THE REFUNDS HELPED STIMULATE UNPARALLELED PARTICIPATION BY SMALL DONORS

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1 AFFILIATED WITH THE GEORGE WASHINGTON UNIVERSITY For Immediate Release July 8, 2009 ` Contact: Michael Malbin (202) , ext. 15 NEW RESEARCH BY CFI ON THE STATES: MINNESOTA'S $50 POLITICAL CONTRIBUTION REFUNDS ENDED ON JULY 1 EXECUTIVE DIRECTOR MICHAEL J. MALBIN CHAIRPERSON ANTHONY CORRADO TRUSTEES F. CHRISTOPHER ARTERTON BETSEY BAYLESS JEFFREY BELL DAVID COHEN VIC FAZIO DONALD J. FOLEY BOB FRANKS GEORGE B. GOULD KENNETH A. GROSS RUTH S. JONES RONALD D. MICHAELSON ROSS CLAYTON MULFORD PHIL NOBLE JEANNE OLSON THE REFUNDS HELPED STIMULATE UNPARALLELED PARTICIPATION BY SMALL DONORS Minnesota, like many states, is suffering through a budget shortfall prompted by the country's larger economic woes. To address the problem Gov. Tim Pawlenty last month announced $2.7 billion in "unallotments" beginning July 1 and continuing for two years. (An "unallotment" is essentially a governor s refusal to spend money that the law has appropriated for a public program.) One unallotment eliminates the $10.4 million that funds the state's political contribution refund program through June 30, Many local observers believe that this step represents the first part of an effort to kill the program altogether. ACADEMIC ADVISORS JAMES E. CAMPBELL ANTHONY CORRADO DIANA DWYRE DONALD P. GREEN JOHN C. GREEN KEITH HAMM GARY C. JACOBSON ROBIN KOLODNY RAY LA RAJA THOMAS E. MANN MARK J. ROZELL KAY SCHLOZMAN CLYDE WILCOX For the past five years, the Campaign Finance Institute has been researching the role of small and large donors in state and federal elections. Our research has found that small donors play an unusually large role in Minnesota s state elections. Consequently, Minnesota s candidates for governor and state legislature are more likely to rely on average citizens, instead of wealthy donors, for campaign funds. The rebate is important to the unusually high level of small donor participation in Minnesota. "Eliminating the rebate would remove an important force for democracy in Minnesota government," said CFI's Executive Director Michael Malbin, who is also a professor of political science at the University at Albany (SUNY). "The refund promotes greater equality by building up from the bottom. It deserves significant credit for the role of small donors in Minnesota. The PCR deserves to be imitated, not destroyed." Minnesota's unique Political Contribution Refund program (PCR) was enacted in (The state previously offered a tax credit, which was repealed in 1987 as part of a simplification of the tax code.) Under the PCR, individuals got rebates of up to $50 per year ($100 for a married couple filing jointly) for political contributions to a state or local political party or to a candidate for state office. To be eligible, a candidate had to participate in the state's system of partial public financing with spending limits. Unlike a tax credit, the PCR came back within four to six weeks, making it more effective than a tax credit for low income donors M STREET NW SUITE 380 WASHINGTON, DC FAX info@cfinst.org CampaignFinanceInstitute.org Consistently, Minnesota stands out as having a different mix of campaign donors from those of almost all other states. The elections of 2006 are the most recent for which comparable data are available from all states. That year, 36 states held both legislative and gubernatorial elections. According to CFI's analysis of the data, small donors ($100 or less to any one candidate) accounted for: Statements of the Campaign Finance Institute and its Task Forces do not necessarily reflect the views of CFI's Trustees or financial supporters

2 Less than 1 of the private contributions to candidates in 20 states; Between 1 and in 12 states; Between and 36% in 3 states; and 45% in Minnesota. 2 In states with lower proportions of money from small donors, two-thirds to threequarters of the contributions often typically has come from individuals who give $1,000 or more, or from non-party organizations such as corporations and labor unions. (A newly released table listing the sources of private contributions in the 36 states is included in the attached PDF file.) The PCR distributed $4.6 million to donors in the election cycle of This was a significant amount. In fact, the PCR accounted for nearly one-third of the private contributions to candidates for the state legislature, with incumbents and nonincumbents being about equal. Small donors in gave approximately $8.5 million to candidates. While it would be a mistake to attribute all of the $4.6 million in PCR money to small donors, much of it clearly went to small donors. Of course, we cannot reach this conclusion solely by comparing public records. The state of Minnesota does not disclose the individuals who file for the PCR or donors who give $100 or less. Nevertheless, we feel confident of the conclusion because of two sets of surveys CFI conducted in the state of Minnesota after the 2006 election. One was a survey of the 2006 general election candidates for Minnesota s state legislature and the other a survey of donors to Minnesota s legislative and gubernatorial candidates in The following summarizes some of the findings. First, most candidates (67% of the incumbents and 8 of the nonincumbents) said that many, almost all, or all of their small donors gave "mostly" because of the rebate. The candidates strongly disagreed with the statement that the rebate only subsidized contributions from those who would have given anyway. The candidates (81% of the incumbents and 88% of the nonincumbents) also agreed with the following statement: "Because of the refund, I asked for contributions from less affluent people who probably won't contribute if they can't receive the refund." The donors mirrored the candidates. 62% with household incomes of $40,000 or less said the rebate influenced their decision to give. The same position was taken by 49% with household incomes between $40,000 and $100,000 and only 28% of those above $100,000. For bar charts and the wording of the above survey questions, see the attached PDF. # 30 # The Campaign Finance Institute is a non-partisan, non-profit institute affiliated with the George Washington University celebrating its tenth year of research. Statements of the Campaign Finance Institute and its Task Forces do not necessarily reflect the views of CFI's Trustees or financial supporters.

3 Sources of Candidates' Funds: Percentage from Donors Who Gave... (All 36 States With Gubernatorial and Legislative Elections in 2006) Individual Donors Organizations Totals State $101- $1-$100 $250 $251- $499 $500- $999 $1,000+ Non- Party Party Percent Dollars AL 2% 1% 2% 3% 21% 68% 2% $69,630,634 NV 2% 1% 1% 14% 71% 11% $27,159,259 CA 2% 1% 2% 2% 43% 4 1 $302,337,398 WY 3% 2% 6% 8% 52% 22% 8% $8,815,953 NY 3% 2% 3% 4% 42% 35% 12% $114,431,703 TX 3% 2% 3% 6% 65% 18% 2% $259,242,430 FL 4% 2% 5% 27% 6% 35% 21% $90,124,399 NM 5% 2% 3% 5% 36% 39% 9% $24,835,728 PA 5% 2% 3% 5% 42% 24% 18% $106,395,841 OR 6% 1% 1% 2% 22% 47% 21% $38,371,497 SC 6% 2% 5% 9% 38% 37% 4% $23,408,117 GA 6% 2% 5% 7% 42% 34% 4% $72,163,981 IL 7% 1% 2% 3% 28% 48% 12% $111,962,249 MI 7% 4% 5% 7% 46% 22% 1 $58,516,995 IA 7% 3% 4% 5% 43% 25% 14% $36,702,319 OK 7% 4% 7% 1 49% 19% 4% $31,393,536 TN 8% 3% 6% 9% 36% 29% 1 $19,536,033 MD 9% 5% 7% 9% 33% 37% 1% $48,683,545 AR 9% 4% 6% 9% 36% 31% 5% $19,538,825 KS 9% 4% 6% 9% 31% 4 1% $15,768,625 CT 1 5% 11% 11% 45% 1 8% $21,862,450 OH 1 2% 3% 3% 14% 55% 13% $99,402,706 SD 1 5% 8% 6% 45% 12% 14% $9,081,577 ID 11% 4% 5% 7% 3 38% 6% $8,281,214 AK 11% 6% 1 18% 33% 13% 8% $9,418,980 NH 13% 5% 8% 1 36% 24% 5% $5,247,673 MA 13% 3% 4% 8% 59% 4% 1 $73,789,177 HI 14% 3% 4% 5% 38% 31% 3% $10,503,295 CO 15% 1 15% 11% 25% 19% 6% $17,770,328 WI 17% 9% 12% 14% 38% 8% 3% $27,487,615 ME 19% 5% 12% 28% 17% 16% 2% $2,127,391 AZ 19% 28% 34% 4% 14% 1% $2,744,532 RI 5% 8% 12% 41% 11% 2% $9,492,562 VT 26% 8% 11% 11% 13% 11% $3,600,658 NE 36% 2% 6% 27% 26% 2% $10,118,990 MN 45% 6% 11% 1 16% 6% 6% $18,934,784 NOTE 1: This table only includes states with gubernatorial and legislative elections in Among the states with legislative elections only, Montana's candidates raised 47% or their money from donors who gave them no more than $100. Montana's result is explained by the fact that the state limits contributions to state legislative candidates to a maximum of $130 per election. A total of $2.3 million was spent on Montana legislative elections in In all other states candidates received a significantly lower percentage from small donors. NOTE 2: Table only includes contributions to candidates, not self-financing or public funds. SOURCE: THE CAMPAIGN FINANCE INSTITUTE

4 Estimated proportion of a candidate's small donors who gave "mostly" because of the rebate Percentage of incumbent or nonincumbent candidates % None or almost none 31% 8% 12% 44% 47% 23% 33% Some Many All or almost all Incumbents (n = 39) Nonincumbents (n = 78) Question text. Some donors may give to a campaign mostly because they can get the refund. To the best of your knowledge, how many of your small donors (that is, people who donated $50 or less) to your campaign gave mostly because they could get the refund? (Source: CFI Survey of 2006 State Legislative Candidates.)

5 "[The rebate] only subsidized contributions from people who would have given anyway." Percentage of incumbent or nonincumbent candidates % 4% 5% 5% 3% 1% Strongly agree Agree Neither agree nor disagree 33% Disagree 56% Strongly disagree Incumbents (n = 39) Nonincumbents (n = 81) Question text: The refund did not help my campaign s fundraising efforts. It only subsidized contributions from people who would have given anyway. (Source: CFI Survey of 2006 State Legislative Candidates.)

6 "Because of the refund, I asked for contributions from less affluent people who probably won t contribute if they can t receive the refund." Percentage of incumbents or nonincumbent candidates % 49% Strongly agree 32% 27% Agree 16% 4% 3% 9% Neither agree nor disagree Disagree Strongly disagree Incumbents (n = 37) Nonincumbents (n = 82) Question text: People have different opinions about Minnesota s refund for political contributions. Please indicate whether you agree or disagree with each of the following statements. Because of the refund, I asked for contributions from less affluent people who probably won t contribute if they can t receive the refund. (Source: CFI Survey of 2006 State Legislative Candidates.)

7 Rebate affected decision to give Percentage of individual donors in income category % Less than $40,000 (n = 34) 49% $40,000 to under $100,000 (n = 175) 28% $100,000 or more (n = 478) Household income in 2006 Question text: Some people could not afford to give in 2006 without the refund. For other people, the refund had nothing to do with their decision to give. Which ONE of these statements best describes you? (Please select one only.) Answers: The refund had nothing to do with my decision to give. I could afford to give, but the refund helped me decide to give. I could not afford to give without the refund. None of the above. Respondents who answered "I could afford to give..." or "I could not afford to give..." were scored as indicating that the rebate affected their decision to give. (Source: CFI Survey of Donors to 2006 Minnesota Gubernatorial and State Legislative Elections, weighted data.) Note: Minnesota s campaign financial disclosure law requires candidates to report the names and addresses only of donors who give more than $100 to a candidate during a calendar year. Consequently, our survey includes only donors who gave at least $100 to a single candidate in Since the size of the rebate-refunded contribution cannot exceed $50 per year, our survey sample does not include any donors who gave only the free contribution of $50 to an individual candidate. Therefore, we strongly suspect that our survey results underestimate the rebate s overall impact on the giving decisions of less affluent Minnesotans.