Gov. Wins Initiative Fundraising Case

California politicians can raise unlimited amounts of money to promote ballot initiatives, a judge said Wednesday, handing Gov. Arnold Schwarzenegger a significant victory as he promotes his political agenda this year.

In a preliminary ruling, Sacramento Superior Court Judge Shelleyanne Chang said forcing Schwarzenegger to abide by fundraising limits for initiatives would unfairly trample on his right to free speech and would not subdue “the demons” of political corruption.

If Chang sticks with her initial ruling after a hearing scheduled for today, she will significantly alter Proposition 34, the initiative voters passed resoundingly in 2000 to reduce the influence of money in politics.

Last month Schwarzenegger, Citizens to Save California and other groups promoting initiatives sued the Fair Political Practices Commission, the agency that enforces state campaign laws. They asked Chang to overturn a regulation prohibiting politicians from “controlling” initiative groups that raise unlimited amounts of money from donors.

Campaign finance watchdogs said the ruling would allow politicians to bypass contribution limits by setting up and promoting themselves through initiative committees.

“This decision thwarts the understanding and intent of voters who assumed by voting in favor of Proposition 34 that the limiting of contributions to candidates and officeholders applied to ballot committees,” said Paul S. Ryan, an attorney with the Campaign Legal Center in Washington, D.C., which joined in defending the regulations.

Chang’s ruling is especially important to the Republican governor, because he has partly staked his political future on overhauling government at the ballot box rather than through the Democratic-controlled Legislature. The governor is expected to support at least four propositions in a possible special election this November, a campaign Schwarzenegger estimated would cost at least $50 million.

The preliminary ruling means Schwarzenegger can actively control Citizens to Save California and other groups promoting ballot initiatives, without having to abide by the contribution limits that apply to his reelection fund. He can accept no more than $22,300 per donor in that account.

“We certainly felt that all along there was a violation of the 1st Amendment,” said Joel Fox, co-chairman of Citizens to Save California. “The right-to-associate and the freedom-of-speech issues were very important.”

Chang’s ruling would open the way for Schwarzenegger and other politicians to collect five- and six-figure donations and control how the money is spent.

If it stands, the decision “would remove any doubts about the governor’s ability to raise unlimited sums for his favorite ballot measures and to raise unlimited sums to oppose his least favorite,” said Rick Hasen, an elections law scholar at Loyola Law School.

FPPC spokesman Theis Finlev said the agency was disappointed by Chang’s tentative ruling and that it hoped to persuade the judge to change her mind.

Assembly Speaker Fabian Nunez (D-Los Angeles) said he would attempt to overturn the ruling by introducing a bill that would bar candidates from controlling initiative groups that don’t abide by fundraising limits. His move would set up another political battle this year between Democrats in the Legislature and the Republican governor.

Nunez said the ruling shows “the governor, in lock step with the corporate backers of his initiatives, have gone to incredible lengths to eliminate the will of the people to limit campaign spending.”

Chuck Bell, a Sacramento-based attorney for the governor and other plaintiffs in the case, said it would be difficult for the Legislature to step in. The constitutionality of such an effort would be dubious, he said: “I don’t think that leaves them much ground there.”

Schwarzenegger has cast himself as an agent of reform who wants to stop a practice in Sacramento in which he says “money goes in” while “favors go out.” Bell said the governor needed initiative campaign money to compete on a “level playing field” with well-funded political opponents and to “communicate on television to voters directly.”

The FPPC ruled last June that committees such as Citizens to Save California can raise unlimited sums as long as their expenditures are not controlled by a candidate. The Sacramento court was asked to decide: If a candidate controls a ballot committee, should fundraising limits apply?

In her preliminary ruling, Chang said she agreed that preventing the corrupting influence of money in politics was important. But Chang, an appointee of former Democratic Gov. Gray Davis, said “it is difficult to comprehend” how limiting campaign contributions to ballot groups would eliminate the “three resilient demons of campaign finance”: corruption, the appearance of corruption and circumvention of campaign finance laws.

The judge said the FPPC wrongly assumed that contributions to initiative groups such as Citizens to Save California were “in reality contributions to the candidate who controls the committee.” The regulation “unreasonably impairs or chills” the right of a politician to exchange ideas with other people, she said.

Citizens to Save California was created to help the governor implement his political vision. Its leadership includes Schwarzenegger allies such as Allan Zaremberg, president of the California Chamber of Commerce, and Rex Hime of the California Business Property Assn..

The four issues Schwarzenegger may ask voters to decide in a special election are whether: teachers should be paid based on merit rather than seniority; the pension system for state employees should be overhauled; the way voting districts are drawn should be changed; automatic restraints on government spending should be imposed.

Citizens to Save California has until May 1 to collect about 1.2 million signatures on each initiative it supports to qualify for the November ballot. The group has been busy raising money to pay people to gather the signatures and others to produce advertisements. Reports that the group has filed with the state show it has raised $4 million so far, with many contributions exceeding $22,300.

Schwarzenegger has attended all of the group’s major fundraising events, including an “Evening with Gov. Arnold Schwarzenegger” on Tuesday night at the Hyatt Regency Irvine. A “dinner chair” for the event was asked to donate $100,000, which bought two 10-seat tables, tickets to a reception and three photos with the governor.

Fox said the ruling frees Citizens to Save California to “enlarge our effort” in assisting Schwarzenegger.

Ned Wigglesworth, an analyst with TheRestofUs.org, which has filed a lawsuit against Schwarzenegger, the governor’s various political committees and Citizens to Save California, cast the ruling as a defeat for ordinary Californians.

“Today’s ruling is out of step with the people and out of step with the law of the land,” he said.

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Times staff writer Peter Nicholas contributed to this report.