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Wednesday, June 28, 2006

Effect of Recent Supreme Court Decision on CA Campaign Reform Initiative

As Joan Biskupic reports in USA Today, on Monday, the U.S. Supreme Court issued a decision in Randall v. Sorrell striking down Vermont's law limiting political contributions and spending. Three justices support both spending and contribution limits, three justices want to get rid of both, and three want to have the latter but not the former. Given that they can’t agree among themselves what the U.S. Constitution says, you might think they would defer to the state of Vermont to figure it out for themselves. Nope.

While the decision likely signals an end to the modestly more expansive approach recently used by the Court in reviewing the constitutionality of campaign finance laws, the Court's ruling leaves intact the basic constitutional framework which has been in place since its seminal (and near-criminal) 1976 decision Buckley v. Valeo.

The $64 million (remember when that seemed like a lot?) question is: how will the Court's decision affect current or prospective campaign finance reforms? Specifically, how is the forthcoming campaign reform ballot measure sponsored by the California Nurses Association, which the California Secretary of State recently certified for the November ballot, affected?

The short answer, at least as to the Nurses' initiative, is not much. A look back at Buckley is informative:

Buckley Paradigm
The Buckley Court reviewed the federal reforms passed in the wake of Watergate. The decision made a fateful and oft-ridiculed distinction between limits on campaign spending and limits on contributions to campaigns.

The Court viewed spending limits as a direct infringement on the free speech rights of candidates, and thus any attempt to limit spending must pass a very strict scrutiny. Such review must find that the government has a compelling interest which is met through a law drawn as narrowly as possible. In a moment of colossal myopia, the Buckley Court found that the only permissible compelling governmental interests in campaign finance law were to prevent corruption or the appearance of corruption. This reading ignored the right to a small-r republican form of government - representative democracy, essentially - explicitly guaranteed by the Constitution (see our amicus brief in Randall). In the Court's view, limiting campaign spending did neither, and was thus unconstitutional.

Contribution limits, on the other hand, did not prevent donors from expressing their support for a candidate, and received a middle tier of scrutiny. Limiting political contributions directly reduced both corruption and the appearance of corruption, according to the Court, and could pass constitutional muster if they were not too low. The Court also approved, even encouraged, voluntary public financing programs.

Randall
So - spending limits no, contribution limits yes, public financing yes. On its face, this week's decision by the Supreme Court did nothing to change that. Spending limits are still no, although 87% of the public thinks we need them. Contribution limits are still fine, but must be carefully drafted. Public financing, ballot measure spending, and independent expenditure committees weren't discussed in the opinion.

But the Court's decision to strike Vermont's contribution limits arguably signaled a shift from its recent jurisprudence. As recently as 2000, in the case Nixon v. Shrink, the Court had upheld Missouri's campaign finance law, which included contribution limits of $1,075 per election for statewide offices and $275 per election for state legislative races. What was different about Vermont?

Vermont's contribution limits were $200 for state representative, $300 for state senator, and $400 for statewide office. Whereas most limit regimes apply per election, which allows donors to give the max to a candidate once for the primary election and again for the general election, Vermont's limits were per election cycle, giving donors only one bite at the apple. Vermont's limits were not indexed for inflation either, meaning their effective value would gradually drop.

In striking these limits, the Court looked at five factors:

1) The contribution limits appear to significantly restrict the amount of money available to challengers to run competitive elections.
2) The same low limits are imposed on political parties, harming the right to association.
3) The law's treatment of some volunteer expenses as campaign expenditures chills volunteer activity, especially in concert with the low contribution limits.
4) The limits are not adjusted for inflation.
5) The record does not show past corruption sufficiently to justify such stringent limits on constitutional rights.

California Nurses' Campaign Reform Initiative
The California Nurses campaign reform initiative has two main parts: 1) a program of voluntary public financing for qualifying candidates for public office, and 2) a very nearly comprehensive series of reforms - including limits on contributions to candidates, parties, and independent expenditure committees among others - aimed at creating a level playing field for California candidates and ballot measures to compete with those backed by financially powerful interests.

While the Randall decision should have no effect whatsoever on the public financing program, an analysis of its effect on the second part of the initiative is a bit more complex.

First off, the contribution limits: the measure limits contributions to candidates to $500 per election for legislative races and $1,000 per election for statewide races; contributions to parties are limited to $7,500 per year. These are not only significantly higher than Vermont's limits going toward the first and fifth concerns listed above, but also address the Court's second and fourth concerns. As to the volunteer expenses, the ballot measure is silent, which should adequately address that issue. So, if we are to believe the Court's sincerity in laying out those five factors, the measure's contribution limits are constitutionally sound.

These limits apply to individuals, corporations, and unions alike.

But as most Californians could attest, limits on contributions to candidates alone will not take back our electoral processes from the financially powerful interests in this state. As this year's Democratic gubernatorial primary demonstrated, wealthy interests will resort to independent expenditure committees to influence elections. The Tsakapouloses (father Angelo and daughter Eleni) spent nearly $8 million on behalf of their business partner, Phil Angelides. Other IE committees spent millions in the June 2006 primary in support and opposition to candidates.

And the ballot initiative process, created as the people's answer to a legislature dominated by special interests, has also been made captive by the state's financially powerful. The pharmaceutical industry alone spent $80 million on two initiatives last year. Tobacco companies, energy companies, gaming tribes, and developers have all spent tens of millions of dollars in recent years on initiatives. Even labor unions have gotten into the act, spending over $120 million in 2005 opposing Governor Schwarzenegger's special election initiatives.

Tha ballot process has been further corrupted by the new technique pioneered by Cruz Bustamante and perfected by Arnold Schwarzenegger, in which candidates for public office use ballot measure committees to evade the state's contribution limits. Bustamante, Schwarzenegger, and Phil Angelides have all used these committees, which are currently not subject to any limits on the size of contributions they can receive, to advance themselves as candidates.

The Nurses' initiative takes on all these issues, addressing them to the fullest extent allowed by constitutional doctrine. The effect of the Randall decision on any of these reforms is unclear, perhaps especially so because the Randall Court addressed none of these issues directly. But a look at where things stood constitutionally prior to Randall suggests that the Nurses' initiative, while important cutting edge policy, remains on sound footing.

1) Independent Expenditure Committees
IE committees are currently allowed to raise and spend money without limit to influence candidate elections in California. As state GOP chairman Duf Sundheim recently pointed out in a discussion we had on the radio program Insight, these committees currently are a huge loophole in California's scheme of contribution limits. Mr. Sundheim recommended a constitutional amendment to allow for mandatory limits on how much anyone can spend on an election, including candidates and independent actors. That’s a good idea. But, the Nurses’ initiative does take some good measures to address the problem.

The Supreme Court has upheld a ban on corporate contributions to IEs in the case Austin v. Michigan Chamber of Commerce. More recently, and perhaps more importantly, the Supreme Court upheld the 2002 Bipartisan Campaign Reform Act's ban on soft money to political parties in the case McConnell v. FEC. In McConnell, the Court found that limiting contributions to parties was a necessary and constitutional way to prevent evasion of BCRA's contribution limits.

As IE committees have been used to evade contribution limits in California, limiting contributions to such committees is a constitutional way of preventing such evasion. The Nurses' initiative does just that, limiting contributions to IE committees to $7,500 per year as part of its overall limit on aggregate contributions by a person or entity to $15,000 per year.

2) Candidate-controlled Ballot Committees
Lt. Gov. Cruz Bustamante was fined $260,000 by the Fair Political Practices Commission for using a ballot committee to evade contribution limits. In just three short years, Gov. Arnold Schwarzenegger has raised tens of millions of dollars into his ballot committees, much of it spent to raise his profile as a candidate. State Treasurer and current gubernatorial candidate Phil Angelides used his ballot committee to send out flyers touting his support for pre-school in the days before the June primary. Assembly Speaker Fabian Núñez is raising $25,000 a piece into his ballot committee from corporations with financial interests in legislation before the Assembly.

You would be hard pressed to make a distinction between the influence gained with a $50,000 contribution to a candidate's campaign committee as opposed to a candidate's ballot committee. Clearly, politicians from both parties are eviscerating California's contribution limits with their ballot committees. The FPPC recognized this when they passed a regulation applying the contribution limits on candidate committees to ballot committees controlled by candidates.

The Nurses' initiative limits contributions to candidate-controlled ballot measures to $10,000 per person. While the original FPPC regulation was struck as unauthorized in the Political Reform Act by a Sacramento County Superior Court judge in a lawsuit by Governor Schwarzenegger and his business ally funders, McConnell would seem to allow for this type of regulation if it is necessary to prevent the evasion of contribution limits. Loyola Law Prof. Rick Hasen, the Campaign Legal Center's Paul Ryan, and others have this point better than I.

3. Ballot Measure Spending
California's love-hate relationship with the ballot initiative process has been a lot more hate than love lately. As wealthy interests have turned the process into a playground for the rich, voters have turned increasingly hostile towards any ballot measure, even those whose general intent is backed by a majority of Californians. While corporate interests have played the predominant role in the corruption of this process, labor unions and wealthy individuals have done their fair share as well.

The Buckley paradigm has traditionally been interpreted to prohibit any attempt to check the influence of big money on the initiative process - there are no candidates to corrupt, after all. But, the ban on corporate contributions to IE committees in Austin also didn't involve candidates. In the Austin case, the Court ruled that the very nature of corporations - that they are designed and given public tax breaks in order to generate profits - created such a risk of overwhelming the political process that corporate political spending could be seen as inherently corrupting, and could thus be limited or even prohibited even when no candidates are involved.

The same rationale applies to corporate spending in California's ballot initiative process. Pharmaceutical, tobacco, energy, financial services, and development corporations have used the massive profits generated by their corporate form to completely overwhelm the California initiative process. While labor unions have done so on a smaller level, there is less of an argument to be made, if any, under current constitutional doctrine that the spending by those groups can be limited because these groups are formed in part for political purposes.

The Nurses' initiative is written accordingly. Corporations are limited to spending $10,000 a year from the corporate treasury on ballot measures. Both for-profit and non-profit corporations are free to create a PAC which can spend unlimited sums on ballot measures. Spending by labor unions and wealthy individuals on ballot measures isn't limited, because there is no readily apparent constitutional basis for doing so.

So what is the upshot of Randall on these provisions? While respecting the Buckley paradigm, the Nurses' initiative is ground-breaking in a couple of areas. In so doing, the measure makes some reasonable assumptions based on the factual record of big money in California politics over the last 30 years (which has never been squarely considered by a court) and on current constitutional doctrine.

Most experts will say that the Randall decision signals that the current Court is less open to campaign finance regulation. Opponents of the Nurses' campaign reform measure will likely cherry-pick Randall's language to argue that the whole thing is folly, that the Court won't uphold any of it.

But that does not mean that any of the Nurses' initiative will be stricken (and even if any provisions are stricken, it isn't fatal to the whole measure - the measure contains a well-written severability clause). California has seen big money pour into its elections on a level unmatched even at the national level at the time of the Buckley decision. This can only help. Likewise, constitutionally, the Court recognized only three years ago not only that contribution limits are constitutional, but that loophole-closing techniques to prevent their evasion are also constitutional.

The facts are behind the measure. The law is behind the measure. Standing between the measure and its enactment will be a whole host of special interests, all of whom have two things in common - a desire to maintain their stranglehold over California policy and politics, and the ability to spend millions to do so.

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Comments:
Great analysis -- I'm recommending that the California Clean Money Campaign Web site, www.caclean.org, link to it.
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