Tuesday, May 7, 2013 · 11:00 AM–3:00 PM · 2013–14 session
Elections
1 BEFORE THE NEW YORK STATE SENATE
STANDING COMMITTEE ON ELECTIONS 2 ------------------------------------------------------ 3 PUBLIC HEARING: 4 TO EXAMINE THE ABUSES WITHIN NEW YORK CITY'S
TAXPAYER FUNDED POLITICAL CAMPAIGN SYSTEM 5 AND THE IMPLICATIONS FOR STATE TAXPAYERS
IF THE SYSTEM WERE TO BE EXPANDED STATEWIDE 6
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New York State Capitol Building 8 172 State Street - Room 124 CAP
Albany, New York 12247 9
May 7, 2013 10 11:00 a.m. to 3:00 p.m. 11
PRESIDING:12
Senator Thomas F. O'Mara 13 Chair 14 15 SENATE MEMBERS PRESENT: 16 Senator Cecilia Tkaczyk (RM) 17 Senator Greg Ball 18 Senator John A. DeFrancisco 19 Senator Patrick M. Gallivan 20 Senator Liz Krueger 21 Senator Kathleen A. Marchione 22 Senator Michael F. Nozzolio 23 Senator Diane J. Savino 24 25 1
SPEAKERS:PAGE QUESTIONS 2
David Keating 11 23 3 President
Center for Competitive Politics 4
Randy M. Mastro 69 81 5 Attorney, Partner
Gibson, Dunn & Crutcher, LLP 6 (Former NYC Deputy Mayor) 7 Amy M. Loprest 110 122
Executive Director 8 Eric Friedman
Director of External Affairs 9 New York City Campaign Finance Board 10 Todd Valentine 176 201
Co-Executive Director 11 Robert A. Brehm
Co-Executive Director 12 William J. McCann, Jr.
Special Deputy Counsel 13 New York State Board of Elections 14 Dick Dadey 210 223
Executive Director 15 Citizens Union 16 Ken Pokalsky 252
Vice President of Government Affairs 17 Business Council of New York State, Inc.
(Written Statement Submitted) 18 19 20 21 22 23 24 25 1 Thank you for coming out this morning for 2 this hearing on taxpayer financed campaigns. 3 There's been a lot of attention to corruption 4 in politics in recent months, and in recent years. 5 And, we're looking at ways to try to root out 6 that corruption, ways to deal with it, and ways to 7 set up a system in which the corruption is not 8 making headlines every other week as we've seen here 9 in New York. 10 We have some witnesses here this morning to 11 testify in regards to the New York City public 12 financing of campaign system; what the strengths of 13 that are, what the weaknesses of that are. 14 And, I look forward to the testimony of the 15 witnesses. 16 With that -- 17 SENATOR TKACZYK: I do have something to say; 18 I do have a statement that I would like to read, but 19 I also wanted to note -- 20 SENATOR DEFRANCISCO: You want to move the 21 mic up so we can hear you? 22 SENATOR O'MARA: It's taped down. 23 SENATOR TKACZYK: It's taped down. 24 Can you hear me? 25 Can you hear me now? 1 This is a public hearing, and I'm disturbed 2 that the public is not in the room with us. 3 There -- it's too small, apparently, for the people 4 who are interested in hearing today's topic. 5 So I would suggest that we move the hearing 6 to one of the empty public hearing rooms in the LOB. 7 And I wanted to ask for the Chair to 8 entertain that motion. 9 SENATOR O'MARA: Well, we're here now, we're 10 all set up, everybody is here that's here. 11 And, without delaying these proceedings 12 unnecessarily, we'll commence with the witnesses. 13 SENATOR KRUEGER: I would just like to second 14 the motion of the Ranker. 15 I believe that, if this is a Senate hearing, 16 it is defined as a -- under open-meetings law. 17 And that, not allowing people into the room 18 because, quote, it can't fit more people, is not an 19 acceptable argument, when we have three rooms called 20 "hearing rooms" in the Legislative Office Building, 21 none of which are being used at this time. 22 SENATOR O'MARA: Yeah, this is -- this is 23 televised. It's broadcast on web cam right now, 24 live, and it's available to the public. 25 And anybody that was here, that wanted to 1 come in and get a seat earlier, could have come and 2 gotten one. 3 SENATOR TKACZYK: I think, clearly, there's 4 not enough room for the public in this room. 5 So, I just want the record to show that, that 6 I think we should have moved the room -- to a 7 hearing room. 8 SENATOR DEFRANCISCO: I want the record -- 9 could I be heard, please? 10 I would like to point out for the record, 11 that the "public" that's being talked about is 12 outside, making noise, stomping their feet, 13 screaming and yelling. 14 And it would seem to me, if they wanted to 15 see this, there's plenty of public access to it 16 through the media, through the live broadcast. 17 And rather than have this disrupted, it would 18 seem it's much more advantageous, because this is 19 for the Legislature, to try to come up with 20 solutions to serious problems. 21 And the legislature that has to make this 22 decision are in the room, and they should be able to 23 do it unimpaired. 24 So, I would oppose that motion. 25 SENATOR NOZZOLIO: Mr. Chairman, on the 1 motion? 2 SENATOR O'MARA: Yes, Senator? 3 SENATOR NOZZOLIO: Mr. Chairman, I concur 4 with Senator DeFrancisco's assessments. 5 And would suggest that any member of the 6 Senate or Assembly who wishes to invite members of 7 those who are not seated in this room, into their 8 offices, or into other areas of the New York State 9 Legislative Office Building, where there are 10 hundreds of computers, where this is being 11 broadcast. That this access is available to anyone 12 who wants to take a moment or two to watch the 13 proceedings. 14 That's why they're being videoed. 15 And that the motion I recommend is 16 inappropriate and should be cast aside. 17 SENATOR SAVINO: Mr. Chairman? 18 SENATOR O'MARA: Senator Savino. 19 SENATOR SAVINO: Yes, thank you. 20 With all due respect to those of you who 21 think this room is adequate, I would like to also 22 register: 23 I think that we should have done this in 24 larger Senate hearing room. 25 I shared my concerns with you yesterday about 1 the individuals who feel that they should have the 2 right to address this Committee on an issue, 3 particularly, because they believe they're going to 4 be the subject of a lot of the discussion. 5 You obviously disagreed with me, but what I 6 was hoping to impress upon you, is that we could 7 avoid what is happening now outside, which is, 8 people exercising their democratic right to petition 9 their government. 10 And I'm afraid that what's going to happen 11 is, that activity in the hallway is going to 12 overtake the very important work that you want this 13 Committee to take up. 14 So, I would just like to register that. 15 I think we could have accomplished both. 16 And, hopefully, we'll be able to actually 17 accomplish something in this hearing today. 18 SENATOR O'MARA: Well, I think we will 19 accomplish a lot today, in this hearing room, with 20 the witnesses that we will hear from. 21 And at this point, I will call 22 David Keating -- 23 SENATOR TKACZYK: Well, I do have -- 24 SENATOR O'MARA: -- to come and testify. 25 SENATOR TKACZYK: Excuse me, Chairman. 1 I do have an opening statement, if we're 2 going to proceed to stay in this room. 3 SENATOR O'MARA: Okay. 4 SENATOR TKACZYK: First of all, I want to 5 thank you for holding this hearing. The timing is 6 impeccable. 7 I think there's near unanimous agreement that 8 our political system is broken, and needs fixing. 9 The Governor, the Assembly Democratic 10 Conference, The Senate Democratic Conference, and 11 the Senate's Independent Democratic Conference, all 12 acknowledge that our current finance system is 13 outdated, too lax, and in desperate need of reform. 14 And poll after poll shows that an 15 overwhelming majority of New Yorkers believe we must 16 reduce the influence of money in politics. 17 Just today, I got a bipartisan survey that 18 said: 7 in 10 likely voters believe campaign 19 finance reform would be effective at reducing the 20 influence of money in politics. And the same 21 percentage believe reform needs to -- would help end 22 corruption in state government. 23 But it appears that the Senate Republicans 24 seem to be advocating to maintain the status quo, in 25 which corporate money and special interests outweigh 1 the will of the people. 2 Clearly, the status quo is no longer 3 sufficient. 4 We need -- we can no longer ignore the 5 problems and corruption plaguing our current 6 campaign finance system, so let's use this hearing 7 as a starting point for real reform. 8 Last month, I suggested that the 9 Elections Committee hold public hearings over some 10 large issues concerning our campaign finance system. 11 Questions I was hoping to address in those 12 hearings included: 13 What can the Legislature do to make elections 14 more fair, and how can we remove the influence of 15 big money and dark money from our government and the 16 electoral process? 17 What can be done to ensure that more eligible 18 voters take the time to cast their ballot, and how 19 can we protect the voting rights of those voters? 20 While this hearing is not as broad as I had 21 hoped, it is a start. 22 And, I welcome the opportunity to gain 23 insight into how we can make our electoral process 24 more open, more fair, and transparent to public 25 scrutiny. 1 I'm pleased that there are advocates from 2 both sides of the issue testifying today, but I'm 3 dismayed that -- as I mentioned earlier, that we do 4 not have organizations here that would like to 5 participate. 6 I find it ironic that, in this discussion in 7 which first amendment rights are an overarching 8 theme, we are barring many experts and interested 9 parties from offering their opinions on how we can 10 make our system more open, transparent, fair, and 11 free from the influence of big money and special 12 interests. 13 I do look forward to hearing from the experts 14 who are going to be here today. 15 I hope, at the very least, we can all agree, 16 and acknowledge, that our current campaign finance 17 regulatory system is broken -- broken, and ignoring 18 its problems and maintaining status quo is no longer 19 acceptable. 20 It's time to strengthen the laws, increase 21 disclosure requirements, increase transparency, and 22 increase accountability among our elected officials. 23 We also need to level the playing field on 24 how we elect people to office, by ensuring that our 25 campaign finance reform includes supporting small 1 donations. 2 And, lastly, we must increase our enforcement 3 efforts to punish those who do not comply with the 4 law. 5 I would like to thank you, Chairman O'Mara, 6 and I look forward to working with you, 7 Governor Cuomo, and our legislative leaders on 8 reforming the state's campaign finance regulations, 9 and restoring New Yorkers' faith in their state 10 government. 11 Thank you. 12 SENATOR O'MARA: Thank you, Senator. 13 Any other senator wish to make any remarks? 14 Then we will commence with David Keating. 15 Good morning. 16 DAVID KEATING: Good morning. 17 Thank you, Mr. Chairman. 18 SENATOR O'MARA: I just want to lay the 19 ground rules a little bit here. 20 We're going to try to keep the testimony to 21 approximately ten minutes, if that's possible, and 22 then leave time for questions, so that we can move 23 through the list of witnesses that we have here 24 today. 25 DAVID KEATING: Great. 1 Well, I'll try to stay within that time 2 frame. 3 Thank you very much for the opportunity to 4 speak before you today. 5 I grew up in Long Island, I went to college 6 in New York as well, so it's great to be back in the 7 Empire State. 8 I represent a group known as the Center for 9 Competitive Politics, which is a non-partisan, 10 non-profit group focused on promoting and protecting 11 first amendment political rights of speech, 12 assembly, and petition. 13 And, if you do want to look for models to 14 emulate, I would not urge you to emulate 15 New York City's model, or other states with 16 so-called "strict campaign finance regimes." 17 There's no evidence that any of this works, 18 there's no evidence that it reduces corruption, and 19 there's no evidence that it increases the 20 competitiveness of elections. 21 If you want to look at a model state, I would 22 say, look to Oregon. 23 A lot of the members of this Legislature 24 probably have a great affinity for Oregon. It's 25 seen as a progressive state, very innovative. And 1 it has probably the most liberated liberal campaign 2 finance laws in the country; and, yet, year after 3 year, it produces state government officials that 4 are highly respected. Seen as not -- very low rates 5 of corruption. 6 It's basically a model. 7 So if you want to look at a model, I would 8 encourage you to look at Oregon, and try to adopt 9 Oregon's model, not New York City's model. 10 Now, proponents of clean elections like to 11 tout these programs as a panacea for eliminating 12 corruption and fixing government. 13 But if you look at the states that have 14 adopted these proposals, there's no evidence that 15 any of this works. 16 The rates of corruption are not lower with 17 states that have public financing. 18 The rates of corruption are not lower among 19 the elected officials with states that have very 20 harsh campaign finance laws. 21 And if you look at the states that have 22 public financing, tax funding, for elections, you 23 find they're often fraught with new forms of 24 corruption, leading, in many cases, to new public 25 cynicism about government, and how effectively and 1 efficiently it's run. 2 There's also no evidence that it reduces 3 special-interest influence in the legislature. 4 Now, a good part of my testimony, I won't 5 read it all, because it's 16 pages long, but it 6 recites many of the forms of corruption we've seen 7 in New York City from this program. 8 And I think one way to think of it is: If 9 the problem is corrupt politicians, why would you 10 want to pour gasoline on the fire of corruption by 11 subsidizing that with tax funds? 12 If you have people of low moral character, 13 you don't want to give them more money, and you 14 certainly don't want to match it at a 6-to-1 rate. 15 But why stop at 6-to-1? 16 In the future, I could easily imagine 17 politicians saying: We don't have enough money to 18 compete with interest groups that are running 19 independent expenditures. We need a 10-to-1 match, 20 or a 20-to-1 match. 21 There's nothing magic about a 6-to-1 match, 22 from what I can tell. 23 Some of the problems we have seen in 24 New York City are: 25 Phony contributors being named, so they can 1 get tax financing; 2 Reimbursed donations, so there can be tax 3 financing; 4 And money spent in ways that are not proper 5 under the New York law. 6 And I think one thing you should ask yourself 7 as a committee itself, and perhaps hold hearings on 8 this: Has the New York City Council, is it 9 attracting candidates of higher moral character 10 today than it was before there was tax financing, or 11 not? 12 There should be hearings to find out: 13 Is there any evidence that the candidates 14 themselves are of higher moral character? 15 Are the candidates who are elected, are they 16 doing a better job? 17 Is the city council seen as more efficient 18 and more effective today than it was before 19 tax-financed elections? 20 I submit, the answer is "no" to all of those 21 questions, but you should certainly look into it. 22 And it's not just New York. 23 Other states that have tax-financed elections 24 have had similar problems. And there are other 25 problems that will probably emerge that are not even 1 clear today. 2 In Arizona, for example, it was clear, some 3 of the candidates just ran the tax-financed 4 campaigns as a way of having great parties. 5 Now, they were eventually run down, and 6 convicted, but, imagine what the voters thought of 7 things like that. 8 You're also likely to see all kinds of gaming 9 of this type of system, especially when you have a 10 very lavish match, $6 for every $1 donated. 11 You're quite likely to see situations, where 12 one major party thinks, Well, maybe if a minor party 13 could be propped up, maybe a Green party, or an 14 extremist right-wing party, it might take votes away 15 from the Democrats, or the Republicans, as a way of 16 trying to win a general election. 17 So you might see operatives of one party or 18 another trying to get money to these more extreme 19 parties as a way of trying to tilt the election 20 field. 21 So if the worry is corruption, basically, why 22 would you want to give more state tax funds to 23 corrupt politicians? 24 If P.J. O'Rourke was here, he would probably 25 say, "This is like providing whiskey and car keys to 1 teenage boys." 2 You don't want to give corrupt politicians 3 more and ready sources of funds. 4 Now, it's often said that these campaign -- 5 tax-financed campaigns are a way of changing 6 legislative voting patterns. 7 Our group did an extensive study of the 8 Connecticut public-financed elections, and we've 9 compared the voting records of clean-election 10 participants in the session before the program was 11 started, and then we looked at it again after it was 12 over, with the same lawmakers. 13 And we found, by looking at the five major 14 interest groups in the state, including the labor 15 unions, the big business organizations, and such, we 16 found that the number of times that legislators 17 voted in favor of the interest groups actually rose 18 after the clean-election program went into effect, 19 or, had no impact. 20 So, that's another question: If it's being 21 sold as reducing interest-group impact, there's no 22 evidence that this has actually happened in 23 Connecticut. 24 In fact, it's quite possible, that if you 25 take a scheme like New York City, interest-group 1 impact is going to increase, because these groups 2 have statewide membership lists. Those members can 3 be solicited for relatively small-dollar 4 contributions, where up to a $250 contribution will 5 magically become a $1500 contribution. 6 So these interest groups could actually have 7 more influence after a tax-financed scheme, like 8 New York City, is adopted statewide. 9 I also wanted to bring to your attention a 10 study that just came out last month, an academic 11 study, that looked at state-level campaign finance 12 reforms, including taxpayer-financed campaigns. 13 And they found, again, the states with the 14 strictest laws, with the lowest contribution caps, 15 with tax financing, had no lower rates of corruption 16 among public officials than states that had no 17 limits at all. 18 So, there's no evidence that it's going to 19 reduce corruption. 20 Now, there are other claims that my testimony 21 goes through. 22 Supporters of these programs say that 23 replacing private contributions with taxpayer 24 dollars will lead to a decrease in the number of 25 lobbyists and influence of special interests. 1 We looked at the number of registered 2 lobbyists before and after these programs. 3 No change, or it went up. 4 They say that it will lead to a more diverse 5 legislature, with people of different backgrounds, 6 rather than the number of lawyers you typically see 7 in legislatures today. 8 Again, we found no impact. 9 There is also a claim that the number of 10 female legislators would go up. 11 Again, we found no impact. 12 We looked before, and after; no impact in the 13 number of women who were elected in the state 14 government. 15 Then, there's often the case made that these 16 programs will help root out waste from 17 special-interest spending. 18 Well, I would hope that would be true. 19 We tested this theory by looking at the rate 20 of growth of government spending in Arizona and 21 Maine, before and after each state's clean-election 22 program passed. 23 And we found that, in fact, state spending in 24 those states grew at a faster rate than the national 25 average after the program passed than before. 1 So, again, there is no impact that we could 2 see. 3 Now, I would like to conclude by looking a 4 little bit at the cost of this program. 5 I think anyone that can project the cost of 6 this program. 7 There's really no way of saying what this 8 program is going to cost. 9 You can look at New York City, and that might 10 be -- might illustrate it, but to take New York City 11 and to just extrapolate to statewide, I don't think 12 that's a legitimate way of looking at it. 13 But even if you did, and you looked at 14 New York City's costs, you would have to say the 15 cost would be, per every two-year election cycle, 16 roughly 160 to 250 million dollars. 17 But there are a lot of differences between 18 state elections and city elections. 19 In New York City, when you win a primary, 20 you've usually pretty much have won the election. 21 I mean, there's a general election, but it's 22 usually a formality. 23 A lot of the State Assembly and State Senate 24 races are quite competitive in both the primary and 25 the general election. 1 So, you can't just take New York City and 2 apply it to state elections, districts and 3 statewide. 4 And then there's the phenomenon, which is 5 growing in importance, of independent expenditures. 6 Independent-expenditure groups are going to 7 be more active probably in the future, and, how is 8 that going to influence the cost of elections? 9 The cost of elections may well go up, and 10 then there may be a demand in the Legislature to 11 say, We need more than a 6-to-1 match. 12 So even though it might, if it becomes law, 13 start at 6-to-1, it could be 10-to-1 in the future, 14 or maybe even more. 15 I don't know what a future legislature might 16 adopt. 17 So, I think it's possible you could see the 18 program ballooning cost far beyond even what are 19 seen as high projections today, into the future. 20 It could be a quarter billion. It could be a 21 half billion. It could even be more. 22 There's really no way of knowing. 23 And, with the combination of statewide 24 interest groups that are able to raise money at a 25 6-to-1 match, working with the candidates, we could 1 see explosive costs in campaigns. There's really no 2 way of knowing. 3 And then there's another thing I hope you'll 4 reflect on: 5 There are often extreme parties that come 6 along. 7 I mean, you -- I don't know who hasn't run 8 into a Lyndon LaRouche-type candidacy, when he kept 9 running for president. 10 Some of these parties and candidates have 11 some pretty strange views. 12 And I think it's great that everyone can 13 express their views in America. That's part of the 14 great strength of our system. 15 But I think a lot of taxpayers will wonder, 16 Why are my tax dollars going to these extreme 17 organizations, propagating these extreme views that 18 I totally disagree with? 19 You might find yourself in a situation, where 20 the state is handing out millions of dollars to 21 these organizations that might be expressing 22 philosophies that you would find totally abhorrent. 23 So I would say, if you look at the objective 24 evidence about the claims of the tax-financed 25 selections, to the reality of what's happened, 1 you'll see, in almost every case, there's no change, 2 corruption doesn't go down, these other effects 3 don't take place, interest groups don't have any 4 less influence after than before, and, arguably, 5 they may have more in this type of system. 6 And I would leave you with the thought of 7 Thomas Jefferson, when he said: 8 "To compel a man to furnish contributions of 9 money for the propagation of the opinions which he 10 disbelieves, is sinful and tyrannical." 11 And that's what you're talking about when you 12 have tax-financed elections, where the taxpayer's 13 putting in $6 for every dollar donated to the 14 candidate. 15 Thank you very much. 16 SENATOR O'MARA: Thank you, Mr. Keating, 17 for being here this morning and providing this 18 testimony. 19 Any questions? 20 Senator Nozzolio? 21 SENATOR NOZZOLIO: Thank you, Mr. Chairman. 22 And thank you, Mr. Keating. 23 One of the comments that you made, or that 24 your -- you indicated in your testimony, was that, 25 and I quote: That the abuse of taxpayers' funds in 1 public financing is so pervasive, particularly in 2 New York City's program, that such a system cannot 3 possibly live up to the clean moniker that has been 4 assigned to it by its opponents. 5 You made an interesting case on that score. 6 One of the things that struck me, was that, 7 according to the budget numbers we have, that we're 8 spending as much in New York City on the 9 administration of this program, than they are in 10 terms of the distribution of funds. Almost a 11 1-for-1. 12 And that administrative costs, I don't 13 believe, take into account the future long-term 14 costs for pensions, healthcare, and the like. 15 This is just on, it appears, the salary and 16 costs of running the program. 17 Is that the experience of any other 18 publicly-financed program that you have analyzed? 19 DAVID KEATING: Well, actually, it is. 20 When you have a program like this, you have 21 to protect the tax funds; you have to have armies of 22 auditors. 23 And, if you don't audit the money coming in, 24 then, you're likely to see more of these problems of 25 straw donations, fake donations, phony reports of 1 donations. 2 So you have to have a very strong auditing 3 force to do this. 4 This leads to other potential problems. 5 The auditors themselves may have a political 6 agenda. 7 Now, we may think, Oh, how can auditors have 8 a political agenda? 9 Well, somebody has -- is the boss of the 10 auditors; right? 11 How are -- how do the auditors decide who to 12 audit? 13 Do they audit everyone? 14 Do they audit based on complaints? 15 If it's based on complaints, then is one side 16 more likely to file a complaint than the other? 17 How do they decide whether to pursue 18 complaints? 19 And, at the federal level, the 20 Federal Election Commission, because they were 21 worried about the FEC being used for political 22 purposes, and there's a long history -- "a long 23 history" -- of, in our government, of government 24 agencies being used for political purposes. 25 And the IRS, for example, presidents, whether 1 they were Republicans or Democrats, often sic the 2 IRS after their political opponents. 3 And we're probably most familiar with this 4 because of what Nixon did in the '70s. 5 But there's a history of political officials 6 using government agencies to go after their 7 opponents. 8 So the question is: Who's going to be 9 running these auditors? 10 Are you going to have a situation where it's 11 the party that controls the Governor's Mansion 12 decides, that oversees the auditors? 13 And if that is how it is, well, if the 14 Republicans are in charge, then the Democrats may be 15 audited more often; and vice versa. 16 So, then the problem might become, the 17 auditors tilting elections, by announcing: There's 18 an investigation. We're looking into wrongdoing, 19 and so on. 20 But by the time the investigation's 21 concluded, the election's over. Or maybe it's many 22 months after the election. 23 SENATOR NOZZOLIO: If I may interrupt on that 24 point, Mr. Keating, it appears that there's a 25 system in place that is, less pointed, more benign, 1 but, nonetheless, very expensive, and you question 2 its merits, in the fact that the system itself is 3 designated to look at those elections where there 4 may be, as they characterize, a well-funded 5 opponent, and make additional contributions to a 6 candidate who is running against an individual who 7 is not accepting taxpayers' dollars. 8 That type of responsibility, for overseeing 9 the internal workings of a campaign, and the 10 internal developments, and it may be even external 11 developments, of a campaign, appears extremely 12 troublesome, of responsibility to be placed on an 13 unelected, unseen, in many cases, unknowing, 14 individual with that responsibility. 15 Do you agree? 16 DAVID KEATING: Well, as I said, I think that 17 there are a multiple set of problems with these -- 18 with the auditing. 19 If the auditing is not strong, then you're 20 going to have more abuses of this system. 21 And if it is strong, you're going to wind up, 22 I think, capturing some innocent candidates with 23 allegations shortly before an election, that could 24 tilt an election unfairly as well. 25 So there are problems both ways. 1 SENATOR NOZZOLIO: Thank you, Mr. Chairman. 2 SENATOR O'MARA: Senator? 3 SENATOR TKACZYK: Do you think our current 4 system is adequate? 5 DAVID KEATING: Adequate to what? 6 SENATOR TKACZYK: The current system that we 7 have in place, where the board of elections reviews 8 the campaign contributions of our people who are 9 running for office. 10 Do you think -- I would assume that you have 11 a position on the New York City Campaign Finance 12 Board of Elections. 13 But, what do you think about how the current 14 system works in New York State? 15 Do you think we need to change anything? 16 You appear to not like this system we're 17 talking about today. 18 Do you think we should change anything? 19 DAVID KEATING: Well, there -- I would be 20 happy to work with you, but I would -- I mean, I 21 would say, if you want to adopt some other state's 22 laws, I'd take Oregon, and adopt those. 23 I think it's probably the best one in the 24 country. 25 So if you want to look to another state, I 1 would take Oregon's and adopt it here, if you want 2 some -- an improvement. 3 SENATOR TKACZYK: Do you think if the State 4 Board of Elections here had more resources and more 5 authority and ability to investigate the campaign 6 irregularities, that that would improve our system 7 here in New York? 8 DAVID KEATING: I don't know. 9 I would have to look more into that. 10 SENATOR TKACZYK: You're a national 11 organization. 12 I'm not that familiar with -- with what -- 13 so, have you taken positions on some federal laws or 14 regulations around campaign finance reform? 15 DAVID KEATING: Yes, we have. 16 We believe that the first amendment is 17 probably the best solution for elections. 18 And it says, of course: Congress shall pass 19 no law bridging freedom of speech. 20 And we think there are a lot of abridgments 21 of speech. 22 We think one of the problems of campaign 23 finance law, at the federal level, and at many 24 states, is, no one can understand it. It's very 25 complicated. 1 I used to work for a taxpayers' organization. 2 I served on the National Commission on Restructuring 3 the IRS, with Senator Bob Kerry of Nebraska. 4 And I can tell you, I know a lot about tax 5 law. And the tax law is a model of simplicity and 6 clarity, compared to election law at the federal 7 level and at most state level. 8 And the problem with that is, to run a 9 political campaign as a citizens' group, or even to 10 run a major campaign, of any kind, you need to hire 11 a set of lawyers to guide you through the maze. 12 And I think that's a problem. 13 If people want to say something about their 14 government, they shouldn't have to hire an attorney 15 to navigate the laws around this. 16 And, so, if you're looking at trying to do 17 something in New York, I would urge you to go 18 through, and try to simplify your laws on elections, 19 simplify your laws on petitioning the government, so 20 it can -- people that want to get involved, can get 21 involved. 22 And, if you -- one way of doing this, would 23 be to greatly increase the thresholds where people 24 need -- before people need to start filing forms. 25 I mean, a lot of states require -- you spend 1 several hundred dollars, and you have to fill out a 2 form, registering with the state to say you exist. 3 Now, that's crazy. 4 It should be way more than that. 5 You know, several hundred dollars is not 6 going to, or even several thousands of dollars is 7 not going to, tilt anything. 8 And even if it did, you know, more power to 9 them. 10 I mean, we look -- we look at places like 11 Russia, which is, you know, a democratic place, 12 supposedly, to have free elections. 13 Whether they do or not, I very much doubt. 14 But, I doubt the opposition in Russia would 15 like the idea of a campaign finance system that 16 gives Putin the name, address, occupation, where 17 they live, how much they've donated to every 18 citizens' group in the state. 19 I mean, we have to balance the rights of 20 people to work, to petition their government, to 21 change their government. And we need to look at the 22 cost and balance of benefits of the types of laws 23 that you might be discussing here. 24 And one of the things that is -- that's part 25 of the bill, that's -- for the Clean Elections Bill, 1 is a massive new intrusion on the names and 2 addresses of people that donate to citizens' groups, 3 even if the group has spent just a tiny fraction of 4 its budget urging people to vote one way or the 5 other. 6 I think that's a massive invasion of privacy 7 to people that want to join these groups. 8 SENATOR TKACZYK: I just have one last 9 question. 10 Do you think donations should be disclosed at 11 all? 12 If you have a large donor, do you think the 13 public should know who's funding campaigns? 14 DAVID KEATING: I think that's something 15 that's widely recognized as something that makes 16 sense here in the U.S. 17 I would just say, I think the threshold 18 amount should be much, much higher for disclosure of 19 donations. 20 I mean, if -- if, for example, there's 21 someone who does not feel comfortable disclosing his 22 sexual or her sexual orientation, and wants to back, 23 you know, candidates who support gay marriage, and 24 so on, why should their contribution be disclosed 25 for a few hundred dollars? 1 That's not going to corrupt a politician to 2 vote one way or another on something else. 3 So I would encourage you to make the 4 thresholds for disclosure of donations much, much 5 higher than they are today. 6 And that would -- I think that would 7 encourage the smaller donors who don't want to see 8 their name and address on some website when you 9 Google their name, and then, boom, a potential 10 employer can see all the donations that you've 11 given. 12 And if your employer may not agree with your 13 political views, the employer might not decide to 14 hire you. Or, give you, you know, a better 15 responsibility in the organization. 16 SENATOR TKACZYK: Well, what about large 17 donors who are paying for ads, and the ads are 18 potentially misleading, and the public doesn't know 19 who's paying for the ads? 20 SENATOR BALL: Like Soros. 21 Soros, I think, is an example of that. 22 DAVID KEATING: I well, don't know the 23 details of what happened in the last campaign, 24 but -- 25 SENATOR BALL: Maybe the Ranker could provide 1 some? 2 DAVID KEATING: In most states, if a donation 3 is given for an independent expenditure -- in fact, 4 I don't know of any state where this isn't the 5 case -- if a donation is given, earmarked for a 6 particular independent expenditure, then that needs 7 to be disclosed. 8 So, I don't think most people would have a 9 problem with that. 10 But if someone has just joined an 11 organization, and is just paying dues to an 12 organization, or maybe even be a generous donor to 13 the organization, and that organization decides to 14 spend a -- you know, some small fraction of its 15 budget on an independent expenditure, I don't see 16 any reason to disclose the names of all the donors 17 to the organization. 18 That doesn't make any sense to me at all, 19 because then you're going to have people who just 20 gave money to the group because they believed in 21 environmental causes, or something. 22 And, then, their contribution will be 23 associated with some ad, that when they gave the 24 donation, they had no idea they might run this ad, 25 or even that particular ad. 1 And I think that would actually mislead the 2 public rather than inform the public. 3 SENATOR TKACZYK: What level do you think 4 those dollars should be disclosed at? 5 I mean, you said it should be raised 6 higher -- 7 DAVID KEATING: I think it should be at least 8 a thousand dollars. 9 SENATOR TKACZYK: I know, Senator Krueger, 10 did you have a question? 11 SENATOR DEFRANCISCO: Well, wait. You want 12 to go around here; right? 13 SENATOR O'MARA: Senator DeFrancisco? 14 SENATOR DEFRANCISCO: Ah, yes, I had a couple 15 of comments and questions. 16 You closed by a quote that I had here, that I 17 thought is extremely important. 18 Whatever the cost is, whatever the various 19 philosophies of people are, "To compel a man to 20 furnish contributions of money for the 21 propaganda" -- "propagation of opinions which he 22 disbelieves and abhors, is sinful and tyrannical." 23 A guy who was a pretty good politician, 24 Thomas Jefferson, said that a few years ago. 25 And, doesn't public financing -- and you 1 mentioned it briefly, doesn't it require me to 2 support individuals, if it ever got created, that I 3 may be running against? 4 DAVID KEATING: Absolutely. Of course. 5 SENATOR DEFRANCISCO: That I may think is a 6 wacko, that I would not agree with anything that 7 they have to say? 8 DAVID KEATING: Well, I mean, of course. 9 I mean, you could have a modern-day 10 Nazi-party candidate decide to run here, statewide, 11 in New York. And they don't get to get a huge 12 number of people to back them. 13 I mean, the state of New York that has, what, 14 19 million or so people, it's not hard to find, you 15 know, a few thousand people that might have some 16 pretty strange views. 17 And, once they are able to qualify, then they 18 get to make their views six times more prevalent 19 than they would if they had to just raise the money 20 straightforwardly. 21 SENATOR DEFRANCISCO: And isn't -- isn't a 22 right -- shouldn't be there be a right in free 23 society, that if you don't want to vote, or you 24 don't want to support candidates, or you don't think 25 government does anything right, you don't want to be 1 any part of it, you want to be as far away as you 2 can, that you should be allowed to be a 3 non-participant in that process? 4 Isn't that part of what a free country is? 5 DAVID KEATING: Well, it is, but I think 6 everyone would agree that you can't have every 7 citizen and taxpayer deciding what their tax funds 8 would go to or what they wouldn't go to, because 9 then someone else might say, Well, I don't want my 10 tax funds being used for abortion. Or, you know, 11 who knows -- divorce counseling. 12 SENATOR DEFRANCISCO: Okay? 13 DAVID KEATING: You can come up with a bunch 14 of different things that people wouldn't want their 15 tax funds going to. 16 But I think there's an agreement that, we pay 17 our taxes, we elect our elected officials, and they 18 make the decisions about how the money should be 19 spent. 20 SENATOR DEFRANCISCO: Okay. And let me just 21 give you a couple of examples. And I think these 22 are real examples, unless I'm misinformed. 23 I happen to be a Democrat in New York City. 24 And I win my race, after getting past the 25 primary, by 95 percent-to-5 percent. 1 There's a few write-ins for Mickey Mouse, 2 or something. 3 And, I can still apply for campaign financing 4 the next year, even though the chances of me losing 5 the race is slim and none. 6 Is that fair to say? 7 DAVID KEATING: I don't see anything in the 8 proposals that would prohibit that, no. 9 SENATOR DEFRANCISCO: Okay. 10 Now, I'm going to ask you, and this is purely 11 hypothetical now. Just purely hypothetical. 12 Let's suppose -- can you think of a motive, 13 any kind of motive, or any kind of reason, why 14 someone would do this? 15 Suppose the someone contacts a person on a 16 city council, and others, and gives that person 17 money, for the opportunity to run on a party line 18 that has no chance of winning in that 19 jurisdiction -- none whatsoever -- but that 20 jurisdiction has public financing of elections. 21 Can you think of any reason that person would 22 want to bribe somebody, in order to get into a race 23 that the person has no possible chance of winning? 24 DAVID KEATING: Well, I would say politicians 25 are often quite clever and very innovative about how 1 to take the rules, whatever the rules might be, and 2 trying to use them to their advantage. 3 Now, I could imagine a case, someone wanting 4 to increase their name ID or favorability, or build 5 a base in the state. 6 And, if you were to be able to go to donors, 7 and say, "Look, I'm thinking of running for mayor, 8 or something, in New York, and if you give me a 9 dollar, your contribution will be multiplied by 10 sixfold," I mean, a lot of potential donors would 11 find that attractive if you find that candidate 12 attractive. 13 It's not uncommon, for example, for a 14 Congressman who is in a very Republican district or 15 a very Democratic district, has no -- has not been 16 opposed heavily, didn't have primary opponents, and 17 they often raise lots of money and build up a big 18 war chest. 19 Well, what are they doing that for? They 20 have no problem getting reelected. 21 And the answer is: They have ambitions, and 22 they hope to run for a bigger office some day. 23 So it's possible, you know, both in the city, 24 but also in New York, you could see candidates 25 building up these tax-funded war chests, to then 1 decide, like an assemblyman could decide to run for 2 a state senator, or maybe a state senator deciding 3 to run for governor, and you build these war chests 4 over time. 5 Now, I don't know if the bill would prohibit 6 the funds from being used for different races. You 7 know, maybe there are things that could be done like 8 that. 9 But, as you see, things can get more 10 complicated, and, you know, how do you draw the line 11 between what's, you know, a race here, versus 12 somewhere else? 13 For example, if you're a New York City-based 14 legislator, getting your name out more heavily in 15 New York City is hugely important for a statewide 16 race. 17 So even if you try to write these rules, 18 someone could easily run radio ads in New York City, 19 saying it's for their reelection to their 20 State Senate race. 21 So there's all kinds of -- that's what I 22 said, in terms of the cost of this program. 23 I don't think anyone can sit down and project 24 what the costs are, based on static analysis. 25 Politicians and political consultants are 1 very clever. They're gonna look at the law; they're 2 gonna try to figure out how they can tilt it to the 3 political advantage of people who have bigger 4 ambitions. 5 SENATOR DEFRANCISCO: Thank you. 6 SENATOR O'MARA: Senator Krueger? 7 SENATOR KRUEGER: Thank you. 8 I want to go back to a number of the things 9 you've already said. 10 You keep referencing Oregon as your model of 11 how campaigns should operate. 12 DAVID KEATING: Uh-huh. 13 SENATOR KRUEGER: They have no campaign 14 limits in Oregon; is that correct? 15 DAVID KEATING: Correct. 16 SENATOR KRUEGER: So, if I was a 17 billionaire -- Democrat, Republican, or neo-nazi -- 18 I could give $10 million, $20 million, endless 19 money, or through corporations, parallel, in Oregon, 20 you don't think that influences the outcome of 21 elections having no limits on how much people can 22 give? 23 DAVID KEATING: Well, a lot -- of course. 24 Lot's -- I'm not going to sit here and say 25 money has no effect on an election. 1 Just like anything else, everything has an 2 effect on elections. 3 But one thing that's quite interesting, is if 4 you look at the history of self-financed candidates 5 for Congress and for U.S. Senate, they have an 6 incredible flameout rate. I mean, it's very, very 7 high. 8 And if it was just a matter of the richest, 9 best-funded candidates winning, then, you know, the 10 rich people would be elected to every level of 11 government everywhere. 12 It just doesn't happen. 13 And that's because, a good candidate, a good 14 public official, is someone that people can relate 15 to, who they believe in, who they think has high 16 moral character. 17 And I think, by and large, if you look at 18 Oregon, and you look at the corruption rates, 19 they're very low there. The state is seen as 20 well-run. I mean, there are a lot of very positive 21 attributes. 22 And I think that a lot of it has come from a 23 system that is, basically, modeled after the first 24 amendment. 25 SENATOR KRUEGER: So you also have no problem 1 with the Citizens United decision, or, the 2 501(c)(4), "dark money, no accountability" system we 3 have in place, also on that theory? 4 DAVID KEATING: Well, the Citizens United 5 decision basically said, that groups of citizens 6 that happened to be formed as corporations could 7 talk to voters about how to vote. 8 I mean, in its simplest form, that's what 9 it's about. 10 And the court has also said that unions can 11 do the same thing. 12 So, yes, I think it's a good thing that 13 unions and citizens' groups are able to express 14 their opinions about candidates. 15 I think that's a good thing. 16 Now, in terms of the so-called "dark money," 17 first of all, under federal law, if people are not 18 following the law, then, obviously, the law has to 19 be followed, and it should be enforced. 20 The law today is, if money is given, 21 earmarked for these ads, it needs to be disclosed. 22 And if people are violating that law, they 23 should be brought to account for it. 24 That being said, if someone gives $500 to the 25 Sierra Club, and then the Sierra Club decides to run 1 an independent expenditure, then I don't think 2 there's any reason for all the donors to the 3 Sierra Club to be disclosed, just because you 4 happened to give, and you're a dues-paying member to 5 the group. 6 SENATOR KRUEGER: But if you follow the 7 Oregon model that you said that you like, if you 8 give $10 million, you wouldn't have to either? 9 DAVID KEATING: Wouldn't have to, what? 10 SENATOR KRUEGER: $500 or $10 million, you 11 don't -- 12 DAVID KEATING: No, no. If it's earmarked 13 for an independent expenditure, it needs to be 14 disclosed. 15 SENATOR KRUEGER: You talked about the cost 16 of auditing a public-financing system; and, yet, you 17 also talk about the need to ensure that we don't 18 have corruption in politics or in our political 19 process. 20 So here in New York State, unlike 21 New York City, we don't basically audit anyone, 22 ever, in our campaign finance system. 23 Do you not have a problem with that? 24 DAVID KEATING: Well, obviously, if it's not 25 doing anything, you need to look at that. 1 But the Clean Elections bill would make these 2 audits a lot more difficult than what you have now. 3 And, you also have incentives for the donors 4 that give the money. 5 I'm not saying the donors are going to, you 6 know, hire their own auditors, but, donors are less 7 likely, I think, to give to, you know, a candidate 8 that they don't believe in, to give a large amount, 9 if they don't believe the candidate is someone good. 10 SENATOR KRUEGER: You referenced the cost of 11 the city's campaign finance system, and how it's 12 spent. 13 And I know that the director is here, so 14 we'll be hearing from her. 15 But, your organization did a report, very 16 critical of the city's system, that you released in 17 September of 2011. 18 And, you make all these -- and I don't know 19 whether you were the author, so I'll just reference 20 it as "your organization's report." You can let me 21 know whether you were the author. 22 But I have several reports documenting that 23 it was filled with incorrect information: 24 That you claimed that half the candidates -- 25 excuse me. 1 That your claims of candidates violating the 2 city law, only half of them actually should have 3 been on the list; 4 That a third of the candidates on the list 5 were not even accused of misusing campaign funds; 6 That candidates penalized by the 7 campaign finance board were significantly less, that 8 you reported. That you were confusing Assembly 9 members with city-council candidates; 10 That there was a confusion between 11 discretionary funds, which, in lingo up here, are 12 called "member items," and have nothing to do with 13 the campaign funds -- and, campaign funds. 14 Do you still stand behind that report that 15 was released in 2011, since there's been so much 16 documentation of factual flaws in that report? 17 DAVID KEATING: Well, there's -- if there's a 18 problem, we'll be happy to try to correct that. 19 But I think -- I don't think there's any 20 doubt, the fundamental thrust, is that there has 21 been a lot of corruption with the New York City 22 program. 23 That when you give a 6-to-1 match, there are 24 a lot incentives for politicians to try to cheat. 25 And, you're going to need a fairly large 1 auditing force to ensure that doesn't happen. 2 SENATOR KRUEGER: Miss? 3 I'm sorry, I don't know what that is. 4 [Inaudible comment from an audience 5 member.] 6 SENATOR KRUEGER: Mr. Chair, for the 7 record, I know that there's several group who asked 8 you to testify today, and were not invited to 9 testify at this hearing, who have, in fact, produced 10 reports documenting the flaws in the analysis of the 11 Center for Competitive Politics' reports, and I 12 would even argue, his testimony here today. 13 And so I wish, that when we have somebody 14 reporting on the massive corruption in a system, 15 that I don't think the majority of people who study 16 our campaign systems do believe there's massive 17 corruption. 18 And, in fact, what the record shows, is that, 19 people who tried something get caught under the city 20 system, and they have to give the money back, or 21 they are fined, or they're prevented from moving 22 forward. 23 And that, in fact, the city system, for 24 25 years, is, they have created a system, and they 25 catch the bad guys. And that's a good thing. 1 And we have a system in New York State where 2 we don't catch anybody, because we don't even look 3 at anybody. 4 So, I wish, Mr. Chair, that those groups 5 had been invited to testify. 6 And perhaps we can have another opportunity, 7 where they will be able to testify on the work that 8 they've been doing nationally. 9 SENATOR O'MARA: Anyone is welcome to submit 10 testimony, that wants to submit testimony. 11 And there's been hearings by the IDC, 12 inviting those other groups. 13 Would the sergeant-at-arms close the window. 14 (Pause in the proceeding.) 15 (The proceeding resumed, as follows:) 16 SENATOR KRUEGER: I was done with my 17 questions. Thank you. 18 SENATOR O'MARA: Senator Savino? 19 SENATOR SAVINO: Thank you, Mr. Chairman. 20 Mr. Keating, I would say, it's probably 21 fair to suggest that you are not a fan of 22 publicly-financed campaigns in any form, either in 23 Arizona, the New York City system, or any of the 24 other states that your report cites. 25 And I just want to say that, you've 1 referenced many times about the issue of corruption 2 in public financing, and how it's not an answer. 3 Quite frankly, the issue of whether or not we 4 should adopt a public-financed system in the state 5 of New York has been kicking around for several 6 years. 7 It may now have seemed to have taken on a 8 larger-than-life proposal, as a result of the 9 corruption scandals, but the truth is, it's not a 10 solution to corruption. 11 And I have cautioned many people that we 12 should not use this as an opportunity to suggest 13 that, if New York State adopts a publicly-financed 14 campaign model, that that's the solution to the 15 corruption problems that have been captivating the 16 state, and the press, because, quite frankly, they 17 are not. 18 I believe, and I think there are others who 19 might agree with me, that if we were going to adopt 20 a public-financed system, it would be because, some 21 of the things that you mentioned: How do we attract 22 more average citizens to run for office? 23 It is very difficult to raise money and run 24 for office. 25 How do we attract more women? 1 How do we attract, you know, diverse 2 candidates? 3 That should be the reason why you have a 4 public-matching system, to attract better 5 candidates, or more citizenship government, and not 6 have people who are inside. 7 That being said, you made a couple of 8 comments, and I'm just curious as to how you arrived 9 at this determination. 10 You said that, in the New York City campaign 11 finance system, that since its inception, there's 12 been no evidence to suggest that it's improved the 13 quality or the caliber of any of the members of the 14 New York City Council. 15 How did you arrive at that decision? 16 What -- how do you determine what is a 17 quality city councilmember? 18 DAVID KEATING: Well, I didn't -- I don't 19 believe I said that. 20 SENATOR SAVINO: You did. 21 DAVID KEATING: No, I said I thought -- I 22 think you should look and try to answer that 23 question as a committee. 24 Look -- you know, look at before and look at 25 after, and see if it's improved. 1 And if it has improved, you know, then that 2 would back your point. 3 SENATOR SAVINO: But what would make you, 4 since you're an observer of this, and you seem to 5 have a lot of experience at analyzing systems, how 6 would you determine whether or not it's improved the 7 caliber of the city council? 8 And I'm not saying it has or it hasn't. 9 DAVID KEATING: Sure, sure. 10 SENATOR SAVINO: I'm just curious as to why 11 you seem to think it hasn't. 12 DAVID KEATING: Well, I would just say, based 13 an anecdotal evidence of, you know, when I'm in 14 New York, I was on an intelligence square debate in 15 New York City last September, and, there was an 16 audience, it was all-New York City audience, and I 17 gave the example of the New York City tax-financed 18 system, and I asked the question: "Does anyone in 19 the audience think" -- 20 And this is a pretty liberal audience that 21 probably backed it. 22 -- I said: You know, what do you think? Do 23 you think the council is better today than before 24 this system? 25 And I just got peels of laughter from the 1 audience. 2 Now, I'm not suggesting that that's an 3 objective, you know, method, by any means. 4 SENATOR SAVINO: Certainly not. 5 DAVID KEATING: But, certainly, one could 6 look at rates of corruption among people on the 7 city council, after the public financing, and 8 before, a period of ten years on either side. 9 We haven't done that. I think it's an 10 interesting question. 11 We may want to try to look into that, and 12 see, you know, are there different rates in 13 New York City? 14 Is -- you could ask people who are close 15 observers of city hall, if you can find them, to 16 think, what do they think of a quality of the people 17 serving today versus before? Has it improved? 18 I mean, I don't know the answer to that. 19 I was suggesting it's something the Committee 20 might want to look into. 21 SENATOR SAVINO: Well, let's follow that 22 through. 23 Do you think if you had an audience of 24 New York State taxpayers, and you asked them if they 25 felt that the quality of the State Legislature was 1 improved, because we have a system that has no 2 campaign-finance oversight, and, basically, no 3 auditing by the New York State Board of Elections, 4 and the limits on how much you can contribute to a 5 member of the State Senate is five times what you 6 can contribute to the President of the 7 United States, do you think they would not erupt 8 into peels of laughter then also? 9 DAVID KEATING: I don't know. We could ask 10 them. 11 But I think if you also asked them, 12 "How would you feel about your tax dollars being 13 used to fund the candidates you don't like?" they 14 probably wouldn't like that either. 15 SENATOR SAVINO: But at the end of the day, 16 if you asked people a question that way, of course 17 they're going to find fault with the system. 18 DAVID KEATING: Right. 19 SENATOR SAVINO: I think what we have to try 20 and figure out is: Does the New York City campaign 21 finance system provide some opportunity for 22 quality-elected to get elected; or, for people in a 23 community to feel that they have a chance to run for 24 office? 25 Because at the end of the day, Mr. Keating, 1 all elections are exactly the same: you raise money, 2 you talk to voters. 3 The question is: How much money do you have 4 to raise, and how many voters are you going to have 5 to talk to, and how do you fund the campaign 6 adequately? 7 The New York City Council's -- the 8 New York City campaign finance system, I know 9 they're here, they're probably going to testify, the 10 biggest complaint you get from participants in their 11 system, is that they're too restrictive. That the 12 requirements that they have to go through to comply 13 with the program are so onerous, that it leads to 14 them -- to candidates being fined for things that 15 were really never nefarious; there was no attempt 16 to, you know, create corruption. 17 In fact, one of the members of the Senate, 18 he's not here, he will tell anybody of his infamous 19 story of being fined for having too many lawn signs, 20 because, in the part of the city that he represents, 21 people actually have lawns. 22 Well, that was an anomaly to the vast 23 majority of the campaign finance board's 24 participants who felt that there had to be something 25 inherently wrong if he had too many lawn signs. 1 So, you will hear people complain that the 2 system is too restrictive. That it doesn't give 3 away money. 4 And that -- I believe you also mentioned, 5 that if -- you could build up these huge war chests. 6 The city system, if I'm not mistaken, you 7 can't keep the money at the end of the campaign. 8 You have to return it. 9 If you don't, if you -- the public-matching 10 portion of your campaign, you're not allowed to keep 11 that money and to roll it over into your next 12 election; unlike, our campaigns, where we can just 13 continue to grow, you know, huge campaign chests, 14 and then potentially use it for other races, or just 15 build it up. 16 So, I'm just curious: Do you think our 17 system is better than that system? 18 DAVID KEATING: Well, I think both have their 19 flaws. That's why I would encourage you to look at 20 a place like Oregon. 21 I think the first -- I think the drafters of 22 the first amendment pretty much got it right. 23 And that's something that's worth emulating. 24 In fact, Oregon has a "free speech" clause in 25 its constitution, that, believe it or not, is 1 stronger than the first amendment to the 2 U.S. Constitution, which is why it's been upheld, 3 the system that it's had. 4 There have been efforts to try to change it, 5 and the Oregon court has struck it down, because 6 it's seen as a stronger "free speech" clause. 7 I think you're making a lot of great points, 8 and I would encourage, you know, you to do a lot 9 more research on this. 10 This is not a -- an easy -- if you decide to 11 enact something like this, this is a very difficult 12 problem, this question of the auditing. 13 And you could have a lot of elections being 14 tilted by the enforcement function. And that -- I 15 think that is something that should really concern 16 anyone who's thoughtful about this. 17 We don't want the auditors tilting elections 18 for things that might, in fact, be a trivial, 19 inadvertent violation that gets played up in the 20 media as a big deal. 21 And you all know how things, in the heat of a 22 campaign, can be totally blown out of proportion. 23 And if we give the auditors -- if the 24 auditors are politically pushed in one way or the 25 other by a party in power, there's a huge potential 1 for abuse there of well-meaning, innocent 2 candidates. 3 So it's a very difficult question. Any which 4 way you go, has problems. 5 I mean, people criticize the Federal Election 6 Commission, because it's three Republicans and three 7 Democrats, and they say that's a problem. 8 But, actually, that's a feature of the 9 system, to ensure that one party doesn't use the 10 commission as a tool, to go after the other party. 11 So, you know, having strong enforcement is at 12 odds with a system that's fair and neutral, and not 13 being used for political purposes. 14 That's a really difficult problem. 15 SENATOR SAVINO: I would imagine, though, 16 that the city's campaign finance board would 17 consider themselves to be as neutral as possible. 18 In fact, both parties hate me equally. We 19 just happen to have a lot more Democrats in the city 20 of New York. 21 DAVID KEATING: I know, but New York is kind 22 of a -- it's not like the rest of New York State. 23 I mean, to sort of state the obvious, but you 24 generally don't have a lot of competitive general 25 elections. You have more competitive primary 1 elections. 2 So, it's not seen as the tool of one party 3 using the agency to go after the other party. 4 And that's something that could definitely be 5 done, and that's why the Federal Election Commission 6 was consciously designed, so that one party couldn't 7 be used to go after the other party. 8 SENATOR SAVINO: Well, in -- and I'll finish 9 on this point, Mr. Chairman: 10 In the New York City system, we're about to 11 embark on a similar situation that we had in 2001, 12 and the last time term limits really kicked in, and 13 there was a whole -- almost a wholesale change in 14 city government. 15 At that time, 340 candidates registered with 16 the New York City campaign finance system, to run 17 for 39 open council seats, and I think 12 that 18 were -- they were incumbents. 19 And that actually encouraged a lot of average 20 citizens to participate in electoral politics, and 21 take a shot. And, in fact, many of the people who 22 were considered to be long-shot candidates wound up 23 winning in the end, because they were able to 24 qualify under the matching system. 25 They were able to get a particular amount of 1 money, they were able to craft a message. 2 There's a cap on how much money can be spent, 3 so they -- how they determine how much it costs to 4 run a city-council race, I don't quite, frankly, 5 understand, but they do have a dollar amount that 6 you can't go above, so that you kind of level the 7 playing field. 8 And it led to the election of some people who 9 conventional politics said would never have gotten 10 elected. 11 Do you not think that that was a good thing? 12 DAVID KEATING: Well, I would -- it might be 13 a good thing, but I think probably a bigger factor 14 was the fact that you had term limits. 15 And you had -- I mean, I'm sure the 16 Legislature is not a big fan of term limits. 17 Usually they aren't. 18 SENATOR SAVINO: No. 19 [Laughter.] 20 DAVID KEATING: But the -- I think probably a 21 much bigger factor there, was the fact that you had 22 this unusual opportunity where there was forced and 23 mandated turnover. 24 And, you know, I don't see New York State 25 adopting term limits at the state-legislative level. 1 That would probably have far more impact than 2 a tax-financed campaign scheme would, to encourage 3 more people to decide to run. 4 SENATOR SAVINO: That is true, but I just -- 5 let me just qualify again. 6 Normally, in politics, they say the person 7 that's hand-picked by the party leaders, the person 8 that has the most institutional support, is going to 9 win. 10 That doesn't always turn out to be the case, 11 because you have a public-matching system in the 12 city of New York, which allowed people who were 13 considered outsiders, to have an equal shot at 14 reaching voters. 15 DAVID KEATING: Well, I would -- I mean, if 16 you decide to go ahead with something like this, I 17 would urge you not to come up with a cap on 18 spending, for candidates. 19 If they can raise more money, then let them 20 spend more money. 21 SENATOR SAVINO: Thank you. 22 SENATOR O'MARA: Senator Ball? 23 SENATOR BALL: Hey, how are you? 24 Good to see you. 25 Just really quick, and I want to thank you 1 for enduring the beauty of Albany. It's a pleasure 2 to have you here. 3 Sometimes it's kind of like being at the -- 4 in one of those circus rooms, with all the funny 5 little mirrors, and it seems like, every other day, 6 we look into a different mirror; because I think it 7 was a month ago, we were talking about the fact that 8 we didn't -- there was about $120 million in cuts to 9 the special-needs community, and an inability to 10 properly fund the mental-health community throughout 11 the state. 12 And, we fought very hard, many of the people 13 at this table, fought very hard for full 14 restoration, and were weren't successful in doing 15 that. 16 So I just want to get back, because we didn't 17 have enough money. 18 But, when you look at the details here, the 19 city system is, what, it was, like, $20 million 20 annually? 21 DAVID KEATING: Well, my understanding, every 22 election cycle, which I believe is four years, it's 23 something on the order of 40 million to 60 million. 24 And then there's the administrative. And, you know, 25 the administrative costs that are each year, 1 obviously. 2 SENATOR BALL: And those are 3 four-year cycles; right? 4 DAVID KEATING: Right. 5 SENATOR BALL: So we have two-year cycles. 6 DAVID KEATING: Right. 7 SENATOR BALL: There are 150 members in the 8 Assembly, depending upon how many indictments, or 9 whatnot, and the same in the Senate; right -- 63 in 10 the Senate. 11 So it's a much -- it's a larger multiple than 12 New York City. 13 So, you go back to the estimate of 150 to 14 250 million dollars? 15 Do you feel comfortable with that? 16 DAVID KEATING: Well, I don't profess to make 17 an estimate, but I think any estimate has to be 18 looked at with a great deal of skepticism, because 19 the way elections are run, for State Assembly and 20 State Senate, are far more -- it's different than 21 New York City. 22 You have more intra-party, you know, 23 Republican versus Democratic general election, being 24 competitive. It's just a different system. 25 And I think you have interest groups that are 1 organized statewide, that you don't see at the city 2 level. 3 So I think you're going to see a lot of 4 different dynamics, that may -- even the most 5 honest, you know, estimate can be off dramatically. 6 I remember, in tax policy, you see these 7 estimates being off all the time on capital-gains 8 taxes. 9 I remember when they first created the 10 individual retirement account. 11 Everyone knows what an IRA is today. 12 Well, when you first had IRAs, there was, 13 like, a tax credit, or something. And when you 14 looked at the costs of the tax credit projected by 15 the Joint Committee on Taxation, and you look at the 16 actual cost two years later, it was off by, I think, 17 a factor of ten. 18 Now, I'm not saying these estimates are going 19 to be off by a factor of ten, that, you know, 20 various groups supporting the bill are doing, or, 21 other budget analysts, but they could easily be off 22 by a factor of two or three. 23 It wouldn't surprise me in the least. 24 SENATOR BALL: Yeah, and regardless of what 25 the factor is off, the reality is, is that we don't 1 have the money. 2 We don't have -- we just don't. 3 The State isn't in a position. I mean, we, 4 literally, gutted the special-needs community, and 5 couldn't come up with the dollars to restore it. 6 So I would love to see the folks who are 7 pushing this, to let me know where the money is 8 actually going to come from to fund it. 9 And it's good to see Speaker Silver champion 10 this, because, of course, we know that 11 Speaker Silver is a champion of reform and good 12 government, and, certainly, has the best interests 13 in reforming, and good government, at every step of 14 the way. That's definitely his number one priority. 15 There's another issue that you came up with, 16 we talked about it a little bit, which was the whole 17 idea that, I think the Ranker talked about it, the 18 dark money? 19 Was it dark money, or something like that? 20 And, we've seen races. 21 I think Soros, in a race, spent about 22 $50,000 a day, for 10 days. 23 And people on all sides are upset with 24 super PACs. 25 So do you think, in looking at taxpayer 1 funding of elections, will taxpayer funding of 2 elections solve the super-PAC issue, or would it 3 make those super PACs possibly even more powerful 4 than they are today? 5 DAVID KEATING: I have little doubt that the 6 super PACs would be more important in New York State 7 elections if you adopted something like this. 8 SENATOR BALL: Okay. 9 DAVID KEATING: And that's because the people 10 that want to donate to a super PAC would not be able 11 to donate to the candidates directly. 12 So, if they can't do that, then they'll 13 donate to the super PACs, so they'll be definitely 14 more important. 15 SENATOR BALL: That's interesting, because it 16 draws a full circle of why some people are now 17 supporting this legislation. 18 It is interesting, how you can always just 19 follow the money, whether it be here, or anywhere 20 else. 21 So I thank you for that. 22 Thanks. 23 SENATOR O'MARA: Senator Marchione? 24 SENATOR MARCHIONE: Thank you, 25 Mr. Chairman. 1 And thank you as well for being here today. 2 Just to follow up: Hasn't there been 3 24 investigations of corruption in New York City, 4 relative to campaign finance? 5 DAVID KEATING: Well, I don't know the exact 6 numbers. You know, that's something that could be 7 looked up, I'm sure, but, I don't know the exact 8 number. 9 SENATOR MARCHIONE: Okay, but there's been a 10 lot of investigations in the New York City area. 11 And, I also want to just talk about 12 New York State campaign financing, as we have it. 13 I've heard here today that, because a dollar 14 match is put in that, people who normally wouldn't 15 be able to run because their party is not supporting 16 them, or, they don't have the funds, have a better 17 opportunity of winning in a New York City campaign 18 finance-type situation. 19 I'm living proof, Senator Gallivan is living 20 proof, Senator Ball is living proof, of not being a 21 party favorite, of not being the candidate with a 22 tremendous amount of money; but, yet, being 23 victorious at the end of our campaigns. 24 So I believe to say, that candidates can't 25 win when you don't have your party support in our 1 existing system, without being given money from our 2 government, I think is not reasonable, because it is 3 proven that you can win when your party is not 4 supporting you, and you don't have as much money as 5 someone else. 6 But, to Senator Ball's point -- 7 DAVID KEATING: Well, Barack Obama is proof 8 of that. I mean, Hillary Clinton was seen as the 9 safe, the established choice. 10 And he excited, you know, many, many people 11 to get to involved in politics, I think is 12 definitely an inspiration, the way he went about 13 that campaign. 14 So, I don't -- I think you're definitely 15 right about that. And that's true for both parties. 16 SENATOR MARCHIONE: Thank you. 17 Just -- I mean, I have just one further point 18 to Senator Ball's thought process: 19 The idea of campaign finance being funded by 20 New York State, you know, where does this money come 21 from, when we tell the OPWDD population, we don't 22 have money for them, or, we tell our schools we 23 can't fill the gap elimination, but, we are going to 24 be funding our own campaigns at a dollar match of 25 6-to-1? 1 That's a real difficult message that we would 2 be bringing to the community who's hurting at this 3 point. 4 DAVID KEATING: Yeah, we'll wait until there 5 is some, you know, very extreme party that no one 6 agrees with. 7 I'm not saying it will be a Nazi party, but 8 something that people would find just as abhorrent. 9 You know, it may be an very virulently 10 anti-gay party, or something like that, and they're 11 getting, potentially, millions of dollars of tax 12 funding. 13 I mean, people are going to be really upset 14 when that happens. 15 And it's going to happen. 16 You can't write it so that only the 17 mainstream parties can get it, because that would be 18 government choosing which type of opinion can be 19 expressed, and which can't. 20 SENATOR MARCHIONE: I would take that one 21 step further. 22 I don't think you have to look at a Nazi 23 party. I think you can look at our own mainstream 24 parties, and you will have people within our country 25 who believe strongly in either Republican or 1 Democrat principles, and they would be very opposed 2 to campaign finance, where they're having to give 3 money to a mainstream party that they don't agree 4 with. 5 Thank you. 6 SENATOR O'MARA: Thank you, Mr. Keating. 7 Appreciate you coming here and testifying 8 today. 9 DAVID KEATING: Okay, you're welcome. 10 Thank you. 11 SENATOR O'MARA: Next we'll hear from 12 Randy Mastro. 13 SENATOR KRUEGER: Mr. Mastro, do you have 14 testimony that we got up here? 15 RANDY MASTRO: I am speaking orally. 16 SENATOR KRUEGER: I'm sorry? 17 SENATOR O'MARA: He has not submitted written 18 testimony. 19 RANDY MASTRO: I'm not submitting written 20 testimony. 21 SENATOR KRUEGER: Thank you. 22 RANDY MASTRO: I thank you, Senators. 23 My name is Randy Mastro. I am a partner in a 24 law firm, Gibson, Dunn & Crutcher. 25 I'm a former deputy mayor of New York City. 1 I was counsel to the Giuliani Fusion campaign 2 in 1993, and represented it before our local 3 campaign finance board. 4 And I have been involved in multiple 5 litigations involving campaign finance issues, and 6 compliance with state election laws in my private 7 practice. 8 SENATOR DEFRANCISCO: Could you please move 9 your mic toward you. 10 I know it's taped down, and -- 11 RANDY MASTRO: Very good. 12 Unaccustomed as I am to public speaking, I 13 will try to speak up. 14 SENATOR DEFRANCISCO: Okay, well, we've got 15 some visitors here -- 16 RANDY MASTRO: Understood. Understood. 17 Senators, I'm here to say at the outset, that 18 I strongly favor a public-financing system. 19 I believe that the state would benefit from 20 such a system. 21 There's an old saying in politics: That 22 money motivates politicians. 23 But it also potentially corrupts politicians. 24 And we have a crisis in our state, and in our 25 city, right now. 1 We have a crisis in confidence; the public's 2 confidence in our system, and our elected officials, 3 from wide range of high-profile scandals. 4 Public financing of campaigns is not a 5 panacea, but it has the potential to help restore 6 public confidence. 7 The potential to restore public confidence, 8 because it affects the corrosive influence of money 9 in politics. 10 It doesn't eliminate it, but it has the 11 potential to reduce that corrosive influence; and, 12 therefore, to restore public confidence. 13 But in very significant ways, I would suggest 14 to the Senators, and the Legislature, and the 15 Governor, that while we can take New York City's 16 campaign finance system as a good start, and a 17 number of fundamental respects, you all should 18 improve upon it. 19 And I would like to lay those out for you 20 now, because there's still a corruption problem in 21 New York City. 22 And the fact that we've had public financing 23 of campaigns, hasn't meant that we haven't had more 24 than half of a dozen high-profile scandals involving 25 local elected officials that resulted in convictions 1 over the past decade, and an impending indictment 2 right now. 3 It doesn't mean that there haven't been those 4 who have tried to skirt the rules. 5 It's going to happen in any system. 6 And it doesn't mean that politics haven't 7 played a role, including in the role of the 8 city council in overseeing and legislating changes 9 in the program. 10 But let me tell you the ways in which I think 11 that you can take a model, that has worked in some 12 respects, and make it something that will work for 13 the state. 14 First, and foremost, I think we have a 15 fundamental problem, as it has developed over time, 16 in a super-matched funding system. 17 This has produced too many campaigns where 18 the public has paid primarily for a campaign. 19 To me, it is one thing to provide some level 20 of public support, to ensure that a candidate has 21 enough supporters and has raised enough money to 22 qualify for the program. 23 But the ceiling, the cap, should be, that any 24 candidate who runs for office should have raised at 25 least half, or more, of the money on which they run. 1 That can be accomplished, either, as we had 2 it in the local campaign finance system originally, 3 back in its inception in the early '90s, where you 4 had a 1-to-1 match on the first thousand. 5 And, therefore, any contributions lower than 6 a thousand got matched 100 percent. You only got 7 matched up to a thousand. 8 Alternatively, you could have some form of 9 matching above 1-to-1, but, capped at a low level, 10 and capped at an overall level, that no campaign 11 could be predominantly funded by public money. 12 I think this is an important symbol, because, 13 if you ask the average New York City resident who 14 supports public financing of campaigns, and I 15 believe it has widespread support in our city, I 16 don't think the vast majority of them know how many 17 campaigns actually were paid for predominantly by 18 public funds. 19 I think they think that it is a supplement, 20 to encourage people to be able to run, not the 21 predominant factor. 22 And let's just look at the statistics. 23 And you'll hear from the executive director 24 of the campaign finance board, but let's look at the 25 statistics. 1 You know, for 2009, 42 percent of those who 2 participated in the program, who ran in the 3 city council, most of their money came from 4 public-matching funds, because of the super match. 5 It's a -- it's, over time, grown, first, 6 1-to-1 on the first 1,000, then 4-to-1 on the first 7 250. Now 6-to-1 on the first 175. 8 42 percent of people who ran for the 9 city council participated in the program, got most 10 of their money from public-matching funds. 11 Ten candidates got over 80 percent of their 12 money from public-matching funds. 13 I think that would shock most New York City 14 residents. 15 And I think it is something that should be 16 fixed in a statewide system, as a matter of fiscal 17 prudence, and as a matter of responsibility, in 18 elections. 19 Now, opting into the system makes a 20 difference. 21 I talked about restoring public confidence in 22 our election system. 23 We have actually seen in New York City, part 24 of it due to term limits, but the big term limits' 25 year was noted earlier by a member of this panel, 1 when you look at '97, there were 100 candidates who 2 ran for city-council post; 3 In 2009, not a term-limits' turnover year -- 4 The city council and the mayor had colluded 5 to eliminate, you know, term limits, for them to all 6 be able to all run for reelection. 7 -- 220 candidates for the city council, who 8 participated in the program; 9 282 candidates overall. 10 It has encouraged people to get involved, and 11 be able to run. And that is a positive thing. 12 But no candidate should be able to run on the 13 public dole, with most of their campaign paid for by 14 public-matching funds. 15 There's another salutary benefit here. 16 When you participate in the program, you have 17 a cap on how much you can receive from any single 18 donor. And that's a single donor who's an 19 individual, or an organization, or a union, or 20 another kind of entity. Even a political party. 21 There's a cap on how much you can spend. 22 That is a positive thing for leveling the 23 playing field. 24 But what I heard earlier, as long as the 25 system is applied equally, evenhandedly, it is not 1 favoring one viewpoint over another; it is not 2 favoring one party's wacko to another party's 3 whacko. 4 It's treating all candidates equally, who 5 participate in the program, capping how much any 6 individual donor can give, capping how much any 7 individual candidate can spend. 8 And that can have a salutary benefit as long 9 as we have some fiscal integrity in the system that 10 caps the total amount at, you know, no more than 11 half of what can be spent by a campaign. 12 Because, to me, that is not a 13 public-financing system that will ultimately work 14 and have the respect it deserves to have with the 15 public. 16 There's a second fundamental component that 17 needs to be addressed. 18 And when the executive director from the 19 campaign finance board gets up here, I hope she will 20 agree with me. 21 Enforcement is key. Auditing is key. 22 The system will only work if you put the 23 resources behind the system, to make it work, and 24 the campaign finance board has enough auditors to 25 get the job done in a timely and effective manner. 1 Now, your prior speaker talked about, you 2 know, picking and choosing auditing. 3 Our campaign finance board does an audit of 4 every campaign, including after the campaign, but 5 the resources are constrained. 6 And while the executive director may not want 7 to admit it, that board needs, an effective board 8 needs, more auditors. 9 We have a situation right now, where there 10 are 100 campaigns, out of the several hundred, that 11 haven't completed the audit process for the 2009 12 campaign. 13 Several of them are among the most 14 controversial races. 15 Two of them involved citywide offices, with 16 candidates who are now running for mayor. 17 Now, there is a process for auditing. 18 There's a process for challenging audits. 19 But nearly four years later, is too long to 20 not have completed the audits. 21 On so many races from 2009, that were 22 extremely controversial, and challenged our campaign 23 finance system to its very core. 24 So if you take this important step, this is 25 not a place to scrimp on staffing and auditing 1 function. 2 The system only works if you have tough 3 auditing. 4 And, now, to a third point that I wanted to 5 make in this regard, and we in New York City have 6 moved in the right direction, but as with 7 everything, it's two steps forward, and one step 8 back: Independent expenditures. 9 It is legal, it is the law, that independent 10 expenditures can be made, whether we like it or not. 11 They have to be truly independent. 12 And what we tried to do in New York City, is 13 shine light on it, and have reporting requirements 14 for independent expenditures for advocacy. 15 And our campaign finance board took that 16 step, because disclosure is the best way to deal 17 with the Soroses of the world, and to deal with the 18 Kochs of the world. 19 It's the way to let everyone know who's 20 contributing to different campaigns. 21 But then we took a step back in our local 22 legislature. Didn't take as big a step as it was 23 being pressed to do by certain advocacy groups and 24 constituencies, but, it pared back that internal 25 communications in certain organizations, unions, 1 corporations, were going to be exempt from the 2 reporting requirement. 3 Let's shine the light of day. 4 If advocacy is involved, it should have to be 5 reported, and reported in the same timely way that 6 candidates have to report on their contributions. 7 Shining the light of day is the best way for 8 the public to have confidence in the system. 9 Now, in 2009, we had a cautionary tale. I 10 went to court to litigate over it. Very 11 high-profile case. 12 I'm not here to repeat that -- you know, what 13 happened in that case. 14 I'm simply here to say, the things that I am 15 advocating today, come out of that experience. 16 Now, we litigated in court, and we won, but 17 that's an imperfect solution to a bigger problem. 18 The bigger problem is, a system that has 19 become distorted by super matches. 20 The bigger problem, is a system where the 21 City, or the State if it chooses to do it, has to 22 invest more resources in enforcement and auditing to 23 keep campaigns honest. 24 And the bigger problem is, independent 25 expenditures that end up being coordinated with 1 campaigns, that's illegal in-kind contributions, and 2 that has to be stopped, both, through enforcement, 3 and through shining the light of day on independent 4 expenditures, that they have reporting obligations 5 like other campaigns. 6 I'm happy to answer any questions anyone has 7 here. 8 But, again, I was honored to serve in city 9 government. 10 I've been honored to serve my state when I've 11 been appointed to positions to do that. 12 I care about the integrity of our state 13 government and our local government. 14 I care about the public having confidence in 15 our systems. 16 That's why I support public financing for 17 campaigns. 18 That's why I support public financing in a 19 structure, that makes sense, with these important 20 improvements on the model you're considering. 21 So thank you very much for giving me the 22 opportunity to testify, and I'm happy to answer any 23 questions. 24 25 1 SENATOR O'MARA: Thank you. 2 Senator DeFrancisco? 3 SENATOR DEFRANCISCO: Yes. I certainly 4 understand your whole point of view, that you 5 believe public financing is something that will help 6 level the playing field, help getting new candidates 7 in, help participation, and maybe make better -- 8 more choices for the people, and so forth. 9 But, this whole thing has been billed as 10 something that's going to root out corruption. 11 Now, my particular point of view is, if 12 you're a crook, you're going to be a crook no matter 13 what the system may be. 14 You can game the public-financing system, you 15 can game the current system, by not reporting 16 things, or by spending it illegally. 17 And, ultimately, hopefully, you'll be found 18 to be a crook. 19 I would just like to know your thoughts on 20 whether -- 21 I understand the beneficial component. You 22 were very, very clear. 23 -- but, do you think it has any relationship, 24 whatsoever, to the concept of rooting out 25 corruption? 1 RANDY MASTRO: I started my remarks by saying 2 it's not a panacea. And we still have corruption in 3 New York City. 4 It hasn't made our -- you know, our political 5 system and our government in New York City pristine. 6 But what I also meant to convey is, this is 7 not an exercise that lends itself to a 8 social-scientist model. 9 This is about taking steps to restore public 10 confidence in the process; the process by which we 11 elect officials, the process by which the public 12 participates, and has transparency into what's going 13 on. 14 And I think most members of the public would 15 tell you, they think money is corrupting politics. 16 It's not just motivating politicians, it's 17 corrupting politicians. 18 This doesn't eliminate that, but it certainly 19 helps to reduce the corrosive influence on money and 20 campaigns, by giving more candidates the ability to 21 participate in the process, where at least some 22 substantial portion of their ability to run would be 23 by qualifying, and agreeing to be limited, capped on 24 donations, capped on total expenditures, within a 25 framework that works, that will be carefully 1 regulated. 2 Do I think that it will cure all corruptions? 3 No. 4 I do think it will go a long way towards 5 restoring public confidence in what this chamber 6 does, what your sister chamber does, what happens on 7 the executive branch? 8 Without question, I believe it will go a long 9 way towards restoring public confidence in a more 10 transparent, regulated, open system, that will 11 motivate more people to become involved, and more 12 people to want to participate in the system. 13 So, I'm not going to tell you it eliminates 14 the corruption. 15 It doesn't. 16 But I also know that the vast majority of the 17 members of your chamber, and the chamber next door, 18 and in the executive branch, are honest, 19 law-abiding, committed people who care about 20 government. And there's a lot of other people out 21 there too. 22 SENATOR DEFRANCISCO: That should be 23 committed. 24 RANDY MASTRO: And I know that there's a lot 25 more people aspiring to public office in 1 New York City today, because of that foot in the 2 door. 3 The statistics speak loudly about it. 4 '97, 100 candidates for city council. 5 2009, 280-plus. 6 SENATOR DEFRANCISCO: Now, can you tell me, 7 you mentioned some exemptions on the reporting 8 requirements. You kind of went through those 9 quickly. 10 What were the exemptions that were put in in 11 the New York City system? 12 RANDY MASTRO: After the campaign finance 13 board passed sweeping disclosure obligations on 14 independent expenditures that were going to apply 15 to, you know, across the board -- associations, 16 unions, entities, corporations -- the city council, 17 in what ended up being a compromise bill, that an 18 organization that I am honored to serve on, the 19 executive board of Citizens Union, weighed in very 20 heavily on, the city council pared back what it was 21 originally going to do, but it, nevertheless, 22 created what amounts to an exception for those 23 unions, associations, entities, or corporations 24 having internal communications with members, 25 shareholders, and the like. 1 It could be advocacy pieces that are campaign 2 literature, like any other campaign literature. 3 You know, I think that what we want to have 4 is sunshine. 5 We want to have everybody held to the same 6 standard. 7 Corporations, unions, unincorporated 8 associations, political parties...all held to the 9 same standard; and transparency and openness about 10 when they are supposedly spending independently on 11 campaigns. 12 SENATOR DEFRANCISCO: So what is -- it seems 13 like the exemptions ate up the rule, didn't it? 14 What's left? 15 RANDY MASTRO: Senator, it didn't eat up a 16 lot of the rule, because a lot of the rule involves 17 spending in advocacy that necessarily happens 18 outside of internal communications. 19 A lot of association party, union, and 20 corporate spending is ads, radio, TV, Getting Out 21 The Vote, print ads, mailings...that's all covered 22 by the disclosure obligation. 23 SENATOR DEFRANCISCO: Just two more areas. 24 One you mentioned, about the -- disclosure is 25 extremely important. 1 For some of these PACs that, for example, may 2 put $500,000 into a campaign, the last three weeks, 3 and which to me is -- it should be disclosed. 4 I mean, it seems logical, that if you guys 5 have little Aunt Jenny who gives you 50 bucks on the 6 campaign website, these groups that are paying 7 $500,000 to elect a candidate in the last three or 8 four weeks, they should be identified. 9 And that's your position; correct? 10 RANDY MASTRO: Yes. 11 And I believe one of the important things is, 12 that, even to the extent there are disclosure 13 obligations sometimes for independent groups, 14 they're not on the same time schedule and held to 15 the same standard as campaigns, which have 16 increasingly shorter time frames for disclosing 17 expenditures and contributions. 18 The independent expenditures should be on the 19 same timetable so that there could be disclosure and 20 public awareness in real time -- 21 SENATOR DEFRANCISCO: Before -- 22 RANDY MASTRO: -- not after the fact. 23 SENATOR DEFRANCISCO: Exactly, and that leads 24 me to my last point: 25 You also discussed the fact that, sometimes, 1 at least in New York City, because they have too few 2 people, some of these investigations go, three, 3 four years down the road. 4 Now, are there any -- I don't know the answer 5 to this: 6 Are there any remedies in the election law in 7 New York City, in case you find out that there is 8 some illegal contributions, illegal campaigns, and 9 those weren't found out in real time, like you say 10 it should be, what's the downside for a candidate 11 now, if the person, as far as his or her election, 12 if you can't find these things out until down the 13 road? 14 RANDY MASTRO: Well, I mean, you've hit on 15 the fundamental question I was driving at: The 16 timeliness of the auditing function, both during the 17 campaigns and in their aftermath, is a problem, in 18 my view. 19 I'm not -- I'm not criticizing the campaign 20 finance board, given its resource constraints, but, 21 to have so many major campaigns from 2009 still 22 hanging out there without a completed audit process, 23 whether that's because the audit is continuing, or 24 more likely, because the candidate's campaign is 25 exercising the right that the candidate's campaign 1 has to challenge the audit in a confidential 2 proceeding, which continues for some period of time. 3 But, it's like running out the clock. 4 We're in the spring of 2013. 5 In the summer of 2013, the first Tuesday 6 after the first Monday of September, those people 7 are going to be standing for election or reelection; 8 some seeking higher-level posts, many seeking 9 reelection. 10 There's something wrong with that. 11 Is there a remedy in the law right now for 12 that, other than whatever the remedy the campaign 13 finance board has to bang that campaign financially? 14 Well, once you're reelected, you don't really 15 mind writing a check. 16 That's the problem with it. 17 And, you know, I, therefore, you know, have 18 always encouraged, in local government, our city 19 council and mayor, to devote more resources to 20 campaign finance board for these purposes, 21 enforcement and auditing. 22 And I would encourage you, in any bill that 23 you would adopt, to make sure that those resources 24 are there. 25 SENATOR DEFRANCISCO: Thank you. 1 SENATOR O'MARA: Senator Tkaczyk? 2 SENATOR TKACZYK: Thank you, Mr. Mastro, 3 for being here today. I appreciated your comments. 4 I would love to get them in writing. 5 RANDY MASTRO: Sure. 6 SENATOR TKACZYK: You had some very specific 7 recommendations, and I would -- I was trying to 8 write as fast as I could. 9 RANDY MASTRO: No problem. I'll be happy to 10 put them in writing. 11 SENATOR TKACZYK: But I would appreciate your 12 recommendations in writing. 13 And I wanted you to go back to -- you know, 14 I'm glad that you say that there's -- this is -- 15 basically, this is a good system, it can be improved 16 upon. 17 One of the things you mentioned was, the 18 campaign, the candidate who's running for office, 19 the cap, that they have to gather, first, the 20 support from community residents, that that should 21 be raised. 22 Could you explain to what extent you think 23 that should be raised to? 24 RANDY MASTRO: What I think I said was, that 25 that's an important component, what the floor -- 1 SENATOR TKACZYK: I'm sorry, I can't hear 2 you. 3 RANDY MASTRO: -- that's an important 4 component, with what the floor is to qualify for the 5 program. 6 I was not commenting on the specific floor. 7 In our system, in New York City, there is a 8 floor. 9 You have to have a certain amount of funds 10 raised, and a certain number of donors, to qualify 11 for the program. 12 It is obviously a lower level for city 13 council, it's more for the citywide offices, and 14 it's the most for mayor. 15 I think that's an essential component of a 16 program. 17 If you haven't got enough support to get in 18 the game, you shouldn't be getting public funds. 19 SENATOR TKACZYK: Right. 20 RANDY MASTRO: So I was simply encouraging 21 you. And I don't come here with a specific proposal 22 on what I think the right amount for that is, for an 23 Assembly race or a Senate race or a governor's race, 24 but, I think that it is an essential component for 25 any system on which the public can have confidence 1 that the public fisc is being protected, but the 2 integrity of the system is working, to have that 3 kind of floor you have to reach to qualify. 4 That's all I meant to convey. 5 SENATOR TKACZYK: Okay. 6 And I appreciate your comment about 7 "enforcement is key." 8 We don't have the ability to audit campaigns 9 and catch problems early. 10 It doesn't -- that's not helping anybody. 11 So I appreciate your comments on that. 12 Thank you. 13 SENATOR O'MARA: Senator Savino? 14 SENATOR SAVINO: Thank you, Mr. Chairman. 15 Thank you, Mr. Mastro, for your comments. 16 Unlike your -- the previous speaker, you 17 obviously believe in the validity of a -- having a 18 public-matching system in the city of New York. And 19 you think it's something that we should explore. 20 And I appreciate the fact that you've 21 outlined where you think we need to improve, if 22 we're going to go down this road. 23 Its' interesting, though, the original 24 program, as you pointed out, in the city of New York 25 was a 1-to-1 match. 1 So, I think that what you're really trying to 2 say to us, that in order for the public to be 3 required to participate in this, because they would 4 be, the candidate themselves seems to have, or 5 should have, more skin in the game, so to speak. 6 RANDY MASTRO: Correct. 7 SENATOR SAVINO: So that, instead of me 8 just -- because I think, right now, if you only have 9 to raise $30,000 to qualify for the maximum 10 contribution -- the maximum allocation from the 11 campaign finance program? Is that somewhere around 12 the amount? 13 RANDY MASTRO: I will get you the exact -- 14 SENATOR SAVINO: Somewhere about that. 15 RANDY MASTRO: -- amount to run for city 16 council. 17 It's low. It's very low to qualify in the 18 city-council race. 19 SENATOR SAVINO: So your point is good. 20 And I think you also acknowledged that, in a 21 system like that, there still has to be caps on 22 spending. 23 RANDY MASTRO: Yes. 24 Actually, for city-council candidates to 25 qualify, it's even lower than that. 1 SENATOR SAVINO: Really? 2 RANDY MASTRO: They have to raise 5,000 from 3 a minimum of 75 contributors. 4 SENATOR SAVINO: That's it? 5 RANDY MASTRO: That gets you into the 6 program. 7 SENATOR SAVINO: I can do that in my sleep. 8 Interestingly, though, since you have -- 9 RANDY MASTRO: So while I am not coming with 10 recommendation on those levels, I am suggesting, as 11 a general proposition, that the candidates have to 12 have more skin in the game to qualify -- 13 SENATOR SAVINO: Certainly. 14 RANDY MASTRO: -- for the program. 15 And, it should never be the case, unlike the 16 way it is now, that so many campaigns who 17 participate in the program are predominantly funded 18 by public-matching funds. 19 42 percent of the city-council races, the 20 last time. And in the case of at least 21 10 candidates, over 80 percent of their campaigns 22 funded by public funds. 23 That's wrong, to me. 24 That's wrong. 25 SENATOR SAVINO: But there's also been a huge 1 change in what it costs to run a campaign. 2 So you were involved with the Giuliani 3 campaign in 1993. 4 How much did -- by the way, did the -- did 5 Mayor Giuliani, did he participate in the campaign 6 finance program. 7 RANDY MASTRO: Absolutely. 8 SENATOR SAVINO: He did. 9 How much did it cost to run his mayoral 10 campaign in 1993? 11 RANDY MASTRO: Well, he was participating in 12 the program. And, actually, there have been 13 adjustments, over time. 14 So, the capped amounts in that campaign, for 15 each cycle, resulted in those campaigns costing 16 under -- you could not spend more than 10 million. 17 You had to spend an amount less than that. 18 Now the amounts in a mayor's race for people 19 to participate in the program, the capped amount is 20 over 6 million. 21 So it has gone up over time, to reflect, you 22 know, inflation and increase in costs. And that 23 makes sense, that the spending cap would rise some, 24 you know, based on inflationary indexes. 25 But it hasn't risen that much. 1 SENATOR SAVINO: No, certainly not, when you 2 compare it to 2001, where I think, at the time, it 3 was -- was it $5 million? Is that -- 4 RANDY MASTRO: It was $5 million. And, of 5 course, the winning candidate didn't participate in 6 the program. 7 SENATOR SAVINO: Right, and spent 8 $100 million. And then another hundred-and-change. 9 And so, even in the face of an incredibly 10 well-financed candidate, the system hasn't caught up 11 to that. And I don't think it -- I don think -- 12 it's not possible to do that. 13 RANDY MASTRO: You can't expect the system to 14 catch up to it. 15 It's not going to be a perfect system. 16 It's not designed to, you know, make every 17 candidate equal. 18 It's designed to give people a chance to 19 participate. 20 There have been -- you know, there's been 21 consideration of what kind of super matches should 22 be available in circumstances where you have such a 23 self-funded candidacy, or someone participating 24 outside of the program. 25 So, that, to me, might be an area that 1 involves unique scrutiny. 2 But, it's never the case that you're 3 attempting to create equity with that situation. 4 That doesn't make any sense, to me. 5 SENATOR SAVINO: No, it certainly doesn't. 6 But the -- the two more questions. 7 One, on the independent expenditures: 8 You made the point that there -- the new 9 exemptions that were put into place did carve out 10 unions and corporations and trade associations. 11 I just want to clarify: 12 I believe the reason they did that is 13 because, internal communications inside a union -- 14 And for full disclosure, I'm, you know, a 15 supporter of unions. No secret to anybody. 16 -- but, so member-to-member contact, if they 17 had not changed the rule, could have been considered 18 as an expenditure on the part of a union for a 19 candidate, and that was never the intent? 20 RANDY MASTRO: Well, actually, it's not -- 21 there's nothing wrong with a union doing that as an 22 independent expenditure. 23 The only question was whether they'd have to 24 reveal they did it. 25 And it's -- now they don't have to reveal 1 what campaigning they're doing -- candidate-advocacy 2 campaigning they're doing internally. 3 And a corporation doesn't have to disclose 4 when it sends something to its shareholders, urging 5 a particular candidate. 6 I don't think it's any less -- should be any 7 less subject to disclosure if such a thing happens, 8 in either circumstance. 9 I think it's the disclosure that is 10 important. 11 SENATOR SAVINO: But wouldn't that have 12 subjected them to the contribution limits? 13 You would have had to count that as a 14 contribution to a campaign? 15 RANDY MASTRO: Yes, but they're only allowed 16 to give to an individual campaign, 4900 -- to a 17 mayoral campaign, 4950, anyway, right now. 18 But part of what the rules are, that everyone 19 is capped: political parties, unions, associations. 20 SENATOR SAVINO: True. 21 RANDY MASTRO: Under our local system, 22 corporations are treated differently, but I mean, 23 you know, business entities. 24 Other than that, everyone, and wealthy 25 individuals, are capped at a certain level. 1 SENATOR SAVINO: Right, but once you give 2 money to a campaign, whether you're a union or a 3 corporation or a trade association, the campaign 4 then decides how they're going to spend that money 5 you gave to them. 6 RANDY MASTRO: That's correct. 7 SENATOR SAVINO: But the member-to-member 8 contact that a union has with its own members, or -- 9 I don't know, give me an organization -- trade 10 organization -- Knights of Columbus has -- 11 RANDY MASTRO: They're allowed to spend as 12 much as they want to on that, without question. 13 SENATOR SAVINO: Right, talking to their own 14 members? 15 RANDY MASTRO: They're allowed to spend as 16 much as they want to of that, on truly independent 17 expenditures. 18 Just, the question is, whether that's 19 something that should be reported or not. 20 It's just a disclosure issue. 21 It's not a question -- it's not illegal. 22 It's just a question of what has to be 23 disclosed by a corporation or a union. 24 I like to treat them both the same. 25 SENATOR SAVINO: They would probably differ 1 on that, but, that being said, I have one final 2 question: 3 One of the big complaints about the state 4 system, is that both parties have their own campaign 5 committees and housekeeping accounts. 6 And that does not exist with inside the 7 New York City campaign finance system. 8 There's no, you know, city-council campaign 9 committee, where you can make unlimited 10 contributions, and then the leaders or the people 11 who are in charge of that particular committee can, 12 basically, run the table on elections. 13 You don't -- do you -- you would not support, 14 I don't think, from the way you've discussed it, you 15 wouldn't think that would be a good idea for us, to 16 continue the existing campaign committees and 17 housekeeping accounts, and then also adopt a 18 public-financing system? 19 RANDY MASTRO: I think that it would subject 20 you to criticism, that you were making an exception, 21 in that regard, that you could have a truck driven 22 through it. 23 You know, we had an issue not dissimilar from 24 this back in the '93 campaign, when the State 25 Democratic Party spent hundreds of thousands of 1 dollars running ads that, clearly, were in 2 coordination with the Dinkins campaign, but, claimed 3 to have been done independently. 4 And -- and that was found by our local 5 campaign finance board to have not been a true 6 independent expenditure, and there had to be an 7 accounting done even before election day. About a 8 month before election day. 9 I think you -- you wouldn't want to do 10 something for all of the right reasons, and then 11 have exceptions for yourselves that would be 12 misperceived by the public. 13 SENATOR SAVINO: Thank you. 14 SENATOR O'MARA: Senator Krueger? 15 SENATOR KRUEGER: Thank you. 16 Thank you, Mr. Mastro. Appreciate your 17 testimony. 18 RANDY MASTRO: Certainly. 19 SENATOR KRUEGER: I think we're very closely 20 aligned on the issues. 21 I don't know that I can agree on the 22 1-to-1 match, because when I actually watched the 23 city council, I mean, we have the borough-president 24 races, and the citywides, and there's very different 25 stories, but, my understanding is, for a max-out in 1 a city-council race, you really end up with about 2 55 percent public and 45 percent privately raised. 3 And in those examples where there's so much 4 more, up to 80 percent public, it's because the 5 candidate really raised very little money, and so 6 there wasn't anywhere near -- it may have been 7 80 percent, but it wasn't anywhere near the maximum 8 that you can draw down. 9 And so, you know, one dilemma of saying 10 you're going to have a lesser public match, is 11 conceivably in poor communities where it's just, 12 frankly, much tougher for candidates to raise even 13 small donations than, say, in my community, or in 14 Diane's community. 15 You might actually find yourself, you know, 16 skewing against the poorest candidates, who we don't 17 want to discourage from running for public office. 18 RANDY MASTRO: May I respond briefly? 19 SENATOR KRUEGER: Yes. 20 RANDY MASTRO: Well, I'm not sure we're that 21 far apart, but -- in this sense: I do see the 22 wisdom of the 1-to-1, and I think that that's a 23 purer, fairer system. 24 But, what I was urging all of you to 25 consider, was, in any scenario, that no candidate 1 could fund more than 50 percent of their campaign 2 with public-matching funds, because I think that 3 that actually erodes public confidence in the system 4 as opposed to improves it. 5 And I don't think most New Yorkers realize 6 that so many campaigns are predominantly funded by 7 public-matching funds. 8 So, you can put a cap on it, that no 9 candidate can get more than 50 percent of their 10 funding from public-matching funds, even if you had 11 a super match, which I wouldn't, but I can 12 understand the rationale for it. 13 And I would say, in the kind of races you're 14 talking about, in certain communities, I understand 15 it. I've been to every district in New York City, 16 but every candidate in that district is dealing with 17 the same issue. 18 So I don't think you're prejudicing one 19 vis-a-vis another, under those circumstances. 20 But I would simply say, I understand where 21 you're coming from, but put a cap on it. 22 Put a cap on how much of anybody's campaign 23 can go from public funds. 24 SENATOR KRUEGER: Going to your points about 25 the importance of auditing, and the value of the 1 model for the campaign finance board, and, yes, the 2 fact that they find themselves even somewhat behind 3 the 8-ball in timing and staffing. 4 Just reference: In New York State system, 5 where we don't do any of that, NYPIRG came out with 6 a report today, saying that there were 7 103,000 violations of our campaign finance laws in 8 the past two years, except, we don't audit them, 9 and, we don't do anything about them. 10 So when I'm here in Albany, being interested 11 in what works and doesn't work in New York City, in 12 order to try to get us a system that I can believe 13 could be more credibly working in the state, I think 14 your point about the importance of auditing, and 15 evaluating how those moneys are being spent, you 16 know, I don't think you knew that NYPIRG came out 17 with that report today. 18 RANDY MASTRO: Didn't know about it. 19 SENATOR KRUEGER: And they unfortunately 20 weren't invited to testify, Mr. Chairman, because 21 then they might have been here to point that out 22 also. 23 So I appreciated your highlighting that, and 24 the importance. 25 And then going back to -- oh, I'm sorry, my 1 colleague John DeFrancisco stepped out -- but he 2 was talking about the concerns about corruption. 3 And that is the title -- I guess the title 4 for this hearing. 5 In Albany, if you chat in the hallways, if 6 you read the daily newspapers anywhere in the state, 7 the biggest issue and concern by the public, and I 8 think by most of us in the Legislature, is the 9 concept of the pay-to-play culture; that enormous 10 amounts of money get contributed by special 11 interests, directly correlating to specific kinds of 12 legislation they want being passed or not passed, 13 they want items in the budget or not in the budget, 14 tax exemptions or not tax exemptions. 15 In your experience, which is very broad in 16 New York City, with New York City's public-matching 17 campaign finance system, is that a big issue? 18 RANDY MASTRO: It's still an issue. It 19 hasn't been eliminated as an issue. 20 So, again, I don't think that anyone should 21 approach this, thinking that public financing is 22 going to be a panacea in that regard. 23 But, I do think the limitations on what one 24 can give locally, when candidates are participating 25 in the public-match program, reduces the 1 opportunities, and improves the public's perception 2 and confidence of a system that isn't encouraging 3 that. 4 SENATOR KRUEGER: And just to clarify: In 5 the city, if you were actually doing business with 6 the government, there are even more restrictions -- 7 RANDY MASTRO: There are -- absolutely, there 8 are restrictions prohibiting contributions from 9 certain categories of people who do business with 10 the City. 11 Absolutely. 12 And those kinds of rules, I believe, should 13 definitely be carried over. 14 SENATOR KRUEGER: Thank you very much. 15 RANDY MASTRO: Thank you. 16 SENATOR O'MARA: Senator Marchione? 17 SENATOR MARCHIONE: I have just one question. 18 You talked about 282 people in the 2009 19 elections that ran in New York City. 20 How much did it cost the City? 21 RANDY MASTRO: Again, you heard -- out of 22 those, there were about -- this is the city-council 23 races, out of those, there were about 220 who 24 participated in the program. 25 It's my understanding, although you'll have 1 the executive director of the campaign finance board 2 here shortly, when you look at the statistics, going 3 back over time, as to how much went to the 4 public-match system, it was surprising to me how, 5 while the number was higher, obviously, in 2009, 6 than in some earlier periods -- some earlier 7 periods, not -- it was -- it was still -- there's 8 been a -- not huge increases, from campaign to 9 campaign. 10 So that, again, that's a question of some 11 candidates do not maximize the return. They don't 12 raise all the money that they need to raise, to be 13 able to max out and reach the spending limit. 14 I mean, it could be attributable to a lot of 15 factors, but, it wasn't the case, that, when you 16 compare the years, one was three times more than the 17 other, in terms of -- it was not. They were much 18 closer in dollars. They weren't 2-to-1 or 3-to-1. 19 SENATOR MARCHIONE: But you don't know how 20 much the total was? 21 RANDY MASTRO: I will be happy to submit to 22 the Committee the exact numbers. 23 And I am going to guess that the next speaker 24 who comes up, the campaign finance board, might be 25 able to recite that to you, exactly what the numbers 1 were in the two campaigns. 2 SENATOR MARCHIONE: Thank you. 3 Senator Nozzolio? 4 SENATOR NOZZOLIO: Thank you. 5 And thank you, Randy, for raising a number of 6 thought-provoking points through your discussion 7 this morning, and this afternoon. 8 But something that you just said, that caused 9 me to ask another question about the public 10 confidence in the electoral system. 11 And I think that's an objective that everyone 12 shares: We want greater participation. We want 13 more people to be involved. 14 One of the things I would like you to 15 address, though, is: Do you believe that the 16 public-financed system in the city has had any 17 appreciable effect on voter participation? 18 Because the numbers that I see, are that 19 we're still looking at less than 20 percent, 20 generally, of those eligible to vote in 21 New York City, voting. 22 RANDY MASTRO: It's a very fair question, and 23 there are a lot of factors contributing to that, 24 that, you know, don't relate to the public's 25 perception of, you know, corruption in government. 1 I may end up suing the 2 Bloomberg Administration often, but there aren't 3 many people who describe it as having a corruption 4 problem. 5 And, you know, I don't think, in New York 6 City right now, in terms of the executive branch, I 7 think we've had, you know, some very strong 8 decades -- Bloomberg; Giuliani, before -- where we 9 haven't had major corruption problems. 10 You have to go back to the '80s, to when we 11 had -- you know, a major corruption-scandal problem 12 in the executive branch in New York City. 13 But, to your question: 14 So, if the public were polled about, you 15 know, honesty or integrity in government in 16 New York City, I think the numbers would be much 17 higher than reflected at the polls. 18 You've had an incumbent mayor who has run and 19 spent enormous amounts of money, and considered to 20 be the prohibitive favorite for reelection in both 21 of his last two races; so, therefore, turnout, I 22 think, was affected by that, and low. 23 You also had a general revulsion among 24 New York City voters to what happened in 2009 on the 25 city council, and the mayor's reversal of the 1 term-limits law, without putting that question back 2 to the voters; something I litigated, unfortunately, 3 unsuccessfully. 4 But, it needed to be litigated, and the light 5 of day shown on that process. 6 And I think that affected voter confidence. 7 I think the public financing of campaigns 8 would be viewed by most New Yorkers, New York City 9 residents, as a positive. 10 I think it would have overwhelming public 11 support in New York City. 12 Does that translate into people necessarily 13 going to the polls in greater numbers? 14 There's a variety of factors that affect 15 that. 16 That's the only point I'm trying to make, 17 Senator: That I think the low turnout the last time 18 was 100 million, by a popular incumbent, who almost 19 lost reelection anyway, but nobody realized it was 20 that close. 21 And voter revulsion at the term limits 22 overturning, I don't think it had anything to do 23 with a perception that, you know, there was some 24 fundamental problem -- corruption problem, or 25 otherwise, in city government. 1 SENATOR NOZZOLIO: Thank you. 2 And thank you, Mr. Chairman. 3 SENATOR O'MARA: Thank you, Mr. Mastro. 4 RANDY MASTRO: Thank you, Senator. 5 SENATOR O'MARA: Next we'll have Amy Loprest, 6 the executive director of the New York City Campaign 7 Finance Board. 8 Good afternoon. 9 AMY M. LOPREST: Good afternoon. 10 SENATOR O'MARA: Thank you for being here 11 today. 12 AMY M. LOPREST: Good afternoon, 13 Senator O'Mara, and members of the 14 Election Committee. 15 I'm Amy Loprest, executive director of the 16 New York City Campaign Finance Board. 17 Joining me today is Eric Friedman, our 18 director of external affairs. 19 Thank you for giving us this opportunity 20 today to discuss the New York City campaign finance 21 program. 22 Almost exactly 25 years ago, New York City 23 faced a watershed moment in its history. A series 24 of high-profile corruption scandals drove public 25 confidence in the government to historic lows. 1 In an effort to repair and restore 2 New Yorkers' relationship with their elected 3 leaders, Mayor Koch proposed a comprehensive 4 finance -- campaign finance reform, aimed at 5 restricting the influence of money on city 6 elections. 7 Along with the city council, he created a 8 program for matching small contributions from 9 New Yorkers with public funds, a program that would 10 provide funds to the potential challengers. 11 Mayor Koch signed the New York City Campaign 12 Finance Act into law in February of 1988. 13 We are pleased to have the opportunity to 14 share our experiences administering New York City's 15 program. 16 Over 25 years, the hard work and commitment 17 of the board and its staff and our partners in city 18 government have shaped the city's program into one 19 of the most robust campaign financing programs in 20 the country at any level of government. 21 We have found -- not found that the 22 matching-funds program can fix all the ills of our 23 political system. 24 It does not keep corrupt individuals from 25 entering public life, but it does increase the voice 1 of all New Yorkers in city elections, it brings 2 elected officials closer to the voters they 3 represent, and it holds candidates accountable for 4 their conduct. 5 The act established the campaign finance 6 board to administer the program. 7 As established in the charter, the board is 8 strictly non-partisan. 9 The mayor and the speaker of the city council 10 each have two appointments who may not be members of 11 the same political party. 12 The mayor appoints the board's chair in 13 consultation with the council speaker. 14 From its inception, our board has maintained 15 its independence, and has insisted on building a 16 professional staff without consideration for 17 political affiliation. 18 The act covers candidates seeking election to 19 59 offices in New York City's municipal government, 20 including three citywide offices, mayor, 21 comptroller, and public advocate, five borough-wide 22 offices, and 51 seats on the city council. 23 The act sets commonsense contribution limits 24 for candidates. 25 For the 2013 election, mayoral candidates may 1 not accept more than $4,950, which is slightly less 2 than the limit for candidates for federal office; 3 For city-council candidates, the limit is 4 2750. 5 These contribution limits, which apply to all 6 contributors, individuals, labor organizations, and 7 political committees alike, are combined for the 8 primary and general elections. 9 A state supreme court last week affirmed the 10 City's ability to set limits for all candidates, 11 whether or not they seek public-matching funds. 12 This ensures that all candidates are subject 13 to the same rules, and that candidates are not 14 rewarded for opting out of the program. 15 The act prohibits direct contributions to 16 candidates from corporations, LLCs, and 17 partnerships. 18 In addition, the act sets lower contribution 19 limits for anyone who has or is actively seeking a 20 business relationship with the City. 21 The "doing-business limits" range from 22 $400 for mayoral candidates, to 250 per city-council 23 candidates. 24 These limits have been highly successful in 25 limiting the role of so-called "pay to play" 1 contributions in city elections. 2 Our mandate includes significant 3 responsibilities to inform, educate, and engage 4 New York City voters. 5 All candidates are subject to strong 6 disclosure requirements, every campaign must report 7 its financial activity to the board on a regular 8 schedule, and this information is made available to 9 the public via our online searchable database. 10 The CFB also administers a debate program for 11 citywide candidates, publishes and distributes a 12 non-partisan voter guide to every household with a 13 registered voter, and works to register new voters 14 throughout the city and keep them engaged in city 15 elections. 16 The centerpiece of our system is the city's 17 voluntary public-matching-funds program. 18 Simply stated, there are two main goals of 19 the program: To increase the role of small-dollar 20 contributions in city elections, and to decrease the 21 perception and possibility of corruption associated 22 with large contributions. 23 The program matches the first $175 24 contributed by New York City residents with public 25 funds at a 6-to-1 rate. 1 This means that an individual's $10 2 contribution is worth $70 to the candidate. 3 Contributions from non-city residents, 4 political committees, and unions are allowed, but 5 are not matched with public funds, nor are 6 contributions from people doing business with city 7 government. 8 Matching funds are available only to 9 candidates who are listed on the ballot and have an 10 opponent on the ballot. 11 Candidates must also demonstrate compliance 12 with the campaign finance law. 13 Any candidate with outstanding penalties or 14 repayment obligations assessed in previous campaigns 15 will not receive public funds. 16 To receive matching funds, candidates must 17 also demonstrate that they have earned sufficient 18 level of public support. Candidates must satisfy a 19 two-part fundraising threshold to qualify. 20 For example, city-council candidates must 21 raise $5,000 in matchable contributions, and collect 22 75 contributions from the district they seek to 23 represent. 24 Public-funds payments to any campaign are 25 capped at 55 percent of the spending limit 1 established for that office. 2 This limitation ensures that every campaign 3 has a mix of private and public funds behind it. 4 In the 2013 elections, the maximum 5 public-funds payment available to mayoral candidates 6 will be 3.5 million for election; for city-council 7 candidates, the maximum will be 92,400 per election. 8 Over the course of our history, covering 9 6 citywide elections, 2 council-wide redistricting 10 elections, and 18 elections to fill vacant seats, 11 the net cost of the program has been $112 million; 12 or about $4.5 million a year. 13 In joining the program, candidates agree to 14 abide by strict spending limits. 15 These limits vary by office, and ensure that 16 the amount of money raised is not the deciding 17 factor in a race between participating candidates. 18 In 2013, participating mayoral candidates may 19 spend up to 6.4 million each in the primary and 20 general elections; the limit for city-council 21 candidates is $168,000. 22 The act calls for these limites to be 23 automatically adjusted, according to inflation, 24 after each four-year election cycle, which allows 25 the program to keep pace with increasing costs of 1 running a campaign in one of the most expensive 2 cities and media markets in the world. 3 Following each citywide election, the act 4 requires the CFB review the program, its effects on 5 candidates' ability to campaign, and recommend 6 appropriate changes to the law. 7 This regular review of our rules and 8 practices has helped the program evolve over time 9 and meet new challenges. 10 Now, more than ever, most candidates believe 11 that public-matching-funds program offers the best 12 chance to compete. 13 More than 90 percent of active candidates 14 joined the program for the 2009 primary elections, 15 as did 80 percent of active candidates for the 16 general elections. 17 The CFB's record of tough but fair 18 enforcement creates a culture, where following the 19 rules matters, and compliance with the law is the 20 norm, not the exception. 21 In the 2009 elections, two-thirds of the more 22 than 200 candidates registered with the CFB were not 23 assessed a penalty. 24 This isn't an accident. 25 The professional staff of our 1 candidate-services unit provides training and 2 guidance to the candidates and campaign staff, 3 helping them to comply with our program's rules. 4 They contact candidates with reminders before 5 each filing deadline, and they are available to 6 answer questions at any time. 7 Candidates for office in New York City also 8 know their campaign finances will be audited 9 thoroughly by the CFB, before, during, and after 10 each election. 11 Pre-election, we carefully review every claim 12 for public funds, to ensure candidates qualify for 13 matching funds honestly. 14 Candidates who have committed serious 15 violations before the election do not receive public 16 funds. 17 Pedro Espada, Jr., in 2001, is an example of 18 that. 19 During the election, we verify that 20 candidates are abiding by the rules. 21 After the election, our audits ensure that 22 candidates have accounted for each and every dollar 23 of -- in public funds they receive. 24 If the money was not spent for their 25 election, we require that they pay it back. 1 As a result of our audit enforcement 2 authority, most candidates in New York City don't 3 take liberties with their campaign funds. 4 Those who flout these rules expose themselves 5 to severe penalties, and may be personally liable to 6 repay the misused funds. 7 The board's non-partisan independent 8 structure has been very important to allowing our 9 board to function effectively. 10 We are asked to safeguard the public's 11 investment in the political process, and we take the 12 responsibility very seriously. 13 Our enforcement efforts have helped keep the 14 program strong over the years. 15 The New York City public campaign finance 16 program is designed to increase New Yorkers' 17 participation in elections. 18 The evidence is -- overwhelmingly suggests 19 that the program has succeeded. 20 Statistics from the recent elections show 21 that the matching program sharply limits the big 22 roll of big donations from special interests in city 23 elections. 24 More than 90 percent of the funds raised by 25 city candidates so far for 2013 have come from 1 individual contributors. Only 7 percent come from 2 special-interest groups, like PACs and unions. 3 Contrast this with Albany, where candidates 4 for State Legislature in 2012 relied on big-money 5 sources, including corporations, for more than 6 two-thirds of their total funding. 7 The 6-to-1 match encourages candidates to 8 focus on collecting smaller contributions which more 9 New Yorkers are able to afford. 10 The match also encourages more New Yorkers to 11 show their support for candidates, and to feel 12 confident that their voices will be heard. 13 Here, the evidence that the city's 14 public-matching-funds program promotes broader 15 participation on our elections is stunning. 16 In the 2009 elections, 69 percent of 17 contributors gave $175 or less. 18 In each of the last three elections' cycles, 19 more than half of all individual contributions from 20 New York City residents were made by first-time 21 donors. 22 A 2012 report from the Campaign Finance 23 Institute shows that more New Yorkers from every 24 neighborhood in every borough made more 25 contributions to city-council candidates than to 1 candidates for State Legislature. 2 Fully, 90 percent of New York City census 3 block groups had someone who gave $175 or less to a 4 city-council candidate in 2009. 5 Meanwhile, just 30 percent of census block 6 groups had someone who gave $175 or less to a 7 candidate for the State Assembly in 2010. 8 The evidence is clear: The New York City 9 matching-funds program greatly increases 10 participation in elections by New Yorkers, living in 11 every neighborhood, in every public school district, 12 on every subway line, and on every street. 13 Their participation is the key to a healthy 14 democracy. 15 Their participation ultimately determines 16 whether candidates are accountable to the public 17 interest. 18 Government works best when the public takes 19 an active role. 20 Unfortunately, New Yorkers have grown 21 disconnected from their state government in Albany. 22 This cycle is all too familiar. 23 Porous campaign finance laws breeds cynicism, 24 causing voters to tune out. 25 With no one watching, corrupt actors escape 1 accountability, and it becomes much more difficult 2 for good people to be effective. 3 New York City was in a similar cycle 25 years 4 ago, but the Campaign Finance Act and the 5 public-matching-funds program have helped reverse 6 the trend. 7 We hope you will consider the urgent need for 8 meaningful action to change course in Albany. 9 We thank you for the opportunity to testify 10 today, and I'm happy to answer any questions you may 11 have. 12 SENATOR O'MARA: Thank you. 13 Senator Nozzolio? 14 SENATOR NOZZOLIO: Thank you very 15 much...Ms. Loprest? 16 AMY M. LOPREST: Yes, that's correct. 17 SENATOR NOZZOLIO: Thank you very much for 18 your participation. 19 I have a couple of questions. 20 The first deals with voter turnout and 21 participation; that your comments, that the 22 public-finance program was designed to increase 23 New Yorkers' participation in elections. 24 Your report, "Who votes? The Voter Turnout 25 in New York City," June 11, 2012, says that 1 New York City has, in 2009, an historic low turnout: 2 18.4 percent; 3 And that in the midterm election in 2010, a 4 year later, that the turnout in the city was 5 28 percent, compared with the rest of the state's 6 average of 53 percent. 7 Now, the rest of the state, at 53 percent, 8 did not have public financing of campaigns, but we 9 focus on the election that did, which was 2009. 10 And an 18 percent turnout, when the system is 11 designed to increase the participation, and the 12 process, is questionable. 13 And, then, when you look at the comparison of 14 2010, with New York City and the rest of state, your 15 recommendation -- or, the recommendation of the 16 board, was that the campaign voting laws need to be 17 changed. 18 Still, how can you reconcile such a 19 difference, comparing apples to apples, a 26 percent 20 turnout -- I'm sorry, small print -- a 28 percent 21 turnout in 2010 for New York City; a 56 percent 22 turnout for the rest of the state? 23 It seems like it's -- I'm looking for cause 24 and effect here, and I'm having trouble dealing with 25 the numbers to determine that cause and effect. 1 AMY M. LOPREST: I guess the answer is, I 2 mean, no one thing affects -- makes -- is 3 determinative of the -- how many people come out to 4 vote. 5 I mean, so that is -- I mean, it's not one 6 single aspect of an election determines whether 7 people are coming out to vote. 8 But one thing that is true about 9 participation, is that, in terms of contributions, 10 from every single area of the city, candidates are 11 seeking contributions from people, from voters, who 12 are in all areas of the city. 13 90 percent of census block groups have a 14 contributor in them, which means that the candidates 15 have to reach out to the voters in every single ward 16 of those areas. 17 So there is participation, on a financial 18 level. But, again, it's hard to say what causation 19 is, and what factors determine -- go into 20 determining what the voting rate is. 21 SENATOR NOZZOLIO: There just seems to have 22 such a disparity between the city and the rest of 23 state, and all dealing under the same rules, under 24 the same umbrella laws, that govern voter 25 participation, govern elections. 1 It seems incongruous. 2 And I understand what you're saying about 3 cause and effect. 4 I just don't see how the public financing 5 really gets to a higher turnout with the numbers 6 that you have and others have discussed. 7 Let me ask you about independent 8 expenditures. 9 Is the City's process eliminate independent 10 expenditures? 11 AMY M. LOPREST: No. 12 What the -- I mean, that would be 13 unconstitutional, according to the Supreme Court's 14 jurisprudence. 15 What we have, is we have adopted a set of 16 rules primed to the comprehensive disclosure of 17 independent expenditures. And those will be in 18 effect, for the first time, in the -- in a citywide 19 election in 2013. 20 Those laws and rules went into effect in 21 March of 2012, but they require disclosure of 22 independent spending, across the city, on the same 23 schedule that candidates disclose their finances. 24 SENATOR NOZZOLIO: So independent 25 expenditures are allowed. 1 There's additional disclosure that will be 2 required -- 3 AMY M. LOPREST: Yes, that's correct. 4 SENATOR NOZZOLIO: -- required. 5 And will that disclosure be contemporaneous? 6 We discussed with Mr. Mastro, the issue of 7 having disclosure in line with the -- the actual 8 election, as opposed to weeks later. 9 AMY M. LOPREST: Our disclosure regime for 10 independent expenditures follows exactly the same 11 schedule as the disclosure for candidates. 12 So as Mr. Mastro pointed out, that disclosure 13 becomes quicker and quicker as you approach the 14 election. And that's the same schedule for 15 independent spenders. 16 SENATOR NOZZOLIO: I don't know if you were 17 in the room when we discussed the fact that the cost 18 of administrating the program is about as much as 19 the program itself. 20 In terms of giving funding to candidates, 21 it's about $25 million. 22 At least the number we had presented to us, 23 to administer this program, of distributing 24 $25 million of campaign funds to candidates in the 25 program. 1 A 1-for-1 seems pretty burdensome. 2 But I guess, maybe to address your answer 3 with this comment -- with this other sort of 4 question: 5 You're required -- the finance board is 6 required, as I read the law, to review, not just the 7 candidate who's applying for these funds, but the 8 candidate who isn't applying for these funds. 9 In other words, you have to have a political 10 unit, or a political-adviser unit, in effect, to 11 determine the scope of the opponent's campaign, in 12 order to accelerate funds. 13 I thought that that was quite a burdensome 14 role of government; to be able to ask government to 15 analyze campaigns, and decide, who's receiving -- 16 who's spending more money, and who, in effect, 17 should get more money, as a result, or get that -- 18 those funds at a faster clip. 19 Is that the role of the board? 20 And -- 21 AMY M. LOPREST: Uhm -- oh, I'm sorry. 22 SENATOR NOZZOLIO: And how do you do all of 23 that? 24 AMY M. LOPREST: I mean, I'll answer the 25 first part about the cost of the program. 1 I'm not sure where that "$25 million" number 2 comes from. 3 The budget for running the program, for 4 non-public funds, and not for the voter guide, which 5 is a significant cost, because we mail it to every 6 voter in the city, is about $10 million for -- per 7 year. 8 So, I'm not sure where the "$25 million" 9 number came from. 10 On the issue of the non-participants, since 11 2005, non-participants -- people who are not 12 participants in the public-financing program are 13 subject to the same contribution limits and 14 requirements as any candidate who's participating in 15 the program, and they're also subject to the same 16 disclosure requirements. 17 So it's from that disclosure, that 18 determinations of whether bonus funds were due, was 19 made from their own disclosure. 20 SENATOR NOZZOLIO: So you had to get into the 21 weeds, into each of those expenditures, and then 22 make a determination that one candidate is spending 23 more than the other? 24 AMY M. LOPREST: Well, the way it worked, 25 and, unfortunately, a part of -- a large portion of 1 this has been overturned, because of the 2 Supreme Court decisions, so there is -- the city's 3 program no longer pays out additional public funds, 4 or pays them out in an additional -- at an 5 accelerated rate, because of decisions by the 6 Supreme Court, dealing with the Arizona program, 7 that makes that kind of payment -- determined that 8 that kind of payment is unconstitutional. 9 SENATOR NOZZOLIO: But you still have that in 10 New York? 11 AMY M. LOPREST: No, no, that was determined 12 unconstitutional. 13 So we -- the one remaining aspect of that, is 14 that the spending is lifted, and that -- and then 15 eliminated, for candidates who are running against 16 non-participants. 17 SENATOR NOZZOLIO: So you don't have to do 18 that work then? 19 AMY M. LOPREST: No. 20 I mean, before, it was all based on the 21 candidate's own -- the non-participants disclosure. 22 So we -- I mean, while we audit all of the 23 candidates, both participants and non-participants, 24 that that particular part was not -- it was based on 25 the candidate's own disclosure. 1 SENATOR NOZZOLIO: Thank you very much. 2 AMY M. LOPREST: Thank you. 3 SENATOR O'MARA: Senator Tkaczyk? 4 SENATOR TKACZYK: Thank you. 5 And thank you for coming up and being with us 6 today. 7 I have a couple of questions, and one of the 8 comments that I wanted to make is, you know, the 9 hearing is about the public-financing portion of 10 what you do in this city, but, clearly you have a 11 lot of regulations, and a lot more going on than 12 just a public-financing system. 13 And I wanted to ask you a couple of questions 14 about some of the other regulations you have in 15 place. 16 For example, in New York State, you can give 17 contributions to candidates through the -- we call 18 it the "LLC loophole," but that's prohibited in 19 New York City for local candidates. 20 So, for example, a -- someone who has a lot 21 of money in New York City could give candidates who 22 are running for office statewide, many contributions 23 through the LLC. 24 Could you explain why the -- well, your 25 department doesn't allow that in New York City? 1 AMY M. LOPREST: Well, I mean, the 2 city council passed a law in -- to bar corporate 3 contributions in 1998, and then expanded that 4 prohibition in 2007 to LLCs and partnerships. 5 And it is, basically, to ensure that the 6 money coming to candidates for office, comes from -- 7 primarily, from individuals rather than from 8 organizations or entities. 9 SENATOR TKACZYK: And isn't it true that, 10 oftentimes, as LLCs, it's not clear who's behind 11 them, and it's a corporation, and you're not clear 12 who the person is that may be making the donations? 13 AMY M. LOPREST: I believe that's true. 14 SENATOR TKACZYK: When you -- one of the 15 things that you do a lot of is auditing. 16 I have a couple of questions on, when you 17 look at a typical candidate, how long does it take 18 to do an audit, and what would that particular 19 audit, essentially, cost? 20 AMY M. LOPREST: I mean, it's hard to 21 determine that. 22 One thing, is that we audit before, during, 23 and after the elections, so, the time, it's hard to 24 predict. 25 We audit every single contribution that is 1 claimed from matching funds, to ensure that the -- 2 that they're really from an individual New York City 3 resident. 4 And then we audit after the election, to 5 ensure that all the public funds were spent, in 6 addition to the fact that they -- that the 7 candidates complied with all the other rules and 8 regulations under the law. 9 SENATOR TKACZYK: And if they haven't spent 10 their money, what -- is it -- what are they required 11 to do with the money that's not spent on the 12 campaign? 13 AMY M. LOPREST: Money that's not -- that's 14 left over after the election is required to be paid 15 back to the public fund, up to, obviously, to the 16 amount of money that you've received in public 17 funds. 18 SENATOR TKACZYK: Okay, so any leftover money 19 goes into the public fund, that you then use for 20 matching in future races? 21 AMY M. LOPREST: Yes. 22 SENATOR TKACZYK: So, about how many -- I'm 23 trying to get a sense of the cost of the auditing 24 piece, because it's not something we do in 25 New York State, that I think we should do, since 1 enforcement is key, that everyone keeps repeating. 2 What do you -- out of your 10 million, about 3 how much of that is for the auditing portion? 4 AMY M. LOPREST: I mean, I think that a -- I 5 think, probably, more than half. I mean, the 6 precise percentage, I wouldn't -- of the staff, is 7 engaged in the auditing-enforcement process, either, 8 you know, directly as auditors, through lawyers, 9 through the enforcement process, to the candidate 10 services, as part of the education. 11 And so, about, more than 50 percent of the 12 staff is involved in that process. 13 So, you know, as a rule of reference, I guess 14 you could say 50 percent of the funds that we 15 spent -- you know, receive as administrative funds, 16 are spent on auditing enforcement. 17 SENATOR TKACZYK: And how many staff do you 18 have? 19 AMY M. LOPREST: About ninety. 20 SENATOR TKACZYK: Ninety? 21 AMY M. LOPREST: Yes. 22 SENATOR TKACZYK: And how long does it 23 take -- I know I keep asking the same questions -- 24 but how long does it take to audit one of -- well, I 25 guess you're doing a process, so you're not auditing 1 one campaign at a time. 2 So I guess -- all right, I understand about 3 that. 4 Do you have any -- you've been working in the 5 system for quite a while. 6 Do you have, as the state is looking at 7 this -- doing some of what you're doing locally, on 8 a statewide level, do you have any recommendations 9 for improving what you're doing locally, as it 10 pertains to the statewide? 11 AMY M. LOPREST: I guess -- after every 12 election, we produce a report that is in-depth about 13 what could be improved in the city program. 14 And some of those recommendations have been 15 adopted, and some of them haven't. 16 So, you know, we're happy to -- I think I 17 actually have a couple of copies here, so we're 18 happy to give you a copy of that report. 19 One thing that we had -- the board had made a 20 recommendation, is to bar the spending of 21 housekeeping accounts. 22 And that was one recommendation that the city 23 board had made a recommendation of. 24 SENATOR TKACZYK: Thank you. 25 I look forward to reading your report. 1 AMY M. LOPREST: Thank you. 2 SENATOR O'MARA: Senator Marchione? 3 SENATOR MARCHIONE: Thank you. 4 Thank you for being here today and sharing 5 your opinion. 6 I'm trying just to get any arms around the 7 cost, and I know you have listed some of the costs 8 in here. 9 What is the direct cost for the 282 people 10 who ran in 2009? 11 AMY M. LOPREST: In 2009, we paid out 12 $27.4 million in public funds. 13 SENATOR MARCHIONE: 27.4? 14 AMY M. LOPREST: Yes. 15 SENATOR MARCHIONE: Okay. 16 And the number I heard previous, the 17 "25 million," you said that, 15 million -- 18 10 million is to run your office. 19 Is that every year? 20 AMY M. LOPREST: I guess what I said is, I'm 21 not sure where that "25 million" number that a 22 previous person cited. 23 It's about $10 million to run the office 24 every year, yes. 25 SENATOR MARCHIONE: Every year. 1 AMY M. LOPREST: But we are auditing the 2 candidates, and preparing for the future elections, 3 during those off-years. 4 SENATOR MARCHIONE: Oh, okay. So it's 5 $10 million a year for your office. 6 And the 15 million, did you say you did some 7 advertising with that? 8 Did you send something out? 9 AMY M. LOPREST: Oh, one of the things we do 10 is, we have a multiplicity of mandates, and one of 11 the mandates is to educate voters. 12 And we produce and mail a voter guide, that 13 has -- all the candidates can produce -- submit a 14 statement. And we print and mail that to every 15 household that has a registered voter in 16 New York City. 17 SENATOR MARCHIONE: Okay, so besides the 18 matching monies that candidates get, they actually 19 get a mailing into everyone's home, on a statement 20 that they would like to -- the voters to know about 21 them as well? 22 AMY M. LOPREST: Yeah, and, basically, it's 23 one -- I mean, it's all the candidates in one book 24 for -- separated by election, you know, by council 25 district, you know, by office. 1 SENATOR MARCHIONE: Okay. 2 And I heard that, at the end of the election, 3 people who haven't spent all of their money, they 4 reimburse it back. 5 How much did you get reimbursed back in the 6 last campaign? 7 AMY M. LOPREST: That -- I don't have that 8 number precisely with me. 9 But we have -- we do have a rigorous audit 10 process, and we do require people to pay back. 11 So in addition to money left over, we also 12 require candidates who have not spent the money 13 appropriately, also to repay that money. 14 So it's a combination of that, of those 15 two -- those two sources of money: money left over, 16 and money that was not appropriately paid out. 17 SENATOR MARCHIONE: Could you get me the 18 dollar amount of what wasn't spent appropriately, 19 and, what was actually returned, that was left over? 20 AMY M. LOPREST: Yes, we can. 21 SENATOR MARCHIONE: Okay. 22 And one other thing: 23 I understand that you are auditing the 24 campaign finance of all of the candidates. 25 How long does that process take? 1 For example, in 2009, was the -- you know, 2 are you -- when did you complete the auditing 3 requirements for 2009? 4 AMY M. LOPREST: Unfortunately, there are 5 still about ten candidates who are left to have 6 their audits completed. 7 We're always trying to make that process 8 quicker. 9 As -- one of the parts of the process, is to 10 allow the candidates an opportunity, obviously, to 11 respond. And you want to give them an adequate 12 amount of time to respond to the audit, and to 13 respond to any notices of violations. 14 So that's included in that time; the 15 back-and-forth between the staff and the campaigns. 16 But -- 17 SENATOR MARCHIONE: So five years later, 18 you're not complete with the auditing process yet? 19 AMY M. LOPREST: There are about ten left 20 who -- yes. 21 SENATOR MARCHIONE: Okay. 22 So we need auditing, because it's important 23 to know whether or not, you know, we're spending our 24 money appropriately, but, you could be out of 25 office, your office -- your four years; right? 1 AMY M. LOPREST: Yes. 2 SENATOR MARCHIONE: You could be out of -- 3 you could have got into office, and been out of 4 office by now, and my campaign financing wouldn't 5 even have been audited yet? 6 AMY M. LOPREST: No, it's -- I mean, the 7 election is only -- it's only been -- 8 SENATOR MARCHIONE: For two years? 9 AMY M. LOPREST: -- three and three-quarters 10 years. 11 The election is in the fall of this year, so, 12 2009 to 2013. 13 So it's only -- it's been -- no one is out of 14 office, yet. 15 SENATOR MARCHIONE: Okay, but I would almost 16 be out of office, perhaps, if I was one of those 17 ten, and, you haven't completed my audit yet? 18 AMY M. LOPREST: Yes. 19 SENATOR MARCHIONE: And it's four years. 20 So in that four-year time, your office has 21 spent 40 million to do this, plus the 27 million 22 that is for campaign finance. 23 I'm just trying to gets my numbers correct. 24 Is that correct? 25 AMY M. LOPREST: Yes. 1 SENATOR MARCHIONE: One other question: 2 If I was submitting to get money from the 3 City, how do you cut my check? 4 How long does that take? 5 Say I submitted it, $20,000 in contributions 6 today, at the end of the campaign, how long will it 7 take me to get that "six times more" in my account 8 so I could use it for the election? 9 How quickly does that happen? 10 AMY M. LOPREST: The law requires, and we 11 have always met this, that we make public-funds 12 payments within four days after you file your 13 disclosure statement. 14 So we make a public-funds payment through 15 electronic fund transfer, in four days. 16 SENATOR MARCHIONE: So you make the payments; 17 and, of course, then auditing is done over the next 18 five years? 19 AMY M. LOPREST: Yes. 20 But, of course, we audit those contributions 21 before we pay them, too. 22 So the majority of those audits -- the 23 contributions are audited before, so some people who 24 are not qualified, don't get paid at all, because 25 they're not qualified right then. 1 Also, we -- the public funds are only paid 2 out to people who are on the ballot, and who are 3 opposed on the ballot. 4 So, public funds can only be paid -- the 5 first payments are only made after the board of 6 elections has made the determination of who's on the 7 ballot, you know, after the petitioning process, and 8 the challenges of the petitioning process. 9 So, the first payments are made in the 10 beginning -- the end of July, beginning of August, 11 because of the requirement that you have to be 12 opposed and on the ballot. 13 SENATOR MARCHIONE: Thank you the very much. 14 Thank you, Mr. Chairman. 15 SENATOR O'MARA: Senator Savino? 16 SENATOR SAVINO: Thank you, Mr. Chair. 17 Thank you, Ms. Loprest. 18 I had the opportunity to hear your testimony 19 the other day when you presented before the IDC, so 20 I won't go over a lot of the details, but, listening 21 to the questions, it kind of made me think of a 22 couple of things that I didn't ask you the other 23 day. 24 There's a lot of attention been paid to how 25 much money this costs the City of New York to run: 1 how much is disbursed, how much is allocated for the 2 auditing unit. 3 One of the things that hasn't come up, is how 4 much money you guys collect in fines. 5 Because one of the complaints of the program, 6 is that it is an overzealous restriction, in an 7 almost arbitrary nature, by which fines are sent 8 out. 9 Do you guys keep track of how many campaigns 10 you assess fines on, and what the size of those 11 fines are? 12 AMY M. LOPREST: Yes, we do. 13 I mean, and, actually, the fines are returned 14 to the public coffers also. 15 In 2009, of the audits that we have 16 completed, about two-thirds of the candidates who 17 were audited received no penalties at all. 18 I don't have the precise numbers of the total 19 amount of penalties for the other third, but we can 20 get that number for you. 21 SENATOR SAVINO: But give me a ballpark, 22 what's an average fine that's imposed on an 23 individual? 24 Give me an infraction and a fine, like, what 25 would it cost? 1 AMY M. LOPREST: Well, I guess it depends on 2 the type of penalty. 3 For late-disclosure filings, it's about $50 a 4 day. 5 Or, you know, for a -- accepting a corporate 6 contribution, it can -- it ranges, but it's the 7 maximum of $250. 8 For people who exceed the spending limit, 9 which is probably the most serious violation of the 10 law, the penalty could be up to three times the 11 amount that the person has exceeded the spending 12 limit. 13 So, it depends. 14 You know, if people who exceed their spending 15 limit by a large amount, are assessed a penalty of 16 three times the amount they have exceeded the 17 spending limit; 18 And small amounts are assessed at a 1-to-1 19 rate. 20 SENATOR SAVINO: And if you're a council 21 candidate in 2009, and you're not term-limited in 22 2013, and you were assessed a fine, or two, maybe 23 three, it could happen, you have to pay that back 24 before you can qualify for matching money for 25 reelection; is that not the case? 1 AMY M. LOPREST: That is correct. 2 SENATOR SAVINO: So you have to be in good 3 standing to participate, going forward? 4 AMY M. LOPREST: Yes. 5 SENATOR SAVINO: Can candidates raise money 6 to pay down their debt? 7 AMY M. LOPREST: Yes, as long as they raise 8 the money under the contribution limits, and 9 regulations that existed. 10 But they can raise money for that. 11 SENATOR SAVINO: Can they spend money before 12 they pay off their debt? 13 And do you have to have two campaign 14 accounts? 15 AMY M. LOPREST: I mean, the one thing is, 16 the city's law requires you to have a separate 17 campaign committee for every single election. 18 So you could -- you know, so you have a 19 little different camp. 20 So unlike the State, where people have the 21 same campaign committee, everyone would have 22 two different committees. 23 SENATOR SAVINO: And there are restrictions 24 on what you can spend the money on; correct? 25 AMY M. LOPREST: That is correct. 1 SENATOR SAVINO: Besides campaign-related; 2 unlike -- on the State, we -- you know, we -- I 3 think we discussed this when you were at our hearing 4 the other day: 5 We, and the -- you know, I don't -- I can't 6 speak for the rest of them, but I spend a lot of 7 money on journal ads, and tickets, you know, to, you 8 know, dinners, and, you know, helping little 9 leagues, and, particularly, the loss of member 10 items, the need is there, even if the public money 11 isn't there, and people ask, it's just as hard. 12 City-council candidates can't do that, can 13 they? 14 AMY M. LOPREST: Well, there are two 15 different kinds of classes of what you can spend on. 16 There's money -- you can spend your campaign 17 money that's allowable, and money that you can spend 18 public money on. 19 So there's slightly different rules between 20 them. 21 But, candidates are allowed to spend money on 22 charitable organizations, on community events, on 23 giving more to other candidates. You can spend your 24 campaign money on those kinds of things. 25 You can't spend public money on contributions 1 to other candidates, or gifts, or those -- that kind 2 of thing. 3 But, you can spend campaign on that -- those 4 events. 5 SENATOR SAVINO: Thank you. 6 SENATOR O'MARA: Senator Krueger? 7 SENATOR KRUEGER: Thank you. 8 There was a number of questions involving the 9 cost of your budget, for the candidate money, versus 10 the auditing money, versus administrative money. 11 But I think when I added it up, and I 12 realized how large the city of New York is, it works 13 out to be a little over $2 per citizen, per year. 14 Have you ever looked at your budget from that 15 perspective? 16 Am I right or wrong on that? 17 AMY M. LOPREST: I mean, we've done some 18 analysis on the amount of public funds per person, 19 per year, and it's about 60 cents, or a little more. 20 But -- I mean, so $2 sounds like it might be 21 right, but we've -- I've never actually done that 22 math. 23 SENATOR KRUEGER: So that -- and I asked 24 that, I wanted to confirm that, because that seems 25 to be consistent with the findings of a number of 1 experts on public-financing of campaigns, and that 2 there's been a great deal of concern raised, that 3 the cost would be so enormously high if the State 4 operated a parallel or a similar type of system. 5 Is there any reason to imagine that, the 6 State, looking at the city's model, and implementing 7 something, if not identical, similar in concept, 8 that it would be much more than $2 a person? 9 Is there in any reason for us to think that? 10 AMY M. LOPREST: I mean, I don't think -- I 11 mean, if you followed the same -- if -- you know, 12 assuming the math is correct, and following the same 13 model, I don't think that there should be any reason 14 why that would be the case. 15 SENATOR KRUEGER: And, again, the subtheme in 16 this hearing was the issue of corruption within 17 publicly-financed system. 18 You can fully document exactly how much money 19 you've given out, how many people you've 20 investigated, and fined. 21 Have you had a chance to look at your numbers 22 compared to other public-financed or campaign 23 finance systems around the country? 24 AMY M. LOPREST: No, I've never -- I've never 25 done that, you know, the comparison between other. 1 But I do know that -- I mean, we certainly -- 2 I mean, we certainly audit, and certainly make sure 3 that the public money is spent appropriately, and we 4 certainly assess penalties, when merited, for 5 violations of the law. 6 SENATOR KRUEGER: And do you know how many 7 people have actually ended up in a criminal case, 8 based on fraud, within the New York City campaign 9 finance system in the 25 years? 10 AMY M. LOPREST: I mean, there have been a 11 number. I mean, a number of high-profile cases 12 that -- involved -- you know, many of them stemming 13 from work that our office has done, for -- but -- of 14 corruption cases. 15 But there have been some high-profile cases 16 leading to criminal prosecutions. 17 SENATOR KRUEGER: But it seems -- I mean, I 18 looked at some of the reports, the numbers. 19 It seems, statistically, based on the number 20 of elected officials over that 25 years, and 21 candidates, it's a pretty small percentage. 22 AMY M. LOPREST: That's true. 23 SENATOR KRUEGER: And can you comment on how 24 we're doing at the state level, as far as the number 25 of people caught involved with campaign corruption? 1 AMY M. LOPREST: Well, I mean, I don't -- I 2 won't comment, but I just -- I mean, I guess, this 3 morning, in "The New York Times" editorially cited 4 that, you know, 32 officials on the state level had 5 been part of some kind of corruption, or -- 6 SENATOR KRUEGER: But that -- but some of us 7 just were corrupt for non-campaign-related purposes, 8 so they're not -- not all corruption is the same. 9 AMY M. LOPREST: Yes. 10 SENATOR KRUEGER: I mean, looking at the 11 state system, are we catching people in our system? 12 AMY M. LOPREST: I mean, I don't believe so. 13 But I -- I mean, I will tell you one thing 14 that happens, on the state system -- the city 15 system, is that, because we are watching the 16 candidates and what they spend their money on, 17 candidates are -- it's created a culture that 18 candidates don't spend money on, you know, the -- 19 you know, high, you know, steak dinners, and 20 entourages, and such, because we're watching them. 21 And, you know, it's much easier to do that on 22 the state level, to raise large contributions, and 23 not have any real enforcement on your spending. 24 So, it would be -- it is much easier on the 25 state level. 1 SENATOR KRUEGER: And in your testimony, you 2 have some charts on the comparison between the -- 3 where the money comes from, for candidates, in the 4 city system, versus, the state system. 5 All right, so in the city system -- excuse 6 me -- individuals give 62 percent -- individuals who 7 are residents of the city give 62 percent; 8 Non-New York City residents, but also who are 9 individuals, give 31 percent; 10 And 7 percent is, quote/unquote, defined as 11 special interests. 12 And then the state level, we've got, special 13 interests, 69 percent; and individuals, 31 percent. 14 What do you think is the correlation between 15 these differences and where the money comes from, 16 and what happens in our government? 17 AMY M. LOPREST: And I think that that is 18 absolutely the demonstration of why a small-donor 19 matching fund, that's what you get; is that you get 20 individuals giving contributions to candidates. 21 Candidates seeking -- they have the incentive 22 to seek those contributions from individuals, rather 23 than from special interests. 24 And, that's what happens when you have a 25 small-donor matching-fund program. 1 SENATOR KRUEGER: Thank you. 2 AMY M. LOPREST: Thank you. 3 SENATOR O'MARA: Senator DeFrancisco? 4 SENATOR DEFRANCISCO: Yes. 5 This recent case with, his name was Liu, down 6 in New York City, what did -- did you uncover that 7 particular situation, your office, or was it brought 8 to your attention? 9 AMY M. LOPREST: Well, that was a -- that's a 10 federal prosecution, and I'm not -- I mean, it's -- 11 our audit of that campaign has not been completed, 12 so I don't feel at liberty to discuss the 13 particulars of that. 14 SENATOR DEFRANCISCO: So he's been convicted 15 of something? 16 AMY M. LOPREST: Two of his campaign staff. 17 SENATOR DEFRANCISCO: Okay, and you haven't 18 completed your audit yet? 19 AMY M. LOPREST: That involves the 2013 20 campaign. 21 That criminal prosecution involved the 2013 22 campaign, which is still ongoing. 23 SENATOR DEFRANCISCO: So it's quicker to 24 prosecute somebody in federal court and get a 25 conviction, than it is to get an audit of one of 1 these candidates? 2 AMY M. LOPREST: Well, we haven't made any 3 determinations of any public-funds payments for the 4 2013 election yet, because it's not -- those 5 determinations will happen this summer. 6 SENATOR DEFRANCISCO: Wasn't one of the 7 allegations that, individuals -- I mean, instead of 8 money being brought by individuals under the limit, 9 that money he was getting was being broken down into 10 what was -- what he portrayed to be individual 11 campaign contributions? 12 Is that fair to say? 13 AMY M. LOPREST: Yes. 14 SENATOR DEFRANCISCO: Have you uncovered any 15 of that yet? 16 AMY M. LOPREST: Yeah, I mean, over the 17 years, we have -- I mean, our program has uncovered, 18 you know, several cases of that. 19 Those kinds of schemes of straw donors are 20 rare, and, usually, they're unsuccessful. 21 I mean, our auditing has caught a number of 22 high and broad -- a number of high-profiled cases. 23 In 1993, Ron Reali [ph.] was prosecuted and 24 convicted for a similar kind of straw-donor scheme 25 that was uncovered by our office. 1 Sheldon Leffler, running for Queens Borough 2 president in 2001, and, Albert Baldeo, who ran in a 3 special election in 2010, is now under indictment 4 because of a -- of an uncovering of a straw-donor 5 scheme brought by our office -- found by our office. 6 SENATOR DEFRANCISCO: So, what -- no matter 7 what the system, if someone's going to be a crook, 8 he can game any system. 9 Is that fair to say? 10 And if he's caught, he gets prosecuted? 11 AMY M. LOPREST: Yeah, I mean, I'm not going 12 to claim that the public-matching-funds program, you 13 know, cleanses out all corruption, or -- you know, 14 because I think that's an unrealistic standard. 15 SENATOR DEFRANCISCO: Okay. 16 Now, another issue: 17 Senator Marchione asked about funds being 18 returned at the end of the year if they're not used. 19 How do you -- I mean, let's suppose there's 20 100,000 left in the city councilor's campaign fund. 21 How do you know which is -- you know from 22 what you've donated, how do you know which of that 23 is private, and which is public money? 24 AMY M. LOPREST: Because money is fudgeable, 25 we -- the presumption is that, all the money, at 1 first, is public money. 2 So if you had 100,000 in your campaign 3 account, and you have received 100,000 in public 4 funds, the presumption is that all of that money is 5 public. 6 SENATOR DEFRANCISCO: All that money would go 7 back? 8 AMY M. LOPREST: Yes. 9 SENATOR DEFRANCISCO: And is that -- that's 10 the presumption; but, in fact, what normally 11 happens? 12 AMY M. LOPREST: That is what happens. 13 I mean, if you have money left in your bank 14 account, the law says that that money comes back to 15 the public first. 16 SENATOR DEFRANCISCO: Okay, if I'm under your 17 system, and I want to try to game the system -- 18 By the way, before I get into that: Isn't it 19 true that some of the payments that go out of 20 campaigns are for consultants? Political 21 consultants? 22 Is that fair to say? 23 AMY M. LOPREST: That's correct, that some 24 people make payments to political consultants. 25 SENATOR DEFRANCISCO: And if you're auditing 1 that, that line item, for consultants -- political 2 consultant, what information do you seek from them 3 to see, if, first of all, it's a legitimate public 4 consultant? 5 AMY M. LOPREST: Candidates are required to 6 provide documentation for all of the spending that 7 they do of public money. 8 So, they have to have a -- you know, 9 documentation that includes such things as, a 10 contract, delineate what the consultant was supposed 11 to do, work product. 12 So, the candidates provide a lot of examples 13 of the work of the different consultants. 14 SENATOR DEFRANCISCO: All right, but, 15 theoretically, it's possible, when you're getting 16 down to the deadline, you got a lot of extra money. 17 In your candidate -- your campaign last time, you 18 won by 90 percent, and you know that money is going 19 to be brought back to the public fund. 20 What prohibits you, or how do you -- from 21 paying a consultant fee to ABC Political 22 Consultants, and it's a legitimate fee, the person 23 thought about campaigning, and so forth, 24 ABC Political Consultants, it happens to be run by 25 the candidate's brother-in-law's best friend; and 1 the money is billed; there's some kind of work 2 product; and then that money is really paid in 3 advance for another campaign. 4 How do you uncover that? 5 AMY M. LOPREST: Well, one thing that we do, 6 is we -- and we definitely -- I mean, there's strong 7 rules about spending money after the campaign, and 8 after the election day. And, really, the audit 9 staff takes a good look at spending that's very 10 close to the election day. 11 You know, if you, all of a sudden, have 12 12 new consultants, that's something the auditors 13 are going to be looking at. 14 SENATOR DEFRANCISCO: Well, there's some 15 brighter corrupt people than that, that would 16 understand that they don't need enough, you know, to 17 get -- to get 96 percent of the vote, rather than 18 95, they don't need to wait till the end. They can 19 have a monthly fee to the brother-in-law's best 20 friend. The candidate's brother-in-law's best 21 friend. 22 I mean, how do you determine that that is 23 improper expenditures? 24 AMY M. LOPREST: Well, I mean, some of that 25 might -- I mean, people can hire consultants. Even 1 if you're going to win, you can hire a consultant. 2 So some of it is, you know, permissible 3 spending. 4 One thing is -- that's important to note, is 5 that -- I'm sorry, I lost my train of thought. 6 SENATOR DEFRANCISCO: That's all right. 7 AMY M. LOPREST: Excuse me. I can't 8 remember. 9 SENATOR DEFRANCISCO: Well, you can come back 10 to it. 11 AMY M. LOPREST: I mean, I'm sorry I don't 12 have the answer. I just completely lost my train of 13 thought. 14 SENATOR DEFRANCISCO: It will come back to 15 you. 16 All right. 17 Now, in addition to auditors, do you have 18 investigators, that, for example, would go to 19 ABC Political Consultants, and see what they're 20 doing? 21 Or, talk to people, to see if this -- Did you 22 ever hear of this group before? because -- you know, 23 because I've never heard of them, and they're 24 getting a $20,000 check each month? 25 Do you have an investigative staff? 1 AMY M. LOPREST: Yes. 2 SENATOR DEFRANCISCO: Okay. And are -- do 3 these investigations sometimes go past the date of 4 the election? 5 AMY M. LOPREST: Sometimes, yes. 6 SENATOR DEFRANCISCO: Okay. 7 AMY M. LOPREST: I do -- I wanted to make my 8 point; I remembered what my previous thought was -- 9 SENATOR DEFRANCISCO: Go ahead. 10 AMY M. LOPREST: -- is that the law, 11 actually, also limits the amount of money. 12 So, for people who are running in 13 non-competitive elections, the law actually limits 14 the amount of public funds. 15 So, ordinarily, you can get 55 percent of the 16 spending limit, in public funds. 17 If you're running in a non-competitive race, 18 you can -- you're limited to 25 percent of that 19 amount. 20 So, a city-council candidate normally get 21 92,000. You're limited to 25 percent, unless you 22 can show that that's a competitive race. 23 SENATOR DEFRANCISCO: And who determines what 24 is competitive or non-competitive? 25 AMY M. LOPREST: Actually, everyone is 1 limited to that. 2 And there's a series of factors that the 3 candidate themselves has to attest to; that these 4 exist, that they need the additional money, and they 5 have to provide documentation. 6 So there are things, like: 7 That my opponent is -- has been named in the 8 newspaper, you know, 12 times; 9 My opponent has been endorsed by a large 10 organization. 11 And the candidate files that certification, 12 and says that they need the additional money, 13 "because my opponent has met whatever these number 14 of different factors are." 15 SENATOR DEFRANCISCO: Well, if it's 16 determined to be non-competitive, why should that 17 candidate get any public funds? 18 AMY M. LOPREST: I mean, well, as long -- as 19 long as there's an opponent, they can get public 20 funds. 21 SENATOR DEFRANCISCO: But, why, if it's a 22 non-competitive race, or, that same brother-in-law's 23 best friend decides to be the candidate on the 24 Republican party? 25 So, there's a -- there's somebody on the 1 ballot; he hasn't got a prayer, and never expects 2 to, doesn't spend a nickel. 3 AMY M. LOPREST: I mean, that's something 4 that we really haven't seen in -- I mean, there's -- 5 you know, I mean, I must say, that, you know, we 6 haven't ended all corruption, but that kind of 7 scheme, we have not really seen on the city level. 8 SENATOR DEFRANCISCO: All right, but -- but 9 with respect to that type of situation, all I'm 10 suggesting is: Would you agree, that if it's 11 determined that the race is non-competitive, you got 12 all of these form they got to fill out, and then 13 somebody makes a determination, that there's really 14 no reason for public money to be spent? 15 AMY M. LOPREST: Well, because they have an 16 opponent, and the -- I mean, the public money, this 17 is, you know, for the candidate to decide. 18 I mean, it's, you know, really up to the 19 candidate. 20 SENATOR DEFRANCISCO: So the candidate 21 decides if he wants public money or not. 22 And even it's a non-competitive race, he gets 23 at least a 25 percent match. 24 Is that what you're saying? 25 AMY M. LOPREST: Yes. 1 SENATOR DEFRANCISCO: Now, Mr.... 2 "Mastri," was it? 3 (Numerous people respond, "Mastro.") 4 SENATOR DEFRANCISCO: ...Mastro suggested 5 that he thought would be a good change in this whole 6 system would be, that candidates have to have more 7 skin in the game than the public does, and that 8 there should be a cap on public funds. 9 Based on your experience, what do you think 10 of that suggestion? 11 AMY M. LOPREST: I mean, there is a cap on 12 public funds. It's capped at 55 percent of the 13 spending limit. 14 That was a determination made by the -- it's 15 in the law made by the city council. 16 So, I mean, I think that you could have a 17 lower limit. 18 There has been a lower cap on public funds in 19 the history of the program. 20 In the beginning years of the program, the 21 cap for city council was lower than that. 22 So, I mean, and you could have a lower cap. 23 SENATOR DEFRANCISCO: Okay. 24 As far as the -- he mentioned something about 25 the law changing recently in New York City, where 1 certain disclosure was exempt. It included 2 corporations and LLCs. 3 Does that include unions as well? 4 AMY M. LOPREST: What he was talking about 5 is, in -- last year, the board passed, for the first 6 time, in -- rules requiring the disclosure of 7 independent expenditures. 8 And the board's rules covered all 9 independent-expenditure communication. 10 So -- and that law that he was speaking of, 11 was a law passed by the city council recently, that 12 exempted from that disclosure requirement, 13 communications between a member organization and its 14 members. 15 So, a union and its union members, a 16 corporation and its shareholders, those are now 17 exempt from disclosure. 18 SENATOR DEFRANCISCO: Now, earlier, and I 19 can't remember the exact question, but, you talked 20 about, there's a bar on certain corporate donations 21 and LLCs. 22 Do you remember that? 23 AMY M. LOPREST: That is correct. 24 SENATOR DEFRANCISCO: Would you explain that 25 to me? 1 AMY M. LOPREST: The law prohibits 2 corporations, LLCs, and partnerships from giving 3 contributions to candidates in the New York City 4 program. 5 SENATOR DEFRANCISCO: Does it prevent unions 6 from giving contributions? 7 AMY M. LOPREST: No, it doesn't. 8 SENATOR DEFRANCISCO: Why not? 9 AMY M. LOPREST: Well, the board has made a 10 long-term -- I mean, over the course of its history, 11 a recommendation to bar all organizational 12 contributions. 13 It's up to the city council to pass that law. 14 SENATOR DEFRANCISCO: So this is a decision 15 made by the city council? 16 AMY M. LOPREST: That's correct. 17 SENATOR DEFRANCISCO: And do you know how 18 many members of the city council there are? 19 AMY M. LOPREST: Fifty-one. 20 SENATOR DEFRANCISCO: Do you know how many 21 are Republican? 22 AMY M. LOPREST: Four. 23 SENATOR DEFRANCISCO: Now, as far as the -- 24 did you say the City allows, the campaign finance 25 allows, housekeeping accounts? 1 AMY M. LOPREST: No. 2 The board made a recommendation in the course 3 of a determination in an enforcement action, that 4 they recommended the State eliminate all 5 housekeeping accounts because of the potential for 6 abuse. 7 SENATOR DEFRANCISCO: Okay, but under your 8 system in New York City, there's no -- housekeeping 9 accounts are not allowed? 10 AMY M. LOPREST: Well, because we regulate 11 the candidates, we don't regulate parties, so it's 12 not -- it's kind of an apples-and-oranges 13 comparison. 14 SENATOR DEFRANCISCO: All right, so, I have 15 $10,000 that I want to give to the Democrat party. 16 Are there any limits on how much of that -- 17 And I really want it to go to 18 Senator Tkaczyk, because I think she's the best. 19 SENATOR TKACZYK: Thanks. 20 SENATOR DEFRANCISCO: -- and under those 21 circumstances -- 22 SENATOR KRUEGER: No, she's not from 23 New York City. 24 You have to pick me. 25 [Laughter.] 1 SENATOR DEFRANCISCO: Well, she's the best. 2 But I'll pick you -- oh, you don't need the 3 money. 4 You don't need the money. 5 [Laughter.] 6 SENATOR DEFRANCISCO: It's Senator Tkaczyk, 7 or whomever, and, is there anything preventing the 8 Republican -- the Democratic party, under the 9 circumstances, just to spend 10,000 directly on her 10 campaign? 11 AMY M. LOPREST: Political parties, you need 12 everyone -- all political committees are limited to 13 the same contribution limits as everyone. 14 So, they -- the limit is 49 -- $4,950 -- 15 SENATOR DEFRANCISCO: Okay. Is there -- 16 AMY M. LOPREST: -- citywide -- for a 17 citywide campaign. 18 For a city-council campaign, it's less. 19 SENATOR DEFRANCISCO: All right, so I get 20 $10,000, and I send it to the local union who 21 supports a candidate. 22 Is there anything preventing that union -- 23 because they get individual donations from all of 24 their members, they can have thousands of members. 25 Anything prohibiting that union to -- 1 Instead of using that ten grand, use -- 2 account for it as a portion of each of the dues that 3 each of those union members pay, and direct that 4 $10,000 in that fashion. 5 Anything prohibiting that? 6 AMY M. LOPREST: Unions, as a whole, as a 7 union entity, are only allowed to give direct 8 contributions, or make in-kind contributions of 9 goods and services, of the contribution limits. 10 So, they wouldn't be able to do that either. 11 SENATOR DEFRANCISCO: Okay, fair enough. 12 And the last point, I just want to get these 13 numbers straight: 14 27.4 million of public funds was used in, 15 what year? 16 AMY M. LOPREST: For the 2009 elections. 17 SENATOR DEFRANCISCO: Do you have anymore 18 updated on future elect -- '10? '11? '12? 19 AMY M. LOPREST: Well, we only have elections 20 every four years. 21 SENATOR DEFRANCISCO: Oh, okay. I'm sorry. 22 And, then, 10 million to run the office. 23 That includes the salaries of all employee, 24 including auditors, investigators, everybody else? 25 AMY M. LOPREST: That's correct. 1 SENATOR DEFRANCISCO: Office space, whatever, 2 stamps? 3 AMY M. LOPREST: Yes. 4 SENATOR DEFRANCISCO: Everything? 5 AMY M. LOPREST: Yes. 6 SENATOR DEFRANCISCO: And, then, does that 7 include the mailing that you just referred to? 8 AMY M. LOPREST: No, it doesn't. 9 SENATOR DEFRANCISCO: Okay, how much is the 10 mailing? 11 AMY M. LOPREST: To print and mail the voter 12 guide, and to translate it into the required 13 languages that we're required to translate it into, 14 costs about $6 million for the -- that includes 15 mailing it once for the primary, and once again for 16 the general election. 17 SENATOR DEFRANCISCO: Okay, so it's 18 6 million. 19 Other than those actual expenditures that you 20 just mentioned, are there others than that? 21 Are you paid for, to do anything, as far as 22 the voting inspectors, or anything like that? 23 Do you do anything else? 24 AMY M. LOPREST: I mean, well, part of our -- 25 I mean, it's included in that staff cost, but, I 1 mean, part of our mandate is to run voter-education 2 programs. 3 So, we do run voter-education programs. 4 We run a debate program for citywide office 5 holders. 6 But all of that is included in -- 7 SENATOR DEFRANCISCO: Included in the ten. 8 Thank you very much. 9 SENATOR O'MARA: Senator Tkaczyk has a 10 follow-up. 11 SENATOR TKACZYK: I have a follow-up 12 question. 13 When you get us some more information about 14 the fines, could you be -- would you be telling us 15 how much in the last -- in the 2009 election was 16 collected in fines, that went to the public fund? 17 AMY M. LOPREST: Yes, we can tell you the 18 amount of fines, and the amount of public funds that 19 was recovered. 20 SENATOR TKACZYK: Great. 21 And the last question I have is, getting back 22 to the enforcement, I'm just trying to get a sense 23 of: 24 How many cases do you have, per auditor? 25 For example, if you have, half your staff is 1 forty-five, and they're working on the candidates, 2 how many, like, would you assign, per auditor, to be 3 reviewing? 4 I'm trying to get a sense of their workload. 5 AMY M. LOPREST: I guess it depends, because 6 we make the assignments, because some campaigns are 7 larger than others. 8 So, I mean, if you did a rough estimate: 9 There was about 230 candidates. 10 There are about 20 auditor -- you know, 11 people who are doing the original auditing work; and 12 then there are the people who do the enforcement 13 work. 14 So, you know, about ten per person, but, of 15 course, the audit of a citywide campaign is more 16 complex than the audit of a small city-council 17 campaign. 18 So, you know, it's not a perfect thing. 19 SENATOR TKACZYK: Okay, so for city-council 20 campaigns, it's about how many per auditor, would 21 you -- 22 AMY M. LOPREST: I would say -- you know, I 23 mean, I think it's a good average to say, that each 24 auditor does about, you know, 10 to 15 -- you know, 25 is working on 10 to 15 campaigns. 1 SENATOR TKACZYK: Okay. Thank you very much. 2 SENATOR NOZZOLIO: Tom? 3 SENATOR O'MARA: Senator Nozzolio. 4 SENATOR NOZZOLIO: Thank you, Mr. Chairman. 5 Just a follow-up on Senator DeFrancisco's 6 questions about the budget: 7 You said, Ms. Loprest, $10 million for 8 administrative, another 6 million for the mandates 9 you have to communicate with the public. 10 That's 16 million. 11 Is that over a four-year cycle? 12 AMY M. LOPREST: That's for -- so the 13 administrative costs are per year, because we don't 14 lose the whole staff, because they're also doing the 15 auditing, and preparing for the next election. 16 But those -- the -- we only send the voter 17 guide for citywide elections, or special elections 18 that are held on the date of an election. 19 So we send -- and we -- the public fund is, 20 obviously, only once every four years. 21 SENATOR NOZZOLIO: So, it's $10 million a 22 year, for four years. 23 So it's $40 million a year, to spend 24 $25 million -- $45 million is -- excuse me, 25 $40 million a cycle, to spend $25 million to 1 distribute and oversee. 2 And I -- I can understand, it being public 3 money, why that's required; however, we want to get 4 an adequate assessment of the scope of the expense. 5 For just the city alone, we're talking 6 $40 million a cycle, to administer. 7 And I still -- I started questioning you 8 about this earlier, Senator DeFrancisco's points 9 expound on how a tremendous burden you have, to 10 analyze the competitive nature of a race. 11 To me, that is far beyond the scope of any 12 government agency. 13 To -- they pay the press to do that. They 14 pay the pundits to do that. 15 Now, the taxpayers are paying you to do that, 16 to determine the scope, and nature, and competitive 17 nature of a race -- of an election race. 18 To me, that seems extremely outside the scope 19 of what government should be required to analyze. 20 And, that's the mandate, your statute; I 21 understand that. It's not your idea. 22 It's, the statutes dictates. 23 But it's just, in terms of the money, we're 24 talking $40 million a cycle, to distribute about 25 $25 million a campaign, with another 12 million on 1 top -- or, 6 million on top of that, for the other 2 responsibilities you have for communications? 3 AMY M. LOPREST: Yes. 4 And -- but I would make this point, is that, 5 you know, the work of that audit does -- you know, 6 saves almost as much as it costs. 7 I mean, conscientious auditing before the 8 2009 election probably saved the taxpayers about 9 $7 million in public funds. 10 So -- you know, so it is -- the auditing 11 costs, you know, saves as much as it costs by doing 12 careful auditing. 13 SENATOR NOZZOLIO: Thank you very much. 14 SENATOR MARCHIONE: Tom? Mr. Chairman? 15 SENATOR O'MARA: Senator Marchione. 16 SENATOR MARCHIONE: Just one follow-up 17 question: 18 How do you determine who gets audited first? 19 How do you determine the auditing schedule of 20 who gets done -- who you audit first? 21 AMY M. LOPREST: Well, we start auditing the 22 candidates who -- asking for documents for 23 candidates who lose the primary, first. 24 And -- and then we ask for the documents for 25 the rest of the candidates who -- you know, who are 1 in the general election, after that. 2 So we start, you know, the people who lose 3 the primaries, first. But, then, there is a timing 4 mechanism in the law, requiring the audits to be 5 done on a particular schedule. You know, less time 6 to do city-council audits than citywide audits. 7 So there's a timing schedule for audits in 8 the law -- set in the law. 9 But the reason it takes longer, is because of 10 extensions requested by the candidates themselves. 11 SENATOR MARCHIONE: Now, why would it be more 12 important to audit someone who has lost in 13 comparison to auditing the person who won, since 14 that's the person who really is going to go on and 15 represent you? 16 AMY M. LOPREST: Oh, it's just -- I mean, 17 it's just when we start. 18 I mean, probably the audits -- if you look at 19 the schedule, the audits of people who won are 20 probably done on a faster level. 21 But it's, just, so we -- because we can start 22 those people's audits, because they're elect -- 23 their campaign is over first. 24 That's just the starting point. 25 SENATOR MARCHIONE: So you choose by 1 district -- by position. 2 It's selected -- audits are selected by the 3 position. 4 So it's is written in the guidelines, that 5 you audit by a certain position, a certain election, 6 first? 7 AMY M. LOPREST: Basically, the law gives 8 deadlines for completing the audits. 9 And the deadlines are shorter for 10 city-council candidates than they are for citywide 11 candidates, given the understanding that the 12 citywide candidates' audits might be more 13 complicated, because their campaigns are more 14 complicated. 15 And, so -- so that's -- I mean, that was my 16 point. 17 It's not that those were necessarily done. 18 We really do work on all the audits as they 19 are -- you know, as their -- as their responses to 20 our requests for documents come in, and as the 21 responses to their audit, when they are sent the 22 draft, come in. 23 SENATOR MARCHIONE: So you work on them all 24 at the same time? 25 AMY M. LOPREST: I mean, we're working -- you 1 know, because they -- you know, if somebody's 2 workload will have some people who's already sent in 3 a response, and somebody else has sent a response 4 so, you know, it depends on, really, the candidate's 5 responses. 6 SENATOR MARCHIONE: But you start them all at 7 the same time? 8 AMY M. LOPREST: Yeah, we -- 9 SENATOR MARCHIONE: You really do them all at 10 the same time? 11 AMY M. LOPREST: Yes. 12 SENATOR MARCHIONE: You divvy out all of the 13 audits to all of your folks on one day, when you're 14 done? 15 AMY M. LOPREST: Yeah, and it's not -- yeah, 16 I mean, it's not like we consciously say, Okay, 17 these 12 people will be first, these 12 people will 18 be last. 19 It's, they all start at the same time. 20 And, really, the timing often depends on 21 the -- the completion timing depends on the 22 candidates' responsiveness. 23 SENATOR MARCHIONE: If a candidate doesn't 24 respond, how do you get them to respond quicker? 25 AMY M. LOPREST: The law allows for the 1 imposition of a penalty, of up the 10 percent of the 2 public funds that they received. And being faced 3 with that penalty often gets people to respond. 4 SENATOR MARCHIONE: May I ask if the 5 10 people that you're not finished being audited 6 from 2009 have received a penalty? 7 AMY M. LOPREST: They will -- some of them 8 will receive a penalty when their audits are 9 completed. 10 We assess the penalties all at once. 11 SENATOR MARCHIONE: But only some? 12 I mean, it's five years? 13 AMY M. LOPREST: I guess, because I just 14 don't -- I don't know the circumstances. That's why 15 I said, "some." 16 I mean, I don't know the circumstances of 17 every one of those cases. 18 That's -- that was the main reason. 19 SENATOR MARCHIONE: Thank you. 20 SENATOR O'MARA: Thank you very much. 21 AMY M. LOPREST: Thank you. 22 SENATOR O'MARA: Next we have some 23 representatives from the New York State Board of 24 Elections: 25 Todd Valentine, co-executive director; 1 Robert Brehm, co-executive director; 2 And, William McCann, Jr., special deputy 3 counsel. 4 Good afternoon. Thank you for coming today. 5 TODD VALENTINE: Good afternoon. Thank you 6 for having us. 7 And may it please the Committee: 8 My name is Todd Valentine. I'm one of the 9 co-executive directors for the New York State Board 10 of Elections; 11 And alongside me is Co-Executive Director 12 Robert Brehm, and, William McCann, the deputy 13 enforcement counsel, for the state board. 14 We're here today to provide information about 15 the work that the enforcement unit of the state 16 board currently does, and an analysis on the impact 17 that a taxpayer-funded campaign financing program 18 would have. 19 And at this point, I would like to turn it 20 over to Mr. Brehm, and then to Mr. McCann, to do 21 a -- 22 SENATOR TKACZYK: Do you have written 23 testimony? 24 ROBERT A. BREHM: We brought it with us, yes. 25 TODD VALENTINE: Yes, we previously submitted 1 the testimony that we had. 2 ROBERT A. BREHM: By way of a background: 3 In 2005, the State Legislature mandated an 4 extensive expansion of the electronic campaign 5 finance disclosure program throughout New York 6 State, basically, requiring any local committee that 7 expects to raise or spend more than $1,000 in a 8 cycle to register with the State Board of Elections 9 as a committee, and to file their reports 10 electronically. 11 That's in addition to the state-level filers, 12 all the local filers. 13 That effort amounted to an increase in the 14 number of registered committees that file with our 15 office, of approximately 650 percent. 16 During that same period of time, although 17 there were additional resources appropriated for 18 that purpose in 2006, those monies were eventually 19 reduced, approximately 30 percent, as the state 20 faced a number of fiscal crises, as you all are 21 aware of. 22 For a quick idea: 23 In 2005, the state-level filers that 24 registered with our office was approximately 25 1500 committees. 1 Presently, at the end of the last year, I 2 will say, there were approximately 12,500 committees 3 that we were responsible for administering. 4 So it's a significant increase in the number 5 of committees that we see activity. 6 Also, I think it's important to highlight, 7 different than the state level, the local-level 8 committees that register with us, the overwhelming 9 majority of those treasurers are volunteers, who are 10 trying to perform what I consider a public service, 11 for what turns out to be a friend who's running for 12 office, and, most of whom don't win that office in 13 that cycle. 14 So, where we were used to seeing a pretty 15 steady flow of people, we see a cycle every year of 16 a large number of treasurers coming into the system, 17 registering a committee. 18 That is the election cycle. 19 They go away, and the next year, a whole new 20 crop of people come along. 21 It's not a four-year cycle of one group that 22 we have four years to work through. 23 It's, every year, is a whole new crop of 24 people, in addition to a large number of carryover, 25 from year to year. 1 As an idea of the workload that we have: 2 The staff responded, in 2012, to over 3 13,000 phone calls to our call center -- campaign 4 finance call center, not the other work that the 5 agency also is responsible for, registering 6 1,916 new committees, terminating 1,660 other 7 committees. 8 Also, last year alone, we had almost 9 30,000 individual campaign finance reports that were 10 filed with our office. 11 And, largely, the number of people who go to 12 the website and look up that information, and it's 13 is used by any number of groups of people, including 14 the group that was quoted earlier today. 15 That information is readily available the day 16 it comes in, and it's widely viewed by people in all 17 walks of life, and it's widely relied upon. 18 The enforcement activity undertaken during 19 that six-year cycle, from 2007 to 2012, we had 20 632 complaints received. 704 of those complaints 21 were processed to a final decision by the board. 22 Number is off a little bit because there were 23 some that were carried over from a previous year. 24 Many of those complaints are closed without 25 requiring formal investigation by the board, mostly 1 because, we either prove it to be unsubstantiated 2 during that initial review; 3 Or, the complainant does not actually allege 4 a violation of the election law, which is our 5 jurisdiction. We don't have jurisdiction for 6 something outside of the election law; 7 Or, that the violation may involve technical 8 violations, but they're minor in nature, and working 9 with our team of people, educating the treasurers is 10 what's required. They file an amendment that would 11 rectify that minor technical deficiency. 12 As to referrals to the district attorney, 13 there were 277 corporate over-contribution referrals 14 made during that six-year period, along with 15 1,120 non-filed referrals by the board. 16 Further enforcement action taken resulted in 17 obtaining 4,425 judgments for people who failed to 18 file a campaign finance report. 19 And I think if you look at that period of 20 time on a yearly basis, the number of registered 21 committees, and the number of committees that failed 22 to file a report, the majority of the committees, 23 and the treasurers, are filing the reports. 24 It's, on average, about 2 percent are the bad 25 apples; the people who do not file the reports. 1 We also are required to provide education and 2 training, so we have a team of three people, in an 3 education unit. 4 During that six-year period, we held 5 127 training sessions, in 44 counties, and including 6 New York City, training over 3,600 attendees. 7 Also, a more recent change in the statute, 8 was in the ethics reform law. There were two 9 provisions: 10 A person who failed to file three campaign 11 reports during a single election cycle could face an 12 additional penalty of up to $10,000 for failure to 13 file. 14 We're in the first phase of -- this is the 15 first time that we can enforce for that, because of 16 the cycle, from the time the law became effective, 17 until now. And we're in the first phase of that 18 enforcement. 19 Also, that law required us to bring a fine of 20 up to $10,000 for persons who received an 21 over-contribution, so that review is undergoing. 22 I think it's important to point out, of the 23 people at the state board, there are 18 positions 24 within our enforcement unit. 25 For those 12,500 committees, 18 total. 1 I think the previous speaker had, I believe, 2 17 auditors alone, for their group of people. 3 So, we have almost as many total people as 4 they have auditors, and we have a larger group of 5 people that require our attention. 6 The administration implementation of the law 7 provides an interesting comparison. 8 Over our budget, we have approximately 9 $1 million, of staff, is the enforcement unit, as 10 compared to the previous speaker. 11 Also, if you compare the Federal Election 12 Commission, they have 375 full-time employees to 13 administer 14,000 -- just shy of 14,500 registered 14 committees, and their budget is about $70 million. 15 The New York City campaign finance group you 16 just heard from has a staff of 89, and they 17 administer, presently, 560 registered committees; 18 the candidates and the PACs that register with them. 19 So if you look at the staffing levels, and I 20 heard that was one of the earlier questions, each 21 New York City campaign finance staff administers, 22 roughly, 6 filers. 23 The Federal Election Committee staff 24 administers, roughly, 39 filers. 25 Our staff, and not all of the staff do it in 1 each of these agencies, but, our staff administers 2 694 filers. 3 It's a tremendous unmet burden. 4 And then just one other unmet burden that we 5 have, and I'm not a technical person, so I'll just 6 say it in a way that most people understand: 7 The statewide campaign finance system was 8 built in 1994. It's that old. 9 It needs help. 10 We have looked, and we are working with the 11 internal resources that we have, of bringing that 12 into the current age, to make it more modern, to 13 make it easier for filers, to make it easier for 14 people to look at the system, to make sure that it 15 meets all of what it needs to meet. 16 But it's a daunting task with the resources 17 we have to accomplish that. 18 Bill is next. 19 WILLIAM J. MCCANN, JR.: Thank you, Bob. 20 I think it's critical today to take the 21 opportunity to speak to the board of elections and 22 its enforcement endeavors, because I want to state, 23 that contrary to popular opinion, the board of 24 elections actually does a lot of enforcement, but, 25 regrettably, it has limited resources. 1 I can say that, our staff, and I would like 2 to just take a moment to talk about our staff, we 3 have eighteen of the most dedicated people you'll 4 meet. 5 When you have 3 people, on average, answering 6 over 13,000 telephone calls in a year, where the 7 public is calling for assistance, on dealing with 8 the laws and compliance, and how to file reports, 9 under limited time frames, I can say, as a treasurer 10 myself -- 11 I served as a treasurer when I got of law 12 school, for a friend of mine who ran for judge, and 13 he asked me to be his treasurer. And that was my 14 first real experience with campaign finance. 15 -- I can tell you, in many ways, it's a 16 thankless job, but it's a critical job. 17 And the vast majority of people who serve as 18 treasurers for political committees are work-a-day 19 people. They have a spouse or a loved one who's 20 running, or, they're helping out a local civic group 21 that they're volunteering for. 22 These aren't certified public accountants. 23 These are people who work for a living, they 24 work every day, hard. They try to comply as best 25 they can. 1 You know, it's easy to hit a button and say, 2 there's an inordinate amount of violations, but 3 let's look at some of those statistics. 4 You know, when you hit a button, and you say 5 that, in 2008 alone, there were 6,711 unpunished 6 violations of the election law, and then you look at 7 those statistics, and you say, there was 8 5300-and-change that didn't have a complete address, 9 well, in 2008 alone, there were over 10 23,000 individual campaign finance disclosures filed 11 with the New York State Board of Elections by 12 work-a-day people. 13 When you look at the, literally, hundreds of 14 thousands -- 15 And, even recently, the Governor announced 16 that there was over 7 million campaign finance 17 records newly disclosed to the public. 18 -- when you look at the literal number of 19 filings, and the literal number of data that are on 20 those reports, to say, in one fell swoop, that 21 everyday work-a-day people are somehow involved in a 22 criminal endeavor because they failed to put a 23 complete address, I think does a disservice to the 24 people who perform those functions. 25 So, for someone to say, clearly, it is not an 1 issue of, "would we do to the work?" when we have 2 12,000-plus filers, those are people that have to be 3 serviced by a group of 18 people. 4 And I don't think people understand that. 5 Let's assume, for argument sake, we hit a 6 button and we print out a thing, and we're gonna 7 send all the filers a letter, saying they have 8 missing data, we'd delightfully do that. 9 But when you make the decision, with limited 10 resources, to do that communication, now all those 11 people that who the letter from the board of 12 elections need to be serviced. 13 They're going to call the board of elections. 14 They're need someone to hold their hand. 15 If their data is missing, they need to go and 16 talk to someone in our IT unit. 17 We have two people in our IT unit who can 18 facilitate servicing those people, to amend their 19 reports. 20 Again, when someone says, "We have a number 21 of corporations that have potentially violated," 22 it's easy to say that there's potential corporate 23 violaters. 24 But our research has shown, through a lot of 25 work, that percentages of corporates who violate the 1 statute is very minimal; but, yet, we do a lot of 2 work on that very particular issue. 3 Our work is very comprehensive. 4 Our audit staff of four auditors, they have 5 to, again, what's critical to note, is that this 6 research is done based upon what filers tell them. 7 So by way of example, if you do a 8 conglomeration of data, and you're looking at X, Y, 9 Z -- well, let's take Pepsi-Cola. 10 There's Pepsi-Cola Corporation, Pepsi-Cola 11 Allied Bottling, Pepsi-Cola this, Pepsi-Cola that. 12 If John Doe's treasurer gets a filing, and he 13 gets the check, and it says, "Pepsi-Cola," he brings 14 "Pepsi-Cola." 15 Well, is it Pepsi-Cola A; is it Pepsi-Cola B? 16 Our auditors have to take all that data, 17 amass it, review it, and determine whether or not 18 you, in fact, have corporate over-contributing. 19 So, for instance, in your materials you'll 20 see, by way of example, we talk about the process 21 for corporate over-contribution reviews, and we use 22 that for 2011. 23 So there's a data review, there's a 24 correspondence and follow-up, there's a board 25 review, and then, ultimately, there are 1 district attorney referrals. 2 The board of elections refers people for 3 prosecution. 4 Regrettably, nothing happens with those 5 referrals. 6 So specifically to 2011, auditors amassed 7 this data from all the filers in our system, and 8 they reviewed 324 entities which were potentially 9 corporate over-contributors. 10 So they did a mass data load, they looked at 11 it, they said, Okay, let's see what this data tells 12 us. 13 When they did that initial review, 57 were 14 removed, as it was determined they weren't 15 corporations, because, again, we're doing this based 16 upon what people tell us. 17 People put things on the wrong schedules, 18 et cetera, et cetera. There's any number of errors 19 that may occur. 20 The remaining 267 corporations were audited 21 to determine if they over-contributed. 22 All of these corporations were issued 23 letters, for a response. And, subsequently, 24 158 came to compliance through mitigation. 25 Contrary to popular belief, when someone goes 1 and forms a corporation, the Department of State 2 doesn't give them a little book that says, Oh, by 3 the way, there's a $5,000 aggregate hard-money 4 contribution limit in the calendar year. 5 The vast majority of corporations are little 6 mom-and-pop corporations, doing their thing. 7 And, so, they don't know, necessarily, that 8 there's a $5,000 hard-money aggregate contribution 9 limit in the calendar year. 10 So, we asked them to mitigate. Seek refunds, 11 and prove that you, in fact, mitigated your old 12 contribution. 13 And 158 came into compliance through that. 14 Sixty-six more were removed, because it was 15 determined that they're either not corporate 16 entities, because they proved us to what they were, 17 or, there was misreporting of their contributions, 18 whether through housekeeping or some other fact. 19 And then, ultimately, 43 corporation were 20 referred to the appropriate district attorney for 21 prosecution, for violating the law. 22 Let's look at non-filers. 23 You know, someone stated recently that, you 24 know, enforcing by letter, that's really not the way 25 to go. 1 Well, we have a statutory mandate, that when 2 people fail to file, we need to notify them of their 3 obligation to file, and then there's a process in 4 place to deal with that. 5 There are late notices; 6 Then there's a lawsuit, which we bring by a 7 special proceeding, which is an order to show cause; 8 We then get a judgment, which is filed in the 9 Albany County Clerk's Office; 10 And then, subsequently, if they don't come 11 into compliance, we file the judgment in their home 12 county where they live. 13 Now, let's takes, as an illustration, 2012. 14 In 2012, which was a state-legislative year, 15 we issued late notices, 5,094 filers, 16 13,222 individual pieces of mail sent by certified 17 and first-class mail, to a combination of treasurers 18 and candidates. 19 Of that, we sued 1239 people, and we took 20 judgments for 654. 21 And since 2007, for a board of elections that 22 does no enforcement, we've referred 1120 individuals 23 to the Albany County District Attorney for 24 prosecution, to which nothing is done. 25 Now, when you speak to people about the 1 purpose of campaign finance, first, and foremost, 2 the purpose of campaign finance is to have an 3 informed electorate, to provide the public with 4 people, the information they need, to see who's 5 attempting to influence those elected officials, or 6 those who are seeking or holding an office. 7 And contrary to popular opinion, I think the 8 board of elections does an exceptional job providing 9 that information. 10 I think there's a couple of key distinctions 11 that were highlighted today from some of the 12 previous testimony, that I think it's critical for 13 people to understand. 14 Firstly, the information that's provided to 15 the New York State Board of Elections involves 16 private money, and not public money. 17 The board of elections would certainly agree, 18 that when it deals with public money, there has to 19 be a higher level of scrutiny relative to how that 20 money is raised and spent. 21 Now, when you look at the New York City 22 Campaign Finance Board, and their process, the 23 New York State Board of Elections has a long 24 involvement with the campaign finance board. 25 I can tell you, they're staff is terrific. 1 They're very accommodating. We work with 2 them on a daily basis, in responding to filers and 3 their issues. 4 However, we're talking about apples and 5 oranges. 6 Under New York City campaign finance laws, 7 when you apply for public money, and you submit your 8 reports, you are obligated to provide all the 9 supporting data, for all the money that you receive, 10 copies of checks, contributions, all your 11 expenditures, all the expenses, receipts, contracts, 12 et cetera. 13 That has to be taken in, it has to be 14 reviewed, and it has be determined whether or not 15 there's compliance. 16 I can tell you today, that the New York State 17 Board of Elections, with 18 people, doing what it 18 does right now, to accommodate 12,500-plus filers, 19 is simply not in a position to engage in a program 20 on that level. 21 And, so, I think it's critical to say, that 22 our folks, who, again, I think do a yeoman's job, to 23 respond to the public, to service the public, to 24 facilitate the disclosure of this information to the 25 public through our website, I think does a very good 1 job relative to that. 2 Mr. Brehm highlighted our staff. 3 We have five staff in our intake processing 4 unit. 5 Now, just by way of example, in 2012, we 6 registered almost 2,000 new committees, but what 7 does that mean? 8 That means, those are people who submit 9 registration documents, that have to be reviewed, 10 assessed, determine whether in compliance, all the 11 correspondence back and forth, dealing with those 12 people on the phone, et cetera, to get them into the 13 system. 14 We also processed over 1600 terminations. 15 Again, that's a whole nother process. 16 A lot of these processes, by the way, people 17 don't consider an audit or an investigation, but a 18 lot of the work that goes into that is very similar 19 to that type of thing: You're determining whether 20 or not someone is in compliance, you're trying to 21 get the public the accurate information, you're 22 trying to do the best you can with the limited 23 resources you have. 24 So when you process those things -- and, 25 plus, resignations and amendments, all those things 1 that go into the filing process, five people work on 2 that. 3 The State Board of Elections has 4 four auditors. 5 These are the auditors, again, to respond to 6 all the things that were criticized about, relative 7 to 12,500 filers. 8 We would love to have a bevy of auditors. We 9 would do all the work necessary to do that job. 10 But there's only, from a practical 11 standpoint, so much you can do with four auditors 12 relative 12,000-plus filers. It's just a matter of 13 numbers. 14 And we have no investigators; it's been 15 well-documented. 16 You can't read the newspaper without 17 determining that the New York State Board of 18 Elections doesn't have an investigator. 19 We understand, we don't have an investigator, 20 but it's not like we haven't asked. 21 And when necessary, we started to implement 22 seeking assistance from the New York State Police to 23 do those endeavors. 24 Our education, outreach, and training staff, 25 we have three. They're responsible for local 1 training. 2 We've greatly increased the amount of 3 education and outreach that we do through our staff 4 of three people. 5 We now have seminars throughout the state. 6 We've expanded that greatly. 7 We have training sessions with local boards 8 of elections, both individually, to seek compliance; 9 And as well as, some continuing 10 legal-education programs as well. 11 And then, as we mentioned, there's the issue 12 of our complaints and our enforcement. 13 Now, again, the number of complaints that we 14 get, to imply that there are high crimes and 15 misdemeanors being conducted, for complaints, this 16 is just simply not true. 17 The complaints run the gamut. 18 Many, many, many, the vast majority, deal 19 with campaign finance. 20 So, for instance, if someone says, "That my 21 opponent didn't file their July periodic on 22 July 15th," and they filed that complaint on 23 July 18th, well, if they filed it on July 21st, 24 we're not going make a federal case out of it. 25 But, again, those go into the tallies of the 1 numbers of complaints that we get. 2 And we have referred people, as we mentioned 3 today, but, again, our resources, in order to do 4 those, are very limited. 5 And so, frankly, with the resources that we 6 have, to do the legislative mandates that we have 7 relative to enforcement and compliance, for filing, 8 for the public disclosure, again, it is our position 9 that the State Board of Elections does a great deal 10 in that area. And if given the appropriate 11 resources, would certainly do our legislative 12 mandate to the best regard that we could. 13 On a side note, the issue was raised about 14 how much it might cost to administer a 15 public-financing program on a statewide level. 16 In your materials today, I prepared, just by 17 way of an example, what we might potentially 18 anticipate as the cost for an administrative 19 program. 20 As a caveat, we don't have an actual bill 21 that's been enacted, so we don't know the ultimate 22 end result of what that would be, so we don't know 23 the actual matching amount, the amount of public 24 funding allowable, donor restrictions, contribution 25 limits, et cetera. 1 So, all of these estimates could be larger or 2 smaller; it just depends on what the ultimate 3 program looks like. 4 SENATOR TKACZYK: Excuse me, Mr. McCann, what 5 page are you on? 6 WILLIAM J. MCCANN, JR.: This is on page 1 of 7 2. It goes right beyond -- it's the segment that's 8 called "New York City Campaign Finance Board 9 Administrative Report" -- oh, I'm sorry. 10 It's, "Testimony of William J. McCann, Deputy 11 of Enforcement Accounts." 12 So what I did was, to determine what it might 13 look, prospectively, on the administrative cost of 14 running a statewide program, with those caveats, was 15 that, ongoing administrative costs: 16 The New York City Campaign Finance Board, as 17 has been testified here today, has 59 offices, which 18 are comprised of 51 city-council positions, 19 5 borough-wide, and 3 citywide, which has a 20 recurring administration on a 4-year election cycle; 21 And in New York State, in comparable terms, 22 we have 217 offices. We have 150 members of the 23 State Assembly, 63 in the Senate, and 4 statewide; 24 And of those 217, we have 213, which is the 25 legislative bodies that run in a 2-year election 1 cycle, and then the 4 statewides run every 4 years. 2 Now, the New York City Campaign Finance Board 3 testified today that, on average, they're expense to 4 run the board, in essence, outside of the voter 5 guide, is roughly $10 million. 6 The information that we had, which was 7 reported, as you'll see -- 8 SENATOR NOZZOLIO: Per year. 9 WILLIAM J. MCCANN, JR.: -- correct, per 10 year. 11 SENATOR NOZZOLIO: Per year. 12 WILLIAM J. MCCANN, JR.: -- as we found in 13 the administrative report for the county, is 2008 14 and 2009, from the New York City Campaign Finance 15 Board, was they had listed, for Fiscal Year 2010, 16 which rose from '9 to '10: 17 Personnel services, which is staff, of 18 4.1-plus million; 19 Other than personal services, a little more 20 than 2 million; 21 For a subtotal of approximately $6.2 million. 22 And then the voter guide was reported that 23 year. 24 It brought their total, actual reported 25 expenditures, to over $12 million. 1 So, simply, in looking at the State Board of 2 Elections' budget for Fiscal Year 2012-2013, our 3 entire budget for the whole State Board of 4 Elections, is $5.3 million, approximately a million 5 of that goes to enforcement. 6 And so what I did was, I took a comparison of 7 programs by ratio. 8 The State Legislature to the city council, is 9 more than 4-to-1 in scope; 10 And the entire state program, compared to the 11 city program, is 3.67-to-1 in scope. 12 So simply taking the $6.2 million that was 13 reported in 2009 for the campaign finance board's 14 actual expenditures, by the ratio, it came out to 15 $22,750,000. 16 Now, again, this is by way of a snapshot. 17 If we were to implement a program statewide, 18 looking at the administrative costs, what we might 19 anticipate, this, also -- this is a one-year 20 snapshot. 21 We also have a two-year cycle for the 22 Legislature. 23 And then, as Mr. Brehm talked about 24 earlier, we have a huge shortfall in our 25 IT services. We need money for those programs. 1 The implementation and start-up costs for 2 this program, especially for IT, the hardware and 3 software, in order to have the necessary disclosure, 4 would be an additional cost as well. 5 So, again, this was a product that I 6 assembled myself. 7 And, again, based upon the information 8 reported by the 2009 campaign finance board, once 9 again, was a four-year cycle last [unintelligible]. 10 SENATOR O'MARA: All right, thank you. 11 Looks like Senator DeFrancisco has a 12 question? 13 SENATOR DEFRANCISCO: No, you just answered 14 it, about the costs. I was just trying to get a 15 comparison. 16 If we went statewide with this New York City 17 system, you just mentioned it. 18 I pass. 19 SENATOR NOZZOLIO: I'm not so sure I heard 20 that answer. 21 What is exactly the cost of start-up? 22 You didn't -- you kind of -- 23 WILLIAM J. MCCANN, JR.: Well, we have no 24 idea what the start-up would be. 25 I can only say that, right now, with our 1 campaign finance system at the state, which 2 Mr. Brehm testified it was created in 1994, we have 3 institutional needs that we know would be 4 significant. 5 In order -- 6 SENATOR NOZZOLIO: The board -- the City 7 Board of Elections has about 80 people. 8 You have, how many? 9 WILLIAM J. MCCANN, JR.: Well, the camp -- 10 they have, I think the testimony today was, roughly 11 90 people on the campaign finance board staff. 12 SENATOR NOZZOLIO: Thank you. 13 WILLIAM J. MCCANN, JR.: And then the 14 campaign finance enforcement with the state board, 15 we have 18 people. 16 SENATOR NOZZOLIO: You have 18, they have 90. 17 WILLIAM J. MCCANN, JR.: Correct. 18 SENATOR NOZZOLIO: So to get to a statewide 19 program, you'd have to have, what's your factor, and 20 how many people do you think you need? 21 WILLIAM J. MCCANN, JR.: Well, we did it 22 based upon a ratio of 3.67 for our complete program. 23 But, again, that's for admin costs. 24 Right now, the State Board for Campaign 25 Finance only has, roughly, a million dollars. 1 So -- 2 SENATOR NOZZOLIO: Senator DeFrancisco is 3 Chairman of the Finance Committee, but I don't think 4 he's gonna hold this number against you. 5 I think what we're trying to get is, to see, 6 from your professional assessment, the scope of this 7 cost. 8 And, we've got a lot of -- you threw a lot of 9 things in the air. 10 What's the bottom line? 11 Mr. McCann, what is the bottom line, in terms 12 of -- 13 WILLIAM J. MCCANN, JR.: Very conservatively, 14 and, again, we don't know the ultimate scope of the 15 program, but just on an admin cost, if you take 16 apples-to-apples, office-wide, where you're dealing 17 with 59, to 217, for the 2-year cycle, for 213 of 18 those, versus, the city council, if the report from 19 2009 from the City Campaign Finance Board was 20 $6 million-and-change, if you multiply that by a 21 factor of 3.67, which is the apples-to-apples 22 offices, it came to almost $23 million, 23 conservatively -- 24 SENATOR NOZZOLIO: I thought they said theirs 25 was 10 million a year for admin costs? 1 WILLIAM J. MCCANN, JR.: Well, again, I only 2 did it based upon what they -- 3 SENATOR NOZZOLIO: What they testified here 4 today, was that it was $10 million a year to 5 administer, and a four-year cycle, that's 6 $40 million. 7 WILLIAM J. MCCANN, JR.: Correct. 8 SENATOR NOZZOLIO: So, extrapolate. 9 WILLIAM J. MCCANN, JR.: Well, I guess the -- 10 taking the 3.67 percent -- or, 3.67-to-1 -- it would 11 be, 36 million-and-change? 12 SENATOR NOZZOLIO: Per year? 13 WILLIAM J. MCCANN, JR.: Per year. 14 SENATOR O'MARA: Senator Tkaczyk? 15 SENATOR TKACZYK: Thank you all for coming 16 here today, and sitting through the testimony. 17 It was very interesting. 18 I think the point you were trying to make is, 19 you also don't do what the New York City Campaign 20 Finance Board does. 21 You don't have the resources to do it. 22 They audit every filer, they audit every 23 committee. 24 Do you audit every committee now? 25 WILLIAM J. MCCANN, JR.: Well, we do 1 systematic audits, based upon our resources. 2 So, for instance, we try to do things that 3 allow to have some impact, because when you're 4 dealing with over 12,000 filers, how do you pick and 5 choose who you're gonna audit? 6 And so, for instance, we do negative-balance 7 audits, where we'll take -- or, you know, we'll have 8 the computer system generate a list, and we'll try 9 to see: Who has a negative balance? How can we 10 help them rectify that? 11 But, again, with four people, when you're 12 dealing with a lot of filers who might have these 13 problems, there's only so many you can accommodate 14 in a day. 15 But our auditors, because we know that 16 there's a high level of public scrutiny, for 17 instance, for the corporate-contribution review, 18 those four auditors are in the process of doing 2012 19 now, because you have to wait till the January 20 periodic comes in for 2013, to see the ultimate 21 scope of the disclosure. 22 But, again, they have to glean through a lot 23 of data. 24 So, for instance, you could hit a button that 25 says, Oh, there might be this many. 1 But that's not simple. 2 The board of elections has a higher 3 obligation, because if you're going to determine 4 that someone did some criminal violation, you have 5 to make that assessment first. 6 And since we're hostage to the data that we 7 get from the filers, we need to do that assessment 8 first. 9 So we have to glean the data, then review it, 10 determine whether we're really dealing with 11 corporations, correspond and communicate with them, 12 facilitate any mitigation, and then, ultimately, 13 refer. 14 And, again, over the last six years, we 15 referred 277 corporations to the district attorney 16 for prosecution. 17 So, again, we do as best we can, within our 18 abilities, our enforcement, to things that we can 19 apply. 20 SENATOR TKACZYK: And I appreciate that, 21 because as a new filer, you know, we want to make 22 sure we're doing it correctly. 23 And my treasurer, I know, is on the phone a 24 lot, because we want to make sure we're submitting 25 what you need. 1 And I'm am interested in, you know, pointing 2 out, that, New York City had, they said, 10 to 3 15 committees per auditor, or per staff person, to 4 monitor. 5 And you're saying, from what I'm am reading, 6 and what you're saying today, you have, like, 7 695 filers per current staff. 8 So, clearly, you're understaffed now, to do, 9 I think, an adequate job today. 10 And, you know, I think we have to take a 11 serious look at: Do you have the resources to do 12 the enforcement and oversight, that would help, you 13 know, make sure that we're giving the candidates the 14 support they need, to file accurately, and that the 15 public is getting a little more scrutiny than we are 16 now? 17 Because you just don't have the time, and 18 staffing. 19 WILLIAM J. MCCANN, JR.: Right, that's why 20 you have to do a practical application of what you 21 can do, as best you can. 22 You know, when you're dealing with this, you 23 know, 600 per auditor, you can't -- by its very 24 nature, it's an impossibility to do the level of 25 scrutiny that other people, frankly, hold us to, but 1 it's unrealistic to have that expectation. 2 SENATOR TKACZYK: Right. 3 ROBERT A. BREHM: There's one other that I 4 didn't cover, but it's in our written testimony. 5 Perhaps it's important. 6 I think, I know, it's important to point out: 7 Of the 18 positions we have, when we 8 developed the plan in 2006, to deal with the local 9 filers coming to the state board, we designed a 10 program for 36 staff members in that unit. 11 And on the last page of the joint testimony, 12 is a staffing chart that we put together. You know, 13 the intake clerks, the audit staff, the training 14 staff, the support staff. 15 We have 18 filled positions, we have 16 18 vacant positions. 17 Of the ten auditor positions, we have four; 18 Of the three investigators, we have zero; 19 Of the four trainers, we have three; 20 Of the intake staff, we have a vacancy of 21 five. 22 So we clearly have need for counsels, 23 auditors, intake clerks, phone clerks. 24 We've identified that information at the 25 appropriate time during budget. And, we live within 1 our appropriation -- 2 SENATOR TKACZYK: And the reason that they're 3 vacant -- 4 ROBERT A. BREHM: -- once that's made. 5 SENATOR TKACZYK: I'm sorry to interrupt you. 6 The reason that they're vacant, is because 7 you don't have the funding in your budget to fill 8 them; is that correct? 9 ROBERT A. BREHM: Well, during the fiscal 10 crisis, any of the empty positions were taken. 11 So, we faced that during the early phases of 12 the fiscal crisis, and we just have not gotten back 13 to the ability to refill them. 14 SENATOR TKACZYK: And you've been requesting 15 that you be able to fill those positions in your 16 quest of the -- 17 ROBERT A. BREHM: We submit a budget-side 18 letter yearly, that identifies what our unmet needs 19 are, both in the personnel and in the technology 20 arena. 21 We are starting with the new IT cluster group 22 that is consolidated information technology. 23 This is a priority that we have identified, 24 amongst a few others, as a number one priority that 25 must be met. 1 So, we're going through that process. 2 We hope there will be some additional 3 resources that come to make it a fruition, because 4 it needs to be improved whether or not this program 5 that you're proposing -- that you're researching is 6 even considered. 7 We need to do it now for the people who file 8 now. 9 SENATOR TKACZYK: Thank you. 10 I think we -- I would agree, we need to 11 improve what you're currently able to do, is going 12 to improve the campaign system we have now as well. 13 Thank you. 14 SENATOR O'MARA: Thank you all very much. 15 Dick Dadey? 16 DICK DADEY: I'm right here. 17 SENATOR O'MARA: It is quarter to three right 18 now. 19 We have -- we're going to have to take a 20 short break at three o'clock. 21 So, if we get started, Mr. Dadey, with your 22 testimony, hopefully, we can wrap that up, and maybe 23 we can get it all done by three? 24 We're going to take about a ten-minute break. 25 DICK DADEY: Okay. 1 SENATOR O'MARA: Proceed. 2 DICK DADEY: Good afternoon, Chairman, and 3 members of the State Elections Committee. 4 My name is Dick Dadey, and I'm the executive 5 director of Citizens Union, which is a 116-year-old 6 non-partisan, good-government group dedicated to 7 making democracy work for all New Yorkers. 8 We serve as a civic watchdog, combating 9 corruption, and fighting for political reform. 10 We work to ensure fair and open elections, 11 honest and efficient government, and a 12 civically-engaged public. 13 I commend you for holding this first hearing 14 in recent memory on the topic of campaign finance 15 reform, and believe it's prudent to examine any 16 public policy before its implementation. 17 Though not a cure-all, comprehensive campaign 18 finance reform is an essential and needed element of 19 any effective solution to political corruption. 20 The Legislature needs to act together, to end 21 the transactional culture in Albany that draws its 22 lifeblood from campaign cash. 23 Before turning to a review of the 24 New York City public-financing system, I would like 25 to reiterate our strong support for a comprehensive 1 approach to campaign finance reform, one that 2 includes public financing, among many other crucial 3 elements: 4 Specifically, we called for a comprehensive, 5 fair, and balanced approach that includes a 6 public-matching program, that encourages 7 participation by small donors, and reduces the 8 perceived or actual influence of large contributors 9 and all institutional donors on our politics; 10 Far lower level contribution limits that 11 reflect the maximum allowable contribution to 12 candidates running for the President of the 13 United States; 14 Three, significant limits on contributions to 15 party committees, and transfers of funds from 16 party-to-candidate committees; 17 A more autonomous enforcement entity that 18 operates independently of the State Board of 19 Elections; 20 Enhanced disclosure, in particular, for 21 independent expenditures; 22 And an end to pay-to-play, by limiting 23 contributions of those doing business with the 24 State. 25 I'm going skip through some of my testimony 1 here in the interest of time. 2 You know, we believe that there are many 3 important benefits and components of this program 4 we've just outlined, including the following: 5 Public-matching funds that increase voter 6 choice and competition, strong independent 7 enforcement, lower contribution limits, and 8 pay-to-play restrictions, and disclosure of 9 independent expenditures. 10 The City's public match is currently 6-to-1 11 for contributions up to $175. This public match, 12 however, is not provided for contributions for those 13 who do business with the City, and candidates who 14 lack public support cannot receive public funds, as 15 we've heard from earlier today. 16 Candidates who run unopposed do not receive 17 public funds, and the law gives the CFB the tools to 18 ensure that incumbents who face only nominal 19 opponents do not receive the full match. 20 These components have created a system that 21 allows for far greater voter choice and competition. 22 In a report that we issued in November, we 23 demonstrated the benefits of and the need for public 24 funding in New York State. 25 The report found that one in five 1 state-legislative races, in -- that one in five 2 state-legislative races, in New York City, for both 3 the primary and the general election, versus one in 4 ten for the city council. 5 This includes a stunning 71 percent of party 6 contests for state legislative -- State Legislature, 7 in New York City, are uncontested. 8 Council primaries, on the other hand, on 9 average, have doubled the number of candidates in 10 the state-legislative contests, in New York City, 11 and feature more candidates, even when only 12 considering races in which incumbents are seeking 13 reelection. 14 When primaries are held, voters choosing 15 candidates for city council also have more choice. 16 Council primaries are feature -- feature an 17 average of about four candidates, while the vast 18 majority of state-legislative primaries feature only 19 two. 20 A public funding -- a public-matching fund 21 does not mean incumbent legislators will face 22 electoral defeat. 23 The reelection rate for council incumbents is 24 93 percent, lower than the 97 percent for 25 state-legislative incumbents, in New York City. 1 We believe this is a result of, or is 2 contributed to by, the additional competition, and 3 the incentive to raise money from the community that 4 a public-matching program encourages. 5 A study by the non-partisan Campaign Finance 6 Institute estimated that a matching-fund system for 7 New York State offices, as currently constructed in 8 the Speaker's proposal, would cost about $40 million 9 per year; just more than $2 per person. 10 We also found that -- that the -- it was 11 peer-reviewed, and that it assumed every candidate 12 who ran in 2010 and 2012 doubled the number of his 13 or her donors, with each new donor giving $50 and 14 stimulating $300 in matching funds, rather than 15 assuming that every race for every office in the 16 state will have two candidates, and drawing the 17 maximum permissible amount of funds, as was the 18 methodology used in study by the Senate Republican 19 Conference. 20 It's noted by the Campaign Finance 21 Institute's Michael Malbin, a professor at 22 SUNY Albany, in the years between 2001 and 2009, 23 covering all of city elections, only 51 percent of 24 the candidates who participated in the voluntary 25 matching program raised enough in qualified 1 contributions to be eligible for the maximum public 2 match. 3 Earlier, you were asking questions about the 4 voter turnout between state-legislative races and 5 New York City. 6 In the last hour, my staff at Citizens Union 7 crunched numbers, and we found that, for -- in 8 New York City races, in the primaries, the turnout 9 for city council is 12.9 percent, voter turnout; 10 And for state-legislative contests, it's 11 10.3 percent. 12 So there's a higher level of turnout for 13 city-council competitive elections than there are 14 for state and legislative races in New York City. 15 We also believe strongly in independent 16 enforcement. 17 The campaign finance board's independent and 18 rigorous enforcement is an important component of 19 the public-program's matching success. 20 In sharp contest, enforcement at the state 21 level is sorely inadequate. 22 And Citizens Union released today, in a new 23 report, that campaign and other activities of 24 224 political clubs are devoid of public scrutiny, 25 because the clubs have failed to register as 1 political committees with the State Board of 2 Elections. 3 These clubs have failed to file as many as 4 2,318 campaign finance reports, which would have 5 been -- which would have detailed the 6 5,485 transactions totaling at least $2.27 million 7 since 2009, as discovered by Citizens Union. 8 For other violations of the election law, 9 between 2002 and 2011, 1,016 complaints were made to 10 the State Board of Elections beyond transgressions, 11 like failure to file or late filings. 12 In only 31 instances, or, 3 percent of the 13 complaints, did the state board conduct a full 14 investigation. 15 In six of those instances, one-half of 16 1 percent, referrals were made to a 17 district attorney. 18 The failure of the state board to 19 meaningfully investigate the lack of compliance of 20 these political clubs, as well as other serious 21 election-law violations, demonstrates the need for 22 greater resources and stronger enforcement. 23 We also want to take issue with the 24 2011 report by the Center for Competitive Politics, 25 that argues that the New York City public-matching 1 system has been rampant -- has seen rampant abuse of 2 public funds, and, corrupt practices. 3 As noted by the Brennan Center for Justice, 4 in an analysis, there are flaws in this study. 5 The 24 scandals that are supposed to be 6 evidence that the city system has not deterred 7 corruption, several cases have nothing to do with 8 public financing, including one state legislator who 9 never participated in the city system; 10 Half of the cases involved no wrongdoing. 11 They either describe activity that is legal and not 12 corrupt, or cite investigations that never found a 13 crime or a violation; 14 Lastly, there are a number of examples of 15 candidates attempting to violate the rules of the 16 city's public-funding program. 17 However, this last category demonstrates that 18 CFB effectively enforced the law, that candidates 19 were either fined or denied public funds. 20 Contribution limits: 21 Lower contribution limits are important, as 22 well as pay-to-play restrictions. 23 Contribution limits for the 2013 election 24 cycle in New York City -- in -- are -- excuse me, an 25 election cycle are much lower than the state limits 1 for all candidates. 2 In New York City, there are currently 3 2,750 for the city council, and 4,750 for citywide 4 candidates. 5 We also believe that contribution limits must 6 be lowered if we want to ensure that large 7 contributions do not have a corrupting or undue 8 influence on public-policy decisions made by most 9 law -- by lawmakers. 10 Currently, two -- only two of every thousand 11 New Yorkers even donate to campaigns, and of those 12 who do, 70 percent contribute $1,000 or more. 13 This creates the perception, if not the 14 reality, that lawmakers may feel the need to be more 15 responsive to a very small group of individuals who 16 generously fund their campaigns. 17 Also, we believe strongly in the disclosure 18 of independence expenditures. 19 As a result of New York City voters approving 20 a charter amendment in 2010, independent 21 expenditures, including expressed advocacy and 22 certain electionary communications, as well as 23 information about the independent spender, must now 24 be reported to the campaign finance board. 25 As stated previously, Citizens Union supports 1 lower contributions to party committees, and lower 2 limits on transfers from party committees to 3 candidate committees, but identifying the proper 4 limit is a delicate balance which must examine 5 unintended consequences, and depends on the degree 6 to which independent expenditures are regulated. 7 Each part of the campaign finance system does 8 not operate in isolation, rather, interrelates with 9 all other parts. 10 The more contribution limits are lowered, the 11 more likely campaign funds that once went candidates 12 and parties will float to individuals and entities 13 making independent expenditures. 14 For this reason, as part of comprehensive 15 campaign finance reform, Citizens Union recommends 16 the following: 17 Include as part of the disclosure of 18 independent expenditures, disclosure of bundlers of 19 intermediaries; 20 Require disclosure of original source of 21 income, to entities making independent expenditures; 22 Provide precise and clear criteria, to ensure 23 these expenditures are truly independent; 24 And consider board and/or member-shareholder 25 approval for entities contemplating independent 1 expenditures. 2 In closing, let me just talk about the 3 pervasive culture of corruption here in Albany. 4 Senator Robert Kennedy once said, 5 "That politics should be the honorable profession." 6 But we see the opposite in today's New York. 7 There are many good and very good legislators 8 representing well their constituency -- 9 constituents, and honorably serving the public 10 interest, but the inaction of good legislators to 11 prevent the reprehensible actions of the bad ones, 12 is unacceptable. 13 As of yesterday, and since the start of the 14 twenty-first century here in Albany, 21 legislators 15 have left office in disgrace, thrown out because of 16 ethical misconduct and political corruption. 17 Five more are now on track to join them, for 18 a total of twenty-six. 19 A rising crime wave of corruption has come to 20 define twenty-first-century Albany. 21 What began as a few bad apples has become a 22 bushel of bad apples, and may well lead to becoming 23 a barrel, possibly by week's end. 24 The rising number of your colleagues who are 25 corrupt taints those of you who do good, and 1 tarnishes our democracy. 2 In the face of this political crisis, what is 3 the Legislature going to do to fight this culture of 4 corruption? 5 I urge you not to ignore it. 6 To do so makes you culpable in perpetuating a 7 political system that responds to big money and 8 large institutional players. 9 Shaking their heads in disgust over one more 10 legislature getting arrested, New Yorkers want an 11 end to these shenanigans. 12 Comprehensive campaign finance reform, with 13 public financing and strong enforcement, is not the 14 silver bullet, but it is an essential element in 15 reforming how candidates get elected, that will 16 limit the influence of money, and help to restore 17 the confidence of the public, and how democracy 18 works in New York State. 19 Thank you. 20 SENATOR O'MARA: Thank you. 21 Now we do have to take a short break, 22 unfortunately. 23 DICK DADEY: Okay. 24 Do you want me to stay for questions? 25 SENATOR O'MARA: Yes. 1 We'll be back in, hopefully, 10, 15 minutes. 2 (A recess was taken.) 3 (The proceedings resumed, as follows:) 4 SENATOR O'MARA: That's an "Albany" 5 10 minutes; so, what, a half hour? 6 But, I appreciate -- 7 DICK DADEY: I've seen longer ten minutes. 8 SENATOR O'MARA: I appreciate your testimony, 9 Mr. Dadey, and for hanging in here throughout the 10 whole day, and appreciate your accommodating us with 11 your comments here. 12 And, we're just are going to wrap up with a 13 few questions. 14 DICK DADEY: Sure. 15 SENATOR O'MARA: Hopefully, not too painful 16 for any of us. 17 SENATOR TKACZYK: I do have a question. 18 SENATOR O'MARA: Senator Tkaczyk. 19 SENATOR TKACZYK: I wanted to point -- thank 20 you for being patient with us, by the way, for being 21 here. 22 One of the questions I had: 23 You -- in one part of your testimony, you 24 talk about strong independent enforcement. 25 And one of the points you make, is that the 1 New York City Campaign Finance Board has -- not only 2 has authority over all candidates, whether or not 3 they participate in the system, it also, 4 effectively, sets its own budget, ensuring its 5 independence. 6 Could you explain what you mean by, "it sets 7 its own budget"? 8 DICK DADEY: It makes a budget request, and 9 it does not -- it's not set according to a formula, 10 I believe. 11 Is that right? 12 I'm going to actually ask Eric for this. 13 The -- that makes a request, and then -- 14 Go ahead, if you don't mind? 15 ERIC FRIEDMAN: Just to clarify -- 16 SENATOR O'MARA: State your name. 17 ERIC FRIEDMAN: My name is Eric Friedman, 18 with the campaign finance program. 19 SENATOR O'MARA: Okay, thank you. 20 ERIC FRIEDMAN: So to clarify: Our budget 21 request is automatically included in the mayor's 22 executive budget that he presents to the council. 23 DICK DADEY: Right, so, it's not challenged. 24 SENATOR TKACZYK: Okay. 25 I think that's an important point. 1 DICK DADEY: Right. 2 SENATOR TKACZYK: We heard from the board of 3 elections for the state, and that they are really 4 hamstrung on their ability to adequately administer 5 the current system we have, because they don't get 6 the resources, and they end up with 18 vacances, and 7 the staff are really overburdened. 8 So, I wanted to also ask you: 9 You mentioned in the past three cycles, that 10 most of the penalties and repayments that came from 11 fines, that was returned to the campaign finance 12 board. 13 Do you know how much the board has collected 14 in fines -- 15 DICK DADEY: I don't. 16 SENATOR TKACZYK: -- in the last cycle? 17 Okay. 18 DICK DADEY: You know, one of the challenges 19 that the campaign finance board does face in 20 collecting those fines, is that, given a court 21 ruling back, I believe, in 2004, or '5, the 22 candidates are not liable, or the treasurers are not 23 liable, for the penalties, but only the campaigns 24 are, and so it makes it difficult for the campaign 25 finance board to levy and collect those fines and 1 penalties. 2 So, against that backdrop, that 75 percent 3 collection, essentially, results from their efforts, 4 is very significant, since they have no leverage but 5 for the fact that, if you run again, you are not 6 going to get public financing if you had not paid 7 any of the fines. 8 SENATOR TKACZYK: Do you think, because 9 you've looked at the city's system, that they have a 10 good system in place to catch corrupt -- corruption 11 and misabuse [sic] of the public-funds system? 12 DICK DADEY: Yes. 13 I mean, I laughed when I saw recently-charged 14 elected officials brag about what they were going to 15 be able to deliver, whether it was discretionary 16 items or access to the ballot. 17 And, the campaign finance board has a very 18 strong track record of being able to root out 19 corruption. 20 If you look at what happened with 21 City Comptroller John Liu, although the campaign 22 finance board may not be able to comment on it, 23 given the fact that they may be part of that 24 investigation, I surmise that some of the 25 information, or maybe the cause for the 1 investigation itself, may have started as a result 2 of their own investigation, and saw irregularities 3 that needed to be reviewed, and then they may have 4 turned it over for prosecution. 5 That's just speculation on my part. 6 But, if you also look at some of the other 7 candidates that they have fined, you know, 8 Miguel Martinez, who was a city councilmember, who 9 was caught. 10 Also, Sheldon Leffler, when he was running 11 for borough president of Queens, you know, he tried 12 to create these straw donors, and was caught. 13 You know, it's pretty shocking, that with the 14 level of enforcement, and the strength of its 15 enforcement, that candidates to this day still think 16 they can game the public-financing system, by 17 violating it. 18 There has been, you know, almost every time, 19 that we know of, when someone has done that, they 20 have been caught, either before or soon after; and 21 the monies to the public have been restored. 22 SENATOR TKACZYK: Thank you. 23 SENATOR DEFRANCISCO: So every time that they 24 got caught, you knew that they did it? 25 DICK DADEY: Say that again, Senator? 1 SENATOR DEFRANCISCO: I said, every time that 2 they -- I'll paraphrase. 3 Every time they got caught, you knew they did 4 it? 5 DICK DADEY: Well -- 6 SENATOR DEFRANCISCO: Instead of, we have no 7 idea how many people are doing it, and not getting 8 caught? 9 Isn't that -- 10 DICK DADEY: Well, the audits, you know, in 11 New York City, the campaign finance board is 12 criticized for its overly strong enforcement, and 13 review during the audit process. 14 And that's one of the, I think, contributing 15 factors for the length of the audits, is that they 16 are painstakingly particular in their evaluation, 17 and, you know, to the point of consternation of the 18 candidates. 19 And so, you know, every -- almost every 20 receipt, every expenditure, is reviewed thoroughly. 21 And, so, we don't see how someone can get 22 through the system with that kind of -- without 23 being caught. 24 And, so, there's that -- there's a great 25 sense of, you know, desire not to -- to violate. 1 And those that do violate, get caught. 2 SENATOR DEFRANCISCO: Let me ask you this: 3 There's been a lot of talk about the 4 legislators who have been charged, convicted; some 5 simply charged; and so forth. 6 Do you know any of those cases where, whether 7 they got financed publicly or privately mattered, as 8 far as the type of conduct that they're either 9 charged with or convicted of? 10 DICK DADEY: Well, I think it's -- you know, 11 instead of specifically focusing on whether it was, 12 you know, the public or private part of this, it's 13 really about the influence of money in our 14 elections, and the competitiveness for cash, and 15 the -- you know, the culture of raising money that 16 allows for people to chase money in a way that I 17 think is corrupting. 18 SENATOR DEFRANCISCO: Well, let me -- 19 everybody that was charged and convicted, from what 20 I know, unless you've got some other information, 21 weren't charged or convicted because -- at least as 22 far as the Legislature is concerned, because they 23 somehow violated some election law, and took -- took 24 campaign donations from -- that violated the 25 election law they were under. 1 The violations that I know of, were, once in 2 office, someone tries to pay you something for a 3 bribe, for preferential treatment, and so forth. 4 Tell me how the type of campaign financing 5 law, public or private, can eradicate that type of 6 conduct already -- while you're in office. 7 DICK DADEY: Well, I mean, John Liu was in 8 office, and his campaign was caught for, you know, 9 violating the campaign finance law in the city. 10 You know, Dan Halloran, a city councilmember, 11 was in office, and caught. You know -- well, that 12 was outside of the campaign finance. 13 SENATOR DEFRANCISCO: It's outside of 14 campaign. 15 Liu is about -- Liu. You may have some 16 others that have happened. 17 But what I'm talking about, we're the State 18 Legislature. Everybody is concerned about 19 corruption of those individuals charged and/or 20 convicted. 21 I'm trying to think of an example, where, it 22 didn't happen while already in office, after they 23 got elected, that the corruption took place. 24 And I can't see for the life of me, where, if 25 we go to public financing, then, all of a sudden, 1 candidate -- people who are in office are not going 2 to be susceptible to bribes, if you're a crook. 3 DICK DADEY: Right. 4 SENATOR DEFRANCISCO: Or to get preferential 5 treatment, if you're a crook. 6 It's not how you got there; it's who you are 7 when you get there. 8 And that's not the campaign finance system 9 that creates that corruption, is it? 10 DICK DADEY: Well, I mean, there have been 11 candidates running in New York City who were not 12 elected officials, who have been caught trying to 13 abuse the system. 14 And then there are, you know, elected 15 officials who are -- I mean, you look at 16 Malcolm Smith. He was using his position to gain 17 access to the ballot, in violation of, you know, the 18 election law. 19 So -- 20 SENATOR DEFRANCISCO: But he was -- well, I 21 better not say anything about that in -- primarily, 22 because it's still in the courts. 23 DICK DADEY: Right. 24 SENATOR DEFRANCISCO: But I guess -- 25 I think I've made my point; you've made your 1 point. 2 I just think that that's -- I think they're 3 two separate issues, to be very honest with you. 4 DICK DADEY: Okay. 5 SENATOR DEFRANCISCO: Okay. 6 SENATOR O'MARA: Mr. Dadey, with respect to 7 the fines and penalties that are levied by the 8 New York Finance Board, you say those are paid out 9 of the campaign committee's funds? 10 DICK DADEY: Yes, they're paid for -- 11 SENATOR O'MARA: The courts can't go back, 12 and you can't go after the candidate individually to 13 get that fine? 14 DICK DADEY: Correct, the courts ruled that. 15 It has to come out of their privately-raised 16 election funds. 17 SENATOR O'MARA: So, then, every penalty or 18 fine that's assessed or levied against a campaign 19 committee is, basically, paid with those public 20 dollars that were matched -- 21 DICK DADEY: No, the public dollars are 22 returned, and then the fines are actually levied 23 against the private funds that are raised by those 24 candidates. 25 SENATOR O'MARA: And the -- in the 2009 1 cycle, which was testified by Ms. Loprest earlier, 2 that in that four-year election cycle, those audits 3 are still not complete in all of those committees. 4 And that's disturbing to me, that we're 5 four years later, and approaching another election 6 primaries this September, and those are still not 7 done. 8 It seems like they've got a backlog. 9 Do you think that they need more help and 10 auditors to get these things done in a more timely 11 fashion? 12 DICK DADEY: Well, I mean, we share your 13 concern as to the lack of timeliness around some of 14 these audits. 15 I think it is largely owed to the 16 thoroughness of the campaign finance board's 17 efforts, as well as the delays that they encounter 18 in dealing with the candidates, and the candidates' 19 committees themselves. 20 I think that they want to be judicious, and 21 they want to be fair, and they want to give 22 opportunities to the candidates, to prove, or to 23 respond to their concerns; and, so, they are very 24 diligent. 25 We do -- you know, we've advocated that there 1 be a hard-and-fast -- Citizens Union has advocated 2 that there be a hard-and-fast deadline for the 3 completion of those audits, because we don't think 4 it serves the public interest, or helps the 5 candidates, to have it go on for much more beyond 6 those 18 months. 7 SENATOR O'MARA: And that kind of builds my 8 concern for this system at the state level, when 9 we're on a two-year cycle, with 213 seats up every 10 two years, and what the needs of the State Board of 11 Elections would be, to have to keep up with that, to 12 get those done in a timely fashion, and in an 13 appropriate fashion. 14 When, you know, you look, there was in the 15 2009 campaign, I think she testified that there was 16 a little over 200 candidates up in that election. 17 DICK DADEY: Uh-huh. 18 SENATOR O'MARA: And that those aren't 19 completed. 20 Those still aren't completed. 21 And that of those over 200 candidates that -- 22 she testified, that two-thirds of them were not 23 penalized or fined in any way, which means that 24 one-third of them -- one-third of all the candidates 25 had some sort of penalty or fine assessed to their 1 campaign. And, that's roughly 70 or so candidates 2 in that four-year cycle that have run awry of the 3 system. 4 And that, to me, seems to be a pretty high 5 percentage of individuals that are -- that are 6 some -- in some way, in varying degrees, obviously, 7 you know, running afoul of the campaign finance laws 8 in New York City. 9 DICK DADEY: Right. 10 I think the campaign finance board is 11 extremely aggressive in its enforcement of the law, 12 and in doing so, aggravates some of the candidates. 13 And some of the violations are very minor. 14 I'll take -- you know, I'll give you one 15 example. 16 When a candidate -- you know, you cannot 17 accept a contribution from a corporation or an LLC 18 or a partnership. 19 Sometimes contributions are unknowingly 20 accepted because of lack of clarity of the name on 21 the check, and they're deposited. 22 And then, all of a sudden, the treasurer 23 discovers, Oops, we should not have accepted that 24 check. 25 Actually, refunds the check to the donor, but 1 the campaign finance board turns around and then 2 fines the candidates's campaign for having accepted 3 the check, even though the check was returned. 4 And so that's a violation of the law, and 5 they're fined. 6 And, so, that just shows you how strong and 7 rigorous the enforcement is by the campaign finance 8 board. 9 And so a lot of candidates get tripped up by 10 those, you know, rather minor infractions, but that 11 are later -- are later then corrected. 12 SENATOR O'MARA: Also in your testimony, you 13 referenced the recent Quinnipiac poll, 87 percent of 14 voters believe that corruption in New York is a 15 serious problem. 16 And, obviously, with the media attention 17 we've had, there is issues that we are certainly 18 working at dealing with, in those instances. 19 I don't think that the public 20 taxpayer-financed campaigns is going to solve those 21 issues, as Senator DeFrancisco said -- stated. 22 But, in that same poll, the same respondents 23 said that 53 percent of them were opposed to public 24 financing of campaigns, with only 37 percent saying 25 they were in favor of that. 1 So, it seems to me that the taxpayers aren't 2 interested in having their tax dollars go to fund 3 these campaigns. 4 And even though you state it's $2 a person, 5 $2, on top of all the other taxes that we have in 6 this state, where we have to get to, what, the 7 middle of May for our "Tax Independence Day," or 8 whatever they call that, that that $2 does make a 9 difference in the grand scheme of things, and all of 10 these things that add up on your utility bills, and 11 you're filling your gas tank up, and the costs of 12 everyday living. 13 So I think that is a major concern, with the 14 overall cost of this system in our state budgets 15 that is, certainly, fiscally stressed at this point. 16 In the last several years, has been very 17 stressed. 18 DICK DADEY: In another poll, if I may, when 19 the voters were asked, "Would they support public 20 financing of elections that was accompanied by 21 strong enforcement, and included the closing of 22 various loopholes, and lowering the 23 campaign-contribution limits?" voter support for 24 publicly-funded campaigns increased dramatically to 25 over 60 percent. Close to 70 percent, if I remember 1 correctly. 2 I can get you those specific numbers, but it 3 was from a poll different than Quinnipiac. 4 So when you ask the broader question about 5 comprehensive campaign finance reform, and not just 6 spending taxpayer dollars on publicly-funded 7 elections, as the Quinnipiac poll did, you see voter 8 support increase to, you know, two-thirds. 9 SENATOR O'MARA: Yeah, but I think you have 10 to, in the questioning, state very clearly that it's 11 taxpayer dollars. 12 I think a lot of people would be confused by 13 saying "public financing," and not understanding 14 that that's going to be their tax dollars that are 15 going to go to fund that. 16 And in a general way, their tax dollars are 17 going to fund candidates who may be absolutely 18 opposed to their own personal views on a variety of 19 issues. 20 That I think -- a lot of people that I've 21 talked to have grave concerns over, you know, their 22 dollars going to fund certain candidates that they 23 completely and totally disagree with. 24 DICK DADEY: Right. 25 And I think, you know, if you ask any voter 1 about how the State spends its money, I think you'll 2 find wide disagreement from a wide variety of 3 New Yorkers about how the state spends its money. 4 And that a lot of New Yorkers may not spend 5 the support funding for a particular educational 6 initiative, or health-related initiative, because 7 they don't support that initiative. 8 And so, I think, you know, it's up to the 9 political leaders and the Legislature and the 10 governor, to, you know, determine what is in the 11 best interests of the common good and the public 12 interest, in spending those dollars, and try and 13 create the broadest possible support. 14 You know, the takeaway is, is that 15 New Yorkers, you know, want honest elections, clean 16 campaigns, better government that's accountable to 17 the people. 18 And given this -- you know, as I said 19 earlier, this rising crime wave of corruption, the 20 Legislature needs to do something. 21 And, we haven't yet seen anything that has 22 come out, where the Governor agrees with the 23 Legislature, and the legislature agrees with the 24 Governor. 25 And, you know, before you leave here in June, 1 we hope that you will do something, and that that 2 will include comprehensive campaign finance reform. 3 SENATOR DEFRANCISCO: Just a comment. 4 To do something, doesn't do anything, unless 5 it deals with the issue that is the problem. 6 If the problem is legislators, while in 7 office, using their office, to promise things and 8 get money back, or, to give money to someone to do 9 something illegal, the campaign finance laws aren't 10 going to change that. 11 Going to jail might. 12 Weeding out those people might. 13 But to suggest, because people are accepting 14 bribes, or giving bribes, for their position in 15 office, is going to be remedied by changing to a 16 public-finance law, I think is ridiculous, to say -- 17 to put it mildly. 18 DICK DADEY: You know, one of the -- one of 19 the, I think, issues that we have here, is the lack 20 of enforcement by the State Board of Elections. 21 So we don't know what we don't know. 22 The fact that our laws are so lax here in 23 New York State, as it relates to campaign finance, 24 and that so much political activity goes unreported. 25 As I mentioned earlier in my testimony, 1 yesterday, Citizens Union released a report, showing 2 224 political clubs, involving millions of dollars 3 of political transactions, goes unreported. 4 These political clubs are not registered with 5 the State Board of Elections. 6 There's no effective oversight and 7 enforcement of our campaign finance laws, and so 8 there may be lots of things going on in 9 New York State that we simply do not know. 10 And so to argue that it's not a problem, and 11 therefore should not be addressed, misses the point 12 that we do not have an effective -- we do not have 13 an effective campaign finance program, because we 14 don't have strong enforcement by the board of 15 elections. 16 SENATOR DEFRANCISCO: I'll pass. 17 SENATOR O'MARA: Senator Gallivan? 18 SENATOR GALLIVAN: Yeah, I'm not sure if you 19 were here or not when the board of elections 20 testified, but they presented testimony today, and 21 they also presented data dating back to 2007, 22 indicating, if I'm reading this correctly, at 23 least -- or close to 1400 referrals to the various 24 district attorney offices for prosecution. 25 Of those, if I am hearing you right, the 1 individuals that haven't filed committees, they 2 referred about 1120 of those individuals for 3 prosecution. 4 DICK DADEY: Right. 5 SENATOR GALLIVAN: Those individuals or 6 corporations, I'm not sure. 7 And I don't know if they're still here to 8 talk about that, but, I was really quite surprised 9 with their testimony, and the fact -- how 10 comprehensive their testimony was in the data that 11 they presented. 12 I would also say, and Senator Tkaczyk had a 13 line of questioning with them, where it was almost 14 more like a budget hearing, and our Chairman of the 15 Senate Finance is here. 16 It appears that they need some assistance 17 from us, in helping to fund the positions that are 18 unfilled. 19 But, despite that, they presented some 20 testimony that I thought was really incredible, 21 especially as far as the criminal referrals to the 22 various district attorney offices, and, the DA's 23 offices, they indicated, did not prosecute one of 24 them. 25 So I just -- I throw that out there. 1 But I actually -- they did testify to the 2 fact that they were conducting investigations, that 3 they were making referrals, and, shared their 4 frustration that there was not any prosecution. 5 DICK DADEY: Right, right. 6 And most of those referrals -- it's 7 unfortunate they're not here maybe to talk about 8 that -- have had to do with failure to file or late 9 filings. 10 Beyond that, as my testimony indicated, there 11 were 1,016 complaints made to the State Board of 12 Elections that went beyond those transgressions. 13 And in 31 of those 1,000 instances, only 3 percent 14 of the complaints did the state board conduct a full 15 investigation. 16 And as was pointed out, they do not have any 17 staff to actually conduct these investigations. 18 SENATOR GALLIVAN: And if I may, I just want 19 to go back to -- along Senator DeFrancisco's 20 lines, I mean, if we -- we need to identify what the 21 problem is, and then do something about it. 22 Perhaps more support for the board of 23 elections, and the staffing levels to be more 24 aggressive may be necessary. 25 I don't know if it is or if it isn't, but I 1 concur. 2 And his seniority, and his sitting next to 3 the Chairman, let him ask a question first, but I 4 was going to raise the same point. 5 And, you know, I'm from out in western 6 New York way, and -- 7 DICK DADEY: I grew up in Syracuse, so I'm 8 very familiar. 9 SENATOR GALLIVAN: -- in the years -- the 10 two years prior to me running for office, for the 11 Legislature, I think there was 12 legislators led 12 out in handcuffs. 13 But the point that I was going to make, is 14 there were bad people who did bad things, and not 15 one of them, even in your earlier testimony, where 16 you may are disputed that one study, I don't know 17 what it was, where 24 individuals were identified in 18 connection with the New York City campaign finance, 19 may not all be 24. Some of them had campaign 20 finance violations. 21 Not one of these 21 legislators, state 22 legislators, 5 more on track to join them, for a 23 total of 26, since the turn of the century, has 24 anything to do with the campaign finance reform, 25 that I'm aware of, or campaign finance. 1 So, I -- I concur with Senator DeFrancisco, 2 "What is the problem?" and let's do something about 3 the problem. 4 And I don't know that the methods, the ways 5 that we finance campaigns in New York State, are 6 indeed the problem. 7 They haven't been shown to be yet, to me 8 anyway at, this point. 9 DICK DADEY: Well, I mean, just because the 10 problem may not necessarily lead to a violation of 11 law, doesn't mean it's not a problem. 12 SENATOR GALLIVAN: Point well taken, but this 13 is -- these individuals, and what they do, and I'll 14 say just the ones that are convicted, it's 15 offensive. 16 It's offensive to any one of us sitting here. 17 And, it's offensive to hear people talk about 18 a culture of corruption in Albany, that I don't 19 think exists. 20 We're not perfect. 21 We can be better, there's no question about 22 it, but I sit next to people in every committee, 23 Democrats and Republicans to my right and my left, 24 that they are good, honorable, decent people that 25 shudder when something like this happens. 1 So, again, I just go back to, for us to do 2 something, I concur with Senator DeFrancisco, 3 "What is the problem?" and let's do something about 4 the particular problem. 5 And I don't know, it seems that there are -- 6 there's advocates for public financing, and it's 7 been around for years and years, are now using the 8 opportunity, because there's been another couple 9 people arrested, which is terrible that it happened, 10 to point the conversation at this, when what we 11 should be pointing at is: 12 What can we do to attract better people? 13 And what can we do to better vet people.? 14 How can the media help in vetting people? 15 DICK DADEY: Right. 16 SENATOR GALLIVAN: Perhaps if they're not 17 talking about a speeding ticket that somebody got 18 when they were 16, and are more willing to put out 19 what a candidate stands for, and their 20 qualifications, and where they are on positions. 21 So it's much more comprehensive than just the 22 same suggestion. 23 And, Chairman, I am getting off of the topic. 24 So, I will -- I'm done. 25 Thank you. 1 SENATOR O'MARA: Senator Tkaczyk, you have a 2 follow-up? 3 SENATOR TKACZYK: Well, I just wanted to 4 comment, that we -- what you're saying is, we 5 haven't made changes. We haven't done anything, for 6 many years, to strengthen our laws around campaign 7 finance, and to give the board of elections more 8 tools in their toolbox to catch people that might be 9 misusing campaign funds. 10 And I think it would be a good question to 11 the DA, as to: What are you getting? And why 12 aren't you prosecuting? 13 And maybe it's because the laws are too lax. 14 And I think there's a lot we can do to 15 strengthen the campaign finance laws, increase 16 disclosure requirements, increase transparency, 17 increase accountability, and give our people who 18 administer these systems, the tools to adequately 19 perform their duties, so that the public does have 20 confidence that, if there is misdeeds going on, they 21 get caught. 22 I think that's what we're seeing in 23 New York City. The finance board was catching 24 problems. 25 We're not catching everything. 1 And we can do more on that. 2 DICK DADEY: And I think the DAs have a lot 3 of problems, in addition to being underresourced, 4 but also the conflicts that exist as a result of 5 their political relations with, you know, the people 6 they're asked to have oversight over, and making it 7 very difficult. 8 You know, and I want to just get back to what 9 the Senator raised earlier, about, our point of 10 view, is that it's not just about a violation of 11 law, or outright corruption, but it's the -- you 12 know, the influence that large contributions have on 13 our political process, and the way that they may 14 influence the decisions of our elected officials. 15 Not that I'm saying that there's any 16 nefarious activity going on, though, you know, 17 people do question, you know, who -- how are -- how 18 is -- "How are decisions made?" 19 Are our legislators influenced by their 20 campaign contributors? 21 Do the calls get returned more quickly if 22 it's, you know, a larger contributor than it is a 23 small donor, or not a donor at all. 24 And so, you know, in New York City, it 25 actually has led to more competitive elections. 1 It's led to, I think, a higher-quality 2 candidate, because there is more competition, and 3 people feel more of an opportunity to run. 4 It's a huge burden to raise the private funds 5 to run in New York, against, you know, a 6 well-financed incumbent that may be supported by 7 large contributions as a result of sitting in 8 office. 9 And, you know, as I said earlier, there are a 10 lot of good and very good legislators that serve the 11 public interest extremely well in New York, and, you 12 know, are harmed by this taint of corruption. 13 But I think that, you know, to not bring 14 public financing into the discussion, misses the 15 point about the need to take money out -- you know, 16 take big money out of our system, and empower small 17 donors to participate in our democracy. 18 SENATOR NOZZOLIO: Mr. Chairman? 19 SENATOR O'MARA: Yes, Senator Nozzolio. 20 SENATOR NOZZOLIO: Thank you for your 21 patience, and for the chaos of the full day. 22 DICK DADEY: Sure. 23 SENATOR NOZZOLIO: And, appreciate the input, 24 and we'll be reviewing your written remarks that you 25 have submitted to the Committee. 1 [Unintelligible] understand how come there is 2 such a low voter turnout in the city of New York. 3 What I -- I don't know if you heard my 4 questions earlier, where we had an 5 18-point-whatever percent turnout in the city, 6 that's during a city election. 7 And then, when it was a statewide election, 8 it didn't get much -- or a -- I guess it was, 2010 9 was the last one that was looked at, it was less 10 than half of what the statewide turnout was, on a 11 percentage basis. 12 Why do you think that is? 13 DICK DADEY: Well, what I -- I think there 14 are many reasons for that. 15 And when -- earlier during my testimony, I 16 pointed out that, as a result of your question, and 17 those of others, I had my staff at Citizens Union 18 take a look at voter turnout. 19 And we found that, in the 2009 city 20 elections, for the primaries, those New York City -- 21 registered New York City voters in a political party 22 voting in the primary, turnout was 12.9 percent; or, 23 12.9 percent of the voters voting in those 24 particular contests. 25 In the 2010 -- 2012 September primary for 1 state-legislative contests, in New York City, voter 2 turnout was 10.3 percent. 3 So there actually was a higher turnout of 4 about 25 percent of voters voting in the 5 city-council primary elections than there were for 6 the state-legislator primary elections, in New York 7 City, between those two years. 8 You know, there could be any number of 9 reasons. 10 One we think is a contributing factor, is the 11 fact that they are more competitive, and they're 12 more competitive because more candidates can run 13 with the aid of public financing. 14 SENATOR NOZZOLIO: This is something that we 15 could pursue, or we should pursue. 16 I would like your thoughts, going forward, on 17 cause and effect. 18 DICK DADEY: Yeah, I mean, we hadn't looked 19 that, until you raised it here today. And we're 20 going to go back and punch those numbers even more. 21 I think, too, you know, there's all kinds of 22 socioeconomic factors to participating in our 23 elections. 24 You know, it's not easy to try and hold a 25 job, or, you know, stand in long lines in 1 New York City, particularly, or get to the voting 2 places sometimes. 3 And so I think, you know, poverty may have an 4 impact. 5 There may be other, you know, work-related 6 issues, child-care issues. 7 We just don't know. 8 There may be some difference between upstate 9 and New York City, but your question raises, you 10 know, an important area of thinking that should take 11 place. 12 SENATOR NOZZOLIO: Forward your analysis -- 13 DICK DADEY: Yeah. 14 SENATOR NOZZOLIO: -- your future analysis. 15 Thank you. 16 DICK DADEY: Sure. 17 SENATOR O'MARA: Thank you very much. 18 DICK DADEY: Thank you very much, Senator. 19 I appreciate the questions, and the comments, 20 and the conversation. 21 SENATOR O'MARA: Thanks for coming, and 22 hanging in there. 23 That concludes our witnesses for today. 24 We have one more on the list, Ken Pokalsky, 25 from the Business Council. 1 He submitted a written statement, that we 2 have distributed to the members. 3 So, that will conclude our hearing this 4 afternoon. 5 Thank you very much. 6 SENATOR NOZZOLIO: Thank you. 7 (Whereupon, at approximately 3:32 p.m., 8 the public hearing held before the New York State 9 Senate Standing Committee on Elections concluded, 10 and adjourned.) 11 12 ---oOo--- 13 14 15 16 17 18 19 20 21 22 23 24 25