Posted June 6, 2006 by Paul S. Ryan

California’s Contribution Limits—A Dream Deferred

California voters go to the polls today to choose party nominees for governor and other state offices on the November general election ballot.  Despite California voters' intent to limit contributions to candidates for state office—through passage of Proposition 34 in 2000—candidates in today’s election have received unlimited contributions by exploiting a loophole in the law.  The California dream of candidate contribution limits has been deferred by candidates who have skirted the limits by raising unlimited funds and depositing the funds into ballot measure committees they control—committees not currently subject to the state contribution limits.  What will happen to this dream deferred?

Democratic gubernatorial candidate and current state Treasurer Phil Angelides, for example, has drawn media attention in recent weeks for this practice.  Despite the fact that California law clearly states that “a candidate for governor may not accept . . . any contribution totaling more than twenty thousand dollars ($20,000) per election,” see Cal. Gov’t Code § 85301(c) (the inflation-adjusted limit in this year’s election is $22,300), Angelides has received multiple $250,000 contributions and deposited these funds into his ballot measure committee, “Standing Up For California,” rather than into is official gubernatorial election committee, “Angelides 2006,” which is subject to contribution limits.

To be fair, Angelides is not alone in this practice.  He’s simply following in the footsteps of those who have come before him, like the self-proclaimed “reform-Governor” Arnold Schwarzenegger who, despite his 2003 campaign promise that he’d go to Sacramento with a broom and clean up the corrupt big-money politics of former-Governor Gray Davis, instead went to Sacramento and shattered Davis’ fundraising record by raising unlimited six- and seven-figure contributions for his own ballot measure committee, the “California Recovery Team.”

So why aren’t candidate-controlled ballot measure committees subject to the contribution limits?  In two words—crafty lawyering.  All political law attorneys know that the Supreme Court ruled in its 1976 Buckley v. Valeo decision that limits can constitutionally be placed on contributions to candidates for public office in order to prevent the corruption or appearance of corruption of such candidates.  The Court realized that contributions to candidates look a lot like bribes and, absent limits, would undermine the public’s trust in government.  However, in the slightly less-well-known Citizens Against Rent Control (CARC) v. City of Berkeley decision several years later, the Court struck down as unconstitutional a limit on contributions to ballot measure committees—and here’s the important part—because there were no candidates involved in the case and, therefore, no one to be corrupted by the unlimited contributions.

Skip ahead 25 years to find a collision between these two landmark Supreme Court decisions.  California voters in 2000 imposed limits on contributions to candidates for state office.  But, given the Supreme Court decision in CARC, neither California nor any other state limits contributions to ballot measure committees.  As soon as California’s contribution limits took effect, political law attorneys recognized a loophole presented by the CARC decision—candidates could set up ballot measure committees and argue that contributions to ballot measure committees can not constitutionally be limited.

Although this strategy has worked as a practical matter, its underlying legal rationale doesn’t hold water.  Again, the constitutional rational for limiting contributions to candidates is preventing real and apparent corruption of candidates.  Such corruption depends entirely on a candidate’s receipt of large contributions, not on whether the candidate decides to deposit contributions in a campaign account or a ballot measure account.  Unlimited contributions to ballot measures committees under the control of candidates present the same corruption concerns as direct contributions to candidate campaign committees: candidates are beholden to the big donors, and the big donors in turn are given special access as a result of their deep pocket contributions.

For this reason, California’s Fair Political Practices Commission (FPPC)—the enforcer of state campaign finance laws—recognized the threat of corruption posed by unlimited contributions to candidate-controlled ballot measure committees.  The FPPC closed the loophole in June 2004 by adopting a regulation making clear that state contribution limits apply not only to a candidate’s principal campaign account, but also to ballot measure committees under the candidate’s control.

Unfortunately, but predictably, Governor Schwarzenegger and others sued the FPPC in Citizens to Save California and Schwarzenegger v. FPPC, arguing that the Supreme Court decision in CARC precludes the state from limiting contributions to candidate-controlled ballot measure committees.  Although this argument misconstrues the fundamental premise of the CARC decision—that contributions to ballot measure committees don’t pose a threat of corruption because no candidates are involved—the trial court bought it and granted the plaintiffs’ motion for a preliminary injunction.  Remarkably, the trial court found it “difficult to comprehend” how unlimited contributions to candidate-controlled ballot measure committees could “foster corruption, the appearance of corruption, or the circumvention of applicable contribution limits.”  Consequently, the FPPC regulation is not in force for this year’s elections.

The case is now pending before the California Court of Appeal.  The Campaign Legal Center filed amicus briefs with the trial court and the Court of Appeal, and is confident that the appellate court will not suffer from the same difficulty of comprehension that afflicted the trial court.  The Court of Appeal should reinstate California’s limit on contributions to candidate-controlled ballot measure.

What will happen to this dream deferred?  To borrow again from Langston Hughes: Will it dry up?  Or fester like a sore?  Or, perhaps, explode—with voter enactment of the California Nurses Association’s full public financing ballot measure in November?