BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 21| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 21 Author: Hill (D) Introduced:12/1/14 Vote: 27 SENATE ELECTIONS & C.A. COMMITTEE: 3-1, 4/7/15 AYES: Allen, Hancock, Hertzberg NOES: Anderson NO VOTE RECORDED: Liu SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15 AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen SUBJECT: Political Reform Act of 1974: gifts of travel SOURCE: Author DIGEST: This bill requires a nonprofit organization that pays for specified types of travel for elected officeholders to disclose the names of donors responsible for funding the travel. This bill requires an officeholder who receives a gift of a travel payment from any source to report the travel destination on his or her statement of economic interests (SEI). ANALYSIS: Existing law: 1)Prohibits specified elected officeholders and other public officials from receiving gifts, as defined, in excess of $440 in value from a single source in a calendar year. SB 21 Page 2 2)Exempts payments for the actual costs of specified types of travel from the annual gift limit. Specifically, 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 applies: a) The travel is in connection with a speech given by the officeholder or 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. 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)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 periodic SEI rests disclosing their financial interests, including investments, real property interests, income, and gifts, including gifts of travel. SEI must include a description of the gift as well as the amount and the date on which the gift was received. 4)Pursuant to Fair Political Practices Commission (FPPC) regulations, a person who makes a gift to a public official is the source of the gift for reporting and other applicable purposes unless that person is acting as an intermediary. The person is acting as an intermediary for the source of the gift when the gift to the official was provided under any of the following conditions: a) The person receives a payment from a source and the SB 21 Page 3 payment is made to the official after the source identifies the official as the intended recipient of the gift; b) The person receives a payment from a source after soliciting the payment with the understanding that the payment will be used for the sole or primary purpose of making a gift to an official; or c) The person receives a payment from a source after the payment was solicited by the official or the official's agent for the purpose of making a gift to the official. This bill: 1)Provides that a nonprofit organization that makes payments, advances, or reimbursements that total more than $10,000 in a calendar year, or that total more than $5,000 in a calendar year for a single person, for travel by an elected state officer or local elected officeholder must disclose the names of the donors responsible for funding those payments, advances, or reimbursements. 2)Limits disclosure of donor names to those who donated $1,000 or more to the nonprofit organization in a calendar year and who knew or had reason to know that the donation would be used for travel by an elected state officer or local elected officeholder. 3)Provides that a donor knows or has reason to know that his or her donation will be used for such travel under any of the following conditions: a) The donor directed the nonprofit organization to use the donation to make a payment, advance, or reimbursement for the travel. b) The donor made the donation in response to a message or solicitation for donations for the stated purpose of making a payment, advance, or reimbursement for such travel. SB 21 Page 4 c) The donor, or an agent, employee, or representative of the donor, accompanied an elected state officer or local elected officeholder for any portion of the travel. 4)Specifies that a nonprofit organization that makes payments, advances, or reimbursements for such travel is the source of the gift for reporting and other applicable purposes unless the nonprofit organization is acting as an intermediary or agent of the donor. If the nonprofit organization is acting as an intermediary or agent of the donor, the donor is the source of the gift for reporting and other applicable purposes including the $440 per year limit. 5)Requires that gifts that are travel payments, advances, or reimbursements disclosed on an official's SEI must also include the travel destination. Background Travel payment exceptions. As discussed above, some travel payments are not subject to the $440 gift limit but are reportable on an official's SEI, e.g., certain travel in connection with a speech, panel or seminar and certain travel provided by specified nonprofit organizations. While nonprofit organizations must submit some specified financial information to the United States Internal Revenue Service and make it publicly available, they are not generally required to publicly disclose the identity of their donors. Hence, nonprofit organizations that provide payments for foreign and domestic travel for California public officials are not required to publicly disclose this information either even when donations are solicited for those purposes provided they are not solicited for a specific recipient of the travel payment. Comments 1)According to the author: Under current law, the public has no way of knowing who is paying for legislator travel or where they are going. Donors hide behind non-profits preventing the public from knowing who was behind the gift to the elected official. The public has a right to know where elected officials are traveling when the travel is paid for by special SB 21 Page 5 interests. The public also has a right to know which special interests are paying for the travel. Examples of non-profits that fund legislator travel include: California Foundation on the Environment and the Economy, California Independent Voter Project, and the Pacific Policy Research Foundation. An analysis by the Sacramento Bee found that California lawmakers received more than $550,000 in travel-related expenses from outside organizations in 2013. This bill is a reintroduction of a portion of SB 831 (Hill of 2014), which was vetoed by the Governor. The Governor vetoed the measure because it contained many restrictions in addition to disclosure requirements. The restrictions in SB 831 included: Prohibiting elected officials from contributing campaign funds to 501(c)(4) nonprofits owned or operated by their family members. Prohibiting elected officials from asking people to donate to a 501(c)(4) nonprofit owned or operated by a family member. Prohibiting elected officials from contributing campaign funds to 501(c)(4) nonprofits operated by another elected official on the same governing body. Prohibiting the expenditure of campaign funds for an elected official's mortgage, rent, utility bills, clothing, club memberships, vacations, tuition, vehicles, and gifts to family members. SB 21 removes the prohibitions in last year's SB 831 and only requires increased transparency for elected official travel. In his veto message, the Governor Brown stated the following: "The activities that are addressed by this bill are already subject to extensive regulation, including robust disclosure requirements. The additional restrictions proposed by this bill would add more complexity to the regulations governing elected officials, without reducing undue influence." Prior/Related Legislation SB 21 Page 6 This bill is identical to portions of SB 831 (Hill, 2014) which was vetoed by the Governor. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee: Annual costs of $178,778 to the FPPC (General Fund) The above estimate includes the need for 1 Political Reform Consultant and half of an Attorney III position to create the new form and update related materials; promulgate regulations; handle advice requests; and provide public outreach and education. SUPPORT: (Verified6/1/15) California Common Cause CALPIRG League of Women Voters of California OPPOSITION: (Verified5/27/15) None received Prepared by:Darren Chesin / E. & C.A. / (916) 651-4106 6/1/15 11:11:19 **** END ****