BILL ANALYSIS �
SB 594
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Date of Hearing: August 30, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 594 (Hill) - As Amended: August 21, 2013
Policy Committee: ElectionsVote:5-0
Judiciary 9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill prohibits nonprofit organizations from spending public
resources received from any local public agency-including
resources received in exchange for services or goods provided by
the nonprofit-for "campaign activity", i.e. communications
advocating for or against the qualification of a ballot measure,
the approval or rejection of a ballot measure, the election or
defeat of a candidate, or a campaign contribution. Specifically,
this bill:
1) Stipulates that campaign activity does not include: the
costs of an endorsement of a ballot measure or candidate by
a nonprofit through adoption of a resolution; incidental or
minimal inadvertent use of public resources; or the costs
of establishing and administering a sponsored committee.
2) Stipulates that the bill does not apply to 501(c)(3)
nonprofits.
3) Makes violation of (1) subject to a civil penalty of up
to $1,000 for each day the violation occurs, plus three
times the value of the unlawful use of public resources. An
action may be brought by the Attorney General (AG) or a
local prosecutor.
4) Requires the AG to conduct a biennial audit of every
nonprofit agency for which public resources from local
agencies account for more than 20% of the non-profit's
gross revenues, unless that non-profit sponsors a political
committee and reports all contributions received and
expenditures made pursuant to the Political Reform Act and
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makes no payments to the committee from its treasury other
than donor contributions earmarked for the committee.
5) Requires a non-profit that engages in campaign activity
and is subject to the above audits to:
a) Place all funds received, and to be used, for campaign
activity into a separate bank account.
b) Make specified disclosures, quarterly and biennially, on
its website regarding its campaign-related revenues and
expenditures
6) Authorizes the AG to impose a fine of up to $10,000 for
each violation by a nonprofit discovered through the audit
process.
FISCAL EFFECT
1)The AG estimates that around 40,000 non-profits would be
subject to the prohibitions on campaign spending proposed in
this bill. The number of these organizations whose campaign
activity and spending levels would be subject to AG audits is
unknown, but would likely be a small subset of all the
nonprofits. The AG's costs will be determined by this
workload, but if only two additional auditing positions were
needed, the annual GF cost would be around $210,000. These
costs could be partially offset by revenues from fines.
2)The AG and local prosecutors would incur unknown costs to
prosecute violations of the bill's spending prohibitions,
partially offset by penalty revenues.
COMMENTS
1)Purpose . 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." 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."
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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 campaign purposes.
This bill was a gut and amend in the Assembly.
2)In support , the California Professional Firefighters states,
"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, it is a compelling public
interest to ensure transparency and facilitate proper
disclosure of how taxpayer dollars are being used."
3)Opposition . The League, CSAC, Urban Counties Caucus,
California Special Districts Association, California School
Boards Association, Association of California School
Administrators, and numerous individual cities, counties, and
special districts 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.
Most controversially from the opposition's point of view, the
bill defines "public resources" to include any resources for
which the nonprofit organization has been 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. Opponents argue
that they follow all current requirements regarding
expenditures for and reporting of political activities, and
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believe this bill will serve to stifle their voice in
important public policy debates and add expensive reporting
requirements.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081