BILL ANALYSIS �
SB 594
Page 1
Date of Hearing: August 15, 2013
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
SB 594 (Hill) - As Amended: August 7, 2013
SENATE VOTE : Not Relevant
SUBJECT : Use of public resources: CAMPAIGN ACTIVITIES
KEY ISSUES :
1)Should a nonprofit organization be prohibited from using
Public resources, as defined, for political campaign activity?
2)Should a nonprofit organization that receives 20 percent of
its revenue from local agencies be required to maintain a
separate bank account for campaign activities, and make
specified disclosures ABOUT The sourcEs of these funds and how
they are spent?
FISCAL EFFECT : As currently in print this bill is keyed
fiscal.
SYNOPSIS
This bill was a gut and amend created last week on August 7th,
so the Committee has not had much time to review it, nor have
interested parties had much time to consider it. In its new
form, it seeks to prohibit a nonprofit organization from using,
for campaign activities, any public resources - including public
resources received in exchange for consideration - it receives
from a local agency. In addition, the bill would require any
nonprofit organization that receives at least 20% of its total
revenue from public resources to deposit funds in a separate
account and to pay for all campaign activity from that separate
account. Existing law prohibits an elected or appointed
official, or any public employee or consultant, from using
"public resources" for political campaign activity. In
addition, the Political Reform Act requires qualifying
individuals and organization to disclose specified information
about campaign funding sources and expenditures in statements
filed with the Fair Political Practices Commission.
According to the author, nonprofit groups like the League of
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California Cities and the California State Association of
Counties receive funding from local governments and agencies
that is then inappropriately co-mingled with non-public sources
and used for political activity. According to the author, this
not only allows these organizations to spend public resources on
campaign activity - thereby violating at least the spirit of the
law - it also means that they do not report the true sources of
their campaign expenditures. The bill is supported by campaign
reform groups and labor organizations. The League of California
Cities, California State Associations of Counties (CSAC), the
Urban Counties Caucus, California District Attorneys
Association, California Police Chiefs Association, California
Special Districts Association, the Rural County Representatives
of California, and several other non-profit associations
strongly oppose this bill, in part because of the substance of
the bill, and in part because the measure is being proposed so
late in the process. The Elections Committee passed the bill by
a vote of 5-0.
SUMMARY : Seeks to prohibit nonprofit organizations and their
employees, officers, or agents from using funds received from
local agencies for campaign purposes, as specified, and requires
nonprofit organizations that receive specified amounts of money
from local agencies to maintain a separate bank account for
campaign activities and to disclose the sources of those funds,
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.
Defines the following terms for the purposes of these
provisions:
a) "Ballot measure" means a state or local initiative,
referendum, or recall measure certified to appear on a
regular or special election ballot.
b) "Campaign activity" means a payment that is used for
communications that expressly advocate for the approval or
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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" means 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
general election, including any officeholder who is the
subject of a recall election.
d) "Expenditure" means 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" means 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" means 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" means 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" means 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.
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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
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
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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,
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:
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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
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 Attorney General (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 :
1)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. (Government
Code Sections 8314 and 54964.)
2)Requires, under the California Political Reform Act,
qualifying individuals and political organizations to disclose
specified information, including, but not limited to,
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political contributions, in statements filed with the Fair
Political Practices Commission. (Government Code Section
81000 et seq.)
COMMENTS : According to the author, this measure seeks 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 co-mingled
funds for campaign activity." "Strengthening our laws in this
regard," the author believes, "strengthens a taxpayer's right to
know and bolster the integrity of California's taxpayer-financed
nonprofit organization." The author and supporters single out,
in particular, the League of California Cities (League) and
California State Association of Counties (CSAC), as the kinds of
nonprofit organizations that this bill is intended to target.
However, the bill would apply to all nonprofit organizations,
which are defined as any 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.
Prohibition on Use of "Public Resources :" This bill would
prohibit a nonprofit organization - including any officer,
employee, or agent of the organization - from using, or
permitting another to use, public resources received from a
local agency for campaign activities. The bill defines
"campaign activity" to mean any payment that is used to
expressly advocate for the approval or disapproval of a ballot
measure or the election or defeat of a clearly identified
candidate. The bill takes a rather broad view of what
constitutes "public resources." That is, it includes not just
monetary funding, but 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 non-profit organization." Most controversially
from the opposition's point of view (see below), the bill would
also define "public resources" to include any resources for
which the nonprofit organization has given consideration. In
other words, any service performed by a nonprofit for a local
agency, and for which it received payment, would be considered
"public resources" under this bill.
Separate Account and Disclosure Requirements : In addition, the
bill would require any nonprofit organization that receives more
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than 20% of its annual revenue from public resources - including
public resources obtained for consideration - to deposit into a
separate bank account all sources of funds received, and it also
requires the nonprofit to pay for all campaign activity from
that separate account. In addition, the bill would require a
nonprofit organization that engages in campaign activity to
periodically disclose to the Attorney General, and post on its
Web site, the identity and amount of each specific source of
funds it receives for campaign activity, a description of the
campaign activity, and the identity and amount of payments that
the organization makes from the required separate account.
Attorney General Responsibilities and Civil Penalties : The bill
would require the Attorney General to regularly audit the
qualifying nonprofit organizations, issue a written audit
report, and transmit the report to the district attorney for the
county in which the nonprofit organization is domiciled.
Finally, a nonprofit organization that violates the provision of
this bill prohibiting the expenditure of public resources on
campaign activity would be liable for civil penalty of $1,000
for each day on which the violation occurs. The fine shall be
collected in an action brought by the Attorney General, a local
district attorney, or by a city attorney, as specified.
What Kind of Nonprofit Organizations Does the Bill Seek to
Reach? In the background materials in support of this bill, the
author indicates that there is "credible reason to believe" that
certain 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 (League) and the California State Association
of Counties (CSAC) in the past decade. The author notes that
the League and CSAC receive millions of dollars in promotion and
marketing fees from the California Statewide Communities
Development Authority (CSCDA), a Joint Powers Authority created
by the League 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 states
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
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campaign purposes. As drafted, the bill applies not just to the
League and CSAC, but to any nonprofit organization that receives
any "public resources" - broadly defined - from a local agency.
Relationship to Political Reform Act: As noted in the
opposition letter provided by the California Special Districts
Association, by limiting the use of certain funds for campaign
activity and by requiring disclosures about the sources of
expenditures related to political campaign activity, the bill
appears to potentially overlap with requirements and provisions
of the Political Reform Act of 1974. Because the Political
Reform Act was a ballot measure, any amendment to the Act, by
its own provisions, requires a two-thirds vote. Although this
bill does not technically amend the provisions of Political
Reform Act per se, it does seek to add new requirements dealing
with the same subject matter. The California courts have held
that a bill does not necessarily need to amend the specific code
sections that constitute the Political Reform Act in order to
constitute an amendment of the Act. If a bill adds to, takes
away from, or alters a requirement of the Political Reform Act,
it effectively amends the Political Reform Act even if those
amendments are not contained within the provisions of the Act
itself. (Huening v. Eu (1991) 231 Cal. App. 3d 766.)
POSSIBLE AUTHOR AMENDMENTS TO BE TAKEN IN ASSEMBLY
APPROPRIATIONS COMMITTEE: When this bill was heard on Tuesday,
August 13, in the Assembly Committee on Elections and
Redistricting, the author indicated that he would consider two
amendments. At the time of this writing, it is not clear to the
Committee what the precise language of those amendments will
consist of or even if the author still intends to take them.
Because of time constraints, if the author still intends to take
these amendments, they will be taken in the Assembly
Appropriations Committee. In general, the two amendments
reportedly would do the following:
Possible Amendment #1 : As noted in the analysis produced by the
Assembly Elections and Redistricting Committee, 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." However, the cited provisions of the Education
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Code are narrower in scope than the restrictions proposed by
this bill. The Committee may wish to discuss with the author if
he believes the broader restrictions proposed by this bill are
preferable to existing restrictions - and that there is no
reason to treat payments made by local educational entities
differently than payments made by any other local agency - then
this exemption could be easily accomplished by simply deleting
the exempting language on page 4 lines 18 to 20 of the bill in
print.
Possible Amendment #2 : 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 adds Section 54964.5 to
the Government Code and 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. In order to avoid possible inconsistency and
redundancy, the author is apparently considering an amendment
that will combine Section 1 and Section 3 or, alternatively, to
make the terminology consistent in both sections.
ARGUMENTS IN SUPPORT : 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 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." The author
believes that this bill will remedy this problem "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."
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According to the California Professional Firefighters (CPF),
this bill "creates 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." CPF contends
that at a time when essential public services are facing cut
backs, "it is in the public's best interest to ensure
transparency and facilitate proper disclosure of how taxpayer
dollars are being used." CPF also notes that organizations like
itself are held to multiple levels of disclosures, and argues
that government funded non-profit organizations that engage in
political activity should be held to the same standard. CPF
acknowledges that these publicly-funded non-profit organizations
provide many valuable public services, but if they co-mingle
public and non-public resources and engage in political
activity, they should disclose their source of funds. SB 594
"doesn't seek to change the way these agencies operate in any
way," CPF contends, it "simply creates a means by which the
public can be assured that their dollars aren't being spent on
political campaigns and when these nonprofits engage in
political activity, proper disclosure will tell the whole story
that is otherwise obfuscated today."
ARGUMENTS IN OPPOSITION : The League of California Cities
strongly opposes this measure and objects to the allegation that
it has been "co-mingling" public and non-public funds in
financing political activity. Specifically, the League raises
several objections to the bill.
First, the League rejects the "unsubstantiated allegation" that
it is inappropriately co-mingling funds or making campaign
contributions from accounts that are financed in whole or in
part with public dollars. The League writes that it
"scrupulously adhered to all legal requirements associated with
ballot campaign activity. The League regularly advises its
members on the scope of the existing use of public funds
prohibition. We publish articles and other information for
informing and training local officials. When the League is
involved in a ballot measure campaign (we never get involved in
candidate races), we regularly advise our staff and members on
how to comply with the law. To the extent non-public funds have
been contributed to a ballot campaign they are derived from
legally-permitted sources." The League adds that their
practices have been validated by the Fair Political Practices
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Commission, noting that in response to a similar allegation made
by the Howard Jarvis Taxpayers Association against the League
and others, the FPPC ruled in November 2009, after a one-year
investigation, that there was "no evidence that public funds
were used to make political contributions by the organizations."
Second, the League contends that this measure is an "effort to
weaken and silence the voice of local government." The League
notes that the "California ballot process has become a major
policy forum where decisions are made that have widespread
impacts on all Californians. Many organizations and entities
have become active on ballot measures to ensure the public has a
full understanding of the effect of these measures, and many of
them have potential financial or policy impact on local
governments." Finally, the League opposes this measure because
it "singles-out specific types of organizations for these
restrictive provisions, but exempts others. This is inequitable.
If the Legislature desires to adopt broader disclosure
policies, then they should apply to all organizations active on
ballot measures." (NOTE: This objection may be partially met
by the author's agreement to remove the exemption of funds
received from local school and community college districts in
the next committee.)
The California State Association of Counties (CSAC) opposes this
bill for substantially the same reasons as those set forth by
the League, but it adds that "SB 594 is a solution in search of
a problem." CSAC writes that it is prepared to spend the time
necessary with the author to discuss its processes for engaging
in statewide ballot measures, its finances, and its
relationships with other local agencies. Finally, CSAC adds:
"[W]e reject any assertion that we have evaded the law when it
comes to CSAC's participation in California's initiative
process. We are strongly opposed to any efforts to effectively
eliminate our voice in matters of statewide importance,
particularly those proposed at the last days of the legislative
session."
The Urban Counties Caucus (UCC) believes that this bill will set
a "dangerous precedent" for all nonprofits. First, UCC claims
that the bill will create "a new process and restrictions on
nonprofits to use public funds for campaigns or ballot measures
which include significant new reporting requirements, audits by
the Attorney General, and accounting requirements." UCC claims
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that while it has never donated any funds for campaign purposes,
it has taken positions on ballot measures. UCC fears that "SB
594 is so broadly worded it is unclear if the provisions in this
bill would allow us to take any position on a ballot measure and
therefore would significantly impact our ability to provide
input in a public process." UCC believes that "SB 594 seems to
be intended to limit our ability to provide input or take
positions on measures. While we have not been as active as
other nonprofits, this bill sets a dangerous precedent by
singling out local agencies and restricting our ability to
participate in the initiative process." Finally, UCC suggests
that the bill is unnecessary, noting that it already files
quarterly reports with the FPPC and is already required to
provide information on campaign donations that are available to
the public.
The California Police Chiefs Association (CPCA) opposes this
measure because, it contends, the bill "rests on a factually
incorrect premise" that nonprofit organizations like the CPCA
are co-mingling funds to circumvent the existing restrictions on
the use of public recourses for political campaign activity.
CPCA writes that it regularly advises its members "on the scope
of the existing use of public funds prohibition. We publish
articles and other information for informing and training local
officials. When the California Police Chiefs Association is
involved in a ballot measure campaign we regularly advise our
staff and members on how to comply with the law. To the extent
non-public funds have been contributed to a ballot campaign they
are derived from legally-permitted sources. When we endorse
candidates we vet all campaign material that uses the name or
the insignia of the California Police Chiefs Association and our
members are prohibited from appearing in uniform at any
candidate events." This bill is opposed by the California State
Sheriffs' Association and the California District Attorneys
Association for substantially the same reasons.
The California Society of Association Executives (CalSAE), which
represents several nonprofit associations in California, opposes
this bill on several grounds. First CalSAE points out that
nonprofit associations include an array of groups and interests,
not just the League of California Cities and CSAC. CalSAE also
believes that "this legislation unjustly hampers non-profit
associations' ability to represent public sector organizations,
their members and employees." CalSAE writes that while most of
the professional associations that it represents focus on
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education, learning and providing information to their members,
they also at times represent those members in the legislative
and political process. CalSAE claims that all of these
associations know and respect the rules regarding the use of
association funds for political campaigns. In addition, CalSAE
maintains that local elected bodies and individuals are "proper
and thoughtful stewards of public funds," and that they can
legitimately decide when and if public funds can and should be
provided to their respective associations to collectively
represent them in political activity. Finally, CalSAE - like
most of the other opponents - more generally objects to "the
introduction of last minute legislation through a 'gut and
amend' process" that does "not provide adequate time for the
needed and necessary interaction between the legislature and the
impacted parties."
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.
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 the Elections 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
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Air Conditioning Trade Association
Associated Builders and Contractors of California
Association of California Health Care Districts
California District Attorneys Association
California Police Chiefs Association
California Society of Association Executives
California Special Districts Association
California State Association of Counties
California State Sheriffs' Association
League of California Cities
Plumbing-Heating-Cooling Contractors Association of California
Rural County Representatives Association
Urban Counties Caucus
Western Electrical Contractors Association
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334