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Profiting from nonprofits

August 29, 2005

FOR A GOVERNOR WHO CLAIMS to take no pleasure in raising money, Gov. Arnold Schwarzenegger is spectacularly good at it. Gov. Gray Davis had a reputation for focusing too hard on fundraising and not enough on leadership, which is partly why he was drummed out of office, but Schwarzenegger has taken campaign fundraising to a new level. On a recent 17-day tour that took him from Sacramento to Boston and back, the governor is expected to have raised about $5 million on top of the $22 million he already had gathered this year. And the campaign won't really begin until after Labor Day.

More than that, Times staff writers Robert Salladay and Peter Nicholas reported last week on another key source of funds to help pay the governor's political expenses: money contributed by tax-exempt nonprofit organizations that do not have to report the identities of their donors to state political regulators. The organizations are run by Schwarzenegger's closest aides. One such group pays the $6,000-a-month rent on Schwarzenegger's Sacramento hotel suite. The Times learned that donors to these organizations include Southern California Edison, Pacific Gas & Electric and Wells Fargo Bank.

Some of the corporations and special interests contributing to these nonprofits have business before the state. If the governor backs them, there is no way for voters to know about influence peddling, meaning there is no way to hold him accountable. Further, the normal limits on the size of contributions don't apply.

The use of these nonprofit funds apparently is not illegal, and past governors also have employed them. But Schwarzenegger took office claiming that he didn't need the help of special interests and calling for complete openness in government. More recently, he seems to have clarified his definition of special interests: Indian tribes and public employee unions that negotiate contracts with the state. But few would be naive enough to believe that his big business allies are not special interests.

Rob Stutzman, the governor's spokesman, said Schwarzenegger directed the disclosure of contributors to organizations that directly benefit him, such as the group that pays his rent. Otherwise, Stutzman said, "He just never bothers himself with it."

The nonprofit fundraising gimmick is just one of many loopholes that keep appearing in state campaign finance law. The Fair Political Practices Commission should plug it by requiring that all such contributions to political candidates or officeholders be fully and immediately reported. A lawsuit is currently trying to settle the question of whether the commission has that authority; if it doesn't, the Legislature should pass a bill to give it the power.

Schwarzenegger, in the spirit of openness that he has embraced, should be happy to sign it into law.

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