Propositions 16 and 17 could pave the way for more company-backed initiatives

Tuesday’s California primary election represents a first — two initiative measures that were conceived and financed by individual companies. The fate of these propositions, analysts say, could determine whether other companies follow suit.

Proposition 16 is being pushed by Pacific Gas & Electric Co., which has provided 98% of the $46 million in campaign financing for the measure, according to the secretary of state’s office. The measure would make it harder for municipalities to launch utilities to compete with corporate providers such as PG&E.

Likewise, Proposition 17 was the brainchild of insurance company Mercury General Corp., which has raised 99% of its $16 million in campaign funding. Approval of the measure would make it easier for auto insurance companies to win customers from competitors by allowing them to carry over their loyalty discounts.

Both companies have spent far more than opponents, who raised just $50,000 against Proposition 16 and $1.3 million against Proposition 17.

A victory for either measure could mark a troubling development in the century-long evolution of direct democracy in initiative-happy California, some veteran political observers say.

“You could very well see the floodgates open,” said Dan Schnur, the newly named chairman of the Fair Political Practices Commission, the state’s political ethics watchdog. “Any number of corporations and union interests could decide that a ballot initiative is a much easier” way to change the law.

Gov. Hiram Johnson championed the ballot initiative in 1911 as a populist tool to counter Southern Pacific Railroad’s influence on the Legislature, noted Jessica Levinson, political reform director at the Center for Governmental Studies, a nonpartisan Los Angeles think tank.

“Now, we’re seeing special interests using the initiative process to simply bypass the Legislature completely by proposing laws that would overwhelmingly benefit the proponents of the initiative,” Levinson said.

PG&E and Mercury both insist the propositions they are backing would benefit millions of Californians.

PG&E contends that it and its allies — many of them nonprofit groups that have received contributions from the utility — are pursuing a good-government goal of giving citizens the right to vote on public power projects. Proposition 16 would require municipal power advocates to get approval from two-thirds of the voters in an affected area for any plan to create or expand a nonprofit alternative to a for-profit utility.

Voters rarely back any proposal by such a super-majority, so Proposition 16’s passage would essentially eliminate future public power efforts, opponents say.

For its part, Mercury claims that Proposition 17 could foster competition and lower insurance bills for most car owners by allowing them to keep a current discount for being loyal to their insurance company, even if they switch insurers.

“A more competitive market always makes people better off,” said Proposition 17 spokesman Mike D’Arelli.

Courts have ruled that such “portable” discounts violate Proposition 103, an initiative passed in 1988 that regulates property insurance rates. Consumer advocates in the past have contended that providing new discounts would raise premiums for motorists buying first-time coverage or who let policies lapse because they didn’t own cars or lived out of state.

The fact that both PG&E and Mercury are pushing pet initiatives doesn’t necessarily signify a trend toward a corporate takeover of the process, said Allan Zaremberg, president of the California Chamber of Commerce, which backs both propositions 16 and 17. “There are two unique circumstances here that happen to be on the same ballot,” he said.

Until this election cycle, initiatives that primarily benefited a single corporation have been rare. In 1984, a drive to give California a state lottery passed with support from Scientific Games Corp., a Georgia company that still sells instant-winner, scratch-off tickets to the agency.

Another company-specific effort, Proposition 10 in November 2008, failed spectacularly. The initiative, backed by Texas oil and gas developer T. Boone Pickens Jr., asked voters to approve $5 billion in bonds to finance investments in natural gas and alternative energy projects.

There have been no publicly available polls on either of next week’s business-backed propositions. But people who have seen private daily tracking polls say that the PG&E initiative has been stuck in the mid-40% approval zone while Mercury’s effort is running somewhere around 50%.

Often with initiatives, voters have an ability to see through the propaganda, said John G. Matsusaka, president of the Initiative and Referendum Institute at USC.

“If voters favor corporations, that’s their choice,” he said. “But the thing that concerns me is when the spending is so one-sided. You wonder, did the other side get to make its arguments?”