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Why some want to make public spending on political campaigns in Minnesota less like Menards rebates

Called “Democracy Dollars,” the proposal would automatically send Minnesota voters coupons to easily spend on their favorite candidates.

Patterned after a program pioneered in Seattle, the idea is to send two, $25 coupons to every voter in Minnesota. Those voters can then give them to candidates or parties who, in turn, can cash them in with the state.
Patterned after a program pioneered in Seattle, the idea is to send two, $25 coupons to every voter in Minnesota. Those voters can then give them to candidates or parties who, in turn, can cash them in with the state.
Seattle Ethics & Elections Commission

Minnesota has a three-decade-old way for the public to make campaign contributions using tax dollars that most members of the public don’t know about. Or use.

Because even if they are aware, all they have to do to use it is make a donation of $50, get a receipt, fill out a form, mail it in or file on a government website and wait for two state agencies to verify their eligibility. Then they get a check. What percentage of Minnesotans use the system? The number is in the single digits

Backers of House File 3, a broad elections bill offered by legislative DFLers, want to increase knowledge and usage by voters with something they call Democracy Dollars. Patterned after a program pioneered in Seattle and now adopted by Oakland, the idea is to send two, $25 coupons to every voter in Minnesota. Those voters can then give them to candidates who, in turn, can cash them in with the state.

To receive the money, candidates must agree to the same set of rules now in place for the refund program and the state campaign subsidy program. They must agree to cap spending on their campaigns and limit their personal contributions, among other rules.

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Rep. Emma Greenman, a Minneapolis DFLer who is the prime sponsor of HF 3, said she thinks a less “clunky” program would push candidates to engage more with voters and voters to engage more with elections.

State Rep. Emma Greenman
State Rep. Emma Greenman
“If we want campaigns that can thrive and communicate with voters, and if we want campaigns that are resourced by the voters of Minnesota — as opposed to big donors and corporations — public finances is the way to do that,” Greenman said. “We’re gonna take our collective resources and say the infrastructure of democracy is worth it.”

The challenge, she said, is to find a system where “candidates can run and win with the support of small dollars.” Now, too often, campaigns are driven by big independent expenditures that wrest control of campaigns from candidates and detach voters from the process, she said.

“How do you create incentives for candidates to get out and reach people?” she asked.

Because Minnesota already has public financing of campaigns, the hurdle of tax dollars to candidates doesn’t need to be overcome. Both DFLers and Republicans make use of the Political Contribution Refund program, as well as a separate program that sends state money to candidates — and parties  who agree to contribution and spending caps. That program isn’t affected by HF 3, but the bill does repeal the 1990 vintage Political Contribution Refund program. Greenman uses the term “modernize” rather than repeal.

The current program is complicated, though. A voter who gives money to a candidate or a political party that has signed up to limit their spending can get a refund from the state worth $50 per person or $100 for a couple. But to get the cash back, that voter would have to get a PCR receipt from the campaign along with an application form. That form, complete with a donor’s Social Security number, is then sent to the state Department of Revenue.

The program requires verification by both Revenue and the Campaign Finance Board before refunds can be sent out. All that depends on funding by the Legislature. In 2009 it was a victim of then-Gov. Tim Pawlenty’s “unallotment” or appropriated money during a recession.

“The PCR program was not funded for contributions received in the last six months of 2009, all of calendar years 2010, 2011, 2012, and 2016, and the first six months of 2013, 2015, and 2017,” reports the Campaign Finance Board

Between 2002 and 2018, Revenue sent out $22,274,373 in refunds.

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Jeff Sigurdson is the executive director of the state Campaign Finance Board. The board is interested in the proposed changes it would administer but has not taken a position. He acknowledged the current refund program is awkward and that the process could limit its use. He compared it to an offer made by a prominent retailer.

Jeff Sigurdson
Jeff Sigurdson
“When I go to Menards and they say, ‘Get 11% back if you fill out this and send it in to this address,’ I think, ‘Well OK, how many times have I actually done that?’” Sigurdson said. Democracy Dollars is a simpler, more direct process. And voters don’t have to know about the program because they get a mailing with the coupons inside. And they don’t have to front the $50 to a campaign in hopes that they’ll eventually get the money returned.

The Democracy Dollars provisions of HF3 would send coupons to each registered voter in March of even-numbered years. Voters who register after that date could send in a request for vouchers. The bill allows residents who are eligible to vote but who have not registered to request vouchers as well.

If every voter used their coupons, the cost would reach close to $200 million an election. But backers assume usage will start in the single digits the first year and rise from there.

The Campaign Finance Board staff is preparing a fiscal note that estimates what it will cost in people and money. But a similar provision in 2021’s House File 9 thought the program would cost around $15 million in its first year and grow to $30 million after 10 years as it becomes better known. That is based on the assumption that only 8 percent of coupons issued will be redeemed, growing to 16 percent in 2030.

But the bill would cap the dollar amount available with a first come, first-served process for deciding which coupons get redeemed if the money runs out. That 2021 fiscal note assumed that the number of eligible but not registered voters requesting coupons would be small “because it is unlikely that a significant number of individuals who are not motivated to register to vote will now be motivated to apply for coupons.”

The program is patterned after a program used in Seattle since 2017. It is the only other government that uses such a system, though Oakland voters have now approved a similar plan. Minnesota would be the first jurisdiction where elected officials, not voters, approved the program.

A study by University of Washington economist Alan Griffith compared elections held before and after the voucher program was used. According to a news release from the university, Griffith found that the program increased the total amount donated to campaigns by $31,000 or 53% and increased the number of donors by 350%.

Wayne Barnett, the executive director of the Seattle Ethics and Elections Commission, said the Democracy Voucher Program was the centerpiece of a 2015 voter initiative dubbed Honest Elections Seattle. Voters receive four, $25 coupons that can be given to candidates for mayor, city council and city attorney. It is paid for with a property tax surcharge that raises $3 million a year.

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Use is growing. The first campaign that used the vouchers was 2017 when vouchers were redeemed for $1.14 million. In 2019 it jumped to $2.45 million and in 2021 it increased to $3.4 million. Candidates must pledge to cap spending and take part in public debates and forums. They must also collect a set number of small donations and collect a set number of signatures to take part.

“I don’t think I voted for it when it first came along,” Barnett admitted. “But I would vote for renewal because I think it has proved itself. It’s proved itself by really opening up the political process. We’ve got new candidates, we’ve got new contributors. It’s really kind of upended politics.”

The Seattle program and what Greenman is proposing are the same in that voters don’t have to $25 or $50 up front to donate like they do in the current state refund program. 

“It’s a game changer,” he said. “You don’t need to have your own money to contribute.”

The side effects, however, are increased spending on campaigns and the increase in money spent via independent expenditure committees. 

“It will increase spending overall,” Barnett said. “I don’t think there’s any way to deny that. This will draw new money into the process and that tends to drive up the costs of elections. It’s not going to reduce spending on elections.”

And when bigger donors find that their money is being matched by small donors, more big donors give to independent committees.

“This program is part of the increase in independent spending,” Barnett said.