Initiative & Referendum Institute

at the University of Southern California 

What Impact Does Money Have In The Initiative Process?

In recent years, economic interest groups with vast financial resources have used the initiative process with increasing frequency. Such groups often spend millions of dollars to promote their political causes, taking their cases directly to voters. These expensive, high profile campaigns have led many observers to conclude that by spending vast sums, narrow, wealthy economic interest groups are able to use the initiative process to pass laws at the expense of broader citizen interests. But can this point be proven? In short, no.

There is no doubt that individuals, industry sectors and special interest groups with large sums of money are using the initiative process to seek reforms they want – but this isn’t new. In the early days of the initiative process, businesses with an interest in selling alcohol and other spirits to the masses used the initiative process to try and overturn prohibition laws – but they were rarely successful. In the 1920s and 30s, the chiropractic industry used the initiative process, with varying degrees of success, to get states to allow them to practice. In the 1980s and 90s, denturists (the people who make dentures, etc) used the initiative process to try and get state laws changed so that they, in addition to dentists, could be licensed to make and sell dentures to the public. They felt that dentists had a monopoly and so they tried to stop it – but they were only moderately successful. Since 1912, gambling and lottery interests have used the initiative process to expand their industry. However, after spending tens of millions of dollars over a 90-year period, the industry has managed to passless than 25% of the initiatives they attempted. This is why the industry has chosen not to pursue initiatives to expand their interests. They realize that money alone will not pass an initiative.

In the last decade alone, numerous wealthy individuals have tried to enact reform through the initiative process only to lose after spending millions of dollars. George Soros, Gene Sperling and Peter Lewis spent millions of dollars in 2000 to try and get a drug policy reform initiative passed in Massachusetts only to be defeated. Dick DeVos (the founder of Amway), along with several other wealthy individuals spent almost $30 million dollars in the 2000 election cycle to try and get school choice initiatives adopted – they too were left empty handed on election night. In yet another example, millionaire Ron Unz, the successful architect of the California and Arizona initiatives to require that schools teach in English only (with some exceptions), saw his campaign finance reform initiative handily defeated in California in 2000 – after spending a substantial amount of his own money. Many more examples can be given, but in short, just because you have money doesn’t mean you can buy a law at the ballot box. But let’s turn from the anecdotes and look at the academic research this area.

Professor Elisabeth Gerber of the University of Michigan, a leading expert in the study of the initiative process, wrote a book on the role and influence of money in the initiative process, The Populist Paradox (Princeton University Press, 1999). In the book, she analyzed surveys of interest group activities and motivations, as well as campaign finance records from 168 different direct legislation campaigns in eight states. Her research found that "…economic interest groups are severely limited in their ability to pass new laws by initiative. Simply put, money is necessary but not sufficient for success at the ballot box. By contrast, research found that citizen groups with broad-based support could much more effectively use direct legislation to pass new laws. When they are able to mobilize sufficient financial resources to get out their message, citizen groups are much more successful at the ballot box, even when economic interest groups greatly outspend them."

Political scientists Todd Donovan, Shaun Bowler, David McCuan, and Ken Fernandez (in a chapter in Citizens as Legislators (Ohio State University Press, 1998)) found that while 40% of ALL initiatives on the Californian ballot from 1986-1996 passed, only 14% of initiatives pushed by special interests passed. They concluded, "[o]ur data reveals that these are indeed the hardest initiatives to market in California, and that money spent by proponents in this arena is largely wasted." 

This is not to say, however, that wealthy economic interest groups have no influence on initiatives appearing on the ballot. They have been very successful in blocking initiatives they do not like. Not because they are buying a "no" vote, but because voters are 1) predisposed to vote against any new law – regardless of if it is proposed by the people or the state legislature and 2) are more likely to vote no and maintain the status quo when confronted with a new law that they are uncertain about. This is supported by the fact that only 41% of all the statewide initiatives to appear on the ballot have been approved by the citizens.

Regardless of the fact that research shows that money can’t buy a new law at the ballot box, there have been numerous attempts at regulating the amount of money spent on ballot measure campaigns. In most cases, the proposed laws have attempted to limit the amount of money corporations could spend in either support or opposition of ballot measures. However, state and federal courts, including the U.S. Supreme Court in 1977, have consistently ruled that states cannot limit the amount of money in ballot measure campaigns. Their basic logic has been that you can’t corrupt a piece of paper (the ballot measure) and therefore there is no need in limiting the amount of money spent on these campaigns. This is where they apply a different standard in those cases pertaining to contributions to candidate campaigns – the courts have upheld contribution limits to candidates because of the possibility of corruption. In short, any attempt to regulate the amount of money in ballot measure campaigns would be viewed as unconstitutional given the current case law.

There is no doubt that there will continue to be large sums of money associated with initiative campaigns. But it is important to understand why. The main reason is the growing regulation of the initiative process by state legislators. They have been swayed by the rhetoric that money has corrupted the initiative process – even though there is no academic research to support this viewpoint. Their new regulations are the cause for the growing amount of money in initiative campaigns. More regulation just means that initiative proponents will just spend more money to overcome these hurdles. The loser in this scenario is the average citizen. They do not have the resources to overcome these hurdles and therefore are locked out of the process. If legislators are concerned about wealthy individuals and special interest being the only ones using the process, then they should make the process more accessible to those individuals without access to large sums of money.

For the most recent evidence on the effect of spending in ballot proposition campaigns, see Thomas Stratmann's article, "The Effectiveness of Money in Ballot Measure Campaigns," and commentary from other experts, in the direct democracy symposium of the Southern California Law Review (May 2005). See also the survey by Arthur Lupia and John G. Matsusaka, "Direct Democracy: New Approaches to Old Questions," in the Annual Review of Political Science (2004).


© 2013 Initiative & Referendum Institute

USC School of Law

Los Angeles CA 90089-0071