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2005-1: Pre-Primary Election Expenditures Are Subject to Primary Election Expenditure Limit Unless Expenditures Yield Benefits Exclusively for the General Election

Friday, 04/29/2005
Friday, April 29, 2005

Re: Administrative Code §§ 3-703(1)(f), 3-706(1)(c); Campaign Finance Board Rules 1-08(b), 1-08(c); Advisory Opinions Nos. 1989-22, 1989-24, 1993-4, Op. No. 2005-1.

The Campaign Finance Board has received a letter from Miller for New York, Gifford Miller's principal campaign committee for the 2005 elections, requesting "confirmation that the primary election expenditure limit of the Act does not apply" to expenditures made by a participating candidate before the primary election "to raise contributions, subject to the $4,950 limit of the New York City Campaign Finance Act (the "Act"), that will be set aside for use after the primary election."1 Miller Letter at 1 (emphasis added). According to the letter, the expenditure limit for the primary election should not apply to these expenditures, because the expenditures would be "made to prepare for a general election campaign... against an opponent who refuses to participate in the voluntary Campaign Finance Program and thus is not constrained by the spending limits of the Program." Id. Because the request raises a matter of general public interest, the Board has determined to issue an advisory opinion to provide clarification to candidates concerning expenditures made during the primary election period that may be attributed to the general election expenditure limit.2

Applicable law, of course, is the starting point for any analysis of the question before the Board. The Board, however, understands the proposal's policy concerns about high-spending non-participants, a concern that is compounded by the very short time period between the primary and general elections.3 Then again, however, the Board is mindful of competing concerns, including the recent enactment in December 2004 of an enhanced matching formula responding to the legitimate policy concern about a high-spending non-participating candidate; the inequities in the primary election that may be created by the proposal vis-à-vis other primary election candidates, undermining the policy reasons for the expenditure limits; the public nature of nearly all fundraising activities that will benefit a candidate when made; and the need for and difficulty of audit and enforcement of these activities to ensure compliance with the applicable expenditure limits.

Miller for New York Proposal

The request seeks a general confirmation from the Board that a large number of broadly-described fundraising expenditures Miller for New York intends to make prior to the primary elections, for use in a general election against a "self-financed non-participating candidate",4 would be deemed subject to the general election expenditure limit.5

The request proposes that (1) the committee would disclose when it "begins to raise funds for the general election"; (2) the funds raised would be placed in a separate bank account; (3) materials used to raise funds would state that the funds are for use in the general election; (4) the candidate may allocate a portion of expenditures made for this fundraising to the general election; (5) the amount allocated by the candidate to the general election would be "disclosed" to the Board in a "cover memorandum submitted with the applicable disclosure statement"; (6) the allocation would apply to "expenditures attributable to the general election effort (fundraising personnel, communications and events to raise funds, and associated overhead costs), which would be listed in the disclosure statement cover memorandum"; and (7) the committee would determine the allocation ratio by dividing the "general election contributions" raised in a disclosure statement period by the total contributions raised in a disclosure statement period. The proposal states that the allocation would not apply to other expenditures, including advertising for purposes other than fundraising. See Miller Letter at 3-4.

Summary of Conclusions

The Board concludes that while broad approval of this request is not possible, the Board's rules nonetheless permit some specifically defined expenditures made during the primary election period to be counted toward the general election expenditure limit. The Board has identified in this Opinion some specifically defined additional items that fall in this category. (See discussion of contribution "re-solicitation" to previous primary election contributors at p. 7 below.) And the Board notes that additional fact-specific items (personnel, etc.), clearly documented and pre-approved by the Board, may also fall within this category. (See p. 8 below.) No expenditures may be made during the primary period to be attributed to the general election expenditure limit, unless the candidate can show that a contested general election is reasonably anticipated for the office sought.

Presumption of The Act and Rules

The Campaign Finance Act (New York City Administrative Code §§3-701, et seq.) is explicit that expenditures by a participant in a contested primary election, made prior to or on the date of such primary election, "shall be deemed" to have been made for the primary election. See Admin. Code § 3-706(1)(c); see also Advisory Opinion No. 1989-22 (June 8, 1989); Advisory Opinion No. 1989-24 (June 8, 1989); Advisory Opinion No. 1993-4 (June 9, 1993). The Board through its rules has interpreted the Act to create a presumption that expenditures made before the primary are for the primary, so as to avoid an interpretation which was unduly rigid and did not fairly reflect the timing of the receipt of the value of goods and services. See Board Rules 1-08(b), (c)(1), the latter adopted in its earliest form in 1989. Board rules presume that the timing of an expenditure determines which election the expenditure is for, but the time when an expenditure is made turns on when the "goods or services are received, used, or rendered." Board Rule 1-08(b).

Attribution of expenditures made before the primary election to the general election expenditure limit is permissible under the law, however, only if candidates meet their burden to overcome the clear presumption in the law by, among other things, providing detailed documentation supporting the re-attribution. See Admin. Code § 3-706(1)(c); Board Rule 1-08(c)(1). If the presumption is not in the end overcome, and as a result the candidate is in violation of the primary election spending limit, the consequences can include penalties of up to three times the amount of the overage; a finding that the candidate is not eligible for future public funds payments; and even a finding that all public funds previously received must be returned. See Admin. Code §§ 3-711(2)(a), 3-703(1)(i).

It must also be stressed that, under the Act, there is no limit on how much candidates can raise during the primary election period, regardless of the existence of primary election spending limits. Thus, a candidate in a primary election has always been free to engage in unlimited general election fundraising or to set aside monies for use only in a general election campaign. As a general rule, however, this can only be done while containing expenditures within the primary election expenditure limit. Thus, the question before the Board does not relate to limits on fundraising activity per se, but to attribution of expenditures made in the course of fundraising.

Purpose of Newly-Amended Bonus Provision

The Act has provisions directly aimed at addressing the need for participants to "compete more effectively against a truly high spending non-participant." City Council Cover Memorandum for Local Law 58. The new $6-to-$1 bonus provision was added to the law specifically to address the imbalance created by a high-spending non-participant. The Act now includes this new tier, above the regular $4-to-$1 matching rate and above the pre-existing $5-to-$1 bonus tier. The new $6-to-$1 bonus provision is triggered if a high-spending non-participant raises or spends three times the spending limit. If that happens, the participant receives public matching funds at the $6-to-$1 rate up to a cap in public funds equal to an increased maximum of 125% of the spending limit, and the expenditure limit is lifted.

Thus, in the general election, the participating primary election winner who faces a high-spending, non-participating candidate in the general election has the benefit of the newly-amended bonus matching funds provision, which after a primary election winner is known, will entitle the party nominee to immediate and significant additional public funds. If the "bonus" provisions of the Act turn out to be inadequate, these inadequacies must be addressed by legislation. The Board cannot compensate for an uneven playing field created by high-spending non-participants by simply giving generalized approval confirming that categories of spending may be re-attributed in ways that would undermine or even nullify existing expenditure limits.

Expenditure Limits as Leveling the Playing Field for Candidates in the Same Election

If candidates choose to participate in the voluntary Program, they must agree to abide by particular requirements regarding their campaign finances that are not otherwise imposed by the New York State Election Law, including expenditure limitations.6 These mandatory limitations are construed strictly because they serve the important purpose of "leveling the playing field" among competing candidates and in some cases are the most important factor in overcoming a disparity of resources between serious candidates.

The request essentially proposes that the law applicable to the primary expenditure limitation should be interpreted so as to level the playing field between two candidates in different elections-i.e., between a primary election candidate who seeks a political party nomination so that he may participate in the general election, on the one hand, and that candidate's potential general election opponent, on the other. The Act's mandatory expenditure limitations, however, serve and are intended to serve to level the playing field for candidates in the same election. As a result, the Board must take account of the effect of any of its interpretations of the Act on the "level playing field" provided for in the law for primary election opponents who are all Program participants and guard against creating disparities among primary election candidates vis-à-vis each other.

If expenditures which should be attributed to the primary election's expenditure limit are instead attributed to a general election in which the expenditure limit has been lifted because of high spending by a non-participant, then these "general election" expenditures would be subject to no limit. Then, if the candidate has incorrectly attributed certain expenditures to a general election spending limit, and as a result exceeds the primary election's expenditure limit, the consequences in law may be substantial. See p. 3 above. The implication for the policy underlying the law is that he or she will have received an unfair advantage over other primary election candidates that cannot be remedied. Indeed, total spending in the primary period, including spending that the participant seeks to have attributed to the general election, might far exceed the existing primary election spending limit.

Inherently Public Nature of Fundraising Activities

Many fundraising expenditures, including many of the categories of fundraising expenditures cited in the request, would surely benefit the candidate in the primary election period, particularly those expenditures involving public promotion of the candidate (as opposed to some "behind the scenes" expenditures). See Board Rule 1-08(b). For example, many "fundraising communications and events to raise funds" would provide the candidate with beneficial publicity during the primary election period, and the safety of having extra money in the bank, notwithstanding a candidate's potential ability to fund a primary contest up to the primary election spending limit, would be tremendously valuable.7 Accordingly, the true value of most of the cited expenditures would be "received, used, or rendered", see Board Rule 1-08(b) (emphasis added), during the primary period when the fundraising solicitations are made, the contributions are received, and the candidate is able to gain publicity and a safety-net of funds. It would thus be contrary to the law to find that the value of fundraising activity is "received", within the meaning of Rule 1-08(b), only when the solicited funds are "used" in the general election. This would also be contrary to the law and Board practice for primary, general, and out-year expenditure limits.8

Need for Adequate Safeguards Against Potential Abuse

The Board further finds that the request's suggested methodology does not address the rigorous audit documentation requirements necessary for satisfying the burden in the law.9 The request proposes an allocation based on fundraising success, as determined by the campaign, including possibly subjective judgment by the campaign about an individual contributor's intent when a contribution is received. The law and Board rules, however, rely upon the actual cost of expenditures. Thus, as discussed below, candidates must demonstrate with detailed documentation that a particular expenditure overcomes the burden in the Act and the Board rules.

Demonstration Required for Attribution of Primary Period Expenditures to the General Election Expenditure Limit

Under the Act, and in accordance with the Board's findings in this Opinion, a candidate may be able to demonstrate with detailed documentation that specific expenditures made before the primary election may be attributable to the general election expenditure limit.

As a general proposition, payments for concrete items that are useful only in the general election period but are prepared in advance so that the candidate can "hit the ground running" the day after the primary election may thus be attributed to the general election expenditure limit. For example, if a campaign were to purchase and hold, but not disseminate or distribute, written materials, buttons, bumper stickers, or shirts during the primary election period that stated "Vote for candidate name on November 8", these expenditures could be attributed to the general election expenditure limit. Or if a candidate were to place a deposit on a facility for use only after the primary election, the expenditure, if properly documented, could be attributed to the general election limit. Similarly, if a candidate were to tape a television commercial clearly directed to a general election audience that was in fact distributed and televised only after the primary election,10 or to pre-pay for advertising space to be used only after the primary election, or to pre-pay funds for a postage meter to be used for sending materials only during the general election, these expenditures could be attributed to the general election.11 These kinds of expenditures have previously been found by the Board to be properly attributed to the general election limit. The Board cautions candidates, however, that they must provide the Board with detailed, contemporaneous documentation of the expenditures. During the post-election audit, and, in its discretion, during the election, the Board will review the documentation to confirm that the expenditures were attributed appropriately.

Additionally, the Board concludes here that the cost of some discretely defined fundraising solicitations made by direct mail would be attributable to the general election limit, if they meet certain conditions. Thus, a primary election candidate may make expenditures, during the primary election period, but attributable to the general election expenditure limit, to "re-solicit" a category (elaborated below) of contributors for funds to be used only in the general election, but only if: 1) the re-solicitation is restricted to those individuals who have previously contributed to the candidate in the primary election period; 2) the individuals who are re-solicited have not already contributed the maximum contribution under the contribution limit; 3) the re-solicitation is made by direct mail through the United States Post Office or non-electronic common carrier (and by no other means of dissemination); 4) the re-solicitation is not made until after previous contributions from the re-solicited contributor(s) have been timely reported in the appropriate disclosure statement submitted to the Board; 5) the re-solicitation clearly states that it concerns only the general election; 6) the re-solicitation does not include any material other than the re-solicitation letter (and accompanying contribution form and return envelope), and does not urge action or solicit the contributor other than to contribute to and vote for the candidate in the general election (e.g., the re-solicitation does not urge the contributor to raise other contributions or to urge others to support the candidate); 7) any new contributions received12 from the re-solicited contributors are deposited in a separate bank account exclusively for use in the general election and which cannot be used by the campaign or co-mingled with other funds for any purpose whatsoever during the primary election period;13 and 8) a copy of the re-solicitation letter and mailing lists are filed with the Board contemporaneous with or in advance of the mailing. It must be stressed that if the campaign fails to meet any of the conditions above, the expenditures will be charged to the primary expenditure limit. (See also pp. 3 and 5 above.)


For the foregoing reasons, the Board concludes that broad approval of the request would undermine and possibly entirely overwhelm the Program's primary election expenditure limits by allowing expenditures for public actions, that benefit the candidate during the primary period, to be counted instead toward a possibly non-existent general election limit. But at the same time, the Board recognizes that some expenditures made during the primary period have in the past been properly attributed to the general election under the Board's rules. Campaigns may demonstrate with detailed documentation that particular expenditures made before the primary election for concrete items that can be and will be used only in the general election should be attributed to the general election expenditure limit, as described above. A particular new "re-solicitation" letter is described in this Advisory Opinion, the expenditure for which may be attributed to the general election even if made during the primary election period, under conditions described above.

In addition, there may be circumstances in which campaigns can show that the time of individual personnel or consultants, or other similar, less concrete items,14 yield benefits exclusively for the general election and are without impact on the primary campaign and thus should properly be attributed to the general election limit. These expenditures cannot be attributed to the general election expenditure limit unless pre-approved on a fact-specific, case-by-case basis, upon the application of a campaign including detailed documentation. This approval will be granted only to the extent that it does not compromise the law or policy concerns described above.

Expenditures made during the primary period that are correctly attributed to the general election expenditure limit will not be considered "qualified expenditures" for which public funds may be used except to the extent that the campaign is ultimately eligible for public funds for a general election campaign.


Appendix A

Applicable Provisions of the Act and Board Rules - Primary Election Expenditure Limit

Sections 3-706(1) and 3-706(1)(c) of the New York City Campaign Finance Act (New York City Administrative Code §§ 3-701, et seq.) (the "Act") and Board Rule 1-08(c) regulate the attribution of expenditures made by a participating candidate in a contested primary election to a specific election for the purpose of determining compliance with the relevant expenditure limitation. Section 3-706(1) provides that

the following limitations apply to all expenditures made by a candidate and his or her principal committee on or after the first day of January preceding the election for which such candidate chooses to participate in the public funding provisions of this chapter and to expenditures made at any time prior to such date for services, materials, facilities, advertising or other things of value received, rendered, published, distributed or broadcast on or after such date ….

Admin. Code § 3-706(1).

Section 3-706(1)(c) of the Act provides that:

expenditures by participating or limited participating candidates in a primary election made prior to or on the date of such primary election shall be deemed to have been made for such primary election.

Admin. Code § 3-706(1)(c) (emphasis added).

Board Rule 1-08(c)(1) provides that:

an expenditure is presumed to be made for the first election (in which the participant is a candidate) following the day it is made, except: (i) in the case of a State or local election, expenditures made before the first January 12 after an election will also be presumed to be made for that election; (ii) in the case of a federal election, expenditures made before the first January 1 after the election will also be presumed to be made for that election, except as may otherwise be provided under federal law and regulations.

Board Rule 1-08(c)(1) (emphasis added).

Additionally, Board Rule 1-08(b) provides that:

an expenditure for goods or services is made when the goods or services are received, used, or rendered, regardless when payment is made.

Board Rule 1-08(b) (emphasis added).

Section 3-703(1)(f) of the Act provides that the contribution limit applicable to participating candidates applies to all covered elections held in the same calendar year. Admin. Code § 3-703(1)(f) ("to be eligible for optional public financing..., a candidate must... not accept any contribution or contributions from any one... entity for all covered elections held in the same calendar year in which he or she is a participating candidate which in the aggregate... for the office of mayor... shall exceed $4,950") (emphasis added).

The Act provides that there are separate expenditure limits for each election, but there is only one contribution limit that covers both the primary and general elections.15


1 Miller for New York posed this question to the Board in a letter and supporting memorandum dated February 23, 2005, stating that "we seek this confirmation not just for Miller for New York, but for the principal committee of every candidate who decides to run for the Democratic Party's nomination for mayor." Miller Letter at 1 (emphasis in original). The Board solicited comments on this request and received responses from the Ferrer campaign, dated April 1, 2005, the Weiner campaign, dated April 11, 2005, and Citizens Union, dated April 12, 2005. The request from the Miller campaign and the responses received by the Board may be found on the Board's website at http://www.nyccfb.info/candidates/resources/ao_requests.aspx. The relevant provisions of the Act and Board rules are attached to this Opinion as Appendix A.

2 At its April 14, 2005 Board meeting, the Board's Chairman gave an oral summary of the Board's response to the request and stated that a written opinion would follow. That summary was posted to the Board's website the same day, with an alert to candidates to await the written opinion before taking action based upon the oral summary. This Advisory Opinion, however, in place of the oral summary, is the Board's formal response to the request and can be the only basis for any candidate action.

3 The Board has been on record for several years as supporting a change in the primary election date. See, e.g., An Election Interrupted... An Election Transformed (September 2002), 158; 2003 City Council Elections (September 2004), 53.

4 Incumbent Mayor Michael Bloomberg has established a political committee to run as a candidate in the 2005 elections.

5 The request asserts that (1) application of the primary election expenditure limit to fundraising expenditures made for the general election "would undermine the primary candidate's ability to campaign effectively" for both a primary election and a general election; and (2) "it is unreasonable to construe the Act's primary election expenditure limit as imposing an eight-and-one half month ban (January 1 through primary day, September 13, 2005) against making fundraising expenditures to prepare for a general election campaign against a high-spending non-participating candidate." Miller Letter at 2-3.

6 In the 2005 elections, for the first time, New York City's taxpayers will expend public funds in exchange almost exclusively for compliance by participating candidates with the Program's expenditure limitations, as all candidates for offices covered by the Act in New York City elections are now required to abide by nearly all the Act's contribution limitations and disclosure requirements, whether or not they choose to participate in the Program.

7 This can be important because, for example, certain expenditures are exempt from expenditure limits, such as compliance costs, so that having funds in hand that are available to be spent above the limits can be valuable to the candidate.

8 Were it otherwise, the value of out-year pre-primary fundraising expenditures under the out-year spending limits would only be "received" when the solicited funds were used in the primary election period, with the consequence that this spending would have to be attributed to the primary election spending limit.

9 The proposal's premise is that categories of expenditures could be presumed to be for the general election and that this would be achieved by a method to be dictated by the candidate. The proposed method would be very difficult to audit and administer, requiring that the Board generally accept at face value allocations provided by the candidate.

10 This Advisory Opinion does not address attendant consultant and personnel costs, except as described below at p. 8.

11 Of course, if the candidate loses the primary election, has no general election, and is able to recoup the money pre-paid, such as in the case of money paid to the Post Office for postage, the funds would be returned to the campaign committee, and the campaign's unspent funds would be adjusted. See also note 13.

12 Matching funds will not be available for any portion of any contribution received in this category during the primary period.

13 If the candidate does not win the primary election and has no general election, the funds would be calculated in the campaign's unspent funds after the election. See also note 11.

14 It may be that this burden cannot be met with respect to individual cases-or even whole categories-of spending. The Board does not reach these questions in this Advisory Opinion.

15 When the Campaign Finance Act went into effect in 1988 there were separate contribution limits for the primary and general elections. The contribution limits were consolidated by legislation that became effective on November 27, 1990, and the new contribution limits were first effective during the 1991 elections. See Local Law No. 69 of 1990.