felt their vote mattered.
Iverson: As fascinating as the story is, this is a different state: different in size, in money – $130 million spent in the gubernatorial campaign of 2002. How can you take what happened in Phoenix and begin to push that through in Sacramento?
Susan Lerner: It shows us that the basic idea of the system – that you show a broad base of support by getting small qualifying contributions in the district that you are running in, that you agree not to raise money beyond the clean money limits, and you voluntarily keep your campaign within the clean money limits – that model works. There are certainly some differences. It will be more expensive to run the system. But we are spreading the cost over a much larger number of people. We've done our best to figure out what would be a reasonable and practical amount of money to run a viable campaign under the clean money system, because if we don't put enough money into the system, candidates are not going to elect to run clean. If the funding that goes into the clean money fund equals one penny a day for each Californian over the age of 18 – that's $3.65 a year – we would have enough money to provide for even a maximum number of candidates electing to run under the clean money system.
Iverson: Let me play devil's advocate for a moment: Al Checchi, Jane Harman, Michael Huffington and Gray Davis all had a lot of money, and they all lost. Just because you raise a lot of money that doesn't necessarily guarantee victory, therefore not necessarily is money something that corrupts the political process.
Lerner: It doesn't ensure victory in every instance. These examples show that a true excess of money will not overcome the limitations of a candidate. All of these candidates did run somewhat viable campaigns, and some came quite close to succeeding. But, in most instances, the candidate who raises the most money – something like 70 to 80 percent of the time – wins.
Spitzer: Donations to the incumbent are special. The lobbyists don't care about whether the candidate wins or loses. Most people, if you write a check to a candidate, you do it with the intent that the candidate prevail. Lobbyists do not have that intent. The taxpayers of California would save money by adopting clean elections.
Iverson: How so?
Spitzer: All the mischievous tax credits and special-interest garbage that goes through. I saw it in the Arizona Legislature. I saw it in Congress. The interests that contribute money expect a rate of return on their investment. Whether the candidates win or lose is beside the point. The fact that the incumbent members to the Legislature must solicit contributions from interest groups, and then deal with those matters on behalf of the people of the state of California, is a corrosive and quixotic set of circumstances.
Lerner: Our calculations indicate that less than what you spend at Starbucks for a large cappuccino in the morning would be enough to fund the clean money system. A month or two ago Phil Angelides and a number of members of the state Senate and Assembly issued a report on eight long-standing tax loopholes in our state tax code to illustrate that once a loophole is placed in the tax code, it is never closed. If you take those eight tax loopholes and add it up, they total lost revenue of over $600,000,000 each year. Divide that by the number of Californians 18 and over; it comes to over $15 per person a year. Would you rather spend $3.65 and we get back in the public coffers over $15, or would you rather save that $3.65 and allow the $15 to go begging?
Iverson: That presumes those loopholes are only in the tax code because they have been done at the behest of special interests, that they aren't, to use a favorite phrase of lawmakers, good public policy.
Lerner: I don't have the exact list of the eight, but the one that has been bandied about is the yacht tax – the exemption from sales tax which allows people who purchase yachts, airplanes or luxury items, and who garage or berth them outside of the state of California for 90 days, to avoid sales tax. There may once have been a good public policy reason for that, but nobody has been able to come up with the justification now. Part of the problem is that it does not take a two-thirds majority to add a tax loophole, it takes a two-thirds majority to close a tax loophole.
Iverson: It's one thing to say that lobbyists give money because they hope they'll have influence in the future; it's another to say there is an absolute cause and effect. Many groups, including the Cato Institute, have made the point that people vote because of certain reasons that are ideological or because of party affiliation.
Spitzer: I don't think there is open bribery. At a minimum, the 50 or so lobbyists that raised the money have access at the Capitol. If they want appointments, they get appointments. My district was 12 minutes from the Capitol, so my constituents could come; Sacramento is a whole different proposition by virtue of remoteness. Lobbyists get the access, no question.
I'm a tax lawyer by trade – for 22 years, federal income tax. One day I was sitting in my office and I got a report on accelerated appreciation attached to realty for convenience stores. I looked at it and said, "Where the hell did this come from?" It was buried in one of the tax bills that no member of Congress ever read. I got on the Internet and I found out that Circle K and Southland corporations, which owns 7-11 and Texaco, had made substantial contributions to the Republican Senatorial Campaign Committee on the eve of the inclusion of this bill. This was a multi-, multi-million-dollar tax break directly tied to monies coming in.
There is the well-known story in '86, just to be bi-partisan. Tony Coelho raised a bunch of money from Gallo: $3 million. Coelho was the bagman for the Democrat Committee. Gallo won a tax exemption reversing a state tax decision of the United States Tax Court. I had a colleague from Michigan who tried the case for the government. It was obscene. It was $110,000,000 out of the federal general fund. Gallo, for a $3 million investment, got a $100 million-return.
Iverson: Your point is that special interests don't necessarily care what happens on Election Day, on November 2; where they come crawling is November 3.
Spitzer: Precisely. But I believe the voters and the people I represent, and I think the people of California, if I may be so presumptuous, can do better than have the fundraising congregated in a small number of zip codes of the very wealthy, particularly the lobbyists. The lobbyists who write checks to political campaigns – to them, it's a cost of doing business, just like the phone bill and the water bill and the paper clips.
Audience Question: Doesn't clean money just push funds to other outside entities that do not have to report and, typically, are also the groups that run negative ads?
Lerner: The question is: If you're not going to contribute directly to candidates, are you going to contribute to organizations which run what are called "independent expenditures"? The system is calibrated to respond, very effectively we believe, to independent expenditures. The independent expenditures are not as effective as they are under the traditional system. When an independent expenditure is made against a clean money candidate, the clean money candidate has the wherewithal already in the bank. If they are outmatched, within 24 hours the clean money system provides matching funds to be able to respond.
Iverson: I'm sure some people are wondering, Well, that's great, the clean candidate gets $200,000, but what about the candidate that's running against him or her that's spending $1 million because they've opted out of the system? If you're running against someone who is going to spend, then what is allowed in the clean system?
Lerner: If the clean money candidate is overmatched either by independent expenditures or by a candidate running a traditionally financed campaign and spending more than the clean money limit, the clean money candidate gets a dollar-for-dollar match, up to three times the baseline clean money funding.
Iverson: Therefore presumably decreasing the incentive for someone to opt out of the system.
Lerner: That is the idea. And it works quite effectively. I've spoken with the administration that administers the funds in Arizona. Within 24 to 30 hours of the independent expenditure being made or having hit the airwaves, the matching funds are in the bank account of the candidate. You don't have to go out and raise the money to determine whether you can respond. You turn to your campaign people and you say, We need to respond. Go to the printer, go to the airwaves right away, the money will be in the bank tomorrow.
Spitzer: There is one interesting facet of that. Some of the candidates you mentioned who spent a lot of money and lost, there was revulsion. I recall one, a popular revolution at what was perceived as a grotesque expenditure of large sums of money by an unqualified candidate. That's also the case where someone exceeds the limits and spends money beyond the triple match. The public knows that one candidate is running under public finance and another candidate, either through a personal bankroll or through lobbyists, is exceeding the limits.
I ran against a Democrat who was raising money from political action committees (PACs). While she was on the phone calling PACs, my fundraising was completed with my qualifying contributions. I spent the summer and the fall meeting voters; she was spending the summer and fall on the phone dialing lobbyists. I went to a bunch of Democratic groups and made the argument that I was more attuned to the interests of the people by virtue of public finance, and I won by a couple hundred thousand votes.
We have a Democrat governor who won over a Republican who raised money from PACs; he spent the last week on the phone dialing for dollars, she spent the last week communicating with the voters.
Iverson: One bit of evidence that would indicate whether or not this is beginning to work or take hold is if more Arizona candidates are opting to be a part of the clean elections system. Is that happening?
Spitzer: Forty percent of the Legislature, the governor, the attorney general, the secretary of state, the state treasurer, four out of five corporation commissioners – yeah, clean elections have done real well.
Lerner: Seventy percent of the candidates who are running this year in Maine for statewide offices and legislative offices are running clean campaigns.
Iverson: Legislatures currently have an R or a D after their name for their respective parties. How do you feel about adding a C for clean campaigners?
Lerner: Our proposal requires that a candidate who runs as a clean money candidate be listed that way. In addition to having their party affiliation they would be identified as a clean money candidate in the sample ballot.
Iverson: Getting money from special interest groups is an equal opportunity exercise, Democrats do it, Republicans do it, but it hasn't been a cause that's been particularly championed – other than by you and U.S. Senator John McCain – by members of the Republican Party. I'm curious how that has played out for you politically and whether members of your own party look at you as someone who is a bit off track from the Party mainstream.
Spitzer: The Party had some reticence, initially. There was some concern that this was just a power grab by the Left to promote liberal causes and liberal interests groups, as opposed to conservative, but that has abated over time. And, as you see, Republicans participate. It's unfortunate that some of the folks in Washington are so hostile to what Senator McCain has tried to do, with some very notable Republican exceptions. It has to do with the fact that in Congress the Republicans are in the majority and are able to milk the cash cow far more effectively than the Democrats did when they were in the majority.
The financing of campaigns has gotten so out of whack that it is undermining public confidence in our democratic institutions. This is beyond party, beyond philosophical orientation.
Audience Question: What would prevent some lobbyists or erstwhile donor from running their own advertising for their favorite cause or candidate? We are certainly seeing that nationally, that despite McCain-Feingold, Susan Lerner, the so-called 527 groups, whether that's MoveOn.org here in the Bay Area or elsewhere, mostly on the Democratic side, are finding a way around.
Lerner: We doAudience Question:n't want to stifle people getting out and talking to the public. We want to ensure that the maximum number of voices can be heard. Our proposal in California reflects a recent addition to the clean money system that they came up with in Maine, where they have defined what they pejoratively call "shame issue adds." They set up a time period in advance of the election in which any advertising in which a candidate for any office is either named or pictured, irrespective of what the ad actually says, will kick off matching funds.
Iverson: Would you say the question isn't whether spending money on clean election campaigns is more important than spending money on a state's educational system, it's that you have to do the former in order to have a functional legislature that can make the right call on those other issues?
Spitzer: Lobbyists can paralyze the legislature. I went down to my old shop to advocate for the Corporation Commission having regulatory authority over wireless carriers. They hired nine contract lobbyists, spent a fortune and killed my bill. They paralyzed the Legislature, and they do that on a routine basis. We pointed out ad infinitum, that if you eliminate the special interest garbage, there will be a net savings to the taxpayers.
In Arizona and Maine, has the advent of clean money elections increased the percentage of people who actually turn out to vote?
Spitzer: Twelve percent was the increase between '98 and last year.
Iverson: Couldn't it have just been because people were excited by the gubernatorial candidates?
Spitzer: The trend had been for decreasing turnout; this was an unprecedented spike. There is no explanation other than people were energized. You had a large number of clean elections candidates. Statistics showed 80 percent of the donors had never before contributed to political campaigns. The PAC check from the interest group is, to me, of no value. When you get a $5 bill by somebody who met you for the first time at a Lions Club and you are the first candidate they have contributed to, they are making an investment in you; they believe in you, and it empowers the candidate.
Iverson: One peculiarity of California is the importance of statewide ballot initiative. You could make the argument that it doesn't matter who gets elected to the Legislature, it matters what propositions get passed.
Lerner: People feel the need, within the past decade or so, to step in because of dissatisfaction with the Legislature and the feeling that the Legislature is not responsible to the voters but, rather, more responsive to well-financed special interests. All we can do is our best to come up with a system which should work properly, and hopefully elect the best people to run under it.
Iverson: But it's also true that many statewide ballot propositions are not necessarily grass-roots efforts. Won't special interests just be poured now into getting enough signatures to put things on the ballots?
Lerner: We are seeing initiative fatigue. It is much easier to defeat an initiative than it is to pass an initiative because we have so many on the ballot that people are less swayable. If special interests are pouring more money into the initiatives, and we have larger numbers of initiatives on each ballot, it will become a less effective tool.
Audience Question: Various communities in California have passed public financing elections at the local level: Oakland has a partial public financing program; in Berkeley it's going to be on the ballot in November. Are we getting anywhere near the tipping point?
Spitzer: Tucson had public financing in the 1998 election and Pima County carried public finance; local communities is a place to start. A lot of the function of the local government is in the area of planning and zoning, where the city council is acting as a board of equalization, a quasi-judicial body. The least appropriate forum for campaign contributions from interest groups is in a judicial body.
Iverson: Don't clean elections actually suppress free speech? Unless you give candidates a huge amount of money, they won't be able to afford expensive TV ads. That's an important question, especially in a state like ours, where if you want to buy a commercial in San Francisco, Los Angeles, even Sacramento or San Diego, it costs an extraordinary amount of money. Doesn't this system limit a candidate's ability of free speech because they won't be able to get their message out?
Lerner: Not if levels are properly set. A clean money candidate for the state Assembly can, if all matching funds kick in, have $1 million to run. I live on the West Side of Los Angeles, and the rule of thumb there is that you shouldn't run for the Assembly if you don't have the potential for raising about $700,000. The $1 million is above the rule of thumb among the politically active in one of the most expensive areas in the state in which to buy media time.
Iverson: Who is behind the ballot measure to repeal the clean elections in Arizona?
Spitzer: It's a constitutional initiative, garnered by paid signature circulators funded by No Taxpayer Money for Politicians – the real estate lobby, according to the disclosure reports. Their polling and focus group showed clean elections is very popular among both Republicans and Democrats, to the order of 70 percent, so they have given, in my view, a misleading title. The clean elections people have sued, and the case will go to the Arizona Supreme Court to determine if their proposition is so misleading that it should be stricken from the ballot. I think it should.
Iverson: We've had a number of people raising questions about what this country could do to import what's done elsewhere. This person writes, "The British people have six-week political campaigns, all government financed. What would it take for the United States to do the same?"
Spitzer: Probably change the First Amendment, sadly. Senator McCain has been livid with broadcasters, because he would like to see the broadcasters voluntarily step up, and government under the First Amendment cannot compel the broadcasters to give airtime for public purposes. I'd like to see a world, and this is something we could import from Britain, where broadcasters provide free media time to all candidates, regardless of ability to pay.
Iverson: Susan Lerner, what's next? Your bill didn't make it out of committee.
Lerner: We are talking to groups and individuals across the state looking for support, putting together a broad coalition. We expect to re-introduce the bill in the next session of the Legislature. If we are not successful with the legislative approach, we will go directly to the people, because we believe very strongly that this is an idea whose time has come.
Iverson: Republicans are often hesitant to support public financing. Would you say that clean elections have helped or hurt Republicans in Arizona?
Spitzer: Early in my campaign – I was the first statewide candidate elected under clean elections, Republican or Democrat – I was catching heat from the Party. I was campaigning in Springerville, at the Apache County Republican Committee – very conservative, farming, Mormon community. I was hesitant to raise the issue of public finance for fear of getting rid out of town on a rail. The chair, a woman who had been a law client of mine years ago, rose and said, "You need to support Marc Spitzer. This electricity and all this is complicated stuff. We need somebody who is honest and who'll work hard, and he is that guy." She said, "We live closer to Albuquerque than to the State Capitol, in Phoenix. Normally, if you want to support a statewide candidate, you drive down to an event at the Phoenix Country Club, four hours over bad roads, with a $1,000 check. We can't do that up here. Under clean elections our voice is equal to that of the wealthiest person in the state of Arizona. Under clean elections, we have a voice." When she made that comment, I figured I was on the right track.
