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 SB 1404 Page 2 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: SB 1404 Page 3 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 SB 1404 Page 4 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. SB 1404 Page 5 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 SB 1404 Page 6 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. SB 1404 Page 7 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