BILL ANALYSIS �
SENATE COMMITTEE ON ELECTIONS
AND CONSTITUTIONAL AMENDMENTS
Senator Norma J. Torres, Chair
BILL NO: SB 594 HEARING DATE: 9/11/13
AUTHOR: HILL ANALYSIS BY: Darren Chesin
AMENDED: 9/4/13
FISCAL: YES
SUBJECT
Use of public resources
DESCRIPTION
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.
This bill 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. 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 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
SB 594 (HILL)
Page 2
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 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
SB 594 (HILL)
Page 3
organization determines that the organization violated the
provisions of this bill, the Attorney General (AG) or the
district attorney for the county in which the organization
is domiciled may impose a civil fine on the organization in
an amount up to $10,000 for each violation.
BACKGROUND
Conduit Bond Financing. "Conduit financing" means the issuance
of conduit revenue bonds. A "conduit revenue bond" means any
municipal security the proceeds of which are loaned to any
nongovernmental borrower, including, but not limited to,
persons, for-profit corporations, nonprofit corporations
pursuant to Section 501(c)(3) of the Internal Revenue Code,
partnerships, and other legal entities for purposes that are
permitted for qualified private activity bonds under applicable
federal law. "Conduit financing provider" means any county,
city, city and county, public district, public authority, public
corporation, nonprofit corporation, joint powers authority, or
other statutorily constituted public entity that issues one or
more conduit revenue bonds.
COMMENTS
1.According to the Author : SB 594 improves transparency with
respect to the campaign activity of nonprofit organizations
that receive at least 20% of their gross revenue from taxpayer
dollars and that engage in political activity through
contributions from their general treasury. The bill requires
those organizations to deposit into a separate bank account
and disclose on their websites and to the Franchise Tax Board
(FTB), all sources of non-public funds they receive and spend
on electioneering. This bill further requires those
nonprofits to provide a description of the campaign activity
they engage in and the identity and amount of payments made
from the separate bank account for that campaign activity.
Additionally, SB 594 clarifies that the organization cannot use,
or permit others to use, public resources it receives for
campaign activities including funds generated from activities
related to tax-exempt bond financing. Tax-exempt bonds are
the same as taxpayer-subsidized debt. Taxpayers are
subsidizing the debt issued by public agencies and so the fees
generated from such a transaction belong to the public. SB
SB 594 (HILL)
Page 4
594 affirmatively declares those revenues to be public
resources, keeping them out of campaign activity.
Finally, the bill authorizes the FTB to perform audits and when
nonprofit organizations reach campaign contribution amounts of
$500,000 in a year, the FTB audits are mandatory.
Publically-funded nonprofit organizations have a duty to be
above reproach given that taxpayers foot the bill for 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. But rather only insists upon appropriate disclosures and
clear protections when it comes to campaign activity.
The courts have made it 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 these nonprofits engage in
political activity, proper disclosure will tell the whole
story that is otherwise obfuscated today. SB 594 guarantees
that taxpayer-financed organizations are held to the same
standards of accountability and transparency as any other
political action committee. The September 4 amendments have
earned the support of the California State Association of
Counties and a neutral position from the League of California
Cities.
2.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.
3.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
SB 594 (HILL)
Page 5
on a 2-5 vote.
PRIOR ACTION
Assembly Elections and Redistricting Committee: 5-0
Assembly Judiciary Committee: 9-0
Assembly Appropriations Committee: 12-1
Assembly Floor: 73-3
POSITIONS
Sponsor: Author
Support: California Clean Money Campaign
California Labor Federation
California Nurses Association
California Professional Firefighters
California State Association of Counties
California Teachers Association
Consumer Federation of California
Howard Jarvis Taxpayers Association
Peace Officers Research Association of California
Planned Parenthood
State Building and Construction Trades Council, AFL-CIO
Oppose: None received
SB 594 (HILL)
Page 6