Hi-Tech Makes Its Political Mark

One of the clearest lessons of the 2000 campaign is that high-tech money is fast becoming the mother’s milk of politics. Perhaps less obvious is that, in California, it is also becoming the mother’s milk of policy.

Reams have been written about the emergence of high-tech moguls as major contributors to both Republicans and Democrats, and about candidate pilgrimages to the money mecca that is Silicon Valley. But something just as significant, and startling in its potential to affect government, is occurring: Silicon Valley, through the initiative process, is becoming an arbiter of public policy.

The influence of industrial wealth on the public realm is not new. Corporate magnates like Andrew Carnegie and Andrew Mellon did it through a civic philanthropy that endowed schools and libraries and museums.

Today’s civic philanthropy is different. At a recent conference hosted by USC’s School of Policy, Planning and Development, Jack Shakley of the California Community Foundation referred to this new incarnation as “dot-com philanthropy.” It is an impatient approach to giving that tends to reflect the “start-up” mentality of newly rich techies. This “ready, fire, aim” philanthropy has found a political outlet in the initiative process. The California Journal reported that just since 1996, 10 propositions with a Silicon Valley pedigree have reached the ballot.

The political awakening of California’s high-tech community can be traced to the 1996 wars over tort reform. Intuit co-founder Tom Proulx, reacting to the vulnerability of high-tech firms to class-action shareholder suits, proposed three initiatives for the March 1996 ballot that would have made such suits more difficult. All went down, in the face of heavy opposition from the state’s politically potent trial lawyers.

William Lerach, an attorney specializing in class-action suits, counterpunched with Proposition 211 on the November 1996 ballot, which would have made key corporate executives and board members personally liable in stockholder suits. That threat was enough to politicize high-tech leaders, who raised $40 million to defeat Lerach’s initiative. Out of that battle, the Technology Network (TechNet), a bipartisan political alliance of Silicon Valley corporate leaders, was born.

So far, only one initiative generated by Silicon Valley has passed. Proposition 227, which dismantled the state’s bilingual-education programs, was approved by California voters in 1998; it was sponsored by high-tech entrepreneur Ron Unz.

Technology firms have also intensified their activity in the state Capitol. Spurred by increasing congestion on San Francisco Bay Area roadways, Silicon Valley interests agitated for greater transportation funding. The ultimate result was a $6.8-billion transportation program proposed by Gov. Gray Davis and passed by the Legislature.

Reforming California’s poorly performing schools has become a major priority for high-tech companies, which need a well-educated work force. Silicon Valley executives have helped push education policy to the top of Sacramento’s agenda. Two tech-backed--and vastly divergent--attempts to improve the state’s education system are on Tuesday’s ballot.

Proposition 38, spearheaded by venture capitalist Tim Draper, would give California parents state vouchers of at least $4,000 a year to send their children to the private or parochial school of their choice. Draper shelled out about $2 million to get the initiative qualified for the ballot and pledged $20 million of his own money to fund the campaign to pass it. However, few other Silicon Valley types have chipped in to support it.

Proposition 39 would permit approval of local school-construction bonds with 55% of the vote, rather than the current two-thirds majority. It is the brainchild of software tycoon Reed Hastings and is backed by TechNet and many of the technology leaders who powered the successful 1998 legislative attempt to increase the number of charter schools.

The initiative is Hastings’ second attempt this year to lower the threshold for school-bond passage. Proposition 26 on the March primary ballot narrowly failed; it would have lowered the threshold to a bare majority.

Recent campaign-finance disclosure statements showed that Propositions 38 and 39 are on track to jointly collect $100 million in contributions. That reflects an exponential rise in the use of stocks as campaign donations by some new-economy entrepreneurs. Draper has surpassed his original donation pledge of $20 million, so far shelling out more than $23 million, much of it in stocks, to support Proposition 38. His is reportedly the largest contribution by an individual to a ballot proposition in California history.

The voucher initiative’s major opponent, the powerful California Teachers Assn., has so far contributed about $25 million in cash and in-kind contributions to defeat Proposition 38; that is reportedly the most that the CTA has ever spent on a single campaign.

Other California technology leaders have allied with the education community to support Proposition 39. Recent disclosure statements showed executives from Cisco Systems, Sun Microsystems and several venture-capital firms have poured in roughly $32 million in cash and stocks. Venture capitalist John Doerr, a driving force behind new-economy activism, has put up about $6 million and raised about $13 million more from the high-tech community.

Polls indicate that Hastings’ initiative has a chance of passing; support for the proposition is at 55% in the latest L.A. Times poll. Draper’s vision of a voucher system is losing, with two-thirds of The Times survey opposing it.

Whatever the outcome Tuesday, both men, and the high-tech community in which they have prospered, will have influenced the direction of state policy. A repudiation by voters of Draper’s school-choice proposal could set back the cause he champions. That alone can have major policy implications in California and nationally.

The governor and Legislature will be paying attention to the state’s tech elite and its status as a potent player in framing the agenda. Politicians won’t want to forfeit their ability to leverage policy change with this newfound source of campaign contributions. Chances are elected officials will be looking anxiously over their shoulders at the potential threat of well-heeled challengers with a taste for the entrepreneurial approach to politics and the venture capital to back it up.