BILL ANALYSIS Ó SENATE COMMITTEE ON ELECTIONS AND CONSTITUTIONAL AMENDMENTS Senator Lou Correa, Chair BILL NO: SB 52 HEARING DATE: 04/30/13 AUTHOR: LENO ANALYSIS BY: Darren Chesin AMENDED: 04/24/13 FISCAL: YES SUBJECT Political Reform Act: advertisement disclosures; contribution origination DESCRIPTION Definitions For purposes of this bill, the following terms have the following meanings: " Advertisement " means a general or public advertisement that is any of the following: Authorized and paid for by a person or committee for the purpose of supporting or opposing a candidate for elective office or a ballot measure. An electioneering communication. An issue advocacy advertisement. "Advertisement" does not include a communication from an organization other than a political party to its members, a campaign button smaller than 10 inches in diameter, a bumper sticker smaller than 60 square inches, or other advertisement as determined by regulations of the Fair Political Practices Commission (FPPC). " Cumulative contributions " means the cumulative amount of contributions received by a committee beginning 18 months prior to the date the committee made its first expenditure for a political advertisement or for the purpose of qualifying, supporting, or opposing a candidate for elective office or a ballot measure. " Disclosure Internet Web site " means a committee's Internet Web site for a specific campaign that discloses the top identifiable contributors to that committee for that campaign, as required by this bill. " Disclosure threshold " means $10,000 in the case of a campaign regarding a statewide ballot measure or a state candidate or in the case of a statewide issue advocacy advertisement, or $2,000 in the case of a campaign regarding a local ballot measure or a local candidate or in the case of a local issue advocacy advertisement. " Identifiable contributor " means a person that is the original source of contributions received by a committee that cumulatively meet or exceed the disclosure threshold, notwithstanding the fact that the contributions were transferred, in whole or in part, through one or more other committees or persons. " Political advertisement " means an advertisement, unless it is paid for by a candidate-controlled committee and is an advertisement relating to the candidate's own election and not for any other campaign. Advertisement Disclosures Existing law pursuant to the Political Reform Act (PRA), provides for all of the following regarding political advertisement disclosures: Requires an advertisement for or against any ballot measure to include a disclosure statement identifying any person whose cumulative contributions are $50,000 or more. Provides that if there are more than two donors of $50,000 or more, the disclosure only needs to include the highest and second highest donors in that order. Requires a committee that supports or opposes one or more ballot measures to name itself using a name or phrase that identifies the economic or other special interest of its major donors of $50,000 or more. Provides that if the major donors of $50,000 or more share a common employer, the identity of the employer must also be SB 52 (LENO) Page 2 disclosed. Requires a broadcast or mass mailing advertisement supporting or opposing a candidate or ballot measure that is paid for by an independent expenditure (IE) to include a disclosure statement identifying the name of the committee making the expenditure and the names of the persons from whom the committee making the IE received its two highest cumulative contributions of $50,000 or more during the 12-month period prior to the expenditure. Provides that when a disclosure of the top two donors is required on an advertisement pursuant to either of the above provisions, only the largest donor needs to be disclosed on an advertisement that is an electronic broadcast of 15 seconds or less or a print advertisement of 20 square inches or less. This bill would repeal these advertisement disclosure requirements and impose new disclosure requirements for radio, prerecorded telephonic messages, television or video, mass mailing or printed political advertisements as follows. Radio and Telephone A political radio advertisement or prerecorded telephonic message must include a disclosure at the end of the advertisement read in a clearly spoken manner and in a pitch and tone substantially similar to the rest of the advertisement that reads as follows: "Top funders of this ad are [state names in descending order of identifiable contributors who have made the three largest cumulative contributions, if applicable]. Paid for by [name of the committee that paid for the advertisement]." Television and Video A political television or video advertisement must include a disclosure area with a solid black background on the entire bottom one-third of the television or video display screen for a minimum of six seconds at the beginning of the advertisement that includes all of the following: SB 52 (LENO) Page 3 The text "Top Funders of This Ad" shall be located at the top of the disclosure area, centered horizontally, yellow in color in Arial equivalent font and at least 4 percent of the height of the television or video display screen in size. The names of the identifiable contributors who have made the three largest cumulative contributions shall be immediately below that text in a similar fashion except white in color. The text "Funding Details At [insert Internet Web site address of the disclosure Internet Web site]." This text must be yellow in color in Arial Narrow equivalent font 2.5 percent of the height of the television or video display screen in size and left-aligned, as specified. The text "Paid for by [name of the committee that paid for the advertisement]." This text shall also be yellow in color in Arial Narrow equivalent 2.5 percent of the height of the television or video display screen in size but right-aligned, as specified. If there are fewer than three identifiable contributors, the disclosure shall be adjusted accordingly. If the committee does not have any identifiable contributors, the disclosure shall be adjusted to include the name of the committee in place of the names of identifiable contributors. Mass Mailing and Print Except for slate mailers, a political advertisement that is a mass mailing or a print advertisement and that is 12 square inches or more in size shall include a disclosure area on the largest page of the advertisement that satisfies all of the following: The disclosure area must have a solid white background so as to be easily legible in a printed or drawn box on the bottom of the page that is set apart from any other printed matter. All text in the disclosure area must be black in color. SB 52 (LENO) Page 4 The text "Top Funders of This Ad" shall be centered horizontally at the top of the disclosure area in an Arial equivalent font at least 12-point in size for advertisements smaller than 93 square inches and at least 14-point in size for advertisements that are equal to, or larger than, 93 square inches. Immediately below the text shall be the names of the identifiable contributors who have made the three largest cumulative contributions centered horizontally in an Arial Narrow equivalent font at least 10-point in size for advertisements smaller than 93 square inches and at least 12-point in size for advertisements that are equal to, or larger than, 93 square inches. The text "Funding Details At [insert Internet Web site address of the disclosure Internet Web site]" shall be similarly displayed unless the advertisement is 5 inches tall or less. If the advertisement is 4 inches tall or less, it need only show the names of the identifiable contributors who have made the two largest cumulative contributions. If the advertisement is 3 inches tall or less, it need only show the name of the identifiable contributor who made the largest cumulative contribution. The text "Paid for by [name of the committee that paid for the advertisement]" shall be located at the bottom of the disclosure area in an Arial Narrow equivalent font at least 8-point in size for pages smaller than 8.5 inches and at least 10-point in size for pages that are equal to, or larger than, 8.5 inches by 11 inches. If there are fewer than three identifiable contributors, the disclosure shall be adjusted accordingly. If the committee does not have any identifiable contributors, the disclosure shall be adjusted to include the name of the committee in place of the names of identifiable contributors. Identifiable Contributors Who are Individuals For purposes of a disclosure required by this bill, the following shall also apply in the event that an SB 52 (LENO) Page 5 identifiable contributor is a person who is an individual: If the committee receiving the cumulative contributions is supporting or opposing a candidate, the disclosure shall include the occupation and employer of the identifiable contributor in addition to the contributor's name. If the identifiable contributor is not employed, no occupation or employer shall be listed. If the committee receiving the cumulative contributions is supporting or opposing a ballot measure, and the passage or defeat of the ballot measure directly benefits the employer of the identifiable contributor, the disclosure shall include the occupation and employer of the identifiable contributor in addition to the contributor's name.
If the employer of an identifiable contributor is also an identifiable contributor of that committee, the cumulative contributions of its employees shall be deemed to be cumulative contributions by the employer for purposes of determining which identifiable contributors shall be disclosed on an advertisement. This does not apply however to an employee whose cumulative contributions amount to more than 75 percent of the cumulative contributions of the employer. Miscellaneous The disclosure of the name of an identifiable contributor required by this bill need not include such legal terms as "incorporated," "committee," "political action committee," or "corporation," or their abbreviations, unless the term is part of the contributor's name in common usage or parlance. If this bill requires the disclosure of the name of an identifiable contributor that is a sponsored committee, the name of the committee's sponsoring organization shall be disclosed. The committee name listed also need not include its economic or other special interests, nor the names of any major donors, as specified. Issue Advocacy Advertisements SB 52 (LENO) Page 6 Existing law does not require disclosure of major funders of issue advocacy advertisements on the advertisements themselves however, radio and television advertisements must include a "paid for by" disclaimer under Federal Communications Commission (FCC) law. This bill would define "issue advocacy advertisement" as an advertisement that clearly refers to and reflects a view on the subject matter, description, or name of a pending legislative action, administrative action, or one or more ballot measures and does any of the following: Can only be reasonably interpreted as an appeal for the recipient of the advertisement to take action by contacting an employee or elected official of the state government or any local government or encouraging others to contact those persons. Refers to a pending legislative action and is disseminated, broadcast, or otherwise communicated within 60 days of the end of the legislative session. Refers to one or more ballot measures and is disseminated, broadcast, or otherwise communicated within 120 days of the election concerning that measure or measures. This bill would require issue advocacy advertisements to disclose their top three funders in the same manner as other political advertisements. Non-Express Advocacy Communications Identifying State Candidates Existing law provides that any person who makes a payment totaling $50,000 or more for a communication that clearly identifies a candidate for elective state office, but does not expressly advocate the election or defeat of the candidate, and that is disseminated, broadcast, or otherwise published within 45 days of an election, shall file online or electronically with the Secretary of State a report disclosing their name, address, occupation, employer, and amount of the payment. The report must be filed within 48 hours of making the payment or the promise SB 52 (LENO) Page 7 to make the payment. Existing law does not require disclosure of major funders of these non-express advocacy communications on the communications themselves however, radio and television advertisements must include a "paid for by" disclaimer under FCC law. This bill would define these communications as "electioneering communications" and would reduce the payment threshold to $10,000 and change the communication dissemination period to the period beginning 120 days before the primary or special election and ending on the date of the general or runoff election. This bill would require electioneering communications to disclose their top three funders in the same manner as other political advertisements. Campaign Committee Websites Existing law does not require committees to establish or maintain their own Internet Web sites nor does it require them to disclose their campaign finance information on them. This bill would provide that a committee that has paid for political advertisements and that has received cumulative contributions that meet or exceed the disclosure threshold, as defined, must establish and maintain a disclosure Internet Web site. The homepage of the disclosure Internet Web site and any landing pages that visitors are directed to on the disclosure Internet Web site and any other Internet Web sites maintained by the committee shall include a disclosure area that satisfies specified criteria. This bill requires that these Internet Web sites include a list of the identifiable contributors who have made the 10 largest cumulative contributions to the committee and a hyperlink to another page on the disclosure Internet Web site that lists all of the committee's identifiable contributors, as specified. SB 52 (LENO) Page 8 This bill would also require that every page of these Internet Web sites include the statement "Paid for by [name of the committee that paid for the advertisement]" and any other identifying information specified by the FPPC. FPPC Regulations This bill would require the FPPC to promulgate regulations to require disclosures on all forms of political advertisements not covered by this bill, including, but not limited to, electronic media advertisements and billboards. If feasible, the regulations shall require the listing of the name of the committee and as many of the three identifiable contributors that made the largest cumulative contributions as possible in a conspicuous manner, as specified. This bill would also require the FPPC to promulgate regulations to require disclosure of the name of the committee, if feasible, on all advertisements that are paid for by a candidate-controlled committee and that are advertisements relating to the candidate's own election and not for any other campaign. BACKGROUND Existing Political Advertising Disclaimers . Under the PRA, committees must put "paid for by" disclaimers on campaign advertising, including campaign mailers, radio and television ads, telephone robocalls, and electronic media ads. The following, which is based on a publication produced by the FPPC, discusses disclaimer requirements for committees that purchase advertisements or circulate material supporting or opposing a state or local candidate or ballot measure in California. Mass mailings, including blast campaign emails, must include identification of the sender. Paid telephone calls must identify the candidate or committee who paid for or authorized the call. Radio and television ads must include "paid for by" disclaimer under FCC law. SB 52 (LENO) Page 9 Ballot measure ads and independent expenditure ads must include "paid for by committee name" and such ads by primarily formed committees must also list top two donors of $50,000 or more. This applies to television, radio, and electronic media advertisements, robocalls, mass mailings, and print ads such as newspaper ads, billboards and yard signs. Are the PRA's disclaimer rules the same for all committees and all ads? No. Basic disclaimer rules apply to campaign materials disseminated by a candidate for their own election campaign because it is generally clear to the public that the candidate is sending the communication. Stricter disclaimer rules apply to (1) ballot measure advertisements and (2) independent expenditure advertisements on candidates and ballot measures, because it is less clear to the public who is responsible for these ads. What does the disclaimer have to state? The basic disclaimer must state: "Paid for by committee name." Ballot measure and independent expenditure ads paid for by primarily formed committees must also list top two donors of $50,000 or more and special committee name rules apply. All independent expenditure ads for or against a candidate must state that the ad was: "Not authorized by a candidate or a committee controlled by a candidate." What is an independent expenditure? An "independent expenditure" is an expenditure made by any person in connection with a communication that expressly advocates the election or defeat of a clearly identified candidate or measure, or taken as a whole and in context, unambiguously urges a particular result in an election but which is not made at the behest of (e.g., in consultation, cooperation or coordination with) the affected candidate or committee. Updating a disclaimer. When a committee's name changes because of new top donors or otherwise, advertisement disclaimers must be revised. Television, radio, electronic media, or robocalls must be amended within SB 52 (LENO) Page 10 five calendar days. Print media, mass mailings, or other tangible items must be amended every time an order to reproduce is placed. Advertisements in languages other than English. Disclaimers on political advertisements should be written or spoken in the same language used in the advertisement. Does a disclaimer have to appear on ALL printed materials or campaign items? No. A disclaimer is not required on regular-size campaign buttons, pins, bumper stickers, or magnets. It is not required on pens, pencils, rulers, mugs, potholders, key tags, golf balls and similar small campaign promotional items where a disclaimer cannot be conveniently printed. The disclaimer is not required on t-shirts, caps, hats, and other articles of clothing; skywriting and airplane banners; or committee checks and receipts. Does a disclaimer have to appear on communications from an organization to its members? For political party communications, yes. For communications from other organizations to their members, a disclaimer is not required. Is there a penalty for circulating or publishing literature or other material concerning a candidate or ballot measure without a disclaimer? Yes. The penalty for failing to comply with the PRA's disclaimer requirements is a fine of up to $5,000 per violation. In addition, any person who violates the disclaimer requirements concerning ballot measure and independent expenditure advertisements may be liable for a fine of up to three times the cost of the advertisement, including placement costs. COMMENTS 1.According to the author : Campaign spending has reached SB 52 (LENO) Page 11 unprecedented levels in recent years. In California, over $450 million was spent on ballot measures alone in 2012. Although there are limits on the amount of direct contributions candidates can receive, funders can make unlimited contributions to candidates through independent expenditure committees and to ballot measure committees that have significantly shaped the way California is governed. Furthermore, many of these committees are purposely established to disguise who exactly is funding the campaign messages that voters see and hear, hiding behind vague names such as "Californians for Progress." As a result, the March 2013 PPIC Poll found that 84% of all likely voters, across political ideology, want increased public disclosure of funding sources for signature gathering and initiative campaigns. While it is essential for individuals and organizations in a democracy to be able to communicate effectively and efficiently with voters, it is equally important that voters are not intentionally deceived and elections are not decided upon misinformation. SB 52 will increase transparency of campaign spending in elections by disclosing major contributors on campaign advertisements and ensuring that the true major contributor are known. SB 52 requires all state and local political ads in California, except those paid for by candidate-controlled committees for their own races, to clearly and prominently list their top three funders of $10,000 or more for state races and $2,000 for local races. It also requires committees to maintain a campaign website that lists all funders of $10,000 or more for state races and $2,000 for local races. Strengthening disclosure requirements on political advertisements is necessary to help Californians be better informed and feel more represented by their government. Current law does not require disclosure of any major funders for electioneering communications - political advertisements that clearly identify candidates but do not expressly advocate for their election or defeat - or for issue advocacy advertisements - political advertisements meant to influence state legislative or administrative action, whether or not they identify specific candidates. Electioneering communications, SB 52 (LENO) Page 12 commonly referred to as "sham issue ads," are an increasing problem at both the state and national levels. For example, 64 days before the 2010 primary, sham issue ads ran against Jerry Brown in an attempt to influence voters. Issue advocacy advertisements that appeal to voters to lobby for or against legislative or administrative proposals while hiding who is behind the ads are a growing problem in California and nationally. For example, in Michigan last year, a secretive new non-profit called "Michigan Freedom Fund" spent $1 million on issue ads supporting right-to-work legislation. SB 52 addresses these problems by applying clear and prominent disclosure requirements of the top three funders to political advertisements including electioneering communications that clearly identify candidates in the period beginning 120 days before the primary and until the general election. The top three disclosure requirements also apply to issue advocacy advertisements that clearly refer to and reflect a view on pending legislative action, administrative action, or ballot measures. 2.Constitutionality . Some provisions of this bill could be interpreted as a violation of the United States and California Constitutions' guarantees to free speech. While the right to freedom of speech is not absolute, when a law burdens core political speech, the restrictions on speech generally must be "narrowly tailored to serve an overriding state interest," McIntyre v. Ohio Elections Commission (1995), 514 U.S. 334. It should be noted however, that the McIntyre case involved the distribution by hand of homemade leaflets, which would not fall under the advertising disclosure requirements of this bill nor those of existing law. Supporters of this bill argue that, notwithstanding the McIntyre case and other similar cases, the provisions of this bill nonetheless are constitutional, particularly in light of disclosure requirements that were upheld by the United States Supreme Court in Citizens United v. Federal Election Commission (2010), 130 S.Ct. 876. While Citizens United is probably best known as the case in SB 52 (LENO) Page 13 which the United States Supreme Court struck down a 63 year old law that prohibited corporations and unions from using general treasury funds to make independent expenditures in federal elections, in the same case, the Court also upheld certain disclaimer and disclosure provisions of the federal Bipartisan Campaign Reform Act of 2002. While some of the requirements of this bill are comparable to provisions of federal law that were at issue in Citizens United, other requirements in this bill, as well as existing law regarding political advertising disclosures, go beyond what was considered by the court. Specifically, the provisions of this bill and existing law that require the identities of certain campaign contributors - entities that were not responsible for the content or the production of the advertising - to be included in campaign advertising go beyond what was upheld in the Citizens United case. In light of that fact, while the court in Citizens United did uphold certain disclaimer requirements, it is unclear whether the broader requirements in this bill or existing law would similarly be upheld against a constitutional challenge on the grounds that those requirements violate the First Amendment. 3.Definitions With Benefits . This bill provides that if the passage or defeat of a ballot measure directly benefits the employer of an identifiable contributor, the disclosure shall include the occupation and employer of the identifiable contributor in addition to the contributor's name. However, since this bill does not define "directly benefit" it would be incumbent upon the FPPC to define it via regulation or advice. 4.Related Legislation . This bill is similar to AB 1148 (Brownley) of 2011 and AB 1648 (Brownley) of 2012. AB 1148 failed passage on the Assembly floor. AB 1648 passed the Assembly very late in the session (August 20, 2012) and was therefore never heard in the Senate. This bill conflicts with portions of SB 2 (Lieu) which is also before this committee as both bills seek to amend the law regarding disclosure of major donors who must be SB 52 (LENO) Page 14 identified on specified advertisements. The provisions of this bill regarding identification of top contributors on a committee's website are similar to provisions in SB 27 (Correa) which is also before this committee. POSITIONS Sponsor: California Clean Money Campaign Support: Brennan Center for Justice at New York University School of Law California Alliance of Retired Americans California Church IMPACT California Common Cause California League of Conservation Voters California National Organization for Women California Public Interest Research Group (CalPIRG) Common Cause Consumer Federation of California Endangered Habitats League Fresno Stonewall Democrats Friends Committee on Legislation Green Chamber of Commerce League of Women Voters of California Lutheran Office of Public Policy - California MapLight National Council of Jewish Women Pacific Palisades Democratic Club Progressives United Public Citizen's Congress Watch Sierra Club of California Southwest California Synod, Evangelical Lutheran Church in America Southwest Voter Registration Education Project (The sponsors, California Clean Money Campaign, have also submitted petitions in support of SB 52 signed by 5,000 individuals.) Oppose: None received SB 52 (LENO) Page 15 SB 52 (LENO) Page 16