08/07/2013 06:36 pm ET Updated Oct 07, 2013

Is Steve Peace Leading California to Disaster... Again?

Throughout my nearly twenty years in California, I have heard natives frequently lament the loss of the Golden State that was -- a state with the nation's premier public educational system and infrastructure. To them, California's passage of Proposition 13's budgetary straight jacket has led to a creeping "Mississippification", as the state's investment in public infrastructure declined from 22 percent of state spending to less than five percent.

As The Economist points out, however, Proposition 13 has altered California in another significant way, by changing the initiative process from a "safety valve" to "an industry and a circus." Since 2000, California voters have been presented with 75 ballot measures, approximately half of which are constitutional amendments which is why it has the third longest constitution in the world behind Alabama and India.

Enter the "California Personal Privacy Initiative" (CPPI) which could do to the Internet what Proposition 13 did to California. CPPI is the brainchild of former State Senator Steve Peace, who drafted the legislation that created the Office of Privacy Protection within California's Department of Consumer Affairs. CPPI would amend the state constitution to create a fundamental right in protecting one's "personally identifying information" which the proposal defines as

"any information which can be used to distinguish or trace a natural person's identity, including but not limited to financial and/or health information, whether taken alone, or when combined with other personal or identifying information which is linked or linkable to a specific natural person."

The language states that it is to be "broadly construed" such that it might restrict collection of a user's Internet protocol (IP) address or even the device being used. More importantly, the CPPI would create a presumption of harm should any information be disclosed without prior authorization.

While strengthening user privacy protection is a worthwhile goal, the fact is that Washington has spent the last decade trying to deal with nuance of internet privacy and how to balance competing interests in order to craft a solution consistent with the "soft touch" approach that has been followed in internet regulation to date. Peace's CPPI rejects nuance and instead rewrites the economic equation of free Internet sites such as the one you are reading by imposing a rigid opt-in regime in place of the prevailing opt-out approach to Internet privacy which may result in more ads, less free content or both (not to mention annoying pop-ups as websites seek consent from visiting consumers).

Far from following a soft-touch approach, the CPPI is a sledgehammer that would unleash California's plaintiff's bar on its most promising sector who would only have a few weeks to comply should the measure pass and no guidance as to what information the initiative may be interpreted to cover or how authorization may be obtained. Given that the proposal is a constitutional amendment, it cannot simply be fine-tuned by the legislature should the measure have unintended consequences, but rather would require a two-thirds vote just to place an amendment on the ballot months later.

At present, CPPI is merely a proposed initiative and still must be approved as to form by the Attorney General and then obtain approximately 808,000 signatures just to qualify for the November ballot.

The CPPI has the makings of being California's worst public policy disaster since electricity deregulation and ensuing rolling blackouts cost the state $40 to 45 billion in 2000-2001. As Chairman of the Senate Energy Committee, Peace played a major role in pushing deregulation through the legislature in what has become known as the "Steve Peace death march."

Should it qualify for the ballot, however, we could see another type of march, as the initiative could have an immediate impact of stifling growth in the vibrant Silicon Beach and Silicon Valley corridors and elsewhere; or, even worse, precipitating an exodus of internet businesses from California. With ultra high-speed Internet being rolled out in Austin, Provo, Seattle and Vancouver, this is not a hypothetical concern.

That this comes just after the Supreme Court liberated California from the yoke of the imprudently passed Proposition 8 should be a warning both as to the wisdom of CPPI and of the need for the state to reform what David Broder once referred to as "Direct Democracy run amok."