Jun 22, 2006 -- San Jose Mercury News Op-Ed: Campaign-Finance Loophole Makes Corruption Possible
By Paul S. Ryan

Six years ago, Californians thought they had put an end to giant contributions to candidates for statewide office. But despite the voter mandate to limit contributions through passage of Proposition 34 in 2000, candidates in this year's gubernatorial election have been raising unlimited contributions by exploiting a loophole in the law. Both the Democratic nominee, state Treasurer Phil Angelides, and the Republican nominee, Gov. Arnold Schwarzenegger, have skirted the limits by depositing huge contributions into ballot measure committees they control -- committees not currently subject to the state contribution limits.

Despite the fact that California law clearly states that ``a candidate for governor may not accept . . . any contribution totaling more than $20,000 per election'' (the inflation-adjusted limit in this year's election is $22,300), Angelides has received multiple $250,000 contributions and deposited these funds into his ballot measure committee.

But Angelides is simply following in the footsteps of the self-proclaimed ``reform governor,'' Schwarzenegger. Despite his 2003 campaign promise that he'd go to Sacramento with a broom and clean up the corrupt big-money politics of then-Gov. Gray Davis, Schwarzenegger instead went to Sacramento and shattered Davis' fundraising record by raising unlimited six- and seven-figure contributions for his own ballot measure committee.

So why aren't candidate-controlled ballot measure committees subject to the contribution limits? In two words: crafty lawyering. All political attorneys know that the Supreme Court ruled in 1976 that limits can constitutionally be placed on contributions to candidates for public office in order to prevent the corruption or appearance of corruption of such candidates. However, in another decision several years later, the court struck down as unconstitutional a limit on contributions to ballot measure committees -- and here's the important part -- because there were no candidates involved in the case and, therefore, no one to be corrupted by the unlimited contributions.

Skip ahead 25 years to find a collision between these two court decisions. California voters in 2000 imposed limits on contributions to candidates for state office. As soon as California 's contribution limits took effect, political attorneys recognized a loophole presented by the intersection of these Supreme Court decisions -- candidates could set up ballot measure committees and argue that contributions to ballot measure committees cannot constitutionally be limited.

Although this strategy has worked as a practical matter, its underlying legal rationale doesn't hold water. The potential corruption of candidates depends entirely on a candidate's receipt of large contributions, not on whether the candidate decides to deposit those checks in a campaign account or a ballot measure account. Candidates are beholden to the big donors, and the big donors in turn are given special access as a result of their deep-pocket contributions.

For this reason, California 's Fair Political Practices Commission -- the enforcer of state campaign-finance laws -- recognized the threat of corruption posed by unlimited contributions to candidate-controlled ballot measure committees. The FPPC closed the loophole in June 2004 by adopting a regulation making clear that state contribution limits apply not only to a candidate's principal campaign account, but also to ballot measure committees under the candidate's control.

Predictably, Schwarzenegger and others sued the FPPC in state court, arguing that the Supreme Court's ballot-measure contribution limit decision precludes the state from limiting contributions to candidate-controlled ballot measure committees. Although this argument misconstrues the fundamental premise of the court's decision -- that contributions to ballot measure committees don't pose a threat of corruption because no candidates are involved -- the trial court bought it and struck down the FPPC regulation. Remarkably, the trial court found it ``difficult to comprehend'' how unlimited contributions to candidate-controlled ballot measure committees could ``foster corruption, the appearance of corruption, or the circumvention of applicable contribution limits.''

The case is now pending before the California Court of Appeals. California voters can only hope that the appellate court will not suffer from the same difficulty of comprehension that afflicted the trial court. The Court of Appeals should reinstate California 's limit on contributions to candidate-controlled ballot measure committees -- and make good on the California dream of real contribution limits.

To borrow from the poet Langston Hughes: What will happen to this dream deferred? Will it dry up? Or fester like a sore? Or, perhaps, explode -- with voter enactment of the California Nurses Association's full public financing ballot measure in November?

PAUL S. RYAN is an attorney for the Washington, D.C.-based Campaign Legal Center , which is involved in the legal defense of the California regulation limiting contributions to candidate-controlled ballot measure committees. He wrote this article for the Mercury News.