THE RISE AND FALL OF PUBLIC FUNDING
Public funding for presidential elections was the most controversial and most innovative part of the post-Watergate reforms. It was not controversial with the public, which supported it by large majorities, and every serious presidential contender participated in the program from 1976 through the rest of the century. But as Watergate receded from the headlines and from public attention, so too did support for, and even knowledge of, the public funding program. In 2012, both major party candidates opted out of the program.
While public funding was losing ground at the federal level, though, it was gaining ground at the state and local levels. These programs ranged from ones that offered only tax incentives for small contributions to more ambitious ones that were based on the presidential model. The popularity of publicly funded elections has increased since Citizens United, but the immediate future of such programs is at the state and local levels.
How does the Presidential Election Campaign Fund work?
The program is financed by an income tax checkoff. When you pay your U.S. income taxes, you see this question on Form 1040: "Do you want $3 of your federal tax to go to the Presidential Election Campaign Fund?" If you check the "Yes" box under that question, you send $3 into the Fund. Checking that box does not increase your taxes; it simply diverts part of what you have already paid to finance a government program you support. The original checkoff was for $1, but Congress increased the amount to $3 in 1993.1
The program uses these checked-off dollars to provide subsidies to qualified candidates: matching funds for small contributions in the primaries and grants for the general election. To qualify for matching funds in the primary elections a candidate must raise at least $5,000 in each of twenty states in contributions of $250 or less. Donors can make contributions up to the FECA limit of $2,700 (as of 2015), but only the first $250 counts toward the $5,000 required for each state. Matchable contributions must be from individual residents of the states, not from PACs or parties. Candidates can still raise money from PACs, but PAC contributions are not eligible for federal matching funds. Candidates with broad support generally raise more money than they get in federal funds.
Congress set the matchable limit at $250 to encourage candidates to solicit small donations. And requiring those donors to be residents of twenty different states ensured that public funds would go only to candidates whose support was not limited to a particular state or region. To be eligible for matching funds candidates also must agree to three spending limits: a limit for each state, which varies by population; an overall limit; and a limit of $50,000 from personal funds.
From 1976 through 2012 the program also provided partial funding for the parties' nominating conventions. Candidates who win their party's nomination get a flat grant for the general election; they must limit their spending to the amount of the grant and cannot raise private funds. Major party candidates began opting out of the program for the primaries in 2000, and in 2012 they opted out entirely, raising private funds for the primary and general elections. As of this writing, none of the candidates for the Republican and Democratic Party nominations have opted into the program for the 2016 primaries, and the eventual candidates will probably raise private funds for the general.