Boost to Political Underdogs Seen : Campaign financing: Experts say that the sudden change in rules could affect several races. A judge overturned the law limiting contributions.

Candidates and political fund-raisers, caught off guard by a federal court decision overturning California’s campaign contribution limits, predicted Wednesday that the ruling will give a major boost to underdog candidates of both parties.

In some races, they said, the sudden change in campaign financing rules could tip the balance between now and the Nov. 6 election, giving a tremendous fund-raising advantage to candidates who can rely on a handful of donors for large contributions.

“You can all give more,” Democratic treasurer candidate Kathleen Brown told a group of contributors after the ruling was announced. “The sky’s the limit.”

Paving the way for other candidates, Democratic gubernatorial candidate Dianne Feinstein became the first to disclose that she is accepting checks from donors who had already given her the maximum allowed under the old rules.

The state Fair Political Practices Commission and backers of the initiative went to court Wednesday afternoon to seek a stay of the decision by U.S. District Judge Lawrence K. Karlton. But their bid to put the Proposition 73 rules back into effect was delayed at least until Friday, when Karlton has scheduled a hearing.

As long as no judge grants a stay of the ruling, candidates are free to raise and spend as much as they want, said attorney Joseph Remcho, who represented Democratic leaders and labor unions in the successful suit to throw out the contribution limits.

“If they have people who are willing to contribute at amounts above the limits, they ought to go ahead and accept the money,” Remcho said. “It would be foolish not to exercise that right and thus have less money to get out their message.”

Proposition 73, approved by the voters in 1988, limited contributions to $1,000 from individuals and up to $5,000 from political committees during the fiscal year from July 1 to June 30.

In his decision issued Tuesday, Karlton ruled that imposing the limits for each fiscal year--rather than each election cycle--gave an unfair advantage to incumbents in violation of the First Amendment.

Karlton also ruled that a ban on the transfer of funds from one candidate to another also was unconstitutional because it was imposed in conjunction with the fiscal-year limits.

Despite Karlton’s decision, many candidates were adopting a cautious approach, waiting before risking the wrath of voters--and contributors--by seeking huge donations.

In part, that is because the Fair Political Practices Commission has ruled that in legislative races candidates are still bound by the contribution limits of Proposition 68, a rival initiative also approved by the voters in 1988. The rival measure had not taken effect until now because it had garnered fewer votes than Proposition 73.

If the judge’s ruling stands, the change in fund-raising rules is most likely to help statewide candidates--Republican and Democrat alike--who trail their opponents in fund raising.

Most prominently mentioned as beneficiaries of the decision were Democratic gubernatorial nominee Feinstein, Republican state Treasurer Thomas W. Hayes, state Sen. Marian Bergeson, the GOP nominee for lieutenant governor, and Joan Milke Flores, the Republican nominee for secretary of state.

In fact, Flores fund-raiser Joyce Valdez predicted that the ability to seek large sums from the Los Angeles city councilwoman’s loyal donors would enable her to defeat Democratic Secretary of State March Fong Eu.

“It is the difference between winning and losing,” Valdez said.

Although Hayes is the incumbent treasurer, he has trailed more than $1 million behind Brown in campaign contributions. The change in the rules would allow him to solicit large donations from the financial community that is affected by the treasurer’s actions. Hayes issued a statement saying he would not accept contributions over the Proposition 73 limit “until the courts can clarify the law.”

The potential boost for the Republican Hayes at the expense of Brown puts an odd personal twist on the campaign financing issue. Brown’s brother, former Gov. Edmund G. Brown Jr., helped push for the judge’s ruling in his current post as chairman of the Democratic Party.

Some candidates, including GOP gubernatorial nominee Pete Wilson, Secretary of State Eu, Hayes and Democratic attorney general nominee Arlo Smith responded to the judge’s action by calling on their opponents to abide by the old $1,000 contribution limit.

Flores has not decided whether to follow such self-imposed limits. Republican attorney general nominee Dan Lungren said he will not take any contributions exceeding the limit until Karlton decides on a stay.

The change is expected to have the most effect on the race for governor, where the stakes are highest and contributors usually give the most.

Wilson, in a luncheon address to Los Angeles County Republican Women, called the court’s decision “one of the worst in memory.” The ruling, he said, constitutes a “reversion to the law of the jungle . . . when we had government by fat cats.”

In the last reporting period, Wilson had $3.9 million in the bank compared to Feinstein’s $645,000.

Feinstein’s decision to accept any level of contribution, Wilson said, will mark her as the candidate of the special interests and the status quo. That is a label Feinstein has been attempting to hang on Wilson.

But the California senator said he also will accept donations above the $1,000 level in the absence of an agreement between the two candidates to abide by the old limits.

“We don’t intend to just turn the other cheek, but I will tell you I think it is very wrong,” Wilson told the Associated Press. “We may have to fight fire with fire.”

Dee Dee Meyers, Feinstein’s press secretary, said the campaign has begun soliciting larger donations. “Quite frankly, there’s still a lot of questions out there. But for the moment we’re asking people for contributions who are already maxed out and . . . we’re telling them to go ahead.”

Assembly Speaker Willie Brown (D-San Francisco), one of the plaintiffs in the lawsuit, said he would follow Proposition 73 “through the election until there is a final decision.” In particular, Brown said he would abide by the initiative’s ban on transferring money among candidates. “I’m not going to transfer a nickel,” Brown told a reporter at a reception he hosted on Feinstein’s behalf for Capitol lobbyists.

Two authors of Proposition 73, Assembly GOP Leader Ross Johnson of La Habra and Independent Sen. Quentin Kopp of San Francisco, joined in seeking a stay of the order from Karlton and also filed a separate appeal Wednesday with the U.S. 9th Circuit Court of Appeals.

Johnson argued that the judge’s decision just six weeks before the election has left candidates in “utter chaos” over what rules to follow. He criticized the judge for waiting so long to issue his ruling when the trial ended last April.

Ruth Holton, a lobbyist for Common Cause, urged voters to clear up the confusion by approving Proposition 131 on the Nov. 6 ballot. The initiative would replace both Proposition 73 and Proposition 68 with new campaign rules, including public financing of campaigns and contribution limits.

Contributing to this story were Times staff writers Cathleen Decker, Paul Feldman, Paul Jacobs, Dean Murphy, Douglas Shuit, Bill Stall and Daniel M. Weintraub.

FUND-RAISING LIMITS: IMPACT ON KEY RACES

The federal judge’s decision to strike down the fund-raising limits imposed by the 1988 voter-approved initiative Proposition 73 could markedly reshape a number of statewide races prior to the Nov. 6 general election. Here are some scenarios:

THE GOVERNOR’S RACE, Republican Pete Wilson and Democrat Dianne Feinstein: In the last reporting period, Republican Wilson was raising money at twice Feinstein’s rate and had $3.9 million in the bank, compared to the Democrat’s $645,000. While Feinstein’s campaign has little hope of matching Wilson, donations from well-heeled Democrats could boost her closer to Wilson’s level and ensure an adequate supply of money for last-minute television commercials.

LIEUTENANT GOVERNOR’S RACE, Democrat Leo T. McCarthy and Repulican Marian Bergeson: Incumbent McCarthy had raised just over $1 million and had $485,000 in the bank as of the latest reports. Bergeson had raised $798,555 but had only $4,000 on hand. Bergeson might seek contributions from her Senate colleagues, to whom she has been generous over the years with donations raised from her lucrative Orange County political base.

STATE ATTORNEY GENERAL’S RACE, Republican Dan Lungren and Democrat Arlo Smith: Smith and Lungren each had about $200,000 cash on hand at the end of the most recent reporting period. Either could receive major contributions from special interest groups: Smith from union, abortion rights and environmental protection interests and Lungren from big business and anti-abortion interests.

TREASURER’S RACE, Republican Thomas W. Hayes and Democrat Kathleen Brown: During the primary, incumbent Treasurer Hayes raised just over $1 million, while Brown raised $2.1 million. Hayes stands to be the big gainer since a tough primary left him with just $24,000 in the bank, while Brown had $1.2 million left.

SECRETARY OF STATE, Democrat March Fong Eu and Republican Joan Milke Flores: A campaign without contribution limits would favor challenger Flores, who has cultivated a loyal core of contributors as a member of the Los Angeles City Council. Flores, who expects to lay out $1 million, already is expected to outspend incumbent Eu, who has said she will spend half that amount. But strategists say Flores will need even more money to topple the four-term incumbent.