BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  June 15, 2016 


                  ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING


                                Shirley Weber, Chair


          SB  
          1107 (Allen) - As Amended March 28, 2016


          SENATE VOTE:  26-12


          SUBJECT:  Political Reform Act of 1974:  public moneys:   
          definition.


          SUMMARY:  Allows state and local governments to offer public  
          campaign financing programs.  Prohibits, under state law,  
          foreign governments and foreign principals from making  
          contributions and expenditures in connection with candidate  
          elections.  Increases the maximum monetary penalties for  
          unlawful foreign contributions and expenditures.  Limits the  
          uses of campaign funds that are held by public officials who  
          have been convicted of various public trust crimes.   
          Specifically, this bill:  


          1)Permits state and local governmental entities to establish  
            programs that provide for public campaign financing for  
            candidates for elective office, if all of the following  
            criteria have been met:











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             a)   The state or local governmental entity has established a  
               dedicated fund for the purpose of providing public campaign  
               financing for candidates for elective office;


             b)   Public moneys held in the fund are available to all  
               qualified, voluntarily participating candidates of the same  
               office without regard to incumbency or political party  
               preference; and,


             c)   The state or local governmental entity has established  
               criteria for determining a candidate's qualification by  
               statute, ordinance, resolution, or charter.


          2)Prohibits a foreign government or foreign principal, as  
            defined, from making, directly or through any other person, a  
            contribution, expenditure, or independent expenditure in  
            connection with a state or local candidate.  


          3)Prohibits a person or a committee from soliciting or accepting  
            a contribution from a foreign government or a foreign  
            principal, as defined, in connection with a state or local  
            candidate.


          4)Increases the potential monetary penalties available for a  
            violation of state law restricting contributions and  
            expenditures by foreign governments and foreign principals as  
            follows:


             a)   Increases the maximum fine available in a criminal  
               enforcement proceeding from an amount equal to the amount  
               contributed or expended to an amount that is the greater of  









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               the following:


               i)     $10,000; or,


               ii)    An amount equal to the amount contributed or  
                 expended.


             b)   Increases the maximum fine available in a civil  
               enforcement proceeding from an amount up to $5,000 per  
               violation to an amount that is the greater of the  
               following:


               i)     $10,000; or,


               ii)    An amount equal to the amount contributed or  
                 expended.


          5)Provides that an 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 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.  Requires the officeholder, six  
            months after conviction for one of the aforementioned felonies  
            becomes final, to forfeit any remaining funds and requires the  
            funds to be deposited in the general fund.  Provides that  
            these provisions do not apply to funds held by a ballot  
            measure committee or in a legal defense fund.










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          6)Requires the Secretary of State (SOS) to submit the provisions  
            of this bill to the voters for approval at a statewide  
            election, as specified.


          7)Contains a severability clause.


          8)Makes corresponding and technical changes.


          EXISTING STATE LAW:  


          1)Creates the Fair Political Practices Commission (FPPC), and  
            makes it responsible for the impartial, effective  
            administration and implementation of the Political Reform Act  
            (PRA).

          2)Prohibits public officers from expending, and candidates from  
            accepting, public moneys for the purpose of seeking elective  
            office.


          3)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.  


             a)   Defines "foreign principal," for the purposes of these  
               restrictions, to include the following:









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               i)     A foreign political party;


               ii)    A person outside the United States (US), unless  
                 either of the following is established:


                  (1)       The person is an individual and a citizen of  
                    the US; or,


                  (2)       The person is not an individual, and is  
                    organized under or created by the laws of the US or of  
                    any state or other place subject to the jurisdiction  
                    of the US and has its principal place of business  
                    within the US;


               iii)   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; or, 


               iv)    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 US nor a  
                 lawfully admitted permanent resident of the US.


             b)   Provides that these restrictions do not prohibit a  
               contribution, expenditure, or independent expenditure made  
               by a lawfully admitted permanent resident.










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             c)   Provides that a person who violates these provisions is  
               guilty of a misdemeanor and shall be fined an amount equal  
               to the amount contributed or expended.


          4)Provides that contributions deposited into a candidate's  
            campaign account are deemed to be held in trust for expenses  
            associated with the election of the candidate or for expenses  
            associated with holding office.  Provides that an expenditure  
            of campaign funds is within the lawful execution of this trust  
            if the expenditure is reasonably related to a political,  
            legislative or governmental purpose, as specified.  Requires  
            an expenditure that confers a substantial personal benefit on  
            anyone with authority to approve the expenditure to be  
            directly related to a political, legislative, or governmental  
            purpose.



          5)Prohibits a person from being a candidate for, or being  
            elected to, an 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.


          6)Provides that a person who violates any provision of the PRA,  
            except as specified, for which no specific civil penalty is  
            provided, shall be liable in a civil action for an amount of  
            up to $5,000 per violation.


          7)Permits the FPPC to impose administrative penalties of up to  
            $5,000 per violation of the PRA.










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          8)Requires every constitutional amendment, bond measure, or  
            other legislative measure submitted to the people by the  
            Legislature to appear on the ballot of the first statewide  
            election occurring at least 131 days after the adoption of the  
            proposal by the Legislature.


          EXISTING FEDERAL LAW:  


          1)Prohibits a foreign national, directly or indirectly, from  
            doing either of the following in connection with a federal,  
            state, or local election:

             a)   Making a contribution or donation of money or other  
               thing of value, or an express or implied promise to make a  
               contribution or donation; or, 

             b)   Making an expenditure, independent expenditure, or  
               disbursement for an electioneering communication.

          2)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.

          3)Defines "foreign national," for the purposes of the  
            prohibitions described above, as either of the following:

             a)   A government of a foreign country; a foreign political  
               party; or 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; or, 












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             b)   An individual who is not a citizen or a national of the  
               US and who is not lawfully admitted for permanent residence  
               in the US.

          4)Establishes the Federal Election Commission (FEC), and makes  
            it responsible for the administration and enforcement of the  
            Federal Election Campaign Act (FECA), including the  
            restrictions on contributions and expenditures by foreign  
            nationals described above.

          FISCAL EFFECT:  According to the Senate Appropriations Committee  
          analysis:





          1)The FPPC indicates that it would incur first-year costs of  
            $167,000 and ongoing annual costs of $160,000 to implement the  
            provisions of the bill (General Fund). 

          2)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).



          COMMENTS:  


          1)Purpose of the Bill:  According to the author:


               In the wake of the U.S. Supreme Court's Citizens  
               United decision, local governments are increasingly  
               reviewing their campaign finance ordinances in order  
               to ensure the accountability of their elections.   









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               However, most California local governments do not have  
               the option to offer any public funding to electoral  
               campaigns, under an existing statewide ban.



               Currently, six charter cities provide limited public  
               funding to match small campaign contributions. These  
               programs provide candidates with an alternative to  
               relying on large campaign contributions and amplify  
               the voices of everyday Californians who make small  
               donations. 

               Unfortunately, other local governments are prohibited  
               from offering public campaign funding, due to a  
               provision adopted nearly 30 years ago as part of  
               Proposition 73 in 1988. While charter cities such as  
               [Los Angeles] are exempt under 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, the courts struck it down under Proposition  
               73.

               SB 1107 would remove the ban on voluntary public  
               campaign financing programs, subject to voter  
               approval.  Programs would have to meet basic criteria  
               for fairness and accountability.  SB 1107 does not  
               create, or require any government to create, any  
               public campaign financing program - it simply restores  
               the option for local governments and the state.



               Additionally, SB 1107 includes two other commonsense  
               provisions to increase election accountability. The  
               bill would require elected officials, who under  









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               current law are banned from running for office due to  
               conviction of a specified felony such as bribery, to  
               forfeit their campaign funds within six months, after  
               paying debts or returning contributions, other than  
               legal defense funds.  





               SB 1107 also would extend the current prohibition  
               against foreign corporations or governments  
               contributing to ballot measure campaigns to also  
               include candidate campaigns, and would increase the  
               maximum fine for violating that prohibition.


          2)Public Financing and Proposition 73:  In 1988, voters approved  
            two separate campaign finance reform initiatives, Proposition  
            68 and Proposition 73.  Proposition 68 proposed a system of  
            public funding and expenditure limits for state legislative  
            races, and passed with 53% of the vote. Proposition 73  
            prohibited public funding of campaigns and set contribution  
            limits for state and local elections, and passed with 58% of  
            the vote.  The California State Supreme Court subsequently  
            ruled in Taxpayers to Limit Campaign Spending v. FPPC (1990)  
            51 Cal. 3d 744, that because the two measures contained  
            conflicting comprehensive regulatory schemes they could not be  
            merged and only one could be implemented.  As such, since  
            Proposition 73 received more affirmative votes than  
            Proposition 68, the Court ordered the implementation of  
            Proposition 73 and proclaimed all provisions of Proposition 68  
            invalid.  



          In 1990, all state and local elections were conducted under the  









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            provisions of Proposition 73.  Many of the provisions of  
            Proposition 73 were ultimately ruled unconstitutional by the  
            federal courts.  The only provisions of Proposition 73 to  
            survive legal challenge were contribution limits for special  
            elections, restrictions on certain mass mailings by  
            officeholders, and the prohibition on the use of public money  
            for campaign purposes.  The contribution limits for special  
            elections that were included in Proposition 73 subsequently  
            were repealed and replaced in another ballot measure.

          Because of the public funding ban contained in Proposition 73,  
            the state and most local governments in California do not have  
            the option to offer public financing programs for electoral  
            campaigns.  While the California Supreme Court ruled that the  
            public financing ban does not apply to charter cities (Johnson  
            v. Bradley (1992) 4 Cal. 4th 389), a state appellate court has  
            held that the public financing ban does apply to charter  
            counties (County of Sacramento v. Fair Political Practices  
            Commission (1990) 222 Cal. App. 3d 687).  The California  
            Constitution generally grants charter cities a greater degree  
            of autonomy over local affairs than charter counties have,  
            particularly with respect to local elections.

          As a result, while charter cities in California can enact public  
            campaign financing programs, general law cities, all counties,  
            all districts, and the state government are covered by the  
            current ban.  According to information provided by the  
            author's office, six charter cities currently provide limited  
            public funding to match small campaign contributions (Los  
            Angeles, Long Beach, Oakland, Richmond, Sacramento, and San  
            Francisco).
          3)Previous Measures to Permit Public Financing:  On three  
            previous occasions, California voters have rejected ballot  
            measures that would have repealed the prohibition against  
            public funding of campaigns that was included in Proposition  
            73.  In all three cases, however, the ballot measures also  
            proposed to enact specific public financing programs for state  









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            elections-something that this bill does not propose.



          Proposition 25-an initiative measure that appeared on the March  
            2000 statewide primary election ballot-would have provided for  
            public financing of campaign media advertisements and voter  
            information packets for qualifying candidates and ballot  
            measure committees that agreed to abide by spending limits and  
            would have repealed the PRA's prohibition against public  
            financing systems, among other provisions.  Proposition 25  
            failed passage, receiving 34.7% of the vote statewide.  

          Proposition 89-an initiative measure that appeared on the  
            November 2006 statewide general election ballot-would have  
            created a public financing system for candidates for elective  
            state office, and would have repealed the PRA's prohibition  
            against public financing systems.  Proposition 89 was defeated  
            by the voters, receiving 25.7% of the vote statewide.

          Proposition 15-a measure that was placed on the June 2010  
            statewide primary election ballot by the Legislature-would  
            have created a public financing pilot project for candidates  
            for SOS, and would have repealed the PRA's prohibition against  
            public financing systems.  Proposition 15 was defeated by the  
            voters, receiving 42.7% of the vote statewide.
          4)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 elections.  According to information  
            from the FEC, "[t]he 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 US elections by  
            establishing a series of limitations on foreign nationals.   
            These included registration requirements for the agents of  









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            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 expenditures by a foreign national who is an individual and  
            who is legally present in the US.  The initial version of SB  
            109 (and an unsuccessful bill from the prior legislative  









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            session) would have restricted contributions by foreign  
            nationals who were legally present in the US, but that  
            restriction was amended out of the bill to address opposition  
            arguments that the restriction could be unconstitutional.

          5)Recent Enforcement Action Related to Foreign Contributions:   
            The FPPC recently brought an enforcement action for the first  
            time in a case involving foreign contributions made in  
            connection with a ballot measure.  That enforcement action was  
            initiated after the FEC considered an enforcement action of  
            its own, and declined to take action in that case.



          Measure B was a Los Angeles County initiative dealing with adult  
            film production that appeared on the ballot at the November  
            2012 statewide general election.  In October 2012, one of the  
            proponents of Measure B filed a complaint with the FEC  
            alleging that the committee opposing Measure B had received  
            contributions made by a foreign national, and further alleging  
            that those contributions violated FECA.  In August 2014, the  
            Associate General Counsel of the FEC recommended dismissing  
            the complaint due in part to a "lack of clear legal guidance"  
                                                       on whether federal law restricts contributions made by foreign  
            nationals in connection with ballot measures.  The FEC was  
            equally divided on whether to dismiss the complaint, and in  
            March 2015, it ultimately closed the file on the complaint  
            without taking further action.

          In July 2015, after the FEC's action to close its file, the FPPC  
            received a sworn complaint in connection with the same matter.  
             Last December, the FPPC reached a stipulated settlement in  
            that case.  As detailed in that settlement, Manwin USA, a  
            Delaware-based subsidiary of Manwin International, a  
            Luxembourg-based corporation, made contributions totaling more  
            than $268,000 to the committee opposing Measure B.  In  
            addition, Froytal, a Cyprus-based subsidiary of Manwin  









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            International, made a contribution of $75,000 to the committee  
            opposing Measure B, although that contribution subsequently  
            was returned by the committee.  Even though Manwin USA was  
            incorporated under Delaware-law, its contributions violated  
            California law because it was a subsidiary of a foreign  
            corporation and the decision to contribute funds was made by  
            an officer of the foreign corporation who was neither a US  
            citizen nor a lawfully admitted permanent resident of the US.   


          The FPPC fined Manwin USA a total of $20,000 for the unlawful  
            contributions that it made, fined Froytal $5,000 for the  
            unlawful contribution that it made, and fined the committee  
            opposing Measure B and its treasurer a total of $20,000 for  
            accepting unlawful contributions made by foreign principals.   
            The FPPC also imposed an additional $16,500 in fines for  
            violations of reporting and disclosure laws that occurred in  
            connection with the unlawful foreign contributions.
          6)Suggested Amendments:  As detailed above, this bill requires  
            the SOS to submit its provisions to the voters for approval at  
            a statewide election.  According to the author's office, it is  
            the author's desire for this bill to appear on the ballot at  
            the November 2018 statewide general election.  



          Existing law, however, requires measures submitted to the people  
            by the Legislature to appear on the ballot of the first  
            statewide election occurring at least 131 days after the  
            adoption of the proposal by the Legislature.  Legislative  
            measures that are chaptered on or before June 30, 2016, will  
            appear on the ballot at the November 8, 2016, statewide  
            election.  Any legislative measure that is chaptered during  
            the current legislative session, but after June 30, likely  
            will appear on the ballot at the 2018 statewide primary  
            election, unless the measure provides otherwise.  (If the  
            Governor called a statewide special election to be held prior  









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            to the June 2018 primary election, legislative measures could  
            also appear on the ballot at that election.)  

          In order to ensure that this measure appears on the ballot at  
            the November 2018 statewide general election, in accordance  
            with the author's intent, committee staff recommends that this  
            bill be amended to require the SOS to submit it to the voters  
            at that election.

          Furthermore, in order to clarify the method by which a dedicated  
            fund may be established for the purposes of creating a public  
            financing program, committee staff recommends the following  
            technical amendment:

          On page 3, line 8, after "purpose" insert:

          by statute, ordinance, resolution, or charter, 
          7)Related Legislation:  AB 2250 (Ridley-Thomas), which is  
            pending reconsideration on the Assembly Floor, is similar to  
            the section of this bill that prohibits, under state law,  
            foreign governments and foreign principals from making  
            contributions or expenditures in connection with candidate  
            elections.  AB 2250 was approved by this committee on a 5-1  
            vote, but failed passage on the Assembly Floor on a 51-0 vote  
            (54 votes were required for passage).


          8)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 by the  
            Legislature must further the purposes of the proposition and  
            require a two-thirds vote of each house of the Legislature, or  
            the Legislature may propose amendments to the proposition that  
            do not further the purposes of the act by a majority vote, but  
            such amendments must be approved by the voters to take effect.  









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             This bill would only take effect if approved by the voters.









































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          REGISTERED SUPPORT / OPPOSITION:




          Support


          California Clean Money Campaign (co-sponsor)


          California Common Cause (co-sponsor)


          AARP


          Alliance of Californians for Community Empowerment Action


          American Civil Liberties Union of California


          American Sustainable Business Council


          Asian Americans Advancing Justice-California


          Brennan Center for Justice at New York University School of Law


          California Alliance for Retired Americans


          California Church IMPACT









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          California Forward Action Fund


          California League of Conservation Voters


          California OneCare


          California School Employees Association, AFL-CIO


          CALPIRG


          Campaign Legal Center


          City and County of San Francisco


          Courage Campaign


          Franciscan Action Network


          League of Women Voters of California


          Los Angeles County Federation of Labor


          Lutheran Office of Public Policy-California










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          MapLight


          MOVI, Money Out Voters In


          National Council of Jewish Women-California


          Represent California


          Represent.Us


          San Francisco Bay Area Rapid Transit District


          Sierra Club California


          Southwest Voter Registration Education Project


          UFCW Western States Council


          Voices for Progress




          Opposition


          None on file.









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          Analysis Prepared by:Ethan Jones / E. & R. / (916)  
          319-2094