Matching funds for candidates falling short
By Michael Kranish, Globe Staff, April 15, 1999
WASHINGTON -- With fewer taxpayers than ever agreeing to earmark $3 each for presidential campaign funds, the federal government may have only one-third of the requested $60 million in matching funds next January, putting a financial squeeze on White House candidates counting on the contributions.
In a combination of circumstances that has never occurred before, a record low number of Americans are expected to check off the campaign contribution on tax returns this year, while an unusually high number of presidential candidates are likely to seek those funds. In addition, next year's compressed primary schedule has made it important to receive the federal matching funds as early as possible.
"This time around, some of the candidates may not get their money till well after the primaries," said Federal Election Commission spokesman Ian Stirton. "That is one of the reasons that the experts are saying they have to collect so much money up front because there may not be the matching funds available." Some campaigns hope to make up for the shortfall with bank loans, but that could add significantly to campaign expenses.
All of this may help the top-tier candidates with lots of money, but hurt the rest of the field.
For example, Texas Governor George W. Bush might have enough campaign money to be unaffected or may forgo matching funds altogether in order to avoid having spending caps. And millionaire publisher Steve Forbes, another Republican candidate, has said he won't take matching funds because he plans to rely partly on his own fortune. Thus, Forbes can avoid spending caps and spend more money than any other primary candidate.
But for the rest of the field, especially among the crowded Republican slate, the shortfall could prove painful. Senator John McCain of Arizona and commentator Patrick J. Buchanan are counting on matching funds in their spending plans.
The problem stems from a long-festering taxpayer rebellion against earmarking $3 of their tax money toward the pool of campaign matching funds, a program that began in 1972. Some of the money is set aside to pay for the major parties' national conventions.
While the contribution does not increase taxes, many people either dislike supporting the matching fund or do not understand it.
By 1976, 27.5 percent of taxpayers agreed to the contribution, which then was $1. By 1997, 12.6 percent of taxpayers made the checkoff. A sampling of 1998 tax returns conducted earlier this month showed that only 10 percent of taxpayers supported the fund, the lowest ever, an IRS official said yesterday.
What has caused the decline? Just listen to a top official in one campaign who has a vested interest in the checkoff.
"I typically do not check it," said the official, who requested that his name not be published. "I don't know why, I just don't." When told that the federal government might have a $40 million shortfall as a result of taxpayers like himself, the official said, "I intend to check it off this year."
The McCain campaign illustrates the potential problem. An individual's contribution up to $250 can be matched dollar-for-dollar with taxpayer funds. Individual contributions are limited to $1,000 per candidate during the primary.
If McCain qualifies for $10 million in matching funds, as is possible, he would receive only $3.2 million at the beginning of next year because of the shortfall, according to FEC projections. He would receive the remainder as it became available.
"The expectation is we are eligible for the matching funds," said McCain spokesman Howard Opinsky. "That is certainly part of our plan." He added that the campaign hoped to take out a loan to cover the shortage.
But if most of the likely candidates, 11 Republicans and two Democrats, seek matching funds, the pool of money will run out more quickly than ever. According to FEC estimates, the candidates are expected to seek $61 million to $67 million in matching funds in January.
That is far more than past requests. The matching funds requested Jan. 1 in previous campaign cycles were: $7.8 million in 1984, $28.7 million in 1988, $6.4 million in 1996 and $37.4 million in 1996.
There was never a shortfall until 1996, when the government was shy $15 million for the candidates. Candidates received about 60 percent of their qualifying matching funds in January 1996. But the shortfall was quickly made up by April 1996, with candidates getting loans to cover the delay.
But now the projected shortfall is far greater, more than $40 million, with only 32 percent of the matching funds expected to be available on Jan. 1, 2000. Moreover, the government does not expect to make up for the shortfall until April 2001, a full year later than in the previous campaign, because so few taxpayers are marking the checkoff.
Many of the presidential campaigns are already making contingency plans. Stan Huckaby, who works as a financial consultant to a number of Republican candidates, spent much of yesterday talking with bankers about getting loans for the anticipated matching funds.
Huckaby said he is confident the loans will come through, but a possible 10 percent interest rate on the loans will add to the expense of a campaign. Some government officials and campaign aides worry that it will take so long to make up for the shortfall that it will be difficult to obtain the loans.
Some FEC officials say part of this problem could be solved if they could promote the notion of making the $3 checkoff. But the agency has determined that would be deemed too political and dropped the idea of airing public service announcements.