June 15, 1998
Paycheck Protection in California:
What Went Wrong?
by
Charles W. Baird
Proposition 226 on the California June 2 primary ballot would have required unions to get the annual written permission of workers from whom they receive dues and agency fees before the unions could spend any of that money on politics. The proposition lost 53% to 47%. In January, just after the initiative qualified for the ballot, polls indicated that over 70% of likely voters and a similar percentage of union households planned to vote in its favor. Exit polls on June 2 indicated that 69% of the voters supported the idea of protecting paychecks against involuntary deductions for politics, yet only 47% voted for the initiative. John Sweeney, president of the AFL-CIO, called the election outcome "a modern political miracle." As a proponent of the initiative I have to ask what went wrong?
Opponents of 226, mainly unions, spent $30 million to defeat it while its proponents could only muster $3.5 million to support it. Unions could take their money from dues and fee payers across the country. We had to ask for ours. The opposition ran an intensive TV ad campaign three months before the first Yes on 226 ad appeared. Early lies that went unanswered became established truths before our TV campaign began. In the final month before election day their ads outnumbered ours by over 2 to 1.
The California business community gave almost nothing to support the Yes on 226 campaign. Why? Two threats and one temptation. First, the unions collected signatures to put three initiatives on a later ballot that would have increased the tax and regulatory burdens on businesses. Then they said that they would not submit those signatures if the business community did not support 226. The unions proposed a Faustian bargain: Let us continue to tax workers for politics and we will not increase your government-based headaches. This amounted to blackmail by ballot initiative, and too many businesses succumbed. It wouldn't surprise me if the unions submitted their signatures anyway.
Second, the unions threatened businesses with negative public relations campaigns based on assertions that employers who support 226 have to be anti-labor. Unions have discovered the efficacy of such efforts in their "corporate campaigns" against firms they seek to organize and firms they seek to punish for continuing to do business with strike targets. Well-intentioned, but ill-informed members of the caring class - e.g., clergy, academics, and journalists - are often complicit in these efforts. And there are far too few business people, like T.J. Rogers of Cypress Semiconductor, who dare to stand up and defend themselves against such unjustifiable attacks.
Third, many businesses believed that they could get a free ride. They interpreted the 70% support in the early polls as a guarantee that the measure would pass without their help. By the time it became clear that the vote would be close, it was too late. The good news, perhaps, is that when such measures are undertaken in other states fewer businesses will fall prey to the free rider temptation. Sweeney's political miracle clearly proves the power of forced dues to overcome initial polls.
The authors of Proposition 226 included a section that required employers to get annual written permission before they deduct any money from paychecks for political contributions and expenditures. I believe that this section was totally unnecessary, and it caused major problems. The authors included this section because they wanted to insulate the initiative against the charge that it was biased against unions. In the event, the unions made that charge anyway by claiming that other membership organizations, like the Rotary, were not affected. More importantly, the employer section created an opportunity for unions to scare charitable organizations, health insurance providers, and other organizations that receive payments from workers via payroll deductions, into believing that they would be adversely affected by passage of 226.
The relevant portion of the employer section stated, "No employer or other person responsible for the disbursement of funds in payment of wages shall deduct any funds from an employee's wages that the employer knows or has reason to know will be used in whole or in part as a [political] contribution or expenditure except upon the [annual] written request of the employee." For example, many employers deduct health insurance copayments from employee paychecks. The unions argued that 226 would make employers liable for any political spending by the health insurance providers, and therefore employers would no longer make such deductions. Some health insurance providers saw this as harmful to them because without payroll deductions their costs of collecting copayments would increase, and some employees might opt out of such policies. The unions also argued that as recipients of payroll deductions from workers, the health insurance providers themselves would have to get annual written permission from those workers before they could spend any of that money on politics.
Both of these union arguments were disingenuous. First, the initiative required only "employers" and "labor organizations," as those terms are already defined in California law, to get the annual written permission. No health insurance provider, except in its role as employer, would be affected. Second, the political "contributions" and "expenditures" for which employers would have been responsible are defined in California's 1974 Political Reform Act specifically to exclude payroll deductions for "consideration" - i.e., in exchange for something of value such as health insurance coverage. Nevertheless, because this big lie went unanswered in the mass media until the very end of the campaign, many voters believed it was true.
The unions also used this argument with respect to charities; and here, because charitable contributions are not for "consideration," they may have had a point. That is, it is easy to imagine some judge deciding that an employer who deducts voluntary charitable contributions from employee paychecks would be liable for the political expenditures and contributions made by charitable organizations such as United Way, the American Lung Association, and the American Cancer Society. If so, many employers would stop gathering charitable contributions through payroll deductions, and there would be less charitable giving. This argument convinced each of the three charities mentioned to take the unions' side against 226.
The unions may have had a point here, but the charities may come to regret that the argument was made. Most people give to charities to support charitable activities, not political causes. In fact, their tax exemptions depend on them refraining from political activity. To the extent that the charities sided with the unions against 226, they seemed to imply that they are involved in politics. Perhaps their tax exemptions should be reconsidered and their donors should reconsider their giving.
In any case, the exit polls implied that if the proposition had been written to apply only to labor organizations it would have passed. The unions were not able effectively to use any part of the section that applied directly to them against 226. They claimed that it was an effort to silence working people in the political process, but everyone, including most union members, saw through that claim. The initiative allowed any and all workers to give permission to unions to use their dues and fees for politics. No limits on voluntary political spending through unions were imposed. In fact, by giving workers a choice, the initiative would have amplified the political voice of working people.
Finally, there is at least one happy outcome of the campaign. Most California workers are now fully aware of their rights under the Supreme Court's decisions in the Hudson (public sector) and Beck (private sector) cases. Until our campaign, unions had tried to keep those decisions as secret as possible. At their behest President Clinton rescinded an executive order that would have required federal contractors to post their employees' Beck rights at their job sites. During the campaign the unions argued that the Hudson and Beck decisions made 226 unnecessary. Of course, that is not the case because those decisions are not adequately enforced, and they impose a heavy burden on employees to prove that unions spend more money on politics than they admit. But California unions have now informed all their members that these decisions exist and that they all may seek refunds of dues and fees used for politics. I predict a substantial increase in the number of California workers who try to do so in spite of the threats, intimidation and hurdles the unions will put in their way.
Oh, one more thing. We will be back on the 2000 primary ballot.