Tracking Money in the California Recall Election

California’s first recall of a sitting governor was a populist uprising of historic proportions, an end to politics as usual, and a purging of political insiders. Or so it was said. Campaign donors must not have been told.

In a campaign that lasted 77 days and ousted Governor Gray Davis, the candidates who vied to replace him, political parties, and moneyed interests operating independent campaigns for and against the candidates, raised and spent between $75 million and $80 million. All the major interests chipped in: businesses, lawyers, unions, wealthy political patrons, Indian tribes that own casinos, and more. The recall was supposed to be different. It wasn’t. Money was a defining issue, like it is in all campaigns.

“This is business as usual, as far as I can tell,” Democratic campaign consultant Bill Carrick told the Los Angeles Times after the election. Added political science professor Gary Jacobson, a campaign finance expert at the University of California, San Diego, “You can have a popular revolt—if you can find ten’s of millions of dollars.”

The million-dollar-a-day-campaign underscored several truths about money in politics. Six- and seven-figure checks were common even though the recall was the first statewide campaign in California in which there were contribution restrictions. Proposition 34, drafted by legislators and approved by the state’s voters in 2000, purportedly barred individual donors from giving more than $21,200 to a single candidate.

As quickly became apparent, however, money seeps in, while laws limiting donations can make money more difficult for the public and press to track. Additionally, if moneyed interests are restricted from giving large sums directly to candidates, they can form independent committees and spend unlimited sums for and against candidates. Unlike candidates who must answer to the voting public about their tactics, operators of independent campaigns are all but unfettered.

“No matter what campaign finance scheme you come up with, money is always going to play a role,” said Sacramento lobbyist Scott Lay, who created a Web page to track money raised for the recall. “Moneyed interests will find a way to speak out.”

Reporting on the Money

Here’s another truth: Newspapers miss a major element of campaign coverage if they give short shrift to campaign money. My editors at the Los Angeles Times assigned veteran reporter Jeff Rabin, Joel Rubin and me, plus researcher Maloy Moore and editor Linda Rogers, to track fundraising and spending in the recall. Rabin has focused on money in Los Angeles politics for years. I have covered money in politics as part of my assignments for the 10 years I have been in the Times’s Capitol bureau in Sacramento.

Money spent on presidential and congressional races attracts interest from national media, campaign finance reform advocates, and academic researchers. But stakes are high in the states, as reflected by the findings of The Institute on Money in State Politics, based in Helena, Montana, which counted $1.54 billion spent on campaigns for governor, lieutenant governor, and legislative candidates in 2002, up from $1.03 billion in 1998.

In California, the campaigns for legislative seats and statewide offices routinely cost a combined $200 million or more. Cumulative campaign spending topped $500 million in 1998, when Californians elected Davis as governor and decided several high-priced ballot initiatives. There is, in short, no way to report fully on state government—or elections to it—without tracking the flow of money. In many instances, money is at the confluence of politics and policy.

Starting in 1999, when Davis took office, I began building an Excel database consisting of his donors. By the time he left office, the file contained almost 12,000 entries. I could sort donors by name, city and state of residence, date of donation, and amount given. The file includes information about the donor’s employer and industry or interest, ranging from health care, gambling, entertainment and telecommunications to labor and state contractors. There were several sub-classifications. Within labor, for example, there are state employee unions, firefighter and police unions, building trades and others.

Using this accumulated data, my colleagues and I could write about the number of donors from outside the state who gave to Davis and how many appointees on boards and commissions were donors and how much they contributed. This enabled me to report in the Times, with some authority, that 23 percent of Davis’s donations came from organized labor. I could readily see that $175,000 was contributed in 2003 from the Mercury Insurance Group, but it’s one thing to know that Mercury gave $175,000 to Davis this year and $270,000 since 1999. It’s another thing to know that in 2003, Mercury sponsored legislation beneficial to its business, and Davis signed the bill before leaving office. Davis’s aides and Mercury denied any connection between their contribution and his signature.

In his first term, as Davis was raising more than $70 million, fundraising became a focus of much of the news coverage of his administration. This was particularly true in the 2002 election year. Newspapers reported that he offered to meet with students at the University of California, Berkeley, who donated $100, and that his administration authorized an oil refinery to dump dioxin in the San Francisco Bay after the refinery owner donated $70,500.

The Times reported that he decided against regulating the dietary supplement, Ephedra, after a manufacturer gave him $150,000. After the San Francisco Chronicle reported that Davis solicited a one million dollar donation from the California Teachers Association, the Times reported that Davis requested the money during a meeting in the governor’s Capitol office. Davis narrowly survived the 2002 re-election against businessman Bill Simon, Jr. But tales of Davis’s fundraising exploits served to increase his vulnerability to the recall. “[Davis] has two ears and two eyes and knows that he was hurt in the 2002 campaign by the perceptions that he was a nonstop fundraiser,” Davis’s chief political adviser Garry South said at a forum analyzing the recall campaign, hosted by the Institute of Governmental Studies at the University of California, Berkeley.

Governor Gray Davis addresses delegates at the California Democratic Party Convention with Lt. Governor Cruz Bustamante (to Davis’s right, gesturing), also a candidate for governor. Photo by Ciro Cesar/La Opinión.

Tracking Campaign Fundraising

In California, retail politics is a quaint concept. Statewide candidates don’t hold barbecues or shake hands outside factory gates. As a rule, local television news provides little original campaign coverage. Statewide candidates generally seek to influence the 15.4 million registered voters by spending two million dollars each week or so on television spots. The recall seemed different. News organizations—including local TV—showed intense interest, in part because Arnold Schwarzenegger was running but also because there had never been a recall of a sitting California governor.

Given this level of media attention being paid to the campaign, political experts believed there would be less need to raise large sums. From the start, they were wrong. Political gadfly Ted Costa proposed the recall last December, shortly after Davis narrowly won reelection. Most experts doubt that Costa would have gathered the requisite 900,000 valid signatures of registered voters to place the recall on the ballot without the infusion of two million dollars by multimillionaire Representative Darrell Issa (R-Calif.). Issa paid petition circulators one dollar to $1.25 per signature and funded a direct mail petition drive. Altogether, he was responsible for 1.3 million of the 2.1 million signatures gathered in the drive, according to consultant David Gilliard, who oversaw Issa’s petition drive. Issa had planned to use the recall to launch his run to replace Davis, until Schwarzenegger muscled him aside.

During the recall, the public had more access to fundraising information than in any past election. California Secretary of State Kevin Shelley’s office expanded its Web site, making it easier to search for donors and download lists of contributors. Like Lay, the Sacramento lobbyist who knitted together a Web site to track recall money, California Common Cause set up a Web site allowing the public to conduct more detailed searches. The Times and other papers published charts showing the amounts raised by each major candidate.

But as the campaign took shape, Proposition 34’s infirmities became apparent. The California Fair Political Practices Commission, which interprets and enforces state campaign finance law, carved some loopholes. Candidates found others:

• There were no caps on donations to committees established to support or oppose the recall, or on donations to and spending by independent committees established to support or oppose candidates.
• The Proposition 34 provision restricting donors to giving candidates no more than $21,200 did not apply to the recall target, Davis. In his failed attempt to beat the recall, Davis accepted at least 70 separate donations of more than $21,200; he received 46 separate donations of $100,000 or more.
• While Proposition 34 barred candidates from loaning themselves more than $100,000, candidates could take out bank loans, so long as the terms were generally available to the public. Schwarzenegger used this loophole to borrow $4.5 million, at four percent interest.

Upon announcing his candidacy, Schwarzenegger portrayed himself as a political outsider who wanted to shake up the establishment. He proclaimed as he entered the race that he would accept no campaign contributions. He quickly withdrew that pledge, saying he wouldn’t raise money from “special interests,” which he defined as public employee unions and Indian tribes that own casinos. In both instances, he would be in a position of negotiating with them. “I take money from [the] little grocery store, or the little shoe store or the guy that owns the real estate company or something like that,” Schwarzenegger explained. “But most of my contributions, 90 percent of them, are just from regular people.”

As it turned out, Schwarzenegger led all other candidates in the money race. He gave himself and borrowed $10 million and raised $11.9 million from outsiders. I have begun building a new database on the new governor’s contributors. It shows that much of Schwarzenegger’s money came from longtime Republican donors, many of whom will have interests in legislation and decisions made by the governor and his administration. He took money from farm interests, insurance companies, the financial services industry and manufacturers, all of which have lobbyists in Sacramento. Real estate and development interests, which are affected by state environmental regulations and various fees, accounted for 14 percent of the nearly 12 million he raised.

One of the hottest policy issues in the recall campaign involved the vehicle license fee, also called the car tax. After presiding over its decrease in 1999, Davis tripled the fee in an attempt to help erase what was a $38 billion budget deficit. Car dealers had donated a combined $450,000 to Davis during his first term. But in the recall, after the car tax was increased, their money flowed to Schwarzenegger. Schwarzenegger promised to roll back the car tax, thereby shaving the cost of new and used cars. Car dealers accounted for $500,000 in donations to the new governor. Bert Boeckmann, who owns car dealerships that had donated to Davis in his first term, helped arrange a fundraiser for Schwarzenegger in the recall. Boeckmann told my reporting partner, Joel Rubin, that there were many reasons why car dealers supported the new governor, but “the car tax was one of the issues that was very strong.”

Tracking money was an essential part of covering the recall race or, indeed, any campaign. The flow of money in the recall likely affected the fate of at least one major candidate, Lt. Governor Cruz Bustamante. But reporting on the influence of money on politics shouldn’t end when the voting does. It ought to be integral to government reporting in off years. Reporters may find that Internet disclosure of campaign money will help, though the promise of Internet disclosure doesn’t yet match reality in many states. Groups such as the Institute on Money in State Politics also can assist.

Reporters can make their own jobs easier by taking time to maintain an up-to-date and searchable database. To be sure, there’s not always a direct line between donations and decisions. Honest reporting on the doings in a state house or city hall should include instances when politicians make decisions that appear to be in conflict with the interest of their patrons. Still, in almost any story about legislative and administrative issues, a few paragraphs describing the donations from the affected interests can provide added edge and give readers insight into the workings of their government.

Dan Morain is a staff writer for the Los Angeles Times based in Sacramento.