The 1996 election marked the twentieth anniversary of the Presidential public funding program. Since 1976, the program has provided nearly $900 million to qualified Presidential candidates for their primary and general election campaigns and to parties for their Presidential nominating conventions. The program is funded by the $3 tax checkoff, and administered by the Federal Election Commission. The Commission certifies payments to qualified candidates and committees; the U.S. Treasury makes those payments.
A long-predicted shortfall in the Presidential Election Campaign Fund resulted in partial matching fund payments to Presidential primary candidates during the first five months of 1996.
The Fund's overall balance in January 1996 was $146.9 million--enough to cover the $37.4 million in first-round matching fund certifications to the 10 candidates participating in the program at that time. However, the U.S. Treasury required that $124 million be set aside to cover the grants to general election candidates and the payments to party nominating conventions, leaving only $22.4 million available for matching funds at the start of 1996. As a result, the participating candidates received a pro rata amount--roughly 60 cents on the dollar--in January. Partial payments continued through May, with the U.S. Treasury adding unscheduled payouts to lessen the impact of the shortfall. The partial payments were:
Tax checkoff receipts and repayments from past Presidential campaigns totaled $16,459,323 for the month of March, exceeding the payout demand of $16,043,920 by a little more than $400,000. As a result, certified candidates received their full entitlements on April 15, including amounts that had been owed to them from previous matching fund certifications. Another temporary shortfall occurred on May 1 when the Commission certified $4,613,827 for payment before the April deposits had been made. The April deposits closed the gap, and all certified candidates received their full entitlements on May 15.
Three principal factors led to the shortfall:
During the shortfall period, one candidate requested an advisory opinion (AO) on how his campaign could remedy the cash-flow problem. In AO 1996-4, the Commission determined that Lyndon LaRouche's campaign could:
Since payments from the Presidential fund are indexed to inflation but the tax checkoff that finances the program is not, a future shortfall is inevitable. With participation in the checkoff declining from a high of 28.7 percent on 1980 tax returns to 13 percent on 1995 returns, that shortfall could come as soon as the election in 2000.
To qualify for primary matching funds, Presidential candidates must submit copies of contributor checks and other documentation showing that they raised more than $5,000 in matchable contributions in each of at least 20 states (i.e., over $100,000). The FEC reviews this threshold submission to determine whether the candidate has met the eligibility requirements. The candidate must also agree to comply with the law in a letter of agreement and certification. Once candidates satisfy these criteria, the Commission declares them eligible to receive matching federal dollars for a portion of the contributions they raise. The federal government will match up to $250 per contributor, but only contributions from individuals qualify for matching.
Presidential candidates may establish their eligibility during the year before the election (i.e., in 1995 for the 1996 primaries) and, once eligible, may submit additional contributions for matching funds (called matching fund submissions) on specified dates.
In AO 1996-7, Harry Browne, a candidate for the Libertarian party's 1996 Presidential nomination, asked the Commission if he could be certified as being eligible to receive matching funds without actually accepting the money. The Commission determined it could not certify Mr. Browne as eligible because he would not have signed the required candidate agreements or agreed to the post-election audits.
Chart 2-1 lists the 1996 Presidential primary candidates who qualified for matching funds and the total amount of matching funds certified and paid to each.
| Candidate | Amount Certified |
Amount Paid |
| Lamar Alexander (R) * | 4.6 |
4.6 |
| Pat Buchanan (R) | 11.0 | 11.0 |
| Bill Clinton (D) | 13.4 | 13.4 |
| Bob Dole (R) | 13.5 | 13.5 |
| Phil Gramm (R) * | 7.4 | 7.4 |
| John Hagelin (NLP) ** | .5 | .5 |
| Alan Keyes (R) | 1.7 | 1.7 |
| Lyndon LaRouche (D) | .6 | .6 |
| Richard Lugar (R) * | 2.7 | 2.7 |
| Arlen Specter (R) *** | 1.0 | 1.0 |
| Pete Wilson (R) **** | 1.7 | 1.7 |
* Senator Gramm, Senator Lugar and Governor Alexander withdrew from the
race in February 1996.
** Natural Law Party.
*** Senator Specter withdrew from the race in November 1995.
**** Governor Wilson withdrew from the race in September 1995.
CD ROM Technology
Before certifying matching funds, the Commission reviews each submission
to verify that the contributions qualify for matching funds and are properly
documented. (The agency uses a statistical sampling technique to select
contributions for review.) In 1996, CD ROM technology accelerated the review
process for matching fund requests submitted on CD ROM disks by the Clinton,
Dole and Buchanan campaigns. The disks contained images of the contribution
checks submitted for matching funds and the other required documents.
For the FEC, receiving submissions on CD ROMs saved time. The time savings largely resulted from faster searches for particular contribution checks. A manual search through approximately 40,000 checks included in a typical monthly submission--some 20 boxes--could take several minutes. Using CD ROMs, staff could access an image of a check in 3 seconds.
While submitting matching fund information on CD ROM is voluntary, it is expected to become more popular with campaigns in future Presidential elections. The technology will vastly decrease the amount of paper needed in the submission and review process. During the 1992 election cycle, the FEC accumulated 5 tons of paper records in processing $42 million in matching funds.
Under the public funding law, national party committees of major parties may become eligible to receive public funds to pay the official costs of their Presidential nominating conventions. Eligible committees receive $4 million plus an adjustment for inflation, provided they agree to certain requirements, including the filing of periodic disclosure reports and detailed audits. A party receiving public funding for the convention may not spend more than the public funding grant, although host cities and committees may provide certain facilities and expend additional funds.
In 1995, the Commission certified the Democratic and Republican convention committees as being eligible initially to receive $12.024 million each in public funds. The Department of Treasury made the payments in July 1995, and in 1996 the Department made an additional cost-of-living payment ($340,000), bringing to $12,364,000 the total amount certified to each convention committee.
The Presidential nominee of each major party may become eligible for a public grant of $20 million (plus a cost-of-living adjustment (COLA)) for the general election campaign. Minor and new party candidates may qualify for partial general election funding based on their party's electoral performance. Minor party candidates (nominees of parties whose Presidential candidates received between 5 and 25 percent of the vote in the preceding election) may receive public funds based on the ratio of their party's vote in the preceding Presidential election to the average vote for the major party candidates in that election. New party candidates may receive public funds after the election if they receive 5 percent or more of the vote. The amount is based on the ratio of the new party candidate's vote to the average vote for the two major party candidates in the election.
In 1996--for the first time in the 20-year history of public funding--a non-major party Presidential candidate qualified for general election funding before the election. The Commission certified Reform Party nominee Ross Perot as being eligible for roughly $29 million on August 22.
The Commission had addressed Mr. Perot's potential eligibility in AO 1996-22. In that opinion, the Commission concluded that, if Mr. Perot became the Reform Party's Presidential nominee, he would be eligible for pre-election public funding because he had received 19 percent of the popular vote in 1992.
Questions on whether a Reform Party nominee other than Mr. Perot would have been eligible for pre-election public funding and whether the Reform Party could have received public funds for its convention were left unanswered. Those questions hinged on whether the Reform Party qualified as a minor party. Additionally, for convention funding, the Reform Party would have had to demonstrate that it qualified as a national party committee under 26 U.S.C. Sec.9008. Since, at the time AO 1996-22 was issued, the Reform Party had not been formed, the questions of whether it qualified as a minor party or as a national committee were hypothetical, and the Commission deemed it premature to address them.
During 1996, the Commission denied requests to stop matching fund payments to the Clinton and Dole Presidential campaigns, and to withhold the Perot campaign's general election funding.
In June, the Democratic National Committee requested that the agency suspend matching fund payments to Dole for President, Inc., alleging that the committee had forfeited its entitlement to the funds because it had overspent the $37.1 million limit on primary spending.
In July, the Dole Committee requested the suspension of matching funds to the Clinton/Gore '96 Primary Committee on the grounds that the committee had exceeded the spending limit.
In both cases, the FEC said that the allegations were too speculative to meet the strict standard in these cases: information demonstrating that a candidate has knowingly and substantially exceeded the expenditure limit. 11 CFR 9033.3.
Similarly, in October, the Commission rejected a request by Herb Rosenberg, of New York, to deny general election funding to Mr. Perot, based on numerous alleged campaign irregularities, including excessive expenditures and possible disenfranchisement of Reform Party members. The FEC determined that the allegations were speculative and did not satisfy the standard that must be met to withhold general election funds, namely, patent irregularities suggesting the possibility of fraud.
In all three cases, the Commission will be able to determine whether the allegations were accurate when it conducts its mandatory audits of the public funding recipients.
FEC regulations require publicly funded Presidential campaigns to spend campaign funds on "qualified campaign expenses" only. 26 U.S.C. Sec.9033, 9038 and 9042 and 11 CFR 9032.9(a)(2). Two 1996 advisory opinions addressed this requirement.
In AO 1995-45, the Commission determined that Dr. John Hagelin--a publicly funded candidate seeking the Natural Law Party's nomination--could use campaign funds to pay for his ballot access efforts, including petition drives. Such payments were seen as qualified campaign expenses since the process by which a non-major party candidate gets on the general election ballot serves a purpose similar to a primary election. Further, payments made by Dr. Hagelin to get his party's name on the ballot would also be qualified campaign expenses where doing so would be the more cost effective means of securing his ballot position as the party's nominee.
Documenting qualified campaign expenses was the focus of AO 1996-12. The Lenora B. Fulani for President '96 committee asked the Commission if additional documentation would be required to demonstrate that disbursements made to vendors with whom the candidate had a close relationship were qualified campaign expenses. (In its audit of Dr. Fulani's 1992 campaign, the Commission determined that certain disbursements to vendors closely associated with the Fulani campaign were not qualified campaign expenses. See page 11.)
The Commission concluded that the 1996 Fulani campaign's plan to hire close associates to provide campaign services would not, in itself, cause the campaign to be held to a higher standard than other publicly funded committees. However, the campaign would have to abide by the same documentation requirements for campaign expenses as all other publicly funded committees. As such, the committee's disbursements to vendors would be considered qualified campaign expenses as long as Dr. Fulani could demonstrate that they represented the usual and normal charge for campaign-related services actually rendered.
Under 2 U.S.C. Sec.434(a)(3)(A), Presidential candidate committees that exceed $100,000 in contributions or expenditures must file FEC reports on a monthly basis. Another provision--2 U.S.C. Sec.434(a)(6)(A)--requires candidate committees to notify the Commission, within 48 hours, of contributions of $1,000 or more received between the 20th day and 48 hours before any election.
In AO 1995-44, the Commission clarified that Presidential candidate committees filing monthly FEC reports would not be required to file 48-hour notices during the Presidential primary season. Since such Presidential candidates are typically active in a number of primary elections, requiring them to abide by these provisions would have required nearly constant filing.
The Commission concluded that Presidential candidate committees filing monthly provided sufficient disclosure to exempt them from the 48-hour filing provisions during the Presidential primary season.
On October 4, 1996, the U.S. Court of Appeals for the District of Columbia Circuit upheld a lower court ruling that dismissed lawsuits against the Federal Election Commission (FEC) and the Commission on Presidential Debates (CPD). The suits had been filed by two Presidential hopefuls who, among other things, sought to participate in the Presidential debates.
Reform Party candidate Ross Perot and Natural Law Party (NLP) nominee John Hagelin filed the suits in U.S. District Court for the District of Columbia after the CPD excluded them from a list of participants for three nationally televised debates. In September, a few days before filing their suits, Perot and the NLP had filed administrative complaints with the FEC, but, because of procedures set forth in the Federal Election Campaign Act (the FECA or the Act), resolution of those complaints was not possible before the debates started in October.
District Court Decision
The court combined the suits for oral argument and dismissed both cases
on October 1, 1996, concluding that it had no jurisdiction in the matter.
First, as mandated by Congress, the FEC has exclusive jurisdiction to hear
complaints alleging violation of the Act, and the plaintiffs have no private
right of action against the CPD. Second, the FEC has 120 days to act on
an administrative complaint before the court may become involved. 2 U.S.C.
Sec.437g. The court also upheld FEC regulations at 11 CFR 110.13(a) that
allow nonprofit, nonpartisan corporations to stage debates in certain circumstances
and, under 11 CFR 114.4(f), to accept contributions from corporations to
put on such events.
Appeals Court Decision
The appeals court expedited the appeals and heard the case two days after
the district court handed down its ruling. The appeals court affirmed the
lower court's decision that it lacked jurisdiction to take action on the
alleged violations of the Act or to order the FEC to resolve the complaints
prior to the CPD-sponsored debate on October 6. With regard to Mr. Perot's
challenge to the debate regulations themselves, the appeals court observed
that the district court had not had the benefit of the administrative record
and that the issue had not been fully briefed. Consequently, the appeals
court vacated the district court's decision upholding the regulation and
remanded the claim to the district court with instructions to dismiss without
prejudice. (Mr. Perot would then be free to file a new suit on the same
issue.)1
Committees receiving matching funds are subject to an FEC audit to determine whether they must repay public funds to the Treasury. Public funds must be repaid if, for example, the campaign incurred nonqualified expenses, received more than its entitlement or had surplus funds remaining at the end of the campaign.
At a February 7, 1996, public hearing, 1992 candidate Dr. Lenora B. Fulani contested the FEC's August 1995 initial determination that her campaign committee repay $612,557 to the U.S. Treasury. The FEC had based this repayment determination on its investigation into charges made by former campaign worker Kellie Gasink in January 1994.
Ms. Gasink had alleged that during the 1992 campaign Dr. Fred Newman, Dr. Fulani's campaign manager, had used a network of vendors to funnel campaign funds to himself. Ms. Gasink had claimed that these vendors billed expenses to the committee that were either inflated or fabricated. Additionally, Ms. Gasink had alleged that Dr. Newman embezzled campaign funds by reporting that certain individuals had received salary payments and reimbursements when actually they had not.
The Fulani committee disputed the repayment determination and provided additional materials to support its view. The FEC will decide what action to take after considering Dr. Fulani's presentation and all the documentation submitted by her committee. (For additional information, consult the April 1996 issue (PDF) of the FEC newsletter, the Record.)
1 On February 12, 1997, Dr. Hagelin and the Natural Law Party filed a petition for a writ of certiorari.