ON NOVEMBER 6, when most Americans were awakening to Republican electoral triumphs, Arizonans learned that they had bucked the trend by electing a left-wing Democrat as governor. What produced Janet Napolitano's victory over GOP candidate Matt Salmon in a state with a 3-2 Republican registration advantage was not issues or personalities, but the nation's most ambitious scheme for the public funding of election campaigns--a harbinger of liberal plans for remaking the nation's political landscape.

The future of campaign finance reform is playing out in Arizona, and so far the results are ugly. In 1998, Arizona voters approved by a vote of 51-49 percent the Clean Elections Act, ostensibly to remove special-interest influence from politics by offering campaign subsidies to candidates for state office. The recent campaign--the first statewide election under the Clean Elections regime--proved to be anything but clean or divested of special-interest pressures.

The act skews the political playing field sharply in favor of subsidized candidates. Those who wish to run with subsidies must collect a specified number of five-dollar contributions, ranging from 200 for state legislative candidates to 4,000 for candidates for governor. Once they meet this requirement, subsidized candidates receive a specified allotment for the primary and general elections; and beyond that are matched dollar-for-dollar for campaign spending and independent expenditures by unsubsidized opponents, up to three times a base amount that varies according to the office. Candidates opting out of public subsidies, meanwhile, are subject to a contribution limit of $720 per donor for the primary and general election combined.

Salmon, a former congressman who honored his term limit pledge, refused to accept campaign subsidies. "I have advocated all my life personal responsibility and less government," he explained, so "it would be hypocritical for me to take taxpayer money for my campaign."

But Napolitano, who served as one of Anita Hill's lawyers during the confirmation battle over U.S. Supreme Court Justice Clarence Thomas, had no such qualms. As the Arizona Republic reported, Napolitano deployed labor union minions to collect the requisite 4,000 five-dollar contributions, then sat back and watched millions in taxpayer subsidies roll in.

Salmon first had to fight a primary against two subsidized opponents. He emerged victorious but broke, with many of his contributors already maxed out under the $720 limit. Napolitano, by contrast, picked up a check for $615,000 from the state the day after the primary, over and above the public funding she had already received during the primary.

The public funds jump-started Napolitano's campaign. While Salmon painstakingly scavenged to replenish his coffers with help from President Bush, his opponent had the airwaves to herself. She used the opportunity to portray herself as a moderate and Salmon as an extremist.

To help bridge the gap, the state Republican party made $200,000 in independent expenditures on behalf of Salmon--but that money was matched dollar-for-dollar by additional subsidies to Napolitano. At the same time, the Democratic party, funded lavishly by developer and state chairman David Peterson, pumped $700,000 into negative expenditures against Salmon--money that did not count toward Napolitano's limit.

For the primary and general election together, Napolitano received a total of $2.25 million in taxpayer subsidies. She outspent Salmon by nearly $1 million. The funding disparity was exacerbated by the enormous investment of time and money--twenty-five cents out of every dollar raised--that Salmon had to make in raising money through voluntary contributions.

A third candidate, the independent Richard Mahoney, collected $1.7 million in taxpayer dollars, to win 7 percent of the vote--or 20 taxpayer dollars per vote. Mahoney plowed his subsidies into attack ads, including one implying that Salmon, a Mormon, would be soft on polygamy and another accusing Napolitano of being soft on homosexual pedophiles. The East Valley Tribune characterized the negative advertising blitz waged by Napolitano and Mahoney as a "tax-funded mud pit."

The funding disparity between Napolitano and Salmon was compounded by draconian requirements imposed by the Citizens Clean Elections Commission, which has jurisdiction over both subsidized and unsubsidized candidates. Ironically, the reporting requirements are more stringent for those forsaking public funds, who by the end of the campaign must report their spending on a daily basis. Not only do the hopelessly complex and subjective reporting rules entail large administrative costs for unsubsidized candidates, they also tip off opponents to campaign strategy.

Early on, the commission took the sensible position that expenses could be reported as they were paid. But late in the primary, the commission's executive director, Colleen Connor, reversed herself and decided they should be reported as they were accrued. She called a widely publicized news conference to announce an investigation of Salmon's campaign for failing to report expenses as they were accrued, even though most other candidates were reporting the same way. Salmon subsequently was mostly cleared of violations, and Connor confessed that she was "very confused" by her own agency's rules. But by then the damage to Salmon's reputation was done.

With empty campaign coffers and negative publicity coming out of the primary, Salmon faced a double-digit deficit against Napolitano. By Election Day, he had whittled the margin to a single point, in part through television spots criticizing Napolitano for bankrolling her campaign with taxpayer money. But ultimately it proved impossible for Salmon to overcome the rules of the game, which assured Napolitano the victory even as Republicans (with some help from redistricting) were capturing both houses of the Arizona legislature and five of seven congressional seats. The Clean Elections Act had achieved the chief goal of its supporters--electing a governor far to the left of the state as a whole.

Inevitably, the program attracted profit seekers and scam artists. One consultant for former secretary of state Betsey Bayless, who lost in the primary for governor, boasts that Clean Elections funds bought his new BMW. It's even easier to game the system for state legislative candidates, who need collect only 200 five-dollar contributions to open the spigot for tens of thousands in public funds. Repeatedly, candidates collect the money, then hire friends or relatives to run their nonexistent campaigns. A trio of Libertarian candidates for state legislature received $86,636 in Clean Elections funds and lived it up on taxpayer-funded meals at chic restaurants such as Opium, Axis/Radius, and the Ra Sushi Bar.

HOW DID A CONSERVATIVE STATE like Arizona embrace such a boondoggle? The framers of the Clean Elections initiative knew that voters would never vote for it if they realized they'd have to pick up the tab. Citizens often like the idea of campaign subsidies, but tend to rank them fairly low among competing budgetary priorities. At the federal level, only about 12 percent of taxpayers check off the box designating $3 for the federal campaign fund, even though it costs them nothing extra. Earlier this year, a Massachusetts state court had to order the recalcitrant Democratic state legislature to appropriate funds for its campaign subsidy system. And 75 percent of that liberal state's electorate voted in a November advisory referendum to abolish the use of taxpayer funds for political campaigns.

So the promoters of Arizona's Clean Elections initiative got clever about funding sources. About one-third of the money comes from a $5 income tax checkoff. But unlike the federal checkoff, which merely shifts $3 from one place to another, the Arizona checkoff sends a $5 refund to the taxpayer and $5 to the Clean Elections fund. Essentially, it bribes taxpayers to check the box, and each checkoff costs the state $10.

Last spring during tax season, the checkoff was promoted by a $600,000 advertising campaign featuring a cartoon character called "Five Dollar Bill" and characterizing the program as the "fastest five bucks in the state." It was a fast one, sure enough: In a state facing a $400 million budget deficit, millions were being drained for political subsidies.

The other two-thirds of the subsidies were earmarked from two involuntary sources. The first was a $100 tax on lobbyists. But not all lobbyists--just those representing for-profit causes, so that the Chamber of Commerce would have to pay but the Sierra Club and teachers' union would not. The second was a 10 percent surcharge on civil and criminal fines, so that Arizonans who park at an expired meter or get a speeding ticket now are also forced to contribute to candidates not of their choosing.

The Institute for Justice, the public interest law firm of which I am vice president, challenged both exactions in court as a violation of the First Amendment's prohibition against compelled political speech. It's one thing if taxpayers generally choose to subsidize political speech. It's quite another, under the Constitution, if discrete groups are singled out to support speech with which they disagree. For instance, the lead plaintiff, former state representative Steve May, received a parking ticket, some of the proceeds of which were used to fund his opponent's campaign.

Earlier this year, a state trial judge struck down the lobbyist fee but upheld the surcharge on fines. An appeals court unanimously invalidated the surcharge, but that ruling was overturned by the Arizona Supreme Court. The Institute for Justice next January will ask the U.S. Supreme Court to review the ruling, in what could be a major test case on public campaign subsidies.

What are all the subsidies paying for? They certainly haven't removed special-interest influences from politics. A study by the Goldwater Institute, a free-market think tank in Arizona, shows that the voting behavior of state legislators who received Clean Elections subsidies was no different from that of legislators who ran entirely with private contributions. And special interests played a major role in collecting five-dollar contributions to qualify candidates for Clean Elections subsidies, as well as in making independent expenditures. Special interests continue to influence politics, they just do it in different ways--and they will continue to do so as long as government remains so powerful.

Nor was the election "clean"; indeed, Bob Schuster of the East Valley Tribune called 2002 the "dirtiest campaign in recent memory." It merely increased the coercive power of government over elections--a frightening phenomenon in a democracy. And instead of private contributors bankrolling negative ads, the taxpayers did.

So what did the dollars buy? For one thing, more politicians. Whenever the government subsidizes anything, we get more of it. In this election, fringe candidates came out of the woodwork to collect their campaign subsidies. Uniformly, they were rejected by the electorate, even as they were siphoning funds from the state treasury.

They also bought a Democratic governor--precisely the goal of the Clean Elections advocates. And the payoff is huge: Not only will Napolitano become the state's chief executive, but over the next four years she will appoint two of the five justices on the state's Supreme Court.

All of this was predictable, of course. The greater the influence government has over politics, the more likely the system is to favor the candidate who believes in bigger government. All of which goes to show that however appalling the current system may be, giving government control of politicians' purse-strings is sure to be worse.

Not surprisingly, the Arizona spectacle has prompted strong calls to repeal the Clean Elections Act. U.S. representative Jeff Flake, a Republican from the First District, announced that he will sponsor a voter initiative on the 2004 ballot to repeal public campaign subsidies. The initiative could shape up as the nation's most important battle over the direction of campaign finance reform.

But before the idea is snuffed out in Arizona, it may spread. A little-noticed provision of the federal McCain-Feingold campaign reform law calls for a study of Arizona's Clean Elections Act. Public financing is the logical next step in the Left's campaign to alter the political playing field. If it can happen in Barry Goldwater's home state, it can happen anywhere--including at the federal level.

The dirty little secret that needs to be exposed about such efforts is that they are designed not to clean up politics, but to secure particular outcomes. At a huge disadvantage will be candidates who believe that in a free society, participation in politics--such as making campaign contributions--should be voluntary, and that taxpayers have better things to fund than political campaigns. The cure, so far, has proved to be worse than the disease.

Clint Bolick is vice president and national director of state chapters for the Institute for Justice. He works in IJ's Arizona chapter.

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