California voters have approved Proposition 34, a measure from an apartment trade group that aimed to restrict spending by the AIDS Healthcare Foundation, which has bankrolled several rent control initiatives and criticized the measure as unconstitutional revenge.
The Associated Press called the initiative Wednesday evening. According to the California Secretary of State, the measure is ahead 50.8% to 49.2%.
As written, Proposition 34 applies to healthcare providers who have spent more than $100 million in any 10-year period on things besides direct patient care and have run multifamily housing with more than 500 “high-severity health and safety violations.”
If a healthcare provider meets that standard they would be required to spend 98% of their revenues from a federal prescription drug program on direct patient care.
The measure was sponsored by the California Apartment Assn., whose campaign committee said the new rules could apply to multiple organizations and noted the initiative’s language did not name any specific group.
In the weeks before the election, much of the advertising in favor similarly did not name a specific healthcare provider, but emphasized Proposition 34 would save taxpayers money while also increasing spending on patient care.
However, the apartment association did single out the AIDS Healthcare Foundation by name as a target during the campaign and no other health organization has such a well-publicized history of operating housing with health and safety complaints and spending money on things other than direct patient care.
The AIDS Healthcare Foundation has bankrolled three initiatives to dramatically expand rent control in recent years, including Proposition 33 on this year’s ballot.
All of those measures were defeated, but forced the real estate industry to spend hundreds of millions of dollars in opposition.
The AIDS Healthcare Foundation, or AHF, earns most its revenue off the federal drug program at question. The program, known as 340B, requires drug makers to sell their drugs at discounts to certain healthcare providers, who then turn around and charge health insurance companies more for the drugs.
According to California’s nonpartisan Legislative Analyst’s Office, the program is supposed to enable providers like AHF to serve more low-income patients, but the law “does not directly restrict how providers spend their revenue from federal drug discounts.”
Proposition 34’s restrictions could hamstring AHF’s ability to fund additional rent control measures or operate apartments it owns in and around Skid Row, which have been beset with vermin infestations, elevator failures and other problems, according to a Times investigation published last fall.
In a statement, AHF president Michael Weinstein said that the organization would continue to fight for renters.
“The results of Propositions 33 and 34 prove only one thing: If billionaires spend more than $170 million lying and confusing voters, they are virtually guaranteed to win,” Weinstein said.
What happens next is unclear.
Prior to the election, AHF unsuccessfully sued to take Proposition 34 off the ballot, arguing it was unconstitutional because it so singularly targets the organization.
However, one legal expert previously told the Times courts generally are reluctant to remove measures before an election and that there was a “good chance” a judge would find the measure unconstitutional if it passed.
In an email, AHF spokeswoman Jacki Schechner said that organization would decide on what legal action to take once it sees how the law will be applied.
The Yes on 34 campaign declared victory last week, before the race was called by the Associated Press, saying voters took action to close a “loophole” that allowed healthcare organizations to spend money meant for patients on “luxury condos, CEO bonuses, naming rights on sports stadiums, and political campaigns.”
