Cuts at FPPC May Halt Probes

The 30-year-old state ethics watchdog agency, which is looking into the governor's use of campaign funds, is targeted for reductions.

By Evan Halper, Times Staff Writer

SACRAMENTO â€" The state agency that polices the flow of money into California political campaigns has been targeted for deep cuts by Gov. Arnold Schwarzenegger, even as the agency is looking into the governors' own use of campaign funds.

The cuts could force the Fair Political Practices Commission, formed in the aftermath of Watergate, to halt investigations. And watchdog groups that have criticized the agency as toothless in the past are now rushing to its defense.

"The public should take pause when elected officials are significantly cutting an agency that watches over their behavior," said Andy Draheim, spokesman for California Common Cause.

The controversy is erupting at a time when more money is flowing into state politics than ever. Ballot initiative campaigns with tabs of $10 million are routine. Once-obscure groups such as the state prison guards union have won significant contract gains. And Indian tribes flush with cash from casinos have been using it to curry favor in the Capitol as they seek to expand their gambling operations.

Campaign finance reform advocates have long been critical of the commission, a bipartisan group of five members, two of whom are appointed by the governor and one each by the secretary of state, attorney general and state controller. They say it often acts too late â€" or not at all. And when it does act, they say, it doesn't do enough. But they also acknowledge that at least it exists and is independent. That's more than most states have, they say."There are times when one might disagree with its penalties, but it's one of the more effective groups of its kind in the country," said Tracy Westen, chief executive and founder of the Center for Governmental Studies, a Los Angeles think tank.

"I am concerned about the proposed budget cuts," he said. "The FPPC itself has said they might cripple its ability to continue to enforce campaign finance and ethics laws. If true, it would be a disaster. We need an honest cop on the beat."

Next week, the commission will mark the 30th anniversary of Californians voting it into existence through the Political Reform Act.

Officials at the commission, which has a $6-million annual budget, warn that the $980,000 in cuts the governor has proposed would cost it several investigators, attorneys and analysts. As a result, investigations into some conflicts of interest may have to be put aside, and the same goes for work rooting out complicated money-laundering schemes that donors use to evade contribution limits, officials say.

The commission receives more than 47,000 phone calls a year from local and state candidates seeking advice on the state's complicated campaign finance laws. But now many could go unanswered. And the commission might have to stop enforcing bans on certain gifts and payments to lawmakers.

"We have a number of programs that are in jeopardy right now," said Steven Russo, the commission's chief of enforcement. "We would be able to investigate fewer cases. There are already cases we would have to close because there is not sufficient staff."

The governor's plan would continue a trend that has seen the staff size steadily whittled down over the last several years, raising concerns about its ability to carry out the mission intended when voters approved the Political Reform Act in 1974.

If the governor's plan were approved, there would be 57 staff members left at the agency â€" down more than a third from its peak in the early 1990s.

Administration officials say they are simply asking the commission to tighten its belt.

"We're not saying there won't be impacts in terms of their workload, but just as other state agencies have been forced to absorb and adopt these reductions, we are asking them to as well," said H.D. Palmer, spokesman for the Department of Finance. "Different agencies have to do it in different ways."

Palmer said many of the reductions were proposed by the FPPC itself before Schwarzenegger took office in November.

But agency officials say they didn't propose the cuts at all; they merely complied with an order to show what would happen if the commission had to sustain such a cut.

Among the cuts are positions that would be lost because the administration is refusing to lift a state hiring freeze to replace investigators and attorneys who are retiring. That freeze, however, has been lifted for thousands of other state positions â€" including the governor's own political and press aides.

Although Palmer said the cuts are justified, he is leaving open the possibility that the administration could change its mind.

"If there is a compelling case that the core functions of the agency would be compromised by these reductions, we wouldn't necessarily be opposed to lowering them," he said.

Commission officials said that was news to them.

The commission is investigating the governor's campaign that led to passage in March of Propositions 57 and 58, which authorized the sale of $15 billion in bonds to balance the budget.

The Foundation for Taxpayer and Consumer Rights, a Santa Monica advocacy group, alleges that Schwarzenegger violated the law by not disclosing the top corporate donors in campaign commercials. Instead, the complaint says, the governor "laundered" his campaign cash by funneling it into another account.

Voters never learned the commercials were paid for by corporations with business before the state. Instead, they were told that "Gov. Schwarzenegger's California Recovery Team" paid for them, according to the complaint.

"This is indicative of a larger pattern," said Carmen Balber, a consumer advocate with the foundation. "Gov. Schwarzenegger came to Sacramento promising to sweep the special interests out. Instead, he is throwing away the broom."

Balber accused the administration of financially starving the commission so it can do less enforcement work.

It's a charge Palmer calls silly. "These guys are giving conspiracy theorists a bad name," he said.

The furor over the funding has, however, prompted lots of reflection over the appropriate role of the commission.

It comes after the commission fined Lt. Gov. Cruz Bustamante and three of his campaign committees $263,000 for illegally funneling $4 million into his failed gubernatorial campaign last year.

The fine was the biggest ever imposed on an individual by the commission, but critics said it was too little, too late. It came almost as a slap on the wrist after Bustamante had already broken the rules and spent the $4 million, they said.

Critics said the FPPC should have pushed for the $9 million in penalties it initially sought in a lawsuit against Bustamante.

Commission members say the law limits how far they can go in many cases.

"For people who thought there would be instantaneous enforcement and an immediate clamping down on illegal contributions, I am not sure that was ever a realistic goal," said Pamela Karlan, a commission member and professor at Stanford.

"Money in politics is like water," she said. "It's very hard to dam it up. What tends to happen is the money flows around whatever obstacles are put in front of it. The real success of the law is making the process more transparent."

Supporters of the commission argue that the Bustamante case is a fine example of how that works. The publicity around his illegal actions, they say, probably helped doom his gubernatorial bid.

"Bustamante may be a poster child for what happens under the current system when you go too far," said Westen, the government studies expert. "The attention paid to his sucking up money from improper sources played a significant role in bringing him down."

"For most people, this commission is pretty obscure," he said. "But it plays a vital role in keeping the government honest."

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