SACRAMENTO -- A shadowy Arizona group has inserted itself into California politics by pouring $11 million into a campaign fighting Gov. Jerry Brown's tax-hike initiative and backing a measure to strip unions of their ability to collect dues for political purposes.
The Americans for Responsible Leadership donated the money to the Small Business Action Committee, a California group that has been waging simultaneous TV and radio wars against Proposition 30 and for Proposition 32. The former raises taxes on sales and the wealthy; the latter curbs labor's ability to use members' dues for campaigns.
But if anyone wants to know who's behind the Arizona group, they won't get that chance, even in a state with the most rigorous campaign disclosure laws in the nation. Its donors don't have to be disclosed because it was formed under the IRS code 501(c) 4, designed for nonprofit groups operating as social welfare organizations. But the code has a loophole that allows the groups to participate in politics.
The development sent shock waves through two campaigns -- the labor-backed No on Proposition 32 and Brown's Proposition 30.
"It's really a frightening reminder that an anonymous donor can just put up any amount of money to influence elections, and you never know who these people are, what motives they have," said Ace Smith, campaign manager for Proposition 30. "I take this seriously."
It's easily one of the largest single donations in this year's statewide ballot measure campaigns.
The ability of groups to wield influence in campaigns without full disclosure has increasingly become a source of concern, especially in light of the U.S. Supreme Court's landmark 2010 Citizens United ruling that allowed unlimited campaign spending by corporations, said Tracy Westen, the founder of the Center for Governmental Studies in Los Angeles.
"It's a terrible development," Westen said. "The most important piece of any message is who's delivering it. And that's exactly what's being withheld. People are getting information without being told who's funding the ads."
Little is known about the group other than it is opposing an Arizona ballot measure for a sales tax renewal and another to adopt a California-style "top two" primary, which allows the top two finishers in primaries to face off in a general election, regardless of party.
Brian Brokaw, spokesman for the labor-backed campaign opposing Proposition 32, said that the relatively low profile of Americans for Responsible Leadership suggests that it's a shell group for large donors eager to influence elections without publicity.
A spokeswoman for the Small Business Action Committee, which had previously operated primarily from the $20 million donated by wealthy GOP activist Charles Munger, said she does not know who is behind Americans for Responsible Leadership.
"SBAC has been running ads statewide for several weeks, and they've garnered a lot of attention here and nationally, so other groups have an interest and apparently like our ads and want to contribute," said Beth Miller. "They indicated they wanted to make a donation. We did our due diligence to determine they are an entity in good standing, and they are."
On its website, Americans for Responsible Leadership says it "seeks to promote the general welfare by educating the public on concepts that advance government accountability, transparency, ethics, and related public policy issues.
"Your contribution will be well spent, promoting the principles of limited and efficient government," the group's website says on its donation link.
Earlier in the campaign, another 501(c)4 group, the California Future Fund for Free Markets, put up $4 million for TV ads on behalf of Proposition 32. It got its money directly from the American Future Fund, another non-profit group with ties to brothers Charles and David Koch, the billionaire oil magnates who have spent tens of millions on campaigns supporting conservative causes around the country this year.
So far, the large bulk of spending by the Small Business Action Committee has been on behalf of Proposition 32 -- $4.8 million of the $5.5 million they've spent, according to campaign finance reports. Another $11 million coming from an outside group contrasts with the Yes on 32 campaign's claim that it's trying to stop special interests, said Brokaw, the spokesman for the No on 32 campaign.
"You'd think a campaign claiming to stop special interest money would come clean about who's funding it," he said.
In all, the Yes on 32 side has raised $44 million, less than the $54 million labor has poured in to defeat Proposition 32.
The non-profit groups are merely using their First Amendment rights to express themselves, said Jake Suski, the spokesman for Proposition 32.
"They have a right to put their voice in the debate," he said.