What is the New York City public financing program and why does it matter?
The program provides a multiple match of public funds for small donations from New York City residents to candidates who opt in. This system reduces the distorting influence of private wealth in the political process. Voters adopted the program by referendum in 1988 in response to a series of corruption scandals. Program participants, from City Council members to now-New York State Attorney General Letitia James, have praised it for allowing them to rely on the support of everyday New Yorkers instead of “big donors demanding meetings and policy changes.”
The New York City program’s track record of promoting clean elections led a special New York State anticorruption commission to recommend in 2013 a statewide public financing system to address the state’s “epidemic of public corruption.” In its report, the commission noted that “by virtually all accounts, the program has succeeded in making New York City’s elected officials more accountable to city voters.”
In its more than 35 years, the program has delivered other key benefits for New York City’s democracy. In 2021, the program played an important role in electing the most demographically representative and diverse City Council in the city’s history. The program has made small contributions from everyday residents the most important source of fundraising. Data shows that publicly financed candidates in New York City depend more on the constituents that they seek to represent compared to their non–publicly financed counterparts. It’s no wonder the reform is popular with New York City voters, 80% of whom voted in 2018 to strengthen the program by increasing its match to $8-to-$1.
What does the indictment of NYC Mayor Eric Adams have to do with public financing, and how much money was involved?
The main allegations by the Justice Department concern Adams’s purportedly corrupt dealings with Turkish government officials and businesspeople from 2014 through 2024. He is also accused of soliciting and funneling illegal campaign funds through straw donors, in part to fraudulently obtain public matching funds through the city’s public financing program.
Any amount of alleged fraud is serious and must be swiftly addressed. However, there has been a good deal of public confusion concerning the amount of taxpayer funds involved in the alleged scheme. The transactions add up to $26,000 in straw donor contributions, $6,000 of which the campaign later refunded and did not claim for public matching funds. In total, these contributions generated an estimated $24,000 in public matching funds, a much smaller subset of the overall pool of $10 million in matching funds that the indictment and some reporting have portrayed as stemming from illegal donations. Of course, the case is ongoing and these numbers could change.
Does public financing cause straw donor schemes?
No. Illegal straw donor schemes, where contributions are routed through someone else to evade legal limits and disclosure requirements, are uncovered periodically across the country. They usually don’t involve public financing programs, which have strict controls to deter fraud and uncover it when it does occur. While there have been a handful of scandals in New York City’s program over the last four decades, the people who broke the rules were caught and faced serious consequences.
In fact, straw donor violations are some of the most common federal campaign finance charges that the Justice Department brings. For example:
- In 2019, executives at the engineering firm Navatek used straw donors to illegally funnel $52,000 to Sen. Susan Collins’s 2020 reelection campaign and sent another $150,000 to a pro-Collins super PAC through a shell company.
- In 2018, businessman Lev Parnas illegally gave more than $350,000 on behalf of a wealthy Russian national who had business interests in the United States.
- In 2012, author and filmmaker Dinesh D’Souza used straw donors to mask $20,000 in donations to an unsuccessful Senate candidate.
- From 2006 through 2012, accounting executive Jeffrey E. Thompson channeled over $3 million in illegal donations to federal and DC candidates.
In short, such schemes are routinely discovered and successfully prosecuted. None of these examples involved public campaign financing.
What can be done to improve the system?
Detailed oversight is critical to effective enforcement. While the New York City Campaign Finance Board already has a strong record in this regard, the Adams indictment and his campaign’s actions leading up to it suggest that the board needs to reexamine and update its internal procedures for identifying and responding to straw donor activity, failures to respond to board requests for information, and other misconduct. The board’s May 2024 draft audit of Adams’s 2021 campaign revealed the campaign’s failure to document $2.3 million in expenses. The campaign also reportedly ignored inquiries from the board about potential program violations before obtaining public matching funds.
To start to address these issues, the board should adopt tighter rules around eligibility for payments. The proposed rule updates that the board issued in late August are an important step forward. Current rules list factors that the board may consider in determining whether to withhold a matching funds payment from a candidate. The board’s new proposal would make it mandatory to withhold a payment under certain circumstances, such as if a campaign fails to respond to the agency’s requests for information or fails to file a disclosure report. This approach complements other existing rules that deem certain acts — such as submitting false information to the board or falsifying documentation — fundamental breaches that warrant total disqualification from public financing.
The board should also give would-be straw donors clearer notice. The board currently requires certain donors to sign a card that states “I understand that state law requires that a contribution be in my name and be from my own funds” and affirm that they haven’t been reimbursed. This language should be sharpened to explicitly and plainly put donors on notice that it’s against the law to give someone else’s money and that doing so can carry penalties.
Finally, the board should work to ensure timelier audits. It has faced significant criticism for its persistent delays — sometimes years-long — in completing the post-election auditing process. In some instances, candidates have run for reelection while still under audit for the previous election. Although the law’s deadlines for the agency to complete audits don’t apply in cases involving potential campaign-related fraud, the board should examine ways to move the process more efficiently while still ensuring a thorough review.
