Prop. 32 Fight Won’t Be Settled in November

Sept. 17, 2012

By John Hrabe

Conservative activists see Proposition 32, California’s latest paycheck protection measure, as a potential game changer.

“When Prop. 32 passes, unions will be on an even level with other power groups,” said Stephen Frank, a Republican grassroots activist and publisher of the California Political News and Views. “This will have a major effect on campaigns.  Remember, Brown received tens of millions of dollars from unions in 2010–few individuals were willing to donate to him.”

Long-suffering activists like Frank have been fighting an uphill battle with unions for years. There was Proposition 226, back in 1998, which lost by 7 percentage points. Just seven years later, in 2005, proponents tried again with Proposition 75, and were once again defeated.

Now another seven years later, proponents vow in true Sisyphean fashion that this year is the year. They finally might be right.

Unlike past measures, Prop. 32 includes a ban on corporate contributions, in addition to the limitation on union dues. The campaign has also been bolstered by an unlikely supporter, former Democratic Assembly Majority Leader Gloria Romero. As the state director of Democrats for Education Reform, she has signed the ballot argument in favor of Proposition 32 and brought much-needed bipartisan gravitas to the campaign. Romero is also the campaign’s most persuasive spokesperson.

“If we don’t deal with how the beast is fed, and what maintains that, and what gives it status and opportunity to run roughshod over the educational lives and futures of six million kids in California, then shame on us,” she told the Wall Street Journal’s Allysia Finley. “It’s do or die.”

It might be do-or-die for paycheck protection proponents, but the state’s powerful labor unions won’t expire, even if voters pass Prop. 32 in November. That’s because unions will likely use legal and regulatory challenges to delay implementation for years, or possibly prevent the measure from ever taking effect. And the corporate contribution ban could prove to be a double-edged sword: it will help earn votes at the cost of more legal challenges.

Hurdle One: Constitutional Challenges

Prop. 32’s legal troubles start with the inevitable constitutional challenges. The measure was carefully crafted by arguably the best initiative drafter in the business, Tom Hiltachk, the managing partner at Bell, McAndrews & Hiltachk, LLP. In drafting Prop. 32, Hiltachk accounted for recent Supreme Court decisions, such as the high-profile Citizens United case, which upheld corporate and union campaign contribution rights. Nevertheless, some First Amendment experts believe that campaign finance law is far from settled.

“Proposition 32 sails between the rock of Supreme Court protection of corporate and union speech and the shoals of unconstitutional restrictions on such speech,” said Dr. Craig Smith, director of the Center for First Amendment Studies. “If it passes, it will be challenged in court and then we’ll see how broadly the Citizens United ruling will be applied.”

Dr. Smith believes that Prop. 32 “tries to skirt” the Citizens United decision and a subsequent case out of Montana “that applied the Citizens United ruling to the states.” In the Montana case, American Tradition Partnership vs. Bullock, the Supreme Court overturned a Big Sky bid to block campaign contributions by mining interests.

Take Your Pick: Business Loophole or Expansion of FPPC’s Regulatory Power

Constitutional challenges won’t be the only obstacle. Michael Houston, a partner at the Newport Beach firm Cummins & White, LLP, raises two other obstacles to Prop. 32’s implementation: 1) how state regulators interpret the definition of a corporation; and 2) whether the measure supersedes local campaign finance regulations.

Colloquially, the term corporation is used interchangeably with business. State law, however, isn’t as simple. In addition to publicly traded corporations like Facebook or Chevron, there are a slew of different categories of business entities, including limited liability companies, limited partnerships, general partnerships, limited liability partnerships and unincorporated associations.

Proponents say, not to worry, the measure will apply to all entities.

“There are no loopholes or exemptions in Prop 32,” reads a Yes on Prop 32 fact sheet. “The federal government has applied the corporate ban to anything that is treated as a corporation for tax purposes and the FPPC will likely follow suit.”

Houston concedes that the FPPC could follow the Federal Election Commission’s example of “looking down the chain of an entity’s ownership to inquire whether a business entity is comprised of a corporate member.” But, that’s not a guarantee, nor would it be good public policy.

“Do we really want the FPPC getting more regulatory power to define something that easily could have been defined in the measure?” he asks. “That the measure implicitly authorizes regulatory rule-making really isn’t a good argument if one claims to believe in limited government.”

Conservatives that routinely carp about regulatory expansion and judicial activism may be left defending a measure that doesn’t contain a clear legislative intent. Consequently, they’d be making the case for a new precedent to apply corporate regulations to the wider universe of business entities.

Charter City Exemption?

The confusion of what constitutes a business entity pales in comparison to the ambiguity over how the measure would conflict with local campaign finance restrictions. Under California’s state constitution, local ordinances of charter cities and counties supersede state law.

“The only state laws that undercut a contrary charter provision are (1) constitutional amendments and (2) state laws that expressly address areas of statewide concern,” said Houston, who routinely advises municipalities on how to resolve conflicts between local ordinances and state law. “Obviously Prop. 32 is neither.”

Because proponents drafted Prop. 32 to be applicable to both state and local campaigns, Houston says. that leads to a “thorny issue.”

“The real question becomes what happens in a city like Santa Ana, which has charter provisions limiting contributions but allows corporate contributions,” he said. “Would Prop 32 be interpreted to ‘imply’ a corporate ban in Santa Ana or, comparatively, would Santa Ana’s adoption of a charter that regulates local political contributions be viewed as occupying this field and be interpreted as a local constitutional decision by the local citizens to allow corporate contributions by the fact the ordinance is silent on the issue?”

Prop. 32’s ambiguity will likely be resolved by the courts. And after the courts have their say, the paycheck protection fight could continue at the local level with city and county campaign finance reform measures. There’d be plenty of financial incentive. After all, local governments negotiate contracts with police, fire and service employee unions.

No doubt, grassroots activists like Frank would just relish the chance to keep fighting.

“This is about freedom of choice,” said Frank. “It is interesting that the union leaders who support a woman’s right to choose do not support a worker’s right to choose not to pay dues or donate to causes and candidates that harm them.”