BILL ANALYSIS                                                                                                                                                                                                    Ó






                           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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