BILL ANALYSIS Ó
SENATE COMMITTEE ON
ELECTIONS AND CONSTITUTIONAL AMENDMENTS
Senator Ben Allen, Chair
2015 - 2016 Regular
Bill No: AB 10 Hearing Date: 7/7/15
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|Author: |Gatto |
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|Version: |4/7/15 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Darren Chesin |
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Subject: Political Reform Act of 1974: behested payments and
economic interest disclosures
DIGEST
This bill makes several significant changes to the Political
Reform Act (PRA) of 1974 including changes to reporting
requirements on statements of economic interests (SEI) and
behested payment reports.
ANALYSIS
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 $2,000 or more;
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b) Any business entity in which the public official is a
director, officer, partner, trustee, employee, or holds any
position of management; or,
c) Any real property in which the public official has a
direct or indirect interest worth $2,000 or more;
d) 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 $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;
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.
3)Delineates 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.
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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 Fair Political Practices Commission
(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;
county treasurers; and county chief administrative
officers;
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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 (If the governmental
decision is to be made during an open session of a public
meeting, the public identification shall be made orally and
shall be made part of the official public record.);
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
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.
1)Requires an elected officer to report a payment made at the
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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.
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 use to describe the value of their investments,
interests in real property, and income when filing a SEI (see
table below under "Background" for a detailed description).
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 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" above) 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.
6)Requires candidates who are not elected officials, and elected
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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.
BACKGROUND
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 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
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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.
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. The changes to the
conflict of interest thresholds and disclosure categories that
are proposed by this bill are detailed below:
-------------------------------------------------------------
|Financial Interest |Existing Law |This Bill |
|-----------------------+-----------------+-------------------|
|Interest in Real | | |
|Property | | |
|-----------------------+-----------------+-------------------|
| Conflict of Interest |$2,000 |$10,000 |
| Threshold: | | |
| | | |
| | | |
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|-----------------------+-----------------+-------------------|
| 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: | | |
| | | |
| | | |
|-----------------------+-----------------+-------------------|
| 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 |
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| |Over $100,000 |$250,000.01 - |
| | |$500,000 |
| | |Over $500,000 |
| | | |
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Behested Payments . 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 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.
Examples of payments made at the behest of an elected officer
that have to be reported under this provision of law include
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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.
COMMENTS
1)According to the author : Transparency and disclosure are
essential to protecting public resources, preventing
corruption, and restoring 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:
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.
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.
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.
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.
It will extend the behested payment reporting
requirements to include those candidates who are
required to file a campaign statement and elected
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officials for one year after leaving elective office.
1)Is More Disclosure Always Better ? Existing law and this bill
address the monetary thresholds that determine when financial
conflicts of interest exist. It is unclear how disclosing the
names of a public official's business partners help determine
whether the official's business interests potentially create a
conflict of interest. Furthermore, the list may be brief for
smaller businesses, but what if the official is an officer for
a much larger company that has partnerships with lots of other
corporations in and out of the state?
Additionally, this bill requires a public official or candidate
to include on an SEI a "thorough and detailed description" of
the business activities of specified business entities instead
of a general description as required under existing law.
Although the bill permits the FPPC to establish the criteria
on which these expanded descriptions will be based, a
"thorough and detailed description" could include an enormous
amount of information that would be not only burdensome but of
questionable value.
2)Why Expand Behested Payment Reports to Non-Officeholders ?
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.
3)Why Add Recusal Information to SEIs ? Since public officials
already have to publicly identify their reasons for
disqualification - often during an open session of a public
meeting - it is unclear how adding recusal information on the
SEI after the fact would be useful. That information would be
reported in many cases long after the recusal which is already
recorded in public meeting minutes.
RELATED/PRIOR LEGISLATION
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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."
PRIOR ACTION
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|Assembly Floor: |79 - 0 |
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|Assembly Appropriations Committee: |17 - 0 |
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|Assembly Elections and Redistricting | 6 - 0 |
|Committee: | |
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POSITIONS
Sponsor: Author
Support: Association of California Water Agencies
California Clean Money Campaign
California Common Cause
California Newspaper Publishers Association
Oppose: None received
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