Public Campaign Finance Isn’t Graft; It’s Democracy

Sioux Falls lawyer and lobbyist Justin Smith is waging Twitter war on the Anti-Corruption Act proposed by Rick Weiland and Don Frankenfeld. Secretary of State Shantel Krebs has yet to certify the 25,216-signature petition submitted two weeks ago to put the act on the South Dakota ballot next year, but Smith is bombarding his followers with arguments against the bill, which, if certified, would likely be labeled on the ballot as Initiated Measure 22:

Justin Smith against IM22 on Twitter Justin Smith against IM22 on Twitter

Smith has called both the initiative and its sponsors “insidious.” Smith’s primary reason for branding Weiland and Frankenfeld stealthily treacherous and deceitful is the public campaign financing component of IM 22. The Anti-Corruption Act is much more than that plank: its 70 sections also set new limits and disclosure requirements for campaign finance, impose greater limits on revolving-door lobbying, and create a statewide ethics commission to enforce those rules and investigate corruption in general. Smith has arguments against those other planks, but for the moment, he’s ginning up memes against gouging the general fund with welfare for politicians. Thus, let’s focus on IM 22’s public campaign financing.

IM 22 creates a Democracy Credit Fund, from which every registered South Dakota voter would be assigned two fifty-dollar Democracy credits. Voters may assign their Democracy credits to any candidates for Legislature or state office (not Congress or President) who agree to abide by IM 22’s campaign finance restrictions.

Section 68 makes an annual appropriation to the Democracy Credit Fund of $9 for every registered voter. Section 68 indexes that per-voter appropriation annually for inflation. According to the Secretary of State’s November 2, 2015, count of 519,503 registered voters, the first appropriation would equal $4.68 million. Smith laments that this ongoing appropriation would take money away from education and other priorities.

However, IM 22 Section 42 caps the Democracy Credit Fund at $12 million. Section 63 suggests that the ethics commission would adjust that cap for inflation every other year, but the language is not clear. Adjusted or not, that 12-million-dollar cap creates the possibility that, after a couple years, if voters do not take full advantage of their Democracy Credits, the annual appropriation would decrease, as we would top the fund off at $12 million and return the remainder right back to the general fund.

But suppose voters and candidates do make full use of the Democracy Credit Fund. Smith says the Democracy Credit Fund would pad politicians’ pockets with graft. However, under Sections 61 and 62, Democracy Credits can’t line politicians’ pockets. Whereas current state campaign finance law has no prohibition against candidates converting campaign funds to personal use, the Anti-Corruption Act says Democracy Credits must be used for legitimate campaign costs and cannot be used for candidate salary or be kept in a campaign war chest forever:

Section 61. A candidates may only use democracy credit proceeds for campaign costs or debts for the relevant office and election cycle, and may not use such proceeds after a reasonable period, to be set by commission rule, following the election to pay campaign debts. No candidate may use democracy credit proceeds for any cash payments or in violation of any law; to pay the candidate; to pay any entity in which the candidate or an immediate family member holds in aggregate a ten percent or greater ownership interest; to pay any amount over fair market value for any services, goods, facilities or things of value; or to pay any penalty or fine; nor to pay any inaugural costs or post-election officeholder costs.

Section 62. Any candidate who has redeemed a democracy credit, then withdraws, dies, becomes ineligible, loses participating candidate status, is eliminated in a primary election, is eliminated in a special election, or is eliminated in or wins a general election, shall within a reasonable period, as set by commission rule, pay all debts and obligations, account to the commission and restore to the commission and the Program “Unspent Democracy Credit Proceeds.” The commission shall define “Unspent Democracy Credit Proceeds” by rule.

These sections of the Anti-Corruption Act do more to prevent “graft” than anything in current South Dakota campaign finance law.

Besides, for real “graft” to take place, we need a pot of money that politicians themselves can dip into at will. Politicians would not control the Democracy Credit Fund; voters would. IM 22 wouldn’t force anyone to spend the money appropriated for the Democracy Credit Fund. Every voter would get to decide whether $100 of their own tax dollars gets spent or stays put. Considering that $100 represents the state sales tax collected on $2,500 worth of purchases, and considering that probably every voter in this state spends at least $2,500 on food and clothing every year, the Democracy Credit really just gives voters a chance to spend their own money on candidates of their choosing. Voters don’t get that kind of direct, democratic choice on any other general fund expenditure.

Public campaign finance is the trickiest part of the Anti-Corruption Act. Shouting “welfare for politicians” is easy judo for lobbyists and politicians who want to fight an act meant to prevent corruption among lobbyists and politicians. Such is the rhetorical battle we’ll see over the next eleven and a half months.


20 Responses to Public Campaign Finance Isn’t Graft; It’s Democracy

  1. He’s either lining his pockets with funds from monied interests opposing this effort, or he’s angling for such a paid gig to line his pockets opposing this effort.

  2. Mr. Smith the lobbyist is partner at a law firm that lines its pockets with taxpayer money – and thus his own pockets are lined with taxpayer money. Lots of it.

  3. Mrs. Nelson

    Flat out, this IM is stupid.

  4. Justin G. Smith

    I knew it was only a matter of time before Mr. Heidelberger did a piece on my Twitter campaign against IM 22. To his credit, this one was (on the whole) pretty respectful. I appreciate that and the civil debate we have had. As for Mr. “Rorschach,” I simply have an intense dislike for this measure on principle. Though Mr. Heidelberger disagrees, I feel that I have raised cogent arguments against IM 22 that have nothing to do with my role as a lobbyist (or my law practice). Attacking me personally (and my business) is an ad hominem smear that is antithetical to legitimate debate.

    Now, on to addressing Mr. Heidelberger’s arguments.

    1. My use of the word “insidious” was intended to mean “operating or proceeding in an inconspicuous or seemingly harmless way but actually with grave effect.” I make no assertion that Messrs. Weiland or Frankenfeld are “treacherous and/or deceitful.” On the “insidious” nature of IM 22, I spoke with numerous signature gatherers and scoured the website of South Dakotans for Ethics Reform. https://sdethics.wordpress.com There was nary a mention of the taxpayer-funded campaigns portion of this measure. Those sources spoke exclusively about the “anti-corruption” components. By the way, the vast majority of the signature gatherers for IM 22 were paid handsomely for their work. This is not some kind of altruistic movement that depends on “spirited citizens enlivened by a dream!” There has already been a significant amount of money invested in IM 22 and you can bet there will be a whole lot more throughout the next year.

    2. For the most part, you have recognized that I have never tweeted about the other components of IM 22. My tweets have focused exclusively on the sections dealing with taxpayer-funded campaigns. I do not know where you got the idea that “Smith has arguments against those other planks.” I have not addressed those other sections (e.g. lobbyist restrictions, campaign contribution limits, etc.). My reasons for limiting the scope of my attack? (1) I knew many would cry foul and say that, as a lobbyist, I am somehow ineligible to argue on the anti-lobbyist components. (2) As a taxpayer, my arguments against the taxpayer-funded campaigns have more punch. (3) Despite the clear fiscal impact of all the “anti-corruption” components of IM 22 (e.g. new databases, new reporting requirements, FTEs to process all the data, FTEs to assist with the Commission, etc., etc.), the cost of the taxpayer-funded campaigns is staggering.

    3. You keep arguing that “the fund is capped at $12 million.” This bill is a bleeder, no matter how you look at it. I fail to see how any South Dakotan can deny this simple fact. “Democracy credits” will be distributed, removing money from the fund. Every year, IM 22 mandates the fund be replenished with taxpayer money. Whence cometh that money? From the general fund. (See Section 68) The fund is indeed limited to $12 million maximum, but there is no limit on how much can be spent out of the fund for all politicians. If no “democracy credits” are going to be spent, if the fund will sit at $12 million for years with no appropriations, why pass IM 22 in the first place? You are spending taxpayer dollars by giving it to politicians. Period.

    4. Taxpayers are going to be supporting, without any choice in the matter, politicians with whom they may have grave moral disagreements. You argue that “not a dollar will be spent unless a voter chooses to assign his/her credits.” First, being a voter does not mean that you are a taxpayer. Fortunately, you may vote in this country without ever paying a dime in taxes. But for those people who do pay taxes, their tax dollars will be up for grabs for anyone (taxpayer or no) to give those dollars to their favorite politician. Second, some of your tax money will clearly go to politicians that you would NOT want to be elected. I will not name names, but there are some South Dakota politicians to whom I would never give money under any circumstances. They hold views and support legal changes that are diametrically opposed to all I hold dear. Yet my tax dollars would be given to that candidate.

    5. You are misrepresenting my argument concerning “padding the pockets of politicians.” Most of my tweets have clearly said, “Lining the campaign accounts of politicians.” I acknowledge that the democracy credits must go into a campaign account. On the other hand, IM 22 does not define “campaign costs or debts.” A politician could still hold lavish campaign dinners, hire limousines, pay campaign staff exorbitant salaries, and any number of other politician-like activities. There are also no restrictions on commingling of “democracy credits” with the general campaign funds. If a candidate receives $2,000 in credits and $2,000 in direct contributions, then spends $2,000, why could s/he not say, “I spent the democracy credits first.” More importantly, Section 62 clearly states that the politician should “pay all debts and obligations” before being required to refund a dime. In the end, a politician could still have thousands in his/her campaign account but say, “I don’t have any democracy credits left – those were spent first.” Then, s/he can dump those funds into their personal checking account after the campaign disbands.

    6. One of the most stomach-turning elements of IM 22 is that the “democracy credits” can be claimed by politicians who are running UNOPPOSED. The very article you tweeted to me raised this point in my mind. In my mind, this single fact essentially makes IM 22 indefensible. Up to $700,000 of taxpayer money given to a gubernatorial candidate running unopposed. Up to $15,000 of taxpayer money given to a legislative candidate running unopposed. IM 22 is devoid of any language that would prevent this situation. Indeed, Maine’s program (upon which South Dakota’s is based) has been used in uncontested races from the beginning. Here is the quote: “While the initial distributions were still enough for uncontested races . . .” http://www.governing.com/topics/elections/gov-maine-clean-elections-2015-ballot.html

    7. In many states where they have enacted similar measures, they have later been repealed or amended with greater taxpayer spending. In Maine, the state that you have lauded for their laws, they had to completely overhaul their program in 2015. Their politicians were not utilizing the program because it did not give them enough taxpayer dollars, so they threw more money at it. In Massachusetts, Portland, and North Carolina, the citizens repealed all or part of their programs (Massachusetts threw out the whole thing).

    8. “Graft” is defined as “the acquisition of money, gain, or advantage by dishonest, unfair, or illegal means, especially through the abuse of one’s position or influence in politics, business, etc.” I have already talked about the insidious and well-funded nature of the IM 22 campaign. There are already clear examples of “graft-like” behavior in the signature drive that just ended. Just wait until the proponents’ ad campaign kicks off with hundreds of thousands to be spent on the measure. (By the by, our South Dakota marketing companies are really going to enjoy life if IM 22 passes – they can benefit from taxpayer-subsidized campaigning!)

    Getting back to “graft,” recall my tweet in which I pointed out Section 48 of the measure. There, it says that a politician may personally solicit a voter to give his/her democracy credits to the politician. In fact, the politician can actually sit a voter down at a computer and actively assist him/her to send the credits to the politician. If that feels too much like “graft,” IM 22 allows you to instead send a paid representative to run a “how to” seminar at your local nursing home, college campus, or other establishment. By the way, “A valid assignment is irrevocable.” All of that definitely sounds like “acquisition of money through unfair means through the abuse of one’s influence in politics.”

    9. You say, “Every voter would get to decide whether $100 of their own tax dollars gets spent or stays put.” We have already talked about the fact that this is wrong. We are not talking about a system like the federal presidential contributions where money only goes in if a taxpayer voluntarily checks a box. Here, mandatory appropriations occur every year from the general fund whether taxpayers like it or not. In addition, non-taxpayers get to participate fully in this whole system, meaning that people are clearly not deciding “what to do with $100 of their own tax dollars.” Your quote above is patently incorrect.

    10. I am going to again address your argument against a straw man. I have not made any attacks against the portions of IM 22 that go after lobbyists and campaign contributions. My only target has been the taxpayer-funded welfare for politicians. You cannot dispose of my arguments just by pointing out that I am a lobbyist. That would be tantamount to me saying that your comments on education funding or common core are void because you are a teacher. I am a taxpayer and a South Dakota citizen and, as such, an interested party. You are not entitled to ignore me just because of my vocation.

    11. “[C]onsidering that probably every voter in this state spends at least $2,500 on food and clothing every year…” Really? I know lots of voters who do not spend that much on food and clothing every year. I absolutely believe they have (and should have) the right to vote, but they cannot afford even $2,500 for food or basic necessities. We the people got together and decided that these people should benefit from our tax dollars with assistance programs like welfare and food stamps. These people are in need and worthy of our public support. Politicians, on the other hand, are not “in need.” Politicians are able to afford basic necessities. Politicians are not worthy of our public support. I do not want to create a system whereby we are literally giving the same kind of taxpayer-funded support to politicians that we give to those in REAL need. I hope IM 22 makes the rest of South Dakota as nauseous as it makes me. Giving $700,000 of taxpayer money to some politician who wants to be Governor versus feeding a single mother and her three children? The fact that IM 22 would make the two situations similar is appalling.

  5. Is it me?
    or is that word salad from Justin G.,
    Ben Carson is calling you, please pick up.

  6. I haven’t decided whether I will support this yet. I’m actually inclined not to. What might change my mind is people like Justin Smith (lawyer/lobbyists) protesting too much. The self-interest of a lawyer/lobbyist in trying to kill an initiative that imposes burdens on lawyer/lobbyists is readily evident. Others besides me will see that Mr. Smith is not the best messenger for the opposition. Mr. Smith does not seem to have learned in his time as a lawyer that sometimes it’s better just to say less (or nothing at all) and go sit down.

    That said, I agree with Mr. Smith that this is an expensive and complicated proposal. I can picture South Dakotans voting no for any number of reasons.

  7. Roger Cornelius

    Whenever you hear a republican/politician/lobbyist say that some tax money could be used for education, you know that it won’t be.

    Remember video lottery?

  8. One piece at a time.

    “ad hominem smear”? Poppycock. I opened the piece by identifying Justin Smith by his profession and location, which is not an attack but a specification made all the more important by a rather common, Google-indistinct name. Understanding that the critic a lawyer may enhance the authority of Smith’s arguments on legal ramifications of the law. Understanding that the critic is a lobbyist and thus will be directly affected by provisions of this law as relevant as it would be to identify me as a blogger in a report about my opposition to restrictions on journalists’ access to public documents.

  9. Justin sounds like a young zealous man with most likely good capabilities and and drive.

    However, Justin, less is more! Four score and seven years…..

  10. Justin, John Tsitrian didn’t feel you were ad-hominemed. He zestfully reads this review and your response and concludes that the public-financing component of the Anti-Corruption Act is a fatal flaw that compels him to vote No on IM 22.

  11. On Justin’s #1:

    1. You used the word “insidious.” I provided a definition; you provided a counter-definition. We could get into a standards debate on how to choose one definition over another, but if you didn’t want to imply treachery or deceit, you should have picked a word that would not leave that interpretation open. Whichever definition we choose, however, neither is particularly flattering to Messrs. Weiland and Frankenfeld, and you applied those words to Weiland and Frankenfeld. Tell me again, who’s lodging the ad hominem attack?
    2. Public campaign finance is an anti-corruption component. It helps citizens finance the campaigns of politicians who choose to resist the corruption of big money.
    3. If you dismiss ballot measures based on the amount paid to circulators, may I assume you also stand firmly against the fake 18% rate cap amendment and will join me in helping educate voters against it as well?
    4. But again, isn’t criticism of circulators an ad hominem attack and not a critique of the bill itself? I think the ad hominem tally is now Justin 2, Cory 0. You don’t get to criticize me for an ad hominem attack I didn’t make, then lob ad hominem attacks to support your position. Which is it, Justin? Gloves on or off?

     
    Hmm… Justin gave us 11, and I’ve got about 200 words just on his #1. This could take a while. Good thing election isn’t for another eleven and a half months. Justin, do you think they’ll let the two of us do the KELO debate on IM 22?

  12. thank u lobbyist justin. my support for rick is now all the more assured. btw, “to his credit, this one” was an ad hominem attack was it not?

  13. On Justin’s #2:

    1. Justin, I was trying to pay you a compliment, assuming that the brain power you’ve mustered to blast public campaign financing can surely come up with arguments against the other planks. In one Tweet, you did take umbrage at being excluded from the Ethics Commission as a lobbyist, which I assumed constituted an argument against that provision. Your statement here about refraining from attacking the lobbying reform provisions indicates that you have arguments against those provisions but are refraining from muddying the debate with them. Your statement about fiscal impact indicates that you have objections to the entire package, but have simply chosen to focus on the area where you see the greatest fiscal impact. That’s fine: I respect decisions to focus one’s debate attacks on one most vulnerable issue.
    2. You won’t escape the foul cry anyway: if you can in good conscience say that IM 22 is just an insidious plot to line politicians pockets with graft, I think I’m allowed to point to your #2 as evidence that your vociferous opposition to IM 22’s public campaign finance may just be an insidious (or maybe that’s too heavy a word; how about just sneaky? crafty?) attempt to undermine a law that would reduce your influence and paycheck as a lobbyist.
    3. You’re not ineligible to argue on the anti-lobbyist restrictions, but you are obliged to acknowledge your self-interest, as surely as I must when arguing for higher teacher pay.
    4. Fiscal impact: your language suggests that you view the “staggering” fiscal impact of public campaign financing as significantly greater than the fiscal impact of the other provisions. That’s important for debate purposes: If we can prove that public campaign financing won’t break the bank, then it will be even easier to prove that the other provisions won’t break the bank and that the net benefits of helping more candidates challenge big money incumbents, empowering an ethics commission to investigate and prosecute campaign finance violations and other corruption, and checking the influence of lobbyists are all worth spending far less than 1% of the general fund.
  14. On Justin’s #3:

    1. In citing the $12M cap, I refute your persistent assertions that IM 22 means the maximum appropriation is taken out of the general fund every year. Your statement on that count is incorrect.
    2. There actually is a limit on how much can be spent out of the fund, both on individual candidates (see Section 59) and on totals spent for Legislature, statewide offices, and Governor (see Section 60).
    3. Under these limits, we never spend the full $12 million. In a gubernatorial election year, if we have two candidates running for every available seat (Legislature, CSPL, treasurer, auditor, PUC, SOS, AG, Gov) and participating in public financing, we only spend $5.38 million, which we could replenish in one year with GF appropriations and interest and fines and not need any GF appropriation in the next year. Your scenario of perpetual losses from the general fund misportray the practical execution of the proposal.
    4. If no one uses the Democracy Credit Fund and it sits at $12 million, then

      —(1) it generates interest, which, in excess of $12 million, must revert back to the General Fund, meaning that even if we don’t get the participation/democracy advantage, we get a fiscal advantage;
      —(2) we still gain advantages from lobbying reform and the ethics commission, which are each enough reason by themselves to vote for IM 12.

    5. You misword your last sentence and prematurely place your period. IM 22 appropriates around $5 million a year; IM 22 does not give that money to politicians (a word that I think you are using, Justin, at least as ad-hominemly as you perceive me to be using the word lobbyists). IM 22 allows individual citizens to give $50 or $100, much less than each of them has likely paid into state coffers through sales and use tax, to candidates of their choosing. The real mechanism at work is not some big-government tax giveaway; it is an opportunity for citizens to exercise more control over their own tax dollars.
    6. IM 22 actually puts less money in politicians’ pockets. Sure, politicians get public financing, but only if they accept limits on the money they take from other donors. See the definition in Section 3 and provisions in Sections 51 and 53: participating candidates agree to take contributions only from “natural person resident[s] of the state that [are] not, in the aggregate, in excess of two hundred and fifty dollars to a candidate for legislative office or in excess of five hundred dollars to a candidate for statewide office.” If I’m reading that right, that means no big donations from rich folks, no PAC money, no big bundles from the party. Whatever money campaigns get from this new public source of funding may be less than the money candidates would give up in big private PAC donations. Either participating candidates make do with less (putting the lie to your dire predictions of politicians lining their pockets) or they make up the difference by getting a lot more people to make small donations, which means they are engaging more people in the democratic process, which is exactly the point of public financing and another reason to vote for IM 22.

     
    Note: I’m having all sorts of fun thinking through and rebutting Justin’s arguments, but at the point where I have to issue 500-word rebuttals to each of his subpoints, he has me at a disadvantage in front of the majority of voters, who won’t be paying much attention until next fall and who won’t listen much past Justin’s three-word cry, “Welfare for Politicians!” But I’ll keep at it. :-)

  15. On Justin’s #4:

    1. Non-unique: Taxpayers have more choice over the spending of the public campaign financing dollars than they do over the spending of tax dollars on nuclear weapons, wars, corporate welfare, crop insurance, racist courts and prisons, Dennis Daugaard’s fancy house and servants, and any number of government line items to which people of good conscience may take offense.
    2. The notion that you can demand that not one penny of your tax dollars be spent to anything that offends you is as absurd and impractical as thinking you have the right to demand that the library stock no books that offend you or that public roads be barred to jerks.
    3. I agree and am similarly glad that we need not pay taxes to vote. But who in South Dakota does not pay sales tax?
    4. The amounts we are talking about here, two $50 credits, fall within the amount that the vast majority of citizens spend in sales tax. To the extent that we can make any individual claim to the public wealth rightly appropriated through taxation (a problematic concept! see my b!), the Democracy Credit Fund is a fraction of our total state tax bill. Each individual taxpayer is arguably grabbing little if any of anyone else’s tax dollars.
    5. Justin’s #4 is akin to arguing that because some people will derive a benefit from the public library that is greater than the amount of taxes that person paid and thus appropriates taxes that originally came from Justin and other, wealthier people, we should not have public libraries.
    6. The harm of my neighbors giving public money to Fred Deutsch, Mike Huether, and other candidates whom I don’t support is less than the benefit of limiting the money those candidates can take from big money interests that would shut effective challengers out of the race against them.
    7. Mitigation: Not all of the dollars in question are taxpayer dollars. Section 42 of IM 22 specifies that the Democracy Credit Fund may also receive voluntary donations, interest, and “other sources of revenue determined as necessary by the state. IM 22 includes provisions that allow us to avoid, in part or in whole, the disadvantage Justin argues here.
  16. On Justin’s #5:

    1. Granted: Justin said “campaign accounts,” not “pockets.”
    2. The more important word is “pad”, which implies extra cushion, beyond what they currently have or need. Cross-apply my 3f above: campaign accounts of participating candidates will quite likely be leaner than those of current big spenders.
    3. If a candidate wants $2,000 to pad her account, right now, she just goes looking one or two rich donors or PACs. To gouge the Democracy Credit Fund, she needs to agree to the rules, hustle eight donors for $250 contributions, and convince at least twenty citizens to send her both of their $50 Democracy Credits. If a candidate is in it for the money, she has much easier routes to enrichment outside the strictures of IM 22.
    4. Turn: the harm Justin talks about happens far more easily in the status quo than it does under IM 22. If you buy Justin’s argument that politicians run to get rich on campaign contributions, you vote for IM 22.
  17. On Justin’s #6:

    1. Justin is right: no language in IM 22 prevents an unopposed candidate from seeking Democracy Credits. The only barrier to that “stomach-turning” possibility is South Dakota voters, who would have to decide that the unopposed candidate needs their Democracy Credits more than opposed candidates on the ballot. I find the chances of that possibility small.
    2. That said, I am open to amendment of the statute in the 2017 Session or rule by the Ethics Commission to include “running opposed” in the criteria for certification as a participating candidate.
    3. Barring such amendment, I contend that IM 22 allows the Ethics Commission to deny certification to an unopposed candidate in observance of the purpose of the Democracy Credit Fund spelled out in Section 43: “The purposes of the Program are to minimize corruption or the appearance of corruption in government; to promote broad, diverse, fair, and undistorted influence and participation by South Dakotans in state electoral politics; to better inform the public about candidates running for office; and to promote meaningful and open discussion of political issues in the context of electoral politics.” The Commission can say, “Hey, dollars are limited, and satisfying our statutory purpose requires funding opposed candidates first.”
  18. Douglas Wiken

    It often takes many more words to demonstrate the fallacy in fewer words loaded with fallacies, distortions, and gross omissions.

  19. Democracy Credits, my tight doopa. When the citizens of SD start giving handouts to candidates just because the libbies can’t finance their own campaigns I will eat Newland’s hat. His good one.

  20. Douglas, is truth always harder to sell than fiction?