Jan. 22 (Bloomberg) -- New York Senator Hillary Clinton won't take public funds in her bid for the U.S. presidency, a move that may hasten the end of a financing system set up in the wake of the Watergate scandal.

While politicians previously have declined public financing for primary elections to avoid the system's spending limits, no major party candidate has given up public funds in the general election. The program, designed to curb the influence of major contributors, doled out $75 million each to President George W. Bush and Democratic candidate John Kerry in the 2004 election.

The 2008 campaign is shaping up to be a much more expensive proposition and candidates may not want to abide by the spending limits. Clinton could raise as much as $500 million and the federal grant would probably be $83.8 million, according to the Los Angeles Times, which earlier reported Clinton's decision.

``It is a further nail in the coffin of the public funding system,'' said Kenneth Gross, a campaign finance lawyer at Skadden, Arps, Slate, Meagher and Flom in Washington. Now even Clinton's Republican rival, John McCain, who has a reputation as a campaign finance reformer, ``would be foolish to impose spending limits on himself,'' Gross said.

Clinton aide Howard Wolfson confirmed her plan to opt out of the public financing system in the general election, should she win the Democratic nomination. McCain's advisers are still considering how to handle the issue of public financing, though a spokesman said the Arizona senator has been working to fix the system in Congress.

`Must Be Reformed'

``Senator McCain believes the public financing system is not fulfilling its original goal and must be reformed,'' said Danny Diaz, a spokesman for his presidential exploratory committee.

A candidate who accepts the public funds can't exceed that amount after accepting a party nomination. That gave an advantage in 2004 to Bush, whose nominating convention took place more than a month after Kerry's, allowing the president a longer period to raise money and spend it freely.

By law, an individual can donate $2,100 to a presidential candidate for the primary and another $2,100 for the general election. The general election donation can be returned if the candidate doesn't win the nomination or decides to accept public financing. Clinton's campaign Web site offers donors the option to give the total $4,200 in one chunk.

`Very Smart'

``Hillary Clinton's decision to begin raising general election money now is very smart strategically,'' said Federal Election Commissioner Michael Toner. ``It's going to place tremendous pressure on other candidates to follow suit.''

Clinton's top competitors for the Democratic nomination so far are former vice presidential candidate John Edwards of North Carolina and Illinois Senator Barack Obama. Officials from their campaigns didn't immediately respond to questions about whether the candidates would also opt out of the public system.

A spokesman for former Massachusetts Governor Mitt Romney declined to comment on plans for the general election, should he win the Republican nomination. A spokeswoman for Rudy Giuliani, the Republican ex-mayor of New York, had no immediate comment.

The money for public financing has lagged behind the amounts that candidates can raise directly as fewer Americans check the box on their tax returns that sends $3 to the system. In 2004, Kerry and Bush would have been able to spend less than $50 million in the primaries if they had opted to accept public funds for that phase; instead, each raised more than $200 million.

Toner supports increasing the available funds and raising the spending limits to keep the system viable. Without changes to make public financing more attractive, he said he expects multiple candidates to raise $100 million this year alone, with the top candidates toting up $500 million or more in donations for the campaign as a whole.

``No serious candidate for president in 2008 is going to accept public funds,'' Toner said.

To contact the reporter on this story: Kristin Jensen in Washington at kjensen@bloomberg.net

Last Updated: January 22, 2007 16:10 EST