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. ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: July 14, 2015 |Policy Vote: E. & C.A. 4 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 17, 2015 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- 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 AB 10 (Gatto) Page 1 of ? 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 | | | AB 10 (Gatto) Page 2 of ? |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: | | | | | | | | | | | AB 10 (Gatto) Page 3 of ? |-----------------------+-----------------+-------------------| | 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 AB 10 (Gatto) Page 4 of ? 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 AB 10 (Gatto) Page 5 of ? 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. AB 10 (Gatto) Page 6 of ? 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. -- END --