California Vote: Losing Proposition for Charities?

Charities in California and elsewhere are rejoicing in the defeat this month of Proposition 226, which would have required organizations financed through payroll deductions to obtain contributors’ approval before using the money for political activities. Yet, by aligning themselves with labor unions to beat the measure, charities unwittingly may have opened the door to more local and national challenges to their advocacy efforts in the future.

That philanthropic groups became involved at all in the Proposition 226 fight is surprising. The impetus for the ballot proposal was a 1988 U.S. Supreme Court decision, Communications Workers of America v. Beck, which dealt with the narrow issue of the rights of non-union employees in “closed” — i.e., union-organized — places of work. Writing for a nearly unanimous court, Justice William Brennan concluded that U.S. labor laws properly required non-members to pay dues for collective-bargaining expenses but that the First Amendment rights of freedom of speech and association protected them from being assessed for union political activities without their consent. However, enforcement of that ruling has proved to be difficult, and most workers in closed shops may not even be aware of it.

Proposition 226 — and similar measures under discussion in at least 20 other states and Congress — aimed to remedy that situation by requiring employers to obtain written approval before deducting “any funds from an employee’s wages” that might pay for a political “contribution or expenditure.” Another part of the proposal underscored that it was directed at union dues by forbidding labor groups to use such funds for political activities without “authorization,” including from their own members. Not unexpectedly, unions judged that those requirements would mean fewer dollars going into their war chests.

Despite that seemingly clear history, California non-profit groups and several national associations concluded that Proposition 226 would hamper their fund raising, too.

That judgment was based on legal opinions that the language of Proposition 226 also applied to United Way donations and other kinds of payroll deductions. Perhaps the charities really believed that. But the fact that such withholdings are made voluntarily — and thus, in effect, with employee approval — would seem to distinguish them from union dues, which are normally compulsory. (If Proposition 226 had passed, the California courts would ultimately have cleared up the matter, as they have had to do with other ballot measures.) Still, the confusion over the issue gave labor politically valuable allies in the more popular and sympathetic charities.

However, that alliance may turn out to be a bad one for charities. In order to claim that Proposition 226 would hurt them financially, California’s charities had to emphasize their own considerable involvement in state politics. To anyone familiar with the history of advocacy by charities, that would hardly have been news. But to those who contributed to on-the-job campaigns in the belief that they were helping pay for services to the needy, the revelation that part of their money was actually going for political activities might dampen their willingness to give in the future.

Indeed, United Way of America first issued, then repudiated, an “alert” about Proposition 226 that warned of its potentially adverse consequences for political involvement by charities. Although the organization’s major California affiliates would supposedly have been directly harmed, they remained silent. While leaders of the anti-Proposition 226 campaign blamed that behavior on arm-twisting by businesses and politicians who favored the measure, it more than likely reflected a calculation that discretion, rather than valor, might be a safer way to preserve United Ways’ fund-raising success. Even so, now that the use of United Way contributions for political activities has become better known, its annual fund-raising drives may not be the same.

The arguments against “paycheck protection” have also left charities more vulnerable to being a target of campaign-finance reforms. Until now, charities have insisted — and federal lawmakers agreed — that money given for non-partisan elections or other activities not aimed at supporting particular candidates or political parties should be considered charitable donations and, therefore, outside the limits on political contributions. But California’s election laws regard expenditures for non-partisan campaigns as political. That was why, the charities claimed, donations to on-the-job drives would fall under Proposition 226’s reporting requirements.

By making an issue out of the proposed payroll-deduction rules rather than challenging California’s view of non-partisan campaigning, the state’s charities provided more fuel for fires already smoldering in Washington. For over a year, the Internal Revenue Service has reportedly been increasing its scrutiny of political activities by philanthropic groups. The U.S. Congress has also been considering steps that would prevent “charitable” donations from being used to circumvent campaign-finance laws. Now that California’s charities have acknowledged that their political expenditures can be equated with labor’s, the case for subjecting them to similar federal rules has become stronger.

That would not be the only irony of the fight against Proposition 226. By opposing a measure that would — if the legal opinions were right — have given donors more say over how contributions would be used, California’s charities appeared to line up against increased accountability. Yet among the leaders of the anti-Proposition 226 coalition was the National Committee for Responsive Philanthropy, which has long championed the rights of employees to direct payroll donations to causes they preferred. Also up front was the Let America Speak Coalition, which defends the First Amendment rights of charities — but apparently not those of the workers the Supreme Court backed in the Beck case.

In politics, organizations often avoid such embarrassing inconsistencies — and preserve their integrity — by staying out of unnecessary battles in which they have to choose expedience over principle. By enlisting on the side of labor in the Proposition 226 debate, charities in California and elsewhere have handsomely repaid a long-time ally on many social and economic issues. But they may have also lost a bit of their souls.

Leslie Lenkowsky is professor of philanthropic studies and public policy at the Indiana University Center on Philanthropy and a regular contributor to these pages. His e-mail address is llenkows@ iupui.edu.