The following story by Joe Garofoli was originally published July 19 in the San Francisco Chronicle.
The stated intention of Proposition 32 on the November ballot is to “ban both corporate and union contributions to candidates.”
But analysts say that while it could dry up organized labor’s primary funding source, it contains a loophole that will allow corporate interests to continue doling out campaign donations.
That scenario has put the fear of Wisconsin into California unions, which have raised $8.2 million to fight Prop. 32, positioning it as one of the most high-profile, high-dollar battles this fall.
Unions don’t want to be weakened to the point where they could suffer a crackdown on their ability to bargain collectively, as happened in Wisconsin under Republican Gov. Scott Walker.
California’s labor unions are stronger than those in Wisconsin, but Prop. 32 would limit labor’s chief weapon for influencing the state’s politics – political donations – by preventing unions from using automatic payroll deductions from members without their permission.
But while the measure also bans donations from corporations to political candidates and candidate-controlled committees, it doesn’t ban contributions from limited liability companies, also known as LLCs, or from limited partnerships or real estate trusts – which represent some of California’s biggest political donors to both major parties.
Those major donors, which contributed at least $10,000 in the 2010 election cycle, include: Yucaipa Companies LLC, which was founded by Ron Burkle, a nationally prominent Democratic donor; and Aurora Management Partners LLC, which is led by Gerald Parsky, a political appointee of five Republican presidents.
“None of them are corporations,” said Calvin Massey, a constitutional law expert who is a professor at the University of New Hampshire.
But Massey said that given how some of these entities could be taxed differently, the courts will have to decide whether an LLC, for example, should be considered a corporation in some cases.
Regardless, a lot of money funding California politicians already comes from these entities, according to an analysis of data from the secretary of state’s office that was done for The Chronicle by MapLight, a nonpartisan organization that studies money and politics.
Of the 2,778 major donors during the 2010 election cycle, MapLight found 97 limited liability companies, 46 limited liability partnerships and 20 limited partnerships.
The “Frequently Asked Questions” section of the website for proponents of Prop. 32 – stopspecialinterestmoney.org – says “LLCs and partnerships are not regulated like corporations and can use general treasury monies for political purposes.”
But Jake Suski, a spokesman for the measure, said the initiative “clearly makes no exceptions. It applies to both corporations and unions. Prop. 32 doesn’t define what a corporation is. It leaves that to state law.”
Such uncertainty is one of the reasons that the nonpartisan League of Women Voters of California is opposing Prop. 32, “because it doesn’t affect both sides equally,” said Helen Hutchison, vice president of advocacy for the league, which would like to reduce the influence of money in politics.
“It would almost effectively silence one side while not doing much to the other,” Hutchison said. Besides, she added, most corporations don’t use employee payroll deductions to fund their political giving.
A 2010 study by CQ Money Line, a political publication, found that 800 employers in the United States reported using some type of payroll deduction, and more than 100,000 salaried employees authorized their employers to deduct more than $70 million from their paychecks for campaign contributions.
Should Prop. 32 pass, “unions would find a way to donate, but it would be a lot harder,” said Jaime Regalado, a professor emeritus of political science at California State University Los Angeles. “It would be a devastating hit on labor.”
From 2000 through 2009, the two biggest political donors in California were labor unions, according to the state Fair Political Practices Commission. The California Teachers Association spent $211 million on behalf of various ballot measures and candidates, and to lobby public officials. The California State Council of Service Employees was the second biggest donor, spending $107 million.
Last month, the U.S. Supreme Court, in a California case, ruled that the Service Employees International Union could not force dissenting members to pay extra dues for political campaigns.
Prop. 32 is the third California ballot measure in 14 years designed to limit the ability of labor unions to fund their political activity through payroll deductions.
In 2005, union-backed forces spent $54.1 million to defeat a similar “paycheck protection” measure that was the centerpiece of former Gov. Arnold Schwarzenegger’s plan to reform state government. The “Yes on Proposition 75” side spent only $5.8 million.
In 1998, the similarly worded Prop. 226 was also defeated by a wide margin as unions outspent the supporters 4-1.
Rick Hasen, a professor of law and expert on election law at the UC Irvine Law School, said Prop. 32’s stated ban on corporate spending on political campaigns “won’t soften union opposition.”
Unions have provided 98 percent of the $8.3 million raised by the anti-Prop 32 forces through July 9, according to MapLight. The top donors for Prop. 32, which has raised $3.7 million so far, include tech CEO Tom Siebel, conservative donor Charles Munger and former Univision CEO Jerry Perenchio.
“When you see over $12 million dollars being thrown at a ballot proposition this early in the game,” said Pamela Heisey, a spokeswoman for MapLight, “you know it’s going to be a fight to the finish.”