The public funding of Presidential elections is not financed by a standard
Congressional appropriation. Instead, the program is funded by the one dollar
checkoff that appears on federal income tax forms.
This unusual financing scheme quickly raised constitutional questions.
In the landmark Supreme Court case, Buckley v. Valeo, the plaintiffs
argued that Congress violated the First Amendment by not allowing taxpayers
to earmark their $1 checkoff to any candidate or party of their choice.
In the Court's opinion, however, the checkoff constituted an appropriation
by Congress, and as such it did not require outright taxpayer approval.
Furthermore, "every appropriation made by Congress uses public money
in a manner to which some taxpayers object."1
By the time its constitutionality had been confirmed, the checkoff had
already amassed sufficient funds to finance the 1976 Presidential election.
It has funded every Presidential election since. In fact, the Presidential
Election Campaign Fund's annual balance has never fallen below the initial
$2.4 million raised in 1973. (See
Chart 5-2.) (NOTE: Chart will appear in a new window.)
Since 1988, however, the Commission has predicted a shortfall in the
Presidential Election Campaign Fund. Initially, Commission staff believed
that a shortfall would not occur until 1996. Then, in early 1990, the Commission
warned that the Fund balance might not even be sufficient to cover all 1992
primary matching fund payments. By the end of 1991, however, the situation
had changed. The 1992 Presidential campaign started later than usual, and
the candidates requested less public money than had been expected. In addition,
the rate of inflation (which governs the size of the pay outs) was well
below expectations; and tax checkoff receipts declined much less than had
been anticipated.2 Consequently, the FEC announced
that a shortfall in 1992 was unlikely, but that the Fund would run a deficit
of between $75 and $100 million by 1996 unless Congress took action.
A funding shortfall--at some point--is inevitable due to a "fatal
flaw" in the public funding program: Payments from the Fund are indexed
to inflation, but the $1 tax checkoff is not. If the checkoff had been indexed
to inflation and the same number of taxpayers checked yes, there would have
been no risk of a shortfall in 1992 nor would there be a projected shortfall
for the 1996 election.
Absent such adjustment, however, as the consumer price index increases,
more and more taxpayers must designate dollars in order to keep pace with
the increasing payments to qualified committees. Internal Revenue Service
(IRS) statistics, however, indicate that citizen participation has declined.
After peaking at 28 percent in 1980, the percentage of tax forms on which
the taxpayer(s) checked yes had fallen below 18 percent in 1992.3 (See Chart 5-1 below).
Percentage of Returns with $1 or $2 Designations*
* Figures for 1973-1976 cannot be verified.
Explanations for the decline are varied. Some have argued that the public
does not want tax money spent to finance elections: "The vast majority
of Americans, who are fed up with taxes and irresponsible government spending,
are in no mood to pay for anyone's political campaign and do not support
the Presidential Election Campaign Fund."4
Others blame increased public awareness of soft money and its alleged role
in the Presidential process. Many have also noted that a number of state-sponsored
public funding programs, financed by a tax checkoff, have seen similar declines
in participation. The Minnesota Ethical Practices Board, for example, reported
that participation in that state's checkoff program fell to an all-time
low of 14 percent in 1991. This, critics say, confirms that taxpayers oppose
using public funds to finance elections.
Supporters of public funding disagree. They say that the decline in participation
may be due less to dissatisfaction with the program than to a growing lack
of understanding of the program's purpose. This problem, they say, is "bound
to increase as time distances most Americans from the founding debate over
the program."5 Supporters also maintain
that a negative vote on the tax checkoff may reflect a widespread dissatisfaction
with government in general, rather than with public funding.
The charts that appear in this section provide statistical information
related to the tax checkoff and the projected shortfall for 1996. (NOTE:
Charts will appear in a new window.)
In 1989, the FEC conducted focus groups around the country to assess
public understanding of the checkoff program. The results of these meetings
confirmed that citizens may not know why the public funding program was
implemented or how it works. The study also revealed, however, that taxpayers
would like to know more. Noting that the creation of an informed populace
might not alter existing patterns of participation in the checkoff, the
focus group report nevertheless recommended that the FEC conduct a public
education program to address three key points:
On March 5, 1991, the Commission launched the first phase of a nationwide
public information program to implement these recommendations. The multimedia
education program featured television and radio public service announcements
in English and Spanish, a flyer, a brochure and an op-ed piece and media
appearances by the Commission chairman. The media announcements, which aired
during the height of the tax-filing season, urged taxpayers to make "an
informed choice" when deciding whether to designate one dollar of their
taxes for the Presidential public funding program. Although the program
lasted just three months, its messages, combined with television, radio
and print news coverage, reached a potential audience of more than 92 million.
On January 3, 1992, the Commission launched the second phase of the education
program, expanding both its scope and duration. This phase, which continued
throughout 1992, featured:
This phase of the program reached a potential audience of 203 million.6
In a related outreach effort, the Commission chairman was a featured
guest on several nationwide radio and television broadcasts, including C-SPAN,
CNN and "The Larry King Show" on the Mutual Radio Network.
Even with an education program, the Commission believes that a shortfall
in 1996 is inevitable unless legislative action is taken. As a result, the
Commission has, since 1989, sent numerous letters both to Congress and the
President warning of the impending deficit. It has also adopted legislative
recommendations7 urging Congress to enact legislation
that would ensure the financial viability of the public funding program
and has testified before various Congressional committees regarding the
While Congress has introduced a number of bills to address this problem,
none of them has been subject to a floor vote.
If the Fund is insufficient to cover all entitlements, current law requires
the U.S. Department of Treasury to allocate remaining funds, giving first
priority to the conventions, second priority to the general election and
third priority to the primaries.8
On May 10, 1991, the Treasury Department published new regulations describing
the method it would use to disburse funds. Under the revised rules, which
apply regardless of whether a shortfall actually occurs, the projected amount
needed for the conventions and the general election is to be set aside by
January 1 of the Presidential election year. The remaining amount in the
Fund--and additional monthly deposits of checkoff dollars--are then to be
used for matching payments to primary candidates.
If the amount of matching funds certified by the Commission in one month
exceeds the total dollars in the Primary Account as of the last day of the
previous month--the amount paid to each candidate will be reduced.9 The difference between the amount certified and the
amount actually paid to the candidate will be carried over to the next month
and added to any amounts certified to the candidate during that month.10
The Treasury rules also provide that matching fund payments be made once
a month rather than twice a month, as was done in the past.11
On July 18, 1991, the Commission adopted conforming regulations to govern
submissions and certifications.12 Candidates
are to make matching fund submissions only once a month, instead of twice
a month, and the Commission will certify matching fund payments on a fixed
day each month, instead of within 5 days of receiving a matching fund submission.
The tax checkoff, like the public funding program it finances, has its
supporters and detractors. One fact, however, is clear to both sides: without
legislative action to correct the structural flaw in the checkoff, the existing
Presidential public funding program will be severely curtailed in 1996.
1. Buckley v. Valeo, 424 U.S. 1, 92
2. The FEC had originally projected a $2 million
decrease, based on an anticipated decline in checkoff receipts in the year
preceding the Presidential year (a pattern that had occurred in every other
election cycle under the public funding program). In fact, they declined
by approximately $140,000--from $32,462,979 in 1990 to $32,322,336 in 1991.
3. Recent IRS studies, sampling 10,000 tax
forms per year, indicate that the checkoff was left blank on about 15 percent
of tax returns. (See IRS Taxpayer Usage Study.)
4. Senator Mitch McConnell, "Checkoff
Time Approaching," Washington Times, Feb. 2, 1992.
5. Frank J. Sorauf, Inside Campaign Finance:
Myths and Realities, p. 144.
6. The text of the public service announcements
used in both phases of the education program is included in Appendix
7. Specific recommendations have included
indexing the dollar checkoff to inflation and appropriating funds directly.
See Appendix 2.
8. The Commission has encouraged Congress
to examine these priorities in light of the projected 1996 shortfall. See Appendix 2.
9. The candidate would receive a payment equal
to the amount certified to the candidate during that month multiplied by
the following fraction:
amount in primary account on last day of month / total certified
that month, for all candidates
In effect, this means that a candidate would receive an amount equal
his/her total unpaid certifications / all unpaid certifications
multiplied by the amount of funds available.
10. The Commission had proposed a "partial
set-aside" alternative to Treasury's approach. The Commission's plan
(submitted to Treasury as oral and written testimony) would have factored
into the equation anticipated receipts to pay for the general election,
thus affording more funds for the early primary campaigns.
11. Previous rules permitted two submissions
and two resubmissions each month, with corresponding payments made twice
12. These regulations took effect November
13. For additional information regarding the
Commission's administration of the matching fund program, see Chapter