BILL ANALYSIS �
SB 594
Page 1
SENATE THIRD READING
SB 594 (Hill)
As Amended September 4, 2013
Majority vote
SENATE VOTE :Vote not relevant
ELECTIONS 5-0 JUDICIARY 9-0
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|Ayes:|Fong, Bocanegra, Bonta, |Ayes:|Wieckowski, Wagner, |
| |Hall, Perea | |Alejo, Chau, Dickinson, |
| | | |Garcia, Gorell, |
| | | |Maienschein, Stone |
|-----+--------------------------+-----+--------------------------|
| | | | |
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APPROPRIATIONS 12-1
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|Ayes:|Gatto, Bocanegra, | | |
| |Bradford, | | |
| |Ian Calderon, Campos, | | |
| |Eggman, Gomez, Hall, | | |
| |Holden, Pan, Quirk, Weber | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Bigelow | | |
| | | | |
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SUMMARY : Prohibits nonprofit organizations and their employees
from using funds received from local agencies in connection with
conduit bond financing for campaign purposes, as specified.
Requires a nonprofit organization that receives significant
amounts of money from local agencies in connection with conduit
bond financing 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)Defines "public resources," for the purposes of this bill, to
include funds received by a nonprofit organization which have
been generated from any activities related to conduit bond
financing by conduit financing providers, as specified.
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Provides that these funds are public resources even if they
are received in exchange for consideration.
2)Makes it unlawful for a nonprofit organization or an officer,
employee, or agent of a nonprofit organization to use or
permit others to use public resources, as defined above, that
are from any local agency for any campaign activity not
authorized by law.
3)Provides that the following are not considered to be "campaign
activity" for the purposes of this bill:
a) The costs of a resolution supporting or opposing a
clearly identified ballot measure or candidate, as
specified;
b) Incidental or minimal use of public resources; or,
c) Incidental costs related to the establishment or
administration of a sponsored committee, as specified.
4)Provides that this bill does not apply to nonprofit
organizations that are organized under Section 501(c)(3), of
the Internal Revenue Code.
5)Provides that for the purposes of this bill, the term "local
agency" includes a public entity created pursuant to the Joint
Exercise of Powers Act, but does not include a county
superintendent of schools, a school district, or a community
college district.
6)Provides that the prohibitions on the use of public resources
described above do not prohibit the use of public resources
for providing impartial information to the public about the
possible effects of a state or local ballot measure, as
specified.
7)Provides that an unauthorized use of public resources pursuant
to this bill is punishable by civil penalties of up to $1,000
for each day on which a violation occurs, plus three times the
value of the unlawful use of public resources, as specified.
8)Requires a "reporting nonprofit organization," defined as a
nonprofit organization for which public resources from local
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agencies, as defined, account for more than 20% of the
organization's gross revenues in the current fiscal year or
either of the previous two fiscal years, to deposit funds
designated for campaign use into a separate account and to
prepare quarterly reports disclosing their campaign
activities.
9)Requires a reporting nonprofit organization that engages in
campaign activity to deposit all funds that are designated or
used for campaign activity into a separate bank account, and
to pay for all campaign activity from that separate bank
account.
10)Requires a reporting nonprofit organization to disclose the
following information if it engages in campaign activity of
$50,000 or more related to statewide candidates or ballot
measures, or $2,500 or more related to local candidates or
ballot measures at any point during a calendar quarter; or if
it engages in campaign activity of $100,000 or more related to
statewide candidates or ballot measures, or $10,000 or more
related to local candidates or ballot measures, at any point
during a two-year period, as specified:
a) The name and amount of the 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 nonprofit organization from that specific source or
sources of funds is at least $250;
b) 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,
c) A description of each campaign activity.
11)Requires each reporting nonprofit organization that engages
in campaign activity to display the information required to be
disclosed by this bill on its Web site and provide that
information to the Franchise Tax Board (FTB), as specified.
12)Permits the FTB to audit a reporting nonprofit organization
that provides records to the FTB pursuant to this bill, and
requires the FTB to audit any reporting nonprofit organization
that engages in campaign activity in excess of $500,000 in a
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calendar year. Requires a nonprofit organization that is
being audited to provide records to the FTB that substantiate
the information required to be disclosed under this bill.
13)Provides that if an audit by the FTB of a nonprofit
organization determines that the organization violated the
provisions of this bill, the Attorney General (AG) or the
district attorney for the county in which organization is
domiciled may impose a civil 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 : According to the Assembly Appropriations
Committee:
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 reportable
and subject to FTB audits is unknown, but would likely be a
small subset of all the nonprofits and would be at FTB's
discretion except for those reporting entities with
campaign spending exceeding $500,000. The FTB's costs will
be determined by this workload. Each additional audit
position would cost about $110,000 annually. These costs
could be partially offset by revenues from fines.
2) The AG and local prosecutors may incur unknown costs to
prosecute violations of the bill's spending prohibitions,
which would be partially offset by penalty revenues.
COMMENTS : 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 California Statewide
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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.
Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094
FN: 0002194