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Special Interests: How They Get Around Voter-Approved Limits on Campaign Contributions

More money is flowing into California’s legislative campaigns than
ever, despite contribution limits that voters approved eight years ago
in an attempt to quash the influence of well-heeled special interests
in state elections, according to an analysis by The Chronicle.

Big-ticket donations have moved from candidate-run funds,
where individual contributions are capped at $3,600 per election, into
independent campaigns run by powerful groups to elect or defeat

Special interests also use loopholes to funnel money to
legislators by donating to funds that fall outside the law’s limits,
including legal defense funds, ballot measure committees or lawmakers’
favorite charities.

As a result, watchdog groups say, it has become nearly impossible for the public to follow the money.

Insurance and tobacco companies, unions, Indian tribes and other
groups have used independent expenditure campaigns to pump millions of
dollars into otherwise obscure state Assembly and Senate races,
sometimes outspending the candidates themselves.

While such expenditures were allowed before voters restricted
political giving by passing Proposition 34 in 2000, their use in
legislative races has exploded by more than 2,500 percent since
campaign contributions went into effect — growing from $1 million in
2000 to nearly $27 million in the 2006 election cycle.

For example, a special election in December to fill a vacant
Los Angeles Assembly seat turned into a slug-fest between labor unions
and business groups — as a committee funded by state employees spent
$251,000 running phone banks and organizing precinct walkers to support
Democratic candidate Warren Furutani, who eventually won.

A corporate coalition funded by real estate developers, doctors
and energy companies ran a $266,000 campaign for another Democrat in
the race.

"The bottom line is the financing of political campaigns is a
mess," said Allan Hoffenblum, a Republican strategist, who follows
state legislative campaigns as publisher of the California Target Book,
a nonpartisan guide to
state and federal election races. "The system favors the moneyed — and
there’s been no sign of reform."

On Thursday, the state Fair Political Practices Commission will
hold hearings on the spike in independent campaign expenditures since
Prop. 34 went into effect in 2001.

In the coming months, the agency’s chairman, Ross Johnson, a
former legislator who was a co-author of the contribution-limits law,
says he hopes to investigate the multitude of ways big contributors are
getting around the reforms.

"The people of California have repeatedly voted to limit
contributions to candidates — with the expectation that that would
reduce special interests’ influence over legislation," said Johnson.
"But the will of the people has largely been thwarted."

Special interests run massive campaigns against candidates they
don’t like, paying to produce their own negative ads and mailers:

— When Ellen Corbett, then a San Leandro assemblywoman who
supported consumer rights, ran for state Senate in the 2006 primary,
she faced a mysterious opponent. Californians for Civil Justice Reform,
funded by insurers, tobacco companies and other corporate interests
opposed to consumer lawsuits, spent $577,000 for mailers opposing her
and ads supporting her opponent, John Dutra.

Meanwhile, a consumer attorney group called California Alliance
jumped in to support Corbett, funding a $385,000 campaign. By the time
the primary was over, 14 different independent committees had weighed
in, spending a total of $2.2 million to influence the election. Corbett
survived that primary and went on to win the Senate seat.

— Former Democratic Assemblywomen Cindy Montanez of Los
Angeles wasn’t so lucky. Montanez was author of a Car Buyers’ Bill of
Rights in 2005. A year later, she was crushed in a Senate primary
against Democrat Alex Padilla, thanks
in part to a $123,000 opposition campaign by a committee known as
Californians Allied for a Prosperous Economy — which was funded by car

The U.S. Supreme Court has ruled that the Constitution’s First
Amendment guarantees individuals and groups the right to spend
unlimited amounts of their own money to promote their political views.
Under state law, candidates are not allowed to coordinate any of the
activities of these independent spenders.

"Do we really believe legislators are less beholden to these
outside groups because they’ve spent independently?" asked UC Berkeley
political scientist Bruce Cain.

Even after the election is over, there are plenty of places
special interests seeking to curry favor with lawmakers can put their
money without having it subject to campaign limits. They can give
unlimited amounts to a lawmaker’s favorite charity or to his legal
defense fund or ballot measure committee.

Since contribution limits went into effect, The Chronicle
found, special interests have nearly tripled the amount of money they
give to charities at the behest of legislators — from $1 million in
2000 to $2.6 million in 2007. Some of these donations benefit bona fide
charitable groups, while others seem to serve only the legislators’
personal interests:

— Last year, as a group of Indian tribes sought to win
lucrative gambling compacts from state government, the Barona Band of
Mission Indians allowed 16 of its favorite legislators to pick a school
to receive a $5,000 donation —
contributing a total of $80,000.

— State Senate President Pro Tem Don Perata, D-Oakland,
solicited $850,000 in contributions to charities last year from donors,
including Sierra Pacific logging company, E&J Gallo winery, Kaiser
Permanente and the Irvine Co. development firm. Of that, $560,000 went
to the Rebuilding California Foundation — an Oakland nonprofit formed
in January of 2007 to monitor the spending of the state infrastructure
bonds approved by voters in a campaign led by Perata.

— In 2006, Democratic Assemblyman Mervyn Dymally of Los
Angeles directed $357,000 in contributions from a host of special
interest groups to the California Black Legislative Caucus Foundation,
a group that he chairs. The caucus has sponsored conferences and posh
retreats for legislators.

In some cases, contributors pull out the stops and give money in as many different ways as they can think of.

In 2006, as AT&T Corp. sought legislation that would allow
it to enter the cable television industry throughout the state, it gave
direct campaign contributions to 76 of 80 assembly members and 36 of 40

But it didn’t stop there. AT&T gave $205,000 to the
Democratic Party, $605,000 to the Republican Party and put $137,000
into various independent expenditure campaigns. And it made $99,000 in
donations at the behest of nine legislators. In the year following the
vote, it gave $50,000 to a ballot measure committee controlled by
Assembly Speaker Fabian Núñez, who sponsored the bill, and $25,000 to a
ballot measure committee controlled by Senate leader Perata.

The bill, which took control of cable TV contracts away from
localities and allowed statewide competition, passed overwhelmingly.
Consumer groups said it was a giveaway that essentially deregulated the
cable TV industry.

"I don’t think special interests are spending any less," said
Carmen Balber of the Foundation for Taxpayer and Consumer Rights, a
Santa Monica consumer lobby that opposed the bill. "They are simply
funneling the money through different avenues."

Meanwhile, Prop. 34 hasn’t made much of a dent in the regular fundraising by lawmakers’ campaigns.

In the 2000 statewide election, before campaign contribution
limits took effect, legislative candidates, competing in 100 races,
raised a combined $109 million in their campaign funds.

In 2002, the year after Prop 34 took effect, total fundraising
dropped to $72 million. But by the last legislative election in 2006,
candidates for the 100 Assembly and Senate seats on the ballot raised
enough money to surpass their 2000 record — collecting a combined
total of $110 million.

Dave Gilliard, who has worked as a strategist in Republican
Assembly races and independent expenditure campaigns, said the new ways
money is being spent have made more work for campaign consultants like
him but haven’t made things
easier for the public.

"I think contribution limits have had the opposite affect that
voters wanted," he said. "It’s driven a lot of money underground and
made it harder for people to figure out who’s behind a candidate. But
it hasn’t lessened the amount
of money going into politics."

How to fix the system is a matter of debate. Republicans and
many academics who follow campaign money argue that, because the
nation’s highest court has ruled that independent expenditures can’t be
banned, the best answer might be to get rid of campaign limits and
improve disclosure to the public.

More liberal reform groups are calling for lower limits,
elimination of loopholes and public funding of campaigns. But few
people think the current system is working.

"It’s just a screwed deal," said former state Sen. John Burton,
co-author of the campaign contribution law. "There’s always a way to
get around limits."

Big spenders:

The biggest independent expenditure committees and what they spent in the California legislative elections during 2006 and 2007.

California Alliance for Progress and Education: $3,621,409
This committee, which bills itself as "an alliance of professionals,
employees and small business," ran campaigns in seven legislative
primaries and four general election races in 2006, including opposing
Democratic San Leandro state Sen. Ellen Corbett in her primary run for
her Senate seat.

Major funders:
· California Dental Association Independent Expenditure PAC: $1 million
· California Real Estate Independent Expenditure Committee: $760,000
· California Real Estate Political Action Committee: $450,000
· Farmers Employees & Agents Political Action Committee: $344,500
· California Building Industry Association PAC: $200,000
· California Hospital Association PAC: $120,000

Team 2006, sponsored by California sovereign Indian nations: $1,992,392
group of tribes with casinos ran independent expenditure campaigns in
eight 2006 Assembly and Senate races, including helping Republican
incumbent Sheila Horton fight off Democrats’ attempts to capture her
San Diego Assembly seat.

Major funders:
· Agua Caliente band of Cahuilla Indians: $2.8 million
· Sycuan band of the Kumeyaay Nation $2.8 million
· Pechanga band of Luiseno Indians :$2.8 million

California Correctional Peace Officers Association Independent Expenditure Committee: $1,653,226
group representing California prison guards, one of the state’s biggest
contributing groups, made independent expenditure contributions in 17
legislative races in 2006.

Major funders:
· California Correctional Peace Officers Association: $2.8 million

Californians for Civil Justice Reform: $1,666,883
group of corporations and industry groups that support legal tort
reform funded independent expenditure campaigns in three Senate
primaries in 2006, including spending more than $500,000 to oppose
Ellen Corbett.

Major funders:
· California Building Industry Association: $100,000
· 21st Century Insurance: $100,000
· ACC Capital Holdings Corp.: $100,000
· California Real Estate Political Action Committee: $100,000
· Bank of America California Political Action Committee: $100,000
· Pfizer Inc.: $100,000
· Pacific Gas & Electric Corp.: $75,000
· American Insurance Association: $75,000
· Amgen Inc.: $60,000
· Countrywide Home Loans Inc.: $50,000
· Farmers Insurance: $50,000
· ChevronTexaco Corp.: $50,000
· The Irvine Co.: $50,000
· Philip Morris USA Inc.: $40,000

Source: Chronicle analysis of campaign finance filings

Big spenders — Follow the money:

Loopholes in California’s campaign contribution limits make special-interest spending hard to follow:

Before Proposition 34 took effect in 2001
— Unlimited: Special interests could give unlimited amounts to candidates’ campaign funds.

After Prop. 34 took effect:
— Limited: Special interests are limited to $3,600 per election to state Assembly and Senate candidates.
— Unlimited: Special interests can spend unlimited amounts on their own campaigns to support or oppose candidates.

Unlimited: Special interests can give unlimited amounts to legal
defense funds or ballot measure committees or make big donations to a
charity at a legislator’s behest.

To view campaign contributions and expenses, go to the California secretary of state’s Web site:

Get involved: The state’s Fair Political Practices
Commission meets Thursday Feb. 14th at 10 a.m., at 428 J St., Suite 800
in Sacramento, to discuss skyrocketing independent campaign
expenditures and new rules for legislators’ out-of-state travel
expenses. To read the agenda, go to:

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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