Millions Flow Through Loophole in State Campaign Finance Law

California legislators are taking advantage of a ruling on the state’s new campaign finance law to raise nearly $3 million in contributions that exceed donation limits imposed by the voters two years ago.

Leading the scramble are the Legislature’s two highest-ranking officials, Assembly Speaker Herb Wesson of Culver City and Senate President Pro Tem John Burton of San Francisco, both Democrats. Burton was the principal author of Proposition 34, the state campaign finance law that was intended to curb political contributions. It was placed on the ballot by the state Legislature and then approved by voters in 2000.

Aided by an interpretation of the campaign finance law, Wesson and Burton say they are obeying its rules even as they have avoided the $3,000 contribution limit it established for legislators. They have taken donations of $25,000, $50,000 and in one case $100,000 from Indian casino operators, labor unions, liquor interests and corporations.

In Wesson’s case, the money has been spent on a variety of purposes. Among other things, he paid his wife $4,000 for writing thank-you letters to contributors, and he made $25,000 donations to other candidates. Those contributions, according to some officials, may have violated the law.

Proposition 34 imposed contribution limits on candidates seeking state offices. Language in the law states that its purpose was to “minimize the potentially corrupting influence and appearance of corruption caused by large contributions.”

But the loophole that has allowed lawmakers to accept unlimited contributions was created by the Fair Political Practices Commission, the political watchdog whose job includes interpreting and enforcing campaign finance law. In a September decision that campaign reform advocates say thwarted the will of the voters, the commission ruled that Proposition 34 restrictions do not apply to political committees created by lawmakers before the measure took effect on Jan. 1, 2001.

Karen Getman, who chairs the commission, said the ruling was an attempt to knit together the rules that predated Proposition 34 with the new limits that the measure imposed.

“While it’s wonderful to talk about the philosophy of contribution limits, we’ve got to make the law work,” she said.

Some proponents of campaign finance reform fiercely disagree.

“This is strictly a creation of the FPPC and a mind-boggling one at that. It’s an abomination,” said Jim Knox, director of California Common Cause, a political reform advocacy organization.

In less than a year, according to a Times analysis, Wesson accepted $1.6 million in contributions whose amounts would have been prevented by the limits included in Proposition 34. Burton took in $532,000 in donations above the limit created by the proposition.

Burton and Wesson both said they are complying with the law and don’t believe they have broken faith with voters. In interviews last week, both said they did not ask for the Fair Political Practices Commission ruling.

“It was a total surprise, albeit a pleasant surprise,” Burton said.

“As the FPPC went through Proposition 34, they found there were several adjustments that needed to be made,” Wesson said. “So, everything that I am doing and other members are doing today is within the parameters of Proposition 34.”

The contributions that exceed the limits of Proposition 34 come as legislators and others are probing allegations of inappropriate fund-raising by state leaders, most notably Gov. Gray Davis.

In recent weeks, a legislative committee has been questioning a former aide to Davis about accepting a $25,000 check for the governor’s reelection from Oracle Corp. shortly after the state signed a $95-million software licensing agreement with the company last May.

Davis also has been criticized for asking a teachers union for a $1-million donation in the middle of a policy meeting in his office, and for granting large salary increases to a prison guards union that is one of his biggest contributors.

Getman, the commission chairwoman, said that one of the knottiest problems in implementing Proposition 34 was what to do with political committees created before the measure took effect. The commission resolved the issue by allowing those committees to continue to raise money under the old rules, which set no limits on contributions.

The preexisting committees were given termination dates that in some cases don’t take effect until two years after this November’s election. In the meantime, some new restrictions were imposed on them, Getman said. Lawmakers could not use money from those committees for direct campaign expenditures such as advertising, but could use it for indirect expenses such as contributions to local groups whose endorsement they are seeking.

Incumbents may transfer their contributions to political parties for party-building activities such as voter registration. Political parties also may give limited amounts of this “soft” money to candidates. Critics claim that process merely substitutes an indirect contribution for a direct donation.

Any contribution made from those older committees to another candidate would be subject to Proposition 34’s $3,000 limit. On May 17, the commission told Wesson that, under Proposition 34’s restrictions, it is illegal to make contributions to other state candidates in excess of the limit.

Wesson, citing the exemption for older committees, wants the commission to reconsider its advice to him. He contributed $25,000 each to Assemblyman George Nakano (D-Torrance), a candidate for reelection, and Assemblyman Tom Calderon (D-Montebello), who ran an unsuccessful race for insurance commissioner in March.

“It sounds like Armageddon but there really are a million safeguards in this system,” Getman said. “The bottom line being it’s not going to be used to get around the Proposition 34 limits for elections that are held under Proposition 34.”

Reform advocates disagreed, charging that the commission had distorted the decision of the voters.

“It is the most outrageous decision the FPPC has ever made,” said Robert Stern, the co-author of California’s landmark campaign finance law in 1974, who served nine years as general counsel to the Fair Political Practices Commission. “If you have contribution limits shouldn’t it apply to everybody? The purpose is to reduce the influence of large contributors on government, and how are you reducing that influence when you allow Burton and Wesson to take unlimited amounts of money?”

He said the one exception might be to allow lawmakers to pay off outstanding debt accrued before the limitations went into effect. But instead of doing that, he noted that the commission lifted the limitation for every officeholder with an old committee whether or not they had debt.

“From start to finish this whole proposition was a sham and unfortunately the FPPC has become part of it,” he said.

The questions regarding the use of preexisting committees for political fund-raising are the latest challenge to the proposition’s effectiveness. Campaign reform advocates have complained that Proposition 34 did not thwart political giving by so-called “independent expenditure” committees, which contribute on behalf of candidates and causes but without giving directly to them.

Advocates of tighter finance rules, including leaders of the Los Angeles Ethics Commission, also complain that Proposition 34 has allowed the political parties and other organizations, such as labor unions, to communicate with their members outside the limits imposed by the measure.

Stern said the Burton proposal, which repealed the much tougher Proposition 208 approved in 1996 by the voters, was hurriedly put on the ballot after an appellate court indicated it intended to uphold Proposition 208.

Proposition 34 was approved by the Legislature in 2000 a week after it was introduced. Only one hearing was held, and opponents of the plan were not allowed to testify. The measure won the approval of 60% of voters in November 2000.

Jamie Court, advocacy director for the Foundation for Taxpayer and Consumer Rights, said lawmakers who accepted the large contributions should be required to return them because they violated a promise to the voters.

Wesson collected $100,000 from the Pipes and Trade Council, an organization of labor unions. Other donations to Wesson included $50,000 from California First Health Plan and $34,445 from Microsoft.

Burton’s contributors included the California State Employees Assn., which gave $75,000. State government attorneys donated $72,000. A sampling of campaign reports showed that Assembly Republican Leader Dave Cox of Fair Oaks accepted no contributions exceeding the Proposition 34 limit. Senate Republican Leader Jim Brulte of Rancho Cucamonga accepted three contributions of $5,000 each, or a total of $6,000 over the limit. A number of other Assembly members and state senators also have benefited from contributions to their existing committees that exceed the Proposition 34 limits.

Brulte said he and Cox originally liked the idea of a loophole, but later changed their minds. “Our lawyers said their interpretation of Proposition 34 found that it called for a ban on all large contributions. Period,” Brulte said.

As word spread of the commission ruling last fall, rank and file members of both parties--and special interests--hustled to invoke the change. On printed invitations to fund-raising events where a glass of wine and dinner may cost $10,000, lawmakers typed in a new line: “There are no limits on contributions to this committee.”