BILL ANALYSIS Ó
AB 2823
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Date of Hearing: April 13, 2016
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Shirley Weber, Chair
AB 2823
(Gatto) - As Amended March 31, 2016
SUBJECT: Political Reform Act of 1974: economic interest
disclosure.
SUMMARY: Increases various conflict of interest thresholds in
the Political Reform Act (PRA), and generally requires greater
detail on public officials' Statements of Economic Interests
(SEIs) about the values of those officials' investments, real
property interests, and income. Specifically, 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,
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c) Raises the conflict of interest threshold for sources of
income, other than gifts or specified loans, from $500 to
$1,000.
2)Revises the monetary ranges that specified public officials or
candidates, when filing an SEI, use to describe the value of
their investments, interests in real property, and income.
3)Makes technical and corresponding changes
EXISTING LAW:
1)Creates the Fair Political Practices Commission (FPPC), and
makes it responsible for the impartial, effective
administration and implementation of the PRA.
2)Prohibits a public official from making, participating in
making, or in any way attempting to use his or her 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 two thousand dollars
($2,000) or more;
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b) Any real property in which the public official has a
direct or indirect interest worth two thousand dollars
($2,000) or more;
c) 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 five hundred dollars ($500)
or more in value provided or promised to, or received by,
the public official within 12 months prior to the time when
the decision is made;
d) Any business entity in which the public official is a
director, officer, partner, trustee, or employee, or holds
any position of management; or,
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.
3)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
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SEIs annually and at other periods of time, such as when
assuming or leaving office.
FISCAL EFFECT: Unknown. State-mandated local program; contains
a crimes and infractions disclaimer.
COMMENTS:
1)Purpose of the Bill: 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 2823 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 2823 has two main components. 1) 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. 2) 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.
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2)Previous Legislation: AB 10 (Gatto) of 2015, was similar to
this bill, but it contained additional provisions that would
have required SEIs to contain more detailed information about
a public official's business partners and about the business
activity of business entities disclosed on the SEI, and would
have required the SEI of specified public officials to include
a disclosure of governmental decisions on which the public
official was required to recuse himself or herself from
participating due to a conflict of interest. AB 10 was vetoed
by Governor Brown. In his veto message, the Governor wrote
"The Political Reform Act already requires public officials to
disclose their income, investments and business activities
with enough particularity so that conflicts of interest can be
identified. This bill adds yet more complexity to existing
reporting requirements without commensurate benefit, and I am
not convinced that this bill will provide more useful
information to the public."
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 "The 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."
Given the fact that the Governor has vetoed legislation that is
similar to this bill twice in the last four years, it is
unclear whether there is reason to believe that this bill will
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receive more favorable consideration from the Governor.
Although this bill does not include certain provisions that
were in AB 10, as detailed above, this bill is fairly similar
to AB 2162. In light of that fact, it is not clear that the
differences between this bill and AB 10 are sufficient to
address the Governor's stated reason for vetoing AB 10.
3)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. 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.
4)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 general, the
revised disclosure categories in this bill would provide
greater specificity about the values of financial interests
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held by public officials. 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: | | |
| | | |
|-----------------------+-----------------+-------------------|
| SEI Disclosure |$2,000 - $10,000 |$10,000 - $100,000 |
| Ranges: | | |
| | | |
| |$10,000.01 - |$100,000.01 - |
| |$100,000 |$250,000 |
| |$100,000.01 - $1 |$250,000.01 - |
| |million |$500,000 |
| |Over $1 million |$500,000.01 - |
| | |$750,000 |
| | |$750,000.01 - $1 |
| | |million |
| | |$1,000,000.01 - $2 |
| | |million |
| | |Over $2 million |
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|-----------------------+-----------------+-------------------|
|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 |$50,000 |
| |$100,000.01 - $1 |$50,000.01 - |
| |million |$100,000 |
| |Over $1 million |$100,000.01 - |
| | |$250,000 |
| | |$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: | | |
| | | |
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| |$1,000.01 - |$10,000.01 - |
| |$10,000 |$50,000 |
| |$10,000.01 - |$50,000.01 - |
| |$100,000 |$100,000 |
| |Over $100,000 |$100,000.01 - |
| | |$250,000 |
| | |$250,000.01 - |
| | |$500,000 |
| | |Over $500,000 |
-------------------------------------------------------------
1)More Detailed Disclosures on SEIs: One of the original
purposes of the PRA was to ensure that public officials
disclose income and assets that could be affected by official
actions and disqualify themselves from participating in
decisions when they have conflicts of interest. In background
material provided by the author's office, the author argues
that revising the disclosure categories for public officials'
financial interests is warranted in order to ensure that the
public has more accurate information about the financial
holdings and potential conflicts of interest for public
officials. If a public official or a candidate reports that he
or she receives income of over $100,000 from one source, isn't
that sufficient information to determine whether there could
be a possible conflict of interest regarding related public
policy issues? On the other hand, if a public official or
candidate's net worth exceeds tens or hundreds of millions of
dollars, disclosure of that information may seem reasonable.
Determining appropriate financial disclosure rules is a
subjective task, and the committee may wish to consider
whether the benefit of the increased specificity proposed by
this bill outweighs the additional burdens that such increased
specificity imposes for those who are required to file
financial disclosure reports.
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2)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
AB 2823
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