Bill to Limit Contributions by Insurers Failing

The most substantive reform to emerge from the state insurance commissioner scandal, a bill to restrict campaign contributions from insurance companies who have regulatory business pending before the commissioner, appeared headed to certain defeat late Monday.

After a two-hour debate in the state Assembly, where six Democratic members spoke against it, the bill garnered only 27 votes, 14 short of the number needed. There were 34 votes against. The measure won no support from Republicans.

Assembly majority leader Kevin Shelley (D-San Francisco) did not rule out the possibility of another vote this week, but many lawmakers said prospects for its passage were negligible.

Although Speaker Bob Hertzberg and former Speaker Antonio Villaraigosa, both Democrats, argued strongly in favor of the bill, other members from both parties ridiculed it as a “knee jerk” and “window dressing.”

Villaraigosa said he feared that defeat of the measure would undo much of the respect won by the Assembly during a series of hearings it conducted into the actions of former Insurance Commissioner Chuck Quackenbush, a Republican, who resigned in July under the threat of impeachment.

“That was our finest hour,” said Villaraigosa. “But I think we need this to put a dot on that final chapter.”

Minority leader Scott Baugh (R-Huntington Beach) led the opposition, offering an amendment that would make insurance commissioner an appointed post.

“If we make this an appointed position, you completely eliminate the root of all problems that we saw this year in the Department of Insurance,” Baugh said. The amendment failed.

The reform bill would have limited insurers’ contributions to $250 within a 12-month period before pending regulatory action and six months after.

It was a more modest form of restrictive campaign finance rules that other states have for elected regulatory officers.

Lou Papan (D-Millbrae) argued that by curtailing contributions, the Legislature would “restrict the ability of a candidate to communicate with the electorate.”

The bill, SB 953 by Sen. Jackie Speier (D-Hillsborough), would have imposed the first campaign contribution limits on any of California’s eight statewide elected posts. A typical campaign for one of those offices can cost millions. It was a reaction to the huge campaign treasury built with insurance industry money by Quackenbush, who faces an ongoing state and federal investigation of his use of public money while in office.

Quackenbush, first elected in 1990 after reneging on his initial pledge not to accept money from insurers, collected more than $8 million in contributions from the industry he regulated for six years.

“I’m deeply disappointed,” Speier, who chairs the Senate Insurance Committee, said Monday night.

“This is an $80-billion industry regulated by one person. As we learned from the Quackenbush episode, the person who has that power should not be in position of receiving $50,000 and $100,000 contributions while companies have actions pending before them.”

Despite reservations, the new chairman-designate of the Assembly Insurance Committee, Thomas Calderon (D-Montebello), voted for the bill.

But he described it as a “rush job” and said he was not surprised by its defeat.

“This was a very complicated issue,” Calderon said. “There was no need to be rushing things at the end of the session.” The Legislature is scheduled to adjourn on Thursday.

All 27 votes in favor of the bill were by Democrats. In addition to Hertzberg, Villaraigosa and Calderon, others voting for the measure were: Elain Alquist of Santa Clara, Dion Aroner of Berkeley, Lou Correa of Anaheim, Susan Davis of San Diego, Dean Florez of Shafter, Martin Gallegos of Baldwin Park, Sally Havice of Cerritos, Hannah-Beth Jackson of Santa Barbara, Fred Keeley of Boulder Creek, Wally Knox of Los Angeles, Sheila Kuehl of Santa Monica, Ted Lempert of San Carlos, Alan Lowenthal of Long Beach, Carole Migden of San Francisco, George Nakano of Torrance, Sarah Reyes of Fresno, Gloria Romero of Los Angeles; Jack Scott of Altadena, Kevin Shelley of San Francisco, Darrell Steinberg of Sacramento, Tom Torlakson of Antioch, Howard Wayne of San Diego, Patricia Wiggins of Santa Rosa and Scott Wildman of Los Angeles.

Democracts voting against were Dennis Cardoza of Merced; Dick Floyd of Wilmington; John Longville of Rialto; Kerry Mazzoni of Novato; Lou Papan of Millbrae; Helen Thomson of Davis and Rod Wright of Los Angeles.

Consumer advocates were dismayed by the Assembly vote.

“While the Assembly uncovered a problem, the politicians turned their back on the solution,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights. “It should be no surprise that those who voted against this legislation also received the most contributions themselves from the insurance industry.”