City’s "Wealthy Candidate" Provision Now Unenforceable

At its September 5th meeting, the City Ethics Commission determined that Los Angeles Charter section 470(c)10 – often referred to as the City’s “wealthy candidate provision” – will no longer be enforced based on a recent 5-4 U.S. Supreme Court decision in Davis vs. FEC, a case testing a similar provision of federal law known as the “Millionaires’ Amendment.” Enacted as Sec. 319(a) of the Bipartisan Campaign Reform Act of 2002 (“BCRA”), that provision enabled Congressional candidates to raise contributions higher than the normal limits when an opponent in their race used personal expenditures beyond certain thresholds.

In a rare step for the Commission, the five-member panel concluded, based on advice from the City Attorney, that the City can no longer require candidates spending more than $30,000 in personal funds to abide by the notice and deposit requirements of Charter section 470(c)10; that opponents of any candidate spending more than $30,000 in personal funds in a primary or runoff election can no longer solicit or receive contributions in excess of the normal $500 or $1,000 per person contribution limit that applies for their election; and that contributors may no longer give contributions larger than the normal $500 or $1,000 limit to a candidate whose opponent uses more than $30,000 in personal funds.

Charter section 470(c)10 is a longstanding provision of City law that pre-dates the 1990 creation of the City’s comprehensive campaign financing system and partial public financing program. It was designed to provide relief to candidates facing opponents who contribute more than $30,000 of their own money to fund their campaigns. Sec. 470(c)10 allowed candidates who do not have, or choose not to use, large personal funds in their own campaigns to raise larger than normal contributions from donors, up to the total amount of personal funds used by their self-funded opponent. It also allowed donors to give up to a higher per person limit under those circumstances.

Specifically, the provision allowed opponents of the self-funded candidate to solicit and receive, and their contributors to make, contributions in excess of the limits established in Charter sections 470(c)3 and 470(c)4 “until such opponent has raised contributions in amounts above such limits equal to the amount of personal funds deposited by the candidate in his or her campaign contribution checking account.” To implement the provision, it required first that self-funded candidates a) deposit all personal funds in their campaign account no later than 30 days before the election, and b) to notify all opponents and the City Ethics Commission no later than 30 days in advance of the election of the amount of personal funds they plan to spend.

The Commission’s resolution on the provision’s enforceability for the 2009 elections was triggered by advice it sought from the City Attorney’s Office in the wake of the Supreme Court’s Davis decision on June 26, 2008. In an August 26, 2008, letter to the Commission’s Executive Director, the City Attorney’s Office stated that the Supreme Court has “treated the ‘asymmetrical’ contribution limits as a spending limit on the self-financed candidate because, by providing advantages to the non-self-financed candidate, the self-financed candidate’s spending and speech are burdened.” Consequently, the Court struck down Sec. 319(a) as unconstitutional. The City Attorney’s Office concluded that the Davis case constituted “compelling legal authority to conclude that a challenge to the City’s provisions on constitutional grounds could not be successfully defended.”

With the 2009 municipal election cycle well underway, the Commission concluded that clear information for both candidates and contributors about the impact of the Court’s decision is vital. Citing its strong concern that the decision has created a “disparate impact” between self-funded and non-self funded candidates, however, the Commission also directed its staff to explore alternative policies that could be adopted in the future to allow candidates some ability to respond under a “wealthy candidate” scenario while addressing the Court’s concerns.

For a copy of the City Attorney’s August 26 communication, or a copy of the September 5 resolution adopted by the Ethics Commission, please contact the CEC.

Detail of all candidates’ campaign fundraising and expenditure activities, including their use of personal funds, will continue to be updated regularly on the City Ethics Commission’s 2009 Municipal and LAUSD Election Totals web page, accessible at http://ethics.lacity.org/efs/public_election.cfm?election_id=37.

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