Government regulations held back in elections through grass roots, money

The San Francisco Chronicle

California businesses staved off government regulation through ballot initiatives in this month’s election by using their most effective foot soldiers: small-business owners. But it was big businesses doling out most of the cash for the campaigns.

Time and again, small-business owners were among the most prominent faces opposing mandated health care and supporting reforms in the state’s Unfair Business Competition Law. They appealed to sympathetic voters through television advertisements, on Web sites and in news conferences.

But in both instances, big businesses were the ones fronting the vast majority of money for the multimillion-dollar campaigns. The campaign to defeat Proposition 72, a referendum on a law requiring medium and large companies to provide their workers with health insurance, raised $10.9 million as of Oct. 16, with a hefty contribution of $600,000 coming from Wal-Mart.

With Proposition 64, which limits citizens’ rights to file lawsuits under the Unfair Business Competition Law, the campaign supporting it collected $12.5 million as of Oct. 16, of which about $4.75 million came from the California Motor Car Dealers Association and the Alliance of Automobile Manufacturers.

Voters rejected Prop. 72 by a thin margin, with 51 percent opposing it and 49 percent favoring of it. They approved Prop. 64 more decisively, with 58.9 percent backing it and 41.1 percent voting against it.

In San Francisco, a grass-roots effort by small businesses led to the defeat of Proposition K, which called for a gross-receipts tax on companies that take in $500,000 or more in revenue. But more than half of the money for the No on K campaign came from attorneys interested in killing an under-publicized provision that would have closed a loophole allowing limited liability corporations to avoid paying the city’s payroll tax.

“Small businesses are the new David, and ironically it was the big businesses that were the Goliaths funding them,” said Jamie Court of the Foundation for Taxpayer and Consumer Rights, which supported Prop. 72 and opposed Prop. 64.

This year’s election demonstrated the historically complicated relationship between big and small businesses. Small businesses often complain that their issues go ignored unless a big business is somehow involved. And it is typically in those circumstances that big businesses link arms with small businesses in order to give their cause a human face.

“More often than not, big business is talking to small business when it’s to the advantage of big business,” said Harold Hoogasian, owner of Hoogasian Flowers in San Francisco’s South of Market district. “We get listened to when it works.”

At times, small businesses will distance themselves from large companies like Wal-Mart, and even clash with these corporate giants when their own livelihood is threatened. But there are other times when small businesses need the muscle, and wallets, of big businesses in order to elevate issues that they both care about.

Hoogasian said he would like to see big and small businesses work more closely together year-round.

“The issues that unite businesses are much greater than the issues that divide businesses by size,” said Hoogasian, whose 75-year-old family business employs 12 people. “Every big business started as a small business somewhere along the line. There are natural alliances.”

But Court said he gets frustrated when he sees small businesses align with big businesses for the sake of having one voice, even though they might not receive any benefit from the relationship.

“The small businesses are the Fortune 500’s ace in the hole,” Court said. “Oftentimes small businesses let themselves get used that way. It drives me nuts because there are a lot of wedges between small businesses and big businesses.”

Organizations like the Chamber of Commerce and the National Federation of Independent Businesses dispute that characterization of big and small businesses. Allan Zaremberg, head of the California Chamber of Commerce, said that the issues tackled in this year’s election affected big and small businesses alike, and that is why the two joined forces.

“It clearly misses the point to say we funded the campaigns with big business,” Zaremberg said.

Although small businesses supported Prop. 64 and opposed Prop. 72, Zaremberg said they did not have the resources necessary to fight for the measures on their own.

“They just can’t afford to run a campaign to the magnitude that it takes to run a campaign in California,” he said. “It’s unrealistic for small businesses to run a campaign without the funding of big business.”

In San Francisco, Scott Hauge, president of the Small Business Advocates, a political action group actively involved in the effort to defeat the city’s proposed gross receipts tax, acknowledged that attorneys contributed about $79,000 of the $142,000 raised in the campaign. But he said it was
small-businesses owners who were out campaigning, talking to people and persuading voters to reject Prop. K.

Whichever the proposition, few can argue the image that small businesses have the power to convey to the public.

“Small businesses are sympathetic because people identify with small businesses,” said Carmen Balber of Election Watchdog, a consumer advocacy group that backed the health care mandate. “They’re one of us.”

“The people who work for small businesses know who the owner is,” said Martyn Hopper, California director of the National Federation of Independent Businesses, which has a membership of 35,000 and which supported Prop. 64 and opposed Prop. 72. “They don’t drive big pink Cadillacs. They don’t have a vacation home in Maui.”

It is precisely for those reasons that small businesses get placed on the front lines when it comes to propositions that also affect big businesses, said Anthony Wright, executive director of Health Access California, a statewide consumer group on health care issues that supported Prop. 72.

Wright points specifically to an anti-Prop. 72 television advertisement that showed an actress portraying the owner of a Mexican restaurant in southern California. The actress complained about the $100,000 she would have to pay a year to cover health care benefits for her workers if voters approved Prop. 72.

Besides the fact that the restaurant would not have actually been affected by Prop. 72 because it fell under the measure’s exemption for businesses with 19 employees or fewer, Wright said, the advertisement was a classic example of putting the face of a small business forward to garner sympathy from voters. “If they put an executive from McDonald’s or Wal-Mart to explain why they don’t cover their workers, that’d be a harder sell,” he said.
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E-mail Pia Sarkar at [email protected]