Reforming Money in Politics

Update 555 — Reforming Money in Politics:
Compromise’s Promise on Campaign Finance

Word is just in, Democratic Senators have agreed to a new compromise political reform bill — the “Manchin compromise” — that is expected to be introduced as the Senate returns. Many years of work on the political reform bill of a generation are coming to legislative fruition. Senate Majority Leader Chuck Schumer has made the For the People Act the first order of business when the Senate returns from recess next week.

Indeed, the bill has been a priority for Democrats the past two Congresses. It would transform our democracy, making it fairer, stronger, and more inclusive. While the voting rights provisions of the bill claim most of the spotlight, the campaign finance titles, especially the Small Donor Matching Program, are extremely critical provisions to get big money out of politics and amplify the voices of ordinary Americans. Today, we highlight the Small Donor Matching Program, its history, and why it matters.

Good weekends, all




What is Small Donor Matching?

The Small Donor Matching Program in the For the People Act is proven to work at the local level and must be adopted at the federal level. In localities where the program has been implemented, more diverse candidates are elected to office and elected officials are more responsive to their constituents rather than big money donors. If the Small Donor Matching Program is implemented, members of Congress will be less beholden to special interests and can center their fundraising efforts around ordinary Americans in their districts. 

The Small Donor Matching Program is outlined in Title V – Campaign Finance Empowerment of the For the People Act. The specific provisions of the program may be changed as the Senate works on a new compromise bill to be released later this month, and the House and Senate will most likely pass different small donor provisions that apply to their own chambers. 

The current proposed program would match small individual contributions up to $200 with matching funds at a ratio of 6 to 1. If a candidate receives a donation of $100, the total donation deposited to their campaign would be $700, as $600 of matching funds would be added.

To qualify for funds, candidates must raise at least $50,000 in small contributions from at least 1,000 individuals. They then must:

  • Maintain a $1,000 individual limit for all contributions
  • Limit personal funds to $50,000
  • Disclose all contributors

No taxpayer funds can be used to finance the Small Donor Matching Program; it is in no way “public financing.” Instead, funding would come from a new “Freedom from Influence Fund,” which gains revenue through corporate criminal fines and civil penalties collected by the SEC. The Congressional Budget Office estimates this fund will raise $1.73 billion in net revenue in the first ten years. 

While the fund could add other sources of revenue, it is specifically outlined in the proposed statute that the program is prohibited from receiving taxpayer funds. The funding source for the program could be subject to political considerations in its reliance on SEC prosecutions, a somewhat arbitrary and speculative basis. But there are numerous supplemental sources of funding that would insulate the program if need be. 

The matching program’s messaging strategy is often misunderstood. Many are calling the provision a “public financing” clause within the bill. This allows opponents to characterize this as a mandate for taxpayers to fund campaigns, even those they do not agree with. This rhetoric is misleading, politically vulnerable, and fundamentally incorrect. No portion of the general public or taxpayer base is expected to finance the Small Donor Matching Program in the For the People Act. Revenue is raised via fines and penalties collected by the SEC from individual white-collar criminals, a wealthy sliver of the American public. 

Successful Track Record

New York City has one of the oldest and most notable Small Donor Matching Programs. The city has had a program in place since 1988. Since then it has ushered in candidates who are more racially and economically similar to the communities they represent. Diversity on the city council has dramatically increased: next year’s council is expected to double its number of female members, who all come from different racial and economic backgrounds.

New York City’s primary election earlier this year demonstrated the great success of the small donor program. Of all of the individual contributions to New York City candidates, 93.2 percent were less than $250. This is the opposite of New York State elections, where only 9 percent of contributions from 2016 to 2019 came from small donors. This is expected to change, as New York State passed a small donor program that will take effect in 2022, effectively endorsing New York City’s program.

Other localities have small donor matching: Washington, DC has a matching ratio of 5 to 1 for small donations; Denver has a matching ratio of 9 to 1; and Montgomery County, Maryland, has a matching system that varies across offices. Candidates who opted into the system outraised those who didn’t while not accepting money from PACs. Council candidates who used small donor matching raised more money than their opponents who used traditional financing from large donors.

The Importance of the Small Donor Matching Program

Matching funds increase diversity among candidates and elected officials. Currently, 27 percent of Congress members are women and 23 percent are people of color. These are both well below the share of the greater population, at 50 and 40 percent respectively. Small Donor Matching Programs empower women and people of color as they rely more on small donors and generally have fewer resources to run competitive campaigns. This is due to systematic barriers to accessing wealthy donors. A federal matching program would reduce barriers to diversity in Congress and allow it to more accurately represent the American people.

In the 2020 federal election, just 1.44 percent of the U.S. population contributed large contributions, over $200 to political campaigns, but they comprised 76 percent of the money that funded these campaigns.This small pocket of wealthy donors has an outsized impact on who serves in Congress. This leads Congress to favor policies that benefit corporations and wealthy interests instead of middle and working-class Americans. 

This system, along with other campaign finance reforms, combats Citizens United v. FEC. It will take power away from big contributors and Super PACs. The top 10 donors in 2018 accounted for 7 percent of election-related giving, compared to less than 1 percent before Citizens United. Through matching funds, congressional candidates can move away from relying on large donors. Instead, they can focus on their constituents who might only be able to spare a small donation. 

Under the current system, most Americans do not contribute to Congressional campaigns. But this would invariably change under a Small Donor Matching Program. The program would provide much greater incentive to contribute especially in lesser amounts, since contributions would have an increased impact by several factors. We commend this provision in particular to Congress to empower everyday citizens and level the badly-tilted campaign finance regime playing field. The compromise bill, we understand, will ensure a more representative, transparent government. We cannot wait to reform our democracy.