(1)The Political Reform Act of 1974 prohibits a public official at any level of state or local government from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision in which the public official knows or has reason to know that he or she has a financial interest. A public official has a financial interest in a governmental decision if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on a business entity in which the public official has a direct or indirect investment worth $2,000 or more, real property in which the public official has a direct or indirect interest worth $2,000 or more, and sources of income aggregating $500 or more in value within 12 months before the time when the decision is made.

The Political Reform Act of 1974 requires persons holding specified public offices to file disclosures of investments, real property interests, and income within specified periods of assuming or leaving office, and annually while holding the office. The act requires the disclosures to include a statement indicating, within a specified value range, the fair market value of investments or interests in real property and the aggregate value of income received from a source.

This bill would increase the thresholds at which a public official has a disqualifying financial interest in sources of income from $500 to $1,000, in investments in business entities from $2,000 to $5,000, and in interests in real property from $2,000 to $10,000.

This bill would make conforming adjustments to the thresholds at which income, investments, and interests in real property must be disclosed on a public officials statement of economic interests. The bill would also revise the dollar amounts associated with the value ranges for reporting the value of economic interests.

This bill would require certain public officials to disclose information on the officials statement of economic interests relating to governmental decisions for which the public official had a disqualifying financial interest, as specified.

Existing law makes a knowing or willful violation of the act a misdemeanor and subjects offenders to criminal penalties.

By creating additional crimes, this bill would impose a state-mandated local program.

(2)This bill would incorporate additional changes to Section 87207 of the Government Code, proposed by SB 21, that would become operative only if SB 21 and this bill are both chaptered and become effective on or before January 1, 2016, and this bill is chaptered last.

(3) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(4) The Political Reform Act of 1974, an initiative measure, provides that the Legislature may amend the act to further the acts purposes upon a ²/₃ vote of each house and compliance with specified procedural requirements.

This bill would declare that it furthers the purposes of the act.

(1)The Political Reform Act of 1974 prohibits a public official at any level of state or local government from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision in which the public official knows or has reason to know that he or she has a financial interest. A public official has a financial interest in a governmental decision if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on a business entity in which the public official has a direct or indirect investment worth $2,000 or more, real property in which the public official has a direct or indirect interest worth $2,000 or more, and sources of income aggregating $500 or more in value within 12 months before the time when the decision is made.

The Political Reform Act of 1974 requires persons holding specified public offices to file disclosures of investments, real property interests, and income within specified periods of assuming or leaving office, and annually while holding the office. The act requires the disclosures to include a statement indicating, within a specified value range, the fair market value of investments or interests in real property and the aggregate value of income received from a source.

This bill would increase the thresholds at which a public official has a disqualifying financial interest in sources of income from $500 to $1,000, in investments in business entities from $2,000 to $5,000, and in interests in real property from $2,000 to $10,000.

This bill would make conforming adjustments to the thresholds at which income, investments, and interests in real property must be disclosed on a public officials statement of economic interests. The bill would also revise the dollar amounts associated with the value ranges for reporting the value of economic interests.

This bill would require certain public officials to disclose information on the officials statement of economic interests relating to governmental decisions for which the public official had a disqualifying financial interest, as specified.

Existing law makes a knowing or willful violation of the act a misdemeanor and subjects offenders to criminal penalties.

By creating additional crimes, this bill would impose a state-mandated local program.

(3) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(4) The Political Reform Act of 1974, an initiative measure, provides that the Legislature may amend the act to further the acts purposes upon a ²/₃ vote of each house and compliance with specified procedural requirements.

This bill would declare that it furthers the purposes of the act.

(1)The Political Reform Act of 1974 requires elected officers, candidates, and committees to file semiannual campaign statements that include, among other things, the total amount of contributions received during the period covered by the campaign statement and the total cumulative amount of contributions received. The act provides that contributions include a payment made at the behest of a candidate unless full and adequate consideration is received from the candidate or it is clear from the surrounding circumstances that the payment was made for purposes unrelated to his or her candidacy for elective office. The act provides that a payment made principally for legislative, governmental, or charitable purposes is presumed to be made for purposes unrelated to a candidates candidacy for elective office and is neither a gift nor a contribution. The act requires a payment of this type made at the behest of a candidate who is an elected officer to be reported 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 the payments are made.

This bill would also require candidates who are required to file campaign statements, and elected officers a Member of the Legislature or a person elected to a statewide elective office, for one year after they leave he or she leaves elective office, to report within 30 days following the date on which a behested payment or payments are made for legislative, governmental, or charitable purposes that equal or exceed $5,000 in the aggregate from the same source in the same calendar year in which the payments are made. The bill would only require a Member of the Legislature or a person elected to a statewide elective office to report the behested payment or payments, as described above, if the behested payment or payments would financially benefit the former officerholder or his or her immediate family, the former officeholders employer or the employer of a member of his or her immediate family, or an entity with whom the former officeholder or a member of his or her immediate family is negotiating employment.

(2)The Political Reform Act of 1974 prohibits a public official at any level of state or local government from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision in which the public official knows or has reason to know that he or she has a financial interest. A public official has a financial interest in a governmental decision if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on a business entity in which the public official has a direct or indirect investment worth $2,000 or more, real property in which the public official has a direct or indirect interest worth $2,000 or more, and sources of income aggregating $500 or more in value within 12 months prior to before the time when the decision is made.

The Political Reform Act of 1974 requires persons holding specified public offices to file disclosures of investments, real property interests, and income within specified periods of assuming or leaving office, and annually while holding the office. The act requires the disclosures to include a statement indicating, within a specified value range, the fair market value of investments or interests in real property and the aggregate value of income received from a source.

This bill would increase the thresholds at which a public official has a disqualifying financial interest in sources of income from $500 to $1,000, in investments in business entities from $2,000 to $5,000, and in interests in real property from $2,000 to $10,000.

The This bill would make conforming adjustments to the thresholds at which income, investments, and interests in real property must be disclosed on a public officials statement of economic interests. The bill would also revise the dollar amounts associated with the value ranges for reporting the value of economic interests.

This bill would require certain public officials to disclose information on the officials statement of economic interests relating to governmental decisions for which the public official had a disqualifying financial interest, as specified.

Existing law makes a knowing or willful violation of the act a misdemeanor and subjects offenders to criminal penalties.

By creating additional crimes, this bill would impose a state-mandated local program.

(3)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(4)The Political Reform Act of 1974, an initiative measure, provides that the Legislature may amend the act to further the acts purposes upon a ²/₃ vote of each house and compliance with specified procedural requirements.

This bill would declare that it furthers the purposes of the act.

(2)The Political Reform Act of 1974 prohibits a public official at any level of state or local government from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision in which the public official knows or has reason to know that he or she has a financial interest. A public official has a financial interest in a governmental decision if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on a business entity in which the public official has a direct or indirect investment worth $2,000 or more, real property in which the public official has a direct or indirect interest worth $2,000 or more, and sources of income aggregating $500 or more in value within 12 months prior to the time when the decision is made.

The Political Reform Act of 1974 requires persons holding specified public offices to file disclosures of investments, real property interests, and income within specified periods of assuming or leaving office, and annually while holding the office. The act requires the disclosures to include a statement indicating, within a specified value range, the fair market value of investments or interests in real property and the aggregate value of income received from a source.

This bill would increase the thresholds at which a public official has a disqualifying financial interest in sources of income from $500 to $1,000, in investments in business entities from $2,000 to $5,000, and in interests in real property from $2,000 to $10,000.

The bill would make conforming adjustments to the thresholds at which income, investments, and interests in real property must be disclosed on a public officials statement of economic interests. The bill would also revise the dollar amounts associated with the value ranges for reporting the value of economic interests.

This bill would require certain public officials to disclose information on the officials statement of economic interests relating to governmental decisions for which the public official had a disqualifying financial interest, as specified.

Existing law makes a knowing or willful violation of the act a misdemeanor and subjects offenders to criminal penalties.

By creating additional crimes, this bill would impose a state-mandated local program.

(3)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(4)The Political Reform Act of 1974, an initiative measure, provides that the Legislature may amend the act to further the acts purposes upon a ²/₃ vote of each house and compliance with specified procedural requirements.

This bill would declare that it furthers the purposes of the act.

The Political Reform Act of 1974 prohibits a public official at any level of state or local government from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision in which the public official knows or has reason to know that he or she has a financial interest. A public official has a financial interest in a governmental decision if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on a business entity in which the public official has a direct or indirect investment worth $2,000 or more, real property in which the public official has a direct or indirect interest worth $2,000 or more, and sources of income aggregating $500 or more in value within 12 months prior to the time when the decision is made.

The Political Reform Act of 1974 requires persons holding specified public offices to file disclosures of investments, real property interests, and income within specified periods of assuming or leaving office, and annually while holding the office. The act requires the disclosures to include a statement indicating, within a specified value range, the fair market value of investments or interests in real property and the aggregate value of income received from a source.

This bill would increase the thresholds at which a public official has a disqualifying financial interest in sources of income from $500 to $1,000, in investments in business entities from $2,000 to $5,000, and in interests in real property from $2,000 to $10,000.

The bill would make conforming adjustments to the thresholds at which income, investments, and interests in real property must be disclosed on a public officials statement of economic interests. The bill would also revise the dollar amounts associated with the value ranges for reporting the value of economic interests.

This bill would require certain public officials to disclose information on the officials statement of economic interests relating to governmental decisions for which the public official had a disqualifying financial interest, as specified.

Existing law makes a knowing or willful violation of the act a misdemeanor and subjects offenders to criminal penalties.

By creating additional crimes, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The Political Reform Act of 1974, an initiative measure, provides that the Legislature may amend the act to further the acts purposes upon a ²/₃ vote of each house and compliance with specified procedural requirements.

This bill would declare that it furthers the purposes of the act.

GOVERNOR'S VETO

GV Bill Id:AB 10

Author:(Gatto)

As Enrolled Ver:September 14, 2015

2/3 vote

Original Committee Reference: E. & R.

SUMMARY:

Makes several significant changes to the Political Reform Act (PRA) of 1974. Specifically, this bill:

1. Increases the thresholds at which a public official's financial interest can potentially create a conflict of interest under the PRA, as follows:

   1. From $2,000 to $10,000 for interests in real property;

   2. From $2,000 to $5,000 for investments in a business entity; and,

   3. From $500 to $1,000, for sources of income, other than gifts or specified loans.

2. Revises the monetary ranges that specified public officials or candidates, when filing a statement of economic interests (SEI), use to describe the value of their investments, interests in real property, and income.

3. Requires a public official or candidate who is required to disclose a business entity investment on his or her SEI because the official or candidate is a director, officer, partner, or trustee of the entity, to provide a thorough and detailed description of the entity's activities and disclose the names of all business partners who share a financial interest in the entity on the official or candidate's SEI, based on criteria established by the Fair Political Practices Commission (FPPC).

4. Requires a public official or candidate who is required to disclose his or her pro rata share of income to a business entity on an SEI to include a thorough and detailed description of the business activity of the business entity, instead of a general description of the entity's business activity.

5. Requires a public official who holds an office listed in Government Code Section 87200 to disclose on his or her SEI, as specified, each governmental decision for which a financial interest resulted in the official's disqualification from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision.

The Senate amendments:

1. Delete provisions of the bill that would have made behested payment reporting requirements applicable to candidates who are not elected officials, and to elected officials for a year after leaving office.

2. Provide that detailed descriptions of a business entity's activities and a disclosure of the names of business partners who share a financial interest in a business entity are not required to be included on an SEI if the business entity is publicly traded.

3. Add an additional disclosure tier on the SEI for describing the value of investments, interests in real property, and income.

4. Make technical and corresponding changes.

5. Add double-joining language to avoid chaptering problems with SB 21 (Hill) of the current legislative session.

FISCAL EFFECT: According to the Senate Appropriations Committee, the FPPC indicates that this bill would result in a one-time General Fund cost of $260,000. Ongoing costs would total about $130,000 per year.

COMMENTS: According to the author, "AB 10… will modernize the financial interest thresholds that necessitate a public official excusing him or herself from a governmental decision. These numbers have been updated only once since 1974… It will include additional middle tiers and upper tiers in the financial disclosures on the FPPC's Form 700, ensuring that the public has a more accurate view of the financial holdings and potential conflicts of interest for their public officials… It will require a more detailed disclosure of these holdings, specifically a more thorough description of any businesses and the names of any business partners… It will add an additional disclosure to the Form 700 that requires public officials to specify any instances in the previous year where a financial interest has been cause for a recusal from being involved with or making a governmental decision."

As part of the PRA's comprehensive scheme to prevent conflicts of interest by state and local public officials, existing law identifies certain elected and other high-level state and local officials who must file SEIs. Similarly, candidates for those positions must file SEIs. Other state and local public officials and employees are required to file SEIs if the position they hold entails the making or participation in the making of governmental decisions that may foreseeably have a material financial effect on the decision maker's financial interests.

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.

The Senate amendments delete provisions of the bill that would have expanded behested payment reporting requirements to candidates who are not elected officials and to elected officials for a year after leaving office. Additionally, the Senate amendments narrow the scope of information that must be disclosed on SEIs about businesses that are publicly traded, and further revise the monetary ranges used on the SEI to describe the value of investments, interests in real property, and income. This bill, as amended in the Senate, is consistent with Assembly actions.

GOVERNOR'S VETO MESSAGE:

This bill makes several changes to the Political Reform Act of 1974, including significant changes to reporting requirements on statements of economic interests.

The Political Reform Act already requires public officials to disclose their income, investments and business activities with enough particularity so that conflicts of interest can be identified. This bill adds yet more complexity to existing reporting requirements without commensurate benefit, and I am not convinced that this bill will provide more useful information to the public.

Analysis Prepared by: Ethan Jones / E. & R. / (916) 319-2094 FN: 0002516

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 10

Author:(Gatto)

As Amended Ver:August 27, 2015

2/3 vote

Original Committee Reference: E. & R.

SUMMARY:

Makes several significant changes to the Political Reform Act (PRA) of 1974. Specifically, this bill:

1. Increases the thresholds at which a public official's financial interest can potentially create a conflict of interest under the PRA, as follows:

   1. From $2,000 to $10,000 for interests in real property;

   2. From $2,000 to $5,000 for investments in a business entity; and,

   3. From $500 to $1,000, for sources of income, other than gifts or specified loans.

2. Revises the monetary ranges that specified public officials or candidates, when filing a statement of economic interests (SEI), use to describe the value of their investments, interests in real property, and income.

3. Requires a public official or candidate who is required to disclose a business entity investment on his or her SEI because the official or candidate is a director, officer, partner, or trustee of the entity, to provide a thorough and detailed description of the entity's activities and disclose the names of all business partners who share a financial interest in the entity on the official or candidate's SEI, based on criteria established by the Fair Political Practices Commission (FPPC).

4. Requires a public official or candidate who is required to disclose his or her pro rata share of income to a business entity on an SEI to include a thorough and detailed description of the business activity of the business entity, instead of a general description of the entity’s business activity.

5. Requires a public official who holds an office listed in Government Code Section 87200 to disclose on his or her SEI, as specified, each governmental decision for which a financial interest resulted in the official's disqualification from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision.

The Senate amendments:

1. Delete provisions of the bill that would have made behested payment reporting requirements applicable to candidates who are not elected officials, and to elected officials for a year after leaving office.

2. Provide that detailed descriptions of a business entity's activities and a disclosure of the names of business partners who share a financial interest in a business entity are not required to be included on an SEI if the business entity is publicly traded.

3. Add an additional disclosure tier on the SEI for describing the value of investments, interests in real property, and income.

4. Make technical and corresponding changes.

5. Add double-joining language to avoid chaptering problems with SB 21 (Hill) of the current legislative session.

FISCAL EFFECT: According to the Senate Appropriations Committee, the FPPC indicates that this bill would result in a one-time General Fund cost of $260,000. Ongoing costs would total about $130,000 per year.

COMMENTS: According to the author, "AB 10… will modernize the financial interest thresholds that necessitate a public official excusing him or herself from a governmental decision. These numbers have been updated only once since 1974… It will include additional middle tiers and upper tiers in the financial disclosures on the FPPC's Form 700, ensuring that the public has a more accurate view of the financial holdings and potential conflicts of interest for their public officials… It will require a more detailed disclosure of these holdings, specifically a more thorough description of any businesses and the names of any business partners… It will add an additional disclosure to the Form 700 that requires public officials to specify any instances in the previous year where a financial interest has been cause for a recusal from being involved with or making a governmental decision."

As part of the PRA's comprehensive scheme to prevent conflicts of interest by state and local public officials, existing law identifies certain elected and other high-level state and local officials who must file SEIs. Similarly, candidates for those positions must file SEIs. Other state and local public officials and employees are required to file SEIs if the position they hold entails the making or participation in the making of governmental decisions that may foreseeably have a material financial effect on the decision maker's financial interests.

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.

The Senate amendments delete provisions of the bill that would have expanded behested payment reporting requirements to candidates who are not elected officials and to elected officials for a year after leaving office. Additionally, the Senate amendments narrow the scope of information that must be disclosed on SEIs about businesses that are publicly traded, and further revise the monetary ranges used on the SEI to describe the value of investments, interests in real property, and income. This bill, as amended in the Senate, is consistent with Assembly actions.

Analysis Prepared by: Ethan Jones / E. & R. / (916) 319-2094 FN: 0001677

 THIRD READING  

Bill No: AB 10

Author: Gatto (D)

Amended: 8/27/15 in Senate

Vote: 27

SENATE ELECTIONS & C.A. COMMITTEE: 4-0, 7/7/15

AYES: Allen, Hancock, Hertzberg, Liu

NO VOTE RECORDED: Anderson

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15

AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

ASSEMBLY FLOOR: 79-0, 6/2/15 - See last page for vote

SUBJECT: Political Reform Act of 1974: behested payments and economic interest disclosures

SOURCE: Author

DIGEST: This bill makes several significant changes to the Political Reform Act (PRA) of 1974 including changes to reporting requirements on statements of economic interests (SEI).

ANALYSIS:

Existing law:

1. Prohibits a public official from making, participating in making, or in any way attempting to use his official position to influence a governmental decision in which the official knows or has reason to know he or she has a financial interest, as specified. Provides that an official has a financial interest in a decision, for these purposes, if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on the official, a member of his or her immediate family, or on any of the following:
   
   
   

   1. Any business entity in which the public official has a direct or indirect investment worth $2,000 or more;
      
      
      

   2. Any business entity in which the public official is a director, officer, partner, trustee, employee, or holds any position of management; or,
      
      
      

   3. Any real property in which the public official has a direct or indirect interest worth $2,000 or more;
      
      
      

   4. Any source of income (except gifts or loans by a commercial lending institution made in the regular course of business on terms available to the public without regard to official status) aggregating $500 or more in value provided or promised to, received by, the public official within 12 months prior to the time when the decision is made;
      
      
      

   5. Any donor of, or any intermediary or agent for a donor of, a gift or gifts aggregating an amount that equals or exceeds the gift limit (currently $460 in a year) that is provided to, received by, or promised to the public official within 12 months prior to the time when the decision is made.
      
      
      

2. 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. Requires filers to file the SEIs annually and at other periods of time, such as when assuming or leaving office.
   
   

3. Delineates certain high-ranking public officials in Government Code Section 87200 (these officials are known, and are hereinafter referred to, as "87200 filers") who are subject to the most expansive disclosure requirements under the PRA. Provides that these 87200 filers include all of the following:
   
   

   1. Elected state officers;
      
      
      

   2. Judges and commissioners of courts of the judicial branch of government;
      
      
      

   3. Members of the Public Utilities Commission;
      
      
      

   4. Members of the State Energy Resources Conservation and Development Commission;
      
      
      

   5. Members of the Fair Political Practices Commission (FPPC);
      
      
      

   6. Members of the California Coastal Commission;
      
      
      

   7. Members of the High-Speed Rail Authority;
      
      
      

   8. Members of planning commissions;
      
      
      

   9. Any of the following county offices: Members of the board of supervisors; district attorneys; county counsels; county treasurers; and county chief administrative officers;
      
      
      

   10. Any of the following city offices: Mayors; members of the city council; city managers; city attorneys; city treasurers; city chief administrative officers;
       
       
       

   11. Other public officials who manage public investments; and,
       
       
       

   12. Candidates for any of the offices listed above.
       
       
       

4. Requires an 87200 filer who is disqualified from participating in a governmental action because of a financial conflict of interest, except for members of the Legislature, to do the following upon identifying the conflict of interest or potential conflict of interest and immediately prior to the consideration of the matter:
   
   

1. Publicly identify the financial interest that gives rise to the conflict of interest or potential conflict of interest in detail sufficient to be understood by the public, except that disclosure of the exact street address of a residence is not required (If the governmental decision is to be made during an open session of a public meeting, the public identification shall be made orally and shall be made part of the official public record.);

2. Recuse himself or herself from discussing and voting on the matter, or otherwise acting on the matter in violation of existing law; and,
   
   

3. Leave the room until after the discussion, vote, and any other disposition of the matter is concluded, unless the matter has been placed on the portion of the agenda reserved for uncontested matters. Provides that notwithstanding this restriction, a public official who has a conflict of interest may speak on the issue during the time that the general public speaks on the issue.
   
   

This bill:

1. Increases the threshold at which a public official's financial interest can potentially create a conflict of interest under the PRA, as follows:
   
   
   

   1. Raises the conflict of interest threshold for interests in real property from $2,000 to $10,000;
      
      
      

   2. Raises the conflict of interest threshold for investments in a business entity from $2,000 to $5,000; and,
      
      
      

   3. Raises the conflict of interest threshold for sources of income, other than gifts or specified loans, from $500 to $1,000.
      
      
      

2. Revises the monetary ranges that specified public officials or candidates use to describe the value of their investments, interests in real property, and income when filing a SEI.
   
   

3. Requires a public official or candidate who is required to disclose a business entity investment on his or her SEI because the official or candidate is a director, officer, partner, or trustee of the business entity, to provide a thorough and detailed description of the business entity's activities and disclose the names of all business partners who share a financial interest in the business entity on the SEI, based on criteria established by the FPPC. Provides, however, that a filer is not required to provide a thorough and detailed description of the business entity’s activities and is not required to disclose the names of all business partners who share a financial interest in the business entity if the business entity is publicly traded.
   
   
   

4. Requires a public official or candidate who is required to disclose his or her pro rata share of income to a business entity on an SEI to include a thorough and detailed description of the business activity of the business entity, instead of a general description of the entity’s business activity. Provides, however, that a filer is not required to provide a thorough and detailed description of the business activity of the business entity if the business entity is publicly traded.
   
   
   

5. Requires a public official who holds an office listed in Section 87200 of the Government Code (a complete list of these offices are detailed under "existing law" above) to disclose on his or her SEI each governmental decision for which a financial interest resulted in the official’s disqualification from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision. Requires the disclosure to identify the governmental decision, the date that the decision was made or considered, the financial interest that created the conflict of interest, and any other relevant information that the FPPC determines appropriate.
   
   
   

6. Makes technical and corresponding changes and contains language to prevent a chaptering conflict with SB 21 (Hill).

Background

Statements of Economic Interests. As part of the PRA's comprehensive scheme to prevent conflicts of interest by state and local public officials, existing law identifies certain elected and other high-level state and local officials who must file SEIs. Similarly, candidates for those positions must file SEIs. Other state and local public officials and employees are required to file SEIs if the position they hold is designated in an agency's conflict of interest code. A position is designated in an agency's conflict of interest code when the position entails the making or participation in the making of governmental decisions that may foreseeably have a material financial effect on the decision maker's financial interests. While the exact number of people that are required to file SEIs is unknown, the FPPC has estimated that the number exceeds 200,000 officials and employees statewide.

The information that must be disclosed on an SEI, and the location at which an SEI is filed, varies depending on the position held by the individual who is required to file an SEI. Although there are some exceptions, individuals who are required to file an SEI typically must file that document with the agency of which they are an elected official or by which they are employed.

Comments

1. According to the author, transparency and disclosure are essential to protecting public resources, preventing corruption, and restoring public trust. This bill will finally bring disclosure requirements into the 21st century. AB 10 will ensure that California’s public officials are more transparent in their business, investment, and income disclosures, which will further confirm that our trusted elected officials are using their positions to serve all citizens equally.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee, the FPPC indicates that this bill will result in a one-time General Fund cost of $260,000. Ongoing costs would total about $130,000 per year.

SUPPORT: (Verified 8/26/15)

Association of California Water Agencies

California Clean Money Campaign

California Common Cause

California Newspaper Publishers Association

OPPOSITION: (Verified 8/26/15)

None received

ASSEMBLY FLOOR: 79-0, 6/2/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Chávez

Prepared by: Darren Chesin / E. & C.A. / (916) 651-4106

8/28/15 15:32:39

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 10 (Gatto) - Political Reform Act of 1974: behested payments and economic interest disclosures.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on August 27, 2015

Bill Summary:

AB 10 would make modifications to the Political Reform Act (PRA) of 1974 with respect to reporting requirements on statements of economic interests (SEI).

Fiscal Impact:

The Fair Political Practices Commission (FPPC) indicates that this bill would result in a one-time General Fund cost of $260,000. Ongoing costs would total about $130,000 per year.

Author Amendments:

Add an additional disclosure tier and double-joint AB 10 to SB 21 (Hill).

Committee Amendments:

Delete changes related to behested payment reports, which were included in the previous version of the bill.

-- END --

Date of Hearing: April 29, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 10

Author:(Gatto) – As Amended Ver:April 7, 2015

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill makes several changes to the Political Reform Act (PRA) regarding conflicts of interest. Specifically, this bill:

1. Increases the thresholds at which a public official's financial interest can potentially create a conflict of interest under the PRA, as follows:
   
   
   

   1. From $2,000 to $10,000 for interests in real property;

   2. From $2,000 to $5,000 for investments in a business entity; and,

   3. From $500 to $1,000 for sources of income, other than gifts or specified loans.
      
      
      

2. Revises the monetary ranges that specified public officials or candidates, when filing a statement of economic interests (SEI), use to describe the value of their investments, interests in real property, and income.
   
   
   

3. Requires a public official or candidate who is required to disclose a business entity investment on his or her SEI because the official or candidate is a director, officer, partner, or trustee of the business entity, to provide a thorough and detailed description of the business entity's activities and disclose the names of all business partners who share a financial interest in the business entity on the SEI, based on criteria established by the Fair Political Practices Commission (FPPC).
   
   
   

4. Requires a public official who holds an office listed in Section 87200 of the Government Code to disclose, as specified, on his or her SEI each governmental decision for which a financial interest resulted in the official’s disqualification from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision.
   
   
   

5. Requires candidates who are not elected officials, and elected officials for a year after leaving office, to report any payment that is made at the behest of that person for a legislative, governmental, or charitable purpose within 30 days following the date on which such 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.

FISCAL EFFECT:

Ongoing General Fund costs to the FPPC of about $250,000 for two positions to draft implementing regulations, respond to increased advice requests, drafting compliance materials, redesign the Form 700 and informational materials, work with a software vendor for electronic filing changes, and provide education and outreach. Costs should diminish in a few years following implementation.

COMMENTS:

Purpose. According to the author, "AB 10 will ensure that California’s public officials are more transparent in their business, investment, and income disclosures, which will further confirm that our trusted elected officials are using their positions to serve all citizens equally."

The author indicates that AB 10 has five main components:

1. Modernizing the financial interest thresholds that necessitate a public official excusing him or herself from a governmental decision. (These thresholds have been updated only once since 1974.

2. Including additional middle tiers and upper tiers in the financial disclosures on the FPPC’s Form 700, which is intended to provide a more accurate view of the financial holdings and potential conflicts of interest.

3. Requiring a more thorough description of any businesses and the names of any business partners.

4. Adding an additional disclosure to the Form 700 requiring public officials to specify any instances in the previous year where a financial interest has been cause for a recusal from being involved with or making a governmental decision.

5. Extending the behested payment reporting requirements to those candidates who are required to file a campaign statement and to elected officials for one year after leaving elective office.

Analysis Prepared by: Chuck Nicol / APPR. / (916) 319-2081

ASSEMBLY THIRD READING

ATR Bill Id:AB 10

Author:(Gatto)

As Amended Ver:April 7, 2015

2/3 vote

SUMMARY:

Makes several significant changes to the Political Reform Act (PRA) of 1974. Specifically, this bill:

1. Increases the thresholds at which a public official's financial interest can potentially create a conflict of interest under the PRA, as follows:

   1. From $2,000 to $10,000 for interests in real property;

   2. From $2,000 to $5,000 for investments in a business entity; and,

   3. From $500 to $1,000, for sources of income, other than gifts or specified loans.

2. Revises the monetary ranges that specified public officials or candidates, when filing a statement of economic interests (SEI), use to describe the value of their investments, interests in real property, and income.

3. Requires a public official or candidate who is required to disclose a business entity investment on his or her SEI because the official or candidate is a director, officer, partner, or trustee of the entity, to provide a thorough and detailed description of the entity's activities and disclose the names of all business partners who share a financial interest in the entity on the official or candidate's SEI, based on criteria established by the Fair Political Practices Commission (FPPC).

4. Requires a public official or candidate who is required to disclose his or her pro rata share of income to a business entity on an SEI to include a thorough and detailed description of the business activity of the business entity, instead of a general description of the entity’s business activity.

5. Requires a public official who holds an office listed in Government Code Section 87200 to disclose on his or her SEI, as specified, each governmental decision for which a financial interest resulted in the official’s disqualification from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision.

6. Requires candidates who are not elected officials, and elected officials for a year after leaving office, to report any payment that is made at the behest of that person for a legislative, governmental, or charitable purpose within 30 days following the date on which such 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 the statement to be filed with the following entity:

   1. In the case of a candidate, with the officials and agencies with which the candidate is required to file campaign statements; and,

   2. In the case of a former elected officer, with the agency with which the officer was required to file such statements when he or she was an elected officer.

FISCAL EFFECT:

According to the Assembly Appropriations Committee, ongoing General Fund costs to the FPPC of about $250,000 for two positions to draft implementing regulations, respond to increased advice requests, drafting compliance materials, redesign the Form 700 and informational materials, work with a software vendor for electronic filing changes, and provide education and outreach. Costs should diminish in a few years following implementation.

COMMENTS:

According to the author, "AB 10 has five main components. 1) It will modernize the financial interest thresholds that necessitate a public official excusing him or herself from a governmental decision. These numbers have been updated only once since 1974. 2) It will include additional middle tiers and upper tiers in the financial disclosures on the FPPC’s Form 700, ensuring that the public has a more accurate view of the financial holdings and potential conflicts of interest for their public officials. 3) It will require a more detailed disclosure of these holdings, specifically a more thorough description of any businesses and the names of any business partners. 4) It will add an additional disclosure to the Form 700 that requires public officials to specify any instances in the previous year where a financial interest has been cause for a recusal from being involved with or making a governmental decision. 5) It will extend the behested payment reporting requirements to include those candidates who are required to file a campaign statement and elected officials for one year after leaving elective office."

As part of the PRA's comprehensive scheme to prevent conflicts of interest by state and local public officials, existing law identifies certain elected and other high-level state and local officials who must file SEIs. Similarly, candidates for those positions must file SEIs. Other state and local public officials and employees are required to file SEIs if the position they hold is designated in an agency's conflict of interest code. A position is designated in an agency's conflict of interest code when the position entails the making or participation in the making of governmental decisions that may foreseeably have a material financial effect on the decision maker's financial interests.

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.

Please see the policy committee analysis for a full discussion of this bill.

Analysis Prepared by: Ethan Jones / E. & R. / (916) 319-2094 FN: 0000608

Date of Hearing: April 15, 2015

ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING

Sebastian Ridley-Thomas, Chair

ABPCA Bill Id:AB 10

Author:(Gatto) – As Amended Ver:April 7, 2015

SUBJECT:

Political Reform Act of 1974: behested payments and economic interest disclosures.

SUMMARY:

Makes several significant changes to the Political Reform Act (PRA) of 1974. Specifically, this bill:

1. Increases the threshold at which a public official's financial interest can potentially create a conflict of interest under the PRA, as follows:
   
   
   

   1. Raises the conflict of interest threshold for interests in real property from $2,000 to $10,000;
      
      
      

   2. Raises the conflict of interest threshold for investments in a business entity from $2,000 to $5,000; and,
      
      
      

   3. Raises the conflict of interest threshold for sources of income, other than gifts or specified loans, from $500 to $1,000.
      
      
      

2. Revises the monetary ranges that specified public officials or candidates, when filing a statement of economic interests (SEI), use to describe the value of their investments, interests in real property, and income.
   
   

3. Requires a public official or candidate who is required to disclose a business entity investment on his or her SEI because the official or candidate is a director, officer, partner, or trustee of the business entity, to provide a thorough and detailed description of the business entity's activities and disclose the names of all business partners who share a financial interest in the business entity on the SEI, based on criteria established by the Fair Political Practices Commission (FPPC).
   
   
   

4. Requires a public official or candidate who is required to disclose his or her pro rata share of income to a business entity on an SEI to include a thorough and detailed description of the business activity of the business entity, instead of a general description of the entity’s business activity.
   
   
   

5. Requires a public official who holds an office listed in Section 87200 of the Government Code (a complete list of these offices are detailed under "existing law" below) to disclose on his or her SEI each governmental decision for which a financial interest resulted in the official’s disqualification from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision. Requires the disclosure to identify the governmental decision, the date that the decision was made or considered, the financial interest that created the conflict of interest, and any other relevant information that the FPPC determines appropriate.
   
   
   

6. Requires candidates who are not elected officials, and elected officials for a year after leaving office, to report any payment that is made at the behest of that person for a legislative, governmental, or charitable purpose within 30 days following the date on which such 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 the statement to be filed with the following entity:
   
   
   

   1. In the case of a candidate, with the officials and agencies with which the candidate is required to file campaign statements; and,
      
      
      

   2. In the case of a former elected officer, with the agency with which the officer was required to file such statements when he or she was an elected officer.
      
      
      

7. Makes technical and corresponding changes.

EXISTING LAW:

1. Prohibits a public official from making, participating in making, or in any way attempting to use his official position to influence a governmental decision in which the official knows or has reason to know he or she has a financial interest, as specified. Provides that an official has a financial interest in a decision, for these purposes, if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on the official, a member of his or her immediate family, or on any of the following:
   
   
   

   1. Any business entity in which the public official has a direct or indirect investment worth two thousand dollars ($2,000) or more;
      
      
      

   2. Any real property in which the public official has a direct or indirect interest worth two thousand dollars ($2,000) or more;
      
      
      

   3. Any source of income, except gifts or loans by a commercial lending institution made in the regular course of business on terms available to the public without regard to official status, aggregating five hundred dollars ($500) or more in value provided or promised to, received by, the public official within 12 months prior to the time when the decision is made;
      
      
      

   4. Any business entity in which the public official is a director, officer, partner, trustee, employee, or holds any position of management; or,
      
      
      

   5. Any donor of, or any intermediary or agent for a donor of, a gift or gifts aggregating an amount that equals or exceeds the gift limit (currently $460 in a year) that is provided to, received by, or promised to the public official within 12 months prior to the time when the decision is made.
      
      
      

2. 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. Requires filers to file the SEIs annually and at other periods of time, such as when assuming or leaving office.
   
   

3. Lists certain high-ranking public officials in Government Code Section 87200 (these officials are known, and are hereinafter referred to, as "87200 filers") who are subject to the most expansive disclosure requirements under the PRA. Provides that these 87200 filers include all of the following:
   
   

   1. Elected state officers;
      
      
      

   2. Judges and commissioners of courts of the judicial branch of government;
      
      
      

   3. Members of the Public Utilities Commission;
      
      
      

   4. Members of the State Energy Resources Conservation and Development Commission;
      
      
      

   5. Members of the FPPC;
      
      
      

   6. Members of the California Coastal Commission;
      
      
      

   7. Members of the High-Speed Rail Authority;
      
      
      

   8. Members of planning commissions;
      
      
      

   9. Any of the following county offices: Members of the board of supervisors; district attorneys; county counsels; county treasurers; and county chief administrative officers;
      
      
      

   10. Any of the following city offices: Mayors; members of the city council; city managers; city attorneys; city treasurers; city chief administrative officers;
       
       
       

   11. Other public officials who manage public investments; and,
       
       
       

   12. Candidates for any of the offices listed above.
       
       
       

4. Requires an 87200 filer who is disqualified from participating in a governmental action because of a financial conflict of interest, except for members of the Legislature, to do the following upon identifying the conflict of interest or potential conflict of interest and immediately prior to the consideration of the matter:
   
   

   1. Publicly identify the financial interest that gives rise to the conflict of interest or potential conflict of interest in detail sufficient to be understood by the public, except that disclosure of the exact street address of a residence is not required;
      
      

   2. Recuse himself or herself from discussing and voting on the matter, or otherwise acting on the matter in violation of existing law; and,
      
      

   3. Leave the room until after the discussion, vote, and any other disposition of the matter is concluded, unless the matter has been placed on the portion of the agenda reserved for uncontested matters. Provides that notwithstanding this restriction, a public official who has a conflict of interest may speak on the issue during the time that the general public speaks on the issue.
      
      

5. Requires a candidate who is an elected officer to report a payment made at the behest of that officer, made principally for legislative, governmental, or charitable purposes, 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. Requires this report to be filed with the elected officer's agency and to contain all of the following:
   
   

   1. The name and address of the payor;
      
      

   2. The amount of the payment;
      
      

   3. The date or dates that the payment or payments were made;
      
      

   4. The name and address of the payee;
      
      

   5. A brief description of the goods or services provided or purchased, if any; and,
      
      

   6. A description of the specific purpose or event for which the payment or payments were made.
      
      

FISCAL EFFECT:

Unknown. State-mandated local program; contains a crimes and infractions disclaimer.

COMMENTS:

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

Transparency and disclosure are essential to protecting public resources, preventing corruption, and restoring public trust. This legislation will finally bring disclosure requirements into the 21st century. AB 10 will ensure that California’s public officials are more transparent in their business, investment, and income disclosures, which will further confirm that our trusted elected officials are using their positions to serve all citizens equally.

AB 10 has five main components. 1) It will modernize the financial interest thresholds that necessitate a public official excusing him or herself from a governmental decision. These numbers have been updated only once since 1974. 2) It will include additional middle tiers and upper tiers in the financial disclosures on the FPPC’s Form 700, ensuring that the public has a more accurate view of the financial holdings and potential conflicts of interest for their public officials. 3) It will require a more detailed disclosure of these holdings, specifically a more thorough description of any businesses and the names of any business partners. 4) It will add an additional disclosure to the Form 700 that requires public officials to specify any instances in the previous year where a financial interest has been cause for a recusal from being involved with or making a governmental decision. 5) It will extend the behested payment reporting requirements to include those candidates who are required to file a campaign statement and elected officials for one year after leaving elective office.

2. Statements of Economic Interests: As part of the PRA's comprehensive scheme to prevent conflicts of interest by state and local public officials, existing law identifies certain elected and other high-level state and local officials who must file SEIs. Similarly, candidates for those positions must file SEIs. Other state and local public officials and employees are required to file SEIs if the position they hold is designated in an agency's conflict of interest code. A position is designated in an agency's conflict of interest code when the position entails the making or participation in the making of governmental decisions that may foreseeably have a material financial effect on the decision maker's financial interests. While the exact number of people that are required to file SEIs is unknown, the FPPC has estimated that the number exceeds 200,000 officials and employees statewide.
   
   The information that must be disclosed on an SEI, and the location at which an SEI is filed, varies depending on the position held by the individual who is required to file an SEI. Although there are some exceptions, individuals who are required to file an SEI typically must file that document with the agency of which they are an elected official or by which they are employed.
   
   
   

3. Financial Interests: Under existing law, when a public official or a candidate for public office is required to disclose a financial interest on his or her SEI, the filer is not required to disclose the exact value of the interest, but instead must select a monetary range that describes the value of the interest. As noted above, this bill revises the monetary ranges that public officials use to describe the values of their financial interests on SEIs. In most cases, the revised disclosure categories in this bill would provide greater specificity about the values of financial interests held by public officials, although in some cases, this bill could provide somewhat less specificity about the value of financial interests held by the public official.
   
   Additionally, this bill increases the thresholds at which certain financial interests of a public official can give rise to a conflict of interest that requires the official to recuse himself or herself from participating in a governmental decision.
   
   The changes to the conflict of interest thresholds and disclosure categories that are proposed by this bill are detailed below:
   
   
   

4. Is More Disclosure Always Better? One of the original purposes of the PRA was to ensure that public officials disclose income and assets that could be affected by official actions and disqualify themselves from participating in decisions when they have conflicts of interest. In the background material provided by the author's office, the author argues that revising the disclosure categories for public officials’ financial interests is warranted in order to ensure that the public has more accurate information about officials’ financial holdings. Additionally, the author points to recent news articles questioning the Governor’s business holdings in arguing for the need to require greater detail about the business holdings and business partners of public officials.
   
   If a public official or a candidate reports that he or she receives income of over $100,000 from one source, isn't that sufficient information to determine whether there could be a possible conflict of interest regarding related public policy issues? Similarly, does the public need to know the names of a public official’s business partners in order to determine whether the official’s business interests potentially create a conflict of interest? On the other hand, if a public official or candidate's net worth exceeds tens or hundreds of millions of dollars, disclosure of that information may seem reasonable. Determining appropriate financial disclosure rules is a subjective task, and the committee may wish to consider whether the benefit of the increased specificity proposed by this bill outweighs the additional burdens that such increased specificity imposes for those who are required to file financial disclosure reports.
   
   
   

5. Behested Payments and Previous Legislation: 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. SB 124 specifically provided that a payment made at the behest of a candidate principally for a legislative, governmental, or charitable purpose is not considered a contribution or a gift. However, SB 124 also 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 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.

This bill makes candidates for elective office, and former elected officials for one year after leaving office, subject to the requirement to disclose behested payments. The reason for such an expansion is unclear. Because candidates and former public officials are not in a position to make governmental decisions, unlike officeholders, the existing rationale for requiring behested payment reporting does not necessarily extend to candidates and former public officials. Furthermore, committee staff is unaware of any instances in which candidates who are not public officials, or former public officials, have solicited behested payments in any significant amount.

6. Arguments in Support: The California Newspaper Publishers Association submitted a letter of support to this bill prior to the most recent amendments. The primary effect of those amendments was adding the provisions of this bill that expand behested payment reporting. In support of the prior version of the bill, which primarily dealt with conflict of interest thresholds and information that is required to be disclosed on SEIs, the California Newspaper Publishers Association wrote:
   
   
   

This bill would increase the reporting requirements in the Form 700, which elected officials and government workers must file annually to reveal whether they have any financial interests that create a conflict of interest in their professional work. The Form 700s submitted by several public officials have been analyzed by journalists who found that there is a paucity of information current law actually requires an official to report. Creating greater obligations of disclosure will provide the public with more detailed information regarding a public official’s financial holdings and potential conflicts of interest.

AB 10 creates greater transparency by giving the public a broader look at an official’s financial holdings. It also creates a more robust database for the public to analyze election and political data. CNPA supports this legislation as it increases public access to data regarding the financial interests that impact public officials’ decisions.

7. Previous Legislation: AB 2162 (Portantino) of 2012 would have revised the dollar thresholds that are used to report the value of investments, real property interests, and income, when a public official files a SEI, thereby providing greater specificity about the value of those investments, property interests, and income. AB 2162 was vetoed by Governor Brown. In his veto message, the Governor argued that "[t]he law already requires public officials to disclose their income and investments with enough particularity so that conflicts of interest can be identified," and indicated that he was "not convinced that this bill will provide more useful information to the public."
   
   
   

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 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:

Support

Association of California Water Agencies
California Newspaper Publishers Association (prior version)

Opposition

None on file.

Analysis Prepared by:

Ethan Jones/E. & R./(916) 319-2094

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 10 (Gatto) - Political Reform Act of 1974: behested payments and economic interest disclosures.

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

AB 10 would make modifications to the Political Reform Act (PRA) of 1974, including changes to reporting requirements on statements of economic interests (SEI) and behested payment reports.

Fiscal Impact:

The Fair Political Practices Commission (FPPC) indicates that this bill would result in a one-time General Fund cost of $342,000. Ongoing costs would total about $130,000 per year.

Background:

As part of the PRA's comprehensive scheme to prevent conflicts of interest by state and local public officials, current law identifies certain elected and other high-level state and local officials who must file SEIs. Similarly, candidates for those positions must file SEIs. Other state and local public officials and employees are required to file SEIs if their position is designated in an agency's conflict of interest code. This occurs when the position entails the making or participation in the making of governmental decisions that may foreseeably have a material financial effect on the decision maker's financial interests. While the exact number of people that are required to file SEIs is unknown, the FPPC has estimated that the number exceeds 200,000 statewide.

The information that must be disclosed on an SEI, and the location at which an SEI is filed, varies by filee. Although there are some exceptions, individuals who are required to file an SEI typically must file that document with the agency of which they are an elected official or by which they are employed.

Under current law, when a public official or a candidate for public office is required to disclose a financial interest on an SEI, the filer is not required to disclose the exact value of the interest, but instead must select a monetary range that describes the value of the interest. This bill would revise the monetary ranges that public officials use to describe the values of their financial interests on SEIs. In most cases, the revised disclosure categories in this bill would provide greater specificity about the values of financial interests held by public officials, although in some cases, the opposite could be true. Additionally, this bill would increase the thresholds at which certain financial interests of a public official can give rise to a conflict of interest that requires the official to recuse himself or herself from participating in a governmental decision. The changes to the conflict of interest thresholds and disclosure categories that are proposed by this bill, as compiled by the Senate Committee on Elections and Constitutional Amendments, are detailed below:

In 1996, 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. Consequently, 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.

This change, 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. SB 124 specifically provided that a payment made at the behest of a candidate principally for a legislative, governmental, or charitable purpose is not considered a contribution or a gift. However, SB 124 also 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 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.

Proposed Law:

This bill would do all of the following:

• Increase the thresholds at which a public official's financial interest can potentially create a conflict of interest under the PRA, as follows:

  • From $2,000 to $10,000 for interests in real property.

  • From $2,000 to $5,000 for investments in a business entity.

  • From $500 to $1,000 for sources of income, other than gifts or specified loans.

• Revise the monetary ranges that specified public officials or candidates, when filing a statement of economic interests (SEI), use to describe the value of their investments, interests in real property, and income.

• Require a public official or candidate who is required to disclose a business entity investment on his or her SEI because the official or candidate is a director, officer, partner, or trustee of the business entity, to provide a thorough and detailed description of the business entity's activities and disclose the names of all business partners who share a financial interest in the business entity on the SEI, based on criteria established by FPPC.

• Require a public official who holds an office listed in Section 87200 of the Government Code to disclose, as specified, on his or her SEI each governmental decision for which a financial interest resulted in the official’s disqualification from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision.

• Require candidates who are not elected officials, and elected officials for a year Require a Member of the Legislature or a person elected to a statewide elective office for one year after he or she leaves elective office, to report within 30 days following the date on which a behested payment or payments are made for legislative, governmental, or charitable purposes that equal or exceed $5,000 in the aggregate from the same source in the same calendar year in which the payments are made, if the payments would financially benefit the former officeholder or his or her immediate family, the former officeholder’s employer or the employer of a member of his or her immediate family, or an entity with whom the former officeholder or a member of his or her immediate family is negotiating employment.

• 
  
  

Related Legislation:

AB 2162 (Portantino, 2012) would have revised the dollar thresholds that are used to report the value of investments, real property interests, and income, when a public official files a SEI, thereby providing greater specificity about the value of those investments, property interests, and income. AB 2162 was vetoed by the Governor.

Staff Comments:

FPPC indicates that this bill would result in one-time costs of $342,000 for 2.5 positions to promulgate regulations, draft compliance materials, revise forms, and perform outreach. Ongoing costs would total 1 position and $130,000 annually.

Any local government costs resulting from the mandate in this measure are not state-reimbursable because the mandate only involves the definition of a crime or the penalty for conviction of a crime.

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SENATE COMMITTEE ON

ELECTIONS AND CONSTITUTIONAL AMENDMENTS

Senator Ben Allen, Chair

2015 - 2016 Regular

Bill No: AB 10 Hearing Date: 7/7/15

Subject: Political Reform Act of 1974: behested payments and economic interest disclosures

DIGEST

This bill makes several significant changes to the Political Reform Act (PRA) of 1974 including changes to reporting requirements on statements of economic interests (SEI) and behested payment reports.

ANALYSIS

Existing law:

1. Prohibits a public official from making, participating in making, or in any way attempting to use his official position to influence a governmental decision in which the official knows or has reason to know he or she has a financial interest, as specified. Provides that an official has a financial interest in a decision, for these purposes, if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on the official, a member of his or her immediate family, or on any of the following:
   
   
   

   1. Any business entity in which the public official has a direct or indirect investment worth $2,000 or more;
      
      
      

   2. Any business entity in which the public official is a director, officer, partner, trustee, employee, or holds any position of management; or,
      
      
      

   3. Any real property in which the public official has a direct or indirect interest worth $2,000 or more;
      
      
      

   4. Any source of income (except gifts or loans by a commercial lending institution made in the regular course of business on terms available to the public without regard to official status) aggregating $500 or more in value provided or promised to, received by, the public official within 12 months prior to the time when the decision is made;
      
      
      

   5. Any donor of, or any intermediary or agent for a donor of, a gift or gifts aggregating an amount that equals or exceeds the gift limit (currently $460 in a year) that is provided to, received by, or promised to the public official within 12 months prior to the time when the decision is made.
      
      
      

2. 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. Requires filers to file the SEIs annually and at other periods of time, such as when assuming or leaving office.
   
   

3. Delineates certain high-ranking public officials in Government Code Section 87200 (these officials are known, and are hereinafter referred to, as "87200 filers") who are subject to the most expansive disclosure requirements under the PRA. Provides that these 87200 filers include all of the following:
   
   

   1. Elected state officers;
      
      
      

   2. Judges and commissioners of courts of the judicial branch of government;
      
      
      

   3. Members of the Public Utilities Commission;
      
      
      

   4. Members of the State Energy Resources Conservation and Development Commission;
      
      
      

   5. Members of the Fair Political Practices Commission (FPPC);
      
      
      

   6. Members of the California Coastal Commission;
      
      
      

   7. Members of the High-Speed Rail Authority;
      
      
      

   8. Members of planning commissions;
      
      
      

   9. Any of the following county offices: Members of the board of supervisors; district attorneys; county counsels; county treasurers; and county chief administrative officers;
      
      
      

   10. Any of the following city offices: Mayors; members of the city council; city managers; city attorneys; city treasurers; city chief administrative officers;
       
       
       

   11. Other public officials who manage public investments; and,
       
       
       

   12. Candidates for any of the offices listed above.
       
       
       

4. Requires an 87200 filer who is disqualified from participating in a governmental action because of a financial conflict of interest, except for members of the Legislature, to do the following upon identifying the conflict of interest or potential conflict of interest and immediately prior to the consideration of the matter:
   
   

1. Publicly identify the financial interest that gives rise to the conflict of interest or potential conflict of interest in detail sufficient to be understood by the public, except that disclosure of the exact street address of a residence is not required (If the governmental decision is to be made during an open session of a public meeting, the public identification shall be made orally and shall be made part of the official public record.);

2. Recuse himself or herself from discussing and voting on the matter, or otherwise acting on the matter in violation of existing law; and,
   
   

3. Leave the room until after the discussion, vote, and any other disposition of the matter is concluded, unless the matter has been placed on the portion of the agenda reserved for uncontested matters. Provides that notwithstanding this restriction, a public official who has a conflict of interest may speak on the issue during the time that the general public speaks on the issue.
   
   

5. Requires an elected officer to report a payment made at the behest of that officer, made principally for legislative, governmental, or charitable purposes, 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. Requires this report to be filed with the elected officer's agency and to contain all of the following:
   
   

   1. The name and address of the payor;
      
      

   2. The amount of the payment;
      
      

   3. The date or dates that the payment or payments were made;
      
      

   4. The name and address of the payee;
      
      

   5. A brief description of the goods or services provided or purchased, if any; and,
      
      

   6. A description of the specific purpose or event for which the payment or payments were made.
      
      

This bill:

1. Increases the threshold at which a public official's financial interest can potentially create a conflict of interest under the PRA, as follows:
   
   
   

   1. Raises the conflict of interest threshold for interests in real property from $2,000 to $10,000;
      
      
      

   2. Raises the conflict of interest threshold for investments in a business entity from $2,000 to $5,000; and,
      
      
      

   3. Raises the conflict of interest threshold for sources of income, other than gifts or specified loans, from $500 to $1,000.
      
      
      

2. Revises the monetary ranges that specified public officials or candidates use to describe the value of their investments, interests in real property, and income when filing a SEI (see table below under “Background” for a detailed description).
   
   

3. Requires a public official or candidate who is required to disclose a business entity investment on his or her SEI because the official or candidate is a director, officer, partner, or trustee of the business entity, to provide a thorough and detailed description of the business entity's activities and disclose the names of all business partners who share a financial interest in the business entity on the SEI, based on criteria established by the FPPC.
   
   
   

4. Requires a public official or candidate who is required to disclose his or her pro rata share of income to a business entity on an SEI to include a thorough and detailed description of the business activity of the business entity, instead of a general description of the entity’s business activity.
   
   
   

5. Requires a public official who holds an office listed in Section 87200 of the Government Code (a complete list of these offices are detailed under "existing law" above) to disclose on his or her SEI each governmental decision for which a financial interest resulted in the official’s disqualification from making, participating in making, or in any way attempting to use his or her official position to influence a governmental decision. Requires the disclosure to identify the governmental decision, the date that the decision was made or considered, the financial interest that created the conflict of interest, and any other relevant information that the FPPC determines appropriate.
   
   
   

6. Requires candidates who are not elected officials, and elected officials for a year after leaving office, to report any payment that is made at the behest of that person for a legislative, governmental, or charitable purpose within 30 days following the date on which such 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 the statement to be filed with the following entity:
   
   
   

   1. In the case of a candidate, with the officials and agencies with which the candidate is required to file campaign statements; and,
      
      
      

   2. In the case of a former elected officer, with the agency with which the officer was required to file such statements when he or she was an elected officer.
      
      
      

7. Makes technical and corresponding changes.

BACKGROUND

Statements of Economic Interests. As part of the PRA's comprehensive scheme to prevent conflicts of interest by state and local public officials, existing law identifies certain elected and other high-level state and local officials who must file SEIs. Similarly, candidates for those positions must file SEIs. Other state and local public officials and employees are required to file SEIs if the position they hold is designated in an agency's conflict of interest code. A position is designated in an agency's conflict of interest code when the position entails the making or participation in the making of governmental decisions that may foreseeably have a material financial effect on the decision maker's financial interests. While the exact number of people that are required to file SEIs is unknown, the FPPC has estimated that the number exceeds 200,000 officials and employees statewide.

The information that must be disclosed on an SEI, and the location at which an SEI is filed, varies depending on the position held by the individual who is required to file an SEI. Although there are some exceptions, individuals who are required to file an SEI typically must file that document with the agency of which they are an elected official or by which they are employed.

Financial Interests. Under existing law, when a public official or a candidate for public office is required to disclose a financial interest on his or her SEI, the filer is not required to disclose the exact value of the interest, but instead must select a monetary range that describes the value of the interest. As noted above, this bill revises the monetary ranges that public officials use to describe the values of their financial interests on SEIs. In most cases, the revised disclosure categories in this bill would provide greater specificity about the values of financial interests held by public officials, although in some cases, this bill could provide somewhat less specificity about the value of financial interests held by the public official. Additionally, this bill increases the thresholds at which certain financial interests of a public official can give rise to a conflict of interest that requires the official to recuse himself or herself from participating in a governmental decision. The changes to the conflict of interest thresholds and disclosure categories that are proposed by this bill are detailed below:

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. SB 124 specifically provided that a payment made at the behest of a candidate principally for a legislative, governmental, or charitable purpose is not considered a contribution or a gift. However, SB 124 also 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 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.

COMMENTS

1. According to the author: Transparency and disclosure are essential to protecting public resources, preventing corruption, and restoring public trust. This legislation will finally bring disclosure requirements into the 21st century. AB 10 will ensure that California’s public officials are more transparent in their business, investment, and income disclosures, which will further confirm that our trusted elected officials are using their positions to serve all citizens equally.
   
   AB 10 has five main components:

• It will modernize the financial interest thresholds that necessitate a public official excusing him or herself from a governmental decision. These numbers have been updated only once since 1974.

• It will include additional middle tiers and upper tiers in the financial disclosures on the FPPC’s Form 700, ensuring that the public has a more accurate view of the financial holdings and potential conflicts of interest for their public officials.

• It will require a more detailed disclosure of these holdings, specifically a more thorough description of any businesses and the names of any business partners.

• It will add an additional disclosure to the Form 700 that requires public officials to specify any instances in the previous year where a financial interest has been cause for a recusal from being involved with or making a governmental decision.

• It will extend the behested payment reporting requirements to include those candidates who are required to file a campaign statement and elected officials for one year after leaving elective office.

2. Is More Disclosure Always Better? Existing law and this bill address the monetary thresholds that determine when financial conflicts of interest exist. It is unclear how disclosing the names of a public official’s business partners help determine whether the official’s business interests potentially create a conflict of interest. Furthermore, the list may be brief for smaller businesses, but what if the official is an officer for a much larger company that has partnerships with lots of other corporations in and out of the state?
   
   Additionally, this bill requires a public official or candidate to include on an SEI a “thorough and detailed description” of the business activities of specified business entities instead of a general description as required under existing law. Although the bill permits the FPPC to establish the criteria on which these expanded descriptions will be based, a “thorough and detailed description” could include an enormous amount of information that would be not only burdensome but of questionable value.

3. Why Expand Behested Payment Reports to Non-Officeholders? This bill makes candidates for elective office, and former elected officials for one year after leaving office, subject to the requirement to disclose behested payments. The reason for such an expansion is unclear. Because candidates and former public officials are not in a position to make governmental decisions, unlike officeholders, the existing rationale for requiring behested payment reporting does not necessarily extend to candidates and former public officials.

4. Why Add Recusal Information to SEIs? Since public officials already have to publicly identify their reasons for disqualification – often during an open session of a public meeting – it is unclear how adding recusal information on the SEI after the fact would be useful. That information would be reported in many cases long after the recusal which is already recorded in public meeting minutes.

RELATED/PRIOR LEGISLATION

AB 2162 (Portantino of 2012) would have revised the dollar thresholds that are used to report the value of investments, real property interests, and income, when a public official files a SEI, thereby providing greater specificity about the value of those investments, property interests, and income. AB 2162 was vetoed by Governor Brown. In his veto message, the Governor argued that "[t]he law already requires public officials to disclose their income and investments with enough particularity so that conflicts of interest can be identified," and indicated that he was "not convinced that this bill will provide more useful information to the public."

PRIOR ACTION

POSITIONS

Sponsor: Author

Support: Association of California Water Agencies

California Clean Money Campaign

California Common Cause

California Newspaper Publishers Association

Oppose: None received

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