BILL ANALYSIS �
SB 831
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Date of Hearing: June 24, 2014
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Paul Fong, Chair
SB 831 (Hill) - As Amended: June 18, 2014
SENATE VOTE : 35-1
SUBJECT : Political Reform Act of 1974.
SUMMARY : Makes numerous significant changes to the Political
Reform Act of 1974 (PRA). Specifically, this bill :
1)Prohibits an elected officer from requesting that a payment be
made, and prohibits a person from making a payment at the
behest of an elected officer, as specified, to a nonprofit
organization that the elected officer knows or has reason to
know is owned or controlled by that officer or a family member
of the officer. Prohibits an expenditure of campaign funds by
an elected officer or committee controlled by an elected
officer to a nonprofit organization that the elected officer
knows or has reason to know is owned or controlled by the
elected officer or a family member of the elected officer.
a) Provides, for the purposes of these restrictions, that
an elected officer is deemed to have complied with this law
if the Fair Political Practices Commission (FPPC)
determines that the elected officer made a reasonable
effort to ascertain whether a nonprofit organization is
owned or controlled by the elected officer or a family
member of the elected officer.
b) Provides, for the purposes of these restrictions, that a
nonprofit organization is owned or controlled by an elected
officer or family member of an elected officer if the
elected officer or family member, or a member of that
person's immediate family, is a director, officer, partner,
or trustee of, or holds any position of management with,
the nonprofit organization, and is paid for his or her
services.
c) Defines the term "family member of the elected officer,"
for the purposes of these restrictions, as the spouse,
child, sibling, or parent of the elected officer.
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d) Provides that the restrictions on payments made at the
behest of an elected officer do not apply to payments made
to a nonprofit organization that is formed for the purpose
of coordinating or performing disaster relief services.
2)Requires a nonprofit organization that makes a payment,
advance, or reimbursement to a public official for specified
travel related to a legislative or governmental purpose, or to
an issue of state, national, or international public policy,
to disclose to the FPPC the names of donors responsible for
funding the payments who knew or had reason to know that their
donation would be used for a payment, advance, or
reimbursement for the travel. Provides that the nonprofit
organization shall not report a donor if the organization has
evidence indicating that the donor restricted or otherwise did
not intend the donation to be used for such travel. Provides
that a donor knows or has reason to know that his or her
donation will be used for the travel under any of the
following conditions:
a) The donor directed the nonprofit organization to use the
donation for the travel;
b) The donation was made in response to a solicitation for
donations for the travel; or,
c) The nonprofit organization made payments for this type
of travel in the current calendar year or any of the
immediately preceding four calendar years.
3)Requires a public official, when reporting a gift that is a
travel payment, advance, or reimbursement on his or her
Statement of Economic Interests (SEI), to disclose the travel
destination.
4)Prohibits campaign funds from being used to pay for any of the
following:
a) A personal vacation for a candidate; elected officer;
immediate family member of a candidate or elected officer;
or an officer, director, employee, or member of the staff
of a candidate, elected officer, or committee;
b) Membership dues for a country club, health club, or
other recreational facility;
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c) Tuition payments;
d) Clothing of any kind to be worn by a candidate or
elected officer;
e) Vehicle use and sports or entertainment tickets not
directly related to an election campaign;
f) A gift to a spouse, child, sibling, or parent of a
candidate, elected officer, or other individual with the
authority to approve the expenditure of campaign funds held
by a committee, except for a gift of nominal value that is
substantially similar to a gift made to other persons and
that is directly related to a political, legislative, or
governmental purpose; or,
g) A utility bill for real property that is owned or leased
by a candidate, elected officer, campaign treasurer, or any
individual with authority to approve the expenditure of
campaign funds, or a member of his or her immediate family.
5)Makes technical and conforming changes.
6)Contains an urgency clause, allowing this bill to take effect
immediately upon enactment.
EXISTING LAW :
1)Provides that a payment made at the behest of a candidate for
state or local elective office is considered a contribution
unless the payment is made for purposes unrelated to the
candidate's candidacy. Provides that a payment is presumed to
be unrelated to a candidate's candidacy if it is made
principally for legislative, governmental, or charitable
purposes.
2)Requires an elected officer to report any payments principally
for legislative, governmental, or charitable purposes made at
the behest of the officer within 30 days following the date on
which the payment or payments equal or exceed $5,000 in the
aggregate from the same source in the same calendar year in
which they are made. Requires this report to be filed with
the elected officer's agency and to contain all of the
following:
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a) The name and address of the payor;
b) The amount of the payment;
c) The date or dates that the payment or payments were
made;
d) The name and address of the payee;
e) A brief description of the goods or services provided or
purchased, if any; and
f) A description of the specific purpose or event for which
the payment or payments were made.
3)Prohibits specified elected officers and other public
officials from receiving gifts, as defined, in excess of $440
in value from a single source in a calendar year. Provides
that payments for travel that is reasonably related to a
legislative or governmental purpose, or to an issue of state,
national, or international public policy are not subject to
the gift limit if either of the following is true:
a) The travel is in connection with a speech given by the
official and the lodging and subsistence expenses are
limited to the day immediately preceding, the day of, and
the day immediately following the speech, and the travel is
within the United States; or,
b) The travel is provided by a government, a governmental
agency, a foreign government, a governmental authority, a
bona fide public or private educational institution, a
nonprofit organization that is exempt from taxation under
Section 501(c)(3) of the Internal Revenue Code, or by a
person domiciled outside the United States who
substantially satisfies the requirements for tax-exempt
status under Section 501(c)(3) of the Internal Revenue
Code.
4)Requires candidates for, and current holders of, specified
elected or appointed state and local offices and designated
employees of state and local agencies to file SEIs disclosing
their financial interests, including investments, real
property interests, and income, including gifts.
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5)Requires contributions deposited into a candidate's campaign
account 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 to seek office
is within the lawful execution of this trust if it is
reasonably related to a political purpose and an expenditure
associated with holding office is within the lawful execution
of this trust if it is reasonably related to a legislative or
governmental purpose. Provides that expenditures which confer
a substantial personal benefit to the candidate or a person
who has the authority to approve the expenditure must be
directly related to a political, legislative, or governmental
purpose.
6)Imposes limitations on the use of campaign funds for certain
expenditures, including those relating to automotive expenses,
travel expenses, tickets for entertainment or sporting events,
personal gifts, and real property expenses.
FISCAL EFFECT : Unknown. State-mandated local program;
contains a crimes and infractions disclaimer.
COMMENTS :
1)Purpose of the Bill : According to the author:
SB 831 modernizes California's Political Reform Act by
increasing transparency of travel related gifts and
prohibiting certain types of campaign expenditures.
SB 831 includes all of the following reforms:
1. Prohibits elected officials from contributing
campaign funds to nonprofits owned or operated by
their family members.
2. Prohibits elected officials from contributing
campaign funds to nonprofits operated by another
elected official on the same governing body.
3. Prohibits the expenditure of campaign funds for
an elected official's mortgage, rent, utility bills,
clothing, club memberships, vacations, tuition,
tickets for sporting and entertainment events,
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vehicles, and gifts to family members.
4. Requires non-profits that pay for travel for
elected officials and all FPPC filers to disclose to
the FPPC the name of the donors responsible for
funding the travel. Currently non-profits do not
have to disclose the source of travel funding
preventing the public from knowing who was behind
the gift to the elected official.
These are important reforms that will help improve and
modernize California's Political Reform Act.
1)Behested Payments : In 1996, the FPPC amended its regulatory
definition of the term "contribution" to include any payment
made "at the behest" of a candidate, regardless of whether
that payment was for a political purpose. As a result,
payments made by a third party at the request or direction of
an elected officer were required to be reported as campaign
contributions, even if those payments were made for
governmental or charitable purposes.
The change in regulations by the FPPC, along with a number of
advice letters issued by the FPPC interpreting the new
definition of "contribution," limited the ability of elected
officers to co-sponsor governmental and charitable events. In
one advice letter, the FPPC concluded that a member of the
Legislature would be deemed to have accepted a campaign
contribution if, at his behest, a third party paid for the
airfare and lodging for witnesses to testify at a legislative
hearing.
In response to the FPPC's modified definition of "contribution,"
the Legislature enacted SB 124 (Karnette), Chapter 450,
Statutes of 1997, which provided that a payment made at the
behest of a candidate for purposes unrelated to the
candidate's candidacy for elective office is not a
contribution. However, SB 124 required that such payments
made at the behest of a candidate who is also an elected
officer, when aggregating $5,000 or more in a calendar year
from a single source, be reported to the elected officer's
agency. The elected officer must report such a payment within
30 days.
Examples of payments made at the behest of an elected officer
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that have to be reported under this provision of law include
charitable donations made in response to a solicitation sent
out by an elected officer or donations of supplies and
refreshments made by a third party for a health fair that was
sponsored by an elected officer.
2)Travel Payment Reporting Threshold & Suggested Amendments :
The provisions of this bill that require nonprofit
organizations that pay for travel expenses for public
officials to disclose the names of donors to the organization
do not include a reporting threshold. As a result, a
nonprofit organization that reimbursed a public official for a
$25 train ticket so that the official could speak at the
organization's annual conference would be required to file a
report disclosing the $25 reimbursement and disclosing donors
to the nonprofit organization. The author and the committee
may wish to consider establishing disclosure thresholds, so
that the reporting obligations created by this bill are
limited to nonprofit organizations that make substantial
payments for the travel expenses of public officials.
In order to narrow the scope of the reporting requirements in
this bill, committee staff recommends that this bill be
amended to provide that a nonprofit organization is required
to disclose the names of donors responsible for funding travel
payments only if the organization makes travel payments of
$10,000 or more in a calendar year, and to provide that the
nonprofit organization is required to disclose the names of
individual donors who are responsible for funding a travel
payment only to the extent that those donors are responsible
for $1,000 or more of the travel payment costs. Additionally,
committee staff recommends that this bill be amended to
specify that a donor to a nonprofit organization would have a
"reason to know" that his or her donation would be used for
travel payments based on the fact that the nonprofit
organization previously funded such travel payments only if
the payments made by the nonprofit organization in the current
calendar year, or in any of the previous four calendar years,
totaled $10,000 or more.
3)Campaign Expenditure Restrictions & Tuition Payments : As
noted above, this bill prohibits campaign funds from being
used for expenditures for certain specified items and
activities, including personal vacations, country club dues,
and gifts for family members. Under existing law, it is
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likely that the expenditure of campaign funds for these
purposes would already be prohibited in most circumstances.
That's because, as noted above, campaign expenditures
generally must be related to a political, legislative, or
governmental purpose, and campaign expenditures that confer a
substantial personal benefit to the candidate or to an
individual who has the authority to approve the expenditure
must be directly related to a political, legislative, or
governmental purpose. It is difficult to envision a scenario,
for instance, where a personal vacation could be deemed to be
directly related to a political, legislative, or governmental
purpose. Thus, it is unlikely that a personal vacation would
be considered an allowable expenditure of campaign funds under
existing law. Similarly, even though the PRA does not contain
an explicit prohibition against the use of campaign funds for
health club dues (as this bill does), the FPPC nonetheless has
concluded that such an expenditure is impermissible, and the
campaign disclosure manuals prepared by the FPPC for state and
local candidates specifically state that "a committee may not
pay for the candidate's health club dues."
On the other hand, certain campaign expenditures that would be
prohibited by this bill may serve important and direct
political, legislative, and governmental purposes. For
example, in the past, the FPPC has advised that the
expenditure of campaign funds to make tuition payments for
leadership programs, educational programs to improve the
administrative skills of government executives, and training
programs designed to assist women entering the political
process were directly related to a political, legislative, or
governmental purpose. This bill would prohibit such
expenditures, because this bill prohibits the expenditure of
campaign funds for tuition payments.
If the author's concern with the expenditure of campaign funds
for tuition payments is that public officials may use campaign
funds for more general educational programs that are not
closely related to the official's duties, the FPPC has
concluded that such expenditures are not permissible under the
existing law. In 1998, the FPPC advised that a county
supervisor could not use campaign funds for the purposes of
paying tuition for a master's degree program in international
policy studies. Even though the master's degree program
included training and coursework in public policy, political
science, and the economy, the FPPC concluded that the use of
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campaign funds for those tuition payments was not directly
related to a political, legislative, or governmental purpose,
because the benefits of holding the academic degree were
primarily personal, rather than political, legislative, or
governmental, and the degree was not required for a county
supervisor to exercise his duties.
The committee and the author may wish to consider whether it is
desirable to prohibit public officials from using campaign
funds for the purposes of attending educational and leadership
programs that are directly related to political, legislative,
or governmental purposes, and that assist officials in more
effectively performing their governmental duties and
representing their constituents.
4)Urgency Clause and Suggested Amendment : As noted above, this
bill contains an urgency clause, and would go into effect
immediately upon enactment. Given the significant changes
that this bill makes to the PRA, however, including creating
new restrictions on behested payments and expenditures of
campaign funds, and establishing new reporting requirements
for travel funded by non-profit organizations, it may be
necessary to undertake efforts to educate individuals who are
subject to these new laws of the restrictions. Furthermore,
given the deadlines for the Governor to act on bills that are
approved by the Legislature this year, it is possible that
this bill could be signed into law as little as five weeks
before the November election. Changing campaign finance rules
so close to the date of a statewide election could create
confusion, and could hamper the implementation and enforcement
of the law.
To address these concerns, committee staff recommends that this
bill be amended to remove the urgency clause.
5)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 that are not
submitted to the voters, such as those contained in this bill,
must further the purposes of the initiative and require a
two-thirds vote of both houses of the Legislature.
REGISTERED SUPPORT / OPPOSITION :
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Support
California Common Cause
Opposition
None on file.
Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094