Consumer Protection vs. Lobbies: It’s a Lopsided Contest

One of the most telling observations about the California Legislature I can recall came in 1988 from then-state Sen. Herschel Rosenthal (D-Los Angeles).

Faced with a deadlock over auto insurance reform, Rosenthal remarked that unless the rival lobbies, the trial lawyers and the insurers--both stupendous campaign contributors--could agree on what the lawmakers should do, they would not be able to do anything.

Since the lobbies could not agree, the Legislature did not act, and the result was a war of five insurance initiatives on the ballot later that same year. Ultimately, voters adopted the most radical of them, Proposition 103.

Years later, asked if things had changed in the relationship between the lobbies and the Legislature, Rosenthal said he could see no change.

But is this always going to be true? Or could there be some issues--such as rising electricity and natural gas prices--that generate sufficient public outrage to overwhelm the lobbies’ influence?

Rosenthal’s declarations come to mind just now, because we have just seen in the recently completed legislative session other illustrations of how important the lobbies, and their huge campaign contributions, are in Sacramento, especially when the public is not paying all that much attention.

Certainly, they often overwhelm the consumer groups, which usually cannot legally make contributions.

In the unsuccessful effort to rein in, to a minor extent, the payday advance lenders, with their legal annualized interest rates up to 911%, Earl Lui and Shelley Curran of the Consumers Union spent 546 hours lobbying on numerous trips to Sacramento. Other groups, including the American Assn. of Retired Persons and the Consumer Federation of California, joined the effort.

But it ended up counting for nothing against the gifts of the payday lobby. Although all figures are not yet reported to the secretary of state, those through June 30, two months before the end of the session, show that Assembly members had already received $130,185, Senate members $50,600, Gov. Gray Davis $7,000, Atty. Gen. Bill Lockyer $1,000 and eight separate lobbying firms an additional $339,346 for their work on the industry’s behalf. The total spent was $528,131.

The payday lobby’s best friend in the Legislature, Assemblyman Herb Wesson (D-Culver City), received $44,030, the most of any single lawmaker.

In the end, following a pledge to engage himself in the matter, Assembly Speaker Bob Hertzberg (D-Sherman Oaks), who received only $3,000 from the payday industry through June 30, did intervene for the payday lenders with a series of weakening amendments that the author of the reform, state Sen. Don Perata (D-Alameda), so objected to that he abandoned any attempt to secure his bill’s passage.

Hertzberg maintains that he was trying to get something passed and offered the amendments in a good-faith effort to compromise. But the appearances, at least, were bad.

Even when consumer protection legislation does pass, it often seems that what puts it over the top is a fissure among the lobbies.

The Legislature, for example, did pass an auto lemon law revision by state Sen. Byron Sher (D-Stanford), reducing from four to two the number of repair attempts that must be made to deal with safety defects before the car can be returned to its maker with full compensation.

But Rosemary Shahan of Consumers for Auto Reliability and Safety points out that passage, by only three votes more than necessary in the Assembly, came only after Ford and Toyota assumed a neutral position.

Shahan is still nervous. She has heard General Motors, which maintains its opposition to the bill, is now lobbying Gov. Davis, and as of Wednesday the governor had not yet said he would sign it.

Davis and his political aide, Garry South, have talked so much about raising money, necessarily much of it from the lobbies, that they have created an impression in some quarters of at least the possibility of impropriety.

Electric rates are another unresolved issue. A freeze is scheduled to be lifted in Los Angeles and the Bay Area no later than early 2002, and conceivably could be ended even earlier if the utilities have their way. Davis alone has already reported $288,500 in contributions from PG&E;, Edison and Sempra last year and this.

This is a potential consumer issue dwarfing in significance payday lending or the lemon law. Under present market rates, electricity deregulation is foundering in California, and major adjustments in the 1996 deregulation bill to create a sound market seem required.

I asked Senate President Pro Tem John Burton (D-San Francisco) whether he believes the Legislature would act independently on these issues.

“The intensity of the voters on an issue tends to overcome all other factors,” he said. “It’s political survival. Lawmakers raise money to help themselves survive. But if one’s constituents are so up in arms on an issue, it may overcome all contributions. That is a more serious matter of survival.

“Would the Legislature have the will to be independent? Yes, if the feeling is intense enough, it will overwhelm everything.”

But Harry Snyder of the Consumers Union, a veteran of battles with corporate lobbies in Sacramento, was not so sure.

“This may be the test,” he said, “to see whether, on something all the constituents feel, the Legislature and the governor will do something real. They will do something, but if they can deflect the interest of their constituents and make it only appear they have done something, they will do that. If they can lower rates in the short run, but make consumers pay billions in the long run, they will do that, to please their contributors.”

I hope Burton’s view, not Snyder’s, is right. But I’m not certain.

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Ken Reich can be contacted with your accounts of true consumer adventure at (213) 237-7060 or by e-mail at ken.reich@latimes.com.