Submitted July 18, 2012

Proposition 32

Prohibits Political Contributions by Payroll Deduction. Prohibitions on Contributions to Candidates. Initiative Statute.

Background

Political Reform Act. California’s Political Reform Act of 1974, an initiative adopted by the voters, established the state’s campaign finance and disclosure laws. The act applies to state and local candidates, ballot measures, and officials, but does not apply to federal candidates or officials. The state’s Fair Political Practices Commission (FPPC) (1) enforces the requirements of the act, including investigating alleged violations, and (2) provides administrative guidance to the public by issuing advice and opinions regarding FPPC’s interpretation of the act.

Local Campaign Finance Laws. In addition to the requirements established by the act, some local governments have campaign finance and disclosure requirements for local candidates, ballot measures, and officials. These ordinances are established and enforced by the local government.

Political Spending. Many individuals, groups, and businesses spend money to support or oppose state and local candidates or ballot measures. This political spending can take different forms, including contributing money to candidates or committees, donating services to campaigns, and producing ads to communicate opinions. Under state campaign finance laws, there are three types of political spending:

• Political Contributions. The term political “contribution” generally includes giving money, goods, or services (1) directly to a candidate, (2) at the request of a candidate, or (3) to a committee that uses these resources to support or oppose a candidate or ballot measure. Current law limits the amount of political contributions that individuals, groups, and businesses may give to a state candidate (or to committees that give money to a state candidate). In 2012, for example, an individual, group, or business could contribute up to $26,000 to a candidate for Governor and up to $3,900 to a candidate for a legislative office. In addition, current law requires political contributions to be disclosed to state or local election officials.
• Independent Expenditures. Money spent to communicate support or opposition of a candidate or ballot measure generally is considered an independent expenditure if the funds are spent in a way that is not coordinated with (1) a candidate or (2) a committee established to support or oppose a candidate or a ballot measure. For example, developing a television commercial urging voters to “vote for” a candidate is an independent expenditure if the commercial is made without coordination with the candidate’s campaign. Current law does not limit the amount of money individuals, groups, and businesses may spend on independent expenditures. These expenditures, however, must be disclosed to election officials.
• Other Political Spending. Some political spending is not considered a political contribution or an independent expenditure. This broad category includes “member communications”—spending by an organization to communicate political endorsements to its members, employees, or shareholders. This spending is not limited by state law and need not be disclosed to election officials.

Payroll Deductions. Under limited circumstances, employers may withhold money from an employee’s paycheck. The withheld funds are called “payroll deductions.” Some common payroll deductions include deductions for Social Security, income taxes, medical plans, and voluntary charitable contributions.

Union Dues and Fees. Approximately 2.5 million workers in California are represented by a labor union. Unions represent employees in the collective bargaining process, by which they negotiate terms and conditions of employment with employers. Generally, unions pay for their activities with money raised from (1) dues charged to union members and (2) fair share fees paid by non-union members who the union represents in the collective bargaining process. In many cases, employers automatically deduct these dues and fees from their employees’ paychecks and transfer the money to the unions.

Payroll Deductions Used to Finance Political Spending. Many unions use some of the funds that they receive from payroll deductions to support activities not directly related to the collective bargaining process. These expenditures may include political contributions and independent expenditures—as well as spending to communicate political views to union members. Non-union members may opt out from having their fair share fees used to pay for this political spending and other spending not related to collective bargaining. Other than unions, relatively few organizations currently use payroll deductions to finance political spending in California.

Proposal

The measure changes state campaign finance laws to restrict state and local campaign spending by:

• Public and private sector labor unions.
• Corporations.
• Government contractors.

These restrictions do not affect campaign spending for federal offices such as the President of the United States and members of Congress.

Bans Use of Payroll Deductions to Finance Spending for Political Purposes. The measure prohibits unions, corporations, government contractors, and state and local government employers from spending money deducted from an employee’s paycheck for “political purposes.” Under the measure, this term would include political contributions, independent expenditures, member communications related to campaigns, and other expenditures to influence voters. This measure would not affect unions’ existing authority to use payroll deductions to pay for other activities, including collective bargaining and political spending in federal campaigns.

Prohibits Political Contributions by Corporations and Unions. The measure prohibits corporations and unions from making political contributions to candidates. That is, they could not make contributions (1) directly to candidates or (2) to committees that then make contributions to candidates. This prohibition, however, does not affect a corporation or union’s ability to spend money on independent expenditures.

Limits Authority of Government Contractors to Contribute to Elected Officials. The measure prohibits government contractors (including public sector labor unions with collective bargaining contracts) from making contributions to elected officials who play a role in awarding their contracts. Specifically, government contractors could not make contributions to these elected officials from the time their contract is being considered until the date their contract expires.

Fiscal Effects

The state would experience increased costs to investigate alleged violations of the law and to respond to requests for advice. In addition, state and local governments would experience some other increased administrative costs. Combined, these costs could exceed $1 million annually.