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Big-Bucks Ballot Battles

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Big-Bucks Ballot Battles

Unions, businesses, and other advocacy groups are spending more than $1 billion on state initiatives and referendums this year. November 1, 2020
Politics and law
Economy, finance, and budgets
California

Though most of the attention—and money—in Tuesday’s election is focused on the presidential contest and congressional races, big dollars are also pouring into ballot initiatives, with well-financed groups battling over the direction of state and local government. So far, supporters and opponents of 120 propositions on ballots across the country have raised $1.1 billion. At the heart of these struggles are face-offs between unions and businesses from California to Illinois to Arizona. Businesses and taxpayer groups are trying to cut taxes and unwind costly regulations, while unions and other groups want higher government levies, more spending, and more government control. The money spent on these campaigns suggests just how much is at stake.

California, with a history of controversial ballot initiatives and a multitude of well-funded groups, leads the way. More than half the money raised so far this year is being used in initiative battles in the Golden State. The fiercest and most expensive is the effort by app-based driving services like Uber and Lyft and other tech firms to define delivery and ridesharing drivers as independent contractors, thus overriding the controversial law AB-5, which classified many of these workers as full-time. Total money raised exceeds $200 million, most of it from the app firms in what will likely be the most expensive ballot campaign in state history. Several unions, including the International Brotherhood of Teamsters and the United Food & Commercial Workers, have stepped up with big contributions of their own to help defeat the override. While polls show the proposition well ahead among voters, it has yet to garner the support of a majority, thanks to a significant number of undecideds. There’s a risk here for the tech companies: even if they succeed in California, a potential Biden administration and Democratic Congress could undo their efforts with a national version of AB-5.

Regulatory issues are on the agenda in other states, including an expensive battle in Massachusetts over a somewhat obscure issue. Question 1, a Right to Repair Law, would require manufacturers of cars with sophisticated digital systems for tracking vehicle location and performance to equip them with an open-data platform that allows independent auto shops to repair them. Supporters argue that without this law, consumers could be forced to turn to expensive auto-dealership shops for repairs to increasingly sophisticated cars. Opponents have played the privacy card: they contend that so-called open platforms would “create easy opportunities for strangers, hackers and criminals to access consumer vehicles and personal driving data—including real-time location.” Money raised by supporters and opponents totals nearly $50 million. Top donors to the Right to Repair Coalition include independent car-repair groups, manufacturers like Advance Auto Parts, and big-chain repair shops like Auto Zone. Opponents of the initiative include General Motors, Toyota, and Ford. One reason for all the interest: a law forcing car makers to provide access to their data systems in Massachusetts would effectively make that information available everywhere, transforming the market for car repairs across the country.

Direct-democracy initiatives have become a battleground for tax increases in many states, especially where state constitutions make it hard to raise taxes. This year, some of the most expensive ballot campaigns revolve around increasing levies.

Last year, Illinois governor J. B. Pritzker signed a bill that would hike the state’s 4.95 percent flat income tax to 7.75 percent for those earning more than $250,000 a year and 7.99 percent for incomes above $750,000. But to raise taxes on high-income households in Illinois requires changing the state’s constitution, which prohibits a progressive state income tax. So the tax increase can go into effect only if voters enact the Illinois Graduated Income Tax Amendment pushed by the governor and his allies. The forces for and against the amendment have raised $110 million. Pritzker himself, part of a wealthy hotel and real estate family, has contributed $56 million to the effort to pass the ballot initiative, which he hopes will raise $3.75 billion in new taxes to bolster the perennially deficit-ridden state budget. Other contributors in favor of the amendment include the National Education Association, AARP, and the American Federation of Teachers. Pritzker’s biggest opponent in this battle is Chicago hedge-fund manager Kenneth C. Griffin, who has chipped in more than $50 million. Other foes include Pritzker’s cousin, Jennifer, who has donated $500,000, and the Illinois Opportunity Project, a free-market state group co-founded by Pat Hughes, head of the public-interest law firm that spearheaded the Janus v. AFSCME Local 31 case, wherein the Supreme Court ended mandatory dues and fee payments for public workers to government unions. Polls show that the amendment enjoys strong support, doubtless in part because Pritzker’s allies threaten a 20 percent tax increase on all Illinois taxpayers if it fails.

Forces on both sides of the revenue question have raised more than $120 million in the fight over a California initiative that would repeal parts of 1978’s Proposition 13, which protects residential and commercial properties from regular reassessments that result in higher real estate taxes. Proposition 15 would allow local tax authorities to reassess commercial properties regularly, amounting to what opponents say would be a $12 billion increase in taxes on businesses, to be used for school funding. Contributions in support of Proposition 15 include $17 million from the California Teachers Association, $11.6 million from an advocacy group led by Facebook founder Mark Zuckerberg and his wife Priscilla Chan, and more than $10 million from several chapters of the SEIU public-sector union. The initiative’s principal opponent, the Business Roundtable of California, has contributed $31 million to the fight. Polls show about half of voters in favor of Prop 15, with 30 percent undecided.

In Arizona, a ballot initiative would raise income taxes to 8 percent, from the current 4.5 percent, on single filers earning more than $250,000 annually and families earning more than $500,000. The tax, supporters argue, would generate $1 billion a year in new revenue to be distributed to school systems—a hefty increase in a state with just $12.5 billion in annual revenues. Supporters have far outraised opponents, garnering $17 million, including $6 million from the National Education Association. Opponents, who have contributed $3.25 million, include the state’s Chamber of Commerce and businesses like SAC Holding. Polls show the proposition getting heavy support.

Ballot campaigns have become so expensive that they can now sometimes be used as a weapon by some groups to drain their opponents of resources. That appears to be the purpose of California’s Proposition 23, the Dialysis Clinic Requirements Initiative. This would call for the state’s clinics to have a physician on hand whenever patients are being treated. It would impose certain reporting requirements on clinic officials and mandate that clinics looking to close get state approval first. The initiator and main supporter of the proposal is an SEIU health-care union, which has anted up some $8 million for the fight. It has failed in several efforts to unionize the state’s dialysis clinics and has consequently waged a series of ballot fights with the industry to harass it and drain it of resources. In 2018, for instance, the group pursued Proposition 8, which would have required clinics to limit their profits to 115 percent of revenues. It failed with voters by 60 percent to 40 percent, but clinics spent $70 million defeating it. They’re spending more than $100 million against the new effort. “The dialysis industry has successfully rebuffed efforts to unionize dialysis workers and increase staffing ratios at clinics,” the San Jose Mercury News wrote in an editorial against the ballot question. “Prop. 23 is the union’s latest harassment effort designed to force the industry into submission.”

The rapid rise in spending for ballot initiatives is perhaps best exemplified by California’s Proposition 16, which would repeal Prop. 209, a measure that prohibits public institutions from discriminating based on “race, sex, color, ethnicity, or national origin.” Prop. 209 made it illegal for state public institutions to use affirmative action programs in California. Supporters are spending $20 million on Prop. 16 in order to reintroduce affirmative action into government. By contrast, the 1996 effort to outlaw these programs generated about $5 million in campaign expenditures. Even allowing for 25 years of inflation, that’s a huge increase in the cost of direct democracy.

For better or for worse, the evidence this year suggests that California’s fondness for expensive ballot questions is spreading well beyond the Golden State.

Photo by Justin Sullivan/Getty Images

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