California’s Initiative System: The Voice of the People Co-Opted

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Source: John ThompsonFlickr

Introduction

When the initiative process was first added to the State Constitution in 1911, it was intended to give the public a tool to directly alter California’s government structure to address perceived problems. These problems would have to be so significant that 8% of the number of voters in the previous governor’s election would sign an initiative petition to place a proposed solution on the ballot.i This threshold turned out to be surprisingly easy to meet. Indeed, in 1914, just three years after the initiative process was adopted, 17 voter-placed initiatives appeared on the ballot.ii

A century later, proposition battles have become incredibly expensive endeavors. The 1998 ballot measures were the first to exceed $200 million together, but the following decade would see even more expensive elections. Between 2000 and late May 2012, more than $1.8 billion was spent for and against propositions, of which 25% $556 million was spent on just the top five ballot measures. 

In this report, we examine the races that attracted the most money and where that money originated. We analyzed spending data for ballot measures races occurring between 2000 through the end of May 2012. Though our high level discussion includes recent spending numbers on November 2012 proposition races, our detailed data analysis does not. Our major findings are:

  • Among the ballot propositions that attracted spending, the average proposition attracted $13.5 million in support and opposition expenditures combined. 
  • Propositions regarding industry taxes attracted the most spending. Just six industry tax propositions garnered $307 million in spending. Energy companies and several wealthy individuals spent $150 million for and against most expensive measure, Prop 87 (2006), an oil tax.
  • 185 donors each contributed at least $1.5 million to ballot measure committees, accounting for $1.4 billion of the $2.3 billion given, or 60% of total expenditures. Among these large contributions, $498 million came from corporations and other businesses, $336 million from unions and union-sponsored committees, $232 million from 41 individuals, and $43 million from generically named political committees.
  • Only 2.3% of all funds that went to ballot measure committees came in the form of donations less than $1,000. Over 92% of all contributed funds came as donations of $10,000 or more.
  • The California Teachers Association (CTA) contributed the most to ballot measure committees ($142 million). It also gave more broadly than other groups, spending at least $1 million each on 20 different propositions since 2000. 
  • 17% of all donated money came from outside of California. 
  • While spending more in support of a measure than the opposition spends against it does not ensure success, spending sufficiently more against a measure than the support spends for it is very likely to defeat it.

Money in Politics

Money Required: Qualification and Campaign

Professional signature-gathering services emerged in the 1970s, dramatically increasing the cost of qualifying initiatives for the ballot. Today, the cost to collect the signatures required to qualify an initiative for the ballot routinely tops $1 million dollars,iii and it can be substantially greater if the gathering process begins late in the political cycle and must be rushed. The high price stems in part from the relatively short time that signature gatherers have to collect the required number of signatures (150 days, the third shortest circulation period of any state).iv Wanting to first see the language of competing measures, some ballot measure proponents wait until less than 60 days remain to submit petition signatures to draft their measures, significantly increasing signature-gathering costs. 

But qualifying for the ballot is only the first step. Since 2000, the average ballot proposition attracted over $13 million in support and opposition spending. While some of those propositions were far costlier and some far less expensive, these spending levels illustrate that implementing change through California’s initiative system is most open to those who have access to vast financial reserves.

The Influence of Money

Unlike contributions to candidate committees, which are limited in California state elections (albeit less strictly than on the federal level), ballot measure campaign committees can collect and spend unlimited amounts of money.v U.S. courts have deemed committees potential influence on political outcomes insufficient to warrant government regulation. In a series of decisions in the 1970s, the U.S. Supreme Court articulated a doctrine of campaign finance regulation that sharply distinguished referenda from candidates for public office, opining that the threat of corruption or the perception thereof that justify limits on the latter do not apply to the former.vi The Court specifically rejected the claim that the potential influence that large expenditures can exercise on the outcomes of ballot measure elections by drowning out other points of view is a sufficient reason to limit expenditures by ballot committees or contributions to them.vii It likewise rejected the claim that the influence of wealthy interests or the perception thereof destroys the public’s trust in government, at least sufficiently to warrant its regulation.

The Drawback of Ballot Measures as Political Tools

Within the confines of existing case law, courts are unlikely to permit limiting contributions to Ballot Measure Committees (BMCs) in the near future. However, the nature of ballot measure campaigns can have a significant drawback for the public. The source of a measure’s funding is the most important signal to the public about the interests (and often goals) on either side of a contest, and thus constitutes especially important information for voters. Yet two common approaches used by ballot measures committees tend to obscure this information: pooling money from many donors and simultaneously distributing it to many initiatives, and committee layering.

Committee layering occurs when an additional political committee handles money between actual donors and the official ballot committees that ultimately incur expenses on behalf of the measure. This structure increases the distance between original donors and the propositions they support, thereby concealing those original financial backers from voters and observers. Though ballot measure advertisements must display the paying political committee as its sponsor, this is usually a committee whose name reveals nothing about the interests behind it (e.g. Yes on 86 or Californians for Justice / No on 54). Some advertisements list the committee’s top two donors, but due to layering, these donors may also be committees with vague names. Most voters will not expend the effort of tracing monies through expenditure reports to identify original donors. 

As of late October 2012, the 2012 election cycle is already the most expensive in history, and the full extent of spending in this cycle remains to be seen.viii Individual donors have contributed unprecedented amounts, with just three individuals giving over $100 million amongst them to several races.ix Furthermore, several high profile donations have come from groups that do not reveal their donors. The Fair Political Practices Commission has already sued one of them Arizona based Americans for Responsible Leadership for failing to do so.x The lack of effective disclosure of advertising sponsorship condemns average Californians to ignorance about the special interests that will have sway over propositions success and failure.

Spending Big Money on Big Ballot Measures

The initiative process bypasses the many hurdles of statutory law. With sufficient backing, virtually any measure can be placed on the ballot. To become law, even if it is a constitutional amendment, it then requires the approval of only 50% of the electorate, which often has relatively little information about it. During the 20th century, voters were relatively averse to propositions, passing only 35% of all measures on the ballot since 1912.xiv More recently, perhaps in response to growing legislative gridlock in Sacramento, voters have been more amenable to altering law through the initiative process. Since 2000, nearly 50% of all qualified propositions have passed (63 out of 128).xv

It is therefore unsurprising that powerful special interests have spent vast sums to attempt to alter the law in their favor or preserve the status quo when a proposition threatens it. Indeed, between 2000 and mid-2012, $1.8 billion was spent on 139 state-level propositions that had official ballot committees. The 20 most expensive propositions alone attracted more than $1 billion of that sum. Although one decade does not reveal a meaningful historical pattern, the past 35 years demonstrate an unambiguous trend of increasing spending on ballot measures.xvi Whereas ballot initiatives attracted less than $50 million in 9 out of 11 major elections between 1976 and 1996, inclusive, every major election but one since 1998 has experienced more than $150 million in ballot measure spending. 

Does Spending Buy Success at the Ballot Box?

As Figure 1 demonstrates, spending more money in support of a measure than the opposition spends against it does not ensure success. This is the case even when the difference is dramatic, as in the case of Proposition 1C (2009) (on deficit spending), for which supporters spent $6,553,197 against just over $1,000 in opposition, and PG&E’s 2010 initiative, for which it spent 350 times more than the opposition. 

Figure 1. Does Spending More Money Guarantee Success? 1 (ca initiative system)

However, as has been noted by a number of studies in the past, spending large amounts of money often is successful in bringing down a proposition.xvii Furthermore, passing an initiative appears to require matching (or nearly matching) the opposition in spending. There were only two notable exceptions to this observation. Prop 21 (2000), which increased penalties for juvenile offenders and gang members, passed despite being outspent almost 10:1 (though this is almost certainly due to incomplete records for initiatives appearing on the 2000 ballot). Prop 60 (2004), which simply affirmed the then-current status quo in election law, passed despite being outspent 20:1. It was only placed on the ballot to split the vote between it and an alternate proposition that would have implemented open primaries (Prop 62), which did ultimately fail.

Which Subjects Attract the Most Money?

Initiatives that attempt to raise taxes on businesses, particularly tobacco and oil, garner the most spending (Figure 2). Since 2000, all such initiatives have failed.xviii Compared to taxes, business regulation initiatives such as changes to auto insurance coverage regulations draw relatively little money. Per initiative, propositions that concern casinos and gambling licenses come in second. Although initiatives that have to do with government operations as a categoryxix have drawn the second largest amount of spending overall, these initiatives attract less than $10 million on average.

Figure 2. Propositions by subject: count and amount spent 1 (ca initiative system)

The 5 Most Expensive Proposition Races

Ballot measure spending varies greatly. While the most expensive measure attracted nearly $150 million in spending, Proposition 48 (2002) did not have an official committee and saw only $1,021 in spending. Below, we examine the five most expensive races.xx

Figure 3. 20 Most Expensive Propositions 2000-2012 1 (ca initiative system)

1. Prop 87 (2000): Implement Severance Tax on Oil Production

Proposition 87 would have implemented an oil extraction tax that would have generated $4 billion over its lifetime to be used for alternative energy research and investment. The race attracted $150 million total, $67 million more than the next most expensive proposition. Environmental philanthropist Steven Bing donated the vast majority of the money in support ($48 million). Several other individuals also contributed over $1 million in support, including venture capitalist Vinod Khosla, Sergey Brin, Wendy Schmidt (Eric Schmidt’s wife), and John L. Doerr. Most of these individuals appeared to give for ideological reasons, though Khosla may have benefitted financially.xxi

Yet the opposition outspent supporters by a significant margin ($91 million to $58 million). Virtually all of the money in opposition came from oil and energy-related companies, with Chevron and Aera Energy each giving over $30 million. While $91 million is a substantial expense, it pales in comparison to the $4 billion in taxes threatened by the proposition (a cost that the businesses were prohibited from passing on to the consumer). As is the case with many business-related propositions, Prop 87 offered the industry 40 times in savings what it spent on the proposition, illustrating the significant economic interest certain players have to get involved in the proposition system.

2. Prop 8 (2008): Ban on Same-Sex Marriage

Although propositions dealing with social issues have drawn less than $20 million on average in the past decade, the ballot measure drawing the second largest total expenditure concerned a social issue. Prop 8 (2008) proposed a constitutional amendment banning same sex marriage. Inspiring a greater emotional reaction than any proposition since Prop 187 (1994), which made illegal aliens ineligible for public benefits, it attracted over $82 million overall. 

Perhaps due to the proposition’s controversial nature, donors for and against it made heavy use of committee layering. The top three donors to the official ballot committees for and against Prop 8 were other Prop 8-specific committees: “No on 8 Equality California” ($11 million), “Human Rights Campaign California Marriage PAC No on Prop 8″ ($3 million), and “No on Proposition 8 Campaign for Marriage Equality” ($2 million). Peeling back the committee layering, we find that defying the norm tens of thousands of individuals and organizations were financially involved in the contest. While unusually democratic in funding, Prop 8 exemplifies the significant obfuscation allowed under the current political system.

3. Prop 86 (2006): Tax on Cigarettes

Almost tying Prop 8 in overall spending, Proposition 86 would have added a $2.60 sales tax per pack of cigarettes on top of the existing $0.87 tax, and would have allocated the estimated $2 billion in new revenue to various health programs. As with Prop 87 (the oil tax), virtually all of the funding for the opposition came from the industry whose product would be taxed. Altria Inc. and R. J. Reynolds together donated $60 million to defeat the proposition, with another $6 million coming from other sources.xxii In contrast, supporters a large group of hospitals, healthcare providers and related groups spent only $21 million. The proposition failed. 

4. Prop 68 (2004): Gambling Regulation

Proposition 68 pitted Native American tribes against other gambling enterprises. It would have forced tribal casinos to either pay a larger tax or face competition from other entertainment enterprises. Both opposition and support funders had strong commercial interests in the outcome, and they spent a total $69 million on the proposition. Supporters spent $26 million to the opposition’s $43 million, and the measure failed by an unusually wide margin of 16% to 83%. 

5. Propositions 78 and 79 (2005): Medical Drugs Discount Programs

The 2005 ballot had two competing drug discount program propositions (as frequently happens with similar competing measures, the voters rejected both). Although both would have instituted discounts on drug purchases for low-income families funded by rebates from manufacturers, Prop 78 was considerably more favorable to the industry than Prop 79. As a result, a variety of pharmaceutical corporations including Johnson & Johnson, GlaxoSmithKline, Pfizer, Merck & Co, and Amgen pooled $50 million, which they spent to simultaneously promote 78 and oppose 79.

Most of the support for Prop 79 ($7 million) came from the union-supported political action committee (PAC) Alliance for a Better California, although the PAC directed most of its funding that cycle to races other than Prop 79. CTA donated by far the most to Alliance for a Better California ($23 million) in that cycle. Prop 79 illustrates two themes of this report: the power of industry to preserve the status quo and committee layering that obscures the forces behind propositions from the voters.

Propositions  that  economically  affect  the  bottom  lines  of  special  interests  (e.g.  corporations  and  Native American tribes) attract the most spending. The following section examines the special interests that have contributed the lion’s share of ballot measure funding over the past decade.

Who’s Behind the Money? An Analysis of California’s Largest Political Donors

Just 48 donors contributed half of the approximately $2.3 billion given to ballot measure committees from 2000 to mid-2012. Nine of these were labor groups, 15 businesses (13 corporations topped by PG&E, which spent $63 million, mainly on Prop 16 (2010) and Prop 7 (2008) and 2 business groups), eight individuals (topped by Stephen Bing who gave $53.3 million mainly to Prop 87 (2000)); nine Native American Tribes; five political or governmental sources (the two parties, two of Governor Schwarzenegger’s committees, and the League of Cities); one advocacy group; and one general PAC. Although a substantial amount of money towards ballot measures comes from outside of California on average 17% of donations there does not appear to be a significant trend of increasing participation from outsiders. The largest percentage of donations to come from outside California was 28% in 2005.xxiii

Donors to Ballot Measure Committees by Sector

Which donors give most to ballot measures? Figure 4 shows the distribution of the 185 largest donors (those who contributed more than $1.5 million, and who together gave $1.47 billion of the total $2.3 billion given to all ballot measure committees). Businesses provided more of the funding than any other sector, $497 million, and labor spent $336 million. Figure 4 likely underestimates the proportion of individual and business contributions overall, as most of the excluded smaller donations come from these two groups. Political committees whose names veil their funding sources spent more than $42 million. These groups use committee layering, preventing us from readily attributing those funds to specific donors. 

Figure 4. Donors who gave more than $1,500,000 to official ballot measure committees by sector 1 (ca initiative system)

Ballot measures are largely the province of large donors. With some exceptions such Prop 8 (2008), most donations come from wealthy individuals and organizations that can afford to give thousands or millions of dollars to a cause. Although the median donation since 2000 was $100, the average donation was approximatelyxxiv $5,000, meaning that most of the money spent on ballot propositions comes from very wealthy donors. As Figure 5 shows, only 2.3% of all funds that went to ballot measure committees came in the form of donations less than $1,000, and those primarily targeted a few propositions (Prop 8 garnered 29% of all donations under $1,000). On the other hand, over 92% of all contributions came from donations of $10,000 or more.

Figure 5. Distribution of Donations to BMCs by Amount Since 2000 1 (ca initiative system)

Individual Donors

Looking at the donors individually (Figure 6), California Teachers Association (CTA) donated the most to committees that spent on propositions ($142 million).xxv It also gave more broadly than other groups, spending at least $1 million each on 20 different propositions that dealt with educational operations and fundingxxvi since 2000 more than the Democratic Party. The California State Council of Service Employees also spent substantial amounts on a variety of different propositions. In contrast, most other spenders only gave substantial amounts to two or three propositions. 

Figure 6. 20 Largest Donors to Ballot Measure Committees 2000-May 2012 1 (ca initiative system)

Influence Purchased

With outright bans and limits on related spending ruled unconstitutional, ballot measures present an attractive option for a variety of wealthy interests to leverage that wealth politically. In the case of individuals such as Stephen Bing, Timothy Draper, and Charles Munger, Jr., the initiative system is typically used to promote personal beliefs or opinions about effective policies (taxing oil, school vouchers and redistricting reform). A superficial examination of corporate donations may suggest that corporations are the most aggressive category of participants, employing ballot measures to create favorable business conditions. While this is true in some cases, e.g. 2010′s Prop 16 (electric utility regulation) and Prop 17 (auto insurance), it does not apply to most propositions. The more accurate interpretation recognizes that corporations have large economic interests at stake in ballot propositions. In many cases, particularly regarding new taxes, businesses seek to maintain the status quo, and the ballot measure spending is essentially a business expense. Thus the level of corporate spending primarily indicates that ballot measures affect business interests far more than any other group. 

In the case of individuals such as Stephen Bing, Timothy Draper, and Charles Munger, Jr., the initiative system is typically used to promote personal beliefs or opinions about effective policies.

The impact of ballot measure spending is asymmetric. The historical record of the 20th century shows that one-sided negative spending is generally effective in defeating a measure, but one-sided spending in support often fails.xxvii The 128 propositions appearing on the ballot since 2000 (not including November 2012 propositions) confirm this observation. Corporations and unions have been quite successful in defeating propositions by outspending supporters. Passing an initiative, on the other hand, appears to require approximately matching the opposition in spending. However financial advantage is not enough to ensure success, as several dramatic instances demonstrate. While large expenditures are often sufficient to defeat a measure, extensive spending may be necessary but not sufficient to pass one.

The lack of limits on contributions to BMCs also makes the committees convenient tools for candidates for office and elected officials, because they present a distinct advantage over official candidate committees which are subject to contribution limits. When candidates and elected officials sponsor ballot measures, the proposition’s success can generate political benefits for the sponsor. Pete Wilson derived such a benefit through his ties to Prop 187 (1994), which ended government benefits for illegal Immigrants.xxviii Initiatives also provide a way for incumbent officials to achieve their policy goals when stymied by the legislature. Arnold Schwarzenegger employed ballot measure committees this way during his tenure as governor.

The Fair Political Practices Commission (FPPC) calculated that between 2000 and 2008, candidate and official-controlled BMCs raised $149 million dollars.xxix Such ballot measures can increase a politician’s popularity, move his or her agenda forward, and achieve high profile victories. While other ballot measures do not present a threat of corrupting influence over elected officials, contributions to an official-controlled BMC can be similar to contributing directly to a campaign because the official has direct control over these funds. 

The initiative system as it exists today translates economic power into political power because it enables wealthy interests to disproportionately shape the voting agenda. When they lack the funding often necessary to participate in the initiative process, community-based and grassroots groups are left out.xxx The influence of

wealthy interests or the perception thereof can damage the public’s trust in government. Voters consistently say they believe the initiative process is co-opted by wealth even as they approve of it generally.xxxi

The Need for Greater Transparency

As the majority opinion of the Citizens United decision noted, re-affirming past decisions, there is an inherent benefit in providing the electorate with information about the sources of funding of political speech.xxxii This is especially important for propositions because their full ramifications are often difficult to discern, and the identity of sponsors (and their motivations) are the best guideposts for voters. Sponsorship information creates a context that allows voters to have a better understanding of the political forces at play and make informed decisions at the ballot box.

Because disclosure of candidate election Independent Expenditures (IEs) on behalf of candidates and ballot measure spending occur through the same system, the verdict in our previous IE report holds here: the state’s current ballot measure spending disclosure system is inadequate to the task. Presently, ballot measure advertising must display the name of the committee sponsoring the communication. Broadcasting or mass mailing advertisement must also show the top two donors if they contribute more than $50,000 to the committee.xxxiii But in contrast to IEs, we have found that in many cases, donors to ballot measure committees are themselves committees, obscuring the source of the money from voters. This was the case in Prop 79 where the main supporter was Alliance for a Better California, which few voters would identify with the public sector labor unions that funded it. A similar situation intentionally or not occurred in the Prop 8 contest and applies to at least $42 million in contributions since 2000. Committee layering obscures the real interests behind the money from most voters, who will not expend the effort of tracing monies through expenditure reports to identify original donors. 

To increase transparency in the initiative process, we reiterate three reforms that first appeared in our IE report, to the extent they are relevant to ballot measures, and discuss a potential reform regarding limits to BMCs controlled by candidates and elected officials.

Recommended Reforms

Reform 1: Improving Cal-Access Reporting and Enforcement

There are a number of steps that would improve disclosure of spending on ballot measures. One place to begin: The byzantine Cal-Access website that serves as a portal for all state campaign finance data. Currently, the website is both insufficiently known and too cumbersome to effectively inform the public. The FPPC or the Secretary of State which operates Cal-Access could promote the site more prominently through earned or paid media. If the public is unaware that this information exists, disclosure requirements largely go to waste.

The website itself and the underlying data collection process require improvement. The interface allows access to some individual items of information (e.g. how much Stephen Bing gave Californians for Clean Alternative Energy, which supported Prop 87). However, it is extremely laborious to conduct useful analysis through the website or obtain most types of aggregate data (e.g. how much public sector unions or even just CTA spent on ballot measures in a given year). Research across multiple election cycles is nearly impossible with the website’s current interface.

Because the website’s organization simply mirrors the reports filed by political committees, the user must contend with unintuitive search criteria that often require information unavailable to the user: committee names as they appear in public advertising are often insufficient to identify actual entities as they are listed on the website (multiple committees may have the same or very similar names); individual transactions are separated unnecessarily; and the interface does not allow users to combine election cycles.

Perhaps most vexing are interface design flaws that mislead the unwary user. For example, the summary information for committees is presented as for an entire two-year cycle but only reflects information for the most recent year, which in some cases can be dramatically different. In one such instance, Alliance for a Better California is listed as having spent $7 million in 2006, while it actually spent a total $42 million in the entire 2005-06 cycle (not displayed on the site). Only by compiling individual expenditure data can one compute that $42 million figure.

Even obtaining the actual database containing this information does not fully solve the problem, as the data is riddled with errors and omissions, and its organization is unnecessarily complex. Some of the issues stem from conflicting information on reports filed with the Secretary of State, and the complete lack of verification of reported information. For example, total expenditures in filed reports often do not match itemized expenditures, and system managers do not know how their own database’s figures are computed.xxxiv This lack of verification and error control likely stems from the present institutional division between the Secretary of State who collects the reports and the FPPC, which enforces compliance with disclosure rules. In short, an intuitive and flexible website connecting to an accurate database would go a long way in clarifying campaign finance to any Californian who sought the information.

Reform 2: Enforcement Principal Officer Liability

A recent FPPC memo noted the need for a Principal Officer to be associated with every committee. The Principal Officer would be ultimately accountable for the committee’s activities.xxxv Disclosure rules are only as meaningful as they are enforced. This is particularly difficult for ballot measure committees, which are by their nature often active for only several months before terminating. By the time FPPC discovers disclosure violations or discrepancies, there is no one to hold accountable. If a committee was required to declare a Principal Officer upon its creation, the person could be held liable after the committee terminates its operation. Along with other enforcement rules, this reform would strengthen existing regulation. 

Reform 3: Disclose Act-like Reforms

A serious inadequacy of current disclosure rules is that, in many cases, ballot measure advertising need only display the sponsoring committee’s name, which often yields no information about the interest promoting the candidate. Even for the advertising forms that require the top two donors of the committee to be also listed, these can be political committees with similarly uninformative names, rather than the actual organizations like corporations, individuals, or unions where the contribution originates, a situation we have referred to here as committee layering.

The recently proposed California Disclose Act would have required the direct, in-ad disclosure of a committee’s Identifiable Contributors and would have been a first step to addressing this problem (although its definition of Identifiable Contributors was not sufficiently specific). It would have required concluding political ads with the logo and name of the top three contributors, which at least in some cases would provide the voters with valuable information. Unfortunately, it failed to pass the State Legislature.

Reform 4: Limit Contributions to Candidate-Controlled Committees

High profile candidates and incumbent officials can derive similar benefits from contributions to ballot measure committees they control as from those made directly to their campaign. Therefore these contributions can pose a threat of corruption similar to direct campaign contributions but are currently unlimited. Richard Hasen argues that contribution limits should apply to candidate-controlled ballot measure committees whose activities may inure even if somewhat less directly to the candidate’s benefit.xxxvi Although in 2006 the California Court of Appeals struck down such a limit implemented by FPPC as going beyond FPPC’s originating statute,xxxvii a law passed by the legislature or a ballot measure may withstand judicial scrutiny.xxxviii 

Conclusion

The initiative system is a core part of California’s political system. But as one commentator recently noted, direct democracy is no longer democratic. Important aspects of the state’s political agenda are being set, not by its elected leaders, but by unaccountable, single-interest groups operating in a fragmented, uncoordinated, and frequently contradictory manner.xxxix In the current legal climate, as contribution limits may become more stringent, the Legislature remains constricted by past initiatives, and partisan deadlock plagues the most important issues to the State, ballot measures are likely to remain the tool of choice for social crusaders, reformers, unions, corporations, and gambling concerns.

Our analysis of ballot measures since the 2000 election revealed that

  • Propositions regarding industry taxes attracted the most spending. Just six industry tax propositions garnered $307 million in spending. Energy companies and several wealthy individuals spent $150 million for and against most expensive measure, Prop 87 (2006), an oil tax. 
  • 185 donors each contributed at least $1.5 million to ballot measure committees, accounting for $1.4 billion of the $2.3 billion given (60%). Among these large contributions, $498 million came from corporations and other businesses, $336 million from unions and union-sponsored committees, $232 million from 41 individuals, and $43 million from generically named political committees.
  • Only 2.3% of all funds that went to ballot measure committees came in the form of donations less than $1,000. Over 92% of all contributions came from donations of $10,000 or more.
  • The California Teachers Association (CTA) contributed the most to ballot measure committees ($142 million). It also gave more broadly than other groups, spending at least $1 million each on 20 different propositions since 2000.
  • 17% of all donated money came from outside of California. 
  • While spending more in support of a measure than the opposition spends against it does not ensure success, spending sufficiently more against a measure than the support spends for it is very likely to defeat it. 

In light of these findings, we conclude that enforced, effective disclosure rules are essential for a well-functioning democracy. Since ballot measures may now only appear on general election ballots, voters will be faced with even more initiatives on a single ballot than in the past. Thus, simple access to information about initiatives is paramount. Given the inadequacies in the current ballot measure funding disclosure and publication system such as the tolerance of errors and omissions in the filing process and committee layering that obscures the identities of original donors from the voters prompt reform of the ballot measure funding disclosure and publishing process in California is imperative.

Data and Methods

We obtained the data used in this report from the Reform Division of the Secretary of State. In addition to instituting contribution limits, Proposition 34 (2000) expanded disclosure requirements for all political spending. Like candidate committees, BMCs must report contributions and expenditures to the Secretary of State, who maintains the records in a database accessible through the Cal-Access website (cal-access.sos.ca.gov).

The analysis in this report is based on a snapshot of the Cal-Access database current as of May 19, 2012. Using the Cal-Access website, we manually collected all official committees associated with the state-level initiatives that appeared on ballots between the year 2000 and 2012, inclusive, and five other committees that spent independently. Of those, 344 had filed expenditure reports with the Secretary of State.xi We isolated these committees ballot measure expenditures from the database by culling only expenditures reported in section E of form 460 and eliminating contribution expenditures. We then eliminated duplicate transactions arising from redundant amendments to previously filed reports.xii In cases where the expenditures were listed as simultaneously targeting multiple propositions within a single election, we split the sum equally among those propositions. For the donor figures, we used the A and C section records of the 460 form. Of the 349 spending committees, we were able to match 311 to existing contribution reports.xiii 

Based on their name and major donations, we coded the 185 largest donors (those who contributed $1.5 million or more) by sector as either business, labor, advocacy group, Native American tribes, individual, political, government, professional association or generic PAC. Business includes corporations, other businesses, and trade associations; political donors are either permanent political organizations such as the two major parties, or organizations created for the purpose of electing specific candidates, such as the Lieutenant Governor Bustamante 2002 Committee (of course, their money ultimately comes from unions, businesses, etc.); government donors include county and city associations.

Works Cited [+ Expand]

i Unlike the federal Constitution, California’s Constitution allowed amendments to be approved by a majority vote of the public both in its initial 1849 version, and in the second 1879 version which is the basis of the current document  (http://www.sos.ca.gov/archives/collections/1879/archive/1879-constitution.pdf). The 1911 reforms additionally allowed the public to place amendments on the ballot, if the required number of signatures could be collected. 

ii A History of California Initiatives. Secretary of State. December 2002. Web

< http://www.sos.ca.gov/elections/init_history.pdf>. Retrieved October 10th, 2012. 1988 and 1990 both had a total of 18 voter-placed initiatives.

iiiLee, Eugene C. Direct Democracy: Initiative, Referendum, and Recall in Governing California: Politics, Government, and Public Policy in the Golden State, Gerald C. Lubenow and Bruce E. Cain (eds.). Institute of Governmental Studies Press: 2006.

iv Simmons, Charlene Wear. “California’s Statewide Initiative Process.” California Research Bureau, California State Library. 1997. Web. < https://134.186.55.80/CRB/97/06/97006.pdf>. Retrieved October 20th, 2012:10. Indeed, as of 1997, ten states did not impose a time limit at all, and until 1973, petitioners in California had two years to collect enough signatures.

v Ballot measures also receive some independent spending, which is spending by a non-affiliated group advocating for the passage of a specific proposition, however, compared to the spending by the official committee this is minor, totaling several million dollars in the surveyed period.

vi Buckley v. Valeo and First National Bank of Boston v. Bellotti. The Bellotti Court specifically noted that Referenda are held on issues, not candidates for public office. The risk of corruption perceived in cases involving candidate elections simply is not present in a popular vote on a public issue (internal citations omitted, First National Bank of Boston v. Bellotti, 435 U.S. 765, 1978).

viiTwo Supreme Court decisions since 2000 (Austin v. Michigan Chamber of Commerce and McConnell v. FEC) appeared to walk back on this point, recognizing the danger of such influence. The Austin Court expressed strong concern about the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas (quoted in Richard L. Hasen. Rethinking the Unconstitutionality of Contribution and Expenditure Limits in Ballot Measure Campaigns. Southern California Law Review. Vol. 78, 2005:894). However, Citizens United v. FEC took a sharp turn and emphatically limited the notion of corruption that can justify government regulation of political speech to quid pro quo transactions.

viiiAt least $42 million was spent on Propositions 28 and 29 on the June 2012 ballot, and as of this writing almost $400 million has been raised for the November ballot propositions.

ix According to Maplight.org, Charles T. Munger, Jr. has given at least $35 million against Prop. 30 and 32, while Molly Munger has contributed $44 million to Prop 38, and Thomas F. Steyer gave $28.6 million to Prop 39. (supra note iii)

x Small, Julie. “CA Fair Political Practices Commission wants names of $11 million donors to Prop 30 and 32.” Southern California Public Radio. October 24, 2012. Web. <http://www.scpr.org/blogs/politics/2012/10/24/10673/fair-political-practices-commission-orders-arizona/>. Retrieved October 30th, 2012.

xi We believe the rest simply did not make expenditures on their own, instead transferring their if any funds to other committees.

xiiEliminating the amendment duplicates on the expenditure side necessarily introduces errors because the method of filing of amendments is not uniform in practice. Some filers refilled all expenditures on every amendment, while others only listed new expenditures. For ballot measures, the final amendment was found to be complete in most cases, and thus we took the most recent available amendment as authoritative in all cases. However, this may introduce some under-counting errors, for transactions that were wrongly omitted from the last amendment.

xiiiWe also excluded the Democratic Party from this list, since it spends extensively on other purposes.

xiv Lee 2006:135.

xv These include only the propositions in our sample, for which there were filed expenditure reports. 

xvi“Democracy by Initiative: Shaping California’s Fourth Branch of Government.” Center for Governmental Studies (CGS). 2008, Web. < http://www.policyarchive.org/handle/10207/bitstreams/5800.pdf>, p. 283.

xviiFor example see Shaun Bowler and Todd Donovan. Demanding Choices: Opinion, Voting, and Direct Democracy. University of Michigan Press: 1998, p. 163.

xviiiThe cigarette tax in California was last raised in 1998 (Prop 10), although in 2012, Prop 29 came exceedingly close to passing.

xixGovernment initiatives include those addressing elections, legislative procedures, revenue handling and spending caps, legislative redistricting, term limits, and inter-governmental relations.

xx $179 million was spent simultaneously on propositions 94, 95, 96 and 97 in 2008 by an array of Native American tribes. This section considers the most expensive races where the money unambiguously targeted individual measures.

xxiA Los Angeles Times article implied that Khosla, a major investor in green technologies, would have made financial gains from government funding associated with Prop 87. (No on Proposition 87. Editorial. Los Angeles Times. September 26, 2006. Web. <http://www.latimes.com/news/la-ed-prop8726sep26,0,4920671.story>. Retrieved October 22, 2006).

xxiiAlthough these sums were donated to measure-specific committees, their total expenditure was somewhat less than the money they raised ($59,481,966).

xxiiiOver the entire period, 1.5% of all donations had an erroneous state designation (totaling $37 million); these were excluded from this comparison.

xxivThe data as obtained from the Secretary of State contained a number of redundancies. Although we reconciled the larger donations, the reported numbers for smaller donations may in fact be slightly exaggerated.

xxvThis number is somewhat inflated due to donations to groups like Alliance for a Better California which spend money in other ways as well. For details about the contribution behavior of these donors visit CACS data visualizations found at  http://cacs.org/ca/visualization/index.

xxviDeparting from its educational focus, CTA made large expenditures on Propositions 93 (2008) and 24 (2010), neither of which had an apparent relevance to education.

xxviiLee 2006:146.

xxviii  Hasen 2005: 897. Hasen writes that observers believe that Wilson and the Republican Party’s support for Proposition 187 were responsible both for Wilson’s gubernatorial reelection and for the decline of the Republican Party’s popularity among the Latino voters and California in general.

xxixThe Billion Dollar Money Train. California Fair Political Practices Commission. April 2009: 18. While there are currently no limits on such contributions, current rules require that the candidate’s name be included in the name of the campaign committee along with the words ballot measure. Committee expenditures must identify the particular ballot measure, or potential measure, it supports or opposes. Expenditures must relate to those campaigns and not be used for other purposes.

(Ibid: 27).

xxxDemocracy by Initiative, supra note xvii.

xxxiA survey of California voters carried out by CGS found that while 57% of respondents expressed satisfaction with the initiative process, 73% of them perceived the ballot initiative process as dominated by big-money interests (Democracy by Initiative, supra note xvii: 302).

xxxiiCitizens United v. Federal Election Commission, Opinion of the Court. Supreme Court of the United States. 2010. Web.                                                                                                < http://www.supremecourt.gov/opinions/09pdf/08-205.pdf>. Retrieved 16 Oct. 2012. The opinion went on to say The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.

xxxiiiPolitical Advertising Disclaimers.  California Fair Political Practices Commission. Web.<http://www.fppc.ca.gov/IPmeetings/2012/PoliticalAdvertisingDisclaimersFactSheet.pdf>. Retrieved 12 Oct. 2012. An FPPC memo interprets and cites statutory authority that is more clear (Gary Winuk et al. Memo regarding Discussion of Independent Expenditures Legislative Reform Proposals. March 28, 2012. <http://www.fppc.ca.gov/agendas/04-12/15IndependentExpendituresLegislativeProposals.pdf>. Retrieved 12 Oct. 2012).

xxxivPersonal communication with the Reform Division of the Secretary of State, July 19th, 2012.

xxxvWinuk et al 2012.

xxxviHasen 2005: 895.

xxxvii  Woodlock, Lawrence T. and Scott Hallabrin. Memo regarding “Repeal of Regulation 18530.9″ Fair Political Practices Commission. July 27, 2007. Web. < http://www.fppc.ca.gov/Agendas/08-07/18530-9memo.pdf>. Retrieved October 21, 2012. The regulation placed the same limit on contributions to a candidate-controlled ballot measure committee as applied to his campaign committee.

xxxviii  The Court rejected the regulation because it conflicted with the statute that defined the FPPC’s authority, but did not consider the larger constitutional question raised (Citizens to Save California v. California Fair Political, opinion available at  http://67.21.3.118/research/CaseLevel3/83941). Thus, if implemented by statute or initiative, such a limit may be allowed.

xxxixLee 2006:149.

 

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