Muzzling Charities by Mistake?

California ballot measure to limit how labor unions use funds deducted from paychecks could ensnare other non-profit groups

Charities in California that receive donations through on-the-job fund-raising drives could soon face new restrictions on their advocacy efforts if voters approve a measure on the June ballot that is primarily intended to limit the political activities of labor unions.

The vote is expected to be the first of numerous state attempts to curb union politicking — and that possibly ensnare charities at the same time.

If the California measure, known as Proposition 226, is approved, labor unions would be required to obtain explicit written permission from their members before spending on “political” activities any money deducted from employee paychecks. A ruling earlier this month by the Legislative Counsel of California, a non-partisan state office charged with analyzing legislation, confirmed charities’ fears that the measure is written so broadly that it applies not only to union dues, but also to charitable contributions.

Under the counsel’s interpretation, any charity that receives donations deducted directly from an employee’s paycheck would have to get that donor’s permission before using his or her money to campaign for or against a ballot measure in California. For example, two years ago many California charities lobbied against passed of a ballot measure that eliminated affirmative action in state contracting. Under Proposition 226, if those groups received money through the local United Way, they would have to get consent from the donors who supported it through through payroll deductions before using their gifts to pay for referendum campaigning.

Non-profit officials fear that the amount of paperwork required under Proposition 226 would lead corporations to stop running on-the-job donation programs. Under the measure, donors would be required to sign a consent form stating, in “at least 24-point bold type, ‘Request for Political Payroll Deductions.’” Activities that are considered political include any work intended to sway an election or a ballot measure.

“We’re very concerned about the chilling effect this measure will have on giving through payroll deduction,’’ says Florence L. Green, executive director of the California Association of Nonprofits. “It creates immense, complicated bureaucracy and paperwork that as far as we can see has absolutely no public benefit.’’

The California measure is just the beginning of a tide of “paycheck-protection’’ legislation expected in the coming months. In at least 26 state legislatures, bills have been introduced that would force labor unions to receive explicit permission before spending membership dues on politics. And supporters are circulating petitions in six states to place similar measures on ballots later this year.

Republican leaders in the U.S. House of Representatives are watching the California referendum closely as they decide if they will bring up “paycheck-protection” legislation for another vote. In April, the House defeated a campaign-finance bill that until just before it came up for a vote included a provision that would have required all organizations classified under Section 501 of the Internal Revenue Code — including charities — to get permission from their members annually if they wished to conduct “political activities.”

The bill defined political activities as any work intended to influence federal legislation, regulations, or elections.

The California vote “is part of a much bigger picture,” Gary D. Bass, executive director of OMB Watch, a Washington public-policy group, told representatives of national non-profit organizations gathered at a briefing this month on Proposition 226. “It is a coordinated effort that is going on and will continue to go on.”

He added that, “many, many people believe the steam will be taken out of this effort if we defeat it in California.”

Because non-profit groups waited for the Legislative Counsel’s ruling before organizing in opposition to Proposition 226, they now face a considerable challenge if they hope to defeat the measure. Proprosition 226 has so far enjoyed strong support in California, with some early polls showing that more than 70 per cent of people who planned to vote were in favor of it. In recent weeks, the level of support has shrunk to just over 50 per cent, and non-profit officials are hoping that their opposition will be decisive in defeating the measure.

The California Association of Nonprofits and the Public Media Center, a non-profit group in San Francisco that helps charities with advertising campaigns, have registered a committee — Nonprofits Concerned About 226 — to help defeat the paycheck measure.

Nonprofits Concerned About 226 hopes to raise more than $250,000 in time to sway votes for the June 2 election. Funds will be used to pay for full-page advertisements in newspapers as well as for radio spots. Nonprofits Concerned About 226 is courting various big-city mayors in the state in hopes that they will publicly oppose the measure.

Most supporters of Proposition 226 say that this flurry of opposition from non-profit groups is needless hysteria, and that the measure does not in any way affect charities.

“A payment to a charity now is not a political contribution and it won’t become one on June 3 after Proposition 226 is enacted,” says Thomas W. Hiltachk, a lawyer for Californians for Paycheck Protection, the group sponsoring Proposition 226.

Other supporters of the measure concede that it could be construed to cover charitable donations but say that non-profit groups are overstating the burden that Proposition 226 would impose.

“It is a paperwork burden, but by all measures it’s not a large one compared to all the other regulatory hoops and hurdles that employers are forced to jump through these days,” says D. Mark Wilson, a labor economist at the Heritage Foundation, a conservative Washington think tank. “It’s not going to be the end of charitable donations in this country.”

The United Way and other organizations that solicit through on-the-job drives are the charities that have the most to lose if Proposition 226 passes in California. In 1995, the most recent year for which data are available, local United Ways in California brought in about $175-million in donations — $95-million of which came through paycheck deductions. The Asian Pacific Community Fund, in Los Angeles, raised about $75,000 of the $100,000 it brought in last year through paycheck deductions.

“It would be a disaster for workplace-giving federations,’’ says Roccie Hill, executive director of Earth Share of California, which raises money for environmental groups.

The United Way has been more cautious in its public pronouncements on Proposition 226 — largely out of fear of alienating conservative donors. The United Way of America sent all of its members a “legislative alert” last month, warning them of the potential impact of Proposition 226. Philip Jones, director of public relations at United Way of America, says that the alert was “sent out in error,” without the approval of the Board of Governors. “United Way of America has not taken a position on the matter of 226, nor will we be taking a position,”’ he says.

Local United Ways in Los Anegels, Orange County, San Diego, San Francisco, and Santa Barbara did not return repeated phone calls for comment on the issue.

Even with this cautious approach, the United Way is already drawing fire from supporters of Proposition 226. Californians for Paycheck Protection derides United Way for meddling in politics.

“I’m offended that the United Way, an organization that I look to to be bipartisan, would try to influence me in a political situation,’’ says Mitch Zak, the organization’s campaign director.

With the California election only a couple weeks away, non-profit groups have very little time to get the word out about their concerns. A state’s voter guide went out to California residents just before the Legislative Counsel issued its opinion that charities would be included under Proposition 226, so voters were not informed of that ruling.

Backers of the measure say that charities’ opposition won’t influence voters and that their complaints will only hurt donations in the long run. “People who are used to seeing a separation of charities and politics will have a bad taste in their mouths,” says Mr. Zak.

Some non-profit officials worry that the California Association of Nonprofits and other charities made a mistake by waiting for the Legislative Counsel to rule on whether charities would be affected by the measure.

“It was an excess of caution,” says Kirke P. Wilson, president of the Rosenberg Foundation, in San Francisco.

But Ms. Green of the California Association of Nonprofits says that her group could not take a stand on the proposition without being assured that there was a legitimate threat to charities.

“We didn’t want to run around and say, ‘The sky is falling, the sky is falling,’ when it wasn’t,” she says. “So now the task in front of us is to see if we can convince voters that this is in fact a very damaging piece of legislation to the not-for-profit sector.’’