Fact Check and Research Synthesis: (1) Prop 209 led to an annual enrollment 60-page online Appendix that critiques the Affirmative Action, Graduation decline of about 800 URM students at UC, Sander & Taylor (2012) book at pp. 12-15). and pushed hundreds of others to less Rather, here the goal is to situate Mr. Bleemer’s Rates and Enrollment Choice at selective UC campuses; core findings about URM students and Prop the University of California+ 209 within the larger body of relevant peer- (2) After Prop 209 URM applicants to UC reviewed research studies. In so doing, this September 7, 2020 with lower test scores ended up 4% less concise review confirms that professor Sander’s likely to earn a bachelor’s degree from any I. Introduction sweeping assertion that Bleemer “is college and the average URM became less demonstrably wrong on his core claims” is likely to earn a bachelor’s degree in STEM; On November 3, 2020 California voters will inaccurate and unpersuasive for several reasons: decide the fate of Proposition 16, which (3) the earlier declines in UC enrollment and proposes to repeal a 1996 ballot initiative (“Prop in degree attainment carried over to the (1) Professor Sander’s rebuttal paper does not 209”) and thereby allow some consideration of California labor market; after Prop 209 URM seriously engage with or critique Mr. Bleemer’s race/ethnicity, sex and national origin in public applicants to UC ended up earning annual data findings and methods. education, employment and contracting so long wages 5% lower between the ages of 24-34. (2) Sander constructs (in order to tear down) as such programs are consistent with federal a straw person argument about the numbers of In response, UCLA law professor Richard and state equal protection laws. A central enrolled URM freshmen and graduates at UC Sander, a frequent critic of affirmative action in question for voters and policymakers is what set after Prop 209. Sander’s medley of descriptive higher education, just issued a short rebuttal of impacts Prop 209 had on University of statistics is irrelevant to Bleemer’s empirical paper. Professor Sander claims Bleemer “is California (UC) patterns of enrollment, degree modeling estimates about the net impact of demonstrably wrong on his core claims” and attainment and subsequent success/earnings in Prop 209 on URM enrollment and college Sander asserts there “is every reason to distrust the workforce. graduation. every other claim in his paper.” (pp. 1, 6) (3) Sander’s narrative about Prop 209 and his A recent paper by Zachary Bleemer, a doctoral Bleemer’s paper uses a “difference-in-difference” medley of UC descriptive statistics rely heavily student in economics at UC Berkeley, utilizes a research design and he engages in extensive on long run changes that are more accurately rich and detailed database of UC freshman efforts to account for “selection bias” when characterized as unrelated to Prop 209, applicants in the two years before and after estimating effects of California’s Prop 209. At a including: (a) the steady rise in the number Prop 209, including those who ended up broad conceptual level, these methodological and proportion of URM (especially Latinx) enrolling at other colleges (Bleemer 2020a, approaches are not inconsistent with principles high school graduates that are the rootstock of 2020b). Mr. Bleemer adopts a number of espoused elsewhere by Dr. Sander (Sander the UC student population; (b) available seats empirical techniques in an effort to make 2019:815; Sander & Taylor 2012:77-79, 107-109). in the freshman class at most UC campuses “apples to apples” comparisons about how the (and the UC system) grew substantially over affirmative action ban impacted Black, Latinx Against this backdrop of academic disagreement the period of the late 1990s and the 2000s; and and American Indian (underrepresented about the impact of Prop 209, the purpose of (c) the upward trend in UC’s admissions minority, or “URM”) students. Among this short summary is not to necessarily endorse selectivity during this era boosted graduation Bleemer’s key findings are: or defend any particular methodological choice rates for reasons independent of Prop 209. in Bleemer’s exhaustive paper (Bleemer 2020b runs nearly 100 pages, plus Bleemer provides a

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(4) Sander cites few peer-reviewed studies in too the size of the entering California resident Sander cites his own study in claiming that at support of his specific claims about Prop 209; (and overall) freshman class expanded UC post-209 (especially UC Berkeley and the ones he does cite are cherry-picked and are considerably at most UC campuses in the late- UCLA) the “likely reason for the jump in not representative of the broader scholarship. 90s and early 2000s (e.g., UCD, UCI, UCR, enrollment rates was the eagerness of talented In summary, professor Sander’s level of disbelief UCSD and UCSC, plus UCM opened in 2005). Black and Hispanic students to attend a about Bleemer’s findings is not supported by the university where they would not be stigmatized as the beneficiaries of race-based admissions.” overall body of relevant peer-reviewed The chart below provides a more holistic view, showing that URMs were 38% of California (pp. 2-3, citing Antonovics & Sander, 2013) But scholarship. Rather, even for those preferring to public high school graduates in 1995 and this Sander is the only scholar purporting to find reserve judgment about questions of detailed increased steadily to 45% by 2005 and 59% by such a “warming effect” on yield rates after an methodological choices and findings in 2016. URMs were 20% of UC freshmen from affirmative action ban. Other peer-reviewed Bleemer’s new paper, it is notable that Bleemer’s these same California schools in 1995, which studies report that Prop 209 negatively core findings about URM student enrollment, dropped by one quarter (to 15%) when Prop 209 impacted URM freshmen yield rates to UC graduation rates and earnings are actually in the took effect in 1998. While the share of URM (more so at the higher end of the admit pool) direction of what one would generally expect freshmen at UC inched back up in later years, it and corresponded with a rise in URMs choosing based on the preponderance of the relevant is still the case (as reported at UC Regents) that to enroll at selective private universities with peer-reviewed research. “while the proportion of public high school affirmative action (Geiser & Caspary, 2005; graduates becomes more diverse, freshman Kidder 2013). Bleemer, using robust National II. UC Freshmen Enrollment & Yield enrollment at the University has not kept pace Student Clearinghouse data, similarly finds: with the state’s diversity” (p. 5) (see also findings “After Prop 209, high-AI [academic index] Bleemer estimates “Prop 209 caused an annual in Long & Bateman, 2020; Kidder 2013:104-105). URM applicants tended to flow from UC’s decline in URM UC enrollment of about 800 more-selective campuses to less-selective students in 1998-99, or 14 percent” (Bleemer URM Students in California and UC, 1995-2016 campuses and – especially among Black 2020a: 19 n.65), a figure that represents an effort applicants – elite private universities, while to calculate joint application, admission, yield lower-AI URM applicants mostly flowed to and enrollment effects compared to a counterfactual less-selective California colleges and without Prop 209 that holds other factors equal universities.” (2020a:2; see also Grodsky & (see Bleemer 2020b: Table A-7). For this reason, Kurlaender, 2010) Sander’s discussion of UC freshman enrollment statistics (pp. 1-3) detours into a different topic Likewise, quality peer-reviewed studies of the and hardly casts doubt on Bleemer’s findings. Texas affirmative action ban and ten percent plan also account for private colleges when Moreover, important trends unrelated to Prop. modeling Black and Latinx enrollment choices 209 are performing the heavy labor behind Dr. (Niu and Tienda, 2008; Niu, Tienda and Cortes, Sander’s claim that “number of URMs at the 2006), contra Sander’s method. Moreover, the university was in fact higher, not lower, within Sander study of yield rates did not account for a couple of years of Prop 209’s implement- confounders including the post-209 bump in the tation…” (p. 2) Namely, the population of URM proportion of URMs who are recruited student- high school graduates in California kept (data from UC Regents 3/19/20, Item B6 p.5) athletes (who have yield rates double other growing in the late-1990s and thereafter, and so freshmen) and the fact that UC lowered tuition in

www.civilrightsproject.ucla.edu Civil Rights Project/Proyecto Derechos Civiles, September 2020 corrected version 2 the late-1990s at the same time that its U.S. Fisher & Massey 2007; Massey & Mooney 2007; Relatedly, other studies show labor market peer/competitor universities raised tuition. Small & Winship 2007; Alon & Tienda 2005; benefits (for URMs and/or others) of attending Bowen & Bok 1998; Kane 1998). The Bleemer a public flagship university compared to similar III. Graduation Rates paper is important because of the richness of his students attending other institutions, or data and methods, not because his findings attending four-year publics versus community Sander claims that addressing the “mismatch” about URM graduation rates and Prop 209 are colleges, etc. (Andrews et al. 2016, 2020; Smith problem for URM students and boosting their somehow novel or facially implausible. et al. 2020; Cohodes & Goodman, 2014; graduation rates is one of the “the most Hoekstra 2009; Black et al. 2005). important benefits of Prop 209.” (p. 3) Sander cites few research studies to support his view, IV. Earnings in the Labor Market V. Conclusion but his citation to the study of UC by Bleemer’s paper includes data on the subsequent Arcidiacono et al. (2014) notes mention. wages of UC applicants by linkage to Professor Sander’s claims about Prop 209 in his Bleemer both replicates the Arcidiacono et al. longitudinal records from the California rebuttal to the Bleemer paper are not consistent estimates of graduation rates and explains why Employment Development Department, leading with the overall body of relevant peer-reviewed those estimates of Prop 209’s effect on to his finding that “Prop 209 led URM UC scholarship. Rather, Mr. Bleemer’s findings graduation rates fade away when more robust applicants to earn five percent lower average about URM enrollment, graduation rates and controls are introduced (Bleemer 2020b: 46-48). annual wages between ages 24 and 34 than they earnings under Prop 209 are broadly consistent Relatedly, others researchers point out that the would have earned had affirmative action with the preponderance of peer-reviewed upward trend in UC graduation rates due to continued, with larger proportional effects for research studies. Dr. Sander substantially increased selectivity is something to properly lower-AI applicants.” (2020a: 3) Other than distinguish from Prop 209 admissions changes expressing disbelief, Sander has nothing to say overstates the role of Prop 209 in positively (Chang & Rose 2010:83; Chingos 2013; Kidder about these findings. shaping URM patterns of enrollment and B.A. 2013:105-108; Kidder & Onwuachi-Willig 2014: degree attainment at UC and his rebuttal paper 912-915), which the Arcidiacono study attempts Just as with graduation rates, a body of peer- does not seriously engage with or critique the to account for but with limited success due to reviewed research finds that affirmative action findings and methods in Mr. Bleemer’s recent constraints in their source UC data obtained is associated with positive labor market paper. from Sander. outcomes/earnings for African American and Latinx attendees of selective U.S. colleges and + Prepared by William C. Kidder, J.D., research In the final analysis, a strong preponderance of universities, often using a variety of methods to associate at the UCLA Civil Rights Project. This peer-reviewed research, using a variety of control for selection bias (Dillon & Smith 2020; represents my own research views, and is not empirical strategies, disconfirm Sander’s basic Dale & Krueger 2014; Long 2010; Daniel et al. intended to represent the views of the UCSC (or UC claim that affirmative action harms Black and 2001). The Dale & Krueger “matching” Latinx overall graduation rates/attainment at methodology is respected by a range of scholars system) administration. selective U.S. universities (Dillon & Smith 2020, including Sander (Sander & Taylor 2012:108), 2017; Lutz et al. 2018, 2019; Eller & DiPrete, but possibly errs on the side of understating labor References 2018; cf. Goodman et al. 2017; Alon 2015; Kidder market returns of attending a selective college Alon, Sigal. 2015. Race, class, and affirmative action. Russell Sage & Lempert 2015; Hinrichs 2014; Arcidiacono & (see Hoxby 2009). It is notable then, that Dale Foundation. Koedel 2014; Golann et al. 2013; Cortes 2010; & Krueger found mixed results for students Alon, Sigal and Tienda Marta. 2005. “Assessing the ‘Mismatch’ Chang & Rose 2010; Bowen et al. 2009; overall, yet found larger wage benefits for African Hypothesis: Differences in College Graduation Rates by Espenshade & Radford 2009; Melguizo 2008; Americans and Latinx students (2014:325-26). Institutional Selectivity.” Sociology of Education 78(4):294–315.

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Andrews, Rodney J., Jing Li, and Michael F. Lovenheim. 2016. Chingos, Matthew M. 2013. Are Minority Students Harmed by Hoekstra, Mark. 2009. "The effect of attending the flagship "Quantile treatment effects of college quality on earnings." Affirmative Action?. Brown Center Chalkboard series at state university on earnings: A discontinuity-based approach." Journal of Human Resources 51, no. 1 (2016): 200-238. Brookings. The Review of Economics and Statistics 91, no. 4: 717-724. Andrews, Rodney J., Scott A. Imberman, and Michael F. Dale, Stacy Berg and Krueger, Alan. 2014. “Estimating the Hoxby, Caroline M. 2009. "The changing selectivity of Lovenheim. 2020. "Recruiting and supporting low-income, Effects of College Characteristics over the Career Using American colleges." Journal of Economic perspectives 23, no. 4: 95- high-achieving students at flagship universities." Economics of Administrative Earnings Data.” Journal of Human Resources 118. Education Review 74: 101923. 49(2):323–58. Kane, Thomas J. 1998. “Racial and ethnic preferences in college Antonovics, Kate L., and Richard H. Sander. 2013. “Affirmative Daniel, Kermit, Dan A. Black, and Jeffrey Smith. 2001. "Racial admissions.” In C. Jencks & M. Phillips (eds.), The Black–White Action Bans and the ‘Chilling Effect.’” 2013. American Law and differences in the effects of college quality and student body test score gap (p. 431–456). Brookings Institution Press. Economics Review 15: 252-299. diversity on wages." In Diversity Challenged (Gary Orfield ed.). Kidder, William C. 2013. "Misshaping the river: Proposition Cambridge: Harvard Education Publishing Group. Arcidiacono, Peter, Esteban Aucejo, Patrick Coate, and V. 209 and lessons for the Fisher case." Journal of College & Univ. Joseph Hotz. 2014 "Affirmative action and university fit: Dillon, Eleanor Wiske and Jeffrey Andrew Smith. 2020. “The Law 39: 53-126. (A longer 2012 version is available here as a Evidence from Proposition 209." IZA Journal of Labor Economics Consequences of Academic Match between Students and Civil Rights Project working paper). 3, no. 1: 7. Colleges.” Journal of Human Resources 55 (3):767–808. Kidder, William C., and Angela Onwuachi-Willig. 2014. "Still Arcidiacono, Peter, and Cory Koedel. 2014. "Race and college Dillon, Eleanor, and Jeffrey Smith. 2017. “Determinants of the Hazy after All These Years: The Data and Theory behind success: Evidence from Missouri." American Economic Journal: Match between Student Ability and College Quality.” Journal of Mismatch." Texas Law Review, 92:895-941. Applied Economics 6, no. 3: 20-57. Labor Economics 35(1):45–66. Kidder, William C. and Lempert, Richard O. 2015. "The Black, Dan, Kermit Daniel, and Jeffrey Smith. 2005. "College Eller, Christina Ciocca and Thomas A. DiPrete. 2018. "The Mismatch Myth in U.S. Higher Education: A Synthesis of the quality and wages in the United States." German Economic paradox of persistence: explaining the black-white gap in Empirical Evidence at the Law School and Undergraduate Review 6, no. 3: 415-443. bachelor’s degree completion." American Sociological Review 83, Levels" in Affirmative Action and Racial Equity: Considering the no. 6: 1171-1214. Evidence in Fisher to Forge the Path Ahead, Uma M. Jayakumar and Bleemer, Zachary. 2020a. "Affirmative Action, Mismatch, and Liliana M. Garces (eds.). Expanded version available at SSRN. Espenshade, Thomas J., and Alexandria Walton Radford. Economic Mobility After California’s Proposition 209." UC Long, Mark. 2010. Changes in the Returns to Education and Berkeley CSHE ROPS paper. 2009. No Longer Separate, Not Yet Equal. Princeton, NJ: Princeton University Press. College Quality.” Economics of Education Review, 29(3):338– Bleemer, Zachary. 2020b. "Affirmative Action, Mismatch, and 47. Economic Mobility After California’s Proposition 209." Fischer, Mary J., and Douglas S. Massey. 2007. "The effects of Long, Mark and Nicole A. Bateman. 2020. “Long-Run Changes Extended version. affirmative action in higher education." Social Science Research 36, no. 2: 531-549. in Underrepresentation After Affirmative Action Bans in Bowen, William, Chingos, Matthew and McPherson, Michael. Public Universities.” Educational Evaluation and Policy Analysis 42 2009. Crossing the Finish Line: Completing College at America’s Public Golann, Joanne W. Kerstin Gentsch, Chang Y. Chung, and (2):188–207. Thomas J. Espenshade. 2013. “Does the ‘Mismatch Hypothesis’ Universities. Princeton, NJ: Princeton University Press. Apply to Hispanic Students at Selective Colleges?” In B. Gastic Lutz, Amy, Pamela R. Bennett, and Rebecca Wang. 2019. Bowen, William and Bok, Derek. 1998. The Shape of the River: & R.R. Verdugo (eds.) The Education of the Hispanic Population: “How Affirmative Action Context Shapes Collegiate Long-Term Consequences of Considering Race in College and University Selected Essays. Charlotte, NC: Information Age Publishing. Outcomes at America’s Selective Colleges and Universities." Journal of Law and Social Policy 31, no. 1: 71-91. Admissions. Princeton, NJ: Princeton University Press. Goodman, Joshua, Michael Hurwitz, and Jonathan Smith. Cohodes, Sarah R., and Joshua S. Goodman. 2014. "Merit aid, 2017. "Access to 4-year public colleges and degree completion." Lutz, Amy, Pamela R. Bennett, and Rebecca Wang. 2018. college quality, and college completion: Massachusetts' Adams Journal of Labor Economics 35, no. 3: 829-867. "Mismatch and academic performance at America’s selective scholarship as an in-kind subsidy." American Economic Journal: colleges and universities." Ethnic and Racial Studies 41, no. 14: Grodsky, Eric and Kurlaender, Michal. 2010. “The 2599-2614. Applied Economics 6, no. 4: 251-85. demography of higher education in the wake of affirmative

action.” In Equal opportunity in higher education: the past and future of Massey, Douglas S., and Margarita Mooney. 2007. "The effects Chang, Tongshan, and Heather Rose. 2010. "A portrait of California’s Proposition 209 (E. Grodsky & M. Kurlaender, eds.): of America's three affirmative action programs on academic underrepresented minorities at the University of California, 33-58. performance." Social Problems 54, no. 1: 99-117. 1994–2008." In Equal opportunity in higher education: the past and future of California’s Proposition 209 (E. Grodsky & M. Hinrichs, Peter. 2014. "Affirmative action bans and college Melguizo, Tatiana. 2008. "Quality matters: Assessing the Kurlaender, eds.): 83-102. graduation rates." Economics of Education Review 42: 43-52. impact of attending more selective institutions on college completion rates of minorities." Research in Higher Education 49, no. 3: 214-236.

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Niu, Sunny Xinchun, Marta Tienda, and Kalena Cortes. 2006. “College selectivity and the Texas top 10% law,” Economics of Education Review 25: 259-272. Niu, Sunny Xinchun, and Marta Tienda. 2008. “Choosing colleges: Identifying and modeling choice sets,” Social Science Research 37: 416-433. Sander, Richard. 2019. "Replication of mismatch research: Ayres, Brooks and Ho." International Review of Law and Economics 58: 75-88. Sander, Richard, and Stuart Taylor Jr. 2012. Mismatch: How Affirmative Action Hurts Students It S Intended to Help, and Why Universities Won T Admit It. Basic Books. Small, Mario L., and Christopher Winship. 2007. "Black students’ graduation from elite colleges: Institutional characteristics and between-institution differences." Social Science Research 36, no. 3: 1257-1275. Smith, Jonathan, Joshua Goodman, and Michael Hurwitz. 2020. The Economic Impact of Access to Public Four-Year Colleges. No. w27177. National Bureau of Economic Research paper.

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ASSEMBLY THIRD READING ACA 5 (Weber, et al.) As Amended May 4, 2020 2/3 vote

SUMMARY:

Amends the California Constitution by repealing Section 31 of Article I relating to the prohibition against discrimination or preferential treatment, among other provisions.

Major Provisions 1) Repeals provisions enacted pursuant to Proposition 209 in 1996 that prohibit the state and all institutions and political subdivisions thereof from discriminating against, or granting preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.

2) States legislative findings in this regard.

COMMENTS:

1) Brief History of Proposition 209 and Relevant Legal Decisions

Proposition 209, also known as the "California Civil Rights Initiative," amended the California Constitution by adding Section 31 of Article I. This statewide ballot proposition was placed before California voters during the 1996 November General Election and received approximately 55 percent of votes cast in favor of its passage. Generally, and as stated under "Existing Law," this initiative prohibited all government agencies and institutions from giving preferential treatment to individuals on the basis of race or sex.

During the late 1970s, the use of racial quotas and minority set-asides led to court challenges of affirmative action as a form of "reverse discrimination." The origins of Proposition 209 partly stem from the judicial decision in Bakke.1 Similar to the history of affirmative action, the passage of Proposition 209 has, and continues to be, not without controversy. Indeed, in private and public discourse there are numerous arguments for and against the moral, social, philosophical, political, economic, and legal aspects of Proposition 209, and the effects that it, and other similar laws have on the pillars on which the United States was founded and the societal values of California. While Proposition 209 reversed decades of California policies that afforded preferential treatment, as of this writing, Proposition 209 continues to withstand legal scrutiny, for right or wrong depending on perspective, following numerous lawsuits challenging its enforcement. A couple of these legal challenges are discussed directly below.

The case of Hi-Voltage Wire Works, Inc. v. City of San Jose involved a legal challenge that a program required contractors bidding on city projects use a specified percentage of minority and women subcontractors, or document efforts to include such subcontractors in their bids. In this case, Hi-Voltage Wire Works, Inc. intended to only use its personnel on a project, was unable to comply with the requirement, and its bid was rejected. Hi-Voltage sued alleging that the

1 See Regents of the University of California v. Bakke, 438 U.S. 265 (1978) ACA 5 Page 2 requirement to give preferential treatment to anyone on the basis of race or sex violated Section 31 of Article I. The California Supreme Court affirmed the holding of the appellate court which ruled that the intention of Section 31 was to reinstitute those principles forbidding discrimination which were present in state and federal jurisprudence in the original construction of the Civil Rights Act, and prohibited the preferential treatment contemplated by the [city's] program. Section 31 did not require Hi-Voltage to violate any federal statutory or constitutional provision.2

In Coral, the contractors challenged an ordinance in the City and County of San Francisco that required preferential treatment to women and minorities in the awarding of contracts. The California Supreme Court held that Section 31 of Article I, which forbid a public entity awarding public contracts to discriminate or grant preferential treatment based on race or gender, did not violate the political structure doctrine. Section 31 prohibited race- or gender-conscious programs the federal Equal Protection Clause permitted, but did not require. Instead of burdening the right to equal treatment, Section 31 directly served the principle that all government use of race had to have a logical endpoint. Further, a core purpose of the Equal Protection Clause was to do away with all governmentally imposed discrimination based on race, ultimately creating a political system in which race no longer mattered. The federal funding exception in subdivision (e) of Section 31 did not exempt the ordinance from Section 31's general prohibition on racial preference.3

2) Facts, Numbers, Data, and Information: Are They Relative?

The dichotomy inherent in competing reports, statistics, surveys and other forms of research regarding the effects of affirmative action or Proposition 209 continues, and will likely continue in the foreseeable future. However, one may plausibly argue that it ultimately is up to the recipient of the information to make a determination whether to accept the information as reasonable or valid. Relating to Assembly Constitutional Amendment 5, the ultimate determination could be made by California voters.

3) Voter Choice

External to the Legislature, Proposition 209 was independently placed on the ballot for consideration by the electorate. As with all other measures placed on the ballot, California voters were afforded an opportunity to either pass or reject that measure. Assembly Constitutional Amendment 5 is an attempt by the author via the Legislature, to provide California voters another opportunity to pass or reject a change in the policy of the state which has become more diverse, and is the most diverse among the States, since the passage of Proposition 209 over two decades ago.

This Constitutional Amendment, in and of itself, cannot and will not change the policy of the state with respect to Section 31 of Article I of the California Constitution absent submittal to the voters for consideration and passage by the voters.

In sum, the fundamental question relating to this proposal is whether the various policy and fiscal committees, and the full body of each house of the Legislature (with the requisite number of

2 See Hi-Voltage Wire Works, Inc. v. City of San Jose, 24 Cal. 4th 537 (2000) 3 See Coral Construction, Inc. v. City and County of San Francisco, 50 Cal. 4th 315 (2010) ACA 5 Page 3 votes) ultimately deem that voters should be afforded another opportunity to change the policy of the state regarding this subject?

4) Other Important Information

Please see the policy committee analysis for a full discussion of this Constitutional Amendment.

According to the Author: "Californians have built the fifth largest and strongest economy in the world, but too many hardworking Californians are not sharing in our state's prosperity--particularly women, families of color, and low-wage workers. Assembly Constitutional Amendment 5 will help improve all of our daily lives by repealing Proposition 209 and eliminating discrimination in state contracts, hiring and education. [This Constitutional Amendment] is about equal opportunity for all and investment in our communities."

Arguments in Support: Numerous proponents of this measure cite various studies, statistics and other data, including legal decisions, regarding Proposition 209 and its long-term effects on California since passage by the voters in 1996.

In sum, proponents generally state that the effects of Proposition to 209 have, overall, not been beneficial to California relating to education, public contracting, and public employment. Proponents also generally state that, as Proposition 209 continues to exist more than two decades later, since that time, California has substantially changed relative to population demographics, education, public employment, and public contracting. As such, the social and economic fabric of the state have changed and voters should be permitted an opportunity to reconsider the merit or necessity of this statewide policy.

Arguments in Opposition: Several opponents cite the Fourteenth Amendment of the United States Constitution regarding equal protection of the law; that this Constitutional Amendment would reintroduce racial preference in California in violation of law and court decisions; that Proposition 209 does not categorically prohibit affirmative action, and that this measure constructs a false narrative of racial inequities.

In addition, some opponents state that the measure will create division among race or ethnic demographics and would minimize the importance of the contributions of minority groups as a result of preferential treatment.

FISCAL COMMENTS:

According to the Assembly Appropriations Committee, this bill would result in "[o]ne-time [General Fund (GF)] costs to the Secretary of State in the hundreds of thousands of dollars for printing and mailing costs to place the measure on the ballot in a statewide election. Actual costs may be higher or lower, depending on the length of required elements and the overall size of the ballot. Over the last three election cycles, the printing and mailing costs per page averaged around $80,000."

The Appropriations Committee also states that the bill would result in "[a]dditional indirect administrative cost pressures to state agencies and the University of California (UC) and ACA 5 Page 4

California State University (CSU) of unknown amounts if voters approve this constitutional amendment. Though this measure does not directly require any state agency or public education entity to change hiring, contracting or admission practices, it is likely they will face pressure to do so. Examples of possible new state costs include:

1) "GF costs for UC and CSU in excess of $300,000 each to the extent either segment develops and implements a revised admissions policy that considers specific demographic factors.

2) "Additional GF costs if the state adopts bid preference policies designed to increase state contracting with minority-or-women owned businesses. Bid preference policies can be a helpful tool to use the purchasing power of the state to support certain types of businesses, but they can also increase the costs of contracting out for goods and services.

3) "Additional GF costs, likely in the hundreds of thousands of dollars, for the California Department of Human Resources to revamp hiring practices to accommodate new hiring programs or standards."

VOTES:

ASM RULES: 7-2-3 YES: Cooley, Carrillo, Grayson, Kamlager, Ramos, Robert Rivas, Wicks NO: Flora, Mathis ABS, ABST OR NV: Cunningham, Maienschein, Quirk-Silva

ASM PUBLIC EMPLOYMENT AND RETIREMENT: 6-1-0 YES: Rodriguez, Voepel, Cooley, Cooper, O'Donnell, Reyes NO: Fong

ASM APPROPRIATIONS: 11-5-2 YES: Gonzalez, Bauer-Kahan, Bloom, Bonta, Calderon, Carrillo, Eggman, Gabriel, Eduardo Garcia, McCarty, Robert Rivas NO: Bigelow, Megan Dahle, Diep, Fong, Voepel ABS, ABST OR NV: Chau, Petrie-Norris

UPDATED:

VERSION: May 4, 2020

CONSULTANT: Michael Bolden / P.E. & R. / (916) 319-3957 FN: 0002865 SENATE RULES COMMITTEE ACA 5 Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478

THIRD READING

Bill No: ACA 5 Author: Weber (D), Gipson (D), Gonzalez (D) and Santiago (D), et al. Amended: 5/4/20 in Assembly Vote: 27

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 4-1, 6/17/20 AYES: Hill, Jackson, Mitchell, Pan NOES: Morrell

SENATE APPROPRIATIONS COMMITTEE: 5-2, 6/23/20 AYES: Portantino, Bradford, Hill, Leyva, Wieckowski NOES: Bates, Jones

ASSEMBLY FLOOR: 60-14, 6/10/20 - See last page for vote

SUBJECT: Government preferences SOURCE: California Faculty Association Chinese for Affirmative Action

DIGEST: This constitutional amendment asks the voters of California to vote on permitting the use of race, gender, and ethnic diversity as factors (but not decisive factors) in college admissions, government hiring, and government contracting. ANALYSIS: Existing law: 1) Provides that no state “shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” This article is also known as the Equal Protection Clause. (U.S. Constitution, Article 14)

ACA 5 Page 2

2) Provides that “the use of race in admissions decisions to further a compelling interest in obtaining the educational benefits that flow from a diverse student body is not prohibited by the Equal Protection Clause…” (Grutter v. Bollinger, 539 U.S. 306 (2003)) 3) Prohibits the use of racial quotas in the admission decisions, and provides that the use of race in admissions decision must be individualized, narrowly tailored, and cannot be decisive. (Regents of the University of California v. Bakke, (438 U.S. 265 (1978)) and Gratz v. Bollinger, 539 U.S. 244 (2003)) 4) Prohibits the State of California from discriminating against, or granting preferential treatment to, “any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.” (California Constitution, Article I, §31, enacted through Proposition 209 (1996)) This constitutional amendment: 1) Repeals Article I, Section 31 of the California Constitution, permitting the use of race and gender as decision factors in public employment, public education, and public contracting. 2) Makes findings and declarations on how Article 31 (Proposition 209) invalidated a series of laws that required state agencies to eliminate traditional patterns of segregation and exclusion in the workforce, and the intent of the Legislature to allow the consideration of gender, racial, and ethnic diversity among factors for college admissions and government hiring and contracting. Comments 1) Proposition 209 (1996) and “Color-Blindness”: A Retrospective In 1996, the voters of California passed Proposition 209 by a 55%-45% margin. Nearly 25 years out, the reasons for the passage of this proposition have receded into rearview for many Californians – and for many others, they were not born or did not reside in California. It is worth revisiting some of the primary beliefs and ideas behind Proposition 209. One of the coauthors of the California Civil Rights Initiative (which became Proposition 209) was Glynn Custred, an anthropologist with California State University, Hayward (now East Bay). In a history of Proposition 209, The Color Bind: California’s Battle to End Affirmative Action, Custred described

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his journey to opposing affirmative action as born from his discomfort with diversity and multiculturalism: As an anthropologist, I know that when you’ve got diversity, you’ve got a problem, which means that you’ve got to come up with ways to deal with it in the most realistic way possible.1 Custred also described multiculturalism as “terribly misguided”2 and was concerned that a peaceful America was not possible without a common ground between all Americans. 3 Where America would find Custred’s common ground is unclear, but apparently, it was not found in either multiculturalism or diversity. Rather, noting the text of the California Civil Rights Initiative, the common ground is in the denial of differences: a color-blind and gender-blind society. Yet, the California Civil Rights Initiative (CCRI) would not have become Proposition 209 without the support of Ward Connerly and Governor Pete Wilson. In late 1995, Ward Connerly, ally of Governor Wilson, took over at the Chair for the initiative, and the California Republican Party gave the campaign $500,000.4 Governor Wilson, who was running for the Republican nomination for President, had recently found political success in using the ballot initiative process (specifically Proposition 187 of 1994) as a wedge issue to drive electoral support from white men. Yet, for Proposition 209, both Connerly and Wilson focused on the need for a colorblind society. Specifically, the official Proposition 209 ballot arguments, Governor Wilson and Connerly argued that: The only honest and effective way to address inequality of opportunity is by making sure that all California children are provided with the tools to compete in our society. And then let them succeed on a fair, color-blind, race-blind, gender-blind basis. Additionally, in a 1997 interview with the New York Times, Connerly claimed to be blind to race, celebrated the “melting pot”, and look forward to the end of race in American society:

1 Chávez, Lydia. The Color Bind: California’s Battle to End Affirmative Action, University of California Press (Berkeley and Los Angeles), 1998. Pg. 1. 2 Ibid., Pg. 8. 3 Ibid., Pg. 7. 4 Ibid., Pg. 264.

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In 10 to 15 years, intermarriage will make this entire debate a moot one, anyhow, and we'll wonder why we didn't see it coming.5 2) A Brief Note on Disparities in the Workplace Despite Ward Connerly’s prediction, disparities and inequities between people of color and their white counterparts persist throughout American society. A recent study from the Economic Policy Institute showed that Black workers are twice as likely to be unemployed, and that a similar disparity exists among college-educated Black workers and their white counterparts.6 Nor does class or neighborhoods solely explain this gap – “controlling for parental incomes, Black boys have lower incomes in adulthood than white boys in 99% of Census tracts.”7 Similarly, the gender pay gap remains durable: the Institute for Women’s Policy Research on average, women make 82 cents for every dollar earned by men. If the United States maintains the current level of progress towards pay equity, it will take until 2059 to achieve pay equity. Yet, this figure obscures the racial and ethnic component of pay equity: Black women will not achieve pay equity with white men until 2130 and Latinas will not achieve pay equity with white men until 2224. Irrespective of the merits of a colorblind society, the data suggests that we are not currently living in one. Instead, the data suggests that we live in a deeply unequal society, where the tools to compete in society are unevenly distributed and distributed in a manner that perpetuates inequality between races and genders at all levels of class and society. ACA 5 asks voters if the State of California should acknowledge race and gender and permit their use as a factor in college admissions, government hiring, and government contracting. 3) Affirmative Action and Proposition 209: Bakke, Gratz, and Grutter “It is worth noting, perhaps, that governmental preference has not been a stranger to our legal life. We see it in veterans' preferences. We see it in the

5 Barry Bearak, Questions of Race Run Deep for Foe of Preference, The New York Times, July 27, 1997. Section 1, Page 1. Accessed on June 14, 2020 at: https://www.nytimes.com/1997/07/27/us/questions -of-race-run-deep-for- foe-of-preferences.html 6 “Black workers endure persistent racial disparities in employment outcomes”, Jhacova Williams and Valerie Wilson. Economic Policy Institute, August 27, 2019. Accessed at: https://www.epi.org/publication/labor-day- 2019-racial-disparities-in-employment/ 7 Chetty, Hendre, Jones, and Porter. “Race and Economic Opportunity in the United States: An Intergenerational Perspective”. Accessed at: http://www.equality-of-opportunity.org/assets/documents/race_paper.pdf

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aid-to-the-handicapped programs. We see it in the progressive income tax…. In order to get beyond racism, we must first take account of race. There is no other way. And in order to treat some persons equally, we must treat them differently. We cannot -- we dare not -- let the Equal Protection Clause perpetuate racial supremacy.” - Justice Harry Blackmun, Regents of Univ. of California v. Bakke, 438 U.S. 265 (1978) If the voters approve ACA 5, one of the more salient questions would be what is now permissible under the law. Fortunately, case law from the U.S. Supreme Court is quite clear on that matter. As noted above, the Supreme Court ruled in Bakke that UC Davis’s use of racial quotas for medical admissions was unconstitutional. Justice Powell, looking to Harvard’s admission policy for guidance, affirmed that it was constitutional for a school to use race or gender as a ‘plus’, but not as a decisive criterion for admission. In 2003, both Gratz and Grutter further affirmed and clarified Bakke on the permissible use of race in college applications. In Grutter, the Court found that race can be used as a factor to create a more diverse student body. However, in Gratz, the Supreme Court made clear that race cannot be the decisive factor: quotas or policies that admit applicants on the basis of race, without individual consideration, are unconstitutional. In short, the repeal of Proposition 209 would permit the use of race and/or gender as a ‘plus’ factor in college admissions, public employment, and public contracting. It would not permit the use of quotas or policies that broadly tailored and do not consider the totality of the individual college applicant, job applicant, or contract bidder. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee, ACA 5 results in one-time General Fund costs to the Secretary of State in the range of $480,000 to $640,000, likely in 2020-21, for printing and mailing costs to place the measure on the ballot in a statewide election. Actual costs may be higher or lower, depending on the length of required elements and the overall size of the ballot. SUPPORT: (Verified 6/17/20) California Faculty Association (co-source) Chinese for Affirmative Action (co-source) California Department of Insurance, Commissioner Ricardo Lara

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California State Controller, Betty T. Yee 10,000 Degrees AAPI Women Lead Abriendo Puertas/Opening Doors ACLU California ACLU, Northern and Southern California, and San Diego and Imperial Counties Advancement Project Advancing Justice-Asian Law Caucus African American Caucus of the California Democratic Party Alliance for Boys and Men of Color Alliance for Children's Rights American Descendants of Slavery American Federation of State, County and Municipal Employees, Local 3299 Anderson Baker Architects Anti-Defamation League Asian Americans Advancing Justice, California Asian Americans Advancing Justice, Los Angeles Asian Law Alliance Asian Pacific Policy and Planning Council Association of California State Employees with Disabilities Aypal: Building API Community Power Black Small Business Association of California Black Students of California United Brighter Beginnings Brother, Sons, Selves Coalition Building Blocks for Kids Bulosan Center for Filipino Studies California Association of Black Lawyers California Calls Action Fund California Change Lawyers California Commission on the Status of Women and Girls California Community College Chancellor Office California Democratic African American Party California Federation of Teachers California Hospital Association California Immigrant Policy Center California League of Conservation Voters California League of United Latin American Citizens California Nurses Association/National Nurses United California Pan-Ethnic Health Network

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California Reinvestment Coalition California State University California State University Northridge - Department of Asian American Studies California Teacher Association California Teamsters Public Affairs Council California YIMBY California-Hawaii State Conference of the NAACP Californians for Justice Californians Together Campaign for College Opportunity Canal Alliance Career Ladders Project Center for African Peace and Conflict Resolution Center for Leadership, Equity, and Research Child Care Law Center Children Now Children's Defense Fund-California Chinese American Progressive Action City of Oakland - City Attorney's Office Coalition for Humane Immigrant Rights Communities United for Restorative Youth Justice Community Coalition Community College League of California Community Legal Services in East Palo Alto Congregations Organized for Prophetic Engagement Consumer Attorneys of California Consumers for Auto Reliability and Safety Council on American-Islamic Relations, California Del Sol Group, Inc. Disability Rights California Disability Rights Education and Defense Fund Diversity in Leadership Institute East Bay Community Law Center East Bay La Raza Lawyers Association Education Board Partners Empowering Pacific Islander Communities Energy Convertors Ensuring Opportunity Campaign to End Poverty in Contra Costa County Equal Rights Advocates Faith in Action East Bay

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Faith in the Valley Families in Schools Fathers and Families of San Joaquin Food for People Fortune School of Education Fresno Metro Black Chamber of Commerce Friends Committee on Legislation of California Fund Her Future Leaders of America Gente Organizada GO Public Schools Greater Sacramento Urban League Hispanic Association of Colleges and Universities Hmong Cultural Center of Butte County Hmong Innovating Politics Inland Congregations United for Change InnerCity Struggle Innovate Public Schools International Action Network for Gender Equity & Law Just Equations Justice in Aging Khmer Girls in Action Kid City Hope Place Korean Resource Center La Comadre Lao Advocacy Organization of San Diego Lao American National Alliance Latino and Latina Roundtable of the San Gabriel and Pomona Valley Leadership Counsel for Justice and Accountability League of Women Voters of California Links, Incorporated Local Initiative Support Corporation Long Beach Coalition for Good Jobs and a Healthy Community Los Angeles Unified School District, Board District 1 Maternal and Child Health Access Mayor Eric Garcetti, City of Los Angeles Mayor Libby Schaff, City of Oakland Merriwether & Williams Insurance Services Mills Legal Clinic, Stanford Law Mt. San Antonio College

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National Association of Minority Contractors National Association of Social Workers, California National Association of Women Business Owners – California National Association of Women Business Owners – San Diego National Black Contractors Association National Center for Youth Law National Women’s Political Caucus National Women's Law Center New Life Christian Church Nextgen California Officers for Justice-Peace Officers Association Our Turn Pan African Global Trade and Investment Conference Parent Organizing Network Policy Link Power-Responsibility-Organization Education Public Advocates Inc. Public Counsel RDJ Enterprises, LLC Reappropriate Reinvent Stockton Foundation Resilience Orange County Rubicon Programs San Francisco African American Chamber of Commerce San Francisco Board of Supervisors, Second District Savvy Consulting Sierra Club California Social Justice Collaborative Somos Mayfair Southern California College Access Network Speak UP Stonewall Democratic Club Student Senate for California Community Colleges Students Making a Change Sycuan Band of the Kumeyaay Nation Teach for America, Bay Area Teach for America, California Capitol Valley Teach for America, Los Angeles Teach for America, San Diego Teach Plus

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The Cambodian Family Community Center The Desertsong Group The Education Trust – West The Fresno Center The Greenlining Institute The Hawk Institute The Praxis Project The Village Nation United Automobile Workers, Local 2865 United Cambodian Community United Negro College Fund University of California University of California Student Association University of California, Berkeley, School of Law University of Southern California, Race and Equity Center Vista Unified School District Western Center on Law and Poverty Working Hero Action Young Invincible 108 Individuals

OPPOSITION: (Verified 6/17/20)

Asian American Coalition for Education Organization for Justice and Equality San Diego Asian Americans for Equality Silicon Valley Chinese Association Foundation Silicon Valley Community United 173 individuals ARGUMENTS IN SUPPORT: Chinese for Affirmative Action argues the following in support: “California must rebuild stronger than ever after the devastating effects of COVID- 19. Chinese for Affirmative Action is committed to a more equitable California. ACA 5 will give our leaders the resources to support diverse small businesses and to get women and people of color back into the workforce with better jobs and higher wages. “The COVID-19 pandemic has forced Californians to confront California’s deep- seated inequality and far-reaching institutional racism. We have seen disproportionately high infection and death rates among African-Americans and

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Latinos, record job loss for nonessential employees in communities of color and the shuttering of minority-owned businesses across the state. “California’s ban on affirmative action after the enactment of Proposition 209 in 1996 prevents state leaders from taking active measures to address the root causes of these inequities. Small minority-owned businesses lose over $1.1 billion each year because of the ban on affirmative action in public contracting. African American and Latino students admitted to the University of California decreased between 12 and 60 percent depending on the campus. A striking shortage of physicians of color has been exacerbated since the ban on equal opportunity programs in state-run medical schools. “Nearly twenty-five years later, it is clear that the proposition has hurt, not helped, Californians by prohibiting time-tested affirmative action programs that bolster education and job opportunities for women and people from Black and Brown communities. We are a majority-minority state, yet our public institutions continue to favor white people and men. Passing ACA 5 is critical to building a stronger California that reflects our diversity and values. We respectfully urges the passage of this important measure to restore equal access to opportunity for all Californians.” ARGUMENTS IN OPPOSITION: The Silicon Valley Chinese Association Foundation, writes the following in opposition: “To understand ACA-5, we have to remember what Proposition 209 is. In November 1996, Proposition 209 (also known as the California Civil Rights Initiative) amended the state constitution to prohibit state government institutions from discriminating against, or granting preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting. In the 23 years that Proposition 209 took effect, California has become the most diversified state in the US. Also, we fully support comprehensive measures having since been introduced to help students from disadvantaged families obtain higher education. “On August, 28, 1962, MLK said, ‘I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character.’ Yet, 58 years later, some Californian legislators are proposing to entirely repeal Proposition 209 and unfairly roll the clock back to legalize discriminating a person based on her/his race, sex, color, ethnicity, or national origin. We are outraged!

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“The 14th Amendment of the US Constitution clearly states that no state shall deny to any person within its jurisdiction the equal protection of its laws. ACA-5 re- introduces racial presences, still a form of racial discrimination, into the state law. Therefore, it violates the US Constitution. It will divide California and pit one group of citizens against another simply based on their race, sex, color, ethnicity or national origin. It will minimize the accomplishments of minority groups to a simple result of preferential treatment, a blow to their extraordinary hard work and sacrifice.”

ASSEMBLY FLOOR: 60-14, 6/10/20 AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chiu, Cooley, Cooper, Daly, Eggman, Frazier, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Lackey, Levine, Limón, Low, Maienschein, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon NOES: Bigelow, Brough, Chen, Choi, Megan Dahle, Diep, Fong, Gallagher, Kiley, Mathis, Obernolte, Patterson, Voepel, Waldron NO VOTE RECORDED: Chau, Chu, Cunningham, Flora, Quirk

Prepared by: Gideon L. Baum / L., P.E. & R. / (916) 651-1556 6/23/20 17:38:40 **** END ****

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ACA-5 Government preferences. (2019-2020)

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Assembly Constitutional Amendment No. 5

CHAPTER 23

A resolution to propose to the people of the State of California an amendment to the Constitution of the State, by repealing Section 31 of Article I thereof, relating to government preferences.

[ Filed with Secretary of State June 25, 2020. ]

LEGISLATIVE COUNSEL'S DIGEST

ACA 5, Weber. Government preferences.

The California Constitution, pursuant to provisions enacted by the initiative Proposition 209 in 1996, prohibits the state from discriminating against, or granting preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting. The California Constitution defines the state for these purposes to include the state, any city, county, public university system, community college district, school district, special district, or any other political subdivision or governmental instrumentality of, or within, the state.

This measure would repeal these provisions. The measure would also make a statement of legislative findings in this regard.

Vote: 2/3 Appropriation: no Fiscal Committee: yes Local Program: no

WHEREAS, Equal opportunity is deeply rooted in the American ideals of fairness, justice, and equality. Programs to meet the goals of equal opportunity seek to realize these basic values. Equal opportunity not only helps individuals, but also helps communities in need and benefits our larger society. California’s equal opportunity program was upended by the passage of Proposition 209 in 1996; and

WHEREAS, Proposition 209, entitled the California Civil Rights Initiative, amended Article I of the California Constitution to prohibit race- and gender-conscious remedies to rectify the underutilization of women and people of color in public employment, as well as public contracting and education; and

WHEREAS, Proposition 209 invalidated a series of laws that had been enacted by the California Legislature over the 20 years prior to it that required state agencies to eliminate traditional patterns of segregation and exclusion in the workforce, to increase the representation of women and minorities in the state service by identifying jobs for which their employment was underrepresented due to discrimination, and to develop action plans to remedy such underrepresentation without effectuating quota systems; and

WHEREAS, Proposition 209 also overshadowed other landmark civil rights and antidiscrimination laws. In 1959, after a 37-year campaign by labor and civil rights groups, the Unruh Civil Rights Act was passed, which was the forerunner of the Civil Rights Act of 1964; and WHEREAS, As a result of the passage of Proposition 209, women and people of color continue to face discrimination and disparity in opportunities to participate in numerous forms of association and work that are crucial to the development of talents and capabilities that enable people to contribute meaningfully to, and benefit from, the collective possibilities of national life; and

WHEREAS, The State of California has provided employment opportunities for people of color and women of all races. However, lingering, and even increasing, disparity still exists, particularly for Asian Americans, Pacific Islanders, Black Americans, Latino Americans, Native Americans, and women, and should be rectified; and

WHEREAS, Proposition 209 has impeded California’s continuing interest in supporting the equal participation of women in the workforce and in public works projects, in addressing the historical and present manifestations of gender bias, and in promulgating policies to enforce antidiscrimination in the workplace and on public projects; and

WHEREAS, In the wake of Proposition 209, California saw stark workforce diversity reductions for people of color and women in public contracting and in public education. Studies show that more diverse workforces perform better financially and are significantly more productive and focused; and

WHEREAS, Since the passage of Proposition 209, the state’s minority-owned and women-owned business enterprise programs have been decimated. A 2016 study conservatively estimates that the implementation of Proposition 209 cost women and people of color over $1,000,000,000 annually in lost contract awards. Most procurement and subcontracting processes remain effectively closed to these groups due to the changes brought on by Proposition 209; and

WHEREAS, Women are vastly underrepresented among firms receiving public contracts and the dollars awarded to certified women-owned business enterprises fell by roughly 40 percent, compared to levels before Proposition 209. In addition, only one-third of certified minority business enterprises in California’s transportation construction industry are still in operation today, compared to 20 years ago; and

WHEREAS, Women, particularly women of color, continue to face unequal pay for equal work. White women are paid 80 cents to every dollar paid to white men doing the same work. Black women are paid 60 cents for every dollar paid to white men doing the same work and would theoretically have to work an extra seven months every year to overcome that differential. This persistent gender wage gap continues to harm women, their families, and communities; and

WHEREAS, Despite a booming economy with almost full employment, a persistent racial wealth gap remains rooted in income inequality. Improving minority access to educational and labor market opportunity reduces the wealth gap and strengthens the economy; and

WHEREAS, Proposition 209 has had a devastating impact on minority equal opportunity and access to California’s publicly funded institutions of higher education. This violates the spirit of the California Master Plan for Higher Education by making it more difficult for many students to obtain an affordable and accessible high quality public education. While federal law allows schools to use race as a factor when making admissions decisions, California universities are prohibited by Proposition 209 from engaging in targeted outreach and extra efforts to matriculate high-performing minority students. This reduces the graduation rates of students of color and, in turn, contributes to the diminution of the “pipeline” of candidates of color for faculty positions; and

WHEREAS, Since the passage of Proposition 209, diversity within public educational institutions has been stymied. Proposition 209 instigated a dramatic change in admissions policy at the University of California, with underrepresented group enrollment at the Berkeley and Los Angeles campuses of the University of California immediately falling by more than 60 percent and systemwide underrepresented group enrollment falling by at least 12 percent. Underrepresented group high school graduates faced substantial long-term declines in educational and employment outcomes as a result of these changes; and

WHEREAS, Among California high school graduates who apply to the University of California, passage of Proposition 209 has led to a decreased likelihood of earning a college degree within six years, a decreased likelihood of ever earning a graduate degree, and long-run declines in average wages and the likelihood of earning high wages measured by California standards. The University of California has never recovered the same level of diversity that it had before the loss of affirmative action nearly 20 years ago, a level that, at the time, was widely considered to be inadequate to meet the needs of the state and its young people because it did not achieve parity with the state’s ethnic demographics; and WHEREAS, The importance of diversity in educational settings cannot be overstated. The Supreme Court of the United States outlined the benefits that arise from diversity, as follows, “the destruction of stereotypes, the promotion of cross-racial understanding, the preparation of a student body for an increasingly diverse workforce and society, and the cultivation of a set of leaders with legitimacy in the eyes of the citizenry”; and

WHEREAS, Federal courts continue to reaffirm the value of diversity in favor of race conscious admissions, as exemplified by United States District Judge Allison D. Burroughs who stated, “race conscious admissions programs that survive strict scrutiny have an important place in society and help ensure that colleges and universities can offer a diverse atmosphere that fosters learning, improves scholarship, and encourages mutual respect and understanding. Further, Judge Burroughs recognized that there are no race-neutral alternatives that would allow a university to achieve an adequately diverse student body while still perpetuating its standards for academic and other forms of excellence; and

WHEREAS, It is the intent of the Legislature that California remedy discrimination against, and underrepresentation of, certain disadvantaged groups in a manner consistent with the United States Constitution and allow gender, racial, and ethnic diversity to be considered among the factors used to decide college admissions and hiring and contracting by government institutions; and

WHEREAS, It is further the intent of the Legislature that California transcend a legacy of unequal treatment of marginalized groups and promote fairness and equal citizenship by affording the members of marginalized groups a fair and full opportunity to be integrated into state public institutions that advance upward mobility, pay equity, and racial wealth gap reduction; now, therefore, be it

Resolved by the Assembly, the Senate concurring, That the Legislature of the State of California at its 2019–20 Regular Session commencing on the third day of December 2018, two-thirds of the membership of each house concurring, hereby proposes to the people of the State of California, that the Constitution of the State be amended as follows:

That Section 31 of Article I thereof is repealed. The Impact of Proposition 209 on California’s MWBEs

One Billion in Contract Dollars Lost Annually by Businesses Owned by Women and People of Color Due to Proposition 209

By Tim Lohrentz

Commissioned by the Equal Justice Society Made possible by a grant from the Surdna Foundation

February 2015 | equaljusticesociety.org This report was made possible by a grant from the Surdna Foundation. The Impact of Proposition 209 on California’s MWBEs One Billion in Contract Dollars Lost Annually by Businesses Owned by Women and People of Color Due to Proposition 209

Tim Lohrentz for the Equal Justice Society February 2015

Table of Contents

Executive Summary ...... 2

Methodology ...... 4

Background ...... 5

Examining the Impact of Proposition 209 on MWBE Procurement in California Jurisdictions ...... 6

State of California (all agencies) ...... 6

Los Angeles ...... 8

San Francisco ...... 9

San Diego ...... 10

Oakland ...... 10

San Jose ...... 11

California Department of Transportation (CALTRANS) ...... 11

Conclusion ...... 12

APPENDIX – Data Tables ...... 13

Acknowledgments and Credits ...... 17

Equal Justice Society 1 Executive Summary

Proposition 209, passed in November 1996, ended the use of race and gender conscious decision-making in California in the areas of public employment, public education, and public contracting or procurement. A major impact was in the public procurement process of the State of California as well as local governments. Minority and women business enterprises (MWBEs), which had been erasing the disparity between their availability and their utilization, were heavily impacted. Some never recovered.

This study attempts to quantify the impact by measuring the loss in contract dollars to those businesses. Proposition 209 caused the state and local governments to end their race-conscious contracting programs, resulting in a loss of $1 billion to $1.1 billion annually for MWBEs.

This study shows the following impacts in today’s dollars due to Proposition 209:

• The loss of about $820 million per year in MWBE contracts with the State of California

• The loss of about $200 million per year in MWBE contracts with the City/County of San Francisco, with some of this loss materializing immediately after Proposition 209 and additional losses following the 2004 Coral Construction case, which definitively ended San Francisco’s race-conscious procurement program

• The loss of about $30 million per year in MWBE contracts with the City of Oakland

• The loss of an estimated $20 million per year in MWBE contracts with the City of San Jose following the 2000 Hi-Voltage Wire Works case, which definitively ended San Jose’s race-conscious contracting program

• There are also numerous indirect impacts of Proposition 209 which this study does not attempt to quantify.

The largest loss in contracts for MWBEs was with the State of California, in which up to $823 million has been lost each year since Proposition 209. In fiscal year (FY) 1994-1995, $519 million was contracted to MWBEs, the equivalent of $823 million in October 2014 dollars. When the state ended its MWBE program, it appears that only a few MWBEs regained contracts with the state. There was only a negligible increase in Small Business Enterprise procurement with the state following Proposition 209, the main route to state contracts that would still be Figure 1 Annual Loss in MWBE Contracts in Dollars (October 2014 $) available for these minority- or women-owned small businesses.

The second largest loss of MWBE contracts 1,100,000,000 San Jose was with City and County of San Francisco. By 1,000,000,000 Oakland refusing to accept an unduly narrow reading San Francisco of the reach of Proposition 209, San Francisco 900,000,000 maintained its race-conscious program until 800,000,000 2004, when the Coral Construction legal 700,000,000 decision forced the City to end it. From 1992 to 19951, before Proposition 209, San 600,000,000 Francisco averaged $202 million per year (in 500,000,000 State of California October 2014 dollars) in contracts or sub- contracts to MWBEs. Contracts to MWBEs 400,000,000 dropped to an estimated $71 million in 300,000,000 FY 1997-98 while the city maintained the 200,000,000 provisions of its race conscious program that were legally defensible within Proposition 100,000,000 0

2 The Impact of Proposition 209 on California’s MWBEs 209. The percentage of contracts to MWBEs never recovered to pre-Proposition 209 levels. Furthermore, San Francisco appears to have stopped collecting and/or reporting MWBE data in the few years following the Coral Construction case, so it is not possible to know how far contracting with MWBEs dropped off. A likely estimate would be that the majority of contracting with MWBEs disappeared.

Additional impacts on MWBE contracts occurred in San Jose and Oakland. San Jose continued its MWBE sub-contracting goal and outreach program on city construction projects until the Hi-Voltage Wire Works decision in February 2000, which ruled against the City of San Jose’s MWBE policy. This resulted in a loss of approximately $20 million per year (in Oct. 2014 $) for MWBEs who sought to be sub-contractors on San Jose construction projects. The City of Oakland’s MWBE program reached levels of MWBE contracting above 30 percent, which was fully dismantled after Proposition 209, resulting in an approximate loss of $30 million per year (in Oct. 2014 $) for MWBEs.

Other jurisdictions were indirectly impacted by Proposition 209. CALTRANS’ Disadvantaged Business Enterprise (DBE) program is driven by federal law, so it was not impacted by Proposition 209.2 However Proposition 209 contributed to an atmosphere where it became acceptable for many in the state to accept CALTRANS’ very low DBE goals and attainment. Los Angeles initiated a race-neutral program after the 1989 Croson decision,3 so its Minority, Women, and Other Business Enterprise (MWOBE) program was not impacted by Proposition 209. However, Proposition 209 took a potentially stronger race-conscious program off the table for Los Angeles MWBE advocates and policy-makers. San Diego ended its MWBE program several years prior to Proposition 209, following the 1989 Croson decision, so it was not impacted by Proposition 209, however, like Los Angeles, Proposition 209 limited the options of MWBE advocates.

The state MWBE program and the San Francisco MWBE program were consistent with the 1989 Croson decision and other national jurisprudence, including use of disparity studies. These programs, as well as the CALTRANS DBE program of the early 1990s, had some of the highest MWBE and DBE outcomes of any state or local program in the country. Even today, Maryland is one of the only states that can match the 19 percent MWBE spending that California attained from 1994 to 1995. Likewise, the CALTRANS DBE program attained 25 percent DBE spending from 1992 to 19954, before it was gutted by Governor Pete Wilson’s Executive Order W124-95 in June 1995. Few, if any, states today can match California’s 25 percent in the early 1990s. Similarly, San Francisco had an MWBE percentage of 31 percent from 1992 to 1995, which is higher than the MWBE percentage of any of the 20 largest cities today.

Comparing state MWBE contracting with state Small Business Enterprise (SBE) contracting between 1990 and 1997 shows that contracting levels of these two programs rose and fell together. While this paired trending might be coincidental, it is more likely that when the State felt an opening for more diverse procurement it found ways to increase both MWBE and SBE procurement. When the State felt pressure to decrease MWBE procurement, it also felt pressure to decrease SBE procurement. Therefore, it is not likely that most of the pressure against the MWBE program was coming from SBE firms, that is, small businesses owned by white males. Rather the pressure against both of these programs was likely coming from larger contractors, the main financial contributors to the campaign to pass Proposition 209, as well as other large businesses, including corporations.

1 July 1, 1992, to June 30, 1995.

2 CALTRANS MWBE program on projects only with state funds was ended June 30, 1997, with Proposition 209, just as with every state agency.

3 On January 23, 1989, the U.S. Supreme Court issued a 6-3 decision in City of Richmond v J.A. Croson Co. against the City of Richmond, Virginia’s ability to calibrate its MBE contracting goals to the percentage of minority population in the city. However, it upheld the right of the City of Richmond and all public entities to have race-conscious procurement programs based on availability as shown in disparity studies. It remains the primary legal decision guiding MWBE policies.

4 July 1, 1992, to June 30, 1995.

Equal Justice Society 3 Methodology

Proposition 209 not only ended race-conscious programs in California, it unnecessarily ended the collection of procurement data related to race, ethnicity, and gender in most jurisdictions of California that had previously been collecting that data.5 Therefore, it is only possible to state the potential loss of contract dollars due to Proposition 209 and not the actual dollars lost. In the case of San Francisco and Oakland, data began to be collected again only years later. However, too much time had passed in between to be able to properly use this data to measure the impact of Proposition 209. The question remains as to how much of the MWBE contracting prior to Proposition 209 continued after its passage, whether in a race-neutral SBE program or in the general procurement process of the jurisdiction.

One guide for this question is CALTRANS, which went from a 22 percent average DBE contracting, using a race-conscious approach in the four years prior to EO W124-95, to an average of 4.6 percent from FY 2007-2011 when using a completely race-neutral approach. The CALTRANS drop of 79 percent is one of the better indicators demonstrating how MWBE (DBE) contracting was impacted when a race-conscious approach changed to a race-neutral approach. Because California became more racially diverse in the years from the early 1990s to the late 2000s, the effective decline could be even greater than 79 percent.

Aside from CALTRANS federal projects, the only other jurisdiction that continued to collect MWBE data after Proposition 209 was the City of Los Angeles. Consistent Los Angeles data is limited only to the Department of Public Works, though. The Los Angeles data indicates that Proposition 209 may have had a negative impact on MWBE contracting, however it is an indirect impact since Los Angeles only had a race-neutral program prior to Proposition 209. This study mostly focuses on data from programs that were directly affected by Proposition 209 and not jurisdictions like CALTRANS or Los Angeles.

Most jurisdictions did not have a race-conscious contracting program in place at the time of Proposition 209, so they were not directly impacted by it. However, Proposition 209 prevented elected officials in those places, like Los Angeles and San Diego, from initiating a race-conscious program. This is an indirect impact that we take note of, but do not attempt to quantify.

For those jurisdictions with a race-conscious program, we use an average of several years of data rather than one year of data where possible, since percentages and dollar amounts can vary quite substantially from year to year. Fiscal years of the State of California and the various cities mentioned in the report are July 1 to June 30.

Generally, inflation-adjusted dollars to October 2014 are used throughout the report to make it easier for the reader to comprehend the scale of the loss of MWBE contracting opportunity. Data tables for jurisdictions include both nominal and inflation-adjusted dollar amounts.

5 The State of California, San Diego, Los Angeles County, Oakland, San Jose (after Hi-Voltage Wire Works), and San Francisco (from 2005 to about 2009), all stopped collecting procurement data based on race and gender after passage of Proposition 209, although San Diego, San Francisco, and Oakland have begun collecting that data more recently in their local small business programs. The failure of Proposition 54 in 2003 maintained the right of state and local governments to collect data based on race, ethnicity, and gender.

4 The Impact of Proposition 209 on California’s MWBEs Background

California was once a national leader in its affirmative action and race-conscious contracting programs. San Francisco and Oakland adapted quickly to the earlier mentioned 1989 Croson decision with disparity studies to guide their MWBE program formulation. California’s MWBE program applied in all state agencies, leading to one of the highest MWBE levels among the 50 states in FY 1994-95. Similarly, the DBE level of CALTRANS in the early 1990s was among the highest of all 50 state transportation agencies.

Some have argued that negative opinions of affirmative action were caused by fighting over a limited resource, be it admission to a prestigious university or contracting dollars. However, although there was a recession in 1990-1991, by 1992 the economy began a long period of growth. Any economic tensions leading to Governor Wilson’s Executive Order W124-95 in 1995 and Proposition 209 in 1996 were not fed by difficult economic times where different groups might be fighting for business survival. Rather, it would appear to come out of tension related to deciding who was going to benefit from the period of protracted economic growth in the mid-1990s.

At the same time, California was approaching “majority-minority” status in the mid-1990s. California went from 57 percent non-Hispanic white in 1990 to 47 percent non-Hispanic white in 2000, becoming majority-minority in 1997, just a few months after Proposition 209 passed. It is likely that white fears over losing majority status played a significant role in Proposition 209 passing. The combination of the nearing majority status for the state’s minorities, combined with protracted economic growth and an affirmative action program that benefited the state’s minorities, was a formula that favored what many advocates describe as a misinformation campaign that led to the passage of Proposition 209 in November 1996.

How California Lost Its National Leadership on Race Conscious Contracting

VOTE

1990: Pete Willson elected 1990s: State MWBE procurement 1992: Economy begins governor of California. levels and DBE contracting within period of growth. CALTRANS peak. 1995: Gov. Wilson begins run for President. His views on affirmative action shift.

1996: Proposition 209 passes. 1995: University of California Federal Judge Thelton Henderson Board of Regents votes to blocks its implementation, based discontinue use of race on his opinion that it violated the and gender in admissions Equal Protection Clause. 1997: State of California, Los Angeles County

and Oakland end MWBE programs.

1997: California becomes I I

I

I

majority-minority state. I

I

I

I

DENIEDI I 2000: San Jose ends MWBE program after the Hi-Voltage Wire Works decision. 1997: Three-judge panel in 2004: San Francisco ends MWBE program federal court upholds Prop. 209. after the Coral Construction decision.

Equal Justice Society 5 Just after Pete Wilson was elected Governor of California in November 1990, both state MWBE procurement levels and DBE contracting within CALTRANS were hitting their peak. For several years under Governor Wilson’s tenure, these programs continued to flourish.

In 1995 Wilson began to run for President on the Republican ticket. He announced his candidacy on August 29, 1995. In mid-1995, his actions and rhetoric towards affirmative action shifted. The first indication of this shift was on June 1, 1995, when Wilson signed the extensive Executive Order (EO) W124-95, which largely took aim at the state’s affirmative action in employment and contracting policies. Employment with the state seemed to be the main focus of the EO as it was mentioned several times, while state government contracting was mentioned only once. In practical terms, the only impact on government contracting was on the CALTRANS DBE program. University admissions policies were not mentioned. However, one month later, in July 1995, The University of California Board of Regents passed Special Policy 1 which discontinued the use of race and gender in admissions to the University of California system, which was in process when Proposition 209 was passed. As noted by many reports at the time, Wilson believed championing anti-affirmative action policies would bolster his presidential ambitions.6 After he dropped out of the race in October 1995, the anti-affirmative action forces continued to press forward with Proposition 209.

Proposition 209 passed in November 1996. Three weeks later, federal Judge Thelton Henderson blocked its implementation, based on his opinion that it violated the Equal Protection Clause. On April 9, 1997, a three-judge panel of the federal 9th Circuit Court of Appeals upheld Proposition 209, allowing it to become law. Curiously, California’s MWBE program did not end immediately but continued two and a half months until the end of the fiscal year, June 30, 1997.

While MWBE programs in Los Angeles County and Oakland ended soon after Proposition 209 passed, both San Jose and San Francisco continued their MWBE programs after the ballot measure, maintaining that the legal basis for such programs was established by disparity studies which not only allowed for, but required, remedial action. Furthermore, Proposition 209 itself required them not to discriminate based on race or gender – something which might occur without a race-conscious program. Both cities were sued. In both cases, courts ruled against the race-conscious programs.

San Jose ended its MWBE construction program after the Hi-Voltage Wire Works decision in 2000 and San Francisco ended its MWBE program after the Coral Construction decision in 2004, more than seven years after the passage of Proposition 209. San Francisco, unlike San Jose, eventually developed a race-neutral MWBE program. Examining the Impact of Proposition 209 on MWBE Procurement in California Jurisdictions

State of California (all agencies)

The largest procuring jurisdiction in California is the state government. State contracts are not concentrated in Sacramento, instead they are generally spread throughout the state. Given that the state had an equal opportunity procurement program prior to Proposition 209, the biggest impact of Proposition 209 on contracting was felt at the state government level. The state’s MWBE program was managed by the California Department of General Services. The state MWBE percentage reached 18.7 percent in FY 1994-95. Within the Department of General Services, the MWBE percentage made steady increases from FY 1988-89 to FY 1993-94, when it reached 23.3 percent of all state procurement. It slightly increased the next year, reaching 24.5 percent, before dropping below 20 percent in FY 1995-96 and FY 1996-97. The policy and program were discontinued July 1, 1997, as a result of Proposition 209.

6 http://www.nytimes.com/1995/06/02/us/california-governor-moves-quickly-against-affirmative-action.html

6 The Impact of Proposition 209 on California’s MWBEs Figure 2 MWBE and SBE Procurement by the California Department of General Service Before and After Proposition 209

35%

30%

25%

20%

15%

10%

5%

0% 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02

MBE% WBE% MWBE SBE%

Note: MBE includes women of color, while WBE does not. MWBE is simply the sum or MBE and WBE. Prior to 1996-97, SBE included primarily small businesses owned by white males.

Looking atFigure both the 3 MWBELos and Angeles the SBE Department procurement of lines Public of Figure Works 2, Contracting there are three with important MBEs and WBEs conclusions:

1. The growth18% of MWBE procurement by the Department of General Services (DGS) in the early 1990s was 16.4% accompanied16% by growth in SBE procurement (at that time, small businesses owned by white males). While procurement with these two segments grew, procurement from large contractors and other large businesses14% shrunk.This is demonstrated by the large14.0% gains in MWBE procurement from FY 1992-93 to FY 1994-95,12% just as the SBE program itself was reaching new heights, essentially doubling from FY 1992- 93 to FY 1993-94. 10% 2. As MWBE procurement with the DGS declined from FY 1994-95 to FY 1996-97, procurement with small 8% businesses, primarily owned by white males, also fell. SBE procurement dropped from 29 percent7.1% in FY 1994-956% to 26 percent in FY 1995-96, and then to 21 percent in FY 1996-97. This makes it appear as if the political forces that pushed for Proposition 209 in November 19966.3% were related to the large 4% 3.6% business economic forces that pushed for a larger2.5% state procurement share from 1995 to 1997 at the expense2% of both MWBE firms and white male SBE firms. 2.2% 1.7% 3. The DGS0% data makes it appear that few MWBE firms successfully entered the state’s race-neutral SBE program immediately1991-1995 following avg Proposition1997-2001 209, sinceavg the SBE procurement2001-2009 avg levels remained2011-2014 subdued avg until mid-1999. Then, during the first year of the Gray Davis administration, SBE procurement bounced back up to 25 percent in FY 1999-2000, perhapsMBE then including more WBEminority and women owned firms. Today, the State does ask firms to voluntarily indicate their MWBE status, but the reported MWBE procurement numbers are not reliable and therefore not comparable to the pre-Proposition 209 numbers, which were based on certified firms.

Like the SBE program of the state, the SBE program within CALTRANS saw a major up-tick during the Gray Davis administration, specifically in July 2000, the third year of his administration.

Equal Justice Society 7 Figure 2 MWBE and SBE Procurement by the California Department of General Service Before and After Proposition 209

35%

30%

25%

20% Los Angeles 15% Los Angeles does not have historical records for procurement in general. Instead there is a limited amount10% of data for one of the larger city departments, the Department of Public Works (DPW). City staff estimate that DPW contracting comprises about 30 percent of the city’s total procurement. Los Angeles5% reformulated its MWBE program into a mostly race-neutral Minority, Women, and Other Business Enterprise (MWOBE) program after the 1989 Croson decision.7 The MWOBE program was a modified SBE program0% which included outreach and voluntary sub-contracting with MBEs, WBEs, and OBEs (white-male owned business86-87 enterprises).87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02

Therefore, Proposition 209MBE% should not haveWBE% had a direct impactMWBE on the LosSBE% Angeles program. However, the numbers show a moderate drop after Proposition 209: MBE contracting fell from 16.4 percent in 1991-95 to 14.0 percent in 1997-2001.8 WBE procurement fell at a slightly faster pace, from 3.6 percent before to 2.5 percent after. Thus, Proposition 209 may have had slight impact on the program. The big drop in Los Angeles DPW contracting with MWBE firms happened from 2001 to 2009.

Figure 3 Los Angeles Department of Public Works Contracting with MBEs and WBEs

18% 16.4% 16% 14% 14.0% 12% 10% 8% 7.1% 6% 6.3% 4% 3.6% 2.5% 2% 2.2% 1.7% 0% 1991-1995 avg 1997-2001 avg 2001-2009 avg 2011-2014 avg

MBE WBE

The 2001 drop in MWBE contracting follows the San Jose Hi-Voltage Wire Works decision. It also roughly corresponds with the election of James Hahn as Mayor. It is not clear if the 2001 decline in MWBE contracting was due more to a reformulation of the program following the Hi-Voltage Wire Works decision or to a political change at the Mayor level. If the former, then Proposition 209 was a major contributor to the drop in MWBE contracting in Los Angeles during the 2000 decade.

7 The City of Los Angeles most likely could have maintained its race-conscious program if it had carried out a disparity study.

8 These periods are July 1, 1991, to June 30, 1995, and July 1, 1997, to June 30, 2001.

8 The Impact of Proposition 209 on California’s MWBEs Figure 4 Estimated Loss in Los Angeles DPW MWBE Contract Dollars Following Proposition 209

Year Range MBE Percentage Estimated Annual Loss WBE Percentage Estimated Annual Loss 1991-1995 16.4% N/A 3.6% N/A 1997-2001 14.0% $2,773,754 2.5% $1,258,374 2001-2009 6.3% *$11,573,330 1.7% *$2,099,353 2011-2014 7.1% *$10,592,427 2.2% *$1,526,802

* Dollars lost from 2001 to present might not be related to Proposition 209. Note: Based on the annual total contract value of $114,224,587, the 2011-2014 average. Actual annual total contracts are not available for previous years. All estimated annual losses are in January 1, 2013 dollars.

The change from 1991-1995 to 1997-2001 is the best estimate of the loss in MBE and WBE contracts within the Department of Public Works due to Proposition 209. The direct estimated loss due to Proposition 209 is $2.8 million annually for MBEs and $1.3 million annually for WBEs, in January 2013 dollars. Proposition 209 may be considered an indirect cause of the additional annual loss for 2001 and beyond, but internal dynamics within the City of Los Angeles are the likely primary cause. Since Los Angeles already had a race-neutral program prior to Proposition 209, the impact was not more substantial.

San Francisco

The City and County of San Francisco was the last jurisdiction in California to operate a race-conscious MWBE program following Proposition 209. Its program continued until 2004. Historically, San Francisco has had the strongest equal opportunity contracting programs of any local government in the state. There are four primary moments of change in San Francisco’s program:

In 1991 and 1992, the City responded to the Croson decision and an Associated General Contractors lawsuit, with a disparity study which led to a robust MWBE program consistent with Croson. One change was the addition of a sub-contracting program.

The response to Proposition 209 in FY 1996-97, led to a one-year drop in percentage of contract dollars to MWBE amounting to about 35 percent of pre-Proposition 209 levels. San Francisco modified its race and gender conscious program, with MWBE levels returning to about 60 percent of pre-Proposition 209 levels.

The Coral Construction decision in 2004, based on Proposition 209, stripped San Francisco of its race- conscious program.

In an effort to modernize the Local Business Enterprise (LBE) program, which includes MBE and WBE firms, the LBE program was moved from the Human Right Commissions to the Office of Contracts Administration, in the General Services Agency, in 2011. This brought the LBE program much closer to where contracts are administered, tracked, and reported. In addition, at this time numerous promising race-neutral practices were initiated or enhanced which could result in greater MWBE participation.

The percentage of Minority Business Enterprises (MBE) procurement in San Francisco averaged 21.5 percent from 1984 to 1987, based on the dollar value of contracts. A lawsuit from the Associated General Contractors (AGC) against the city in 1991 did little to change the long-term results of the MWBE program, as MBE procurement maintained itself at an estimated 25.3 percent from 1992 to 1995. Contracting to Women Business Enterprises (WBEs) - white women owned firms - increased from 2.6 percent prior to 1992 to an estimated 5.6 percent from 1992 to 1995. The overall rate of 30.9 percent procurement with MWBE firms from 1992 to 1995 was likely one of the highest city rates in the country.

Equal Justice Society 9 Figure 5 Summary of MWBE Contracting by San Francisco, 1984 to 2002

MBE percent WBE percent WBE/LBE percent MWBE percent

1984-1987 21.5% 2.6% 24.1%

1992-1995, annual average, 25.3%* 5.6%* 30.9% prime and sub

1997-2002, annual average, 14.1% 10.2% prime and sub

* estimate. Note: each beginning year commences July 1 and each end year terminates June 30.

At the time of Proposition 209’s passage, San Francisco operated its MWBE program under a policy encapsulated in the Civil Code Chapter 12.A.D. which remained law until the Coral Construction case in 2004. While the policy did not significantly change due to Proposition 209, the City made significant changes to the program. The level of MBE contracting fell dramatically from 25.3 percent prior to Proposition 209 to 14.1 percent in the first six years after Proposition 209. This drop of 11.2 percentage points resulted in an annual decline of an estimated $65 million to MBE firms each year from 1997 to 2002 (Oct. 2014 dollars).

It is not possible to calculate the change in WBE contracting following Proposition 209, as the city seemed to switch its data definitions to track WBE/LBE contracting together, which includes both Women Business Enterprises and Local Business Enterprises, which at that time meant local small businesses owned by white male(s).

San Francisco does not have sufficiently reliable MWBE data following the Coral Construction case to determine the precise drop-off caused by Proposition 209 and Coral Construction, but it is likely that MWBEs secured only a few San Francisco contracts. More recent MWBE data indicates that some of the pre-Coral procurement level has been gained back by MWBEs in San Francisco’s Local Business Enterprise program, which could be described as consisting of both a local SBE program and a race-neutral MWBE program.

San Diego

San Diego had an MWBE program up until the time of the Croson decision (1989-1990), when it was disbanded. Between 1990 and 1996 the City attempted some moderate race-conscious remedies, without a disparity study, but was challenged by the AGC. San Diego initiated a Local Small Business Enterprise program in 2010. The impact of Proposition 209 was negligible in San Diego, although it did close the door on the possibility of any initiative for a renewed race-conscious program.

Oakland

The City of Oakland, like San Francisco, had a race-conscious MWBE program prior to Proposition 209 that resulted in a high percentage of MWBE procurement. For the three fiscal years from July 1991 to June 1994, Oakland averaged $91.8 million annually in procurement. Over one-fourth of that – 28.4 percent – went to MBEs and another 4.8 percent went to WBEs. This ended with Proposition 209 although some firms entered Oakland’s Community Business Enterprise (CBE) program – a small business enterprise procurement program consisting only of local firms.

10 The Impact of Proposition 209 on California’s MWBEs Figure 6 Summary of Oakland MBE and WBE Procurement Prior to Proposition 209

Total MBE Amount MBE Percent WBE Amount WBE Percent Procurement (male and female) (Caucasian female) 1991-1994 $54,919,535 $15,609,638 28.4% $2,614,601 4.8% annual average Oct. 2014 $91,823,763 $26,098,832 $4,371,532 dollars

Note: Contracting information between 1994 and 2010 is not readily available.

From 2010 to May 2014, Oakland had MBE participation of 15.0 percent and WBE participation of 2.6 percent, through its CBE program which requires 20 percent participation of Local CBEs. Without late 1990s data, it is impossible to know the impact of Proposition 209. Current Oakland data for MWBE procurement indicates levels about half of those prior to Proposition 209.

San Jose

San Jose is another city where there was a significant drop-off in contracting to MWBEs due to Proposition 209, but where it is impossible to determine how much, due to a lack of data. A conservative estimate would be $20 million per year in today’s dollars.

First established in 1983, San Jose’s MWBE program applied to construction contracts over $50,000 – with participation goals of 5 percent that included good faith outreach to at least four MWBE firms in each trade, a program design that was based on the findings of the city’s 1990 disparity study. San Jose’s modest MWBE program continued beyond Proposition 209 until 2000, when the Hi-Voltage Wire Works decision ended the program. The City now has a Small Local Business Enterprise program which likely regains some of the previous MWBE contracting.

California Department of Transportation (CALTRANS)

CALTRANS greatly changed its Disadvantaged Business Enterprise (DBE) program 16 months before Proposition 209, due to Governor Wilson’s Executive Order (EO) W124-95, which called on the state to do no more than the minimum necessary under federal law. CALTRANS apparently interpreted this EO to mean that it should fulfill its DBE requirements under federal law using race-neutral means, something allowed by the Federal Highway Administration (FHWA) if CALTRANS could show through its disparity studies that DBEs are not discriminated against in the race-neutral process. Since the DBE program is federal, Proposition 209 did not have direct impact on CALTRANS’ DBE program although it contributed to a climate where a low level of DBE contracting became de facto acceptable. Proposition 209 did impact CALTRANS contracting with MWBE firms on projects funded only by state funds.

Of all the jurisdictions examined, CALTRANS has the most complete data, however it is only indirectly relevant. The CALTRANS data is limited to projects funded with federal transportation dollars – in most cases FHWA. CALTRANS stopped collecting DBE (MWBE) data for projects funded by the state, with no federal funds. On federally funded projects, CALTRANS is required to follow FHWA (or FAA or FTA) policies related to contracting.

Proposition 209 should not have had any impact on CALTRANS contracting on federally-funded projects. However, at the very least, Proposition 209 had an indirect impact on CALTRANS federal projects, in that the same political forces that backed Proposition 209 were already busily working the year before stifling and curtailing DBE participation on federal CALTRANS projects, using EO W124-95. Furthermore, Proposition 209 may have limited the mindset of CALTRANS Managers, causing them to minimize utilization of race-conscious strategies in CALTRANS’ DBE program. Today, that mindset seems so ingrained that even without Proposition 209, CALTRANS may not do anything differently.

Equal Justice Society 11 It may come as a shock for those familiar with CALTRANS of the last ten years, but from 1992 to 1995 CALTRANS had some of the highest DBE outcomes of any of the 50 state transportation agencies, ranging from 20.8 percent to 27.7 percent. Then in July 1995 – the start of fiscal year 1996 – DBE contracting fell dramatically, to 13.5 percent in that year. This was nearly a 50 percent drop from FY 1995. It was not a one year fluke. In FY 1997, when Proposition 209 was passed, and FY 1998, DBE contracting was similar to the low FY 1996 level. This helps demonstrate that Proposition 209 did not have a direct impact on DBE contracting.

Figure 7 CALTRANS DBE Contracting, 1992 to 2000

Fiscal Year DBE White Women, Person of Color, Person of Color, Outcome DBE Male, DBE Female DBE

FY 92 20.8% 6.3% 13.8% 0.7% FY 93 22.8% 7.0% 14.0% 1.7% FY 94 27.7% 7.7% 19.1% 0.9% FY 95 25.8% 6.6% 18.1% 1.1% FY 96 13.5% 2.4% 10.0% 1.2% FY 97 12.2% 2.9% 8.6% 0.7% FY 98 13.4% 4.7% 7.7% 1.0% FY 99 8.4% 1.8% 5.7% 0.9% FY 00 10.6% 3.5% 6.2% 1.0%

Shading indicates year immediately following Executive Order W124-95.

DBE levels fell further in FY 1998-99 – to below 10 percent, where it has remained most years since, putting California in the company of states with much less diversity, such as Nebraska and Vermont, in terms of level of DBE contracting. From perhaps being the top performing state in the country in the early 1990s, with its DBE contracting, California has fallen to one of the two worst performing states relative to its diversity (only Hawaii may challenge California for that dubious crown). The political climate created and maintained by Proposition 209 certainly contributed to CALTRANS’ poor DBE outcomes, but it does not appear to be the primary cause. Conclusion

California’s MWBEs lost somewhere between $610 million and $690 million ($1 billion to $1.1 billion in today’s dollars) in public contracts directly due to Proposition 209. The biggest losses occurred with the state of California and city programs in San Francisco and Oakland. Eventually some MWBE firms were able to gain back some of those contract dollars through race-neutral small business enterprise programs, but many other procurement and sub-contracting processes remain effectively closed to MWBEs due to the changes brought by Proposition 209.

California jurisdictions have responded to Proposition 209 and related executive orders and judicial decisions in different ways. San Francisco has most consistently attempted to create and maintain equal opportunity in its procurement process.9 While Los Angeles failed to respond to the Croson decision in a way that would maximize inclusion in the procurement process, since Proposition 209 it has maintained the political will to have an innovative race-neutral MWBE program. Other jurisdictions, like San Diego,

9 Jurisdictions in Washington State, which has a similar measure as Proposition 209, have gone even further than San Francisco, including the State of Washington, King County, and the City of Seattle.

12 The Impact of Proposition 209 on California’s MWBEs Oakland, and the State of California have made efforts to increase fairness within their Small Business Enterprise programs in the last several years. But all of these jurisdictions lack the race-conscious tools that would allow them to more completely tackle discrimination in the procurement process. Ironically, one of the jurisdictions that still has those tools, CALTRANS through its federal DBE program, has shown some of the least political will to diversify its contracting process.

While California is a majority-minority state in terms of population, thanks to Proposition 209 it is clearly a minority-minority state with its public procurement dollars.

APPENDIX – Data Tables

State of California, MWBE Procurement, 1987-1998

Fiscal Total Total in MWBE MWBE in MWBE% MBE% WBE% Year Procurement Oct. 2014 $ Oct 2014 $ 1987-88 3,644,583,000 7,488,916,274 366,652,000 753,399,258 10.1% 6.8% 3.3% 1988-89 3,339,286,000 6,563,383,219 276,065,000 542,607,129 8.3% 6.9% 1.4% 1989-90 4,377,141,000 8,199,429,736 268,315,576 502,619,110 6.1% 3.9% 2.2% 1990-91 3,819,892,000 6,758,333,959 249,791,813 441,943,514 6.5% 4.0% 2.6% 1991-92 3,949,206,374 6,794,724,036 251,086,167 432,001,028 6.4% 4.2% 2.1% 1992-93 3,822,490,816 6,380,214,144 No data No data No data No data No data 1993-94 4,031,286,297 6,555,893,146 No data No data No data No data No data 1994-95 2,785,213,203 4,408,676,843 519,631,833 822,518,300 18.7% 11.2% 7.5% 1995-96 3,427,148,274 5,285,599,846 No data No data No data No data No data 1996-97 3,560,355,927 5,321,661,875 No data No data No data No data No data 1997-98 4,675,121,329 6,875,367,498 0 0 0% 0% 0%

State of California, SBE Procurement, 1987-2001

Fiscal Year Total Procurement Total in Oct. 2014 $ SBE SBE in Oct 2014 $ SBE% 1987-88 3,644,583,000 7,488,916,274 393,069,000 807,681,107 16.8% 1988-89 3,339,286,000 6,563,383,219 328,879,518 646,414,326 14.9% 1989-90 4,377,141,000 8,199,429,736 382,347,188 716,227,534 12.2% 1990-91 3,819,892,000 6,758,333,959 419,114,726 741,517,636 13.0% 1991-92 3,949,206,374 6,794,724,036 363,343,451 625,142,939 11.2% 1992-93 3,822,490,816 6,380,214,144 332,556,701 555,078,630 8.7% 1993-94 4,031,286,297 6,555,893,146 407,159,916 662,145,208 10.1% 1994-95 2,785,213,203 4,408,676,843 431,874,913 683,609,041 15.1% 1995-96 3,427,148,274 5,285,599,846 387,267,755 597,272,783 11.3% 1996-97 3,560,355,927 5,321,661,875 419,404,543 626,883,720 11.8% 1997-98 4,675,121,329 6,875,367,498 397,385,313 584,406,237 8.5% 1998-99 3,950,574,092 5,716,006,449 430,612,576 623,044,703 10.9% 1999-2000 4,607,446,304 6,490,417,077 566,468,173 797,972,339 12.3% 2000-01 3,955,918,608 5,381,069,166 651,588,071 886,327,760 16.5%

Equal Justice Society 13 Department of General Services (DGS), California, MWBE & SBE Procurement, 1987-1998 (in $millions)

Fiscal DGS DGS Total in MWBE MWBE MWBE% MBE% WBE% SBE SBE in SBE% Year Procurement, Oct. 2014 $million in Oct $million Oct 2014 $million $million 2014 $million 1987-88 927 1,904 70.5 144.9 7.6% 3.6% 4.0% 168.79 346.8 18.2% 1988-89 832 1,635 4.1 8.1 0.5% 0.4% 0.1% 149.13 293.1 17.9% 1989-90 1,242 2,327 48.1 90.1 3.9% 0.5% 3.4% 190.98 357.8 15.4% 1990-91 1,147 2,029 94.9 167.9 8.3% 4.5% 3.8% 175.68 310.8 15.3% 1991-92 1,070 1,841 117.1 201.6 11.0% 6.3% 4.7% 191.84 330.1 17.9% 1992-93 911 1,520 144.5 241.2 15.9% 10.1% 5.8% 143.90 240.2 15.8% 1993-94 700 1,139 163.4 265.7 23.3% 14.6% 8.8% 224.12 364.5 32.5% 1994-95 849 1,343 208.0 329.2 24.5% 13.7% 10.9% 245.38 388.4 28.9% 1995-96 738 1,138 147.0 226.7 19.8% 12.4% 7.4% 191.32 295.1 25.9% 1996-97 591 884 114.0 170.4 19.3% 11.4% 7.9% 126.04 188.4 21.3% 1997-98 719 1,057 0 0 0 0 0 140.37 206.4 19.5% 1998-99 576 833 0 0 0 0 0 119.45 172.8 20.8% 1999-2000 950 1,338 0 0 0 0 0 234.21 329.9 24.7% 2000-01 927 1,904 0 0 0 0 0 168.79 346.8 18.2%

14 The Impact of Proposition 209 on California’s MWBEs CALTRANS DBE Contracting 1988 to 2010

Fiscal Year Total Contracts Total in Oct. DBE Outcome DBE Outcome in DBE Rate Awarded 2014 Dollars Oct. 2014 Dollars 1987-88 $709,500,262 $1,437,224,152 $167,117,713 $338,527,871 23.6% 1988-89 $1,064,895,891 $2,057,910,463 $190,667,037 $368,463,897 17.9% 1989-90 $997,390,745 $1,831,184,265 $180,536,061 $331,459,657 18.1% 1990-91 $1,150,405,790 $2,030,251,068 $223,826,474 $395,011,866 19.5% 1991-92 $1,108,687,560 $1,901,469,781 $230,618,681 $395,525,727 20.8% 1992-93 $1,019,348,385 $1,700,316,255 $232,542,423 $387,890,605 22.8% 1993-94 $961,031,365 $1,563,500,797 $266,563,207 $433,671,368 27.7% 1994-95 $1,605,679,075 $2,540,250,920 $414,646,857 $655,988,532 25.8% 1995-96 $1,094,530,512 $1,682,560,437 $147,814,835 $227,227,465 13.5% 1996-97 $906,929,255 $1,363,869,916 $110,582,796 $166,298,030 12.2% 1997-98 $834,537,264 $1,238,380,146 $112,171,632 $166,452,869 13.4% 1998-99 $1,506,646,133 $2,186,987,998 $127,279,628 $184,754,079 8.4% 1999-2000 $1,430,120,269 $2,006,172,798 $152,034,580 $213,274,118 10.6% 2000-01 $2,363,997,479 $3,228,305,283 $233,465,559 $318,823,562 9.9% 2001-02 $3,101,198,927 $4,177,642,950 $253,658,128 $341,704,326 8.2% 2002-03 $905,903,178 $1,193,689,318 $107,212,272 $141,271,327 11.8% 2003-04 $1,661,145,172 $2,133,486,919 $171,923,319 $220,809,209 10.3% 2004-05 $958,505,986 $1,189,074,289 $99,109,937 $122,950,800 10.3%

Equal Justice Society 15 Los Angeles Department of Public Works, MBE and WBE Contracting

Year MBE% WBE% 1991-92 16.9% 3.7% 1992-93 14.9% 3.2% 1993-94 No data No data 1994-95 17.4% 3.8% 1995-96 No data No data 1996-97 9.3% 8.0% 1997-98 12.1% 1.5% 1998-99 10.0% 3.5% 1999-00 12.3% 3.7% 2000-01 21.5% 1.2% 2001-02 6.4% 3.2% 2002-03 1.8% 0.6% 2003-04 13.8% 0.4% 2004-05 7.0% 0.6% 2005-06 3.1% 0.9% 2006-07 7.0% 3.0% 2007-08 5.2% 2.7% 2008-09 5.9% 2.4%

San Francisco, MWBE Procurement, 1984-1995

Fiscal Year Total Total in MWBE MWBE in MWBE% MBE% WBE% Procurement Oct. 2014 $ Oct 2014 $ 1984-85 151,487,810 341,254,319 52,287,271 117,786,752 17.4% 13.7% 3.7% 1985-86 216,762,023 470,228,026 123,519,080 267,953,455 27.3% 25.4% 1.8% 1986-87 151,671,120 324,869,003 81,010,141 173,518,094 26.3% 23.8% 2.5% 1990-91 347,549,669 614,901,345 31,176,800 55,159,472 9.0% 6.5% 2.5% 1992-93 365,853,956 610,655,904 109,216,333 182,295,688 29.9% 1993-94 413,034,110 671,698,136 118,938,552 193,424,228 28.8% 1994-95 426,710,726 675,434,719 144,976,637 229,481,586 34.0%

Note: No data for 1987-88, 1988-89, 1989-90, 1991-92.

16 The Impact of Proposition 209 on California’s MWBEs San Francisco, MBE and WBE/LBE Procurement, 1997-2003

Fiscal Year Total Total in $ MBE MBE MBE% WBE & LBE WBE & LBE WBE% Procurement Oct. 2014 Procurement in Oct 2014 $ Procurement in Oct 2014 $ & LBE 1997-98 301,168,992 442,907,756 34,978,334 51,440,141 11.6% 29,382,346 43,210,521 9.8% 1998-99 656,764,364 950,259,191 70,109,644 101,440,238 10.7% 89,767,084 129,882,194 13.7% 1999-00 585,562,712 824,870,433 104,914,096 147,790,380 17.9% 82,454,546 116,152,063 14.1% 2000-01 478,374,681 650,712,894 56,954,012 77,472,139 11.9% 31,486,187 42,829,332 6.6% 2001-02 604,516,576 811,374,699 110,693,746 148,571,782 18.3% 41,163,692 55,249,400 6.8% 2002-03 132,055,909 172,942,254 10,344,794 13,547,686 7.8% 12,162,750 15,928,506 9.2%

Note: 2002-03 data is from a partial fiscal year.

Acknowledgments and Credits

This report was made possible by a grant from the Surdna Foundation and with support and encouragement by Shawn Escoffery, Director of Surdna’s Strong Local Economies program. The Equal Justice Society would like to thank author Tim Lohrentz for his outstanding research and writing, as well as Michael Sumner for his significant contributions. EJS President Eva Paterson and Director of Communications Keith Kamisugi, and California Civil Rights Coalition Statewide Director Claudia Pena assisted with this report. Renay R. Prince, Public Records Officer for the California Department of General Services, located and shared with us an impressive amount of relevant state reports. We also express our appreciation to the many jurisdictions that provided us with data including the City of Los Angeles, City and County of San Francisco, City of Oakland, and CALTRANS. Thank you the Coalition for Economic Equity and Fred Jordan for their assistance. Photo of San Jose City Hall in infographic on page 14 is by Christopher Chan, used under Creative Commons license (https://flic.kr/p/dLoWoV).

Equal Justice Society 17 “This issue will be around with us for the rest of the century. There’s no question the discussion will go on — and there’s no question that we will remain scarred.”

Fred Jordan, now President of the San Francisco African American Chamber of Commerce, quoted in the San Francisco Chronicle on December 16, 1996.