Corporate Democrats and the Corporate Power Structure in California Politics

Introduction

After the 2016 presidential election, California has been a leader in progressive politics, pushing back against the agenda of Trump. With a Democrat supermajority in both the Assembly and Senate and a Democratic Governor in the face of a Republican monopoly on all branches of the federal government, it should be easy to protect and advance progressive state legislation and be a progressive leader in the nation. However, a growing corporate-backed moderate faction of the Democrat Party in California has been able to stop policies that are seen as dangerous to corporate interests.

In the past seven years, a new brand of Democrat has begun to emerge. Calling themselves “New Democrats”, “Moderates” and “Centrists”, these corporate-backed Democrats are exceedingly attentive to the interests of big-oil, the pharmaceutical industry, and big retailers. Backed by deep-pocketed corporate interests, these Democrats have seen increasing success in elections. In the legislature, they are organized into an unofficial “Moderate Caucus” that has been successful in stopping key bills on labor, health care, and environmental policy.

The rise of Corporate Democrats has, in recent years, become increasingly salient in public and policy debates and media in California. A trove of articles and coverage have been published in varying attempts to describe and articulate this trend and its rise to prominence in California politics. Organizers, academics, and progressive organizations have, up to this point, attempted to combat the gains of corporate Democrats in the legislature with varying degrees of success.

Progressives have not be able to agree on an appropriate response or strategy for engaging with Corporate Democrats in the legislature. However there is growing dialogue about strategies to respond to the Corporate Democrats. This brief memo will outline the factors allowing for the rise of the Mod Squad and a profile on their narrative and tactics as well as provide an understanding of the role and influence of corporate players in the rise of the Mod Squad.

How legislators and progressives in California respond to the growing power of the Moderate Caucus in the coming years will have far-reaching consequences for advancing progressive legislation concerning the environment, economic justice and criminal justice reform. It will also have a significant impact on a state level as corporations increase their bipartisan and multiracial expansion into the state Democratic Party.

Background

The Moderate Caucus was created in 1998, as a result of a battle between a liberal Assembly Speaker and a group of moderate, business-friendly Democrats. During that legislative year, moderate Democrats wanted to vote against a bill that would have increased the amount of money victims could receive as a result of medical malpractice. Moderate Democrats were able to stop the bill and a campaign was launched by the lawyer lobby to remove these Moderate Democrats from office. On the defensive, the Moderate Caucus was born out of this fight as moderate Democrats began to accept PAC money from business groups and corporations in order to counter the progressive wing of the party. Around 2005, the caucus rebranded themselves as the “New Democratic Caucus”. A small caucus led by former assembly member Nicole Parra (D-Hanford), its members were famously locked out of their offices by the then Democratic Leader of the Senate Don Perata after attending a fundraiser for the business-friendly caucus.1  In a similar show of force, in 2008 after failing to vote on a Democrat drafted spending plan, Nicole Parra was removed from her office in the Capitol into a building across the street.2  Today’s powerful Moderate Caucus no longer holds the risk of facing punishment from party leadership. In response to past incidents with party leadership, former Moderate Caucus leader and Assemblymember Henry Perea said “That’s not happening any more...the Mods have matured, become more sophisticated and more relevant, and are playing a leading role in shaping California’s policies.”3  Today’s Moderate Caucus is an emerging power in the California Legislature.

Propositions 11 and 14 resulted in a major overhaul of the primary and electoral system in California. Passed in 2008, proposition 11 transferred authority to redraw boundaries from the legislature to a redistricting commission. The result was an expansion in size of Assembly Districts, making grassroots campaigns for Assembly seats more difficult and elections more competitive. Proposition 14 required that candidates run in a single primary open to all voters. The two candidates with the most votes then meet in a runoff election. Proposition 14 was famously financed by former Governor Arnold Schwarzenegger’s “California Dream Team”, billionaires, business advocacy organizations and large corporations.4

After the overhaul of the electoral system, the composition of the Moderate Caucus shifted.5  While corporate influence in the Democratic Party is by no means a new phenomenon, the Moderate Caucus has rebranded as a result of the shifting demographics within California. With Democrats having a majority in both the Assembly and the Senate for the past forty years and with people of color now the majority in the state and growing, corporations are growing their influence by supporting Democrats of color.

While still financing Republican candidates, corporations are also financing the campaigns of Democrats of color who have strong ties to their communities.

The dominance of the Democrats paired with these new electoral laws has allowed for a strategy of electing moderate Democrats in largely Democrat-leaning districts. With California’s shifting demographics, corporations along with progressives have been aware of this shift in representation. Their focus on legislators of color in the Democratic party is an issue with which progressive candidates and organizations are coming to terms with. In response to the Mod Squad’s rising power, a group of Democrats in the Assembly created a Progressive Caucus in 2017 in order to fundraise as a group and counteract the corporate backed Moderate Caucus.

Narrative

Moderate Democrats have employed a narrative of pragmatism in the face of increasing polarization in California and national politics. Seeing themselves as the brokers between Republicans and progressive Democrats, they claim not to tow party lines and rather vote with their constituents' interests.  They see themselves as pragmatic and bipartisan, willing to compromise with Republicans and enact legislation in a time of partisan gridlock. The leaders of the Caucus - Assemblymembers Rudy Salas,  Adam Gray, and Jim Cooper describe themselves as fiscally conservative, “middle of the road”, and voices for the “silent majority” i.e., the middle and working class people who are not represented by the liberal coastal elite.3  

The Mod Squad has increasingly pushed a populist, anti-elite narrative - that they are representing true Californians: “It’s not all about business...  It’s about the middle class and the working-class people who aren’t being given a fair shake.”6

Moderate Democrats often represent poorer inland and central coast districts containing people of color.  Increasingly the geographical identity of the Moderate Squad has conflated the racial and ideological identity of the area, so that “inland” and “Central Valley” come to mean Latino and moderate. Moderates posit that increasing government regulations on business negatively impact job prospects for their middle class and poor constituents.  Despite the populist narrative, corporate Democrats consistently vote in direct opposition to the well-being of their working class communities.  Nowhere is this argument more apparent that in the battle over environmental regulation. Siding against oil regulation policies, Mod Squad leader Adam Gray said “I’m trying to make sure the well-being of our poorest communities isn’t sacrificed for the sake of clean air…  I shouldn’t have to choose between good jobs and clean air for my constituents. We deserve both.”7  The Mod Squad employs a narrative of pragmatic non-partisanship that allows them to avoid gridlock. This narrative paired with their populist, anti-elite narrative and their call for small government that can work on behalf of California is the cornerstone of Mod Squad strategy.

Structure

The Moderate Caucus operates as an informal caucus within the California legislature, only revealing the names of its leaders. The Caucus does not publish a roster of the members, nor does it specify the responsibilities of its leadership.6  

The Moderate Caucus is supported by an extensive network of lobbyists, political strategists and independent expenditure committees.

David Townsend and Chris Tapio have been facilitating this network through convenings among lobbyists, corporate donors, and Moderate Democrats in the legislature. Townsend’s Independent Expenditure Committee Californians for Jobs and a Strong Economy has been integral in funding these events. Tapio’s nonprofit organization the California Issues Forum funds industry tours and meetings between corporate donors and moderate Democrat legislators.8

In the 2016 election cycle the top fifteen Independent Expenditure (IE) committees contributed over $77 million to both primary and general elections in the California legislature. The top fifteen IE committees in order of contribution amount are:

1. California Charter School Association Advocates IE Committee
2. EdVoice IE Committee
3. Spirit of Democracy IE Committee
4. Coalition to Restore California’s Middle Class, Including Energy Companies who Produce Gas, Oil, Jobs, and Pay Taxes
5. California Real Estate IE committee
6. Keeping Californians Working, Dentists, Housing Providers, Energy and Insurance Agents
7. California For Jobs and Strong Economy
8. California Alliance for Progress and Education
9. Equality California PAC
10. Govern For California Action Committee
11. California Dental Association IE PAC
12. JOBSPAC, A Bi-Partisan Coalition of California Employers
13. Building and Protecting a Strong California, a Coalition of Firefighters, Building Trades, Realtors and Correctional Officers
14. Keep California Golden
15. California Apartment Association IE Committee

Charter school IE committees overwhelmingly contributed more to campaigns than any other IE committees. The California Charter School Association and EdVoice IE committee together contributed over $23 million. While other IE committees received contributions from both other IE committees and corporations, these two IE committees received a majority of contributions from billionaires including the Walton Family, Michael Bloomberg, Reed Hastings, Eli Broad, and John Scully. Among corporations, energy corporations donated the most to top fifteen IE committees.

Corporations have become racially literate in a racially changing California.

They have successfully contributed to campaigns of Democrats of color - mostly Latino and Black candidates - who have connections to the communities they are representing. Corporations have become representative of California’s changing demographics, often more than progressive organizations. While corporations are successfully supporting the campaigns of Democrats of color, other organizations are often not as racially literate. During the 2016 election cycle, the Political Action Committee Leadership for a Clean Economy only endorsed white Democrats, while corporations were pushing a multiracial coalition of moderates.

A look into the 2016 election cycle, demonstrates this wide-scale coordination amongst independent expenditure (IE) committees, corporations, and billionaires. Energy corporations like Chevron contributed to IE committees like Townsend’s Californians for Jobs and Strong Economy as well as Keeping Californians Working and the Coalition to Restore California’s Middle Class. However, tracing the revenue streams toward specific candidates becomes difficult, as the coordination amongst the fifteen largest corporate- and trade-funded independent expenditure committees is extensive. Once billionaires and corporations donate directly to IE Committees, the money then moves between different IE committees. This strategic movement of money makes it difficult to trace. In the 2016 election, the California Charter School Association, the Waltons and the Apartment Owners Association strategically contributed to Equality California in order to use this historically progressive organization as a front for their contributions.9

 

10

The extensive corporate network has created a revolving door for Moderate Democrats. In 2013, state Democratic Senator Michael Rubio resigned to take a position as manager of governmental affairs at Chevron.11  In 2015, former Moderate Caucus leader Henry Perea resigned before his term expired to lobby for the Pharmaceutical Research and Manufacturers of America and in 2017 was hired by the Western States Petroleum Association (WSPA).12

Strategy

Like its structure, the actions of the Mod Squad are often purposefully difficult to trace. Members have successfully adopted the California Chamber of Commerce’s strategy of abstaining from voting on certain bills13 ; successfully opposing a bill while not voting against a fellow Democrat. However, more often the work of the Mod Squad occurs when bills are introduced into the appropriation committees. Legislators will successfully amend portions of bills and gut them, which pays off for business. Often these bills will not make it out of committee and disappear without a formal vote. For the bills that do make it out of committee, Mod Squad leadership will also strategically allocate votes on key legislation - taking into account voting records for members who are up for re-election. This allocation of votes makes it increasingly difficult to identify members of the Moderate Caucus as their voting records will show support for progressive legislation.

The Mod Squad also works closely with the California Chamber of Commerce’s “Job Killer List”. Created by the advocacy arm of the Chamber, the annual list contains proposed legislation that would have a “negative impact” on the “job climate and economic recovery” of California. Much of the self-described successes of the Mod Squad have come from blocking key “Job Killer” legislation. They have been a show of force against environmental legislation in the past few years, especially as California has pushed to become a leader against climate change. In 2013, California progressives pushed for a moratorium against fracking and introduced a series of bills in the legislature. While the bill to impose a fracking moratorium did not make it out of committee, the Senate version failed on the Senate floor. California’s cap-and-trade program has also been an area where the Moderate Caucus has flexed its power. Cap and trade limits greenhouse emissions allowed by companies who pay a penalty if they exceed the cap. The program also creates a market for companies to buy and sell allowances that permit them to emit only a specified amount of emissions. The first bill, AB 378, to extend the program beyond its 2020 end date was overwhelmingly opposed in the Assembly by the Moderate Caucus.14  AB 398 which passed and successfully extended cap-and-trade to 2030, also contained provisions that benefit oil corporations. The bill removed local authorities' ability to regulate carbon emissions, rather only the California Air Resource Board can regulate carbon emissions at oil and gas facilities.15

Corporate Democrats also successfully blocked the “Walmart Loophole” bill in 2013 which would prevent companies from excluding employees from their medical plans in order to cut costs. Companies like Walmart would ensure that employees earn just enough so that they would be covered by medi-cal and not be able to afford their health care package.16  Even against a coalition of unions and progressive organizations rallying for the bill, moderate Democrats were able to defeat the bill.17  Six key Democrats abstained from voting and two voted in opposition - just eight votes short of the necessary fifty-four. The Moderate Caucus has also been increasingly able to attack legislation that would not seem to fall under corporate interest. AB42 “The California Money Bail Reform Act” was introduced in 2017 and would ensure California jails do not hold people pretrial because they cannot afford bail. The bill prioritized services to help people make their court appearances. This would curtail the reliance on money bail and reduce the amount of people in California’s prisons. Large insurance companies that profit off the bail bonds industry were able to influence the Moderate Caucus and the bill failed on the Assembly floor.18

By supporting candidates of color, corporations are able to gain support from ethnic and racially based caucuses in the legislature, as well as gender-based caucuses. The Latino and Black legislative caucuses have indeed expanded since the passage of proposition 47, in part because of the Moderate Caucus. These Democrats of color often have histories of community work and strong community ties. For example, Cheryl Brown - former representative of district 47 in San Bernardino - had a strong history of community work and connections. The former president of the San Bernardino NAACP, founder of the community-based newspaper Black Voice News, and founder of the California Black Media - a network of twenty-two Black newspapers and media enterprises in California - Brown received contributions from corporations like Chevron.19

The Progressive Response

For progressives to advance progressive legislation and curtail corporate power in the legislature, it will take an openness to investing more into partisan work and elections. While most racial- and ethnic-based progressive organizations are performing mobilization and organizing work, more will need to leverage their power into partisan work.

California is only one of six states that have a trifecta of Democratic governance (majorities in both chambers of the legislature and a Democratic governor). Unlike other states, California progressives have the chance to not only resist the policies of the Federal Government, but also protect and advance progressive legislation.

However, even with a supermajority in the legislature, corporate-backed interests and the Mod Squad have been able to successfully block attempts to advance. A progressive strategy to circumvent the legislature and advance progressive policies has been the use of the initiative process.

While progressives have been able to rely on Californians to pass progressive initiatives, initiatives are a costly strategy requiring millions of dollars and can only address single issues.20  In order to pass progressive policies, organizations need to invest money in partisan work and face the corporate-backed Democrats directly in elections.

Progressive organizations need to directly address and contribute to partisan work at every level. In the legislature, one area of work that is already being undertaken by progressive coalitions like the California Dream Alliance is working to expose the Moderate Democrats actions to voters through transparency and education. Courage Campaign has created the People’s Report Card of California in order to “educate voters when legislators are out of step with their constituents and aligned with corporate interests”.  Consistently, however, Moderate Democrats vote well on social issues that have low impact on corporate profit margins. Progressives should begin to unpack the extent to this voting record covers up their poor voting on economic issues.

The second area of work is electing progressives and combating gains in the legislature by the Mod Squad and unseating core members. In 2016, a coalition of progressive organizations and the United Food and Commercial Workers Union successfully unseated moderate Democrat Cheryl Brown. The coalition used a strategy of transparency and educating voters.21  Brown had consistently voted against climate change policies and instead voted in the interests of Chevron. The coalition was able to make this strategy relevant to the voters of San Bernardino - an area with poor air quality.

Successful campaigns need to focus on the corporate contributors and connect the poor voting records of Moderate Democrats to the corporate brand in order to beat them in the ballot box.

In order to replicate the successful electoral campaign, progressives still need to solidify an election strategy that can be replicated in different areas of the state.

In the top two primary system, corporate Democrats consistently advance to the run-off election because corporations are able to financially solidify around one Democrat and subsequently out-fund any other candidates. While progressive candidates push to make it to the run-off election, most of their time and money goes to attacking fellow progressive candidates. Once a progressive candidate makes it to the run-off election, the corporate-backed Democrat is able to appropriate the arguments made against the candidate in the first primary and use them to win. Progressive candidates and organizations need to save money to be used against corporate Democrats in the campaign trail.

While California has been a leader of progressive values in the face of increasing attacks on immigrants, people of color, and working class people, it has also been a model for the rest of the country in its unequal and exclusionary policies.22

Corporations have long held a bipartisan political strategy. However, as the demographics of the United States continue to change, progressives will have to shift what representation means. As progressives continue to organize and build a progressive infrastructure in California and across the country, representation will have to mean more than just people of color in elected offices.

People will have to engage in the work of electing Democrats of color who have a commitment to their communities and progressive values before and after entering office.

As the Moderate Caucus strategically pushes their anti-elite, populist narrative to working Californians facing economic uncertainty and massive inequality, progressives will have to also be on the ground educating their communities about candidates. The overwhelmingly successful election of corporate Democrats in California may become a model for the country more candidates of color are elected in other states and with the United States’ changing demographics that predict a majority of people of color in the coming decades. The progressive response to corporate Democrats in the upcoming years will indeed be critical as corporations continue electing people of color and supporting the Moderate Caucus.

Daniel Russell Cheung is a senior at UC Berkeley majoring in History and a research assistant with the Blueprint for Belonging project.

This essay was created​ by the Blueprint for Belonging ​project, to find more videos, essays, podcasts, and our California survey on othering and belonging from this series click here.