BILL ANALYSIS Ó
AB 2840
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Date of Hearing: April 13, 2016
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Shirley Weber, Chair
AB 2840
(Lopez) - As Introduced February 19, 2016
SUBJECT: Political Reform Act of 1974: travel.
SUMMARY: Prohibits tax-exempt 501(c)(3) nonprofit organizations
from making travel payments for Members of the Legislature.
Specifically, this bill:
1)Prohibits a nonprofit organization that is exempt from
taxation under Section 501(c)(3) of the Internal Revenue Code
from providing any payment, advance, or reimbursement for
travel, including actual transportation and related lodging
and subsistence, to a Member of the Legislature.
2)Prohibits a Member of the Legislature from accepting payments,
advances, or reimbursements from nonprofit organizations that
are prohibited as provided above.
EXISTING LAW:
1)Creates the Fair Political Practices Commission (FPPC), and
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makes it responsible for the impartial, effective
administration and implementation of the Political Reform Act
(PRA).
2)Prohibits specified elected officers and other public
officials from receiving gifts, as defined, in excess of $460
in value from a single source in a calendar year. Provides
that payments for travel that is reasonably related to a
legislative or governmental purpose, or to an issue of state,
national, or international public policy, are not subject to
the gift limit if either of the following is true:
a) The travel is in connection with a speech given by the
official and the lodging and subsistence expenses are
limited to the day immediately preceding, the day of, and
the day immediately following the speech, and the travel is
within the United States; or,
b) The travel is provided by a government, a governmental
agency, a foreign government, a governmental authority, a
bona fide public or private educational institution, a
nonprofit organization that is exempt from taxation under
Section 501(c)(3) of the Internal Revenue Code, or by a
person domiciled outside the United States who
substantially satisfies the requirements for tax-exempt
status under Section 501(c)(3) of the Internal Revenue
Code.
3)Prohibits a lobbyist or lobbying firm from making gifts
aggregating more than $10 in a calendar month to a candidate
for elective state office, an elected state officer, or a
legislative official, or to an agency official of any agency
required to be listed on the registration statement of the
lobbying firm or the lobbyist employer of the lobbyist.
Prohibits an official from knowingly receiving a gift that is
unlawful under this provision.
4)Requires candidates for, and current holders of, specified
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elected or appointed state and local offices and designated
employees of state and local agencies to file statements of
economic interests (SEIs) disclosing their financial
interests, including investments, real property interests, and
income, including gifts.
5)Requires certain tax-exempt 501(c)(3) and 501(c)(4) nonprofit
organizations that make travel payments for elected officials
to file a report with the FPPC that discloses the names of
donors to the organization that meet specified criteria.
FISCAL EFFECT: Unknown. State-mandated local program; contains
a crimes and infractions disclaimer.
COMMENTS:
1)Purpose of the Bill: According to the author:
In recent years public distrust in government has
increasingly grown particularly due to the amount of
influence that special interest groups have over
policy makers.
One technique that special interest groups have
utilized to secure their influence with law makers has
been by taking them on trips commonly known as
"junkets". A "junket" is when a non-profit fully pays
for a trip for an elected official that includes
travel, lodging, meals, and other associated expenses.
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During these trips elected officials are educated on
issues and topics that pertain to their jurisdictions.
Current law requires a nonprofit organization that
makes travel payments of $5,000 or more for an elected
official or $10,000 or more for more than one elected
official to disclose the names of donors who donated
$1,000 or more and also went on the trip(s). The law
also requires the elected official attending to
disclose the destination of the trip.
According to a recent article by the Sacramento Bee
members of the California legislature accepted travel
and associated expenses by non-profits and foreign
governments that were valued at $612,000 in 2015
alone.
Unfortunately special interest groups have hidden
behind non-profits they have created in order to take
legislators away to luxurious destinations to educate
them on the issues facing Californians. Simple
disclosure of such trips still allows for such groups
to have greater influence with elected officials.
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2)Gifts of Travel: When the PRA was enacted in 1974, it did not
include a general limit on the value of gifts that could be
received by public officials, though it did include the $10
lobbyist gift limit. In 1988, the voters approved Proposition
73, which prohibited elected officeholders from accepting any
gift exceeding $1,000 in value in a calendar year from a
single source, among other provisions. SB 1738 (Roberti),
Chapter 84, Statutes of 1990, subsequently lowered the gift
limit to $250 for elected state officials, and made the same
$250 gift limit applicable to members of state boards and
commissions and to designated employees of state agencies,
among other provisions (though the gift limit remained at
$1,000 for local elected officeholders until the passage of SB
701 (Craven), Chapter 690, Statutes of 1995). SB 1738 also
required the FPPC to adjust the gift limit every two years to
reflect inflation. Based on those adjustments, the gift limit
has risen to $460. The $1,000 gift limit in Proposition 73
and the $250 gift limit in SB 1738 both included exceptions
for reimbursements of certain travel expenses.
Travel payments received by public officials generally are
considered to be reportable gifts or income under the PRA,
with certain exceptions. If a travel payment is a gift, it is
also normally subject to the $460 gift limit and $10 lobbyist
gift limit, though certain exceptions apply.
Payments for travel (including lodging and subsistence) that are
related to a legislative or governmental purpose, or to an
issue of state, national, or international public policy, are
considered gifts but are not subject to the $460 gift limit if
the travel is: (1) in connection with a speech given by the
official and any lodging and subsistence expenses are limited
to the day immediately preceding, the day of, and the day
immediately following the speech and the travel is within the
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United States, or (2) provided by a government agency or
authority, a bona fide public or private educational
institution, as specified, or a nonprofit organization
pursuant to Section 501(c)(3) of the Internal Revenue Code or
a similar foreign organization. Although these payments are
not subject to the $460 gift limit, they must be reported on
an official's SEI, and the travel payments can create a
conflict of interest for the official.
Payments made for travel for leisure or recreational purposes
are not exempt from the gift limit; instead, the exception to
the gift limits applies only for travel that is "reasonably
related to a legislative or governmental purpose, or to an
issue of state, national, or international public policy," and
only if certain other conditions are met. Exempting certain
travel payments from the gift limits may give public officials
the opportunity to become better educated on public policy
issues through travel that those officials otherwise would be
unable to afford, or that otherwise would need to be paid for
with public funds.
Among the travel payments received by members of the Legislature
in 2015 that were made by 501(c)(3) nonprofit organizations
were payments for travel to conferences and training sessions
put on by the National Conference of State Legislatures, the
Council of State Governments, and the State Legislative
Leaders Foundation; travel and lodging in connection with a
conference held in California on the state's drought; lodging
in connection with the Latino Legislative Caucus' annual
policy retreat; and travel and lodging in connection with the
United Nations Climate Convention in France. All of those
travel payments would be illegal under this bill.
In fact, this bill would prohibit 501(c)(3) nonprofit
organizations from making payments of any amount in connection
with travel by members of the Legislature. It would be
illegal, for instance, for a 501(c)(3) nonprofit organization
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to pay for a $30 train ticket for a member of the Legislature
to attend and speak at their annual conference in California,
or to pay for a hotel room for one night for a legislator who
spoke at that conference. Even if those gifts of travel are
well below the $460 gift limit, they would be illegal under
the provisions of this bill. On the other hand, it would
continue to be legal for a 501(c)(3) nonprofit organization to
make gifts of up to $460 in a calendar year to a member of the
Legislature as long as those gifts are not related to travel.
If there is concern that travel being funded by nonprofit
organizations has been primarily for leisure purposes and is
not serving the purpose of educating members about issues of
public policy and assisting those members in the performance
of their duties, perhaps it would be more appropriate to
revisit the standards that are used to determine whether
travel is sufficiently related to public policy issues.
It should also be noted that this bill would not necessarily
limit certain trips that have been prominently covered by the
media and that have been criticized by the author of this
bill. For example, in a press release announcing the
introduction of this bill, the author is quoted as saying that
she "do[es] not agree with the current loophole that allows
nonprofits to pay for travel to places like Maui so
legislators can 'relax' with lobbyists." This appears to be a
reference to an annual conference in Maui which various
members of the Legislature have attended. While that
conference is sponsored by a nonprofit organization, and that
organization has made travel payments for members of the
Legislature to attend the conference, the sponsoring
organization is not organized pursuant to Section 501(c)(3) of
the Internal Revenue Code, but instead is organized pursuant
to Section 501(c)(4). The travel payments made by that
organization for members of the Legislature to attend the
conference appear to be exempt from the gift limits not
because of the nonprofit status of the organization, but
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because attendees at the conference generally make speeches or
participate in panels at the conference, and the travel is
within the United States.
3)Recent Legislation: Last year, the Legislature enacted and
the Governor signed SB 21 (Hill), Chapter 757, Statutes of
2015, which required specified nonprofit organizations that
make payments for travel by public officials to disclose the
names of certain donors, among other provisions. According to
the author, SB 21 was an attempt to "increase[] transparency
within the [PRA] by requiring non-profits that pay for elected
official travel to disclose to the FPPC the names of the
donors responsible for funding the travel."
4)Any Public Official May Choose to Decline Gifts: No public
official is compelled to accept gifts. To the extent that a
public official is concerned that the acceptance of a gift of
travel may result in public distrust, that official is free to
decline any or all gifts. In fact, a number of members of the
Legislature have chosen not to accept gifts of any kind or
value.
5)Limited to Legislators: This bill only prohibits specified
travel payments to Members of the Legislature; it does not
restrict such payments made for other public officials or
employees. The reason for this distinction is unclear. If,
as the author contends, special interest groups are paying for
junkets in an attempt to influence public officials, and if
this bill is the appropriate way to protect against any
inappropriate influence, the committee may wish to consider
whether this bill should also apply to public officials other
than members of the Legislature.
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6)Arguments in Support: In support of this bill, the Howard
Jarvis Taxpayers Association writes:
For years this Association has criticized the multiple
trips legislators take annually to far-flung places
across the globe, including to Australia this year.
We certainly don't dispute that valuable knowledge is
shared and connections are made, and we are thankful
that taxpayers don't fund any of these so-called
junkets. But that misses the point regarding why
these average California citizens are angered by this
practice. According to a recent study done by the
Social Security Administration, 50% of all American
workers in 2014 made less than $30,000, an amount just
above the federal poverty line for a family of five.
Why should legislators, solely by virtue of holding
public office, be able to go on an all-expenses paid
trip when half the country likely cannot afford it?
7)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:
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Support
Howard Jarvis Taxpayers Association
Sierra Club California
The Utility Reform Network (TURN)
Opposition
None on file.
Analysis Prepared by:Ethan Jones / E. & R. / (916) 319-2094