(March 5, 2007) The California Chamber of Commerce is strongly opposing a proposed regulation to limit campaign contributions by certain businesses to candidates for Governor and several other constitutional offices.

The proposal from the California State Teachers’ Retirement System (CalSTRS) creates a new campaign contribution limit, prohibiting companies that do busi­ness with CalSTRS from contributing more than $1,000 to current officeholders and candidates for Governor, controller, treasurer, superintendent of public in­struction, CalSTRS officers and employ­ees and any CalSTRS board member.

First Amendment Violation
“The vague and overly broad regula­tion proposed by CalSTRS is an unfair and unreasonable restriction that violates the First Amendment right of businesses

to participate in the political process,” said Kyla Christoffersen, CalChamber policy advocate. “It could apply to busi­nesses of all types and sizes. Ultimately, the restriction hurts government and taxpayers by reducing competition for projects. Companies may be forced to opt out of bidding on contracts, causing the state to lose vital expertise and vendor options.”

The proposed restriction applies to any business that may be likely to bill CalSTRS for $100,000 or more in goods or services.

In testimony to the CalSTRS board, the CalChamber pointed out that the blanket restriction could apply to busi­nesses that provide information technol­ogy services, food products, insurance, building or maintenance supplies, legal services, copying services, office supplies and more.

Of particular concern is that adoption of the proposed regulation by CalSTRS might lead to other state agencies adopt­ing similar contribution limits, which would have an impact on many more companies across the state.

Vague Wording
Vague and ambiguous wording in the proposed regulation will create difficul­ties for businesses seeking to comply and for state regulators seeking to enforce the requirements, the CalChamber said.

For example, the proposed regulation states that the contributions limit applies to anyone who has made both direct and “indirect” contributions, without clarifying what “indirect” means. Thus, it appears that a company doing business with CalSTRS would be prohibited from contributing more than $1,000 to a trade association political action committee (PAC) if the PAC gave money to a candi­date for one of the offices listed.

The limit also would apply to third parties that do not do business with CalSTRS but merely “sought” business on behalf of a company. The regulation does not explain whether “sought” might include even informal inquiries about a potential contract.

The CalChamber pointed out that the proposed rule is unnecessary, given that existing laws clearly prohibit state officers and employees from having a financial interest in state contracts.

Questionable Authority
Also questionable is whether CalSTRS has the legal authority to create the rule. The CalChamber pointed out that the CalSTRS proposal is similar to a contri­bution limit proposed by the Fair Political Practices Commission (FPPC) that was struck down in a recent appellate court ruling (Citizens to Save California et al. v. California FPPC).

Proposition 34, the political reform act enacted by a vote of the people in 2000, established contribution limits on persons donating to campaigns of candidates for elected office and designated the FPPC to create regulations to implement the reform act.

In December 2006, the California Court of Appeal rejected an FPPC at­tempt to create new contribution limits via a regulation that sought to impose a $1,000 limit on campaign contributions to ballot measure committees.

The court held that the FPPC regu­lation was invalid because, among other reasons, it conflicted directly with Proposition 34, preventing contributions outside the scope of harm Proposition 34 intended to prevent and undermining Proposition 34’s emphasis on upholding the right to participate in the political pro­cess.

Deadline for Comments
The CalChamber believes the state Of­fice of Administrative Law should reject the CalSTRS regulation.

CalSTRS held a hearing on the proposed rules on February 21 and has scheduled a second hearing for March 15.

Written comments will be accepted by the CalSTRS Board until March 12.

The CalChamber is leading a coalition of business associations opposed to the regulatory proposal. Those interested in joining the coalition and submitting com­ments should contact the CalChamber staff.

Staff Contact: Kyla Christoffersen