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Sacramento Bee
Nov 15, 2004 - 01:00 AM

by MARGARET TALEV, Sacramento Bee

Schwarzenegger must alter his fund-raising style

The fund-raising engine Gov. Arnold Schwarzenegger used so successfully in his first year to promote issues and consolidate power is grinding to a halt thanks to state regulators.

A state Fair Political Practices Commission ruling that took effect the day after the Nov. 2 election says Schwarzenegger's California Recovery Team and other candidate-controlled issues committees are now subject to the same finance limits as traditional candidate committees.

That imposes limits of $21,200 per donor on a committee that until now was taking in about $1.5 million a month, often in installments of $100,000 or $250,000 from wealthy individuals and corporations.

Schwarzenegger couldn't promote himself directly with the committee's money.

But he used it masterfully to leverage support or opposition for bond deals, workers' compensation law, gambling expansions, local government funding, prison sentencing and stem cell research - all the while boosting his own visibility bystarring in advertising campaigns and rallies paid for with the money he controlled.

The governor's lawyers opposed donor limits when regulators considered their adoption earlier this year. But Schwarzenegger fund-raising coordinator Marty Wilson said Monday that the committee is complying with them and doesn't plan to appeal.

"We don't have the pressure to raise the kind of money in 2005 that we did in 2004," Wilson said.

In a year without any scheduled ballot contests, Wilson said, "We can have a very fine and viable organization under these limits."

If nothing else, keeping the Recovery Team open allows donors to give the maximum amount twice - once to Schwarzenegger's personal committee and again to the policy committee.

With some costs outstanding, Wilson estimated the Recovery Team will beginnext year with a balance of about $1 million.

Doug Heller of the campaign finance watchdog group Foundation for Taxpayer and Consumer Rights said he hopes the new regulations end an era of "bust-the-limits fund-raising" that voters thought they had brought to a close four years ago when they adopted individual contributor caps to legislative and statewide races with Proposition 34.

"None of these politicians should be busting the caps set by California voters. And nobody's raised more than Schwarzenegger," Heller said.

"Schwarzenegger provided himself such a huge political advantage by raising above-the-limits money into his special committee that any other politician looking to compete with him in terms of financial resources was a half a mile behind in the race."

As the implementation date for the new caps approached, one potential Schwarzenegger rival sought to get in under the wire.

Democratic state Treasurer Phil Angelides launched Standing Up for California in October, according to campaign finance records, and in the four weeks during which he could take in unlimited amounts raised $730,300.

Of that, $250,000 comes from AKT Development Corporation, controlled by Angelides' longtime benefactor, developer Angelo Tsakopoulos.

Developer George Marcus and the Auburn Manor Holding Corporation each gave $100,000. Another real estate investor and developer, George Marcus, who sits on the University of California Board of Regents, donated $100,000. Unions and Democratic law firms also gave in sums above the limit now in place.

Angelides could not be reached last Friday or on Monday for comment. Campaign spokesman Dan Newman said of the timing of the group's formation, "I don't think it was a response to anything the governor did... he really did it as a way to support the issues he believes in."

Newman noted the committee gave $50,000 to the campaign for Proposition 71, a successful November ballot measure also supported by Schwarzenegger that paves the way for $3 billion in bonds for stem cell research. Angelides gave another $150,000 to Proposition 72, an unsuccessful campaign opposed by Schwarzenegger that would have required mid-size and large companies to provide health insurance for workers.

Meanwhile, law firms that advise Republican and Democratic candidates say there are ways around the new limits.

One involves taking spending decisions out of the candidates' hands. For example, lawyers believe the Recovery Team could continue accepting unlimited donations and promoting Schwarzenegger's agenda, so long as the governor was kept out of decisions on how precisely to spend the money.

Another option is to pay for some policy-related speeches and travel by setting up new charitable organizations whose tax status allows donors and the amounts they give to stay exempt from public scrutiny.

Aides to Schwarzenegger and Angelides say neither plans to use such loopholes.
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Contact Margaret Talev at mtalev@sacbee.com




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