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After a series of scandals roiled municipal government in the 1980s, New York City made a bold move to reduce the role of money in city politics. The City Council in February 1988 passed a Campaign Finance Act that limited the size of contributions that individual donors could make, prohibited donations from corporations and offered an incentive to campaigns: Agree to limit your overall spending, and the city will match a portion of the private contributions you collect with taxpayer money. The idea was to use public financing to level the playing field among candidates and donors, make money less of a factor in who won or lost, and restore citizens’ faith in their government. Twenty years later, most would agree that the Act has made an impact – but not a transformational one, as the continuing power of incumbents and primacy of fundraising demonstrate.

As reported in the new edition of City Limits Investigates, Getting Change, the campaign finance system is credited with helping New York avoid major municipal scandals. In concert with term limits – approved by a popular vote in 1993 – which served to open up City Council seats and other offices, matching funds have allowed hundreds of candidates to wage credible campaigns that would have been unlikely if they had to rely on private money. The Voters Guide, televised debates, news stories about which contributor is giving how much to which candidate – these reflect the important role the Campaign Finance Board, which administers the 1988 law, has taken on to inform the public and shine light on the way candidates finance their runs for office. Admirers consider New York City’s system the most rigorous in the country. Hank Sheinkopf, a longtime political consultant, says the city’s campaign finance law has “strengthened democracy.” Veteran good-government advocate Gene Russianoff, a lawyer with the New York Public Interest Research Group, calls it “a politician liberation act” because it has given candidates a measure of independence from wealthy donors.

But now the system faces new challenges. Starting with the 2009 race – which includes mayor, the entire City Council, all five borough presidents, comptroller and public advocate – the Campaign Finance Board’s monitoring duties have been expanded to include enforcing a ban on donations from partnerships, LLCs and LLPs, as well as restricting donations from lobbyists, vendors and others who do business with the city. But the “doing business” law, like term limits, is up in the air – the subject of a federal suit led by a conservative legal activist who argues that the law violates civil rights by depriving candidates from racial and ethnic minorities of an important stream of donations. Meanwhile, the CFB is under a new requirement to complete its post-election audits of campaigns’ finances within tight time limits – a rule that grew out of mounting frustration with the CFB’s enforcement system, which some critics say is harsh, arbitrary and agonizingly slow. The CFB’s defenders counter that the board’s duty to prevent misuse of matching money is paramount. “Let me tell you,” says Carole Campolo, who was deputy director of the CFB from its founding until she retired last year, “that is your tax money, and the staff and board take that very seriously.”

Mayor Bloomberg’s bid to extend term limits presents the CFB with other complications. If term limits hold, the CFB will have to monitor dozens of candidates seeking open seats; the agency has bulked up on staff and budget to handle the load. If the limits are lifted, millions in taxpayer money that the city expected to distribute to campaigns could remain into public coffers if fewer candidates decide to run. The CFB would also have to sort out tricky questions about how to apply spending limits and contribution restrictions to candidates who started out seeking one office but, if term limits extend, might pursue a different post—in many cases, the one they already have. On Friday, the board requested public comment on a proposed set of new rules governing candidates affected by any term limits change.

The CFB’s current executive director, Amy Loprest, says her agency is ready for the challenges that 2009 presents, and is working hard to make complying with the law easier. But the campaign finance system also faces deeper questions about the effectiveness of the reforms themselves. While the system provides candidates with public funds, it has not replaced the importance of private donations; after all, private money is what triggers the matching funds. “It’s not undoing the problem of undue influence, but abetting it by matching it,” says Sal Albanese, a former Councilman who launched a run against Mayor Rudy Giuliani in 1997 with the help of matching funds.

Although the 1988 law was intended to level the playing field, the city has seen a dearth of truly competitive campaigns. Most evidence suggests that in New York City, the field is still heavily tilted toward wealthy donors and incumbent candidates. That’s because individuals can give up to $4,950 to a mayoral candidate – and public money only “matches” the first $175 of each donation from a New York City resident. Larger donors – considered to be those who give more than $250 – are still crucial to candidates’ war chests; even when matching funds are included, the average large donor’s contribution is worth four times as much as the average small donor’s.

In the 350 contested elections city incumbents have faced since 1989, only 13 have recorded turnovers. On 226 occasions, incumbents have faced no primary challenge or general election rival. In fact, in 2005, seven incumbent City Council members faced no rival in either the primary or general election. And even when they do face an opponent, for most incumbents, the outcome is not even close: Officeholders captured 80 percent of the vote, on average, in 2005. (Then again, in most races without incumbents, the eventual victors won by large margins as well; across all elections in 2005, more than half ended with a winner taking 75 percent of the vote or better.)

Nicole Gordon, who ran the CFB from 1988 to 2006, thinks those statistics miss the point. “It’s not just about having a competitive election,” she says. “It’s about knowing that a real challenger could emerge.” Thanks to matching funds, Gordon argues, incumbents are always at some risk of being ousted, and that forces them to pay more attention to constituents. But Bloomberg’s two successful runs for mayor, in which he has stayed outside the campaign finance system and spent $150 million of his own money, pose a challenge to the CFB’s efforts to level the playing field—in 2009, if the mayor runs again, and beyond if other wealthy candidates attempt to follow in his footsteps. The mayor’s aides are telling reporters that the mayor is willing to spend as much as $100 million if he runs in 2009 – a prediction that Bloomberg’s critics think is meant to discourage potential rivals.

Even many critics of the campaign finance law – who take issue with the way it’s enforced or highlight the limitations it faces – believe the city has benefited from it. “We’re better with [the CFB] than without them,” concedes a former mayoral candidate who’s had his share of disagreements with the board. And the city’s system has nowhere the problems of the state’s operation, where individuals can give $37,800 to a statewide candidate for a general election, and where more than 1,000 people gave more than $10,000 to candidates in the 2006 cycle. The seriousness of the flaws in Albany’s campaign finance regime have made it a top target of “clean elections” advocates, who propose to practically eliminate private fundraising and replace it with taxpayer money.

Skeptics of “clean elections” question whether taxpayers would want to foot so large a part of the bill for campaigns. But places including Portland, Oregon; Albuquerque, New Mexico; Arizona and Maine have already adopted such systems for some offices, and proponents say that similar reforms could come to New York if the state Senate shifts to Democratic control in November. If that happens, the city would face the question of whether matching funds or “clean money” presents the better hope for a healthier politics.

– Jarrett Murphy