BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1404
                                                                  Page  1

          Date of Hearing:   June 22, 2010

                  ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
                                  Paul Fong, Chair
                     SB 1404 (Pavley) - As Amended:  May 10, 2010

           SENATE VOTE  :  21-12
           
          SUBJECT  :  Elections: ballot cards and voting systems.

           SUMMARY  : Requires voting system vendors and ballot paper  
          manufacturers to notify the Secretary of State (SOS) of any  
          flaws or defects that they discover in their products.   
          Specifically,  this bill  :   

          1)Defines the following terms, for the purposes of this bill:

             a)   "Defect" means any flaw in the hardware or documentation  
               of an approved or conditionally approved voting system that  
               could result in a state of unfitness for use or  
               nonconformance to the manufacturer's specifications.

             b)   "Failure" means a discrepancy between the external  
               results of the operation of any software or firmware in an  
               approved or conditionally approved voting system and the  
               manufacturer's product requirements for that software or  
               firmware.

             c)   "Fault" means a step, process, or data definition in any  
               software or firmware in an approved or conditionally  
               approved voting system that is incorrect under the  
               manufacturer's program specification.

          2)Requires a voting system vendor that knows of, or becomes  
            aware of, a defect, fault, or failure in the voting system or  
            a part of the voting system, to make the following written  
            notifications of that defect, fault, or failure:

             a)   In the case of a voting system that is being submitted  
               to the SOS to be reviewed, notification to the SOS of any  
               defect, fault, or failure known to the vendor as part of  
               the application for review;

             b)   In the case of a voting system that has been submitted  
               to the SOS to be reviewed, but for which the SOS has not  








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               completed his or her report on the examination of the  
               system, notification to the SOS of any defect, fault, or  
               failure that becomes known to the vendor;

             c)   In the case of a voting system that has been approved by  
               the SOS, notification to the SOS and to all local elections  
               officials who use the system within 30 calendar days after  
               the vendor learns of the defect, fault, or failure; and, 

             d)   In the case of a voting system that is approved by the  
               SOS prior to the effective date of this bill, notification  
               to the SOS and to all local elections officials who use the  
               system not later than January 8, 2011 of any defect, fault,  
               or failure known to the vendor prior to January 1, 2011.

          3)Requires the SOS to notify the United States Election  
            Assistance Commission (EAC) or its successor entity of any  
            defect, fault, or failure disclosed to the SOS by a voting  
            system vendor pursuant to this bill.

          4)Requires a ballot card manufacturer or finisher to disclose  
            any known flaw or defect in its manufacturing or finishing  
            process or manufactured or finished ballot cards in writing to  
            the SOS not later than five working days before the SOS begins  
            his or her initial inspection of that manufacturer's or  
            finisher's facilities.  Requires a ballot card manufacturer or  
            finisher that has been approved by the SOS to notify the SOS  
            and affected local elections officials in writing within two  
            business days after it discovers any flaw or defect in its  
            manufacturing or finishing process or manufactured or finished  
            cards.

          5)Requires the SOS to inspect manufacturing and storage  
            facilities for ballot cards biennially, instead of  
            periodically, and requires the SOS to inspect finishing  
            facilities for ballot cards biennially.

          6)Permits the SOS to seek injunctive and administrative relief  
            when a voting system or part of a voting system is defective  
            due to a known hardware, software, or firmware defect, fault,  
            or failure that has not been disclosed as required by this  
            bill.  Permits the SOS to seek all of the following relief for  
            a known but undisclosed defect, fault, or failure in a voting  
            system or part of a voting system approved or conditionally  
            approved for use in California:








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             a)   Refund of all moneys paid by a local agency for a voting  
               system or part of a voting system that is defective due to  
               a known but undisclosed defect, fault, or failure, whether  
               or not the voting system has been used in an election;

             b)   A civil penalty from the offending party or parties, not  
               to exceed $50,000 per violation; and,

             c)   A penalty of $1,000 for each day between the deadline  
               for the vendor to disclose the defect, fault, or failure  
               and the day when the required disclosure is filed with the  
               SOS.

          7)Provides that, for the purposes of monetary penalties provided  
            for in this bill, a defect, fault, or failure constitutes a  
            single violation regardless of the number of voting system  
            units in which the defect, fault, or failure is found.

          8)Provides that all monetary penalties levied pursuant to the  
            provisions of this bill, other than the refund of moneys paid  
            by a local agency for a voting system, shall be deposited in  
            the General Fund.

          9)Requires regulations adopted by the SOS governing ballot cards  
            to govern the finishing and quality standards of such cards.

          10)Repeals an obsolete provision of law that establishes a  
            revolving fund for the purchase of ballot paper.

          11)Changes terminology in the Elections Code from "punchcards"  
            to "ballot cards."

          12)Makes corresponding changes.

           EXISTING LAW  :

          1)Requires ballot paper and punchcards used by any jurisdiction  
            in California to be tinted and watermarked or overprinted with  
            a design furnished by the SOS in a manner that the watermark  
            or overprint is plainly discernible.

          2)Requires the SOS to adopt regulations governing the  
            manufacture, distribution, and inventory control of  
            punchcards.  Requires the SOS to inspect the manufacturing and  








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            storage facilities for punchcards periodically.  Requires the  
            SOS to approve each punchcard manufacturer prior to that  
            manufacturer providing punchcards for use in California  
            elections.

          3)Prohibits a user, vendor, or manufacturer from warehousing  
            ballot paper or punchcards furnished or released by the SOS  
            for a specific election for any subsequent election without  
            the advance written authorization of the SOS.

          4)Establishes a revolving fund for the purchase of ballot paper  
            and punchcards.

          5)Permits a person or corporation owning or being interested in  
            a voting system or a part of a voting system to apply to the  
            SOS to examine it and report on its accuracy and efficiency to  
            fulfill its purpose.  Requires the SOS to complete his or her  
            examination without undue delay.

          6)Permits the SOS to seek injunctive and administrative relief  
            when a voting system has been compromised by the addition or  
            deletion of hardware, software, or firmware without prior  
            approval.  

           FISCAL EFFECT  :  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.

           COMMENTS  :   

           1)Purpose of the Bill  :  According to the author:

               Under current law, ballot vendors or voting system vendors  
               are not required to inform the Secretary of State about  
               previously undisclosed flaws in their product before or  
               after an election.  This lack of disclosure can result in  
               serious delays or jeopardize or nullify votes in counties.   


               The [SOS] inspects ballot manufacturing facilities and  
               voting systems for potential problems or flaws before  
               approving their use for California elections.  However  
               existing law does not require a ballot manufacturer or a  
               voting system vendor to notify the [SOS] of any flaws in  
               their products that are undiscovered before or after the  
               Secretary's inspection.








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               An incident in Humboldt County in which Premier Elections  
               Systems' GEMS software deleted nearly 200 votes cast during  
               the November 2008 elections illustrated the consequences of  
               not requiring vendors to notify the [SOS] or anyone else  
               when they learn of a problem.  

               Although Premier was aware of the problem and made limited  
               attempts pre-election to notify individual counties of the  
               software flaw, the [SOS] was not informed and there was no  
               public disclosure of the flaw.

               SB 541 (2009), a similar version of this bill, was vetoed  
               by the Governor last year because of concerns about the  
               civil penalties placed on voting system vendors.  This bill  
               clarifies that the penalty in the measure would apply to  
               each defect, flaw or failure, not to each machine that may  
               contain a defect, fault or failure.

           2)Humboldt County Incident  :  As noted by the author, this bill  
            is prompted in part by an incident in Humboldt County during  
            the November 2008 election that resulted in the deletion of  
            nearly 200 votes cast in that election.  The deletion was  
            caused by a programming error in a version of the GEMS  
            election management software produced by Premier Elections  
            Solutions (formerly Diebold).  That programming error caused  
            the first batch of ballots counted by a central count server  
            at an election to be deleted under certain circumstances.

          Premier knew of this problem at least four years prior to the  
            November 2008 election, and developed a "work-around" to avoid  
            the deletion of ballots.  While Premier did notify elections  
            officials in the 11 affected California counties of the  
            work-around, they did not explain why it was necessary.   
            Furthermore, Premier did not provide notice of the defect to  
            the National Association of State Election Directors (NASED),  
            the EAC, SOS or to the public.  When the Humboldt County  
            employee who had been notified of the work-around left  
            Humboldt County for another job in 2007, that employee did not  
            pass the information about the work-around along to anyone  
            else in the county elections official's office.

           3)Ballot Paper Manufacturing Facilities  :  Under existing law,  
            any manufacturer who wishes to sell ballot paper or ballot  
            cards to jurisdictions in California must first be approved by  








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            the SOS.  Existing law also requires the SOS to adopt  
            regulations governing the manufacture, distribution, and  
            inventory control of ballot paper.  

          This bill codifies a number of the regulations adopted by the  
            SOS pursuant to existing law.  Among the regulations codified  
            by this bill are a requirement that ballot manufacturing and  
            storage facilities be inspected biennially (the Elections Code  
            requires such facilities to be inspected "periodically") and a  
            requirement that the SOS approve and inspect ballot finishing  
            facilities (which is not explicitly required by the Elections  
            Code).  
           
           4)Arguments in Opposition  :  The Election Technology Council  
            (ETC), which is a national trade association of voting system  
            manufacturers, writes the following in opposition to this  
            bill:

               The ETC represents voting system manufacturers providing  
               over 90% of the voting systems used in the United States,  
               including all of the voting system manufacturers currently  
               operating within the State of California.  Our collective  
               assessment is that this bill, if enacted, would create an  
               extremely unwieldy and potential damaging environment for  
               the voting industry in the State of California with the  
               additional potential of increased costs for California's  
               local election officials.  Additionally, we view the bill  
               as being unnecessarily redundant to the requirements of the  
               United States Election Assistance Commission ("EAC") under  
               its Voting System Guidelines processes and procedures. . .  
               .

               In light of the economic conditions that all states, local  
               jurisdictions and their voting system providers face, any  
               proposed legislation that attempts to put into place a  
               series of financial penalties will directly impact the  
               overall costs to California's county customers and  
               ultimately California taxpayers.  If it is necessary to  
               institute a penalty as a means of protecting the interests  
               of the California public, then the potential for  
               decertifying products or prohibiting business activities  
               are sufficient alone.  From an industry viewpoint, it is  
               clear that an arbitrary fee established for penalties, as  
               proposed in SB 1404, has the potential to  
               disproportionately affect smaller new entrant providers.   








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               In effect, these penalties will force those providers who  
               have a smaller footprint to conduct a cost-benefit  
               assessment on the continued viability of operating in the  
               State of California.  The cumulative effect of these  
               punitive financial policies, as outlined in SB 1404, could  
               also result in fewer providers from which local elections  
               officials may select voting systems in the future.

           5)Previous Legislation  :  SB 541 (Pavley) of 2009 was  
            substantially similar to this bill, except that it did not  
            contain the explicit provision included in this bill that  
            specifies that a single defect, fault or failure on multiple  
            units of a voting system constitutes a single violation, and  
            not a violation for each unit.  SB 541 was vetoed by Governor  
            Schwarzenegger, who expressed concern that the bill could have  
            subjected voting system vendors to substantial civil  
            penalties.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Secretary of State Debra Bowen (sponsor)
          City of Millbrae
           
           Opposition 
           
          Election Technology Council

           Analysis Prepared by  :    Ethan Jones / E. & R. / (916) 319-2094