BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 594
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          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        |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           APPROPRIATIONS      12-1                                        
           
           ----------------------------------------------------------------- 
          |Ayes:|Gatto, Bocanegra,         |     |                          |
          |     |Bradford,                 |     |                          |
          |     |Ian Calderon, Campos,     |     |                          |
          |     |Eggman, Gomez, Hall,      |     |                          |
          |     |Holden, Pan, Quirk, Weber |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Bigelow                   |     |                          |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           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 


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