SACRAMENTO, Calif. — Sen. Jackie Speier has been trying for two years to pass financial privacy legislation in the California Legislature.
But the bill has encountered a “wall of blue suits,” she said, as multitudes of lobbyists from banks, insurance companies, investor services and other businesses swarm into Sacramento to kill it.
“The battleground for financial privacy in this nation is happening here in California,” said Speier, a Democrat from Daly City. “We are ground zero. It’s not just a wall of blue suits from California. They’re importing them from across the country.”
California legislators, along with consumer and environmental groups, have become unhappy with the pace of action in Congress, turning the Capitol into a battleground for national issues.
What happens in California spreads to other states, said Carl Kurtz, director of state services for the National Conference of State Legislatures. “What California does gets a lot more notice because of the size.”
So far this legislative session, committees in California’s Legislature have approved bills limiting carbon dioxide emissions from cars, tightening regulations on accountants and increased financial privacy for consumers. All are expected to produce major battles in the full Assembly and Senate.
Nearly one-third of money spent lobbying state lawmakers nationwide was spent in California, according to a recent report by the Center for Public Integrity.
In 2000, special interests seeking to influence California lawmakers and elected officials spent more than $180.5 million, almost three times as much the next-highest state, New York, with $66.3 million.
“For reformers, the state of California is critical,” said Jerry Flanagan, spokesman for the California Public Interest Research Group, “because of the size of the markets and the buying power that California consumers represent.”
Unlike Washington, where a Republican president and Republican-controlled House of Representatives can stop what are considered liberal bills, Democrats control the Assembly, Senate and the governor’s office.
That hasn’t escaped corporate interests, who are working to either kill or seriously amend several of those bills moving through the Legislature.
At the top of their list is a bill by Assemblywoman Fran Pavley, D-Agoura Hills, that seeks to regulate carbon dioxide emissions from autos.
Carmakers oppose the bill because “we don’t see it giving any benefit for the customer, and it creates an island for the market, which is the largest in the country with 10 percent of sales,” said Peter Welch, a lobbyist for the California Motor Car Dealers Association.
After Congress rejected a bill to require carmakers to increase fuel mileage for their fleets, national environmental groups “started coming to California in numbers we haven’t ever seen before,” Welch said. That’s because Pavley’s bill gives them “a back door to increase fuel economy by regulating carbon dioxide.”
For years, California has led the nation in creating tougher emissions standards, once getting a federal Clean Air Act exemption to let the state set more stringent rules.
Eventually, the federal government adopted California’s standards, so automakers make engines that conform to all states’ rules, Welch said. “So everyone in the country is paying more for them, not just California.”
Senate Leader John Burton, a San Francisco Democrat who supports Pavley’s bill, said carmakers are “pulling out every stop they can” to kill it, because “it’s an issue that if we could pass it, Congress would pass it.”
Assemblyman Lou Correa, D-Anaheim, said he’s also experiencing a “full-court press” from lobbyists opposing his bill to prohibit auditors from also offering consulting services to their clients.
Other states would follow a change in California, Correa said, so the industry wants to kill his bill now. Other states are also considering changes after the collapse of energy giant Enron amid alleged accounting fraud.
“That’s the case in a lot of issues,” he said. “We are the fifth largest economy.”
Correa said he’s resisting attempts by industry lobbyists to “gut and amend” his bill with language that mimics a federal bill pending in Congress.
Those changes would no nothing to reform auditing practices, said Flanagan, whose group support Correa’s bill and two others. “The Big 5 accounting firms are trying to derail investor protections and replace it with the status quo.”