On June 27, 2011, the Supreme Court decided Arizona Free Enterprise Club's Freedom Club PAC v. Bennett, holding that Arizona's public financing system substantially burdens political speech and violates the First Amendment by increasing the public financing contribution to one candidate when the amounts raised or spent by a privately financed candidate (or the expenditures of independent groups made in support of that candidate) exceed a certain level.
The Arizona Citizens Clean Elections Act, passed by initiative in 1998, created a voluntary public financing system to fund the primary and general election campaigns of candidates for state office. Eligibility is contingent upon the collection of a specified number of $5 contributions from Arizona voters and the acceptance of certain campaign restrictions (limitation of expenditure of personal funds, adherence to an overall expenditure cap) and obligations (agreement to participate in at least one public debate, return of all unspent public moneys to the State). In addition to initial allotments of public funds, candidates can receive "equalizing" or matching funds if a privately financed candidate's expenditures, combined with the expenditures of independent groups made in support of the privately financed candidate or in opposition to the publicly financed candidate, exceed the initial allotment of state funds to the publicly financed candidate. Once matching funds are triggered, each additional dollar spent by the privately financed candidate results in about one dollar in additional state funding to each publicly financed candidate. Additional expenditures by independent groups also can result in dollar-for-dollar matching funds to each publicly funded candidate. Matching funds top out at two times the initial authorized grant of public funding, which varies depending upon the office being sought.
Five past and future candidates for Arizona state office challenged the constitutionality of the matching funds provision. The federal district court permanently enjoined the enforcement of the matching funds provision, but the Ninth Circuit reversed, finding that the provision imposed only a minimal burden on First Amendment rights because it did not "actually prevent anyone from speaking in the first place or cap campaign expenditures." The Supreme Court stayed the Court of Appeals' decision pending its consideration of the merits, and subsequently reversed.
In striking down the matching funds provision, the Court stated that it did "not today call into question the wisdom of public financing as a means of funding political candidacy. That is not our business. … But the goal of creating a viable public financing scheme can only be pursued in a manner consistent with the First Amendment. … When it comes to protected speech, the speaker is sovereign." The Court held that the matching funds provision unconstitutionally burdened the speech of the privately financed candidate and of independent groups when choosing to exercise their First Amendment rights to spend funds on their own messages, because their choices to spend money would create a benefit to the candidate they opposed in the form of a direct and automatic release of additional public funds. In a multi-candidate race, the burden could be even greater, because each of the opposing candidates could receive the matching public funds. Furthermore, the publicly financed candidates could completely control their own messages, while the privately financed candidate could not coordinate with (and might even disagrees with some statements of) the independent expenditure groups.
The Court was not persuaded by Arizona's argument that it was increasing debate about public issues. "[E]ven if the matching funds provision did result in more speech by publicly financed candidates and more speech in general, it would do so at the expense of impermissibly burdening (and thus reducing) the speech of privately financed candidates and independent expenditure groups." The Court stated that an individual should not be compelled to "help disseminate hostile views" by having his own speech trigger the release of state money to his opponent. The Court disapproved of "a subsidy given in direct response to the political speech of another, to allow the recipient to counter that speech."
The Court held that this burden on privately financed and independent speech was not justified by any compelling state interest. An interest in "leveling the playing field" by equalizing financial resources of candidates was not even a legitimate government objective, because it meant that government would be making and implementing judgments about which strengths (money, name recognition, prior exposure to the candidate's views, etc.) should be permitted to contribute to the outcome of an election. Although an interest in combating corruption or the appearance of corruption would be legitimate, the provision did not further that objective, because a candidate is not corrupted by the expenditure of his own funds and because the "separation between candidates and independent expenditure groups negates the possibility that independent expenditures will result in the sort of quid pro quo corruption" that could be addressed without encountering First Amendment problems. Finally, the Court held that "the fact that the State may feel that the matching funds provision is necessary to allow it to … ‘fine-tune' its public funding system, ... to achieve its desired level of participation without an undue drain on public resources, is not a sufficient justification for the burden."
Maine and North Carolina have passed matching funds statutes that resemble Arizona's law, and that now are questionable in light of Bennett. Three other states have adopted matching funds provisions, but court previously enjoined enforcement of those statutes after concluding that their operation violated the First Amendment: Minnesota (enjoined in 1994), Connecticut (enjoined in 2010), and Florida (enjoined in 2010).
Chief Justice Roberts delivered the opinion of the Court in which Justices Scalia, Kennedy, Thomas, and Alito joined. Justice Kagan filed a dissenting opinion in which Justices Ginsburg, Breyer, and Sotomayor joined.