McGeorge School of Law

Proposition 89

Proposition 89:
Political Campaigns. Public Financing.
Corporate Tax Increase. Campaign Contribution
and Expenditure Limits.

By

Christopher Chaffee
JD, McGeorge School of Law, University of the Pacific
to be conferred May, 2008
B.A., Political Science, University of California Berkeley, 2003

and

Gail Maiorana
JD, McGeorge School of Law, University of the Pacific
to be conferred May, 2007
B.A., Journalism, Arizona State University, 1983

 

Copyright © 2006 by University of the McGeorge School of Law


Table of Contents

I. Executive Summary
II. Drafting Issues
III. Constitutional Issues
IV. Public Policy
V. Conclusion


I. Executive Summary

A. Background

Proposition 89 (“Prop. 89”), known as the California Nurses Association Clean Money and Fair Elections Act, would allow a voluntary system of public funding for qualifying state political candidates who agree to tight contribution and spending limits. It would leave part of the traditional financing system – private donations – intact for those who wish to use it but would dramatically lower the amount each contributor legally could give. Traditionally funded candidates’ spending could trigger additional funding for their publicly financed opponents. Prop. 89 also would place new limits on corporate contributions to support or oppose ballot measures.

The public funding would come from a 0.2 percent tax increase on corporations, which is expected to raise $200 million a year.

Among Prop. 89’s stated purposes are providing a greater diversity of candidates, permitting candidates to pursue policy issues instead of being preoccupied with fundraising and increasing elected officials’ accountability to the voters rather than to major campaign contributors. Prop. 89, § 91019. The measure is patterned after statewide public financing systems in Arizona and Maine, which have given candidates public funds since the 2000 election cycle. In December 2005, the Connecticut legislature approved such a system, set to go into effect in January 2007.

Other states have limited public funding for certain races, such as for judges, or for specified districts. Even Sacramento uses a modified system of public financing by making matching funds available to certain candidates.

B. Existing Law

Currently, California prohibits the use of public funds for statewide campaigns. Cal. Gov Code § 85300 says “No public officer shall expend and no candidate shall accept any public moneys for the purpose of seeking elective office,” with an exception for charter cities and counties under Regulation 18530. Section 85300 was passed as part of Proposition 73, discussed in the Constitutional Issues section.

The current ban on public financing is part of a much broader framework known as the Political Reform Act (“PRA”), which was passed as Proposition 9 by California voters in 1974 amid the Watergate scandal. The legislature has amended the PRA dozens of times in the ensuing years, and Fair Political Practices Commission (“FPPC”) regulations and advisory opinions, as well as lawsuits filed by various sources, have reshaped it.

C. Proposed Law

Funds for “Clean Money” candidates would come from a 0.2 percent tax on banks and corporations in the state. Prop. 89, § 91133. Prop. 89 would amend various Revenue and Taxation Code sections to accomplish this. Id. at §§ 23151, 23181, 23183. Legislative candidates who collect a certain number of $5 contributions from within their district (or the whole state if they are running for governor, treasurer, etc.) would be given a sum of money raised by the corporate tax increase in return for agreeing to forgo private donations. If a competing, traditional candidate spends past a certain threshold, the “Clean Money” candidate would get a second round of financing. Even before candidates set out to collect their $5 contributions, they can collect “seed money” contributions of up to $100 per contributor in a qualifying period that ends well before the election. Id. at § 91067. If there isn’t enough money to give to each qualifying candidate, the FPPC can proportionately reduce the amount of funds available to each candidate. Id. at § 91142.

II. Drafting Issues

A. Pre-election review

No lawsuits have arisen over the procedures used to qualify Prop. 89 for the ballot. Procedural irregularities in signature gathering and in other mechanics of the process, under case law, may disqualify a measure from being submitted to voters. Costa v. Superior Court, 37 Cal. 4 th 986 (2006); Independent Energy Producers Association v. McPherson, 38 Cal. 4 th 1020 (2006).

B. Severability

Section 13(a) of Prop. 89 includes a severability clause. The test for severability is that the language of the statute is grammatically, functionally, and volitionally severable. If portions of a statute are found invalid, the remainder cannot be salvaged unless the text as whole can be severed in all three ways. People’s Advocate v. Superior Court, 181 Cal. App. 3d 316, 330-332 (1986). A court is likely to find that provisions of this Act are grammatically severable because sections can be separated by paragraph, sentence, clause, phrase or even single words. Id.

A finding of functionally severable is chancier. Under the People’s Advocate test, valid sections must stand on their own ; , that is, be capable of independent application. Because the key to the whole Clean Money Act is dollar figures scattered in various clauses, and those dollar figures underlie the purpose of the proposed public financing system, a court may invalidate the whole statute even if only portions are found invalid. On the other hand, because the Act sets up two parallel systems of financing – traditional and “clean” ‑‑ (see constitutional discussion below), it could be argued that the Act is functionally severable because voluntary limits for “Clean” candidates could operate independently of limits for traditional financing.

The statute’s volitional severability is discussed in the Past Versions section.

C. Past versions

The idea of public financing in California dates back at least 18 years, when California voters passed Proposition 68. Cal. Sen. Elections Comm., Leg. Analyses by Darren Chesin, Hearings on AB 583, 2005-2006 Leg., Reg. Session , April 19 and May 11, 2006. But that year voters also passed Proposition 73, which specifically prohibited public financing. Id. Because Proposition 73 got more “yes” votes than did Proposition 68, Prop 68 became inoperative, as required by the California Constitution. Id.; Cal. Const. art. II, § 10(b). Five years of court battles ensued over both propositions (see discussion in Constitutional Issues section).

In 1990, with the Proposition 68/73 court battles in progress, voters rejected Proposition 131, an initiative measure that garnered only 37.75 percent of the vote. Id. Proposition 131 would have provided partial public campaign financing for candidates to state office who agreed to specified campaign expenditure limits. Id. This measure also contained term limits that were less restrictive than those in competing Proposition 140, which was approved by voters. Id. Other public financing proposals died in the Legislature. In 1999, state Sen. Debra Bowen introduced SB 1169, which proposed providing matching funds to legislative candidates who agreed to abide by specified voluntary expenditure limits. Id. SB 1169 died on the Senate Floor without being brought up for a vote. Id. Likewise, AB 190 in 2001 and AB 2134 in 2002 called for different methods to provide matching funds and public financing grants to legislative candidates who agreed to abide by voluntary expenditure ceilings. Id. AB 190 failed passage in the Assembly Elections and Reapportionment Committee, while AB 2134 passed out of the committee but was held on the Assembly Appropriations Committee’s suspense file. Id.

Under the final portion of the severability test, volition, this record of failure may be cited by opponents of Prop. 89 to show that a legislative body was not inclined to act on any portion of public financing, and at various points in time the public has also not been receptive to campaign finance reforms that center on public financing mechanisms.

D. Language: Voter vs. resident

Prop. 89 defines “Qualifying contribution” as “a contribution of five dollars ($5) that is received during the designated qualifying period by a candidate for elective state office seeking to become eligible for Clean Money campaign funding from a legal resident of the district in which the candidate is running for office.” Prop. 89, § 91063. Arizona, by contrast, specifies that the $5 contributions for would-be publicly funded candidates must come from voters within the district. Ariz. Rev. Stat. § 16-946 (2006). The Arizona method makes it more difficult for candidates to gather such contributions by restricting the pool of potential $5 donors. But the Prop. 89 method could make it harder for California officials to verify that the contributions came from real people within the district. They would have to use general databases to verify qualifying contribution records; general databases tend to be less reliable than voter registration records kept by counties. The wording of this provision raises the potential of fraud among would-be candidates.

III. Constitutional Issues

A. Single-subject rule

California Constitution Article II section 8(d) requires that “an initiative measure embracing more than one subject may not be submitted to the electors or have any effect.” This clause has been in effect since 1948, but after one instance of initial usage, it took more than five decades for a court to reject an initiative for this reason. Under the single subject rule, the terms of a measure must be reasonably germane to a common theme or purpose. Senate v. Jones, 21 Cal 4 th 1142, 1158 (1999) . In Senate v. Jones, the State Senate and other officials sought to keep Proposition 24 off the March 2000 ballot because it included changes to legislators’ control over both redistricting and their own salaries. The two provisions were found not to be reasonably germane to a common theme or purpose even though proponents put a sweeping label on the act. Id.. at 1158 . Internal rule setting was left to the Legislature.

Prop. 89 would amend existing statutes in the Revenue, Government and Election codes. Courts have found that this by itself is not a problem. Manduley v. Superior Court, 27 Cal. 4 th 537 (2002). Instead, ballot measures that ran afoul of the single-subject rule changed codes in a way that amounted to violating the separation of powers doctrines. While Prop. 89 covers a variety of issues in its 55 pages, including a whole new chapter of state code, all provisions would cover the financing of political campaigns. There are no shifts in power among the three branches of government, nor major changes of authority granted to any entity. A court is unlikely to reject the measure under the Jones standard.

B. First Amendment Applicability

The contribution limits Prop. 89 sets – $500 for Assembly and Senate candidates and $1,000 for statewide candidates – will come under constitutional scrutiny for possible First Amendment violations following the recent ruling of the Supreme Court in Randall v. Sorrell,, 126 S. Ct. 2479 (2006). In Randall, the Supreme Court struck down the Vermont contribution and expenditure limits; the contribution limits were $200 and $400 for legislative and statewide candidates, respectively. Id. at 2491-2500. Citing the landmark decision Buckley v. Valeo, 424 U.S. 1 (1976), the Supreme Court stated the contribution limits put in place in Vermont violated the First Amendment because they burdened protected interests in a manner disproportionate to the public policy purposes they were enacted to advance. Id. at 2495, 2500. In Buckley, the Supreme Court allowed the federal contributions limits of $1,000 per election cycle to remain given the governmental purpose in preventing corruption and the appearance of corruption in elections. 424 U.S. 1.

The five factors that the Supreme Court looked to in Randall when deciding that the Vermont limits were too restrictive were: 1) The limits would restrict the amount of funding available to challengers to run competitive campaigns; 2) Limiting political party’s campaign contributions to the same amount as individuals’ threatens the ability to associate in a political party, a vital First Amendment right; 3) The manner in which volunteers were treated would make it difficult for a challenger to create a competitive campaign against an incumbent given the already low contribution limits; 4) The limits were not indexed with inflation; 5) There were no special justifications given for the low contribution limits. Randall, 126 S. Ct. at 2495-2500.

It is unknown whether Prop 89 will meet these five factors set out by the Supreme Court in Randall and the basic rationale of Buckley. Although the individual limits to candidates are similar to the federal limits upheld in Buckley, the public financing of candidates could make it difficult for non-participating challengers to compete against a publicly financed incumbent. Buckley, 424 U.S. at 1, 2. This would be especially true for non-participating candidates running for governor. To match the total amount of money a publicly funded candidate for governor would receive, $25 million ($10 million for the primary and $15 million for the general), a non-participating candidate would need 12,500 individual donations of $2,000 (the limit for the primary and general election). Prop. 89 §§ 91099(a)(1)(E), (b)(1)(E). This is feasible, but the low limits could make it exceedingly difficult to raise the funds because the aggregate limit to all individuals statewide is only $7,500 per year, forcing individual contributors to be very selective on where they contribute their funds each year. Id., § 91105(g).

Note that Phil Angelides through the last filing date, July 31, 2006, had 10,674 individual contributions to his campaign. This is not the number of individuals that contributed to his race but is an indication of the amount of separate contributions that he received. There were about 8,600 contributions from individuals, non-corporate entities, for a total of $11 million, an average contribution of $1,280. Another large portion of Angelides’ money came from corporations and/or trade unions. About 2,000 individual contributions come from trade unions and corporations for a total of $7.4 million, averaging $3,700 per contribution. Secretary of State’s website, http://ss.ca.gov, (accessed Sept. 1, 2006). These numbers indicate that there are probably enough wealthy donors for a non-participating candidate to raise the requisite funds to run for governor, but the effort could be deemed too arduous by the Supreme Court for a challenger.

The second factor from Randall could be met under the language of Prop. 89. Political party contribution limits are much more liberal than individual and corporate limits, undermining the argument that Prop. 89 would harm free political association. Political parties can give up to $1.25 million (for the primary and general elections) to a candidate for Governor. This is greatly reduced for legislative races. Prop. 89, § 91123(a)(5) and (b)(5). The only difficulty potential challenge for political parties under Prop. 89 would be the source of funding for political parties and their candidate activities. Individuals could only give $7,500 per year to political parties for the purpose of funding candidates. Id., § 91105(c). The individual contribution limits to political parties would be applicable to that individual’s $7,500 aggregate contribution limit to candidate committees (any contributions in excess of $7,500 must be given to an Independent Expenditure Committee or to a political party for non-candidate related activities). Id. This aggregate limit will force many individuals to decide whether they would give money directly to a candidate or to give it to a political party to then give to a candidate of the party’s selection.

The final three factors discussed in Randall would probably not be applicable to Prop. 89. Prop. 89 does not contain any strict limitations on volunteer time, expenses, etc. Also, Prop 89. is indexed for inflation. Prop. 89, § 91144. The final factor, a special justification for the limits, could be shown by the amount of money spent in each election cycle in California. Further, the general purpose of eliminating corruption and its appearance, reducing the influence of corporate and special interest money in campaigns, and increasing the diversity of candidates may be enough to withstand the strict scrutiny standard the Supreme Court has used in the past. Buckley, 424 U.S. 1. This final factor would give the Supreme Court the ability to strike down higher or lower limits than those discussed in Buckley given the political environment, spending patterns, and cost of elections of a particular state.

C. Corporate Contribution Limits

Prop. 89 also limits the amount a corporation can give to ballot propositions to $10,000 per year. Prop 89, § 91139(a). Currently there are no limits on the amount corporations can give to ballot propositions. Recently the Ninth Circuit struck down a Montana ballot initiative, I-125, that prohibited corporations from contributing to ballot propositions, directly or indirectly. Montana Chamber of Commerce v. Agenbright, 226 F. 3d 1049 (9th Cir. 2000). Montana’s I-125 allowed corporations to create separate political action committees to seek donations from stockholders, employees, and other members of the corporation to support or oppose ballot propositions. Id. at 1053. The Ninth Circuit found the prohibition of corporate contributions to be unconstitutional under the First Amendment and the Supreme Court’s ruling in First National Bank of Boston v. Bellotti, 435 U.S. 756 (1978). Id. at 1052. The Ninth Circuit found that I-125 did not meet the strict scrutiny standard applied to limitations on First Amendment speech and that the state could not show both a compelling state interest in prohibiting such political speech and that the method was narrowly tailored to avoid unnecessary abridgment of speech. Id. at 1056, 1057, 1058.

The Ninth Circuit followed the Supreme Court’s ruling in Bellotti, which struck down a Massachusetts law that prohibited corporate contributions to ballot propositions. First Natl. Bank v. Bellotti, 435 U.S. 756 (1978). In Bellotti, the Supreme Court found that although corporate contributions may influence public opinion and the outcome of a vote, such an influence was not unfair in the same manner it can be when corporate contributions are used to finance individual candidates. Id. at 789, 790. The Supreme Court noted that contribution limits on corporations can meet the strict scrutiny standard if a state can show the limits were in place to prevent corruption or the appearance of corruption. Id. at 788. But, limits on contributions to ballot initiatives have been struck down by the Supreme Court in Citizens Against Rent Control v. City of Berkeley, 454 U.S. 290 (1981).

In City of Berkeley, the Supreme Court struck down a $250 limit imposed by a local measure on individual contributions to initiative committees. Id. at 299 .. No such limits were placed on individual contributions for or against a local measure, the only limit created by the measure was the limitation placed on contributions to initiative committees. Id. at 297. The Supreme Court noted that the limitation on contributions to initiative committees did not meet the strict scrutiny standards applied to limitations on the freedom of speech and also undermined the ability of individuals to associate and pool their resources to engage in the political debate. Id. at 299-300. The Supreme Court’s decision hinged significantly on the absence of a compelling government interest to impose the limitation on the First Amendment. Id. at 299. The Supreme Court did not agree with the California Supreme Court’s conclusion that the limitation furthered a compelling government interest: “it ensured that special interest groups could not “corrupt” the initiative process by spending large amounts to support or oppose a ballot measure.” Id. at 293. The ruling in City of Berkeley leaves open the possibility that limitations on contributions to ballot initiative committees could be valid under the strict scrutiny standard applied by the Supreme Court if the government could show that the limitation both served a compelling state interest and was the least restrictive means available to accomplish the interest.

Prop. 89 and its limits on corporate contribution to ballot propositions have yet to be challenged. It is unknown whether such strict limits will meet the strict scrutiny standard the Supreme Court uses to test the validity of limitations on free speech. The stated purpose of the $10,000 limit on corporate contributions is to limit the impact of corporate dollars on ballot initiative outcomes in campaigns and to allow individual voter contributions to be on a more even playing field compared to corporate funded ballot propositions. Prop. 89, § 91019. Also, the proponents of Prop. 89 have articulated that the corporate limits would reduce the appearance of corruption in ballot initiative campaigns and to preserve the public’s belief and confidence in the initiative process. Id. If Prop. 89 is challenged under the ruling in City of Berkeley, the government would have to show that there is a compelling interest in the ballot initiative contribution limits and the limits are the least restrictive to accomplish the interest. 454 U.S. 290. The government could show such a compelling interest through a well developed record and data from the amount of money spent on the average ballot initiative campaign, but the main issue will be whether the limitations of Prop. 89 are the least restrictive to accomplish the governmental interest. Id.

Prop. 89 further allows corporations to set up independent committees and seek contributions from employees and stockholders, allowing for corporate interests to be expressed and protected in elections. Id. at § 91138 (c)(3). But Prop. 89’s limits on corporate contributions do not allow a corporation to use its accumulated wealth to safeguard its interests to the fullest extent that it could without such a limit. As the Supreme Court noted in Bellotti, political speech is at the heart of what the First Amendment protects. Bellotti, 435 U.S. at 776. As the Supreme Court stated in Bellotti, “a restriction so destructive of the right of public discussion, without greater or more imminent danger to the public interest than existed in this case, is incompatible with the freedoms secured by the First Amendment.” 435 U.S. at 792. The Supreme Court was not convinced that the purpose of reducing corporate influence on voter opinion and the outcome of the vote on ballot propositions met the strict scrutiny requirement and was narrowly tailored. when weighed against the importance of disseminating information to the public. Id. at 791, 792.

The state interest of limiting a corporation’s ability to disseminate information in support or opposition to a ballot proposition was curtailed under the Massachusetts prohibition on corporate contribution to ballot initiatives. Id. This prohibition directly impinged upon the freedom of speech of corporate interests and the ability of the public to hear information about ballot propositions. Id. Such a restriction was not counterbalanced by a compelling state interest. Id. at 792. Although Prop. 89 does not prohibit corporate contributions to ballot propositions, its does severely limit the ability of corporations to contribute to ballot propositions. It is an open question as to whether the state can show a compelling interest to withstand the strict scrutiny that will be applied to Prop. 89’s limit on corporate contributions to ballot initiatives. If the measure passes, this will certainly be a provision that will be challenged by initiative proponents and other politically interested parties.

D. Non-Profit Designation

The only manner to get around the limitations that Prop 89 imposes upon corporate contributions is to qualify as a non-profit corporation. A qualified non-profit is defined as a 501(c) organized corporation that does not engage in business activities, has no shareholders or persons “who are offered or who receive any benefit that is a disincentive for them to disassociate themselves with the corporation on the basis of the corporation’s position on a political issue.” Prop 89, § 91140(a)(2)(B). Further, a non-profit cannot be formed by a business entity or by its shareholders to circumvent the limitations imposed upon corporate contributions. Id., § 91140. Nor can a qualified non-profit corporation accept direct or indirect donations from business entities. Id. This could occur when a corporation gives to a non-profit corporation money for a fundraiser, such as when corporations give large amounts to the Salvation Army, Cancer Society, or Sierra Club for a special project that organization is undertaking. This language seems to imply that if a non-profit corporation accepts any money from a business entity it would no longer qualify as a non-profit under Prop. 89 and would therefore be defined as a corporation and would have to comply with the $10,000 limit to independent expenditure committees. Id., §§ 91137, 91140.

The other implicit issue with qualified non-profit corporations would be the limitation on how contributions could be gathered. A candidate for elected office is prohibited from fundraising on behalf of a non-profit, if that corporation wishes to remain a qualified non-profit and be able to collect unlimited contributions. Prop. 89, §§ 91137, 91140. This prohibition will force non-profits to question the source of contributions, as noted above, and also who may solicit those contributions. If a politician solicits a contribution from an individual on behalf of a non-profit corporation, the contribution is technically illegal. If the non-profit accepts that contribution without knowledge of who solicited it, the non-profit would violate Prop. 89; the FPPC could impose a fine and force the non-profit to return the contribution. Prop 89.’s strict prohibition on candidate solicitations could impose a heavy burden upon officers of a non-profit to scrutinize every dollar contributed to their organization. Id.

E. Aggregate Contribution Limits

Prop. 89 imposes a $7,500 aggregate limit upon corporations, individuals, and other entities to all candidates running for elected office. Prop 89, § 91105(c). It further limits corporations, individuals, and other entities to an aggregated amount of $7,500 to independent expenditure committees. Id., § 91105(g). The text is not clear if this independent expenditure limit applies to expenditures for candidates only or also applies to expenditures for ballot measures. Nothing in the text limits the aggregate limit to candidates, however, Prop. 89 does have a separate and specific limit for corporate contributions to ballot measure committees, which is discussed above. It is possible that a court would interpret the $7,500 aggregate limit as in addition to the $10,000 separately stated limit. Because this aggregated limit of $15,000 ($7,500 for candidate contributions, $7,500 for independent expenditure committees), limits contributions and to some extent expenditures, it may be examined under a strict scrutiny standard that the Supreme Court has imposed on other provisions that limit an individual’s First Amendment rights. The Supreme Court has noted that contribution limits to ballot measure committees operate to limit expenditures in a campaign and therefore are a direct restraint upon the freedom of speech. Citizens Against Rent Control v. Berkeley, 424 U.S. 290, 299 (1981).

Even under a lesser standard of scrutiny, contribution limits to candidates have been invalidated for burdening First Amendment rights without being closely drawn to a substantial government interest. The United States District Court for the Eastern District of California invalidated the fiscal limits that Proposition 73 imposed upon contributors because those limits violated the First Amendment. Serv. Employees Intl. Union v. Fair Political Practices Commn, 747 F. Supp. 580 (E.D. Cal. 1990) (“SEIU”). The court stated that the legislative purpose of Prop. 73, to limit contributions to campaigns and reduce both the appearance of and actual corruption created by political contributions, was a strong government interest, but that the proposition was not narrowly tailored to serve those purposes. Serv. Employees Intl. Union, 747 F. Supp. at 590. The court found that Prop. 73 benefited incumbents and its use of a fiscal limit could be as effective with a per-election limit that would not create the same incumbent advantage. Id. at 588-90.

The question is how such a legal standard would be applied to Prop. 89. The contribution limits of Prop. 73 were limits on individual candidates ranging from $1,000 to $5,000 per fiscal year. Serv. Employees Intl. Union, 747 F. Supp. at 580, 581. Prop. 89 imposes an aggregate limit upon contributors; a more restrictive limit. Prop. 73 would have allowed an individual to contribute $1,000 per year to every candidate running for legislative office, a total of $120,000 per year. Prop. 89 will reduce this hypothetical and unlimited amount to a $7,500 per year limit, greatly reducing a political contributor’s ability to contribute to multiple candidates running for Assembly, Senate, and statewide offices. Prop. 73’s fiscal year limitations were struck down because the fiscal year limits gave incumbents an unfair advantage over challengers without a compelling state interest to do so. Id. at 590. The court noted that incumbents raised money while in office permitting them under the limitations to raise a significant war chest prior to a challenger deciding t start raising campaign contributions. Id. at 588. The incumbent advantage under Prop. 89’s fiscal year aggregate limit is lessened because candidates are limited to raising money only 18 months prior to the primary election. Prop 89, §§ 91033, 91071. It is unknown what affect the 18 month limitation on fundraising would have on the outcome of a first amendment attack on Prop. 89.

Once it is shown that a provision impinges upon the rights protected by the First Amendment, the Supreme Court has developed a balancing test to show constitutional validity. Serv. Employees Intl. Union, 747 F. Supp. at 1172, 1175. The court must determine if there is a sufficiently strong government interest served by the restriction and whether it is narrowly tailored to the restriction which may be legitimately regulated. FEC v. Natl. Conservative PAC, 470 U.S. 480, 495 (1985). Prop. 89 restricts the ability of individuals, corporations, and other entities to contribute to political campaigns and would impinge upon these individual’s protected First Amendment rights under Citizens Against Rent Control. 424 U.S. at 290, 299. The purpose of Prop 89 is found within Article I of the proposition, a few of these purposes are to limit corruption and the appearance of corruption in California politics, to reduce the ability of special interests to give unlimited contributions to ballot measures and in support of candidates through independent expenditure committees, to reduce the overall amount of money necessary for candidates to raise to run for office, and to give the average voter’s voice and political contribution more weight in comparison to corporate and special interests’ unlimited contribution ability under the current system. Prop 89, §§ 91017(3), (4), (5), (6), (7), (11). The legislative purpose of Prop 89 is similar in many respects to the purposes of Proposition 73 (“Prop. 73”), which was struck down by a federal district court.. Serv. Employees Intl. Union, 747 F. Supp. 580. The district court in SEIU found that the legislative purpose of Prop. 73 was compelling and that a restriction on the First Amendment for Prop. 73’s specific purposes could withstand a constitutional challenge as long as it was narrowly tailored. The key question is whether the legislative purpose of Prop. 89 is narrowly tailored to reduce the amount of special interest money in state politics.

The Supreme Court found in Buckley that the federal contribution limits were narrowly tailored to meet the legislative purpose of curbing corruption and its appearance in campaigns but did not discuss the underlying questions raised in the constitutional challenge to Prop. 73 and a possible challenge to Prop. 89. Buckley, 424 U.S. 1. In SEIU, the court found that the fiscal limits imposed by Prop. 73 were not narrowly tailored and gave incumbents too much of an advantage under the limits imposed. 747 F. Supp. at 590. Prop. 89 imposes an aggregate fiscal limit on individuals, corporations, and other entities. This type of aggregate fiscal limit has not been tested. If a court finds that the aggregate limit impairs the ability of challengers to compete against incumbents given the 18 month limitation on raising campaign contributions prior to the Primary election, a court could strike down the limit. Alternatively, a court could turn to the 18-month limit on raising campaign contributions and note that such a provision gives challengers and incumbents alike the ability to raise money from an even playing field. This is an open question, and again one that would surely be raised in the courts if Proposition 89 passed.

F. Lobbyist Restrictions

There also could be issues with Prop. 89’s call for further restrictions on lobbyists under Prop. 89, § 91105(e). Under existing law, lobbyists are prohibited from making contributions to candidates. California General Election Voter Information Guide November 2006, p. 89. Prop. 89 would also forbid lobbyists from making donations to political parties and committees. Id. “An elected state officer, nonparticipating candidate, legal defense account, political party committee, or independent expenditure committee shall not solicit or accept a contribution from a registered state lobbyist or lobbying firm, or from a state contractor, if the lobbyist or employee or principal of the lobbying firm is registered to lobby, or if the state contractor has present or potential future business with, the governmental agency for which the candidate is seeking election or the governmental agency of the elected state officer.” Prop. 89 at § 91105(e).

In Connecticut, a new provision paralleling the above was enacted recently and promptly was challenged. The Association of Communicator Lobbyists, LLC filed a lawsuit August 31, 2006, against the state Elections Enforcement Commission, Office of State Ethics, and Attorney General challenging the constitutionality of the 2005 campaign finance legislation that bans lobbyist contributions. http://ctnewsjunkie.com/index.php/2006/09/01
/lobbyists_file_lawsuit_against_state_off
, Christine Stuart, (accessed Sept. 12, 2006).

The lawsuit claims the new legislation will violate freedom of speech because it prohibits lobbyists and their family members from participating in the political process. Id.

G. Miscellaneous constitutional issues

Among the most high-profile cases challenging a public financing law was that of David Burnell Smith, a Republican legislator in Arizona who lost office after officials determined that he had overspent Clean Election funds in his 2004 primary campaign by more than the allowable 10 percent. Smith v. Ariz. Citizens Clean Elections Commn., Ariz. App. Ct. CV 2005-093310, Jan. 19, 2006. Prop. 89 has a similar forfeit-office clause under which popularly elected candidates can lose their posts. Prop. 89 § 91147 (b)(1)(C).

Smith lost his appeals through the state courts, becoming the first state legislator in the nation to be removed under a public financing statute, rather than by criminal conviction or recall. Le Templar, Judge upholds ouster of Smith, East Valley Tribune, Dec. 8, 2005. Smith argued that the Arizona Constitution permits only two methods of removing an official from office: recall and impeachment. Smith, CV2005-0933310, Pet.’s 1 st Amend. Verified Spec. Compl., P188, (Oct. 28, 2005). He alleged that the statute was void because it added a third removal method. However, the court focused on Smith’s chronology of challenging both administrative and civil proceedings rather than the constitutional issue. Prop. 89’s forfeit-office clause could raise post-election challenges in California if someone has standing to sue and follows appellate procedures.

Smith’s bid follows in the footsteps of another Republican state legislator’s challenge to the constitutionality of Arizona’s Citizens Clean Elections Act. May v. McNally, No. CV-02-0215-PR (Oct. 10, 2002). Republican state legislator Steve May objected to a surcharge on his traffic citation for the Citizens Clean Elections Fund. He sued state officials, challenging the constitutionality of a portion of Citizens Clean Elections Act on the grounds that the surcharge forced him to support candidates he didn’t want to support. The Arizona Supreme Court held, in part, that the surcharge on fines allocated to political campaigns in a viewpoint-neutral manner did not violate free speech rights of those who paid fines because traffic violators did not constitute a group for association rights purposes.

IV. Public Policy

A. Enforcement

Under Prop.89, the FPPC would be charged with enforcement of Clean Money provisions. The FPPC was formed under the Political Reform Act (PRA) to interpret the PRA and to enforce traditional campaign financing rules and conflict of interest codes. Prop. 89 allocates “at least $3 million" in addition to the existing funding, which has ranged from $6 million to $7 million in recent years. While many existing regulations – such as those covering the manner in which a computer or clothes can be considered legitimate campaign expenses -- likely could be picked up intact and applied to Clean Money candidates, other provisions could require many new regulations in time for the June 2008 primary election. Regulations typically take months to write, and they require public hearings.

If the measure passes, and opponents sue to overturn it, the FPPC likely would be required to defend the measure in court as it did with past ballot measures. While the FPPC is prohibited under Gov. Code 83105 from taking a stance on ballot measures, and even from commenting objectively on provisions of measures, several past commissioners are on record against Prop 89: Tony Quinn, Karen Getman and James W. Rushford. Californians to Stop 89, http://www.noprop89.org (accessed Oct. 22, 2006).

B. Funding source

Prop.89 calls for a corporate tax increase to generate money for the Clean Money fund. Gov. Code § 91133. Arizona uses various sources, such as surcharges on traffic ticket fines and lobbyist registration fees. Ariz. Rev. Stat. 16-944 and 16-954 (A)-(C). Maine uses primarily general fund revenues. 21A Me. Rev. Stat. Ann. §1124(2)(B) (2006)

Using a corporate tax would seem to foreclose a challenge on the same grounds as those articulated in May, supra, because corporations’ First Amendment speech and association interests are not those of individuals. Prop. 8, § 91017 (v). Rather, corporate interests opposing the measure seem to be basing their argument on how the measure would hinder labor unions, which typically are incorporated. Anti-Prop 89 material focuses on teachers, firefighters and other respected service professions. Californians to Stop 89, http://www.noprop89.org, (accessed Oct. 3, 2006).

The corporate tax does raise issues of burdening mom-and-pop businesses. The Chamber of Commerce and small business advocates have questioned the fairness of applying an increase in the corporate tax rate on all businesses, no matter their size. Id.

C. One party dominant district

Prop. 89 allows publicly financed candidates who belong to the dominant party in a one-party dominant district to shift 25 percent of the funds they would receive in the general election cycle to the primary. Prop. 89, § 91097. A one party dominant legislative district is a district in which the number of registered voters for the party with the highest number of registered voters exceeds the number of registered voters for each of the other parties by an amount no less than 20 percent of the total. Prop. 89, § 91047. Traditionally funded candidates do not have this option under the PRA or under Prop. 89. The same contribution limits will be imposed on traditionally funded candidates no matter what type of district they are running in.

This measure would further subdivide the rules of campaign financing: traditional funding, clean funding, and clean funding in a one party dominant district. Therefore, the new category hinges on district lines. Under existing law, party dominance is not formally a factor in determining where legislative district lines are drawn. Under Davis v. Bandemer, 478 U.S. 109 (1986), the mere fact that a districting scheme makes it more difficult for a group of voters in a particular district to elect representatives of their choice does not render the scheme constitutionally infirm. Rather discrimination occurs only when the electoral system is arranged in a manner that will consistently influence a group’s choice in the political process as a whole. Id. Applying this rule to Prop 89, shifting campaign funds based on a candidate’s party registration would not seem to violate any factors on which district lines are drawn because funding is just one element of the electoral process. However, it would make district lines a factor in increased funding for some candidates where it is not a factor now.

D. Minority voters

Some Prop. 89 critics are concerned that minority candidates' voices will be diluted under public financing. Under Prop. 89, any candidate in either party who gathers the necessary amount of initial contributions would be given $650,000 for an Assembly primary race. The amount of money given to candidates and the seemingly low threshold of contributions necessary to receive it could create an explosion of candidates in primary elections. The possible explosion of candidates in primary races could dilute the voice of the minority candidates running for office. This argument does not follow from the election results that have occurred in Arizona and Maine after Clean Money initiatives have been implemented. In both Arizona and Maine after public financing went into effect, more minorities and woman have been elected. "Proposition 89 Launches Latino Website to Reach this Important Segment of Voters in California," The Latina Voice, http://latinavoz.com/blogs/2006/09/proposition-89-launches-latino-website.html, (accessed Oct. 22, 2006). One argument is that minorities and women have made amazing strides under the current campaign contribution limits and there is no data to indicate how these groups will do any better under a Clean Money system.

E. Advertising costs

Among the biggest concerns for politicians is how the limited funding will help them get their message to voters. Mailings and broadcast advertisements are the lifeblood of most campaigns. Television ad rates typically are more expensive in large cities than in small and medium ones, although a host of other factors can wipe out the population/expense factor, says Cindy Winton, president of GCW Media Services in Glendora, California. Rates also vary dramatically by time of year, type of program during which the ad runs and how much competition there is for that ad slot. “Right now, Las Vegas is costing almost as much as L.A.,” Winton says. Telephone interview with Cindy Winton, Sept. 29, 2006 (Notes on file with the McGeorge School of Law, University of the Pacific Capital Center for Government Law and Policy).

In California, Assembly districts average 423,000 residents. Under Prop 89, an Assembly candidate could receive up to $650,000 (primary plus general), or about $1.50 per resident. http://www.assembly.ca.gov/committee/c7/asmfinal/newtextdocument.html, viewed October 3, 2006.

In Arizona, major-party candidates for House of Representatives get just under $30,000 for the two elections in districts that average about 200,000 people, or about 15 cents per resident. State of Ariz. Citizens Clean Election Commn. Participating Candidate Guide 2005-2006 at 33. However, two people from each major party in each of 30 House districts advance from the primary to the general election. Then two candidates are elected from each House district, rather than one candidate as in California’s counterpart, Assembly districts. . Further, Arizona legislative candidates have been known to use radio ads for campaigning but rarely use TV ads. Marc Spitzer, Arizona Corporation Commn., testifying at Cal. Senate Elections Comm. Hearing (April 19, 2006). The $680,774 Arizona Governor Janet Napolitano will receive for her general election campaign this year “ is enough to run one TV ad,” said Andy Gordon, Napolitano’s campaign attorney. John Wildermuth, San Francisco Chronicle, The ‘clean campaign fiancé idea grows: Arizona experience mixed as California considers Prop. 89, http://www.sfgate.com/, (accessed Sept. 29, 2006).

TV ads are far more typical in California, as exemplified by the Machado-Podesto race for the 5 th state senate district in 2004. During the campaign in this rural California district Machado and Podesto, combined, raised and spent over $8 million.. Cal Sec. of State, http://www.ss.ca.gov (accessed Oct. 1, 2006). This total does not include the amount of money spent by the Democratic and Republican Parties or amounts spent in the race by independent expenditure committees. Thus the $1.50 per resident funding under Prop. 89 may have to be used in more creative ways, particularly in urban districts.

Admittedly, not all residents are voters. Children, inmates and some immigrants are not eligible; other people are eligible but unregistered. There is no reason to believe the ratio of voters/nonvoters in California and Arizona varies dramatically or that the effect of capped amounts on reaching voters would vary, even if the raw numbers do.

F. Third parties

One major objection to public funding systems is that “fringe” candidates with little support would gain access to a larger stage than they otherwise would merit. With dozens of candidates turning out for the traditionally financed 2003 gubernatorial recall election, this criticism is especially relevant in California. Prop. 89 attempts to counter this by setting up “office qualified” candidates – those whose political parties got more than 10 percent of the statewide vote in the last gubernatorial election -- and performance-qualified candidates – those whose parties got less than 10 percent. Prop. 89, §§ 91046, 91053. Performance qualified candidates may still qualify for public funding but must collect twice as many $5 contributions as candidates in the major parties. The performance qualified candidate also receives lower funding. Id. At §91073.

In two Nixon-era cases, the Supreme Court established that recent popular vote totals are a proper measure of public support for ballot access, especially where it is based on signatures and not votes. Jenness v. Fortson, 403 U.S. 431 (1971 ) Even in Buckley v. Valeo, supra, which concerned federal presidential public funding system, the court said that Congress’ interest in not funding hopeless candidacies with large sums of public money necessarily justifies the withholding public assistance from candidates who lack significant public support. 424 U.S. at 85-109. . State officials would have the same right to give lower funding and require more qualifying signatures for certain minor parties.

More recently, under Munro v. Socialist Workers Party, 479 U.S. 189 (1986), the U.S. Supreme Court affirmed the state of Washington’s requirement that minor party candidates for partisan office may be required to show a modicum of support among potential voters. A candidate who received only 0.09 percent of the vote in the primary argued that this rule hinders voters’ freedom of association. He also said there was no history of voter confusion over a plethora of candidates. But the Court said legislatures may respond to potential deficiencies in the electoral process with foresight rather than reactively.

The ballot access case law would help backers of public funding access, particularly since minor parties are free to use traditional financing.

G. Issue ads and independent expenditures

Independent expenditures have been used both nationally and in California to subvert the campaign limits that have been imposed through legislative action or the initiative process. In California, there is no limit on the amount of money that an independent expenditure committee can raise and spend on behalf of a candidate as long as they are not “controlled” by a candidate. Cal. Gov. Code § 85501. Often corporations labor unions and other politically active groups gather together to raise money for candidates they support and then develop television and radio advertisements and direct mail pieces in support of candidates. These committees do not fall under the current campaign finance laws because they are not “controlled” by the candidate and organized by members of the candidate’s campaign staff. Independent expenditures are a complicated concept and it traditionally has been very difficult to prove collaboration between independent expenditure committees and campaigns, says Bob Stern, president of the Los Angeles-based Center for Governmental Studies. Political proxy wars, editorial, San Francisco Chronicle, http://www.sfgate.com, June 1, 2006 (accessed Oct. 22, 2006).

More than television or radio advertisements can be considered independent expenditures. About a week before the Sept. 10 primary in Arizona, some voters received a call from a purported pollster asking them if it would make a difference if they knew that gubernatorial candidate Len Munsil had “fathered an illegitimate child.” The clean campaign finance idea grows, supra.. Munsil, a 44-year-old social conservative who had championed the cause of abstinence from premarital sex since his college days, was forced to admit on his campaign page that his wife, also an outspoken conservative, was pregnant when they married 20 years ago. Id.

Munsil, who ran a publicly financed campaign, immediately sought extra money from the Arizona Clean Elections Commission to counter what he said were the effects of the poll. Id. Although the panel did not know the source or cost of the poll or how many voters were called, Munsil was granted $80,000 for last-minute advertising under the independent expenditure trigger provision of the Clean Elections Act . His primary opponent received nothing, even though he was not believed to be responsible for the poll. Id.

Because the independent expenditure concept is evolving, and because it triggers additional financing for “clean” candidates, this could ratchet up the expense of running Prop. 89 in the future.

V. Conclusion

Proposition 89 raises fundamental First Amendment questions because of its contribution limits. Especially constitutionally suspect are the limits on corporate contributions to ballot measure committees and the radically decreased contribution limits to individual candidates, including traditionally funded ones. Lesser concerns are that qualifying contributions may come from residents rather than voters and prohibitions on political contribution from lobbyists. While proponents say Prop. 89 will reduce special-interest influence on elections, opponents say this measure is the wrong way to go about it.