Pay to Play Governance In California

Special interest groups have filed suit against SB 1439, a bill supported by Govern For California and signed into law last year by Governor Newsom that restricts “pay-to-play” (“P2P”) practices. Effective January 1 of this year, the new law requires an elected local official (e.g., a member of a city council) to recuse themself from voting in certain proceedings if that official has received a campaign contribution in excess of $250 in the preceding 12 months from any party to those proceedings (e.g., a contestant in a competition for trash removal services). The bill passed the Legislature without a single no vote and was supported by a number of good government groups in addition to GFC:

Screenshot of Senate floor analysis dated August 30, 2022 showing GFC as a supporter of SB 1439
Senate floor analysis of SB 1439 showing supporters including GFC

P2P rules are very familiar to Wall Street money managers, who are subject to federal restrictions on donations to elected officials with potential authority over appointments to public pension fund boards that approve lucrative money management contracts. But California has been slow to impose similar restrictions. While the state has long imposed P2P restrictions on members of public boards, elected officials have remained free to take donations from parties with business before them. That left a big loophole that SB 1439 took a step towards closing, though only partially. That’s because donors to local officials include not only trash removal companies and other businesses in search of local licenses but also police and fire unions whose members are on the receiving end of compensation arrangements approved by local officials. SB 1439 also didn’t restrict donations to state officials who approve compensation contracts with prison and other government employee unions and annual budgets appropriating money to agencies that award contracts to commercial enterprises.

P2P has plagued government services in California for decades. It’s the principal reason why most spending benefits corporate and union providers of public services instead of residents and students who consume those services. That’s why Govern For California will continue to seek legislation applying P2P restrictions to donations to all elected California officials from any corporation, union, association or individual with business before them. For residents and students to be treated properly as the consumers of government services in California, P2P will have to end. That sort of legislation will be a big lift and take time. For it to happen, state legislators will have to know that supporters of the public interest will have their backs when special interest groups come after them.