Some critics contend that North Carolina needs to get “big money” out of politics. State lawmakers have responded to that argument by starting taxpayer financing of races for appellate court seats and some Council of State offices. But a recent U.S. Supreme Court ruling casts serious doubt on whether North Carolina’s public financing schemes are constitutional. Daren Bakst, John Locke Foundation Legal and Regulatory Policy Analyst, recently discussed the topic with Donna Martinez for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)

Martinez: Daren, before we get into the ruling itself, briefly summarize for us how this works in North Carolina now.

Bakst: Well, if you are a traditional candidate — which means, basically, you don’t accept taxpayer dollars — if you spend beyond a certain amount of money, a threshold level, an equal amount will go to your opponent that is taking the taxpayer dollars. We will call them the subsidized candidate. So, for example, if I am a traditional candidate and I don’t take taxpayer dollars and I spend $5,000 above the threshold level, my opponent gets $5,000 from the taxpayers of North Carolina to equalize the funding. That is kind of how it works. In addition, any independent group, like a political action committee, that spends a certain amount of money can also trigger money going to the subsidized candidate. So if I am an independent group and I support a candidate that doesn’t want to take taxpayer dollars, I can wind up punishing the candidate I like and supporting the candidate I oppose. …

Martinez: OK now, Daren, you have been writing about this recent U.S. Supreme Court ruling called Davis v. FEC — and you say that this will, and should, have an impact on what North Carolina is doing. Explain to us what the court ruled in Davis v. FEC.

Bakst: Well, yes, first of all, any reasonable interpretation of this case would lead someone to believe that the North Carolina systems are unconstitutional. What the Supreme Court was looking at was McCain-Feingold, which is the federal campaign finance law — infamous law. There is a provision in the law that punished self-financed candidates — people that spent a lot of their own money, congressional candidates. So if you are a congressional candidate and you spent beyond a threshold amount, it would trigger all kinds of advantages to your opponent — fundraising advantages. What the Supreme Court said was, if you are going to punish speech like that, that is a significant burden on speech, and they found that there is no compelling reason to have that type of restriction. Just because I can speak and go out and promote my campaign, if I am getting punished for making that speech, that is not really free speech. That is what the Court said. And we can definitely compare that to the North Carolina situation.

Martinez: Let’s do that. Exactly how will this federal ruling affect North Carolina law?

Bakst: Well, hopefully the legislature will pay attention to the fact that the U.S. Supreme Court ruled this way and will reconsider the existing systems. I mean, I think there should at least be a moratorium on these systems until there is some type of clarification in the courts as to whether or not they are constitutional. The North Carolina system is actually worse than the provision that the Supreme Court reviewed. In North Carolina, the subsidized candidate gets matching funds. They actually get the money. In the federal law, the candidate only got contribution advantages — special advantages for fundraising — so he still had to raise the money. In the North Carolina law, there is punishment of independent groups, not just the candidate. Federal law doesn’t have that problem. It is possible under the North Carolina law, for the candidate — the traditional candidate — to spend less than the subsidized candidate, for the independent groups that support the traditional candidate to spend less than the other independent groups supporting a subsidized candidate, and matching funds would still go to the subsidized candidate. That is possible. That is how weird it is.

Martinez: Daren, for someone like me who is not an attorney — and you are an attorney — explain how a Supreme Court ruling relates to a state law. Shouldn’t a Supreme Court ruling just automatically trump a state law?

Bakst: Well, it does. But, you know, what is going to have to happen is, somebody is going to have to go to court and challenge the system. Now, there was a challenge of North Carolina’s taxpayer financing system as relates to judges. And the 4th Circuit, which is the federal Court of Appeals for North Carolina, ruled that public financing was constitutional. But the key point though is, that was before this U.S. Supreme Court case in Davis. A lot of the taxpayer financing proponents keep bringing up the 4th Circuit case, failing to mention that was before the Supreme Court ruled. Another thing they’ll argue is that the Supreme Court declined to review the 4th Circuit case. That means nothing. The Supreme Court has a chance to hear 8,000 cases a year and declines tons of cases. It means nothing. You can’t read anything into the fact the Supreme Court decided not to review that 4th Circuit opinion. One reason the Supreme Court may have declined to review it is because they probably think the Davis case is so clear that when the circuit courts start to review this issue again, they’ll come up with a different result. A lot of these proponents argue that taxpayer financing is working because so many candidates are accepting the taxpayer dollars. But it’s a shock that anybody would not take taxpayer dollars if you are a candidate, because there are so many punishments for not taking the money.

Martinez: Daren, North Carolina is not the only state that has this type of law. Other states have them as well. Are any other states actually beginning to deal with this Davis ruling?

Bakst: Yes. In New Jersey they were considering a public financing bill, and a legislative counsel’s office there did an analysis after the Davis case and basically told the legislature these matching fund provisions are most likely unconstitutional. In Arizona, where a lot of this public financing stuff kind of began, there was a challenge to the Arizona taxpayer financing system. Basically, what they wanted to do was block matching funds from going to candidates in this past 2008 election. Now the court, basically, didn’t block the matching funds, but it did say it was very highly likely that, on the merits of the issue, the plaintiffs — the ones challenging the law — would be successful. In other words, they pretty much agreed with the argument that the Davis case basically means that the matching-fund provisions in these laws are unconstitutional.

Martinez: So bottom line for us here in North Carolina — do we just have to wait for someone or some entity to challenge state law?

Bakst: Well, you know what, legislators — they swear to uphold the Constitution. This is a provision that, I think, violates First Amendment rights, and when something most likely violates First Amendment rights, I think they should defer to the idea that let’s not violate rights and let’s make sure that it doesn’t. The legislature can do something. They should do something. And that should probably be a moratorium or [a] repeal [of] these provisions altogether.

Martinez: Beyond the legalities of this issue, give us your top reason why you believe that this type of public financing is misguided public policy.

Bakst: Besides the legal, it certainly protects incumbents, because once you equalize funding, it gives a built-in advantage to incumbents — because [of] name recognition just by itself. The Supreme Court has pointed out that this equalization of funds gives incumbents advantages. Plus budgetary problems — we are basically giving welfare to politicians. Do we want to do that and force taxpayers to support speech they don’t support?