Money Flow in Politics Faces Limits

State officials are moving to bar lawmakers from taking donations of unlimited size in campaign accounts created before new contribution caps took hold.

The Fair Political Practices Commission is expected next week to reverse a decision it made in 2001 that allowed such fundraising. The decision created a loophole used by Lt. Gov. Cruz Bustamante, state Senate leader John Burton (D-San Francisco), Assembly Speaker Herb Wesson (D-Culver City) and other officeholders to tap donors for millions above current contribution limits.

In a memo recommending the reversal, the commission’s attorneys said the “potential loophole ... may give some candidates an unnecessary and unfair advantage.”

“By amending the regulation,” the nine-page memo says, “the commission can ensure that incumbents and challengers conduct their campaigns under the same set of rules and that neither has an unfair advantage over the other.”

Advocates of campaign finance limits praised the commission for moving toward repeal of the 2001 rule. The board is expected to act Wednesday.

“I think that is a major step in the right direction,” said Sen. Ross Johnson (R-Irvine), a co-author of Proposition 34.

Voters approved the measure, written primarily by Burton and Johnson, in November 2000. It bars single donors from giving more than $3,200 a year to legislative candidates, and more than $21,200 to candidates running for governor.

The measure superseded stricter limits approved earlier by voters but tied up in the courts. The more restrictive caps were expected to be reinstated; Proposition 34 prevented that.

Trying to implement the new measure in 2001, the commission voted 3 to 2 to allow candidates to operate under the old rules, which set no limits, when they were using campaign bank accounts that existed before Proposition 34.

“It sounds like Armageddon, but there really are a million safeguards in this system,” then-chairwoman Karen Getman said, explaining the ruling. “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.”

Then came the recall.

Bustamante, running to replace Gov. Gray Davis, accepted more than $4 million from an old campaign committee. By far, the bulk of the money came in contributions of $100,000 or more from Indian tribes and unions.

Johnson sued to block Bustamante from continuing the practice. A judge ruled that Bustamante had violated Proposition 34, and ordered that he return any unspent money. The FPPC sued Bustamante on Wednesday, seeking as much as $9 million in penalties.

Campaign finance expert Robert Stern, president of the Center for Governmental Studies, called the 2001 ruling “one of the worst decisions” ever made by the FPPC, and praised the move toward reversing it. But he also said the commission should go further: “The FPPC really should order everybody who has any money left over beyond the net debts to return the money.”

FPPC Chairwoman Liane Randolph, though not saying how she intends to vote on the recommendation, said she probably would oppose forcing candidates to return the money.

The candidates were relying on the FPPC decision, Randolph said.

Burton, the top Senate Democrat, raised $1.6 million in 2003 in donations of $10,000 or more, campaign finance reports show. Donors ranged from developers and unions to big businesses and wealthy individuals, including entertainment moguls Haim Saban and A. Jerrold Perenchio.

Randolph and others note that Bustamante’s actions differ from those of most legislators who raised money to go into old campaign accounts. Bustamante sought to finance his gubernatorial campaign directly by using money raised in excess of the limits.

Most legislators who took money in old accounts did not use it directly on their own campaigns. They transferred it to other candidates and party organizations. And many of the veteran lawmakers are being forced from office by term limits and cannot run again.

On Thursday, Burton, serving his final year in the Senate, seemed unfazed by the commission’s expected turnaround.

“This came from the FPPC without any request or encouragement from anybody I know in elective office,” Burton said. “They wrote the letter, and they have a right to erase the letter.”

Sen. Jim Battin (R-La Quinta) also seemed unperturbed. Two Indian tribes that own casinos donated $75,000 each to him, and another gave him $25,000 last year.

“If they’re going to change the interpretation, I will live under it,” Battin said, adding that Proposition 34, like many campaign finance overhauls, has had little if any effect on the amount of money being spent on campaigns.

“The money didn’t go away. It just went underground,” Battin said, noting that donors now give larger sums to political parties or spend it directly on campaigns through campaign committees that operate independently of any candidate. “That dilutes all ability to follow the money,” Battin said.