CALIFORNIA BALLOT PACKAGE DEFERS TO SPECIAL INTERESTS
3 May 2009
BY SHANE GOLDMACHER
As California’s legislative leaders and Gov. Arnold Schwarzenegger rushed to craft a budget compromise in February, there were two key political goals.
The first: Obtain enough votes to get it through the Legislature.
The second: Keep the state’s richest interest groups happy with the result.
The latter goal was critical. Six elements of the final budget deal, Propositions 1A through 1F, will face the voters in a May 19 special election.
Legislative leaders knew that any well-financed campaign against the delicate package could sink the whole thing.
“Any time you do a ballot measure – any ballot measure – you always sit around and say, ‘Who could be the potential opposition?’ ” said Assembly Speaker Karen Bass, a Los Angeles Democrat and one of four lawmakers at the negotiating table. “You also always sit around and say, ‘How do I get that opposition on board or neutral at best?’ ”
The entire architecture of the ballot pact that emerged was heavily shaped by leaders’ desire to please – or at least neutralize – the state’s most powerful political players.
Now, some of those very interest groups protected in the budget deal are bankrolling the campaign to ratify it.
For the oil industry, the package omits a once-proposed 9.9 percent oil severance tax. Energy companies have given more than a million dollars to pass the plan, led by a $500,000 donation from Chevron.
For the liquor, beer and wine industry, increased alcohol taxes were shelved. Alcohol industry heavyweights, such as E. & J. Gallo Winery ($100,000) and California’s Beer and Beverage Distributors ($50,000), have all opened their checkbooks.
For the teachers union, the list of ballot measures includes a separate measure to ensure repayment of deep cuts to schools and protections for top-priority programs. The California Teachers Association has contributed $7 million to the passage of Propositions 1A and 1B.
For casino-operating Indian tribes, the state lottery measure avoids any new games that could threaten their gambling operations. Tribes, who could have been major contributors against the lottery proposition, have kept their checkbooks closed.
The influence of such groups is, more often than not, simply unspoken.
“If somebody has a history of putting tens of millions of dollars into lobbying and ballot measures, they don’t have to say anything,” said former Assemblyman John Laird, who was the Democrats’ chief budget negotiator for several years.
In 2006, for instance, the oil industry spent $100 million to defeat an oil severance tax on the ballot.
Negotiators know that an industry with that track record “would quite probably be willing to do it again,” Laird said.
At the start of 2009, lawmakers and the governor faced a daunting $40 billion budget hole made worse by a cash shortage so severe the state would soon no longer be able to pay all its bills.
Democrats, who control a strong majority in both houses of the Legislature, were stymied by Republicans and California’s constitutional requirement that two-thirds of lawmakers approve tax hikes.
Lawmakers of both parties and Schwarzenegger squabbled for months before settling on a complex plan that raises broad taxes (the sales tax, personal income tax and vehicle fees) on most Californians, borrows heavily and slices deeply into state services.
Bass said Democrats also fought hard to protect programs for the poor, aged, blind and disabled.
“If it was just as black and white as who yelled the loudest and who had the most money, we would have wiped out (in-home supportive services) and we would have wiped out (welfare programs),” she said. “They would have been gone.”
The linchpin of the ballot deal was Proposition 1A.
If passed, the measure would allow $16 billion in continued tax hikes and create a stronger rainy-day fund to constrain future state spending.
Large special interests played a key part in determining which taxes were raised.
Democrats had wanted to tax the rich, but GOP lawmakers nixed that idea. Then, on New Year’s Eve, the Schwarzenegger administration proposed taxing oil, alcohol and extending the sales tax to certain services, such as sporting events.
The business community objected loudly, as did Republican lawmakers, who had long insisted on closing the budget gap without new revenues.
The California Chamber of Commerce said it didn’t object to all tax increases – but didn’t like those targeted at particular businesses.
Then, ever so slowly, the GOP leadership moved toward embracing broad-based taxes, such as the sales and income tax.
“If you’re going to raise taxes, you should do it where everybody sees it and feels it and gets mad,” said Assembly Republican leader Mike Villines of Clovis.
In the end, any industry-specific taxes were left out.
There was no new sales tax on event tickets. The Golden State Warriors, Los Angeles Clippers, Los Angeles Lakers and their parent company, Anschutz Entertainment Group, have combined to donate $200,000 for the measures.
Many industry donors declined to comment for this story. Those that did generally said they contributed because, as Chevron put it, they are “committed to playing a positive role in restoring fiscal health to our state and building a stronger future for all citizens.”
Anschutz said “we should all be very concerned with these propositions” because, if they fail, “This will be catastrophic.”
Linking the spending constraint and taxes in one ballot measure was also driven by Republican lawmakers, who feared a repeat of 2005.
That year, a package of Schwarzenegger’s self-styled reform measures – including a controversial spending cap – went down to defeat thanks in large part to a $100 million union-led opposition campaign.
“Their demand at the table was that there be some relationship between spending restraint and the length of the taxes,” said Senate President Pro Tem Darrell Steinberg, D-Sacramento. ” … They didn’t want all of the constituencies that would ordinarily fight such a measure to be able to do so without some sort of an impact on revenue.”
The structure of the ballot package has divided the union coalition that pummeled the 2005 measures. The state’s two largest teachers unions are on opposite sides. The state council of the 700,000-strong Service Employees International Union has donated $850,000 to defeat 1A, while the California Labor Federation is neutral.
“You could have organized labor completely against Prop. 1A,” Steinberg said. “You don’t.”
Lawmakers also linked Proposition 1A to Proposition 1B, which will take effect only if the first measure also passes.
Proposition 1B, which would require paying an additional $9.3 billion to schools in the future to compensate for current budget cuts, was designed to keep the California Teachers Association from bankrolling a campaign against 1A.
Education consultant Kevin Gordon said the move was “smart politics.”
“A campaign with the education community led by CTA to oppose Prop. 1A would have been the death knell to all the measures on the ballot,” Gordon said.
CTA President David Sanchez has called the final budget package “unconscionable” because of its deep cuts to school funding. Yet CTA is spending millions to ratify the package.
The third measure on the ballot, Proposition 1C, sounds simple enough.
It would borrow $5 billion against future years of the state lottery’s proceeds to balance the current budget. Current levels of school funding from the lottery would be maintained, thereby avoiding conflict with the education lobby. It would also increase payout to gamblers in hopes of luring more players (and thus generate more revenues for the state).
Its evolution is a testament to the power of large interests.
First approved by voters in 1984, the lottery needs voter approval for most changes. That meant neutralizing potential campaign spending by rival gambling interests and the union that represents lottery workers was a necessity.
“The lottery thing had to be crafted in such a way that it wouldn’t be killed by the tribes, or by racing, or by card clubs, by all of the various interest groups,” Bass said. “I don’t think there’s anything unusual about that.”
The negotiations were led by the Schwarzenegger administration, which first proposed in 2007 to lease the underperforming lottery to a private company. That firm would then be granted the power to operate new, high-tech gaming.
The tribes opposed that model, believing it would infringe upon their sole right to slot machines. So did SEIU, whose union members account for roughly two-thirds of the 600 workers at the state’s lottery agency.
Schwarzenegger’s second proposal kept the state in control of the lottery’s operations but still “modernized” the games played. The tribes didn’t like that either; SEIU – no longer threatened with losing workers to a private vendor – was OK with it.
The final proposal kept the state in charge and dropped the high-tech games.
Both SEIU and tribes are now supportive, or at least neutral, on the plan.
David Quintana, the political director for a coalition of casino-operating Indian tribes known as the California Tribal Business Alliance, said the final lottery package that emerged was a “completely different animal.”
“It went from a wolf to squirrel,” he said.
The sheer complexity of an issue can increase the clout of special interests, said former Democratic Assembly Speaker Bob Hertzberg, especially “when you’re trying to deal with issues of governance that don’t have direct, popular appeal but are necessary for the operations of the state.”
“Anybody can come along with a few dollars and try to knock you off,” said Hertzberg, who now co-chairs a government reform group called California Forward.
Joe Mathews, who studies California government and the initiative process at the New America Foundation, said California’s “incredible, powerful and inflexible direct democracy” means that many such public policy decisions have to go to the ballot.
As a result, he said, “a major negotiation on legislation is, more often than not, really actually a campaign strategy session.”
Villines said lawmakers do the best they can.
“Anybody who says that there isn’t a heavy influence in Sacramento is not telling the truth,” Villines said. “There is influence in Sacramento. And our job is just to sort of push that back as much as possible.”
DISPLAY ADVERTISING
San Francisco Sentinel impressions reach more than 5,000 readers daily.
Our readers are those who make things happen in stage, film, fashion, dining, travel, business, philanthropy, and governance.
Published online since 1999, The Sentinel is updated many times during each day as news breaks.
More than 1,000 readers receive Sentinel Emails, sent at least once daily, listing the most up-to-date stories, with photos, synopsis, and link to each new story.
Sentinel Advertising couples your campaign to our high net readership, with your message changed as needed to drive newest market trends, respond to issues, display latest service and product values.
We offer choice of Right Column, Left Column, Center News Section ad placement.
Your message appears on all Sentinel Archived Pages, accessed frequently through Google topic search, with archived pages now numbering more than 3,000.
Ask about our new customer incentive program to work within your budget!
SYLVIE LISS
Account Executive
415-794-9955
EMAIL Sylvieliss@gmail.com
