Money and Influence Flow Through a Ballot Measure Loophole

If Gov. Arnold Schwarzenegger has his way, we’ll be voting this year on a ballot initiative to take redistricting out of the hands of the Legislature. Democrats, meanwhile, may support an initiative to increase the minimum wage. Conservatives, for their part, want a ballot measure cracking down on illegal immigration.

Each of these measures will cost money. Proponents will have to come up with as much as $2 million just to qualify them for the ballot, and even more will be needed to run an effective campaign for or against them. Yet the frenzy of initiative activity is beginning without clear campaign finance rules in place. It is imperative that the Legislature act now to clarify and toughen the rules. California law imposes contribution limits for a candidate’s election campaign. The governor can raise no more than $22,300 from any individual for his reelection committee, and members of the Legislature are limited to contributions of $3,300 from each individual. But until recently, there were no such rules in force for ballot measures. The governor and other elected officials have traditionally been able to raise unlimited donations for committees they control for the purpose of supporting or opposing ballot measures.

According to my calculations, elected officials have raised at least $84 million since 1990 through these “candidate-controlled” ballot measure committees. The governor’s fundraising for such committees, in particular, has been unprecedented. His main committee, the “California Recovery Team,” received $14.2 million in contributions from January through mid-October 2004 -- money to be spent at his discretion to support or oppose ballot measures. This included $750,000 in donations from Ameriquest Capital Corp.; $750,000 from Jerry Perenchio, head of Univision; and $500,000 from developer Alex Spanos (and $250,000 more from his company).

The governor also created and controlled a separate committee specifically to promote bond measures Propositions 57 and 58 for the March 2004 ballot. Donors of $100,000 or more to that committee included Toyota and Anheuser-Busch.

This makes no sense. If campaign contribution limits are justified to prevent corruption and the appearance of corruption in candidate elections, shouldn’t the same justification apply to candidate-controlled ballot measure committees? After all, a $100,000 contribution from a major corporation to a candidate’s “ballot committee” leaves him just as beholden as a donation to his reelection committee would.

That’s why California’s Fair Political Practices Commission recently adopted a regulation limiting contributions to candidate-controlled ballot measure committees to the same amount the candidate is allowed to raise for his own reelection committee. Thus, future contributors to the governor’s ballot committees can give no more than $22,300.

But it is unclear whether the new rule will stand up to an inevitable court challenge. Critics have argued that it is unconstitutional, noting that the U.S. Supreme Court decided in 1981 that contributions in ballot measure campaigns may not be limited because there is no candidate who can be corrupted by them. That precedent should not apply, however, to candidate-controlled ballot measure committees, where there is a candidate to corrupt.

The Supreme Court has become more willing in recent years to uphold campaign finance laws. But even if the new regulation is determined to be constitutional, it faces other problems. One is that it gives the governor an unfair advantage. Although he can raise money for his committees in $22,300 chunks, members of the Legislature are limited to accepting $3,300 contributions. Also, there’s a question whether the FPPC had the authority to adopt this new rule. Finally, the regulation may not prevent candidates from circumventing its provisions by setting up multiple candidate-controlled committees supporting the same ballot measure.

For all these reasons, the Legislature should act to supersede the FPPC regulations and impose fair and reasonable limits on contributions to candidate-controlled ballot measure committees. Each candidate-controlled ballot measure committee should have the same limit. And elected officials should be able to control only one committee per ballot measure.

Of course, it is possible that the governor would veto new rules, given the success he’s had in influencing the ballot measure process through his unlimited fundraising abilities. But a governor who is committed to ending the power of “special interests” in Sacramento should welcome such a change to “business as usual.”