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October 14, 2012

Dan Morain: Brown struggles against Mungers

Gov. Jerry Brown must be feeling like he has left California and landed in the State of Munger.

Gov. Jerry Brown must be feeling like he has left California and landed in the State of Munger.

It's not a hospitable place. Mungerland is populated by Molly and Charles Munger, two of nine children of Charles Munger, the billionaire partner of billionaire investor Warren Buffett.

The offspring have plenty of money, too, as Brown is finding as he tries to win passage of Proposition 30, the $6 billion-a-year tax increase on the Nov. 6 ballot.

"With the Munger family, we're getting both barrels," Brown told me by phone the other day, clearly worried that his initiative might not survive the onslaught.

Molly, a liberal civil rights lawyer, has spent $31 million on her Proposition 38, which would raise income taxes by $10 billion a year to fund public schools. She spent $3 million more last week for television ads that swipe at Brown's initiative.

Charles Munger, Molly Munger's half brother and the Santa Clara County Republican Party chairman, has given $20 million to yet another campaign group that is targeting Brown's initiative in a more direct attack.

As weird as California politics are, there's never been a drama quite like the one playing out now. It would be amusing, except that the stakes are so high.

"The state is at risk here," Brown said. "We are at risk and it will be very hard to recover."

Brown's Proposition 30 would generate $5 billion a year by raising income taxes on high earners, and another $1 billion by jacking up sales taxes by a one-quarter of a percentage point. The money would help stabilize state finances, pay down debt, fund local law enforcement and give some money for schools.

In this year's budget, Brown made the optimistic assumption that voters would approve Proposition 30. But on the chance that it might fail, the budget included the threat of trigger cuts amounting to $6 billion, most of it coming from schools and universities.

"I think she thinks we're kidding about the trigger cuts. The truth is you can't borrow more money," Brown said.

Brown knows that if Proposition 30 fails, legislators and lobbyists will want to unwind the trigger cuts, "and I won't let them," he said. "I can't. How do you do it? Tell me, where do you get the money? Where's it going to come from? What's the gimmick?"

Sure enough, Molly Munger said she seriously doubts Democrats in Sacramento would whack $5 billion from public schools and another $500 million from universities.

"I personally do not believe the money will come out of schools," Munger said. "They're going to have to go through the budget and spread pain and nobody will like it."

There was a time when Munger hoped she and Brown could get along. It was a nice idea but it's clearly not happening.

Brown is convinced Munger has been led astray by political consultants, who, as the narrative goes, see a fat payday. Certainly, a $35 million-plus campaign is good for the business of politics.

"It is so profoundly irrational," the governor said. "You have this woman throwing this money against everything she stands for."

Munger has never gotten deeply involved in politics. But she is hardly an innocent. She started her career as an assistant U.S. attorney in Los Angeles, and went to work for Los Angeles law firms.

She changed course after the Rodney King riots in 1992, and decided to devote her legal expertise to civil rights, helping create the Advancement Project, a $12 million-a-year nonprofit that focuses on voting rights, education and immigration.

In her view, Brown's measure is a "cynical, deceptive proposition." She became annoyed after seeing ads portraying it as being all about schools. Brown, she said, appropriated her initiative's message.

"There are two ballot initiatives. They are different. One of them is not for schools. In order to convey the truth of what is going on and not be sucked into this deceptive vortex the governor is spinning, you do have to stand up," Munger said.

Munger's ads could be far more cutting than they are. But if she has gone somewhat easy, the ads funded largely by her half brother rip into Proposition 30, describing it as smoke and mirrors.

This is where Mungerland gets a little murky. Charles Munger didn't answer my email asking him to chat about his political endeavors. But Molly Munger said her half brother told her he never intended to fund the No-on-30 campaign.

As Molly Munger understood it, Charles Munger's $20 million was earmarked for yet another campaign, one to pass Proposition 32, the initiative that would eviscerate organized labor's ability to raise campaign money.

"I have been repeatedly assured that my brother is not involved in attacking 30," Molly Munger said.

Charles Munger donated his millions to a campaign established with a dual goal of killing Proposition 30 and promoting the anti-union measure. Joel Fox controls the campaign committee and is a longtime anti-tax advocate. If you give Fox $20 million and there's a tax measure on the ballot, you can be reasonably certain he'll try to kill it.

Sure enough, Fox said Charles Munger's money has been used to fund the No-on-30 and Yes-on-32 campaigns: "We get no earmarking instructions. We have distributed the money. It goes where it goes."

Three weeks from the election, Brown's measure is sinking. That is fine with Molly Munger. If it fails, she said, better alternatives will be on the ballot in 2014, a gubernatorial election year.

"We can have a vote on something that is much fairer," she said.

Brown views the situation as being much more dire. If Proposition 30 goes down, he said, "it will lead down us down a path where everything I've worked for will be undermined."

It's a too early to pronounce Proposition 30 dead. Brown has won more campaigns than he has lost. But voters are skeptical of initiatives, hate raising taxes, and don't need much of a reason to vote against initiatives that raises taxes. The Mungers' millions are giving voters plenty of cause for doubt.

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