BILL ANALYSIS                                                                                                                                                                                                    



                                                                     SB 330  


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          Date of Hearing:  August 26, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 330  
          (Mendoza) - As Amended August 18, 2015


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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          No


          SUMMARY:


          This bill provides, commencing January 1, 2017, for the purposes  
          of Government Code Section 1090 dealing with conflicts of  
          interests in contracts, that an elected public officer with  
          membership on any state or local body, board, or commission, is  
          deemed to have a remote interest in a contract if the officer's  
          spouse, child, parent, sibling, or the spouse of the child,  
          parent, or sibling, has a financial interest in the contract  








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          made by the public officer in his or her official capacity, or  
          by a body, board, or commission of which the public officer is a  
          member.


          FISCAL EFFECT:


          1)The Fair Political Practices Commission (FPPC), pursuant to  
            legislation enacted in 2013, has authority to: (a) commence  
            administrative or civil enforcement actions for violations of  
            Section 1090 and related statutes; and (b) issue written  
            opinions or advice in response to requests from persons  
            subject to these laws. The FPPC will experience an increase in  
            advice requests from public officials to determine whether  
            they may have a financial interest in a contract as a result  
            of a family relationship. Ongoing General Fund costs will be  
            up to $211,000 annually for 1.5 positions in the legal and  
            enforcement divisions.  


          2)Potential but likely minor increase in state costs to the  
            extent anyone is sentenced to state prison for violation of  
            the bill's provisions. (The penalty for violation of the  
            conflict of interest provisions is a fine of not more than  
            $1,000, or by imprisonment in the state prison, and by  
            permanent disqualification from holding any office in this  
            state.)


          COMMENTS:


          1)Purpose. According to the author, "The public perception  
            that political decisions are wrongly influenced by  
            personal financial interests is pervasive. Public  
            officers may be seen as having biases in their public  
            contract decisions when a specific contract decision may  
            affect their spouse, child, parent, sibling, or the  








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            spouse of a child, parent, or sibling? California is at  
            the forefront in defining the potential consequences of a  
            violation of conflict of interest policies. However, in  
            light of allegations involving our state in the last  
            several years, it is time to expand and strengthen our  
            definition of a conflict of interest.


          2)Background. Section 1090 of the Government Code generally  
            prohibits a public official or employee from making a contract  
            in his or her official capacity in which he or she has a  
            financial interest.  In addition, a public body or board is  
            prohibited from making a contract in which any member of the  
            body or board has a financial interest, even if that member  
            does not participate in the making of the contract.  This  
            prohibition, contained in Section 1090, dates back to the  
            second session of the California Legislature (Chapter  
            136/Statutes of 1851).



            State law recognizes two categories of exceptions to Section  
            1090. One category is "remote interests". Where a government  
            official has a "remote interest" in a contract, he or she must  
            take three steps before the body on which he or she sits may  
            vote on that contract. First, the official must disclose the  
            interest to the government body. Second, the interest must be  
            noted in the government body's official records. Finally, the  
            official with the "remote interest" must abstain from  
            participating in the review and approval of the contract.


           


            State law lists 16 situations that qualify as "remote  
            interests." While the willful failure of an officer to  
            disclose a remote interest in a contract would subject that  
            officer to the conflict of interest penalties, the contract  








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            itself is not subject to cancelation due to the violation  
            unless the contracting party had knowledge of the fact of the  
            remote interest of the officer at the time the contract was  
            executed.





          3)Precedent-Setting. This bill creates a new "remote  
            interest," establishing a situation under which the  
            financial interests of an elected official's relatives  
            create a remote interest for the official. Most  
            previously-established remote interests were designed to  
            narrow the reach of Section 1090, by taking interests  
            that were found by legal opinions to be financial  
            interests under Section 1090, and redefining those  
            interests as "remote interests."  Conversely, this bill  
            expands the scope of Section 1090 through the creation of  
            a new remote interest, i.e. it makes interests currently  
            not covered by Section 1090 subject to that law by  
            defining those interests as "remote interests."


            Because actions that affect the financial interests of a  
            public official's spouse or dependent child may have a  
            corresponding impact on the official, existing conflict  
            of interest laws generally recognize that the financial  
            interests of an official's spouse or dependent child can  
            create a conflict of interest for the official. This  
            bill, however, breaks new ground by extending the  
            conflict of interest provisions of Section 1090 to  
            situations where a governmental decision does not have  
            the potential for having a financial impact on an elected  
            official. Instead, this bill deems a public official's  
            ties by blood or marriage with siblings, children,  
            parents, and the spouses of those relatives to be  
            sufficiently important as to prohibit the official from  
            participating in a contracting decision.








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          Analysis Prepared by:Chuck Nicol / APPR. / (916)  
          319-2081