BILL ANALYSIS Ó
AB 10
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Date of Hearing: April 15, 2015
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Sebastian Ridley-Thomas, Chair
AB
10 (Gatto) - As Amended April 7, 2015
SUBJECT: Political Reform Act of 1974: behested payments and
economic interest disclosures.
SUMMARY: Makes several significant changes to the Political
Reform Act (PRA) of 1974. Specifically, this bill:
1)Increases the threshold at which a public official's financial
interest can potentially create a conflict of interest under
the PRA, as follows:
a) Raises the conflict of interest threshold for interests
in real property from $2,000 to $10,000;
b) Raises the conflict of interest threshold for
investments in a business entity from $2,000 to $5,000;
and,
c) Raises the conflict of interest threshold for sources of
income, other than gifts or specified loans, from $500 to
$1,000.
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2)Revises the monetary ranges that specified public officials or
candidates, when filing a statement of economic interests
(SEI), use to describe the value of their investments,
interests in real property, and income.
3)Requires a public official or candidate who is required to
disclose a business entity investment on his or her SEI
because the official or candidate is a director, officer,
partner, or trustee of the business entity, to provide a
thorough and detailed description of the business entity's
activities and disclose the names of all business partners who
share a financial interest in the business entity on the SEI,
based on criteria established by the Fair Political Practices
Commission (FPPC).
4)Requires a public official or candidate who is required to
disclose his or her pro rata share of income to a business
entity on an SEI to include a thorough and detailed
description of the business activity of the business entity,
instead of a general description of the entity's business
activity.
5)Requires a public official who holds an office listed in
Section 87200 of the Government Code (a complete list of these
offices are detailed under "existing law" below) to disclose
on his or her SEI each governmental decision for which a
financial interest resulted in the official's disqualification
from making, participating in making, or in any way attempting
to use his or her official position to influence a
governmental decision. Requires the disclosure to identify
the governmental decision, the date that the decision was made
or considered, the financial interest that created the
conflict of interest, and any other relevant information that
the FPPC determines appropriate.
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6)Requires candidates who are not elected officials, and elected
officials for a year after leaving office, to report any
payment that is made at the behest of that person for a
legislative, governmental, or charitable purpose within 30
days following the date on which such payment or payments
equal or exceed $5,000 in the aggregate from the same source
in the same calendar year in which they are made. Requires
the statement to be filed with the following entity:
a) In the case of a candidate, with the officials and
agencies with which the candidate is required to file
campaign statements; and,
b) In the case of a former elected officer, with the agency
with which the officer was required to file such statements
when he or she was an elected officer.
7)Makes technical and corresponding changes.
EXISTING LAW:
1)Prohibits a public official from making, participating in
making, or in any way attempting to use his official position
to influence a governmental decision in which the official
knows or has reason to know he or she has a financial
interest, as specified. Provides that an official has a
financial interest in a decision, for these purposes, if it is
reasonably foreseeable that the decision will have a material
financial effect, distinguishable from its effect on the
public generally, on the official, a member of his or her
immediate family, or on any of the following:
a) Any business entity in which the public official has a
direct or indirect investment worth two thousand dollars
($2,000) or more;
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b) Any real property in which the public official has a
direct or indirect interest worth two thousand dollars
($2,000) or more;
c) Any source of income, except gifts or loans by a
commercial lending institution made in the regular course
of business on terms available to the public without regard
to official status, aggregating five hundred dollars ($500)
or more in value provided or promised to, received by, the
public official within 12 months prior to the time when the
decision is made;
d) Any business entity in which the public official is a
director, officer, partner, trustee, employee, or holds any
position of management; or,
e) Any donor of, or any intermediary or agent for a donor
of, a gift or gifts aggregating an amount that equals or
exceeds the gift limit (currently $460 in a year) that is
provided to, received by, or promised to the public
official within 12 months prior to the time when the
decision is made.
2)Requires candidates for, and current holders of, specified
elected or appointed state and local offices and designated
employees of state and local agencies to file SEIs disclosing
their financial interests, including investments, real
property interests, and income. Requires filers to file the
SEIs annually and at other periods of time, such as when
assuming or leaving office.
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3)Lists certain high-ranking public officials in Government Code
Section 87200 (these officials are known, and are hereinafter
referred to, as "87200 filers") who are subject to the most
expansive disclosure requirements under the PRA. Provides
that these 87200 filers include all of the following:
a) Elected state officers;
b) Judges and commissioners of courts of the judicial
branch of government;
c) Members of the Public Utilities Commission;
d) Members of the State Energy Resources Conservation and
Development Commission;
e) Members of the FPPC;
f) Members of the California Coastal Commission;
g) Members of the High-Speed Rail Authority;
h) Members of planning commissions;
i) Any of the following county offices: Members of the
board of supervisors; district attorneys; county counsels;
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county treasurers; and county chief administrative
officers;
j) Any of the following city offices: Mayors; members of
the city council; city managers; city attorneys; city
treasurers; city chief administrative officers;
aa) Other public officials who manage public investments;
and,
bb) Candidates for any of the offices listed above.
4)Requires an 87200 filer who is disqualified from participating
in a governmental action because of a financial conflict of
interest, except for members of the Legislature, to do the
following upon identifying the conflict of interest or
potential conflict of interest and immediately prior to the
consideration of the matter:
a) Publicly identify the financial interest that gives rise
to the conflict of interest or potential conflict of
interest in detail sufficient to be understood by the
public, except that disclosure of the exact street address
of a residence is not required;
b) Recuse himself or herself from discussing and voting on
the matter, or otherwise acting on the matter in violation
of existing law; and,
c) Leave the room until after the discussion, vote, and any
other disposition of the matter is concluded, unless the
matter has been placed on the portion of the agenda
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reserved for uncontested matters. Provides that
notwithstanding this restriction, a public official who has
a conflict of interest may speak on the issue during the
time that the general public speaks on the issue.
5)Requires a candidate who is an elected officer to report a
payment made at the behest of that officer, made principally
for legislative, governmental, or charitable purposes, within
30 days following the date on which the payment or payments
equal or exceed $5,000 in the aggregate from the same source
in the same calendar year. Requires this report to be filed
with the elected officer's agency and to contain all of the
following:
a) The name and address of the payor;
b) The amount of the payment;
c) The date or dates that the payment or payments were
made;
d) The name and address of the payee;
e) A brief description of the goods or services provided or
purchased, if any; and,
f) A description of the specific purpose or event for which
the payment or payments were made.
FISCAL EFFECT: Unknown. State-mandated local program; contains
a crimes and infractions disclaimer.
COMMENTS:
1)Purpose of the Bill: According to the author:
Transparency and disclosure are essential to protecting
public resources, preventing corruption, and restoring
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public trust. This legislation will finally bring
disclosure requirements into the 21st century. AB 10 will
ensure that California's public officials are more
transparent in their business, investment, and income
disclosures, which will further confirm that our trusted
elected officials are using their positions to serve all
citizens equally.
AB 10 has five main components. 1) It will modernize the
financial interest thresholds that necessitate a public
official excusing him or herself from a governmental
decision. These numbers have been updated only once since
1974. 2) It will include additional middle tiers and upper
tiers in the financial disclosures on the FPPC's Form 700,
ensuring that the public has a more accurate view of the
financial holdings and potential conflicts of interest for
their public officials. 3) It will require a more detailed
disclosure of these holdings, specifically a more thorough
description of any businesses and the names of any business
partners. 4) It will add an additional disclosure to the
Form 700 that requires public officials to specify any
instances in the previous year where a financial interest
has been cause for a recusal from being involved with or
making a governmental decision. 5) It will extend the
behested payment reporting requirements to include those
candidates who are required to file a campaign statement
and elected officials for one year after leaving elective
office.
2)Statements of Economic Interests: As part of the PRA's
comprehensive scheme to prevent conflicts of interest by state
and local public officials, existing law identifies certain
elected and other high-level state and local officials who
must file SEIs. Similarly, candidates for those positions must
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file SEIs. Other state and local public officials and
employees are required to file SEIs if the position they hold
is designated in an agency's conflict of interest code. A
position is designated in an agency's conflict of interest
code when the position entails the making or participation in
the making of governmental decisions that may foreseeably have
a material financial effect on the decision maker's financial
interests. While the exact number of people that are required
to file SEIs is unknown, the FPPC has estimated that the
number exceeds 200,000 officials and employees statewide.
The information that must be disclosed on an SEI, and the
location at which an SEI is filed, varies depending on the
position held by the individual who is required to file an
SEI. Although there are some exceptions, individuals who are
required to file an SEI typically must file that document with
the agency of which they are an elected official or by which
they are employed.
3)Financial Interests: Under existing law, when a public
official or a candidate for public office is required to
disclose a financial interest on his or her SEI, the filer is
not required to disclose the exact value of the interest, but
instead must select a monetary range that describes the value
of the interest. As noted above, this bill revises the
monetary ranges that public officials use to describe the
values of their financial interests on SEIs. In most cases,
the revised disclosure categories in this bill would provide
greater specificity about the values of financial interests
held by public officials, although in some cases, this bill
could provide somewhat less specificity about the value of
financial interests held by the public official.
Additionally, this bill increases the thresholds at which
certain financial interests of a public official can give rise
to a conflict of interest that requires the official to recuse
himself or herself from participating in a governmental
decision.
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The changes to the conflict of interest thresholds and
disclosure categories that are proposed by this bill are
detailed below:
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-------------------------------------------------------------
|Financial Interest |Existing Law |This Bill |
| | | |
| | | |
|-----------------------+-----------------+-------------------|
|Interest in Real | | |
|Property | | |
| | | |
| | | |
|-----------------------+-----------------+-------------------|
| Conflict of Interest |$2,000 |$10,000 |
| Threshold: | | |
| | | |
| | | |
| | | |
| | | |
|-----------------------+-----------------+-------------------|
| SEI Disclosure |$2,000 - $10,000 |$10,000 - $250,000 |
| Ranges: | | |
| | | |
| |$10,000.01 - |$250,000.01 - |
| |$100,000 |$500,000 |
| |$100,000.01 - $1 |$500,000.01 - |
| |million |$750,000 |
| |Over $1 million |$750,000.01 - $1 |
| | |million |
| | |$1,000,000.01 - $2 |
| | |million |
| | |Over $2 million |
|-----------------------+-----------------+-------------------|
|Investment | | |
| | | |
| | | |
|-----------------------+-----------------+-------------------|
| Conflict of Interest |$2,000 |$5,000 |
| Threshold: | | |
| | | |
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| | | |
| | | |
| | | |
|-----------------------+-----------------+-------------------|
| SEI Disclosure |$2,000 - $10,000 |$5,000 - $10,000 |
| Ranges: | | |
| | | |
| |$10,000.01 - |$10,000.01 - |
| |$100,000 |$100,000 |
| |$100,000.01 - $1 |$100,000.01 - |
| |million |$250,000 |
| |Over $1 million |$250,000.01 - |
| | |$500,000 |
| | |$500,000.01 - $1 |
| | |million |
| | |$1,000,000.01 - $2 |
| | |million |
| | |Over $2 million |
|-----------------------+-----------------+-------------------|
|Income | | |
| | | |
| | | |
|-----------------------+-----------------+-------------------|
| Conflict of Interest |$500 |$1,000 |
| Threshold: | | |
| | | |
| | | |
| | | |
| | | |
|-----------------------+-----------------+-------------------|
| SEI Disclosure |$500 - $1,000 |$1,000 - $10,000 |
| Ranges: | | |
| | | |
| |$1,000.01 - |$10,000.01 - |
| |$10,000 |$100,000 |
| |$10,000.01 - |$100,000.01 - |
| |$100,000 |$250,000 |
| |Over $100,000 |$250,000.01 - |
| | |$500,000 |
| | |Over $500,000 |
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-------------------------------------------------------------
1)Is More Disclosure Always Better? One of the original purposes
of the PRA was to ensure that public officials disclose income
and assets that could be affected by official actions and
disqualify themselves from participating in decisions when
they have conflicts of interest. In the background material
provided by the author's office, the author argues that
revising the disclosure categories for public officials'
financial interests is warranted in order to ensure that the
public has more accurate information about officials'
financial holdings. Additionally, the author points to recent
news articles questioning the Governor's business holdings in
arguing for the need to require greater detail about the
business holdings and business partners of public officials.
If a public official or a candidate reports that he or she
receives income of over $100,000 from one source, isn't that
sufficient information to determine whether there could be a
possible conflict of interest regarding related public policy
issues? Similarly, does the public need to know the names of a
public official's business partners in order to determine
whether the official's business interests potentially create a
conflict of interest? On the other hand, if a public official
or candidate's net worth exceeds tens or hundreds of millions
of dollars, disclosure of that information may seem
reasonable. Determining appropriate financial disclosure rules
is a subjective task, and the committee may wish to consider
whether the benefit of the increased specificity proposed by
this bill outweighs the additional burdens that such increased
specificity imposes for those who are required to file
financial disclosure reports.
2)Behested Payments and Previous Legislation: In 1996, the FPPC
amended its regulatory definition of the term "contribution"
to include any payment made "at the behest" of a candidate,
regardless of whether that payment was for a political
purpose. As a result, payments made by a third party at the
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request or direction of an elected officer were required to be
reported as campaign contributions, even if those payments
were made for governmental or charitable purposes.
The change in regulations by the FPPC, along with a number of
advice letters issued by the FPPC interpreting the new
definition of "contribution," limited the ability of elected
officers to co-sponsor governmental and charitable events. In
one advice letter, the FPPC concluded that a member of the
Legislature would be deemed to have accepted a campaign
contribution if, at his behest, a third party paid for the
airfare and lodging for witnesses to testify at a legislative
hearing.
In response to the FPPC's modified definition of
"contribution," the Legislature enacted SB 124 (Karnette),
Chapter 450, Statutes of 1997, which provided that a payment
made at the behest of a candidate for purposes unrelated to
the candidate's candidacy for elective office is not a
contribution. SB 124 specifically provided that a payment
made at the behest of a candidate principally for a
legislative, governmental, or charitable purpose is not
considered a contribution or a gift. However, SB 124 also
required that such payments made at the behest of a candidate
who is also an elected officer, when aggregating $5,000 or
more in a calendar year from a single source, be reported to
the elected officer's agency. The elected officer must report
such a payment within 30 days.
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Examples of payments made at the behest of an elected officer
that have to be reported under this provision of law include
charitable donations made in response to a solicitation sent
out by an elected officer or donations of supplies and
refreshments made by a third party for a health fair that was
sponsored by an elected officer.
This bill makes candidates for elective office, and former
elected officials for one year after leaving office, subject
to the requirement to disclose behested payments. The reason
for such an expansion is unclear. Because candidates and
former public officials are not in a position to make
governmental decisions, unlike officeholders, the existing
rationale for requiring behested payment reporting does not
necessarily extend to candidates and former public officials.
Furthermore, committee staff is unaware of any instances in
which candidates who are not public officials, or former
public officials, have solicited behested payments in any
significant amount.
3)Arguments in Support: The California Newspaper Publishers
Association submitted a letter of support to this bill prior
to the most recent amendments. The primary effect of those
amendments was adding the provisions of this bill that expand
behested payment reporting. In support of the prior version
of the bill, which primarily dealt with conflict of interest
thresholds and information that is required to be disclosed on
SEIs, the California Newspaper Publishers Association wrote:
This bill would increase the reporting requirements in the
Form 700, which elected officials and government workers
must file annually to reveal whether they have any
financial interests that create a conflict of interest in
their professional work. The Form 700s submitted by several
public officials have been analyzed by journalists who
found that there is a paucity of information current law
actually requires an official to report. Creating greater
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obligations of disclosure will provide the public with more
detailed information regarding a public official's
financial holdings and potential conflicts of interest.
AB 10 creates greater transparency by giving the public a
broader look at an official's financial holdings. It also
creates a more robust database for the public to analyze
election and political data. CNPA supports this legislation
as it increases public access to data regarding the
financial interests that impact public officials'
decisions.
4)Previous Legislation: AB 2162 (Portantino) of 2012 would have
revised the dollar thresholds that are used to report the
value of investments, real property interests, and income,
when a public official files a SEI, thereby providing greater
specificity about the value of those investments, property
interests, and income. AB 2162 was vetoed by Governor Brown.
In his veto message, the Governor argued that "[t]he law
already requires public officials to disclose their income and
investments with enough particularity so that conflicts of
interest can be identified," and indicated that he was "not
convinced that this bill will provide more useful information
to the public."
5)Political Reform Act of 1974: California voters passed an
initiative, Proposition 9, in 1974 that created the FPPC and
codified significant restrictions and prohibitions on
candidates, officeholders and lobbyists. That initiative is
commonly known as the PRA. Amendments to the PRA that are not
submitted to the voters, such as those contained in this bill,
must further the purposes of the initiative and require a
two-thirds vote of both houses of the Legislature.
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REGISTERED SUPPORT / OPPOSITION:
Support
Association of California Water Agencies
California Newspaper Publishers Association (prior version)
Opposition
None on file.
Analysis Prepared
by: Ethan Jones/E. & R./(916) 319-2094