Republican Gov. George Deukmejian announced Thursday night that he intends to veto Democrat-backed anti-apartheid legislation, placing in jeopardy final passage of major unrelated legislation designed to overhaul the state’s unitary tax system.
Deukmejian, saying he shared the Democrats’ “repugnance” for South Africa’s racial policies, proposed in a counteroffer to issue an executive order asking the directors of the state pension funds to review their investments in companies doing business in South Africa or with the government of South Africa.
The order would be patterned after the selective investment policy adopted last June by the University of California Board of Regents.
Brown Not Satisfied
This did not satisfy Assembly Speaker Willie Brown (D-San Francisco), a UC regent who believes that the university’s policy is not strong enough, and the anti-apartheid bill’s author, Assemblywoman Maxine Waters (D-Los Angeles).
“I got no comment,” Brown said angrily when approached by reporters.
Democrats displayed their anger at Deukmejian’s decision by voting to bottle up in the Assembly Ways and Means Committee the unitary tax repeal legislation favored by Deukmejian. This put in serious doubt the fate of the bill since the Legislature will adjourn for the year today.
Waters’ bill goes substantially beyond the UC policy, carrying both civil and criminal penalties. It would prohibit new investments of state pension funds, or surplus treasury dollars, in companies with South African connections.
Waters said, “Obviously the governor’s ideas about sanctions are very different from my own ideas.”
The Los Angeles legislator added: “I don’t think they’re tough enough. I don’t think they’ll send a clear message that the state of California is on record in opposition to apartheid.”
The Speaker earlier in the day Thursday told Assembly lawmakers he would not allow a floor vote on the unitary tax repeal bill until Deukmejian indicated he would sign anti-apartheid legislation.
The South Africa issue, in Brown’s words, was the only major sticking point blocking final passage of the tax legislation.
The Speaker seemed optimistic that the issue could be resolved until a late afternoon meeting between Deukmejian and Waters in the governor’s office, in which the governor told the legislator he will veto her bill.
In his statement, Deukmejian said his policy would exempt from sanctions companies that subscribe to the so-called “Sullivan principles,” a code that requires equal opportunity practices in South Africa.
“If the pension boards adopt the same approach as the University of California, the state will have joined the growing chorus of voices protesting the repressive system of apartheid in South Africa,” Deukmejian said.
“Such a message would be sent in a clear and responsible manner consistent with the legal and moral obligations that exist to those who depend upon the sound investment of their pension funds,” he declared.
The Speaker had expressed optimism to reporters earlier in the day that Deukmejian’s remarks Wednesday to the national convention of the Episcopal Church, meeting in Anaheim, indicated the governor might be more agreeable to imposing state sanctions against South Africa. In the speech, Deukmejian said that further U.S. government sanctions against the Pretoria regime may be necessary because of that nation’s denial of “basic human rights and liberties” to blacks.
The heavily lobbied unitary bill, carrying an estimated $258 million in tax breaks for some of the world’s largest corporations, involves a bitter struggle between foreign-based multinational corporations and U.S. corporations.
Foreign firms, particularly the Japanese, have provided the strongest push to pass the legislation. It would overhaul the state’s controversial unitary tax system, freeing foreign firms from state regulations requiring that they pay a corporate tax based on worldwide business operations. They claim the tax is discouraging them from investments in California.
Domestic companies claim the bill would give their overseas competitors an economic advantage.
But Assemblyman Sam Farr (D-Carmel), sponsor of the bill in the Assembly, called the unitary system “a dark cloud over California’s future.” He added, “There are companies in France and Canada, in Great Britain and Japan who are boycotting California.”
Waters told reporters she was worried that corporations would use money from the tax break to invest in South Africa. Her bill would prohibit state investments in any companies that make new investments in South Africa.
“I think it’s very relevant to be able to say that if you get this tax break we are going to ensure that there are going to be no new investments in South Africa,” she said.