Referendum as a corporate investment strategy
Tobacco companies and oil producers spend millions to halt laws that affect their bottom lines.
In passing Proposition 31 on the Nov. 8 ballot, California voters wisely rejected a Big Tobacco ploy to continue selling harmful flavored products that get kids hooked on nicotine. The measure was a referendum, which is a process allowed in the state Constitution to overturn a law passed by the Legislature. The direct democracy provision was intended to give citizens a way to repeal bad laws, not to help industries protect their bottom line. Yet increasingly corporations are using their millions to try to reverse progressive policies coming out of Sacramento, raising questions about whether the system is working as it should or is in need of reform.
Even when the effort to repeal a law fails, it can be a win for the big-money interests behind it. For example, companies that make cigarettes and vapes spent $20 million to get Proposition 31 on the ballot, which forced the state to delay the law — which was passed in 2020 — from taking effect until after this month’s balloting in which voters overwhelmingly upheld the law. For their $20-million investment, tobacco companies won 22 more months to sell their poisonous, addictive products, generating an estimated $1.1 billion in revenue from menthol cigarette sales alone.
They barely even tried to make their argument to voters, and spent just $1.7 million on their campaign. And then just a day after the election, tobacco giant R.J. Reynolds filed a lawsuit against the state seeking an injunction — another attempt to block the law from taking effect. Between the meager campaign and the lawsuit, it sure looks as though tobacco companies were more interested in stalling implementation of the law than persuading voters to overturn it.
So, a referendum may amount to a lucrative business decision for corporate America: Spend about $22 million for a $1.1billion return.
Other referendums in recent years were sponsored by bail bond businesses, which successfully convinced voters in 2020 to overturn a law banning money bail and replacing it with a risk-based system, and plastic manufacturers, which pushed a measure in 2016 to overturn the state’s ban on single-use plastic bags. (Voters upheld the plastic bag law.)
Other industries have taken note and are paying to gather signatures in the hopes of qualifying referendums for the 2024 ballot that would delay two new laws. Fast-food companies are trying to stop a law that could raise wages for fast-food workers, and oil companies are trying to block a ban on new drilling projects near homes and schools. Both campaigns have reportedly deceived voters about the petitions they’re being asked to sign.
The common denominator in all these campaigns is an industry or large corporations that stand to lose money because lawmakers have acted in the public interest. The businesses are trying to overturn laws that put public health, safety and justice above corporate profits.
It’s a perverse application of a system designed to empower ordinary people against corporate influence in the state Capitol. Progressive reformers pushed for creation of the initiative (allowing citizens to propose laws on the ballot) and the referendum (allowing people to overturn laws) more than a century ago out of frustration that the railroads controlled the Legislature. Now corporations have apparently found a new way to get what they want when representative democracy is working to help the people.
Lawmakers and good-government advocates should consider whether systemic changes would prevent abuse of the referendum process. To start with, there must be a better way to ensure that signature gatherers are truthful when they are asking people to sign their petitions. Reports that signature gatherers lied about the petitions to block the fast-food and oil drilling laws — by describing them as efforts to raise wages and stop drilling, when in fact they would do the opposite — are extremely troubling.
Perhaps signature gathering firms whose workers deceive voters should be banned from doing business in California for a period. Or maybe the state should consider licensing signature gathering firms to do business here and periodically review complaints against them. Could the state launch an enforcement team, the way cities have code enforcement officers, that conduct spot checks for honesty in signature gathering? It’s worth considering.
Signature gatherers are paid per signature, a practice that critics say encourages deception. Gov. Gavin Newsom and his predecessor, Jerry Brown, have both vetoed bills that sought to prohibit paying people per signature gathered. Lawmakers should explore other ways to reduce the mercenary quality of this practice. For instance, perhaps the populist intention of the process could be restored by requiring that a portion of signatures be gathered by volunteers.
And voters need to do their part too. Sign a petition only if you’ve read it and agree with the way it will change the law. Learn about the measures on your ballot and vote your values.
Direct democracy is a hallmark of California politics. It should not be for sale to the highest bidder.