The Sacramento Bee offers this news update, “GOP says Democrats breaking campaign law.” It begins: “The California Republican Party filed a complaint with the Fair Political Practices Commission on Tuesday charging that the state Democratic Party has violated campaign spending laws by running issue advocacy ads against Gov. Arnold Schwarzenegger within 45 days of the election. The complaint charged that the Democrats have relied on ‘unlimited’ contribution funds to pay for the issue ads that purport to link Schwarzenegger with President Bush. Such spending is barred in the final 45 days of a campaign under Proposition 34 campaign financing limits, the Republican complaint said.”
Bob Salladay has posted a snippet of an earlier letter written by the head of the California GOP to the head of the California Democratic Party.
It is not clear, however, that the Democrats are breaking the law, at least under a literal reading of the statute. Here is the relevant statute, California Government Code Section 85310 (scroll down to 85310):

(a) Any person who makes a payment or a promise of payment totaling fifty thousand dollars ($50,000) or more for a communication that clearly identifies a candidate for elective state office, but does not expressly advocate the election or defeat of the candidate, and that is disseminated, broadcast, or otherwise published within 45 days of an election, shall file online or electronically with the Secretary of State a report disclosing the name of the person, address, occupation, and employer, and amount of the payment. The report shall be filed within 48 hours of making the payment or the promise to make the payment.
(b) (1) Except as provided in paragraph (2), if any person has received a payment or a promise of a payment from other persons totaling five thousand dollars ($5,000) or more for the purpose of making a communication described in subdivision (a), the person receiving the payments shall disclose on the report the name, address, occupation and employer, and date and amount received from the person.
(2) A person who receives or is promised a payment that is otherwise reportable under paragraph (1) is not required to report the payment if the person is in the business of providing goods or services and receives or is promised the payment for the purpose of providing those goods or services.
(c) Any payment received by a person who makes a communication described in subdivision (a) is subject to the limits specified in subdivision (b) of Section 85303 if the communication is made at the behest of the clearly identified candidate.

At issue is subdivision (c), subjecting certain communications to the individual contribution limits of Section 85303(b), which are $25,000, subject to adjustment for inflation.
The Democratic Party has been running ads that have been critical of Republican Gov. Arnold Schwarzenegger, who is running for reelection against Democrat Phil Angelides. So far as I know, the ads do not mention Angelides—and my analysis assumes they don’t. There seems no question that large contributions received to fund the ads are covered by 85310(a), requiring disclosure, because they are payments exceeding $50,000 that clearly identify a candidate for state elective office (Schwarzenegger), broadcast within 45 days of the election. They also appear covered by the disclosure provisions of 85310(b).
But here’s the Democrats’ argument against application of the 85310(c) contribution limits to these ads. The limit applies to a communication “made at the behest of the clearly identified candidate” (emphasis added). Here, the clearly identified candidate is Schwarzenegger, not Angelides, and certainly these ads are not broadcast at Schwarzenegger’s behest. It is a factual question whether they are broadcast at Angelides’ behest, but the statute doesn’t say “at the behest of the clearly identified candidate or his opponent.”
So under a literal reading of the statute, the Democrats appear to have a good case that they are not subject to these contribution limits. I’d like to look at the legislative history (this was proposed by the legislature to the voters as part of Prop. 34, the party-supported measure that was meant to water down the earlier campaign finance measure, Prop. 208), and my guess is that this was a drafting error. Notice how 85310(a) talks about the election or defeat of a candidate. If it is rational to impose contribution limits on large party-sponsored ads near the election that support a clearly identified candidate at that candidate’s behest, the limit should also cover ads that oppose a clearly identified candidate at the opponent’s behest.
There may be more to an interpretation of 85310(c) in either court decision or FPPC regulation or opinion that I’m not aware of. But this should be interesting. Democrats have a strong technical argument, but one that won’t be easy to explain to the public and that doesn’t seem to be based in any common sense distinction between two similar situations.
UDPATE: The letter from the chair of the Democratic Party to the Republican Party is here. An updated Bee story featuring an FPPC staffer and Bob Stern agreeing with the Democrats’ interpretation is here.