BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  August 24, 2015 


                  ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING


                           Sebastian Ridley-Thomas, Chair


          AB 1544  
          (Cooley and Jones) - As Amended August 20, 2015


          SUBJECT:  Political Reform Act of 1974: behested payments.


          SUMMARY:  Provides that a payment made by a state, local, or  
          federal governmental agency that is made principally for  
          legislative or governmental purposes does not need to be  
          reported as a behested payment, as specified.  Specifically,  
          this bill:  


          1)Specifies that a payment by a state, local, or federal  
            governmental agency that is made principally for a legislative  
            or governmental purpose is not subject to the behested payment  
            reporting requirements described below.


          2)Contains an urgency clause, allowing this bill to take effect  
            immediately upon enactment.  Provides that the urgency clause  
            is necessary for the following reasons:


             a)   It is a core principle of representative government that  
               an elected official's duties include advocacy of government  
               agencies in favor of expenditures that benefit constituents  









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               or public purposes generally. 


             b)   It is also well-established that a government agency may  
               not expend public funds for purposes unrelated to the  
               business of that agency. 


             c)   To that end, government expenditures are subject to a  
               myriad of laws designed to protect the public interest and  
               promote transparency, including laws relating to open  
               meetings, the appropriate use of public resources,  
               conflicts of interests, and disbursement practices. 


             d)   Therefore, it is necessary for this bill to take effect  
               immediately in order to provide clarity for elected  
               officials, in conformity with the Legislature's intent that  
               reporting requirements for behested payments not apply with  
               respect to the payments made by a government agency at the  
               behest of an elected official for a legislative or  
               governmental purpose.


          3)Contains double-jointing language to avoid chaptering problems  
            with AB 10 (Gatto) of the current legislative session.
          EXISTING LAW:  


          1)Creates the Fair Political Practices Commission (FPPC), and  
            makes it responsible for the impartial, effective  
            administration and implementation of the Political Reform Act  
            (PRA).


             
           2)Provides that a payment made at the behest of a candidate is a  









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            contribution unless at least one of the following criteria are  
            satisfied:

             a)   Full and adequate consideration is received from the  
               candidate; or

             b)   It is clear from the surrounding circumstances that the  
               payment was made for purposes unrelated to the candidate's  
               candidacy for elective office.  Provides that the following  
               types of payments are presumed to be for purposes unrelated  
               to a candidate's candidacy for elective office:
              
                i)     A payment made principally for personal purposes, in  
                 which case it may be considered a gift under the PRA, as  
                 specified; 
                
                ii)    A payment made by a state, local, or federal  
                 governmental agency or by a nonprofit organization that  
                 is exempt from taxation under Section 501(c)(3) of the  
                 Internal Revenue Code; or,
                
                iii)   A payment that is made principally for legislative,  
                 governmental, or charitable purposes, in which case it is  
                 neither a gift nor a contribution.
                
           3)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;









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              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:  None. This bill is keyed non-fiscal by the  
          Legislative Counsel.


          COMMENTS:  


          1)Purpose of the Bill:  According to the author:


               AB 1544 provides specific guidance for elected  
               officers who request or provide support for an agency  
               action as part of the public procedures of duly  
               constituted state, local or federal agencies for  
               purposes of the behested payment provisions of the  
               Political Reform Act.





               Government Code Section 82015 generally provides that  
               a payment made at the "behest" of an elected officer  
               is a campaign contribution to that officer. However,  









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               Section 82015 also provides that a "behested" payment  
               made by a government agency is presumed not to be a  
               contribution. In another provision, Section 82015  
               requires that elected officers file what is known as a  
               "behested payment report" for payments made for a  
               legislative, governmental or charitable purpose that  
               they "behest" from others.  These provisions are  
               ambiguous on whether payments made by government  
               agencies must be covered in these reports.





               Government expenditures are subject to many laws  
               designed to protect the public interest, promote  
               transparency, and ensure the appropriate use of public  
               resources. It is illegal for a government agency to  
               spend its funds unless the expenditure relates to the  
               agency's official function.  It is a core principle of  
               representative government that an elected officer's  
               duties include advocating to government agencies on  
               matters of consequence to benefit their constituents,  
               which can include funding of various types.   





               This bill would clarify that a payment made at the  
               behest of an elected officer by a state, local, or  
               federal governmental agency that is made principally  
               for legislative or governmental purposes is exempt  
               from "behested payment" reporting.  


          2)Behested Payments and Previous Legislation: In 1996, the FPPC  









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            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  
            charitable donations made in response to a solicitation sent  
            out by an elected officer or donations of supplies and  









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            refreshments made by a third party for a health fair that was  
            sponsored by an elected officer.

          Because SB 124 was enacted in response to the FPPC's modified  
            regulatory definition of the term "contribution," the rules  
            governing behested payments-including the requirement that  
            certain behested payments be publicly reported-are found  
            within the provision of state statute that defines the term  
            "contribution."  The language added by SB 124 specifically  
            provides that a payment made at the behest of a candidate is  
            not a contribution if it is "clear from the surrounding  
            circumstances that the payment was made for purposes unrelated  
            to his or her candidacy for elective office."  SB 124  
            additionally enumerates three types of payments that are  
            "presumed to be for purposes unrelated to a candidate's  
            candidacy for elective office":  (1) payments made principally  
            for personal purposes (which may be gifts under the PRA); (2)  
            payments made by governmental agencies or by nonprofit  
            organizations that are exempt from taxation pursuant to  
            Section 501(c)(3) of the Internal Revenue Code; and (3)  
            payments made principally for legislative, governmental, or  
            charitable purposes. It is the third type of payments-those  
            made principally for legislative, governmental, or charitable  
            purposes-that are potentially required to be reported when  
            made at the behest of a public official.  

          Notwithstanding the fact that payments by governmental agencies  
            are covered by the second enumerated type of payments that are  
            presumed to be for purposes unrelated to a candidate's  
            candidacy, the FPPC nonetheless has advised that such payments  
            also may be covered by the third enumerated type of payments  
            (those made principally for legislative, governmental, or  
            charitable purposes), and thus may be required to be reported  
            as behested payments.

          3)Behested Payments by Governmental Agencies and FPPC Advice:   
            In 2013, the FPPC was asked to provide advice on whether a  









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            member of the Legislature would have reporting requirements  
            under the behested payment rules if the member communicated  
            with a local, state, or federal government agency to express  
            his or her support for a payment to be made to a local  
            government agency within the legislator's district.  In its  
            response (Harrison Advice Letter, No. I-13-106), the FPPC  
            concluded that such payments were not required to be reported  
            by the member of the Legislature as behested payments.  In  
            reaching that conclusion, the FPPC noted that regulations it  
            adopted to implement the behested payment rules provided that  
            a payment behested by an elected officer and made by a local,  
            state, or federal government agency is not subject to  
            reporting if "that payment will be used in the regular course  
            of official agency business of the elected officer['s  
            agency.]"  The FPPC noted that legislators "have traditionally  
            been expected to assist local agencies within their  
            legislative districts in obtaining government funding for  
            local government agency projects," and as such, "when a  
            legislator acts to achieve this purpose, he or she is acting  
            in the regular course of legislative business and bringing  
            benefits, through the affected local government agency, to the  
            state citizens whom he or she represents as constituents."  In  
            the same response, however, the FPPC stated that "not all  
            payments an elected officer 'behests' from a government  
            agency" would be exempt from reporting, mentioning  
            specifically that "a payment from a government agency to a  
            private individual or entity, such as through a government  
            grant or contract," could have benefits to specific,  
            identified private persons, and thus may not be exempt from  
            reporting.



          Earlier this year, in response to a request for advice from the  
            Executive Officer of the California State Coastal Conservancy  
            (SCC) (Schuchat Advice Letter, No. A-15-070), the FPPC cited  
            the Harrison Advice Letter in concluding that "[a]n elected  









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            official has a 'behested payment' reporting obligation when he  
            or she provides a letter to the [SCC] expressing support for a  
            grant of funds to be made by the Conservancy to a nonprofit  
            501(c)(3) organization to carry out a specific project."  The  
            FPPC letter indicated that "a key component of the SCC's work  
            is to grant funds to public entities and?501(c)(3) nonprofit  
            organizations to aid the grant recipients in carrying out  
            projects that further the SCC goals," and acknowledged that  
            the SCC "typically asks grant applicants to contact their  
            local and state elected representatives to seek letters of  
            support for their projects." Nonetheless, the FPPC concluded  
            that grants made by the SCC to private nonprofit entities  
            would "not be used in the regular course of official agency  
            business of the elected officer" and therefore are subject to  
            behested payment reporting.  

          This bill specifies that payments made by state, local, and  
            federal governmental agencies that are made principally for  
            legislative or governmental purposes are not subject to the  
            behested payment reporting requirements, regardless of whether  
            the beneficiary of the payments is another governmental agency  
            or a private entity.  In effect, this bill would overturn the  
            Schuchat Advice Letter, and future payments made by  
            governmental agencies that are made principally for  
            legislative or governmental purposes would not be subject to  
            behested payment reporting.

          4)Related Legislation:  AB 10 (Gatto), which is pending in the  
            Senate Appropriations Committee, requires members of the  
            Legislature and statewide elected officials to continue to  
            publicly report behested payments for a year after leaving  
            office, if certain conditions are met.  This bill contains  
            double-jointing language to avoid chaptering problems with AB  
            10.












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          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.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          None on file.




          Opposition


          None on file.




          Analysis Prepared by:Ethan Jones / E. & R. / (916) 319-2094














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