BILL ANALYSIS �
SENATE COMMITTEE ON ELECTIONS
AND CONSTITUTIONAL AMENDMENTS
Senator Norma J. Torres, Chair
BILL NO: AB 800 HEARING DATE: 7/2/13
AUTHOR: GORDON ANALYSIS BY: Darren Chesin
AMENDED: 6/13/13
FISCAL: YES
SUBJECT
Political Reform Act
DESCRIPTION
Existing law provides for all of the following:
1.Creates the Fair Political Practices Commission (FPPC), and
makes it responsible for the impartial, effective
administration and implementation of the Political Reform Act
(PRA).
2.Prohibits an expenditure of $500 or more from being made by an
agent or independent contractor of a candidate or committee
unless it is reported by the candidate or committee as if the
expenditure were made directly by the candidate or committee.
Requires the agent or independent contractor to make known to
the candidate or committee the information required to be
reported pursuant to this provision.
3.Provides that campaign funds under the control of a former
candidate or elected officer shall be considered surplus
campaign funds at the time the person leaves office or at the
end of the postelection reporting period following the defeat
of a candidate for elective office, whichever occurs last.
Provides that surplus campaign funds shall be used only for
the following purposes:
The payment of outstanding campaign debts or elected
officer's expenses;
The repayment of contributions;
Donations to a bona fide charitable, educational, civic,
religious, or similar tax-exempt, nonprofit organization,
where no substantial part of the proceeds will have a
material financial effect on the former candidate or
elected officer, any member of his or her immediate family,
or his or her campaign treasurer;
Contributions to a political party committee, provided
that the campaign funds are not used to support or oppose a
candidate for elective office, provided, however, that the
campaign funds may be used by a political party committee
to conduct partisan voter registration, partisan
get-out-the-vote activities, and slate-mailers;
Contributions to support or oppose a candidate for
federal office, a candidate for elective office in a state
other than California, or a ballot measure; or,
The payment for professional services reasonably
required by the committee to assist in the performance of
its administrative functions, including payment for
attorney's fees for litigation that arises directly out of
a candidate's or elected officer's activities, duties, or
status as a candidate or elected officer, including, but
not limited to an action to enjoin defamation, defense of
an action brought for a violation of state or local
campaign, disclosure, or election laws, and an action from
an election contest or recount.
1.Prohibits an audit or investigation of any candidate,
controlled committee, or committee primarily supporting or
opposing a candidate or measure in connection with a report or
statement required by specified provisions of law from
beginning until after the last date for filing the first
report or statement following the general, runoff, or special
election for the office for which the candidate ran, or
following the election at which the measure was adopted or
defeated, except as specified.
2.Permits the Franchise Tax Board (FTB) and the FPPC to make
investigations and audits with respect to any reports or
statements required by specified provisions of the PRA.
3.Requires the FTB to complete its report of any audit conducted
on a random basis pursuant to specified provisions of law
within one year after the person or entity subject to the
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audit is selected by the FPPC to be audited.
4.Prohibits a member, employee, or agent of the FTB from
divulging or making known in any manner the particulars of any
record, documents, or information that he or she receives as
part of an audit or investigation conducted pursuant to the
PRA, except in furtherance of the work of the FTB or in
connection with a court proceeding or the lawful investigation
of any agency.
This bill makes numerous significant changes to the PRA.
Specifically, this bill:
1.Requires subagents and subcontractors that make expenditures
on behalf of or for the benefit of a candidate or committee to
make known to the agent or independent contractor of the
candidate information about those expenditures.
2.Extends, for a period of 90 days, the period of time before
campaign funds that are under the control of a former
candidate or elected officer become surplus campaign funds,
and thus subject to additional restrictions on how those funds
can be spent.
3.Repeals a provision of law that prohibits the FPPC from
beginning audits or investigations of certain entities prior
to the election.
4.Allows the FPPC and the FTB to make audits and investigations
regarding any statement or report that is required by any
provision of the PRA, instead of allowing such audits and
investigations only of specified statements or reports.
5.Extends, from one year to two years, the limit on the amount
of time that the FTB has to complete its report of any audit
that it conducts under specified provisions of the PRA.
6.Prohibits the FPPC and its staff from divulging or making
known in any manner the particulars of any information that it
receives as part of an audit or investigation conducted
pursuant to the PRA, except in furtherance of the work of the
FPPC or in connection with a court proceeding or the lawful
investigation of any agency.
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7.Permits the FPPC, and the FTB at the direction of the FPPC, to
audit any record required to be maintained under the PRA to
ensure compliance with the PRA prior to an election, even if
the record or statement has not yet been filed. Permits the
FPPC, to further the purposes of this provision, to seek
injunctive relief in superior court to compel disclosure.
Permits a superior or appellate court to grant a stay of an
order granting relief pursuant to these provisions. Requires
the court to grant expedited review to an action filed
pursuant to this procedure, as specified.
BACKGROUND
Audits and Investigations . This bill makes a number of
significant changes to state law governing audits and
investigations that are conducted under the PRA. Some of these
provisions appear to be in response, in part, to an $11 million
campaign contribution made to the Small Business Action
Committee PAC (SBAC PAC) three weeks prior to the November 2012
Statewide General Election.
The SBAC PAC, which was a primarily formed committee that was
opposing Proposition 30 and supporting Proposition 32 at the
time the contribution was received, reported that the $11
million contribution was made by Americans for Responsible
Leadership (ARL), an Arizona-based non-profit organization.
ARL, in turn, initially refused to disclose the names of its
contributors, arguing that it was not required to do so under
California law because it had not "solicited earmarked
contributions for any particular project" and because "[n]o
contributors to ARL at any time specified where any of their
donations 'must go.'"
After receiving a complaint regarding the $11 million
contribution, the FPPC requested to review certain records held
by ARL to ensure compliance with state campaign disclosure laws,
and subsequently commenced a discretionary audit of ARL. When
ARL did not produce records as requested by the FPPC, the FPPC
sued ARL in Sacramento Superior Court seeking an order to compel
ARL to produce those records. ARL opposed that request on a
variety of grounds, including arguing that the FPPC was
prohibited from conducting an audit or an investigation prior to
the election. The Court ultimately granted the FPPC's request
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for an order for ARL to produce the requested records, finding
that the statutory prohibition against pre-election audits and
investigations applied only to candidates and certain types of
committees, and was not applicable to ARL. After an
unsuccessful appeal, ARL and the FPPC reached a settlement in
which ARL revealed that it was not the true source of the $11
million contribution, but instead was an intermediary for that
contribution. ARL disclosed that the actual source of the $11
million was another nonprofit organization, Americans for Job
Security (AJS), and that the contribution was then passed
through a second intermediary (and another nonprofit
organization), the Center to Protect Patient Rights (CPPR).
CPPR, in turn, made the contribution to ARL. AJS has not
disclosed its donors.
Subcontractor Reporting . As noted above, the PRA requires a
candidate or committee to report payments of $500 or more that
are made by an agent or independent contractor as if the
candidate or committee had made the payment directly. For
example, if a candidate pays a media buying company $50,000 to
pay for advertisements supporting that candidate, and the
company arranges for the placement of individual advertisements
with numerous television and radio stations, the candidate would
be required to report the identity of and the amount paid to any
television or radio station that received $500 or more from the
media buying company for the purpose of broadcasting those
advertisements.
In order that the candidate can comply with this requirement,
existing law also requires the agent (in this case, the media
buying company) to provide the candidate with details about the
payments that it made sufficient for the candidate to report
those payments. However, if a subagent or subcontractor makes a
subsequent payment of $500 or more on behalf of the candidate,
there is no explicit requirement for that subagent or
subcontractor to provide the relevant information to the agent
or independent contractor on a timely basis so that the agent or
independent contractor, and the candidate or committee, can
comply with their obligations under the law. This bill imposes
such a requirement.
Surplus Funds . Existing law provides that campaign funds that
are held by a candidate or elected official become surplus
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campaign funds once the person leaves elective office or at the
end of the postelection campaign reporting period following the
defeat of the candidate for elective office, whichever occurs
last. Once funds are considered surplus campaign funds, they
are subject to additional restrictions on how the funds may be
used, including a prohibition against the candidate using the
funds for a future election.
Because of the short period of time that a candidate or
officeholder has to determine what to do with these campaign
funds before they become surplus funds, FPPC staff indicates
that many candidates simply create new committees as
placeholders until they can decide whether they want to run for
another office in the future, and the tight timelines under
which those new committees must be created and money must be
transferred generates additional workload for the FPPC in the
form of requests for advice. This bill increases the period of
time before campaign funds become surplus funds by 90 days.
COMMENTS
1.According to the Author : For Californians to have confidence
in their government, they must have faith in elections.
Nearly 40 years ago, California voters passed the PRA to
ensure greater transparency, disclosure, and accountability in
elections. The Act specifically stated as one of its purposes
that "the voters may be fully informed and improper practices
may be inhibited."
Overall, AB 800 contains several distinct changes intended to
clarify the FPPC's authority to carry out the provisions of
the PRA, ensure that information is provided to the public in
an expedited manner prior to elections, and provide candidates
and campaigns clear guidance to comply with the law.
AB 800 makes a number of concrete changes that would provide the
FPPC the tools necessary to enforce the PRA, and ensure
accountability and protect public trust in campaigns and
elections. They are as follows:
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Audit Authority
Under existing law, the FTB has a role in auditing accounts
under the PRA, but the law provides that audits must be
completed within one year. Moreover, the Commission has
limited existing authority to audit and investigate a
candidate or committee during the pendency of a campaign. AB
800 would extend the one year limit on FTB audits to two years
so that the audits can examine more complex matters, as well
as clarify and expand the Commission's existing audit
authority to permit immediate review of records of a candidate
or committee to enforce compliance with the PRA. The bill
would also establish an expedited judicial process to ensure
that parties have a chance to contest actions before the
election.
Audit Disclosure
AB 800 would place the audits the Commission performs under the
existing confidentiality provision of law that prevent the FTB
from divulging particulars of audits except in furtherance of
the work of the Commission or in connection with a court
proceeding or agency investigation. This change would have
the law regarding the Commission parallel the law applicable
to the FTB. This is also consistent with current Commission
policy.
Injunction Authority
AB 800 would make it clear that the Commission has the authority
to seek an injunction to compel compliance before the
election, as well as specify the civil process. In addition,
the bill provides that any stay of an order granting relief
would be at the discretion of the trial or appellate court.
Subvendor Recordkeeping
Under existing law, subvendors do not always provide timely
reports or records to campaigns. When there is a failure to
report this information, the campaign faces a possible
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penalty. To increase transparency as well as assist
campaigns, AB 800 would create a clear recordkeeping
requirement for vendors who provide services to campaigns.
The information would need to be disclosed in time for the
campaign to timely report. This requirement is consistent with
existing law applicable to in-kind contributions.
Surplus Campaign Funds
Under existing law, a former candidate or elected official's
campaign funds become surplus once the campaign ends or the
official leaves office. Currently, a former candidate or
official must make an immediate decision about remaining funds
- such as whether to open a new campaign account or a
placeholder account. AB 800 would clarify the law to provide
persons leaving office or a defeated candidate after a
campaign 90 days to determine the future of the funds. By
doing so, former candidates or officials can better plan for
the future, which will lead to more transparency for the
public on future uses of the funds.
2.Related Legislation . AB 45 (Dickinson, 2013) has identical
language relative to injunctions. In addition, SB 2 (Lieu,
2013) also addresses the issue of audits and injunctions, but
does so in a slightly different manner.
PRIOR ACTION
Assembly Elections and Redistricting Committee: 5-2
Assembly Appropriations Committee: 12-5
Assembly Floor: 54-22
POSITIONS
Sponsor: Author
Support: California Common Cause
Fair Political Practices Commission
Secretary of State
Oppose: None received
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