Small-business PAC gets big-business support

A November ballot initiative to implement a two-thirds majority vote requirement on all new fees imposed by the state took in a big chunk of change from some not-so-small businesses – including big tobacco and alcohol interests.

The Small Business Action Committee recently donated $800,000 to the campaign for Proposition 26, the November ballot initiative that would require a two-thirds majority vote for the Legislature to approve new state fees or charges.

The committee also has financed some $3 million in TV advertising attacking Jerry Brown in his campaign for governor, according to Brown’s campaign. But the sources of those donations have not been revealed.

The difference underscores the ad hoc nature of California’s campaign finance laws, where there are different standards for different kinds of political communication. Under current law, SBA does not have to disclose the source of the money being spent on the issue advertising.

SBA President Joel Fox said as long as the ads are more than 45 days before Election Day, current law does not require the source of those donations to be disclosed.

That may soon change if Dan Schnur, the new chairman of the Fair Political Practices Commission has his way. Under Schnur’s guidance, the FPPC is currently drafting new regulations that would increase disclosure requirements for issue ads – ads that do not explicitly take a position on a candidate, but simply provide “information” about a candidates record.

Disclosure requirements are different for the SBA PAC, which has been funneling money to initiative campaigns. “That’s our initiative PAC,” Fox said. “I’ve got two lawyers who have looked at all of this, and there are different rules for the PAC. This has all been lawyered to death.”

The contrast also reveals a growing trend in state politics. If money is passed through a non-profit foundation, like SBA, the true source of the money is nearly impossible to trace. That’s because federal law does not require non-profits to reveal the sources of their donations.

So, Fox is engaging in at least a two-front war – “informing” voters about  Jerry Brown, while simultaneously working to defeat Proposition 25 and boost Proposition 26. The campaign that received the $800,000, the No on 25/Yes on 26 campaign, also is fighting Proposition 25, an initiative that would replace the current two-thirds vote required to pass the state budget with a simple majority.

The committee’s rapid infusion of cash caught political observers by surprise.

The recent expenditures also show how groups like SBA become key instruments for funneling campaign contributions as Election Day approaches. The Small Business Action Committee had less than $2,000 to its name on June 30, but managed to scramble some fast cash by Aug. 11, when it gave the Proposition 26 campaign $800,000 – its largest single contribution to date.

Despite its name, the money for the committee’s contribution didn’t come from small businesses: Major alcohol and tobacco companies proved to be the driving force behind the big money, according to figures the committee reported to the state Tuesday evening.

SBA revealed that it received more than $1 million from alcohol, tobacco and real estate groups. Altria, the parent company of Philip Morris USA, donated $500,000. Anheuser-Busch, which brews Budweiser, gave $200,000 and the Wine Institute chipped in another $50,000. Los Angeles-based Cypress Management Company gave the group $250,000.

Fox said the committee had to solicit big business for funds because of the economic strife suffered by small business.

Prior to the committee’s late contribution filing on Tuesday, there was speculation about the source of the funding for the $800,000 donation. Lenny Goldberg, executive director of the California Tax Reform Association, had demanded disclosure of the funding sources. Goldberg is in the campaign in support of Proposition 25 and against Proposition 26.

“It’s funded by oil and alcohol companies,” Goldberg said earlier this week. No oil money has shown up on the PAC’s campaign reports, although oil and energy companies have donated directly to the pro-Proposition 26 campaign.

The committee’s political action committee is one of thousands of recipient committees designed to take in contributions from various sources and recycle the money into political campaigns.

The rules requiring PACs to disclose the sources of their funding is a contentious topic. Some campaigns say too much disclosure exposes donors to intimidation, which could in turn inhibit them from making contributions. But political reform advocates say voters should be able to fully trace the tracks of campaign dollars.  

Fox said his committee may make contributions elsewhere in the near future but that keeping the two-thirds majority vote in place is his most important cause.   

Apart from the money disclosed in the state records, the committee has waged a significant TV campaign opposing Brown, according to Brown’s staff’s survey of media purchases statewide.   

SBA hit the airwaves earlier this month with an ad that allies of Jerry Brown said was a thinly veiled hit against the Democratic gubernatorial nominee. The group has spent $3 million on TV so far, according to media trackers from the Brown campaign.

Brown spokesman Sterling Clifford said the donations reveal the truth about “the obviously mis-titled Small Business Action Committee.”

“Everyone knows that small businesses are the good guys in our economy when corporate America is best known for launching the worst recession in a generation. It’s disappointing that they refuse to say who’s paying for the false attack on Jerry Brown.

It stands to reason that alcohol and tobacco groups would join the fight to make fee increases more difficult. So-called “sin taxes” on alcohol and tobacco products are among the most commonly passed in the Legislature. There are efforts this year to increase levies on alcoholic beverages, but they are opposed by Republicans in Sacramento.