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The San Jose Mercury News (California)

In California politics, Silicon Valley executives used to be considered newbies, nerds or simply multimillionaires with too much time and money on their hands.

No longer.

Emboldened over the past decade by some success passing ballot propositions, a handful of the valley’s most influential power brokers are once again aiming to use the initiative process to put their stamp on public policy in California.

Two of the boldest electoral initiatives yet to emerge from valley interests will be on November’s ballot: NetFlix founder Reed Hastings and Kleiner Perkins venture capitalist John Doerr are backing Proposition 88, an unprecedented statewide real estate parcel tax to benefit education; and Vinod Khosla, another Kleiner partner, is behind Proposition 87, a first-ever royalty on oil pumped from California to fund alternative energy ventures.

Together, the two initiatives could raise nearly $1 billion a year in new revenues.

Ten years ago, after the valley’s tech community successfully organized — and spent $30 million — to defeat a tech-unfriendly initiative that was designed to promote shareholder lawsuits, the predictions from political veterans were valley folks might rest on their laurels.

Instead, tech moguls have continued to play politics, and even a few electoral losses haven’t discouraged them.

“John Burton once said, ‘When you deal with people who weigh their money instead of count it, you probably ought to listen,’ ” said Kevin Gordon, an education lobbyist who was in the meeting a few years ago when Burton, then leader of the state Senate, warned colleagues not to ignore the powerful sector.

Current initiatives

For this November’s ballot, Hastings and Doerr have committed $7 million to Proposition 88, which would impose a statewide $50 annual tax on every real estate parcel and earmark it for education. Khosla, along with Hollywood producer Stephen Bing, is pushing Proposition 87, which calls for the state to collect royalties on oil extracted from California and spend the money on clean-energy research and ventures. The tax would range from 1.5 percent to 6
percent, depending on oil’s price per barrel. Other states and the federal government levy similar assessments.

Anti-tax opponents are labeling the parcel tax a direct assault on Proposition 13, the landmark 1978 measure that limits increases in California’s property taxes. The alternative fuels measure has prompted the oil industry to raise more than $12 million to combat it.

Hastings, who formerly chaired the state Board of Education, calls the parcel tax “a modest step” to raise per-student spending in the state.

Since 1996, when valley tech leaders and trial lawyers waged fierce battles over lawsuit reforms, each election year has featured at least one ballot measure that grew from the efforts of valley high-tech leaders, with the exception of 2002 and special elections. The scorecard: three wins, six losses.

Of the nine initiatives pursued by valley leaders since 1996, the key backers have spent at least $50 million of their own money. Hastings and Doerr and his family, frustrated by the slow pace of school reforms, have combined to spend about $25 million on initiatives. November’s proposed parcel tax marks the third time the pair has committed several million dollars each to an education-funding measure.

“It’s public-policy philanthropy,” Hastings said of his hefty personal investments in several initiatives since 1998, mostly aimed at raising money for public education. But, he said with a laugh, “donations are not tax deductible.”

Often these leaders come to embrace initiatives based on strong personal convictions about how to address pressing problems such as failing education. Others have pushed initiatives with business-related agendas, such as restricting shareholder lawsuits or spurring investments in a certain sector.

Increasingly, initiatives have become the political megaphone of choice among affluent Californians. Hollywood producer Rob Reiner led the failed June initiative to introduce universal pre-school in California and a conservative San Diego alternative-newspaper publisher was behind November’s unsuccessful measure to require minors to get a parent’s permission before having an abortion.

Getting on ballot

“We’re going to see more and more wealthy people getting their pet issues before the public when really for them all it takes is a little bit of money to get on the ballot,” said Bob Stern, president of the Center for Governmental Studies in Los Angeles.

Undeterred by controversy, valley leaders often push policy agendas that have been stymied in the Legislature by powerful interests, including trial lawyers, the education establishment and, now, oil companies.

Khosla says the time is ripe to rally a public angry over high gasoline prices because legislative attempts to cap gas prices and tax oil company profits have stalled.

“We’re counting on the fact that people don’t trust oil companies and energy companies in general,” he said. “Remember Enron.”

Khosla, who invests in alternative energy ventures, last fall joined a fledgling initiative campaign — dreamed up by environmentalists and backed by producer Bing — that set a goal of spurring investments in alternative energy. And they decided to tap oil producers to pay for it.

Self interest?

Critics charge that because Khosla and Kleiner Perkins invest in companies that will probably benefit from the oil tax, he is trying to enrich himself.

“It’s inappropriate for one industry to go out and tax another industry,” said Allan Zaremberg, president of the California Chamber of Commerce. He said market forces are boosting investments in alternative fuels, with Bill Gates and major venture capitalists making substantial investments.

Anti-tax activists also question why some valley leaders are espousing tax increases on others at the same time key valley lobbying groups are asking legislators in Sacramento to cut corporate taxes and renew manufacturing investment credits.

Khosla said the fact he has alternative fuel investments “doesn’t make the initiative wrong if it’s something that is socially beneficial.”

He said “the only way to solve the oil addiction problem is to dramatically increase the level of Wall Street investment. That’s the only way to counter the massive clout of the oil industry.”

Winning support

Consumer activist Jamie Court said while at first he suspected a power grab by supporters of the alternative energy measure, he is convinced it “advances the public benefit by developing an alternative to gasoline.” His Foundation for Taxpayer and Consumer Rights has signed the proponent’s ballot statement.

But, he said, valley backers are going to find themselves in an underdog position facing an oil industry with even deeper pockets than their own. Chevron alone has contributed nearly $4 million to the opposition campaign.

“They are Davids going up against Goliath,” Court said. “I don’t know if they know how to be Davids. They are not used to it.”
Contact Mary Anne Ostrom at [email protected] or (415) 477-3794

Consumer Watchdog
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