BILL ANALYSIS Ó
SB 1107
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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