California voters will face 11 statewide ballot initiatives when they visit the polls in less than three weeks. One, Proposition 32, has garnered significant media attention because it would bar unions from using payroll deduction to collect PAC contributions. Its effects on corporate PACs — which could be just as far-reaching — have been largely ignored.
Although the union payroll deduction prohibition has drawn the ire of the state’s unions, that same provision also prevents corporations from “deduct[ing] from an employee’s wages, earnings, or compensation any amount of money to be used for political purposes.” If the deducted funds go to the corporation’s federal PAC and the PAC then uses them to make contributions to California candidates or parties, they are used for “political purposes.” What does this mean for federal PACs? If Proposition 32 is passed, many of those PACs may have to stay out of California state races. Many federal corporate PACs (especially those affiliated with big companies) raise their funds by asking their executives to automatically enroll in a payroll deduction plan pursuant to which a specific amount is automatically deducted from the executive’s paycheck. If the initiative passes, it appears that those PACs would be prohibited from using that money to contribute to California state candidates or state political parties.
So what will corporations with federal PACs active in California do if Proposition 32 becomes law? Establish separate California PACs that do not raise funds through payroll deduction? Annually ask employees to make automated payments through their credit cards rather than via payroll deduction? Give up payroll deduction entirely? One option that will be off the table: making direct corporate contributions to candidates and parties. Proposition 32 also bars those.