Judge Strikes Down Prop. 73 Funding Limits

Dramatically changing California campaign fund-raising rules six weeks before the Nov. 6 election, a federal judge Tuesday sided with Democrats and struck down the voter-approved campaign contribution limits of Proposition 73 as unconstitutional.

In concluding that the initiative’s restrictions on campaign financing violate the 1st Amendment right to free expression, U.S. District Judge Lawrence K. Karlton also rejected a key provision banning the transfer of campaign funds from a candidate to another.

Barring further court action, candidates for governor and other statewide posts are now free to raise unlimited amounts of money.

The decision came as a shock to candidates of both parties, who must adapt their campaigns to cope with the sudden change in the rules. But the ruling was hailed by Democratic Party Chairman Edmund G. Brown Jr., who helped bring the lawsuit.

“The decision strikes down one of the most pernicious campaign laws ever enacted,” the former governor said.

Two authors of the initiative and the state Fair Political Practices Commission said they would go to court immediately to challenge the ruling and seek a stay of the judge’s order.

“The timing of this decision is most unfortunate,” said Assembly Republican Leader Ross Johnson, the primary author of Proposition 73. “There will be enormous confusion now as hundreds of candidates at all levels of government try to figure out what the new rules are.”

Republican gubernatorial candidate Pete Wilson called on his Democratic rival, Dianne Feinstein, to continue complying with the $1,000 campaign contribution limit. But Feinstein, who trails far behind Wilson in fund raising, did not accept the challenge.

Further complicating the fund-raising picture, the Fair Political Practices Commission declared that Karlton’s ruling now means the fund-raising restrictions of a rival initiative, Proposition 68, will take effect for legislative races--not statewide offices. Proposition 68 was approved by voters in 1988 but did not take effect because it received fewer votes than Proposition 73.

Proposition 73 has been under legal challenge ever since its passage.

Among other things, it prohibited candidates for state and local offices from accepting contributions of more than $1,000 from individuals and more than $5,000 from political committees during the fiscal year from July 1 to June 30. The limits applied only to candidates, not ballot measures.

In a direct attack on the power of Democratic Assembly Speaker Willie Brown and other legislative leaders, the measure also outlawed the longstanding legislative practice of transferring campaign funds among candidates.

Proposition 73 was sponsored by Johnson, Sen. Quentin Kopp (I-San Francisco) and former Sen. Joseph B. Montoya (D-Whittier), who is serving a 6 1/2-year prison sentence on federal corruption charges.

In large part, the measure was drafted in an attempt to defeat Proposition 68, a broader measure that called for public financing of campaigns and even more sharply restricted campaign contributions.

With Karlton’s ruling, the only major provisions of Proposition 73 that remain intact are the ban on public financing of elections and certain restrictions on mass mailings sent out by elected officials.

The lawsuit challenging Proposition 73 was brought by Speaker Brown of San Francisco, Senate President Pro Tem David A. Roberti (D-Los Angeles), the Democratic Party, the Service Employees International Union and the California Teachers Assn., among others.

Karlton agreed with the argument of the Democrats and labor unions that limiting contributions by fiscal year is unconstitutional because it gives an inordinate advantage to incumbents running for reelection.

“I conclude that Proposition 73, in measuring the limitation on campaign contributions by fiscal year rather than election, unconstitutionally restricts free speech and favors incumbents against challengers,” Karlton said in a 65-page opinion.

Enacting contribution limits that correspond with the election year cycle--such as the limits imposed by Proposition 68--would not give the same advantage to incumbents and would therefore not be unconstitutional, the judge noted.

“The situation for challengers is entirely different than for incumbents,” Karlton said. “Few non-incumbents will decide to run for a particular office years in advance of the election. Even if they do, they will have significant trouble in raising money early in the election.”

The ban on transfers by candidates is also unconstitutional, Karlton ruled, because it violates their right to freedom of expression. But the judge specifically noted that he was offering no opinion on the similar transfer ban contained in Proposition 68.

Speaker Brown, who has long used the ability to transfer funds to help maintain his power, greeted the victory with an uncharacteristically subdued response.

“The court made the proper decision,” Brown said. At the same time, the Speaker was warning legislators to be “circumspect” in their fund-raising efforts until legal questions surrounding the decision are resolved, a spokesman said.

But U.S. Sen. Wilson criticized the judge’s decision, saying: “I disagree with the court’s ruling and believe it subverts the will of Californians who voted overwhelmingly for campaign reforms under Proposition 73.”

Dee Dee Meyers, a spokeswoman for the Feinstein campaign, said it is only natural for Wilson to object, since he fares better with the contribution limits in place. But the Republican senator will still be able to raise more money regardless of what campaign rules the candidates follow, she said.

“It’s no surprise that Wilson is in favor of a measure that locks in his fund-raising advantage,” she said. “No matter what the rules are, they are going to out-raise us and outspend us.”

John Larson, chairman of the Fair Political Practices Commission, warned legislative candidates not to engage in a “fund-raising frenzy” because the campaign contribution limits of Proposition 68 still apply.

But Joseph Remcho, the attorney who represented the Democrats and unions in the case, contended that Proposition 68 does not take effect at all since it was superseded by Proposition 73.

“In my view, Proposition 68 does not click in at all,” Remcho said. “Now that Proposition 73 is not constitutional, Proposition 68 does not rise Phoenix-like from the ashes.”

Times staff writer Jerry Gillam contributed to this story.