Impact of Prop. 209

Impact-Prop209-MWBEs-Cover-SmallOne Billion in Potential Contract Dollars Lost Annually by Businesses Owned by Women and People of Color Due to Proposition 209

California’s minority and women business enterprises (MWBEs) have lost the potential equivalent of $1 billion in public contracts because of Proposition 209, according to a report by the Equal Justice Society.

EJS released the report today during an informational hearing by the California State Assembly Committee on Judiciary. The hearing also heard other testimony related to the impact of Proposition 209 on public contracting.

2016 will mark the 20th anniversary of Proposition 209, which 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.

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. Therefore, the report states the potential loss of contract dollars due to Proposition 209 and not the actual dollars lost.

EJS commissioned Tim Lohrentz, an expert in affirmative procurement and supplier diversity, to author the report. Lohrentz was formerly the Director, Inclusive Business Initiative, with the Insight Center for Community Economic Development. Lohrentz was assisted by Michael Sumner, Ph.D., former Research Manager at the Thelton E. Henderson Center for Social Justice, UC Berkeley School of Law.

The report was made possible by a grant from the Surdna Foundation.

“Taxes from women and people of color help fund public contracts, but are denied equal opportunities to obtain those contracts, said Eva Paterson, EJS President. “We often tout the great economic engine of California, and public contracting is a major part of fueling that engine. This report clearly shows that Proposition 209 denied Black, Latino, Asian American, and women-owned businesses equal opportunities to contribute to our state’s economic growth.”

Lohrentz and Sumner found that MWBEs, which had been erasing the disparity between their availability and their utilization by participating in race- and gender-conscious programs, were heavily impacted by Proposition 209. Some of these businesses never recovered.

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 and 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.
  • 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.

Download the complete report.

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