BILL ANALYSIS �
SB 594
Page 1
Date of Hearing: August 13, 2013
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Paul Fong, Chair
SB 594 (Hill) - As Amended: August 7, 2013
SENATE VOTE : (vote not relevant)
SUBJECT : Use of public resources.
SUMMARY : Prohibits nonprofit organizations and their employees
from using funds received from local agencies for campaign
purposes, as specified. Requires a nonprofit organization that
receives significant amounts of money from local agencies to
maintain a separate bank account for campaign activities and to
disclose the sources of the funds it receives for campaign
activities, as specified. Specifically, this bill :
1)Makes it unlawful for a nonprofit organization to use or
permit others to use public resources, including, but not
limited to, public resources received in exchange for
consideration, from any local agency for any campaign activity
not authorized by law. Prohibits an officer, employee, or
agent of a nonprofit organization from expending or
authorizing the expenditure of any public resources from any
local agency to support or oppose the approval or rejection of
a ballot measure or the election or defeat of a candidate by
the voters. Defines the following terms for the purposes of
these provisions:
a) "Ballot measure" to mean a state or local initiative,
referendum, or recall measure certified to appear on a
regular or special election ballot.
b) "Campaign activity" to mean a payment that is used for
communications that expressly advocate for the approval or
rejection of a clearly identified ballot measure or the
election or defeat of a clearly identified candidate by the
voters, or that constitutes a campaign contribution.
c) "Candidate" to mean an individual who has qualified to
have his or her name listed on the ballot, or who has
qualified to have write-in votes on his or her behalf
counted by elections officials, for nomination or election
to an elective office at any regular or special primary or
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general election, including any officeholder who is the
subject of a recall election.
d) "Expenditure" to mean a payment that is used for
communications that expressly advocate the approval or
rejection of a clearly identified ballot measure, or the
election or defeat of a clearly identified candidate, by
the voters or that constitutes a campaign contribution.
e) "Local agency" to mean a county, city (whether general
law or chartered), city and county, town, municipal
corporation, district, political subdivision, or any board,
commission, or agency thereof, other local public agency,
or a public entity created pursuant to the Joint Exercise
of Powers Act by one or more of these entities. Provides
that the term "local agency" does not include a county
superintendent of schools, a school district, or a
community college district.
f) "Nonprofit organization" to mean an entity incorporated
under the Nonprofit Corporation Law, or a nonprofit
organization that qualifies for exempt status under Section
115 or 501(c), excluding Section 501(c)(3), of the Internal
Revenue Code.
g) "Public resources" to mean any property or asset owned
by a local agency, including, but not limited to, cash,
land, buildings, facilities, funds, equipment, supplies,
telephones, computers, vehicles, travel, and local
government compensated time that is provided to a nonprofit
organization.
h) "Use" to mean a use of public resources from one or more
local agencies that is substantial enough to result in a
gain or advantage to the user or a loss to any local agency
for which any monetary value may be estimated.
2)Provides that the prohibitions on the use of public resources
described above do not prohibit the use of public resources
for providing information to the public about the possible
effects of any bond issuance or other ballot measure on state
activities, operations, or policies, provided that the
informational activities are otherwise authorized by the
California Constitution or by the laws of this state, and that
the information provided constitutes a fair and impartial
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presentation of relevant facts to aid the electorate in
reaching an informed judgment regarding the bond issue or
ballot measure.
3)Provides that a nonprofit organization or person that
intentionally or negligently violates the provisions of this
bill prohibiting the use of public resources is liable for a
civil penalty not to exceed $1,000 for each day on which the
violation occurs, plus three times the value of the unlawful
use of public resources. Provides for the penalty to be
assessed and recovered in a civil action brought by the
Attorney General (AG), any district attorney, or any city
attorney of a city having a population in excess of 750,000.
Provides that if two or more nonprofit organizations or
persons are responsible for a violation, they are jointly and
severally liable for the penalty. Provides that if the action
is brought by the AG, the moneys recovered shall be paid into
the General Fund; if the action is brought by a district
attorney, the moneys recovered shall be paid to the treasurer
of the county in which the judgment was entered; and if the
action is brought by a city attorney, the moneys recovered
shall be paid to the treasury of that city. Prohibits a civil
action alleging a violation of this provision from being
commenced more than four years after the date of the alleged
violation.
4)Requires certain nonprofit organizations that receive more
than 20% of their gross revenues from local agencies to
deposit funds designated for campaign use into a separate
account and to prepare quarterly reports disclosing their
campaign activities, as follows:
a) Defines "auditable nonprofit organization," for the
purposes of this bill, as a nonprofit organization for
which public resources from one or more local agencies
account for more than 20% of the organization's annual
gross revenue in the current fiscal year or either of the
previous two fiscal years, including gross revenue from
public resources received in exchange for consideration.
b) Defines "specific source or sources of funds," for the
purposes of this bill, to mean any funds received by an
auditable nonprofit organization that have been designated
for campaign activity use or any other funds received by
the nonprofit organization, including, but not limited to,
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funds received in exchange for consideration, that are
used, in whole or in part, within a two-year period from
receipt for campaign activity.
c) Requires an auditable nonprofit organization that
engages in campaign activity, either directly or through
the control of another entity, to deposit all specific
source or sources of funds received into a separate bank
account, and to pay for all campaign activity from that
separate bank account.
d) Requires an auditable nonprofit organization that
engages in campaign activity at any point during a calendar
quarter to disclose the following information within
fifteen days after the end of the quarter:
i) The name and amount of each specific source or
sources of funds used for campaign activity, provided
that the aggregate amount of funds received since January
1 of the most recent odd year by the auditable nonprofit
organization from that specific source or sources of
funds is at least $250;
ii) The name of the payee and amount of all payments
aggregating $250 or more made from the single bank
account required pursuant to this bill; and,
iii) A description of each campaign activity.
e) Requires an auditable nonprofit organization that
engages in campaign activity at any point during a two-year
period, beginning with an odd-numbered year and ending with
the following even-numbered year, to disclose the following
information within fifteen days after the end of the
even-numbered year:
i) The name and amount of any specific source or
sources of funds used for campaign activity, provided
that the aggregate amount of funds received since January
1 of the most recent odd year by the auditable nonprofit
organization from that specific source or sources of
funds is at least $250;
ii) The name of the payee and amount of all payments
aggregating $250 or more made from the single bank
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account required pursuant to this bill; and,
iii) A description of each campaign activity.
f) Requires each auditable nonprofit organization that
engages in campaign activity to display the information
required to be disclosed by this bill on its Web site.
Requires the information to be clearly described and
identified on a separate Web page that is linked from the
home page of the Web site.
g) Requires the AG to conduct a biennial audit of each
auditable nonprofit organization. Requires each auditable
nonprofit organization to provide records to the AG that
substantiate the information required to be disclosed under
this bill. Requires the audit to determine whether the
organization complied with the requirements of this bill.
Requires the AG to issue a written audit report and
transmit it to the district attorney for the county in
which the auditable nonprofit organization is domiciled.
5)Provides that if an audit by the AG of an auditable nonprofit
organization determines that the organization has violated the
provisions of this bill, the AG may impose a fine on the
organization in an amount up to $10,000 for each violation.
EXISTING LAW makes it unlawful for an elected state or local
officer, appointee, employee, or consultant to use, or permit
others to use, public resources for a campaign activity.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of the Bill : According to the author:
Disclosure and transparency are particularly crucial
when public resources are involved. As public agencies
continue to cut back on essential public services due
to financial struggles, California taxpayers deserve
to understand just how their tax dollars are being
used. As such, there is a need to eliminate existing
loopholes utilized by taxpayer-financed nonprofit
organizations and curb their practice of "co-mingling"
public and private resources and ultimately using the
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co-mingled funds for campaign activity. Under existing
law, even when the funds used are from "non-public"
funds, disclosure of the source of those funds is
non-existent. Strengthening our laws in this regard
will not only strengthen a taxpayer's right to know
and bolster the integrity of California's
taxpayer-financed nonprofit organizations, but also
restore the public's trust.
SB 594 remedies this by creating a more robust
prohibition on the use of public resources for
campaign activities. It provides an appropriate level
of transparency and an enforcement mechanism, which
are applicable to taxpayer-financed nonprofit
organizations that spend non-public resources on
political campaign activities.
This bill requires a nonprofit organization that
receives at least 20% of its funds from taxpayer
dollars to deposit into a separate bank account and
disclose on its website, as well as to the Attorney
General, the source(s) of non-public funds it receives
and spends for campaign activity. This bill further
requires the nonprofit organization to provide a
description of the campaign activity and the identity
and amount of payments made from the separate bank
account for that campaign activity. SB 594 also
clarifies that a non-profit organization cannot use,
or permit the use of, the public resources it receives
for campaign activities. Finally, the bill requires
the Attorney General to perform audits and initiate
enforcement actions for non-compliance or miss-use of
public resources.
2)Does Existing Law Indirectly Permit Public Funds to be Used
for Campaign Purposes ? In background materials in support of
this bill, the author indicates that there is "credible reason
to believe" that nonprofit organizations are making campaign
expenditures from accounts that are "financed in whole or in
part by public dollars." In particular, the author points to
millions of dollars spent on ballot measure campaigns by the
League of California Cities and the California State
Association of Counties (CSAC) in the past decade. The author
notes that the League of California Cities and CSAC receive
millions of dollars in promotion and marketing fees from the
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California Statewide Communities Development Authority
(CSCDA), a Joint Powers Authority created by the League of
California Cities and CSAC that provides tax-exempt bond
financing. The author argues that because CSCDA is a public
entity, and because the bonds it issues are tax exempt, any
profits earned as a result of bond sales belong to the
taxpayers, and should not be used for campaign purposes. The
author further argues that it is impossible to determine
whether these organizations are using public resources for
campaign purposes impermissibly since these nonprofit
organizations are not currently required to publicly disclose
the source of revenue that is used for campaign purposes.
3)Public Resources Received in Exchange for Consideration : This
bill imposes new restrictions on the use of funds that are
received by a nonprofit organization from a local agency, as
defined, even in the circumstances where the funds received by
the nonprofit organization are received in exchange for
consideration, prohibiting such funds from being used for
campaign activities. While existing law includes strict
prohibitions against the use of public resources for campaign
activities, this bill proposes a fundamental change by
restricting the purposes for which private resources can be
used when those private resources were obtained from a public
agency, under specified circumstances. While the author and
supporters of this bill argue that these restrictions are
important to ensure that public resources are not being
inappropriately diverted toward political activities, as
prohibited by existing law, placing legal restrictions on the
use of private resources because those resources were public
at one point in time may have other significant unanticipated
consequences.
4)Use of Resources by an Organization vs. Use of Resources by
Employees : Section 1 of this bill, which proposes to add
Section 8314.1 to the Government Code, places restrictions on
the use of public resources by nonprofit organizations.
Section 3 of this bill, which proposes to add Section 54964.5
to the Government Code, places similar restrictions on the use
of public resources by the officers, employees, and agents of
nonprofit organizations. While the restrictions imposed by
these two sections are similar, they are not identical, as
there are many small differences between the terminologies
used in the two sections.
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Those differences could result in differing interpretations of
two sections that are intended to address the same issue. If
those two sections are interpreted differently, that could
potentially create confusion and make it more difficult for
nonprofit organizations and their officers, employees, and
agents to comply with this bill. In light of that fact, the
author and the committee may wish to consider amending this
bill to consolidate Sections 1 & 3 of the bill into a single
section that deals with the use of public resources by
nonprofit organizations and their officers, employees, and
agents.
5)Local Agencies and School Districts : The provisions of this
bill relating to payments made by local agencies specifically
exclude county superintendents of schools, school districts,
and community college districts from the definition of the
term "local agency." Materials provided by the author's
office explain that these entities have been excluded because
they "are already covered by restrictions contained in the
Education Code." The provisions of the Education Code cited
by those materials, however, are similar to existing
restrictions that already apply to other local agencies, which
are narrower in scope than the restrictions proposed by this
bill. In light of that fact, to the extent that the committee
is supportive of the policies proposed by this bill, it may
wish to consider whether those policies should similarly be
made applicable to payments by county superintendents of
schools, school districts, and community college districts.
6)Technical Amendments : To clarify the author's intent with
this bill, committee staff recommends the following technical
amendments:
a) In multiple locations in the bill, the phrase "public
resources received in exchange for consideration" should be
changed to "public resources received by the nonprofit
organization in exchange for consideration."
b) On page 4, line 10, the word "advocates" should be
replaced by "advocate."
c) On page 6, lines 10 through 12, the words "beginning
with the first quarter of each odd year through the fourth
quarter of the following even year," should be deleted.
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d) On page 6, lines 19 & 34, the word "corporation" should
be replaced by "organization."
7)Arguments in Support : In support of this bill, California
Professional Firefighters writes:
SB 594 creates a more robust prohibition on the use of
public resources for political purposes by
taxpayer-financed nonprofit organizations, as well as
provides for an appropriate level of transparency and
related enforcement mechanisms.
At a time when the state and local public agencies
have been forced to cut back on essential public
services, including critical public safety services
due to tight budgets, it is in the public's best
interest to ensure transparency and facilitate proper
disclosure of how taxpayer dollars are being used.
Further, our organization and our local affiliate
organizations are held to multiple levels of
disclosure - both at the state and federal levels. The
political action we engage in is subject to every
manner of public disclosure - 100% disclosure of both
union general fund dollars and PAC dollars. The rules
should be the same for everyone, particularly for
those relying on public subsidies.
Publically-funded nonprofit organizations have a duty
to be above reproach given that taxpayers foot the
vast majority of their operating expenses. These
nonprofits, in many cases, provide many valuable
public services and SB 594 doesn't seek to change the
way these agencies operate in any way. Secrecy breeds
distrust, disclosure bolsters credibility.
The courts have made it crystal clear that the public
has a compelling interest in making sure their tax
dollars aren't used for politics. SB 594 simply
creates a means by which the public can be assured
that their tax dollars aren't being spent on political
campaigns and when theses nonprofits engage in
political activity, proper disclosure will tell the
whole story that is otherwise obfuscated today.
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8)Related Legislation : AB 621 (Wagner), which is pending in the
Senate Governance and Finance Committee, would prohibit a
local agency from entering into specified relationships with
an individual or firm with respect to a new issue of bonds
requiring voter approval if the individual or firm provides
bond campaign services to the bond campaign. AB 621 was
approved by this committee on a 7-0 vote.
9)Previous Legislation : AB 1992 (DeVore) of 2008, would have
prohibited an organization or association that represented
local agencies and that was funded in part by payments made by
local agencies from using the organization's or association's
resources, whether derived from public funds or not, for a
campaign activity, or a personal or other purpose not
authorized by law. AB 1992 failed passage in this committee
on a 2-5 vote.
10)Double-Referral : This bill has been double-referred to the
Assembly Judiciary Committee. Due to impending committee
deadlines, if this bill is approved in this committee today,
it would need to be heard in the Assembly Judiciary Committee
later this week, absent a waiver of the Joint Rules. However,
this bill cannot be amended in committee today and still be
heard in the Assembly Judiciary Committee before this week's
deadline for policy committees to hear and report bills. In
light of this fact, if it is the committee's desire to approve
this bill with amendments, committee staff recommends that
this bill be passed out of committee with the author's
commitment to take those amendments subsequent to passage by
this committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Clean Money Campaign
California Common Cause
California Labor Federation
California Professional Firefighters
State Building and Construction Trades Council, AFL-CIO
Opposition
None on file.
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Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094