Governor Is Raising Funds Faster Than Davis

Gov. Arnold Schwarzenegger is collecting money to promote his March 2 ballot measures at a clip of $121,313 a day -- far outpacing Gray Davis at the height of the former governor’s fundraising.

Schwarzenegger has raised $5.2 million since the start of the year, much of it in five- and six-figure chunks, to campaign for Proposition 57, a $15-billion bond issue that would allow the state to restructure its debt, and Proposition 58, to limit future debt.

Because the contributions are not going to his reelection account, they are not subject to restrictions on the size of donations, one of several ways the fundraising illustrates gaps in the laws regulating donations and disclosure.

Schwarzenegger aides are soliciting contributions of as much as $500,000 to attend a private dinner with the Republican governor later this month. The event will be held in New York City, headquarters for the bond industry, which would vie for the right to underwrite and market California’s $15-billion deficit- restructuring bond. Schwarzenegger’s aides say he is seeking money from donors outside the municipal finance industry.

Several of the major donors to date are regulated by state officials or affected by their decisions.

“It is absurd to think that a $500,000 contribution to his issue campaign would not produce the same level of gratitude as would a $500,000 donation to his candidate committee,” said USC law professor Elizabeth Garrett, an expert on campaign donations. “This is a ... way to evade the contribution limits.”

Democrat Davis, often criticized for his aggressive fundraising and for taking money from donors who had business before the state, broke previous records for a California governor by raising $96 million during his nearly five years in office. Schwarzenegger made that an issue during last year’s recall, promising not to take money from “special interests,” specifically Indian tribes and public employees unions.

In his unsuccessful campaign to fend off the recall, Davis was collecting almost $97,000 a day.

“Schwarzenegger is putting Gray Davis to shame,” said campaign finance expert Robert Stern, president of the nonprofit Center for Governmental Studies in Los Angeles. “This guy is going to out-fundraise Gray Davis. That is the ironic thing.”

Proposition 34, approved by voters in 2000, caps donations to gubernatorial candidates at $21,200. That restriction does not apply to funds established to wage campaigns for or against ballot measures, such as money going to the governor’s committee, Gov. Schwarzenegger’s California Recovery Team.

Experts on campaign finance law say the theory behind the limits goes like this: Direct donations to candidates’ campaign accounts can be capped, since individuals can be corrupted by large gifts, or at least voters might believe that big money can sway politicians’ decisions.

But because ballot measures are not individuals, they cannot be corrupted. As a result, donors can give unlimited sums to campaigns for or against ballot propositions.

Garrett called the distinction between donations to candidacy committees and those to politicians’ ballot measure accounts naive. Political analysts say that the success of the propositions is tied closely to Schwarzenegger’s popularity and that the outcome of the March 2 election will be viewed as a referendum on the new governor.

If voters reject Propositions 57 and 58, Schwarzenegger may be forced to make deep cuts in state services. In the official voter pamphlet mailed out for the March election, he writes that he might have to raise taxes if the measures fail.

The governor’s campaign team expects to spend more than $8 million. Todd Harris, spokesman for the Propositions 57 and 58 effort, dismissed any notion that donations would affect Schwarzenegger’s decisions.

“Anyone who has dealt with this governor understands that culture has changed in Sacramento,” Harris said. “You can write as big a check as you want, but this governor is going to do what is in the public interest.”

Some major donors to the Recovery Team are regulated by state officials or affected by their decisions. Those who have given $250,000 contributions at one time include developers William Lyon Homes and A.G. Spanos Cos.; agriculture giant Dole Food Co. and its affiliates; A. Jerrold Perenchio, chairman of Spanish-language television network Univision; and American Sterling Co., a banking and insurance concern.

Several others have given $100,000 or more.

The governor has also navigated around a requirement that names of major donors to ballot measures be disclosed in television and print ads.

The donations flow into Schwarzenegger’s California Recovery Team, a campaign account established to fund an array of ballot measures including Proposition 57. Once the money is in the first account, the governor transfers it to another fund established specifically for Propositions 57 and 58.

State law requires public disclosure of the largest donors to ballot measures. By shifting the money from one account to another, Schwarzenegger can shape the disclosure on ads for the proposition campaign. The ads say the effort is supported “with major funding provided by Gov. Schwarzenegger’s California Recovery Team,” rather than by donors such as A.G. Spanos or William Lyon Homes

“They are getting around the intent of the law,” Stern said.

Harris shrugged off the issue, saying people who want to check into Schwarzenegger’s donors can log on to California Secretary of State Kevin Shelley’s website “with a couple clicks of a mouse.” Once on the campaign finance page -- https://cal -access.ss.ca.gov -- those interested have to find the correct committee -- Schwarzenegger has six of them -- and download the donors’ names.

By raising money through the Recovery Team committee, Schwarzenegger could also avoid a federal regulation aimed at restricting political donations from bond underwriters to political candidates, although the governor’s aides say he intends to reject money from bond dealers who might benefit from the sale of the $15 billion in bonds.

The Municipal Securities Regulatory Board, which regulates bond underwriters, imposed a rule in 1994 barring bond houses and their partners and employees from making donations directly to candidates in most instances. The regulation was intended to curb the perception that bond houses had to “pay to play” -- contribute to campaigns to win business.

Christopher Taylor, the board’s executive director, said the rule and another one adopted more recently do not apply to campaigns for or against ballot measures, including those that involve bonds.

“When you contribute to an official’s campaign, that official clearly personally benefits,” Taylor said. “When you are contributor to a bond campaign, the municipality benefits. The whole community benefits.”

Schwarzenegger attorney Thomas Hiltacht said that, in his view, bond dealers could not give to Schwarzenegger’s campaign.

“That would be my conservative advice,” he said.

If bond dealers offer funds, campaign spokesman Harris said, the governor will “appreciate the gesture but will not be taking their money.”

Schwarzenegger has made it clear that he intends to appeal often to voters directly with ballot measures during his tenure, in particular if the Legislature rejects his major proposals. He is contemplating an initiative for the November ballot to overhaul the workers’ compensation insurance system. He has also suggested a “sunshine” law to open more state records to the public.