BILL ANALYSIS SB 1404 Page 1 Date of Hearing: August 4, 2010 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair SB 1404 (Pavley) - As Amended: May 10, 2010 Policy Committee: ElectionsVote:5-2 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill requires voting equipment vendors to notify the Secretary of State (SOS) regarding discovered defects in their systems. Specifically, this bill: 1)Specifies that the SOS's statutorily required "periodic" inspection of manufacturing, finishing, and storage facilities involving ballot cards must be conducted biennially. 2)Requires a ballot card manufacturer or finisher, with regard to any known flaw or defect in its production or process that could adversely affect the casting or tallying of votes, to: a) Notify the SOS within five days before the start of the inspection per (1). b) Once approved by the SOS, to notify the SOS and affected local elections officials within two business days of discovering a flaw or defect. 3)Requires the vendor of a voting system or part of a voting system, in applying to the SOS certification of that system, to notify the SOS of any known defect, fault or failure, as specified. 4)Requires a vendor per (3) to notify the SOS of any defect, fault, or failure discovered after the application is complete but before the SOS completes its examination report of the system. 5)Requires the SOS, after receiving a vendor's notification of a defect, fault, or failure, to notify the United States SB 1404 Page 2 Election Assistance Commission (EAC) as soon as practicable. 6)Requires the vendor of a voting system or part of a voting system already certified by the SOS, upon learning of a defect, fault, or failure in the system, to notify the SOS and affected local elections officials within 30 calendar days, and requires such notification by January 8, 2011 regarding any defect, fault, or failure known to a vendor prior to January 1, 2011. 7)Authorizes the SOS to seek the following relief for an undisclosed defect, fault or failure of a voting system or part of a voting system approved for use in California: a) Refund all moneys paid by a local agency for the system. b) A civil penalty of up to $50,000 per violation and a penalty of up to $1,000 per day after the deadline established in (6). Penalty revenues are to be allocated to the General Fund. 8)Repeals an obsolete provision of law establishing a revolving fund for the purchase of ballot paper. FISCAL EFFECT 1)Absorbable costs to the SOS for biennial inspections of ballot card manufacturing and finishing facilities, as the bill is generally consistent with the office's current practice. The SOS indicates that there are currently 27 such entities. 2)Minor absorbable costs to the SOS for enforcement of the bill's provisions, and potential General Fund revenue from civil penalties. COMMENTS 1)Purpose . This bill, sponsored by the Secretary of State, was prompted in part by an incident in Humboldt County during the November 2008 election that resulted in the deletion of nearly 200 votes cast due to a programming error in software produced by Premier Elections Solutions (formerly Diebold). The programming error caused the first batch of ballots counted by a central count server to be deleted under certain circumstances. SB 1404 Page 3 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, the SOS or the public. The Humboldt County employee who had been notified of the "work-around" left for another job in 2007 and did not pass this information along to anyone in the county elections official's office. 2)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 the SOS. This bill codifies a number of the SOS-adopted regulations governing the manufacture, distribution, and inventory control of ballot paper, including requirements that ballot manufacturing and storage facilities be inspected biennially (the Elections Code only requires such facilities to be inspected "periodically") and that the SOS approve and inspect ballot finishing facilities (which is not explicitly required by the Elections Code). 3)Opposition . The Election Technology Council (ETC)-a national trade association of voting system manufacturers-argues that the potential for penalties could discourage some vendors from continuing to operate in California, which could reduce the options to local elections officials for these services. 4)Prior Legislation . SB 541 (Pavley) of 2009, which was substantially similar to this bill, was vetoed. The governor was concerned that SB 541 could have subjected voting system vendors to substantial civil penalties. Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081