Real estate companies, corporate executives and high-level investors have contributed nearly $5 million to help Gov. Arnold Schwarzenegger pass a slate of government reform initiatives in a special election that’s likely to be called this fall.
Led by Univision Communications Inc. Chairman A. Jerrold Perenchio’s $1.5 million donation, business interests have given the bulk of the money raised to date by the Citizens to Save California committee, set up by the governor’s allies to push the government reform initiatives.
Few of these companies stand to gain directly from passage of the ballot initiatives. But the measure would likely create a more friendly business environment and for contributors, an opportunity to gain further access to the Schwarzenegger administration.
“We are frustrated with the way things are up in Sacramento,” said Tom Scott, chairman of the California Apartment Association Political Action Committee, which has donated $50,000 to the committee. “You try to go in and talk to people, they seem to listen, but in the end, we don’t accomplish anything because of the gridlock. We are supporting these measures in the hopes that this will change.”
It’s part of Schwarzenegger’s high-stakes goal of reforming state government. In his January State of the State speech, the governor announced plans to take the power to redistrict out of the hands of the Legislature. He also announced proposals to institute merit pay for teachers, convert defined benefit pension plans for state workers into 401(k)-type contribution plans, and enact strict spending limits for the state budget.
Schwarzenegger challenged the Legislature to pass his proposals or he would take them to a vote of the people. Under state election law, he has until early June to call a special election. That could also serve as the effective negotiating deadline to reach a deal with the Legislature.
In February, allies of the governor including California Chamber of Commerce president Allan Zaremberg, California Business Roundtable president William Hauck and Joel Fox, a former official with the Howard Jarvis Taxpayer Association announced the formation of Citizens to Save California to promote the initiatives (though they are not actively promoting the redistricting effort).
The organization’s goal is to raise $50 million between now and the special election date; other committees, such as Schwarzenegger’s California Recovery Team, are looking to raise tens of millions of dollars more.
On the other side is an array of powerful labor unions, trial attorneys and educators. Several unions have announced that they are hiking member dues to raise at least $90 million to fight the Schwarzenegger-backed initiatives; the California Teachers Association alone plans to raise $50 million through dues increases.
Local donors
A special election runs the risk of spiraling out of control, and already, Democrats, labor unions, trial lawyers and other groups have put forward their own initiatives, including ones to raise the minimum wage, increase commercial property taxes and limit corporate political contributions. Other wild-card initiatives are likely to qualify, most notably, one to require minors to get parental consent before having an abortion.
For now, the attention is on Schwarzenegger and his effort to get his initiatives qualified. His cause was bolstered by a court ruling last month removing contribution limits to committees controlled by politicians. Until that ruling, Schwarzenegger was forced to keep an arm’s length from Citizens to Save California; now he can fully participate in its fundraising efforts.
On March 17, he stopped at the Century Plaza Hotel for a fundraiser that had among its co-chairs: Roland Arnall, chief executive of Ameriquest Capital Corp.; Occidental Petroleum Corp. Chairman Ray Irani, developer Alan Casden, attorney Marshall Grossman and Latham & Watkins LLP attorney David Fleming.
Besides Perenchio and his $1.5 million, only a handful of L.A. area businesses and executives have made significant contributions to Citizens to Save California. Among them: KB Home ($30,000), Warner Pacific Insurance Services ($10,000), Automobile Club of Southern California President and Chief Executive Tom McKernan ($10,000), and engineering firm Psomas ($6,000).
Much of the business-originated dollars are coming from Orange County, where several companies and executives have donated at least $100,000 each. These include Ameriquest, which is under investigation in several states for alleged improprieties in its lending practices. A spokesman for Ameriquest said the company does not comment on political contributions.
Other big Orange County donors include William Lyon Homes ($250,000), American Sterling Corp. ($120,000) and the Henry Segerstrom Trust ($100,000).
The contributions are not limited to California. Major companies like Minneapolis-based Target Corp. and business titans like Carl Lindler of Cincinnati have also ponied up.
Businesses and executives have contributed millions of dollars to other committees directly controlled by Schwarzenegger, including his 2006 re-election campaign fund and the California Recovery Team committee, which was set up to promote last year’s ballot measures. That committee has been maintained for future efforts.
Among L.A.-area companies and business executives that have contributed to the California Recovery Team: hotel magnate William Barron Hilton ($20,000), retail developer Rick Caruso ($22,300), Dole Food Company Inc./Castle & Cooke Inc. executive David Murdock ($22,300) and Pardee Homes ($23,000).
Unlike Citizens to Save California, the California Recovery Team and the re-election campaign fund have contribution limits.
Investment benefits
Real estate-related companies have been the most prolific contributors to Schwarzenegger-controlled fundraising committees, giving a total of $6.2 million since Schwarzenegger took office, according to ArnoldWatch.org, a consumer watchdog organization that’s been critical of Schwarzenegger’s fundraising activities.
Financial services firms have come in a close second, giving $6 million.
Investment companies and accountants could stand to gain business if the Schwarzenegger-backed initiative to reform public pensions passes in a special election. The proposal calls for converting defined-benefit pensions to 401(k)-style plans, which would presumably be managed by private-sector firms.
Although real estate companies have little in direct gains from any of the initiatives Schwarzenegger has put forward, critics argue that they have specific agendas.
“The real estate industry and developers want to get rid of regulatory oversight of their industry and of what they see as restrictive environmental laws,” said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights. “They are pushing hard on Schwarzenegger and this is their way of helping him in order to buy responsiveness from his administration.”
Scott denied that the real estate industry was out to gut environmental laws. But he noted that apartment owners would like to limit further regulations in other areas, such as rent control laws or bills increasing liability of apartment owners.
The key, Scott said, is redistricting, which he believes would produce more moderate legislators. Schwarzenegger is pushing redistricting efforts through another committee.
There are some obvious beneficiaries. One is L.A. engineering firm Psomas, which has received numerous contracts to perform transportation-related work throughout the state.
Company founder Tim Psomas said the company decided to contribute in part because of a provision in the spending limit initiative that would ban diversions of money from special funds into the state’s general fund budget.
One fund that has seen repeated diversions is Proposition 42 gas tax dollars. Voters approved the measure several years ago on the assumption that this money would go to congestion relief projects. Instead, the legislature has been diverting those dollars to the general fund.
“It’s been very disappointing to see the money bleed off to fix problems that the voters didn’t intend,” Psomas said. “We want to see that funding restored. Infrastructure funding is a big deal for us, as it should be for all Californians.”
But many investors and executives sound like Caruso, who said his decision to donate was based less on specifics than on a belief that California required fundamental change.
“The state is spending more than it’s taking in and that cannot be sustained without disastrous consequences,” he said. “We now have a unique opportunity with Schwarzenegger as governor to make changes that no other governor in recent history could have done.”
