BILL ANALYSIS Ó AB 1828 Page 1 Date of Hearing: May 18, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 1828 (Dodd) - As Amended April 28, 2016 ----------------------------------------------------------------- |Policy |Elections and Redistricting |Vote:|4 - 3 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill eliminates the current $250 campaign contribution threshold that triggers conflict of interest requirements for members of the Board of Equalization (BOE), under the Quentin L. Kopp Conflict of Interest Act of 1990 (Kopp Act), expands the conflict of interest provisions of the Kopp Act to apply to contributions made in the three months after a proceeding before the BOE, and applies conflict of interest provisions to behested payments aggregating $5,000 or more. Specifically, this bill: 1)Lowers the campaign contribution threshold that triggers the AB 1828 Page 2 conflict of interest requirements under the Kopp Act from $250 to $0, and in addition subjects to the Kopp Act behested payments of $5,000 or more that are currently reportable by a BOE member pursuant to the Political Reform Act (PRA) and made within the 12 months prior to a proceeding. 2)Prohibits a member of the BOE from accepting a contribution of any amount from a party, participant, or agent of a party or participant in the three months following an adjudicatory proceeding before the BOE in which the party or participant is involved, and in which the BOE member participated. 3)Provides that if a member of the BOE receives a contribution that is prohibited per (2), the member shall be deemed not to have accepted the contribution lawful if it is returned within 30 days from the time the member knows or has reason to know about the contribution and the decision in the adjudicatory proceeding. 4)Requires a party, participant, or agent in an adjudicatory proceeding before the BOE-who makes a behested payment of $5,000 or more that is currently reportable by a BOE member pursuant the PRA in the 12 months preceding the decision on the proceeding-to disclose that payment on the record of the proceeding. 5)Requires a party, participant, or agent in an adjudicatory proceeding before the BOE that makes a contribution to a member of the BOE in the three months following the decision in that proceeding to disclose that contribution to the BOE within 30 days of making the contribution. 6)Requires the BOE to make the contributions and payments reported per (4) and (5) available on its website. AB 1828 Page 3 FISCAL EFFECT: This measure will add significantly to the requirement for BOE members to track the timing of contributions and also of reportable behested payments, in order to avoid conflicts of interest on matters before the board. This is particularly so because the Kopp Act would now encompass contributions of any amount, including contributions under $100 that are not even reportable under current campaign laws. Assuming one-half a staff analyst position for each of the five BOE members, annual General Fund costs would be around $212,000. (Two board members assert that their costs to comply with this bill will be absorbable, while two other members believe that they will require at least one full-time staff position to comply.) The BOE estimates additional one-time General Fund costs of $35,000 in the first year provide notification to taxpayers, participants, and agents with matters before the board, creating online disclosure forms and revising contribution forms and relevant regulations. COMMENTS: 1)Purpose. According to the author's office "?recent reports have highlighted contribution activities of individuals and organizations having cases before the Board, which, while not illegal, raise concerns about potential conflicts of interest. AB 1828 Page 4 For example, organizations having cases before the BOE have had multiple individuals associated with that same organization each make $249 contributions to a single Board member, thereby complying with the letter of the Kopp Act, but cumulatively, exceeding the contribution threshold triggering recusal or a return of the contribution. Concerns have also been raised that organizations having cases before the BOE have contributed substantial sums to a PAC, which in turn contributes an unlimited amount to a BOE member. "To be clear, there is no allegation of improper action by any BOE member who may have received such contributions. AB 1828 would, however, remove any perception of a conflict of interest, and would have the effect and benefit of increasing the public's trust in the BOE, which is responsible for collecting approximately $60 billion in state revenue each year." In support, Board Members Fiona Ma argues that AB 1828, by strengthening disclosure requirements, will "close a potential avenue for corruption" and ensure citizens that BOE decisions are made fairly and impartially. Board Member George Runner believe AB 1828 will "remove the perception of potential conflicts of interest created when Board Members accept contributions from parties, or participants, or their employees who have or recently had business before the Board." 2)The Kopp Act (named for former Senator Quentin Kopp) prohibits a member of the BOE from participating in an adjudicatory proceeding if the member knows or has reason to know that he or she received contributions totaling $250 or more in the 12 months prior to the proceeding from a party, participant, or agent of a party or participant, as specified. Members are permitted to participate in the decision, however, if they return the contribution within a specified time period. The AB 1828 Page 5 argument for enacting the Kopp Act was that the BOE should be subject to rules similar to those that applied to appointed boards and commissions (under the Levine Act) because of the BOE's quasi-judicial role as the appellate body for state tax appeals. Unlike the Levine Act, the Kopp Act is not part of the PRA, and is neither administered nor enforced by the FPPC. 3)Behested Payments. 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. 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. AB 1828 brings such behested payments under the Kopp Act. 4)Strategic Disqualification Under the Kopp Act. Under the BOE's Regulation 5550, any three members of the BOE constitute a quorum, except in specified circumstances, and a majority of the quorum is required to approve or disapprove taxpayer appeals and other matters. As a result, if two members of the BOE are disqualified under the Kopp Act from participating in a proceeding, it would take only two of the remaining three members to reach a decision in the proceeding. The fact that disqualifications due to the Kopp Act can reduce the number of votes necessary for the BOE to reach a decision has led to concern that parties and participants can strategically disqualify members of the BOE from certain proceedings by making campaign contributions of $250 or more to those members. 5)Implementation Issues. As noted in the analysis of this bill by the Assembly Elections Committee, "The broad new additions to the Kopp Act that are proposed by this bill could make compliance with that Act considerably more difficult, could AB 1828 Page 6 increase the risk of inadvertent violations of the law, and could exacerbate the potential for parties and participants in BOE proceedings to use the Act's conflict of interest provisions strategically to force BOE members to disqualify themselves from participating in certain proceedings." 6)Opposition. Board Member Diane Harkey argues that the bill will "create an extremely complex, if not impossible, situation for monitoring campaign contributions, but more egregiously, behested payments and participation on charitable boards and foundations." Board Member Jerome Horton expresses similar concerns, and contends the bill will create increased filing burdens for small businesses and for third-party donors to nonprofits, and believes that the requirements could deter donors to nonprofits that participate in charitable events with BOE members. 7)Related Legislation. AB 816 (Hill), which recently passed the Senate, reduces the campaign contribution threshold that triggers the conflict of interest requirements under the Kopp Act from $250 to $100. Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081 AB 1828 Page 7