POLITICS

The One Percenters: How A Handful Of California Power Brokers Work To Further Inequality

02/19/2015 01:29 pm ET | Updated Feb 19, 2015
DEA / M. SANTINI via Getty Images

By 2010 California, shaken by recession, found itself in a close race with New Mexico for having the most extreme divide between the richest and middle household incomes. It’s a trend that, five years later, is only worsening. We didn’t arrive at this low point in barely a generation by accident.

The condition of California’s battered middle class is the result of policies paid for by a statewide fraternity of corporations, trade groups, lobbyists and wealthy individuals. Together, they have blocked needed initiatives through a network of Capitol lobbyists, political action committees, think tanks and libertarian advocacy organizations with a national reach.

In Sacramento, the fate of legislation that could most benefit the great majority of Californians is often sealed behind closed doors by corporate and trade lobbying long before a bill can ever see a floor vote. Numbers released this month by California’s Secretary of State showed that, in 2014, top lobbyists representing big oil and gas, the health care industry, utilities, manufacturing and business interests, together outspent organized labor nearly four-to-one ($28.4 million to $7.7 million).

For their $28.4 million, state policy powerbrokers were able, among other things, to block attempts to aid education and increase the average Californians’ quality of life. Their target list is revealing, beginning with a proposed law that would have brought California in line with other petroleum-rich states’ tax policies.

California is the only top-ten oil-producing state without a so-called severance tax and, last year, legislators proposed Senate Bill 1017, which would have instituted a well-head tax on oil and natural gas. The revenue would have been used to roll back tuitions for the state’s public universities and community colleges — once more putting them within reach of students from middle-income families. The other half of the estimated $2 billion in annual revenues would have been divided equally between health and human services programs, and state parks.

But passage of SB 1017 was not to be, in part because of the efforts of the California Chamber of Commerce. This perennial powerhouse of corporate influence is known for its yearly “job killer” legislation hit list and has proved one of the most effective forces in perpetuating economic inequality.

In 2014 alone, CalChamber managed to:

  • Defeat Assembly Bill 2416, which would have given victims of wage theft a potent legal remedy against unscrupulous employers;
  • Won Governor Jerry Brown’s veto on SB 25’s attempt to rein in grower stalling tactics in farm labor contract negotiations;
  • Killed AB 2372, which tried to close a Proposition 13 loophole that has allowed corporations to evade property tax reassessments for more than 35 years;
  • Helped head off SB 1021, which tried to rectify a 2013 state court decision eliminating higher parcel taxes on corporate land that have funded K-12 school districts, community colleges and other agencies.

An important ally of CalChamber is the powerful Western States Petroleum Association (WSPA) and its effective president Catherine Reheis-Boyd. Although it spends much of its Capitol firepower shooting down proposed fracking moratoriums, the association shared a huge role, with CalChamber, in killing SB 1017, the bill to impose an oil severance tax. WSPA financed a constellation of business allies and faux-grassroots organizations that included single-issue “AstroTurf” groups like the Californians Against Higher Oil Taxes.

When it comes to putting profits ahead of the health of Californians, CalChamber sometimes teams up with another ally, the California Hospital Association (CHA), whose health care industry lobbyists are major players in Sacramento. In 2014, CalChamber took the lead on defeating AB 2533, a bill designed to allow patients to get urgent care from an out-of-network provider at the same price it would cost them to use an in-network provider.

But it was CHA that spearheaded — and prevailed for the second year running — in killing AB 503, a law that would have given Californians an exact accounting of the hundreds of millions of dollars that nonprofit hospitals are currently writing off as charity care to fulfill their charitable tax exempt status. CHA also successfully brought down SB 1269. That bill would have set hospital service standards in the post-Obamacare landscape, in which some hospitals have been placing acute care patients in lower-standard outpatient observation beds in order to cut costs on Medicare beneficiaries.

* * *

Perhaps the most prominent individuals with a proxy at California’s powerbroker table are the out-of-state brothers who have become synonymous with national income inequality. Together, Charles and David Koch have a net worth of around $100 billion (or about $313.58 million for every U.S. man, woman and child), and the pair has made no secret of their willingness to use their bottomless pockets to clear the decks of those opposed to transforming America into a laissez faire corporate Utopia. Just last month, a Koch-funded donor network revealed its intention to spend much of a $889 million fund to tilt races in California and elsewhere during the 2016 election cycle.

A 2012 analysis of the donor network’s Byzantine but highly effective money laundering operations revealed an array of limited-liability companies that dissolved and reappeared under different names, and that swapped funds back and forth. The report stated this system was designed to darken the sources of its cash and allow the network to maintain the appearance of “social welfare” spending as stipulated under its 501(c)(4) nonprofit status.

Some of that money came under the harsh light of California’s Attorney General in 2013, when Kamala Harris slapped two Koch front groups, the Center to Protect Patient Rights and Americans for Responsible Leadership, with a record $1 million fine for violating state election law.

A major clearinghouse for inequality-aimed political money — and a longtime conduit in the national Koch donor network — is Donors Trust (DT), which since 1999 has funneled more than $400 million to a number of far-right think tanks, foundations and advocacy groups. Dubbed “the dark money ATM of the conservative movement,” DT (and its sister trust, Donors Capital Fund), is a “donor advised fund” that offers its wealthy libertarian patrons both anonymity and guarantees of ideological purity by funding assaults on labor unions, climate scientists, public schools and economic regulations of all stripes.

The trust’s California interests are watched over by DT director William “Jerry” Hume, CEO of Walnut Creek-based vegetable processing giant Basic American Foods. The little-known Hume, who also sits on the boards of the Heritage Foundation, the Hoover Institution and privatized-education promoters the Foundation for Educational Choice, has been a major donor to business-friendly Democrats in Sacramento as well as failed “paycheck protection” ballot measures.

One of Donor Trust’s more prolific clients is the vast, $83 million State Policy Network (SPN), which devotes itself to funding a broad spectrum of nominally nonpartisan studies designed to support and fine-tune model laws, created by the pro-corporation American Legislative Exchange Council, for adoption at the statehouse level.

In California, both DT and SPN support such like-minded think tanks as Orange County’s California Public Policy Center and the San Francisco-based Pacific Research Institute (PRI), which may be best known for the omnipresence of its Canadian-citizen president, Sally Pipes, on TV panels and at congressional hearings, inveighing against universal healthcare.

The Golden State, of course, is but one of many battlegrounds in the national inequality war, and that makes its fortunes inextricably linked to brewing battles elsewhere on such powerbroker-pushed initiatives as laws that preempt county and municipal living wage and paid sick leave laws, while allowing those same localities to pass right-to-work statutes in places like Ohio, Wisconsin and Pennsylvania.

The entire American public sector workforce may suffer the fate of workers in those states, depending on how the U.S. Supreme Court rules in a California case that could overturn an earlier high court decision that had extended to nonunion public sector employees the requirement to pay a fee to the labor organization that is legally required to represent them.

This potentially far-reaching suit, Friedrichs v. California Teachers Association, originated in Orange County and was brought by another Koch affiliate, the Washington, D.C.-based Center for Individual Rights. Last month, Friedrichs lead counsel Michael Carvin (who is also suing to eliminate the Affordable Care Act’s health insurance subsidies for about five million Americans) petitioned the Supreme Court to hear the case. Should that happen, and the court’s anti-labor majority prevail, America could well find itself transformed into a right-to-work nation at the single stroke of a gavel.

(Bill Raden is a freelance Los Angeles writer.)

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