BILL ANALYSIS
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THIRD READING
Bill No: AB 2842
Author: Leno (D)
Amended: 4/14/04 in Assembly
Vote: 27 - Urgency
SENATE ELECTIONS & REAP. COMMITTEE : 5-0, 6/16/04
AYES: Perata, Johnson, Escutia, Murray, Poochigian
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 77-0, 5/27/04 - See last page for vote
SUBJECT : Political Reform Act
SOURCE : Author
DIGEST : This bill provides that the proceeds of a loan
obtained by a candidate from a commercial lending
institution and loaned by the candidate to his/her campaign
are subject to the $100,000 personal loan limitation.
ANALYSIS : Existing law provides that a loan received by
a candidate or committee is a contribution unless the loan
is received from a commercial lending institution in the
ordinary course of business, or it is clear from the
surrounding circumstances that it is not made for political
purposes.
Existing law also provides that the campaign contribution
limits enacted by Proposition 34 do not apply to loans made
to a candidate by a commercial lending institution in the
CONTINUED
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lender's regular course of business on terms available to
members of the general public for which the candidate is
personally liable.
Existing law provides that a candidate for elective state
office may not personally loan to his/her campaign an
amount, the outstanding balance of which exceeds $100,000.
Furthermore, a candidate may not charge interest on any
loan he/she made to his/her campaign.
This bill clarifies that the $100,000 limit on how much a
candidate may personally loan to his/her campaign includes
the proceeds of a loan obtained by the candidate from a
commercial lending institution.
According to the author's office, during the gubernatorial
recall, then candidate Arnold Schwarzenegger loaned himself
over $4 million using his personal wealth as collateral.
On January 28 of this year, the Sacramento Superior Court
decided in Camp v. Schwarzenegger that bank loans in excess
of $100,000 violated the spirit of Proposition 34. In
fact, the judge called the practice of wealthy candidates
who "pledge personal wealth as security for a loan from a
commercial bank to their campaign," a form of "money
laundering."
Despite this ruling, legislative candidates continue to
obtain these type of loans. In fact, five legislative
candidates for the November 2004 election took out bank
loans in excess of the $100,000 limit. One of these loans
was taken out after the Superior Court's ruling. Since the
Superior Court ruling does not carry the force of law, the
Legislature must act immediately to close this loophole.
This bill is similar in intent to SB 1449 (Johnson) which
passed the Senate Elections and Reapportionment Committee
with a vote of 5-0 and the Senate with a vote of 36-0.
The intent of this bill is consistent with Sacramento
Superior Court Judge Loren McMaster's decision in Camp v.
Schwarzenegger . In that case, the court found that the
defendant violated the Political Reform Act's prohibition
on a candidate loaning his/her campaign more than $100,000
when he obtained bank loans totaling over $4 million that
AB 2842
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were in turn loaned to his campaign committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 6/28/04)
Secretary of State
ASSEMBLY FLOOR :
AYES: Aghazarian, Bates, Benoit, Berg, Bermudez, Bogh,
Calderon, Campbell, Canciamilla, Chan, Chavez, Chu,
Cogdill, Cohn, Corbett, Correa, Cox, Daucher, Diaz,
Dutra, Dutton, Dymally, Firebaugh, Frommer, Garcia,
Goldberg, Hancock, Harman, Jerome Horton, Shirley Horton,
Houston, Jackson, Keene, Kehoe, Koretz, La Malfa, La
Suer, Laird, Leno, Levine, Lieber, Liu, Lowenthal,
Maddox, Maldonado, Matthews, Maze, McCarthy, Montanez,
Mountjoy, Mullin, Nakanishi, Nakano, Nation, Negrete
McLeod, Oropeza, Pacheco, Parra, Pavley, Plescia, Reyes,
Richman, Ridley-Thomas, Runner, Salinas, Samuelian,
Simitian, Spitzer, Steinberg, Strickland, Vargas, Wesson,
Wiggins, Wolk, Wyland, Yee, Nunez
NO VOTE RECORDED: Haynes, Leslie, Longville
DLW:mel 6/28/04 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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