Slate Canyon: Expense Reimbursements and the Dilemma for Small Parties

In my previous post, I discussed the possibility that the Green Party of Canada may not run a full slate in the 2021 election, and could potentially lose hundreds of thousands of dollars of public funding as a result.

Why? The reason lies in Canada’s system of reimbursing campaign expenses from public funds. This post describes how those reimbursements work, and examines how the rules create a dilemma for smaller parties at a certain level of public support, while providing other parties with effectively guaranteed public funding.

Two Thresholds for Reimbursement

The Canada Elections Act provides a registered party with a 50% reimbursement on its election campaign expenses, provided the party achieves one of two thresholds:

  1. Get 2% of the votes cast across the country.
  2. Get 5% of the votes cast in those ridings where the party ran candidates.

Meeting either threshold qualifies the party to receive the expense reimbursement. It doesn’t matter how many candidates the party ran, or which ridings it ran them in, or how the votes were distributed. As long as the party’s support meets the threshold in the appropriate ridings, the party qualifies.

The Dilemma for Small Parties

For a party polling in the low single digits, these thresholds create a strategic dilemma:

  • To meet criteria #1, you should run the largest slate of candidates you can. Each additional candidate, even a very weak candidate, gives you more votes out of the total across all ridings, and gets you closer to the 2% threshold.
  • However, to meet criteria #2, you should run a slate of candidates whose average vote will be at least 5%. If your party is polling in the low single digits, this set of ridings would be less than a full slate—possibly much less.

The risk for a small party comes if it runs a mid-sized slate and its result falls somewhere between these two goals, achieving neither of them. To avoid this outcome, parties polling in the low single digits need to commit to meeting one of the two criteria and base their nomination and campaign strategies around that choice: they must cling to one of two cliffs to avoid falling into the “slate canyon” between.

An Example

The graph below illustrates the dilemma. The data for this graph is based on the real-world vote distribution of a party in the 2019 federal election, but scaled down so that its overall public support is equal to 2.1%.

Graph showing the vote distribution of a fictional party with 2.1% national support. Key elements of the graph are described in the following paragraph.
The “slate canyon” effect for a party with 2.1% public support and typical vote distribution for a small party.

From left to right, the party’s candidates are arranged in descending order of the vote share they’re expected to receive in their ridings. (The curve seen here is typical of smaller parties.) To read this graph, assume that whatever size candidate slate a party runs, it always picks the strongest possible candidates, so the slate expands from left to right across the graph.

For a particular size of candidate slate, the dotted line represents the percentage of votes received across all ridings. As the slate grows, this number increases due to the addition of more and more votes, reaching the 2% threshold when the slate includes the party’s best 292 candidates (out of a possible 338). Slates that achieve the 2% threshold are coloured blue.

Meanwhile, the dashed line represents the average level of support in those ridings where candidates were run. As the slate grows, this number decreases, due to the addition of weaker candidates. Average support falls below the 5% threshold for any slate larger than the party’s 37 best candidates. Slates that achieve the 5% threshold are coloured green.

In between these two safe regions is the “slate canyon”, the large yellow area. If this fictional party ran a slate containing anywhere from 38 to 291 of its best candidates, it could not possibly reach either threshold for expense reimbursement. For these slates, the average support for candidates would be below 5% and the total support across all ridings would be below 2%.

Of course, in real life it’s impossible to know the exact performance of candidates in advance. (Remember, this graph was constructed using past election results.) Because of this, the edges of the slate canyon are not clearly defined. If you like, picture a steep slope with plenty of loose rock: it’s best to stay a few extra steps back. A truly “safe” candidate slate for this party might be limited to less than 30 candidates or more than 310.

Different Parties, Different Pressures

A party polling just above 2%, as in the example above, experiences the worst possible “slate canyon” scenario. The two cliffs are extremely small and the canyon between them is very wide. This party must choose between two very divergent nomination and campaign strategies if it wants to be certain of receiving the expense reimbursement.

Meanwhile, a party polling just above 5% experiences almost no pressure. It should achieve both thresholds easily, regardless of how it constructs its candidate slate. And for a party polling in double-digits, the expense reimbursement is all but guaranteed.

Effects of a Two-Tier System

What effect does this system have on the decisions of small parties? First, let’s put the size of the expense reimbursement in context.

Looking at five parties of different size across four recent elections (twenty campaigns total), election expense budgets were always equal to a year’s worth of donations or more—typically two to three years’ worth. (This makes sense: to maximize your impact in a four-year election cycle, you should save for three years and spend that money in the fourth.)

In other words, a 50% reimbursement on campaign expenses is equivalent to an extra year of fundraising in a four-year cycle. This is an amount that no party can afford to ignore.

As we saw above, parties at the “slate canyon” level of support (2-5%) are forced into one of two nomination strategies. Those nomination strategies don’t exist in a vacuum—they have an effect on candidate quality and on campaign strategy. Specifically:

  • A party aiming for the 2% country-wide votes threshold needs to nominate as many candidates as possible. This pressures the party to accept lower-quality candidates or to resort to “paper” candidates (non-campaigning candidates). This can result in more candidate gaffes or scandals, creating an amateurish impression. However, this nomination strategy does allow the party to have a presence in all ridings, helping future growth. The campaign platform for this party would focus on country-wide appeal and avoid regionalism, in the hopes of maximizing total votes across all ridings.
  • A party aiming for the 5% average support threshold needs to nominate its strongest candidates and exclude the rest. This avoids any problem of lower-quality or paper candidates, but at the same time, slows the party’s growth in ridings without candidates. Furthermore, the party’s candidates are more likely to be concentrated in a single region, or in ridings that share some attribute (e.g. urban ridings), which creates pressure for the party’s campaign platform to cater to those ridings, sacrificing country-wide appeal.

These strategic distortions are bad for voters, who would generally prefer to have a wide selection of parties that offer high-quality candidates and campaigns that cater to all regions of the country. The fact that parties below 5% are financially penalized, potentially losing the equivalent of a year’s worth of fundraising every election cycle, further limits the quality and variety of voters’ options at the ballot box.

Parties in the “slate canyon” level of support can attempt to compensate for these distortions. If they plan to run a full slate, they can begin recruitment earlier, allowing them to maintain a higher standard for candidates and rely on fewer paper candidates. If they plan to run a limited slate, they can work to establish riding associations or other presence in ridings without candidates, and commit to a policy development process that ensures a platform with country-wide appeal.


References

Campaign expense reimbursement rules for parties are given in section 444 of the Canada Elections Act (https://laws-lois.justice.gc.ca/eng/acts/e-2.01/page-73.html#h-208059). The text of section 444 is below; comments in [italics and square brackets] are mine.

  • 444 (1) On receipt from a registered party of the documents referred to in subsection 437(1) [the party’s election expenses report], the Chief Electoral Officer shall provide the Receiver General with a certificate that sets out the amount that is the sum of 50% of the registered party’s election expenses, as set out in the return for its general election expenses, that were paid by its registered agents and 90% — to a maximum of $250,000 — of the registered party’s accessibility expenses, as set out in that return, that were paid by its registered agents, if
    • (a) the Chief Electoral Officer is satisfied — even despite any statement that the registered party’s auditor has included under paragraph 438(2)(d) in a report under subsection 438(1) [a statement from the party’s auditor that the party may not have complied with Canada Elections Act financial administration rules] — that the registered party and its chief agent have complied with the requirements of sections 437 to 443 [various rule for submitting expense reports and audited statements];
    • (b) the auditor’s report does not include a statement referred to in any of paragraphs 438(2)(a) to (c) [a report of faulty or dishonest financial records, a different offence than failing to comply with financial reporting rules]; and
    • (c) candidates endorsed by the registered party received at least
      • (i) 2% of the number of valid votes cast at the election, or
      • (ii) 5% of the number of valid votes cast in the electoral districts in which the registered party endorsed a candidate.

To summarize the above in plain language: a party that has complied with expense reporting rules to the satisfaction of the Chief Electoral Officer (even if the party’s auditor had previously raised concerns), and which has not been reported for faulty or dishonest accounting by its auditor, and which has reached either of the two vote thresholds, is entitled to the reimbursement of 50% of its campaign expenses, as well as 90% of accessibility expenses up to $250,000.

2 thoughts on “Slate Canyon: Expense Reimbursements and the Dilemma for Small Parties

  1. Saul,

    Is it worth adding in the effect of the riding reimbursement as well, received by the EDA campaign when vote share exceeds 10%? The reimbursement is either 60% or 90% depending on the category of expense. All you’ve looked at is the central party reimbursement.

    This could influence the strategy of running a smaller number of candidates. Though I don’t know how Elections Canada would view transfers from HQ to a riding: who qualifies for the reimbursement?

    >

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  2. Intriguing question Colin! The candidate-level reimbursement is 60% for campaign expenses, campaign travel, and lodgings, and 90% for childcare, accessibility needs, and caregiving for someone normally under the candidate’s care. The reimbursement is paid to the candidate’s official agent, who is required under the Elections Act to pay the candidate the personal portion (travel, accessibility, etc). The remainder, minus any outstanding debts, becomes a campaign surplus. Surpluses must, by the Act, be transferred either to the EDA or the party.

    Is there a way for the party to game this system? For example, could a party loan money to a candidate who was polling around 9%, hoping to boost them above the 10% threshold and earn the reimbursement, which would flow back to the party? It would be complicated. First, the party would need an agreement with candidates/EDAs that surpluses go to the party, not the EDA. (As far as I can see, this would be legal.) Second, it would need to successfully identify candidates who were near the threshold and could be pushed over (or kept above) by an infusion of funds. Third, it would need to co-ordinate these loans against its own central campaign budget.

    The potential payoff is not insignificant. Any successful party will have a number of candidates around the 10% vote threshold, and a 60% reimbursement on a maximum-spending campaign is more than $100,000 for each of those candidates. Not all targetted candidates would succeed, but we might be talking about $500,000 of reimbursements that could be achieved.

    However, there is a wrinkle. Assuming the central party is expected to qualify for the party reimbursement, any of the dollars it’s lending are already getting a 50% reimbursement risk-free if they’re spent by the central party. To jump through all these hoops to (potentially) achieve 10% more reimbursement on those dollars seems not worthwhile. I think it would only make sense in situations where (A) somehow the central party is NOT going to qualify, but individual candidates might, so the gain is the full 60% reimbursement, or (B) the central party is hitting the expense limit, but has additional cash it could send to candidates, so it has no reason NOT to boost individual campaigns.

    Of course, your original question was not about loan strategies, but about whether all this would influence the party’s nomination strategy. I’d say it’s very unlikely.

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