Bloomberg News

Munger Siblings Spend $54 Million to Sway California Vote

October 12, 2012

Munger Siblings Spend $54 Million to Sway Voters in California

Molly Munger, civil rights attorney and the primary advocate behind California Proposition 38, speaks in Los Angeles. Photographer: Damian Dovarganes/AP Photo

Siblings Molly Munger and Charles Munger Jr., whose father is vice chairman of Berkshire Hathaway Inc. (A:US), have poured $54.4 million into California ballot measures, stoking a battle with Governor Jerry Brown and powerful labor unions.

Molly Munger, whose plan to raise taxes to help schools is competing with the governor’s budget-balancing tax proposal, has spent $31 million, according to MapLight, a nonpartisan research organization. Her brother has given almost $23 million to oppose Brown’s proposal and pass one barring unions and corporations from using payroll-deducted funds for politics.

“They’ve emerged as a major power in California because of their money,” said Bob Stern, who was president of the former Center for Governmental Studies in Los Angeles, a group that examined the initiative process. “They’ve set the agenda for California in many ways.”

The Munger-supported initiatives are among 11 ballot measures state voters will consider Nov. 6, the most in a single California election since 2008. Voters will decide whether to require labeling of genetically modified food, abolish the death penalty and increase penalties for human trafficking.

Direct Democracy

California is among 24 states that allows unelected individuals such as the Mungers to circumvent the Legislature and take their ideas directly to voters. In 2010, a ballot measure financed largely by Charles Munger Jr. won approval, stripping California lawmakers of responsibility for drawing the boundaries of congressional districts and giving a commission the authority to do so.

“In recent years, I have supported political reforms that have placed more power back in the hands of citizens,” Munger, 55, a physicist who lives in Palo Alto, said by e-mail.

His sister, a 64-year-old lawyer in Los Angeles, says she’s “not a political person.”

“I’m a civil-rights lawyer, I’m an advocate,” said Molly Munger, a partner with English, Munger & Rice. “We have an enormous problem in California with our underfunded schools, and I’m just trying to do what I can.”

At Loggerheads

Her initiative, Proposition 38, would increase taxes for 12 years on income of more than $7,316 from 0.4 percent for the lowest earners to 2.2 percent for those making more than $2.5 million a year. It would raise $10 billion annually. While 30 percent of the added revenue would pay down school-bond debt for the first four years, all the money would go to educational operations for the remaining eight years.

Brown, a 74-year-old Democrat, is campaigning for Proposition 30 to avoid deep cuts to schools. It would temporarily boost the state sales tax to 7.5 percent from 7.25 percent and raise the levy on income starting at $250,000. A rejection by voters would trigger $5.5 billion in education cuts. The budget he signed in June counts on more than $8 billion from the higher taxes.

If both measures pass, only the tax increases from the proposal that gets the most yes votes would take effect, under the state constitution.

“Unfortunately, because of their resources, they are able to attempt to drown out the voices of the united education community that is supporting Prop. 30,” said Dan Newman, a spokesman for the pro-Proposition 30 campaign.

‘Money Tie’

Charles Munger Jr. has donated $21.9 million to the Small Business Action Committee, which opposes Brown’s measure. The group also supports Proposition 32, which would ban corporations and unions from contributing directly or indirectly to candidates and candidate-controlled committees. The proposal also would forbid unions from using payroll deductions for political purposes.

“It prevents an organization with power over an employee, whether it be a corporation or a union, from taking money automatically out of an employee’s wages to pursue politics the employee doesn’t support,” Charles Munger Jr. said.

The measure “also cuts the money tie that allows corporations and unions to make direct contributions to influence elected officials,” he said. “These reforms place more power back in the hands of the citizens.”

Charles Munger Jr. has also given more than $872,700 directly to the campaign for Proposition 32, according to MapLight data.

Outsider Effort

“In a certain sense, both of these people -- the Mungers - - are sort of policy entrepreneurs,” said Jack Citrin, a political science professor at the University of California, Berkeley. “They have ideas, they want to implement them, they know they can’t get it through the Legislature, so they have this opportunity.”

Apart from the initiative process, any state tax increase would require a two-thirds vote of the Legislature.

Molly Munger dismissed criticism of her use of family wealth to shape California politics.

“I’ve given years of my life to influence policy,” she said. “I’ve trudged around Sacramento. To me, being able to help a big coalition of people fight for kids is just a natural extension of work that I’ve done for a very long time.”

San Francisco Mayor Edwin Lee, 60, said voters will look past the money spent to understand the issues involved.

“We have been very much used to, and we have a lot of examples throughout the state, where there was a lot of money spent on special-interest groups and the public has been able to pierce that,” Lee said.

Making Enemies

Both Mungers said they’re not interested in public office.

“I have absolutely no interest in ever running for political office,” Molly Munger said in a telephone interview.

Charles Munger Jr. said, “If running for public office had been my intent, I would have been well-advised not to raise up as many adversaries as my quests to pass political reform have done.”

Their father, Charles “Charlie” Munger, 88, has served as vice chairman of Warren Buffett’s Omaha, Nebraska-based company for more than 30 years. His net worth is estimated at more than $900 million, according to data compiled by Bloomberg.

Propositions 30, 32 and 38 are among 11 measures facing voters, the most in a single California election since 2008.

A campaign to make California the first state to require labeling of genetically modified foods, Proposition 37, has drawn more than $34 million from opponents including Monsanto Co. (MON:US), the world’s biggest seed producer, DuPont Co. (DD:US), the biggest U.S. chemical maker by sales, PepsiCo Inc. (PEP:US), the world’s largest snack-food maker, Nestle SA (NESN)’s Nestle USA and Coca-Cola Co. (KO:US)

Proposition 31 would create a two-year state budget cycle. Proposition 33 would allow auto insurers to set prices based on whether a driver was previously covered by insurance.

Shadow of Death

A proposal to abolish the death penalty, Proposition 34, would change the maximum sentence to life without parole, and would apply retroactively to prisoners now on death row.

Proposition 35 would increase penalties for human trafficking. An effort to change the state’s three-strikes law, Proposition 36, would reduce the prison sentence for third-time offenders whose latest crimes were “nonserious, nonviolent felonies” from the minimum sentence of 25-years-to-life.

Proposition 39 would require multistate business to calculate their California income-tax liability based on the percentage of their sales in the state.

Charles Munger Jr. also gave more than $463,700 to support Proposition 40, according to MapLight data. The measure would let voters approve or reject the state senate redistricting plan approved by the California Citizens Redistricting Commission.

To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net.

To contact the editor responsible for this story: Stephen Merelman in New York at smerelman@bloomberg.net.


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