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The $11 Million Gift to Jerry Brown

Tony Quinn
Political Analyst

The mysterious $11 million dropped into the No on Proposition 30 and Yes on Proposition 32 campaign last week is proving a godsend for Gov. Jerry Brown and his union allies because they can now scream about money laundering by shadowy out-of-state groups rather than defending the merits of the Brown tax proposal that is becoming a harder and harder sell.

Last week, an Arizona group calling itself Americans for Responsible Leadership contributed $11 million to the Small Business Action Committee No on 30/Yes on 32, a registered political committee that is involved in these campaigns.  The SBAC properly reported the contribution; you can find it on the Secretary of State’s campaign finance page.  SBAC did not, however, provide any information as to the original source of the $11 million, which is Americans for Responsible Leadership’s responsibility.

That sent Brown, his Democratic allies, and their front groups and friends in the media into high hysteria.  “”A committee, when it gets money, especially $11 million has a duty to understand where it comes from,” Brown claimed on Saturday. Actually, Governor, you are wrong. The SBAC does not have a duty to say where that money originally came from; merely to report its receipt. But the California Fair Political Practices Commission does have a duty to see that all money contributed for political campaigns in California is adequately reported, and in this case they are falling down on the job if they do not immediately demand full disclosure of the donors to Americans for Responsible Leadership.

Common Cause, the leftwing activist group that masquerades as a political reformer, has alleged the money may have come from Karl Rove or the Koch brothers, corporate bugaboos for the Democratic left.  There is, of course, no evidence that Rove or any of the other Great Satans of the right gave this money.  But that is the problem; unless we know where it came from people are free to allege it came from anywhere, including al Qaeda or the ayatollahs in Iran.

The FPPC should immediately insist that Americans file as a California major donor and disclose the source of their funds. I served on the FPPC more than 30 years ago and we wrote the regulations on disclosure by major donors. There is no question at all that these funds were provided for the purpose of influencing an election and California law is crystal clear that the donors must be disclosed.

The argument for non-disclosure seems to revolve around the fact that Americans for Responsible Leadership is a non-profit social welfare organization formed under section 501(c)(4) of the federal Internal Revenue Code, and that the money was given without an earmark as to how it should be spent.  But that dog won’t hunt.  The fact this group is a non-profit federal 501(c)(4) is completely irrelevant; these funds were given to a campaign committee and they have been reported as such. That makes Americans a major donor under California law. We did not exempt federal non-profits when we passed the regulations to implement the Political Reform Act of 1974 more than three decades ago.  The only way Americans for Responsible Leadership might be exempt from California disclosure laws is if it gave the money for issue advocacy that is protected from campaign disclosure laws.  But this contribution is not for issue advocacy, it is to encourage people to vote a certain way in an election.

The controlling case on campaign disclosure, the Supreme Court’s 1976 Buckley v Valeo decision, made it perfectly clear that states can demand that these kinds of contributions be disclosed. That is what California law requires.  The FPPC adopted a rule last spring requiring nonprofit organizations that make contributions to ballot measures to identify donors, if donors knew or should have known the money would be used for political purposes.  It does not pass the smell test to claim that these donors did not know these funds would be used in a campaign three weeks before the election.  We are no longer in the genteel world of issue advocacy; people are now casting their ballots.

But I smell a rat here.  Brown and his allies do not want to know who the donors are – likely rich conservatives that oppose higher taxes and labor union abuses – they want an issue.  “California students are being hit by a money bomb tossed at them by a shadowy out-of-state Super PAC,” Brown said on Saturday.  “Crossing the Arizona border and spending $11 million of secret money to hurt California students is an extreme act.”

Count on this outrage coming your way in a television ad very soon.

You can see the set-up from the outrage campaign in a Sacramento Bee editorial last Friday where the Bee tried to blame the IRS for “being toothless when it comes to political activity by bogus nonprofits. The IRS gives them free rein to flaunt their tax exempt status and shield the identities of their donors.”  Of course this is not true when it come to the California Political Reform Act that demands disclosure regardless of IRS status.

However, Brown and the Bee know a good issue when they see it.  If they can make Proposition 30 about secret shadowy out-of-state donors rather than the tax increases, they can deflect the growing criticism and convince voters to vent their unhappiness by voting yes on the measure.

After all, Jerry Brown got elected governor the first time by sponsoring the Political Reform Act of 1974, the very law that will eventually compel disclosure of these donors.  The old pro knows a gift horse when he sees it, so count on Yes of 30/No on 32 talking about nothing but secret shadowy donors over the next two weeks.

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