BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 330 |Hearing |4/15/15 |
| | |Date: | |
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|Author: |Mendoza |Tax Levy: |No |
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|Version: |2/23/15 |Fiscal: |Yes |
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|Consultant|Lewis |
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CONFLICTS OF INTEREST
Provides that a public official has a prohibited financial
interest in a public contract if certain family members of the
public official, as defined, have a financial interest in the
contract.
Background and Existing Law
California state and local officials who negotiate, make, or
vote on public contracts are subject to two main conflicts of
interest laws: Section 1090 of the Government Code (known simply
as "Section 1090") and the Political Reform Act of 1974.
The origins of Section 1090 date back to a California statute
from 1851, which formalized the longstanding common law rule
prohibiting public officials from having a personal financial
interest in the contracts they form in their official
capacities. The Legislature later codified this prohibition in
Section 920 of the former Political Code, and in 1943, moved it
to its current home in the Government Code with only minor
changes. The consequences of violating Section 1090 are severe:
a contract that runs afoul of the law is void, even if it is
fair and the affected official did not intend to receive a
personal benefit. Willful violators can also face criminal
penalties ranging from fines to prison time, plus a lifetime ban
on holding public office.
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Section 1090 contains several exceptions. Certain remote
interests do not fall within its purview. State law recognizes
16 situations as remote interests, including when a public
contract would financially benefit a public official's minor
child or a nonprofit corporation at which a public official is
also a non-salaried officer. Section 1090 requires an official
with a remote interest to publicly disclose his or her interest,
and allows the government body on which he or she sits to
approve the contract only if that official abstains from voting.
Section 1091.1 classifies 14 further exceptions as
non-interests, which do not trigger the 1090 conflict of
interest prohibitions.
In 1974, California voters passed Proposition 9 to create the
Political Reform Act (PRA), along with the Fair Political
Practices Commission (FPPC), the agency tasked with enforcing
the PRA through administrative and civil penalties. In 2013, the
Legislature expanded the FPPC's jurisdiction to include Section
1090 (AB 1090, Fong). The PRA is broader than Section 1090
because it prohibits any state or local public official from
using his or her official position to influence any
"governmental decision" in which the official has a financial
interest. The PRA also applies to decisions that will have a
material financial effect on a member of the official's
"immediate family," which the Legislature has defined as a
government official's spouse or dependent children.
In 1850, California's first legislature adopted the English
common law as the state's basic legal framework, insofar as it
did not conflict with state statutes or the state and federal
Constitutions. This legal framework remains in place today,
codified at Civil Code Section 22.22. Independent of Section
1090 and the PRA, California courts continue to apply the common
law doctrine against conflicts of interests to invalidate public
contracts tainted by self-dealing, even in situations when
Section 1090 or the PRA do not apply. In several recent
opinions, the Attorney General's Office has suggested that the
common law doctrine against conflicts of interest is broader
than Section 1090 and the PRA, prohibiting public contracts that
raise only potential conflicts of interest, or even the mere
appearance of impropriety. Proponents of stricter conflict of
interest laws want to expand Section 1090, bringing statutory
conflict of interest prohibitions closer in line with the common
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law doctrine.
Proposed Law
Senate Bill 330 expands the list of family relationships that
give rise to a prohibited financial interest in a public
contract under Section 1090 of the Government Code to include a
public official's:
Spouse
Child
Parent
Sibling
And the spouse of an official's child, parent, or
sibling.
SB 330 requires that the same standards used to determine a
public officer's financial interest under current law must be
used to determine a financial interest with respect to any
person listed above.
The bill directs that an individual lobbying on behalf of a
contracting party must be construed to be an agent of that
contracting party for purposes of determining a financial
interest pursuant to the bill's provisions.
State Revenue Impact
No estimate.
Comments
1.Purpose of the bill. Existing law does not expressly forbid
state and local officials from awarding public contracts to
their adult children, parents, siblings, in-laws, or other
relatives. This bill is motivated by concerns that the
lobbying efforts or financial interests of family members
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beyond an official's household may be unduly influencing
official decisions in public contracting, thereby undermining
public confidence in government. The author's office points
out that several other states' conflict of interest laws are
more expansive than California's. For example, Arizona and
Indiana prohibit a public official from making or voting on a
contract that would benefit the official's spouse, parent,
sibling, child, stepchild, grandparent, grandchild, in-law,
and even unrelated persons who rely on the public official for
significant financial support. Meanwhile, some states, like
Maine and West Virginia, even consider an official
"interested" in a contract if the contract would benefit the
official's "close business associate." SB 330 would bring
state and local agencies' conflict of interest restrictions
into line with policies adopted by other states, California's
public universities, and many private corporations.
2.Raising the stakes. While SB 330 would clearly prohibit public
officials from making or voting on public contracts that would
benefit certain close family members, California judges can
already use the common law doctrine against conflicts of
interest to invalidate agreements tainted by this kind of
self-dealing. However, officials who violate the common law
doctrine are not subject to criminal prosecution. SB 330
would significantly strengthen these common law prohibitions
by making it a crime, punishable by fines or jail time, for a
public official to make or vote on a public contract
benefitting his or her adult child, sibling, parent, or
in-law. SB 330 raises questions about whether state law
should distinguish between imposing criminal penalties for
willful 1090 violations in which a public official directly
enriches him or herself, and violations involving more remote
financial interests, such as those of an official's
stepparents and in-laws.
3.Mandate . Because a willful violation of Government Code
Section 1090's prohibitions is a crime, the Legislative
Counsel's Office says that SB 330's expansion of those
prohibitions creates a new crime. By creating a new crime, SB
330 also creates a new state-mandated program. But the bill
disclaims the state's responsibility for reimbursing local
governments for enforcing these new crimes. That's consistent
with the California Constitution, which says that the state
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does not have to reimburse local governments for the costs of
new crimes (Article XIIIB, 6[a] [2]).
Support and
Opposition (4/9/15)
Support : Unknown.
Opposition : Unknown.
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