* At issue is Arizona public financing law for candidates
* Obama administration supported the law
* Supreme Court decision due by end of June
By James Vicini
WASHINGTON, March 28 The U.S. Supreme Court considered on Monday its first campaign finance case since ruling last year that corporations have the free-speech right to spend freely to support or oppose federal candidates.
The justices appeared divided along conservative-liberal lines in hearing arguments about an Arizona law that gives extra money to publicly funded candidates for state office who face privately funded rivals.
President Barack Obama and fellow Democrats in Congress have criticized, while Republicans have praised, the court's 5-4 decision in January last year that overturned long-standing limits on corporate spending in federal elections.
That ruling never came up during the arguments on whether the Arizona law adopted in 1998 violated free-speech rights.
In Arizona, candidates who opt for public financing of their campaigns can get funds up to twice their base amount when outspent by privately funded rivals or targeted by independent group spending. Eight states have similar laws.
William Maurer, an attorney for those challenging the law, said the case was governed by a different Supreme Court ruling from 2008 that struck down a similar federal law.
He said Arizona's law placed an improper burden on political speech, limited spending in elections, and was intended to "level the playing field" among candidates.
Liberal Justice Elena Kagan asked whether the purpose instead was to eliminate corruption, a justification the court has upheld in the past for campaign spending laws.
Another liberal, Justice Ruth Bader Ginsburg, cited the scandals in Arizona, with politicians selling their votes, right before the law's adoption.
While opposing the Arizona law, Maurer said in response to questions from Justice Stephen Breyer that the public financing system for presidential candidates was constitutional.
Attorney Bradley Phillips, who defended the law, faced sharp questioning from skeptical conservative justices.
Justice Anthony Kennedy asked whether the law would deter independent spending in political campaigns. Chief Justice John Roberts said as a "matter of common sense" a privately financed candidate might think twice about even entering a race.
The Obama administration argued in support of the law. But Justice Antonin Scalia expressed concerns and said of the law, "It seems to me it's very much pro-incumbent."
A decision is expected by the end of June.
The Supreme Court cases are Arizona Free Enterprise v. Bennett, No. 10-238, and McComish v. Bennett, No. 10-239. (Editing by Eric Walsh)