A Millionaires’ Guide To Passing A Ballot Measure

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What do Thomas Steyer and Chris Kelly know that fellow California high-rollers George Joseph, Molly Munger, her brother Charles T. Munger Jr. and Nicolas Berggruen don't?

All six multimillionaires bankrolled a ballot proposition in this year's election. But voters approved the ones backed by Steyer, a financier in San Francisco, and Kelly, a former Facebook executive; the rest effectively flushed their money down a rathole.

Here's one reason: Steyer and Kelly had the good sense to align themselves with unions. Steyer spent more than $32 million supporting Proposition 39, which raised taxes on some multistate corporations to raise money temporarily for energy-efficiency and alternative-energy projects at public buildings. Kelly spent more than $2 million backing Proposition 35, which cracked down on human trafficking. Both measures had the support of organized labor.

INTERACTIVE: California election results

Charles Munger, by contrast, ran head-first into a union buzzsaw. Munger spent more than $29 million on Proposition 32, a measure that would have cut off unions' main source of money for political activities. Despite a boatload of money from wealthy corporate executives and shadowy political groups, Munger couldn't overcome the unions' strength at the grass roots.

But the real lesson from Tuesday's votes, said Consumer Watchdog President Jamie Court, is that "if you’re a billionaire and you want to do a ballot measure, you’ve got to do it on something the public cares about." Propositions tend to lose support over the course of the campaign, Court said, so a measure succeeds only if it addresses something that already concerns two-thirds of the public.

"You cannot change the public’s mind. You have to meet the public where its mind is," he said.

The experience of Joseph, the founder of Mercury Insurance, is instructive. Joseph bankrolled Proposition 33, which sought to end the ban on auto insurers charging new customers who've been insured by another company lower premiums than applicants who haven't; Mercury had done the same for a similar measure, Proposition 17, in 2010.

Both measures seemed like slam dunks, promising more competition among auto insurers and lower premiums for most drivers. What's not to like? But Court, who opposed both measures, said they tried to make voters care about a problem that most of them didn't have. Instead, voters saw the proposals as the work of a special interest — namely, Mercury Insurance — trying to use the initiative process to advance its own business model. Each was handily defeated.

A similar problem befell Berggruen, a financier who contributed more than $1.5 million to the complex government reform measure, Proposition 31. The public might embrace the good-government aspects of the measure, such as requiring the Legislature to produce two-year budgets, audit the performance of the programs it funds and make bills public at least three days before voting on them. But it's hard to imagine that any of those changes were on the average voter's to-do list for Sacramento.

But what about Molly Munger, the civil rights attorney who spent more than $48 million on Proposition 38, a measure to raise income taxes to boost school funding? Isn't there broad public support for funding schools?

Court said Munger started in a hole — polls showed that most people disliked the measure based just on the title and summary — and couldn't climb out of it. Regardless of what the Yes on 38 campaign argued, Court said, the public didn't believe that tax increases would have generated more money for schools. It didn't help that the measure's income-tax increase would have hit even moderate-income households, albeit proportionately less than it would wealthy households.

Proposition 30, Gov. Jerry Brown's successful initiative to raise sales taxes and taxes on (ahem!) high-income households, took a different approach. Instead of simply promising to dedicate more money to schools, its backers warned that school budgets would be cut, deeply and immediately, if the measure didn't pass. That's because of the "trigger cuts" written into law earlier this year, which required more than $5.8 billion in cuts to public schools and higher education if Proposition 30 were to fail.

The difference between the two measures, Court said, is the difference between fear and aspiration. "Voters vote out of fear of losing a park or a school or a library or a hospital. But they don’t vote out of ambition, I guess, in that way. They’re not aspirational, because they don’t believe the motives of ballot-measure proponents unless they’re addressing a problem that’s real …. They don’t vote on intangibles."

Oh, and yes, Brown had the vociferous support of the public employee unions.

So, for all you civic-minded ladies and gentlemen with a surfeit of cash, let this year's measures be your guide. Pick a problem that's already on most people's radar screens, and propose a solution that they like. If the polls show you aren't starting with a supermajority in support, give up immediately and cut your losses. And by all means, don't get on the wrong side of labor.

(All the dollar figures in this piece came from the California Secretary of State's campaign finance website.)

For the record, 7:52 a.m. Nov. 8: An earlier version of this post misspelled Nicolas Berggruen's first name as Nicholas.

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