Campaign Finance Reform Law Held Unconstitutional

In a decision likely to assure the continued escalation of campaign spending in California, a federal appeals court in San Francisco ruled Friday that a wide-ranging campaign finance reform measure approved by state voters in 1988 was unconstitutional because it discriminated in favor of incumbents.

The U.S. 9th Circuit Court of Appeals, agreeing with a lower court decision, struck down virtually all the major provisions of Proposition 73, including yearly contribution limits to legislative candidates and a ban on transfers of campaign funds.

The 2-1 decision leaves California with no limits on contributions to candidates for state legislative offices.

“This decision portends more of the same--escalating campaign costs and large contributions,” said Robert Stern, co-director of the California Commission on Campaign Financing, a nonprofit research organization. “In this year of reapportionment and more competitive races, it’s a safe prediction that this will be the most expensive legislative campaign in California history.”

Proposition 73 was approved in June, 1988, amid widespread concern that the huge amounts of campaign money contributed to lawmakers each year by special interest groups were having a corrupting influence on the Legislature.

The court battle illustrated the complexity of attempts at campaign finance reform. The court ruled that Proposition 73 unfairly favored incumbents, yet the reforms were challenged by the Democratic legislative leadership, which represents the majority of incumbents.

Much of Proposition 73 had been gutted by a trial court judge in Sacramento in 1990, though the campaign contributions limits were in effect for the legislative races that year and for part of the gubernatorial campaign.

“The fact is that it’s a free-for-all out there now,” said Lisa Foster, executive director of California Common Cause, which has favored stricter spending limits than those enacted by Proposition 73.

She said the impact of unlimited contributions is readily apparent: “In the first six months of 1991, which was not an election year, members of the Legislature raised $19 million. That compares with the $11.4 million they raised in the first six months of 1989, the last off-year period when Proposition 73 was in effect,” Foster said.

In addition to banning the transfer of campaign money between candidates, Proposition 73 limited the size of contributions to $1,000 from individuals and businesses each fiscal year and $5,000 from broad-based political action committees.

The measure also barred public financing of election campaigns. That ban was not challenged in this suit and remains in effect.

“This is a very significant decision because it prevents a major change in the California campaign financing system,” said UCLA law professor Daniel H. Lowenstein, an election law specialist who chaired the state Fair Political Practices Commission from 1975 to 1979.

Proposition 73 was sponsored by Assemblyman Ross Johnson (R-La Habra) and state Sens. Quentin L. Kopp (I-San Francisco) and Joseph B. Montoya (D-Whittier). Montoya later was convicted on federal racketeering and money-laundering charges.

The measure was approved in June, 1988, amid widespread concern that the huge amounts of campaign money contributed to lawmakers each year by special interest groups were having a corrupting influence on the Legislature.

The measure was challenged by Democratic leaders and labor unions on grounds that the limits unfairly favored incumbents over challengers because of the way the limits were structured. San Francisco attorney Julie Randolph asserted that even though the law looked neutral on its face, in practice it enabled incumbent state senators to raise four times as much money as challengers.

Appeals Court Judge William A. Norris agreed, noting in his majority opinion that incumbents raise money every year and thus can collect up to the limit each fiscal year. Challengers, on the other hand, usually do not decide to run until the year before an election and therefore can raise only the amount allowed for a single year.

Such a system gives incumbents, who typically have a built-in fund-raising advantage, the means to further enhance their advantage.

The contribution limits “discriminate against challengers and their supporters,” wrote Norris. “Governments must remain scrupulously neutral when it regulates activity protected by the 1st Amendment. . . . including contributions,” he said in an opinion joined by Appeals Court Judge Cecil F. Poole.

“We recognize that the state has a legitimate interest in preventing corruption and the appearance of corruption, but hold that this interest will not a support a discriminatory formula for limiting contributions,” Norris wrote.

Bruce Cain, a UC Berkeley political science professor who was an expert witness for the law’s opponents, praised the ruling. “It’s important that courts distinguish between genuine attempts at reform, which try to be evenhanded, and politically motivated attempts at reform such as this which use the language of evenhandedness, but create the reality of favoritism,” Cain said.

The majority opinion cited studies by Cain and Prof. Gary Jacobson of UC San Diego showing a vast disparity in funds raised by incumbents over challengers in off-election years. In state Senate races in the off-years 1983, 1985 and 1987, incumbents outraised challengers by an average of more than 40 to 1. In Assembly races in those years, incumbents outraised challengers by an average of more than 70 to 1, the opinion said.

Los Angeles attorney Calvin House, who represented the Democratic Party’s challenge of Proposition 73, said the statute’s ban on transferring funds, if upheld, would have been particularly adverse to the party.

The Democratic leadership, headed by Assembly Speaker Willie Brown of San Francisco and state Senate President Pro Tem David A. Roberti of Los Angeles, raises vast sums of campaign contributions and transfers them to Democratic newcomers or incumbents in tight races.

Roberti welcomed the ruling as a boost for legislative Democrats.

“This decision probably will help the Democrats because traditionally Democrats have relied more heavily upon the legislative leadership and their colleagues to help fund their campaigns than have the Republicans,” Roberti said. “So, it will offset to some degree the devastations (handed Democrats) by reapportionment.”

Appeals Court Judge Charles Wiggins issued a dissent to the ruling, denying that the measure was discriminatory. He said the decision would “preserve the seats of incumbent Democratic members of the Legislature.”

Johnson said he was “very disappointed” with the decision and would consider appealing the ruling to the U.S. Supreme Court. He also has introduced legislation to restore the limits on campaign contributions to candidates for elective office.

Stern and Foster both said they thought it unlikely that the U.S. Supreme Court would take the case because no other state has a statute like it and thus no broad constitutional question is at issue.

But Foster said Common Cause is considering going before the California Supreme Court in an attempt to get another campaign reform measure put into effect. In 1988, California voters also approved Proposition 68, which contained even more restrictive limits and contained a mechanism for public financing of campaigns. But because Proposition 73 received more votes, it went into effect immediately.

In response to a taxpayers’ suit filed in 1989, the state Supreme Court ruled 5 to 2 that none of Proposition 68 should go into effect. However, in dissent, Justice Stanley Mosk said that Proposition 68 should become law if Proposition 73 were overturned by the federal appeals court.

“A dead horse cannot win a race,” Mosk said. “If one proposition is ultimately declared invalid, the other necessarily prevails by default.”

But attorney Randolph asserted that there is no legal way for Proposition 68 to be revived.

Times staff writers Jerry Gillam and Carl Ingram contributed to this story.