Stage Set for Fundraising Free-for-All

The Federal Election Commission ruled Thursday that members of Congress are free to raise unlimited sums to support or oppose California ballot measures -- a potentially serious blow to one of Gov. Arnold Schwarzenegger’s key initiatives.

The ruling is likely to intensify the expected flood of campaign advertising aimed at California voters this fall. Schwarzenegger already has the right to raise unlimited amounts for his ballot measures and plans to spend millions of dollars promoting three of them.

The ruling clears the way for a bipartisan group of congressmen, led by Reps. Howard L. Berman (D-Valley Village) and John T. Doolittle (R-Roseville), to raise and spend large sums opposing one of those measures: Proposition 77, which would change the way that congressional and state legislative districts are drawn. The ballot measure would take away the Legislature’s authority to draw the boundaries of legislative districts and give the power to a panel of retired judges.

The FEC ruling opens what could become a big hole in the federal law that limits campaign money. Depending on how aggressively lawmakers decide to exploit that opening, interest-group money could begin pouring into the state not only on the redistricting fight, but also on other high-profile issues voters will face in November, including parental notification for minors’ abortions, political activities of unions and restraints on state spending.

Larry Noble, a former general counsel of the FEC, predicted that the new ruling would give rise to the sort of “influence buying” on Capitol Hill that was supposed to be banned under the McCain-Feingold campaign finance law that Congress passed in 2002.

The law was written to close the “soft money” loophole that allowed federal officials and candidates to raise unlimited amounts of cash from interest groups as long as the money was not spent directly on their campaigns. The new ruling will now allow members of Congress to return to the same interest groups to raise money for initiative campaigns, Noble said.

“Many of the soft-money donors don’t care where they’re giving the money, as long as it’s a member of Congress soliciting it,” said Noble, executive director of the Center for Responsive Politics, a nonpartisan research group that tracks campaign money. He called the ruling part of a pattern of the FEC “just writing loopholes in the soft-money ban” with “no basis in the law.”

Schwarzenegger did not comment on the ruling, but Todd Harris, one of the governor’s political consultants, called Berman and Doolittle “virtual poster children for safe seats” and accused them of “leading the charge to prevent real competition in our elections.”

The weeks leading up to the Nov. 8 election already were expected to feature heavy spending. Two initiatives involving the price of prescription drugs, for example, are the focus of what is expected to be a pharmaceutical industry campaign topping $59 million. Public employee unions have boosted dues to help fight the initiative that would curtail their political activities.

Federal law says members of Congress normally cannot take more than $5,000 from any individual donor. But the elections commission on a 5-1 vote said the limit does not apply to November’s special state election -- freeing lawmakers to solicit unlimited sums from interest groups or wealthy donors.

Members of the commission, who were lobbied before the vote by several California members of Congress, offered differing rationales. Some argued that the election was a special case because the balloting was entirely a state affair, with no federal candidates involved.

Berman, one of those who lobbied the commission, portrayed his position as a matter of fairness. Schwarzenegger is “running all around the country, talking about raising $50 million in very large amounts,” he said. “And all we wanted to do is make sure ... that the same rules that apply to him would apply to us.”

The commission’s vice chairman, Republican Michael E. Toner, said he agreed with that reasoning. Because Schwarzenegger is not limited in his fundraising, “there would be a fundamental funding imbalance if members of Congress were limited,” he said.

But FEC Chairman Scott E. Thomas, who cast the lone dissenting vote, said he believes that Congress intended to limit such fundraising when it passed the McCain-Feingold law.

“If the member of Congress is out there raising big, huge donations,” said Thomas, a Democrat, “there’s always the possibility that whoever gave that donation gave so much they ought to be able to expect some favor down the road. That’s the whole concern that underlies these restrictions on campaign contributions.”

In making its decision, the FEC rejected the advice of its general counsel. The commissioners did not agree on a legal explanation for the vote, and each will write a separate opinion explaining their decision, Thomas said.

He called both the lobbying by members of Congress and the commission’s failure to agree on a legal rationale for the ruling unusual.

Under rules that require commissioners to disclose who has contacted them about pending business, members of the panel said they had received phone calls from Berman, Doolittle, Rep. Nancy Pelosi (D-San Francisco) and Rep. Zoe Lofgren (D-San Jose).

The ruling drew sharp criticism from advocates of campaign spending limits.

“The captive Federal Election Commission once again sold out the nation’s campaign finance laws in order to serve its congressional masters,” said Fred Wertheimer, president of Democracy 21.

Paul Ryan, associate legal counsel at the Campaign Legal Center, a nonprofit campaign finance group, said the FEC provided no safeguards against a political party moving money raised by members of Congress from an initiative campaign into a reelection battle in a future year. That would be possible in California because of loose accounting rules for campaign money, he said.

“The FEC has no way whatsoever of tracking these funds,” he said. “Who knows how this money is going to be spent?”

The decision marks the second time in a year that a hole has been punched in efforts to control spending on California’s initiative campaigns. Last year, the state’s political watchdog agency, the Fair Political Practices Commission, moved to restrict such fundraising. Schwarzenegger’s allies sued and won a court ruling saying the governor -- and members of the Legislature -- had a right to spend unlimited amounts to advocate their positions. That ruling is now under appeal.

Many legislators in both major parties oppose Proposition 77, fearing how it could affect them.

In 2001, after the last census, Democratic and GOP lawmakers struck a gentlemen’s agreement to protect the status quo. The district lines, drawn by Berman’s brother Michael, a political consultant, mostly created constituencies that were so overwhelmingly Democratic or Republican that incumbents had little chance of losing.

In the 2004 election, not one of California’s 153 congressional or legislative seats changed party control. Schwarzenegger points to that result frequently in saying the current system is “not democracy.”

Some Democrats see the governor’s efforts to change the system as an attempt by Republicans to grab more seats in Congress and the state Legislature.

Some Republicans, however, fear that the move would harm them, and the initiative has caused an unusual public breach between the governor and some of his usual GOP allies.

Doolittle’s spokeswoman, Laura Blackann, for example, said Schwarzenegger’s redistricting measure was a threat to the current Republican majority in the House of Representatives.

In a statement released by his staff, Doolittle praised the FEC ruling as upholding the 1st Amendment rights of members of Congress to participate in the political process.

Other opponents of the redistricting initiative say retired judges would bring their own political biases to the process.

“The one thing I know is, whether it’s retired judges doing it or legislators doing it or some random group of citizens doing it, you can’t take politics out of redistricting. Everybody’s notion of what’s fair is different,” Berman said.

Advisors to members of Congress said several in the California delegation might now jump into the initiative fundraising battle -- on both sides.

Mark Abernathy, a longtime political advisor to Rep. Bill Thomas (R-Bakersfield), said that Doolittle, Rep. David Dreier (R-San Dimas) and other Republicans had been “working ferociously” behind the scenes against Schwarzenegger’s redistricting plan. “Nothing brings elected officials of both parties together like self-preservation,” said Abernathy, who is managing a campaign in favor of the ballot proposition.

Thomas, the chairman of the House Ways and Means Committee, which writes the nation’s tax laws, backs Proposition 77 and may now try to raise money for it, Abernathy said.

By contrast, Dreier’s position illustrates the delicate line that some Republicans have walked on the issue. His seat, centered in the northern San Gabriel Valley, was carefully drawn to give him a Republican edge in an increasingly Democratic part of Los Angeles County. The district is made up of several affluent, Republican-leaning enclaves partly separated by wilderness areas.

Dreier had urged Schwarzenegger to write his initiative in a way that would affect only the Legislature, not members of Congress. But he is also one of the governor’s closest friends in Congress and may not want to quarrel publicly.

Dreier did not respond to a request for comment Thursday.

Times staff writer Joel Havemann contributed to this report.