BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 10 (Gatto) - Political Reform Act of 1974: behested payments  
          and economic interest disclosures.
          
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          |Version: July 14, 2015          |Policy Vote: E. & C.A. 4 - 0    |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: August 17, 2015   |Consultant: Robert Ingenito     |
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          This bill meets the criteria for referral to the Suspense File.




          


          Bill  
          Summary: AB 10 would make modifications to the Political Reform  
          Act (PRA) of 1974, including changes to reporting requirements  
          on statements of economic interests (SEI) and behested payment  
          reports.


          Fiscal  
          Impact: The Fair Political Practices Commission (FPPC) indicates  
          that this bill would result in a one-time General Fund cost of  
          $342,000. Ongoing costs would total about $130,000 per year.


          Background: As part of the PRA's comprehensive scheme to prevent conflicts  







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          of interest by state and local public officials, current 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 their  
          position is designated in an agency's conflict of interest code.  
           This occurs 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 statewide.
          The information that must be disclosed on an SEI, and the  
          location at which an SEI is filed, varies by filee. 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.


          Under current law, when a public official or a candidate for  
          public office is required to disclose a financial interest on an  
          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. This bill would revise 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, the opposite could be  
          true. Additionally, this bill would increase 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, as  
          compiled by the Senate Committee on Elections and Constitutional  
          Amendments, are detailed below:


             ------------------------------------------------------------- 
            |Financial Interest     |Existing Law     |This Bill          |
            |-----------------------+-----------------+-------------------|
            |Interest in Real       |                 |                   |








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            |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:           |                 |                   |
            |                       |                 |                   |
            |                       |                 |                   |
            |-----------------------+-----------------+-------------------|
            |  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:           |                 |                   |
            |                       |                 |                   |
            |                       |                 |                   |








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            |-----------------------+-----------------+-------------------|
            |  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      |
            |                       |                 |                   |
             ------------------------------------------------------------- 



          In 1996, 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. Consequently, 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.


          This change, 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  








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          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  
          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.




          Proposed Law:  
          This bill would do all of the following:
                 Increase the thresholds at which a public official's  
               financial interest can potentially create a conflict of  
               interest under the PRA, as follows:


                  o         From $2,000 to $10,000 for interests in real  
                    property.


                  o         From $2,000 to $5,000 for investments in a  
                    business entity.


                  o         From $500 to $1,000 for sources of income,  
                    other than gifts or specified loans.


                 Revise 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.


                 Require 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  








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               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 FPPC.


                 Require a public official who holds an office listed in  
               Section 87200 of the Government Code to disclose, as  
               specified, 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.


                 Require candidates who are not elected officials, and  
               elected officials for a year Require a Member of the  
               Legislature or a person elected to a statewide elective  
               office for one year after he or she leaves elective office,  
               to report within 30 days following the date on which a  
               behested payment or payments are made for legislative,  
               governmental, or charitable purposes that equal or exceed  
               $5,000 in the aggregate from the same source in the same  
               calendar year in which the payments are made, if the  
               payments would financially benefit the former officeholder  
               or his or her immediate family, the former officeholder's  
               employer or the employer of a member of his or her  
               immediate family, or an entity with whom the former  
               officeholder or a member of his or her immediate family is  
          negotiating employment.





          Related Legislation: AB 2162 (Portantino, 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 the Governor.












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          Staff  
          Comments: FPPC indicates that this bill would result in one-time  
          costs of $342,000 for 2.5 positions to promulgate regulations,  
          draft compliance materials, revise forms, and perform outreach.  
          Ongoing costs would total 1 position and $130,000 annually.
          Any local government costs resulting from the mandate in this  
          measure are not state-reimbursable because the mandate only  
          involves the definition of a crime or the penalty for conviction  
          of a crime.




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