Daniel A. Smith, Ph.D.
Associate Professor
Department of Political Science
117A MRH
University of Denver
Denver, CO 80208
(303) 871-2718
dasmith@du.edu
www.du.edu/~dasmith
in M. Dane Waters, ed., The Battle Over Citizen Lawmaking. Durham: Carolina Academic Press, 2001.
This essay examines the historical role of special interests in initiative and referendum ballot contests in the American states. Most scholars agree that special interest money today plays a major role in ballot initiative campaigns, especially when groups are trying to qualify their measures for the ballot (Garrett, 1999). The jury is still out, however, as to the causal nexus between campaign contributions and expenditures on ballot measures and subsequent success (Braunstein, 1999; Gerber, 1999; Smith, 2000). Sidestepping this important question, this essay instead focuses on the unfolding of special interests in the process of direct democracy over time. As such, it calls into question some of the assumptions that scholars, journalists, and practitioners often make about how “populist” or “grassroots” the process once was during the beginning of the 20th century.
The understanding of special interest involvement in early ballot campaigns has serious implications for the current debate over the merits of direct democracy. While some early ballot campaigns were certainly “grassroots” and “populist,” many in fact were not. Since so much of the current debate concerning the practice of the initiative and referendum hinges on the belief that direct democracy was somehow purer in its incipient stage, an fuller historical understanding of early ballot campaigns is critically important.
After this historical overview of the role of special interests in initiative and referendum ballot campaigns, the essay considers a few attempts by states to regulate the involvement of special interests in the process of direct democracy. Although they have a goal of returning direct democracy to the people, most state regulations of interest group activity have been struck down by the courts as infringing on First Amendment rights. As a result of a series of judicial rulings, states largely have been unable to restrict the involvement of special interests in ballot campaigns. If in the future, however, states were to become more successful in curtailing the role of special interests in ballot campaigns, some current developments in ballot campaigns suggest there may be severe unintended consequences resulting from any increase in the state regulation of the process. The essay concludes by examining some of these current developments by special interests in direct democracy campaigns.
The Current Lament
There is common perception among supporters of direct democracy that during first half of the century citizen interests -- rather than special interests -- dominated the process of initiative and referendum. Advocates of direct democracy, with little empirical evidence to support their claims, frequently assert that eighty years ago citizens successfully utilized the two populist mechanisms to circumvent or counteract state legislatures or elected officials who were held captive by special interests. As David Schmidt (1989: 25-26) writes, citizens used the tools of direct democracy as “a safeguard against the concentration of political power in the hands of a few.” Although little empirical evidence is compiled in support of their claims, there is a strong yearning among supporters of direct democracy for the earlier, purer days when the process was allegedly more “grassroots” and “populist” and less tainted by special interests.
Scholars and journalists alike hold California up as an example of how far the process of direct democracy has fallen from its supposedly unadulterated olden days. The editorial board of the Los Angeles Times (1998) commented that in California, “well-heeled special interests,” are able to “write their own wishes into state law or the Constitution.” This concern about the process certainly seems to ring true. In 1998, for example, special interests spent more money fighting for and against the 21 ballot measures in California than in all of the other states combined. While the spending level by groups sponsoring and opposing ballot measures in California is not necessarily representative of ballot campaigns in other states, it does shed light on the role of interest groups in the initiative and referendum process. In 1998, issue committees in California spent nearly $250 million on 12 general election and nine primary ballot measures, approximately the same amount spent by all the political candidates running for the California General Assembly and statewide offices, and more than the combined total or “soft money” raised by the national Republican and Democratic parties during the 1997-98 election cycle (Morain, 1999a; Common Cause, 1999). The quarter billion dollars spent on the 21 ballot measures broke several state records, including the previous spending record of $141 million, set just two years earlier. Furthermore, a record $88.6 million was spent on a single November 1998 ballot measure, Proposition 5. The successful measure, sponsored by Native American tribes, allowed Indians to operate casinos on their reservations. Indian tribes anted up an impressive $63.2 million in support of the tribal gaming measure, with Nevada casino operators and organized labor in California spending $25.4 million to oppose the measure. The San Manuel Tribe alone spent $27.8 million promoting the measure, and Mirage Resorts, Circus Circus Enterprises, and Hilton Hotels all spent in excess of $6 million opposing the measure (California Voter Foundation, 1998).
California special interests were heavily involved in several other recent ballot measure contests. In the November ballot contest, electric companies spent $38.1 million in their successful effort to defeat Proposition 9, a measure that would have deregulated the electric utility industry. Edison International/Southern California Edison and Pacific Gas and Electric each contributed more than $17 million to defeat the measure, sponsored by several consumer and public interest groups. Tobacco companies drained $29.7 million from their corporate coffers (including nearly $21 million from Philip Morris and $5 million from Brown and Williamson) in their failed bid to defeat Proposition 10, a measure raising taxes on cigarettes by 50 cents a pack to pay for early childhood education and health programs. The California Teachers Association spent $6.8 million in their successful effort to defeat Proposition 8, Pete Wilson’s education reform measure promoting accountability of teachers in the public schools, and spent a total of $20 million on ballot measures in 1998 (California Voter Foundation, 1998; Morain, 1999b).
Less populous states too have witnessed a dramatic rise in spending on ballot measures by special interests. In Colorado, issue committees supporting and opposing eleven ballot measures spent in excess of $10 million in 1998. The amount easily surpassed the previous spending record on ballot measures of $8.8 million set in 1994. The privately owned Stockman Water Company -- the sole financial backer of two Colorado initiatives, Amendments 15 and 16 -- spent in excess of $1 million, only to see both measures badly defeated by the voters. In addition, Colorado billionaire Phil Anschutz -- a railroad and mining magnate and the principal shareholder of Quest communications -- contributed $402,500 of the $425,282 (95%) raised by the successful proponents of Amendment 14, an initiative placing severe environmental regulations on large, corporate hog farms. The National Education Association contributed $685,000 of the $1.1 million raised by the opponents of Colorado’s Amendment 17, a private school tax credit program defeated by the voters in 1998. In Montana, corporate interests opposed to Initiative 122, a 1996 measure that would have required tougher water treatment standards in mine operations, spent nearly $9 per vote to defeat the measure (Billings, 1998). In Nebraska, AT&T spent $5.3 million in its successful campaign to defeat a single 1998 initiative that would have lowered long-distance access charges (Cordes, 1999). During the decade of the 1990s, the sugar industry in Florida contributed over $10 million to issue committees supporting successful initiatives capping state taxes and spending and thwarting efforts to clean up the Everglades (Smith, 1998b; Florida Secretary of State, 1998). These are only a few of the numerous examples of the involvement of special interests in the initiative process.
Numerous commentators have noted how the practice of direct democracy today appears to be distinctly different from that of yesteryear. The heavy involvement of special interests these days seems to run counter to the populist-sounding story preached by proponents of direct democracy. Present day champions of the initiative and referendum frequently claim that when states began adopting these plebiscitary mechanisms nearly a century ago, they had the effect of minimizing the role of special interests. The mechanisms of direct democracy, proponents assert, made it possible in the past for “the people” to circumvent intransigent state legislatures beholden to special interests by allowing citizens to propose and vote on public policies directly.
But today, special interest influences -- these commentators argue -- seem to be undermining the once-populist tools of initiative and referendum. Rather than citizen groups utilizing the initiative and referendum process, it is now the special interests themselves that are dominating the process of direct democracy. By paying for the collection of signatures and by spending hundreds of thousands or even millions of dollars on thirty-second TV and radio soundbites, direct mailings, and print advertising, special interests have allegedly debased the once hallowed process.
Lamenting the loss of purity of these populist tools, some journalists and scholars write fondly of the earlier, more sacrosanct past. For example, journalist Peter Schrag (1998: 195) observes that in California, “the people’s remedy,” specifically the initiative, is being used by “‘the interests’ -- the insurance industry, the tobacco companies, the trial lawyers, public employee unions.” These special interests “are themselves running and/or bankrolling ballot measures to advance their economic agendas,” Schrag contends, with other states inevitably following California’s lead. Political scientist David McCuan and his co-authors (McCuan, et al. 1998: 55-56) note how there is a common perception that almost all initiative campaigns today are run by highly paid professionals:
[A] major cause of dismay for contemporary supporters of the initiative process has been the perceived decline in its amateur status. From this perspective, what was once the province of good government amateurs has recently been taken over, and possibly subverted, by big-money special interests and their hired-gun campaign firms. In consequence . . . supporters bemoan its lost ‘innocence’ and newfound professionalism.
Embedded in these commentaries of how special interests today are dominating the process of direct democracy is the implication that special interest groups and professionals were somehow not as prominent during the early days of initiative and referendum.
Historical Backdrop of Special Interests and Ballot Measure
Unfortunately, there is very little scholarly research documenting exactly who was behind early ballot measures or how initial campaigns were actually conducted. Unlike more recent scholarly studies (Gerber, 1999; Smith, 1998a; Cronin, 1989; Magleby, 1994), earlier scholarly research does not delve into the particularities of how initiative and referendum campaigns were run; nor do they investigate the political and economic motivations of the financial supporters and opponents of the measures (see Beard, 1912; Munro, 1912; Wilcox, 1912; Barnett, 1915; Cushman, 1916; Cottrell, 1939). A few recent historical studies, though, are beginning to directly challenge what Richard Ellis (1999) calls the “mythic narrative” of citizen-dominated initiative and referendums at the turn-of-the century. Ellis argues that there “was no enduring golden age” in Oregon and California. Similarly, Smith and Lubinski (n.d.) challenge the prevailing perception of how early ballot measure campaigns were untainted by special interests. Their archival research uncovers the active presence of special interests in Colorado from the inaugural 1912 election onward. With this historical research, it is gradually becoming clearer that since the earliest days of the initiative and referendum, special interests regularly have tried to manipulate the process to advance or defeat ballot measures in which they have a stake.
Interestingly, early proponents of the initiative and referendum occasionally admitted that special interests would try to influence the outcomes of ballot measure. Writing in 1912, Professor Delos Wilcox (1912: 103), an avid supporter of the initiative, stated that he fully “expected” that “the people. . . . will have to rebuke not only public service corporations [utilities] seeking to get favors from them, but also many other kinds of special interests having a pecuniary stake in legislation proposed by themselves.” Wilcox noted that “school-teachers,” “letter-carriers, or the policemen,” “brewers” and “labor unions” would in all likelihood try to use the initiative to offer “some legislation for their own benefit or for the advancement of their pet ideas.” Not surprisingly, these special interests were eager to use the initiative and popular referendum to advance or protect their own private agendas. Due to their considerable financial resources, these interests were able to overcome a series of collective action hurdles facing citizens and public interest groups. The historical record suggests that the initiative as practiced in the states, even in its formative years, was not dominated by “grassroots” operations run by “amateurs” and “citizen” groups.
With respect to spending on ballot initiatives and referendums, levels of campaign spending by special interests on ballot measures is nothing new. Special interests, since at least the 1910s, have always played an important, if not a decisive role in the process of direct democracy. Despite the good intentions of the original reformers, the systematic lack of restrictions on campaign contributions and expenditures of ballot measures has concentrated an immense amount of power in the hands of a few well-financed interests. While state campaign finance records dealing with the initiative and referendum are scarce, the existing documents do suggest that large spending by special interests was a large part of the process.
In South Dakota in 1910, for example, 11 out of 12 ballot propositions were rejected by the voters. Historian Charles Beard (1912: 49) submits that the defeat of the measures -- which included a popular referendum invoked by the railroads to overturn a law requiring electric headlights for locomotives and a referendum regulating embalmers -- was directly attributable to the “activity of certain parties, especially interested in the defeat of one or two propositions, who filled the newspapers with advertisements and plastered the fences with billboards advising the electors to ‘Vote No.’” In Oregon, substantial expenditures were also made by rival fishing interests during the months leading up to the June 1908 election. Upstream and downstream fisherman each placed an initiative on the ballot that would effectively eradicate the other’s right to fish for salmon on the Columbia River (Cushman, 1916; Beard, 1912; Eaton, 1912; Bowler and Donovan, 1998: 118-128). Ellis (1999: 12) documents how special interest money was so rampant in Oregon ballot measures, that the state’s newspapers frequently editorialized how the initiative process was becoming corrupted. The Eugene Register penned in 1913 that “Any person with sufficient money knows that he can get any kind of legislation on the ballot.” Furthermore, the Portland Oregonian noted, “The corporation, the ‘vested interest’ or ‘big business,’ when it takes a hand in law-making, dips into a well-filled cash box and never misses the money.”
In many of the states permitting direct democracy it is quite difficult (if not altogether impossible) to acquire early records documenting the campaign activity of special interests. Many of the contribution and expenditure records of early ballot issue committees that are requisite today were either not required or have been discarded by state governments. In Colorado, for example, state records from early campaigns do not exist, but there is extensive newspaper coverage of special interest activity in the first statewide ballot election of 1912. That year, citizens cast their vote on 32 ballot measures: four constitutional amendment referendums placed on the ballot by the state legislature; six statutory popular referendums placed on the ballot by the people; and 10 constitutional amendment and 12 statutory initiatives placed on the ballot by citizens. According to Smith and Lubinski (n.d.), the most prominent example of special interest activity in these early campaigns was a statutory initiative sponsored by a land speculator, Newman Erb, who had purchased land surrounding James Peak with the hopes of having a tunnel drilled through the peak connecting Denver with Salt Lake City and the rest of the West. Erb drew up a ballot initiative just weeks before the election that called for the state to provide the majority of the funding for this endeavor. In addition, there were several counter-measures on the ballot that year, including a pair of utilities bills and two versions of an eight-hour workday law for miners. In each case a citizen’s group sponsored one measure while the competing counter-measure was drawn up by utility companies and mining companies, respectively. By the 1920s, Colorado special interests were hiring lawyers to draft petitions, paying solicitors up to 3 cents a name for collecting signatures on petitions, and routinely spending more than $25,000 to promote or oppose ballot initiatives (City Club of Denver, 1927).
Evidence of early special interest ballot measure activity in California is similarly quite striking. A California Senate committee issued a report in 1923 that unearthed “startlingly large expenditures in [ballot initiative] campaigns” (McCuan, et al., 1998: 57). The committee reported that an excess of $1 million was spent on seven measures on the 1922 ballot. In an effort to defeat the Water and Power Act, proponents and their opponents (led by the powerful Pacific Gas and Electric Company) spent over $660,000. By the 1930s, the process of direct democracy in California was becoming even more centralized and capital-intensive (Key, 1936; Cottrell, 1939; Kelley, 1956; Crouch, 1950; McCuan, et al., 1998). Clem Whitaker and Leone Baxter, a husband and wife team, were the leaders of this “industrialization” of the initiative process. Whitaker and Baxter joined forces in 1933 to work as campaign managers for candidates and ballot initiatives. The two public relations specialists experimented with radio and television ads, direct mail solicitation, and the use of “gimmicks” in their ballot campaigns (Kelley, 1956: 39-66). A few years later, Whitaker & Baxter’s Campaigns, Inc. were running as many as five or six ballot campaigns per election (McCuan, et al., 1998: 59). In 1936, special interests spent $1.2 million fighting for and against a referendum taxing chain stores, and groups battling an initiative on a retirement life payment proposal spent almost $1 million (Crouch, 1950: 32). In the 1950s, Whitaker and Baxter were hired by Pacific Telegraph and Telephone, Standard Oil, Pacific Gas and Electric, and Southern Pacific Railroad, who collectively had raised $3.45 million to fight Proposition Four, an oil conservation initiative (Pritchell, 1958: 287; Heard, 1960, 95). The precedent for high amounts of money spent on ballot measures by special interests is deeply rooted in the history of California as well as in other states.
State Regulation of Special Interest Activity
While the involvement of special interests in direct democracy seems relatively untrammeled today, is it any different from the early days of the process? While the level of activity is perhaps different in scale, it certainly is not is anything new in kind. Special interests have attempted to use the process to their advantage whenever possible. With this history in mind, what is to be done? Will it ever be possible to devolve direct democracy to “the people,” as Populists and Progressives originally intended?
Efforts to regulate the role of special interests in the process of direct democracy is currently underfoot in several states (Drage, 1999). This is nothing new. Since the early 1900s, states allowing the initiative and referendum have tried to check the activity of special interests in a variety of ways. Two regulations in particular bear mentioning. As early as the 1940s, several states passed laws prohibiting payment to circulators to collect signatures in order to qualify measures for the ballot (Grant, 1996). These laws were intended to purify the initiative and referendum process by forcing special interests to use volunteers to circulate petitions. The United States Supreme Court in its 1988 decision, Meyer v. Grant, overturned these laws by unanimously striking down Colorado’s ban on paid signature gatherers. Beginning as early as the 1910s, quite a few states tried to eliminate corporate expenditures on ballot measures. By the early 1970s, in fact, nearly half of the states permitting direct democracy had some form of limitations on either the campaign contributions or expenditures of ballot issue committees (Shockley, 1980: 8). In 1974, for example, voters in California passed Proposition 9, the Political Reform Act. The initiative limited the spending by issue committees sponsoring or opposing ballot measures to $1.2 million each. Montana had a law dating back to 1912 banning corporate spending on ballot campaigns (Winkler, 1998: 140). By the mid-1970s, though, the state laws in California and Montana and most other states were found to be unconstitutional by the courts. With its 1978 decision, First National Bank of Boston v. Bellotti, the Supreme Court weighed in on the matter, and invalidated Massachusetts’s limits on corporate contributions to ballot measures on First Amendment grounds.
It is important to note that prior to being struck down by the courts, these state regulations had relatively minor success in mitigating the role of special interests. It is highly unlikely, therefore, that any current legislative attempts to rein in the influence of special interests -- even if they could pass constitutional muster -- would have much success either. The reason for this is fairly straight forward. One way or another, special interest money will find its way into the process of direct democracy. As such, there are good reasons not to try to restrict special interest money in the process, as increased state regulation may produce some severe unintended consequences.
Take, for example, the current involvement in ballot campaigns by some non-profit, 501 (c) (3) organizations and some “educational” committees. These organizations, which do not have to list their donors (and in the case of 501 (c) (3) organizations, may receive unlimited, tax deductible contributions from their benefactors), are legally eligible to participate in ballot measure campaigns (Colvin and Finley, 1996). It is possible, then, for special interests to make unregulated and anonymous contributions to initiative and referendum campaigns by funneling their money through these non-profit or “educational” organizations serving as conduits.
A case in point is the role of Grover Norquist’s non-profit and “non-partisan” organization, Americans for Tax Reform. ATR was behind several statewide ballot campaigns in the late 1990s. There is substantial evidence that the Republican National Committee transferred more than $4.5 million to Norquist’s ATR in 1996 for the explicit purpose of promoting conservative ballot measures (Smith, 1998c; Levin, 1997). As it turns out, Norquist did funnel a substantial amount of this money to issue groups in California, Colorado, and Oregon to promote conservative initiatives, including anti-tax, right to work, and “paycheck protection” ballot measures. In 1996, ATR contributed $509,500 to Bill Sizemore’s group, Oregon Taxpayers United, to promote a tax limitation measure, and in 1998, it provided $441,000 to the Campaign Reform Initiative in California, the sponsoring group of Proposition 226, the paycheck protection measure (Smith, 1998c; California Secretary of State, 1998).
Similarly, in 1998 in Colorado, the libertarian-leaning Independence Institute, which is formally registered as a nonprofit 501 (c) (3) group, laundered campaign contributions to the issue committee backing Amendment 17, a tax credit program to help parents offset the cost of sending their children to private schools. Steve Schuck -- who served simultaneously as the Chairman of the Independence Institute and the director of Coloradans for School Choice. . .For All Kids, Inc., the political committee that sponsored Amendment 17 -- freely admitted to the press that he intentionally routed campaign contributions through the non-profit Institute. According to Schuck, this scheme had real benefits, as “The contributor gets the advantage of passing the money through a tax-deductible organization,” and that the donors to the institute can remain anonymous (McPhee, 1998).
Conclusion
Although it may come as a surprise to some observers, special interests have played a major role in direct democracy ballot measures since the turn of the 20th century. For nearly 100 years, vested interests have tried to influence the process of initiative and referendum in the American states. While by no means have these groups always been successful in their endeavors, special interests have not been shy about trying to use the process of direct democracy to their own advantage. There is little indication that they will voluntarily lessen their involvement in the initiative and referendum process in the next millenium.
Regulatory actions by the states, many of which have been overturned in the courts, have done little to curb the activity of special interests. But such legislation, even if it were to be upheld as constitutional, likely would do little to eliminate the influence of special interests in the process of direct democracy. The recent (and growing) practice by special interests of funneling contributions through nonpartisan or “educational” organizations (or even making their own “independent expenditures” for or against a ballot measure) is likely to become more common in direct democracy campaigns. These ballot campaign practices, which are perfectly legal, provide special interests with tax deductible incentives as well as anonymity.
Direct democracy
emerged in the late 19th century out of a widespread popular concern of moneyed
special interests controlling the legislative process. Ironically, due to protections afforded
under the First Amendment, the relatively unregulated process of direct
democracy has catered to special interests just as much as has to citizen
groups. While it is impossible to
predict what the 21st holds for the initiative and referendum, it appears
fairly certain that special interests will continue to have a hand in shaping
the process.
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