BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 1107| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 1107 Author: Allen (D), et al. Amended: 3/28/16 Vote: 21 SENATE ELECTIONS & C.A. COMMITTEE: 4-1, 4/19/16 AYES: Allen, Hancock, Hertzberg, Liu NOES: Anderson SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16 AYES: Lara, Beall, Hill, McGuire, Mendoza NOES: Bates, Nielsen SUBJECT: Political Reform Act of 1974: public moneys: definition SOURCE: California Clean Money Campaign California Common Cause DIGEST: This bill provides, within the Political Reform Act (PRA), an exception to the existing ban on use of public moneys for the purpose of seeking public office, a prohibition on foreign contributions to candidates, and a requirement that an officeholder who is convicted of specified crimes to forfeit any remaining campaign funds to the general fund. ANALYSIS: Existing law: SB 1107 Page 2 1) Provides, pursuant to the PRA as amended by Proposition 73 of 1988, that no public officer shall expend and no candidate shall accept any public moneys for the purpose of seeking elective office. 2) Provides, pursuant to the California Constitution, that every person shall be disqualified from holding any office of profit in this state who has been convicted of having given or offered a bribe to procure personal election or appointment and that laws shall be made to exclude persons convicted of bribery, perjury, forgery, malfeasance in office, or other high crimes from office or serving on juries. 3) Provides that a person shall not be considered a candidate for, and is not eligible to be elected to, any state or local elective office if the person has been convicted of a felony involving accepting or giving, or offering to give, any bribe, the embezzlement of public money, extortion or theft of public money, perjury, or conspiracy to commit any of those crimes. 4) Provides that campaign funds under the control of a former candidate or elected officer are considered "surplus campaign funds" on the 90th day after the person leaves office, or on the 90th day following the end of the postelection reporting period following the defeat of the candidate, whichever occurs last. 5) Permits surplus campaign funds to be used only for the following purposes: a) The payment of outstanding campaign debts or elected officer's expenses. b) The repayment of contributions. SB 1107 Page 3 c) Donations to a bona fide charitable, educational, civic, religious, or similar tax-exempt, nonprofit organization, where no substantial part of the proceeds will have a material financial effect on the former candidate or elected officer, any member of his or her immediate family, or his or her campaign treasurer. d) Contributions to a political party committee, provided that the campaign funds are not used to support or oppose a candidate for elective office. However, contributions made pursuant to this provision may be used by a political party committee to conduct partisan voter registration, partisan get-out-the-vote activities, and slate-mailers. e) Contributions to support or oppose a candidate for federal office, a candidate for elective office in a state other than California, or a ballot measure. f) The payment for professional services reasonably required by the committee to assist in the performance of its administrative functions, including payment for attorney's fees and other costs for litigation that arises directly out of a candidate's or elected officer's activities, duties, or status as a candidate or elected officer. 6) Prohibits a foreign government or foreign principal from making, directly or through any other person, a contribution, expenditure, or independent expenditure in connection with the qualification or support of, or opposition to, a state or local ballot measure. Prohibits a person or a committee from soliciting or accepting a contribution from a foreign government or a foreign principal in connection with the qualification or support of, or opposition to, any state or local ballot measure. These restrictions do not prohibit a contribution, expenditure, or independent expenditure made by a lawfully admitted permanent resident. A person who violates these provisions is guilty of a misdemeanor and SB 1107 Page 4 shall be fined an amount equal to the amount contributed or expended. A "foreign principal," for the purposes of these restrictions, includes the following: a) A foreign political party. b) A person outside the U.S., unless the person is an individual and a citizen of the U.S. or the person is not an individual, and is organized under or created by the laws of the U.S. or of any state or other place subject to the jurisdiction of the U.S. and has its principal place of business within the U.S. c) A partnership, association, corporation, organization, or other combination of persons organized under the laws of or having its principal place of business in a foreign country. d) A domestic subsidiary of a foreign corporation if the decision to contribute or expend funds is made by an officer, director, or management employee of the foreign corporation who is neither a citizen of the U.S. nor a lawfully admitted permanent resident of the U.S. 7) Prohibits, pursuant to federal law, a foreign national, directly or indirectly, from making a campaign contribution, expenditure, independent expenditure, or disbursement for an electioneering communication in connection with a federal, state, or local election and prohibits a person from soliciting, accepting, or receiving a contribution or donation made by a foreign national in connection with a federal, state, or local election. These federal prohibitions only apply to elections for candidates and do not therefore, apply to elections for ballot measures. 8) Establishes, pursuant to federal law, the Federal Election Commission (FEC), and makes it responsible for the administration and enforcement of the Federal Election SB 1107 Page 5 Campaign Act (FECA), including the restrictions on contributions and expenditures by foreign nationals described above. 9) Permits the Fair Political Practices Commission (FPPC) to impose administrative penalties of up to $5,000 per violation of the PRA and provides for specified civil penalties. 10)Provides that any person who violates any provision of the PRA for which no specific civil penalty is provided, shall be liable in a civil action brought by the FPPC or the district attorney or the elected city attorney for an amount up to $5,000 per violation. 11)Provides that any person who violates the PRA's prohibition on foreign contributions for ballot measure campaigns shall be guilty of a misdemeanor and shall be fined an amount equal to the amount contributed or expended. 12)Provides that the PRA may only be amended or repealed in the following manner: a) Amended to further its purposes by a statute passed in each house of the Legislature by a two-thirds vote and signed by the Governor. b) Amended or repealed by a statute that becomes effective only when approved by the electors. The Legislature may place a PRA amendment on the ballot by majority vote in each house and signed by the Governor. This bill: 1) Permits a public officer or candidate to expend or accept public moneys for the purpose of seeking elective office if the state or a local governmental entity establishes a SB 1107 Page 6 dedicated fund for this purpose, and both of the following are true: a) Public moneys held in the fund are available to all qualified, voluntarily participating candidates for the same office without regard to incumbency or political party preference. b) The state or local governmental entity has established criteria for determining a candidate's qualification by statute, ordinance, resolution, or charter. 2) Provides that a state or local officeholder who is convicted of a felony involving accepting or giving, or offering to give, any bribe, the embezzlement of public money, extortion or theft of public money, perjury, or conspiracy to commit any of those crimes, and whose conviction has become final, may only use funds held by the officeholder's candidate controlled committee only for the payment of outstanding campaign debts or expenses and the repayment of contributions. 3) Requires that six months after conviction for one of the aforementioned felonies becomes final, the officeholder shall forfeit any remaining funds and these funds shall be deposited in the general fund. This provision does not apply to funds held by a ballot measure committee or in a legal defense fund. 4) Expands the scope of the PRA's prohibitions relating to contributions by foreign governments and principals in relation to ballot measures by also prohibiting a foreign government or principal from making a contribution in support of, or opposition to, a state or local candidate. SB 1107 Page 7 5) Provides that a person who violates the PRA's foreign contribution ban is guilty of a misdemeanor and shall be fined the greater of $10,000 or an amount equal to the amount contributed or expended. Alternatively provides that a person who violates this prohibition can be held liable in a civil action brought by the civil prosecutor, for each violation, for the greater of $10,000 or an amount equal to the amount contributed or expended. The civil prosecutor may not bring a civil action against a person who is being criminally prosecuted for violation of same prohibition. 6) Requires the Secretary of State (SOS) to submit this bill to the voters for approval at a statewide election occurring at least 131 days after the adoption of the proposal by the Legislature. Background Where does the public funding ban apply? The state itself and most California local governments do not have the option to offer any public funding to electoral campaigns, under the existing statewide ban. While charter cities are exempt under autonomy granted by the State Constitution, general law cities, counties, districts, and the state government are covered by the current state ban. In fact, after voters in Sacramento County enacted public financing several years ago, the courts struck it down under Prop. 73. Currently, six charter cities provide limited public funding to match small campaign contributions (Los Angeles, Long Beach, Oakland, Richmond, Sacramento, and San Francisco). Proponents of these programs describe them as intended to provide candidates with an alternative to relying on large campaign contributions and amplify the voices of Californians who make small donations. Other local governments are prohibited from offering public campaign funding, due to a provision of Proposition 73 of 1988. Foreign campaign spending, federal law, and previous legislation. As detailed above, federal law prohibits foreign nationals from making contributions in connection with federal, state, and local candidate elections. According to information SB 1107 Page 8 from the FEC, the ban on political contributions and expenditures by foreign nationals was first enacted in 1966 as part of the amendments to the Foreign Agents Registration Act (FARA), an 'internal security' statute. The goal of the FARA was to minimize foreign intervention in U.S. elections by establishing a series of limitations on foreign nationals. These included registration requirements for the agents of foreign principals and a general prohibition on political contributions by foreign nationals. In 1974, the prohibition was incorporated into FECA, giving the FEC jurisdiction over its enforcement and interpretation. Until 2002, the restriction on contributions by foreign nationals specifically applied to contributions made "in connection with an election to any political office." Because that language was limited to elections for office, it was the position of the FEC that contributions from foreign nationals relating exclusively to ballot measures were not restricted by federal law. In 2002, the restriction on foreign contributions was amended to make it applicable to any contribution made "in connection with a Federal, State, or local election," though it is unclear whether that change was intended to cover ballot measure elections. In 1997, the Legislature approved and Governor Wilson signed SB 109 (Kopp, Chapter 67, Statutes of 1997), to prohibit foreign governments or foreign principals from making contributions, expenditures, or independent expenditures in connection with state or local ballot measures. The legislative history suggests that SB 109 did not seek to regulate foreign contributions made in connection with elections for office because such contributions were already restricted by federal law. Instead, SB 109 was limited to foreign spending in connection with ballot measure elections, thereby restricting foreign spending that was not covered by federal law. Aside from the fact that state law is limited to foreign spending made in connection with ballot measures, state and federal law differ in one other important respect. While federal law restricts contributions and expenditures by foreign nationals, state law does not restrict contributions or SB 1107 Page 9 expenditures by a foreign national who is an individual and who is legally present in the U.S. The initial version of SB 109 (and an unsuccessful bill from the prior legislative session) would have restricted contributions by foreign nationals who were legally present in the U.S., but that restriction was amended out of the bill to address opposition. Comments 1)According to the author, SB 1107 would restore control to local governments and the state to enact new options for election campaign funding. Voters are increasingly concerned about political mega-donors in our elections. Most Americans think that money has too much influence in our political campaigns today and they believe that campaign finance should be reformed so that the influence of special interest money is reduced. Los Angeles, San Francisco, Sacramento, Long Beach, Oakland, and Richmond offer limited public funds to match small campaign donations. Unfortunately, such programs are currently prohibited in other California jurisdictions. Unlike charter cities, state law bans counties, districts, general law cities, and the state itself from offering public campaign funds, under a provision enacted by Proposition 73, a 1988 initiative that had virtually all of its other provisions invalidated in federal court. SB 1107 would remove the ban on voluntary public campaign financing programs. Because the ban was originally instituted by ballot initiative, this bill refers the issue to the ballot for voters' approval. SB 1107 would not create a public financing program or require any government to offer public financing. It would not spend any public funds or raise any taxes or fees. It would simply amend the ban to permit local governments or the state, if they so choose, to enact laws that create public financing programs. Local governments would have the flexibility to tailor policies to local concerns and conditions, while requiring basic protections for fairness and accountability. SB 1107 Page 10 SB 1107 also includes two other common sense reforms to increase the accountability of our elections. Currently, foreign corporations and governments may not donate to ballot measure campaigns, but current law does not ban contributions to candidates. SB 1107 extends the ban to prohibit foreign corporations and governments from donating to state or local candidates, enforceable by the state FPPC. Given the FEC's recent history of deadlocking on enforcement matters, the FPPC is in a better position to enforce this prohibition in California. Lastly, when an elected official is convicted of a felony that includes the abuse of their office, such as bribery or embezzlement, they are disqualified from running for office again. In these rare but serious cases, SB 1107 requires the convicted official to return any unused campaign funds to donors or pay past debts, and forfeit any surplus funds after six months to the state's general fund. (Legal defense funds would not be affected.) Related Legislation AB 2250 (Ridley-Thomas, 2016), which is pending in the Assembly Floor, is similar to the section of this bill that prohibits, under state law, contributions, expenditures, and independent expenditures from foreign governments and foreign principals in connection with candidate elections. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee: The FPPC indicates that it would incur first-year costs of SB 1107 Page 11 $167,000 and ongoing annual costs of $160,000 to implement the provisions of this bill (General Fund). One-time costs in the range of $414,000 to $552,000 to the SOS for printing and mailing costs to place the measure on the ballot in the next statewide election. (General Fund) SUPPORT: (Verified5/27/16) California Clean Money Campaign (co-source) California Common Cause (co-source) Alliance of Californians for Community Empowerment American Association of Retired Persons American Civil Liberties Union of California American Sustainable Business Council Asian Americans Advancing Justice - California Bay Area Rapid Transit Brennan Center for Justice at New York University School of Law California Alliance for Retired Americans California Church IMPACT California Forward Action Fund California League of Conservation Voters California Public Interest Research Group California School Employees Association California Voices for Progress Campaign Legal Center Courage Campaign Franciscan Action Network League of Women Voters of California Los Angeles County Federation of Labor MapLight Money Out Voters In National Council of Jewish Women-California Represent California Represent.Us Sierra Club California Southwest Voter Registration Education Project UFCW Western Stats Council OPPOSITION: (Verified5/27/16) SB 1107 Page 12 None received Prepared by:Darren Chesin / E. & C.A. / (916) 651-4106 5/28/16 16:57:30 **** END ****