BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1692| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1692 Author: Garcia (D) Amended: 8/13/14 in Senate Vote: 27 SENATE ELECTIONS & CONST. AMEND. COMM. : 4-1, 6/24/14 AYES: Padilla, Hancock, Jackson, Pavley NOES: Anderson SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 77-0, 5/15/14 - See last page for vote SUBJECT : Political Reform Act of 1974 SOURCE : Author DIGEST : This bill limits the use of campaign funds and legal defense funds to pay fines and penalties that are imposed for an improper personal use of campaign funds. Senate Floor Amendments of 8/13/14 add double-jointing language with AB 1666 (Garcia) and SB 831 (Hill). ANALYSIS : Existing law: 1. Prohibits campaign funds from being used to pay or reimburse fines, penalties, judgments, or settlements, except those CONTINUED AB 1692 Page 2 resulting from either of the following: A. Parking citations issued in the performance of an activity that was directly related to a political, legislative, or governmental purpose; or B. Any other action for which payment of attorney's fees from contributions is permitted pursuant to the Political Reform Act (PRA). 1. Requires campaign expenditures to be reasonably related to a political, legislative, or governmental purpose. Campaign expenditures that confer a substantial personal benefit on an individual with the authority to approve the expenditure of campaign funds must be directly related to a political, legislative, or governmental purpose. "Substantial personal benefit" for these purposes means an expenditure that results in a direct personal benefit of more than $200. 2. Permits candidates and elected officials to establish a legal defense fund to defray attorney's fees and other related legal costs incurred in the defense of the candidate or elective officer who is subject to one or more civil, criminal, or administrative proceedings arising directly out of the conduct of an election campaign, the electoral process, or the performance of the officer's governmental activities and duties. Funds deposited into a legal defense fund may be used only to defray those attorney's fees and other related legal costs. 3. Provides that campaign funds that are raised on or after January 1, 1989, by a candidate and that remain in the campaign account at the time the candidate leaves elective office, or at the end of the postelection reporting period following the defeat of the candidate, are considered surplus campaign funds. Such funds may be used for payment of attorney's fees for litigation which arises directly out of a candidate's or elected official's activities, duties, or status as a candidate or elected officer. 4. Provides that expenditures of campaign funds for attorney's fees and other costs in connection with administrative, civil, or criminal litigation are not directly related to a political, legislative, or governmental purpose except where CONTINUED AB 1692 Page 3 the litigation is directly related to activities of a committee that are consistent with its primary objectives or arises directly out of a committee's activities or out of a candidate's or elected officer's activities, duties, or status as a candidate or elected officer. This bill: 1. Prohibits an expenditure of campaign funds to pay a fine, penalty, judgment, or settlement relating to an expenditure of campaign funds that was found to be improper because the expenditure resulted in either of the following: A. A personal benefit to the candidate or officer, and the expenditure was not reasonably related to a political, legislative, or governmental purpose; or B. A substantial personal benefit to the candidate or officer, and the expenditure was not directly related to a political, legislative, or governmental purpose. 1. Codifies a regulatory definition of the term "attorney's fees and other related legal costs" for the purposes of provisions of existing law that specify the permissible uses of funds raised into a legal defense fund, and makes that definition applicable to provisions of state law that restrict the use of surplus campaign funds and that limit the circumstances under which campaign funds may be used to pay fines, penalties, judgments, or settlements. 2. Contains double-jointing language with AB 1666 (Garcia) and SB 831 (Hill) to avoid chaptering-out issues. Background Personal use of campaign funds . Existing law generally prohibits campaign funds from being used for personal expenses, and instead requires campaign expenditures to be reasonably related to a political, legislative, or governmental purpose. When a campaign expenditure results in a personal benefit of more than $200 to an individual who had the authority to approve the expenditure, the expenditure must be directly related to a political, legislative, or governmental purpose. These provisions are intended to ensure that campaign funds are not CONTINUED AB 1692 Page 4 used as a method of personally enriching candidates and officers of political committees. Use of campaign funds to pay fines & penalties . As noted above, the PRA generally allows campaign funds to be used to pay or reimburse fines and penalties only if the action is one for which the use of campaign funds to pay attorney's fees will be permissible. The use of campaign funds to pay attorney's fees is permissible only when those attorney's fees arise directly out of an election campaign, the electoral process, or the performance of an official's governmental activities. These provisions are a natural extension of the "personal use" provisions of the PRA -- if litigation against a candidate or elected official is unrelated to that person's duties or activities as a candidate or official, then the expenditure of campaign funds for attorney's fees (or to pay any fines or penalties that result from the litigation) would not be reasonably or directly related to a political, governmental, or legislative purpose, but instead would serve to defray the personal legal expenses of the candidate or official. Regulatory definition of "attorney's fees" . As noted above, existing law permits candidates and elected officials to establish a legal defense fund to defray attorney's fees and other related legal costs under certain situations. The Fair Political Practices Commission (FPPC) has adopted a regulation to define the term "attorney's fees and other related legal costs" for the purpose of expenditures from legal defense funds. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes ASSEMBLY FLOOR : 77-0, 5/15/14 AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V. CONTINUED AB 1692 Page 5 Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Weber, Wieckowski, Wilk, Williams, Yamada, Atkins NO VOTE RECORDED: Mansoor, Waldron, Vacancy RM:d:n 8/14/14 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END **** CONTINUED