Existing law, the Voting Modernization Bond Act of 2002, authorizes the Voting Modernization Finance Committee to issue and sell bonds in the amount of $200,000,000, as specified. Existing law authorizes a county to apply to the Voting Modernization Board for money from the proceeds of the sale of bonds (1) to pay for or purchase new voting systems that are certified or conditionally approved by the Secretary of State, (2) to research and develop new voting systems, or (3) to manufacture the minimum number of voting system units reasonably necessary to test and seek certification or conditional approval of the voting system, or test and demonstrate the capabilities of a voting system in a pilot program.

This bill would enact the Voting Modernization Bond Act of 2018 which, if approved, would authorize the issuance and sale of bonds in the amount of $450,000,000, as specified, for similar purposes. This bill would authorize the Voting Modernization Finance Committee and the Voting Modernization Board to administer the Voting Modernization Bond Act of 2018.

This bill would provide for submission of the act to the voters at the June 5, 2018, statewide direct primary election.

Existing law, the Voting Modernization Bond Act of 2002, authorizes the Voting Modernization Finance Committee to issue and sell bonds in the amount of $200,000,000, as specified. Existing law authorizes a county to apply to the Voting Modernization Board for money from the proceeds of the sale of bonds (1) to pay for or purchase new voting systems that are certified or conditionally approved by the Secretary of State, (2) to research and develop new voting systems, or (3) to manufacture the minimum number of voting system units reasonably necessary to test and seek certification or conditional approval of the voting system, or test and demonstrate the capabilities of a voting system in a pilot program.

This bill would enact the Voting Modernization Bond Act of 2018 which, if approved, would authorize the issuance and sale of bonds in the amount of $450,000,000, as specified, for similar purposes. This bill would authorize the Voting Modernization Finance Committee and the Voting Modernization Board to administer the Voting Modernization Bond Act of 2018.

This bill would provide for submission of the act to the voters at the June 5, 2018, statewide direct primary election.

Existing law, the Voting Modernization Bond Act of 2002, authorizes the Voting Modernization Finance Committee to issue and sell bonds in the amount of $200,000,000, as specified. Existing law authorizes a county to apply to the Voting Modernization Board for money from the proceeds of the sale of bonds (1) to pay for or purchase new voting systems that are certified or conditionally approved by the Secretary of State, (2) to research and develop new voting systems, or (3) to manufacture the minimum number of voting system units reasonably necessary to test and seek certification or conditional approval of the voting system, or test and demonstrate the capabilities of a voting system in a pilot program.

This bill would enact the Voting Modernization Bond Act of 2018 which, if approved, would authorize the issuance and sale of bonds in the amount of $450,000,000, as specified, for similar purposes. This bill would authorize the Voting Modernization Finance Committee and the Voting Modernization Board to administer the Voting Modernization Bond Act of 2018.

This bill would provide for submission of the act to the voters at the June 5, 2018, statewide direct primary election.

Existing law, the Voting Modernization Bond Act of 2002, authorizes the Voting Modernization Finance Committee to issue and sell bonds in the amount of $200,000,000, as specified. Existing law authorizes a county to apply to the Voting Modernization Board for money from the proceeds of the sale of bonds (1) to pay for or purchase new voting systems that are certified or conditionally approved by the Secretary of State, (2) to research and develop new voting systems, or (3) to manufacture the minimum number of voting system units reasonably necessary to test and seek certification or conditional approval of the voting system, or test and demonstrate the capabilities of a voting system in a pilot program.

This bill would enact the Voting Modernization Bond Act of 2018 which, if approved, would authorize the issuance and sale of bonds in the amount of $450,000,000, as specified, for purposes of assisting counties in the purchase of specified voting equipment and technology. similar purposes. This bill would authorize the Voting Modernization Finance Committee and the Voting Modernization Board to administer the Voting Modernization Bond Act of 2018.

This bill would provide for submission of the act to the voters at the June 5, 2018, statewide direct primary election.

Existing law describes the domicile of a person for voting purposes as that place in which his or her habitation is fixed, wherein the person has the intention of remaining, and to which, whenever he or she is absent, the person has the intention of returning. Existing law provides that the place where a persons family is domiciled is his or her domicile, except as specified. Existing law provides that if a person has a family fixed in one place, and he or she does business in another place, the former is his or her place of domicile. However, if the person having a family fixed in one place, has taken up an abode in another place with the intention of remaining and his or her family does not reside with him or her, that abode is the persons domicile.

This bill would clarify that, for purposes of these provisions, a person may take up an abode at the same place at which he or she does business.

 THIRD READING  

Bill No: AB 668

Author:

:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 5-2, 6/28/17

AYES: McGuire, Beall, Hernandez, Hertzberg, Lara

NOES: Nguyen, Moorlach

SENATE ELECTIONS & C.A. COMMITTEE: 4-1, 7/12/17

AYES: Stern, Allen, Hertzberg, Leyva

NOES: Anderson

SENATE APPROPRIATIONS COMMITTEE: 5-2, 9/1/17

AYES: Lara, Beall, Bradford, Hill, Wiener

NOES: Bates, Nielsen

ASSEMBLY FLOOR: 56-19, 5/31/17 - See last page for vote

SUBJECT:

SOURCE: Secretary of State Alex Padilla

DIGEST:

This bill places a $450 million bond act on the June 5, 2018, statewide primary election ballot and authorizes the use of those bond funds for the purchase of specified voting equipment and related technology.

ANALYSIS:

Existing law:

1) Requires the Secretary of State (SOS) to adopt regulations governing the use of voting systems, electronic poll books, ballot on demand systems, and remote accessible vote by mail (VBM) systems.

2) Prohibits a jurisdiction from using a voting system, electronic poll book, ballot on demand system, or remote accessible VBM system in an election unless it has been previously approved by the SOS, as specified.

3) Requires the SOS to adopt regulations establishing guidelines based on best practices for security measures for the use of VBM ballot drop boxes, as specified.

4) Establishes the Voting Modernization Bond Act of 2002 (VMBA), which authorized the issuance and sale of bonds not to exceed $200 million, for the purpose of assisting counties in the purchase of updated voting systems.

6) Creates the Voting Modernization Board, consisting of three members selected by the Governor and two members selected by the SOS, and makes it responsible for administering the fund that contains the proceeds of the bonds issued pursuant to the VMBA and also creates the Voting Modernization Finance Committee consisting of the Controller, the Director of Finance, and the Treasurer, for the purpose of authorizing the issuance and sale, pursuant to the State General Obligation Bond Law, of the bonds.

7) Permits counties, pursuant to the California Voter’s Choice Act (CVCA), to conduct elections in which every voter is mailed a ballot and vote centers and ballot drop-off locations are available prior to and on election day, in lieu of operating polling places for the election, subject to specified conditions.

This bill:

1. Enacts the Voting Modernization Bond Act of 2018, which allows the sale of up to $450 million in general obligation bonds to fund improvements to voting systems, contingent on the approval of voters at the June, 2018, statewide direct primary election.
2. Provides that counties may apply for funds if it has agreed to pay expenses for any of the voting equipment listed below, and continues to pay on the date the voters approve the bond. Counties that choose to conduct elections under the CVCA may receive $3 from the Fund for every $1 they pay, while counties that do not only receive $2 for every $1 they spend. Counties may use funds for any of the following:
3. Voting systems certified or conditionally approved by the SOS that do not use pre-scored punch card ballots,
4. Electronic poll books certified by the SOS,
5. Ballot on demand systems certified by the SOS,
6. Remote accessible VBM systems certified or conditionally approved by the SOS,
7. Vote by mail drop boxes that comply with regulations promulgated by the SOS,
8. Communication technologies to facilitate electronic connection for the purpose of voter registration between polling places, vote centers, and the office of the county elections official or the SOS’s office, and
9. VBM ballot sorting and processing equipment.
10. Provides that counties may also use funds to contract and pay for:
11. Research and development of new voting systems not certified by the SOS, if it uses nonproprietary software and firmware with disclosed source code, except for off-the-shelf unmodified commercial software and firmware.
12. Manufacture of the minimum number of voting system units reasonably necessary to test and seek certification or conditional approval, or testing and demonstrating the capabilities of the system or part of the system in a pilot program.
13. Requires that any voting system paid for with bond funds must produce a paper version or representation of the voted ballot or of all the ballots cast on a unit of that system at the time the voter votes or when the polls close, if it does not require the voter to directly mark on the ballot. The paper copy shall not be given to the voter but is instead retained by the elections official.
14. Provides that the Legislature may alter county eligibility requirements, amounts of matching funds, or allowable uses of bond funds by 2/3 vote, if the change is consistent with the purposes of the act.
    
15. Makes other technical and conforming changes to existing law in order to carry out the provisions of this bill.

Background

State of Voting Equipment in California: In the aftermath of the 2000 Presidential election, California and the federal government enacted legislation designed to modernize elections, including providing significant new funding to replace voting systems. In California, AB 56 (Shelley, Chapter 902, Statutes of 2001), established the VMBA, which authorized the sale of $200 million in bonds for counties to use for the purchase of updated voting systems. At the federal level, the Help America Vote Act (HAVA) established new standards for federal elections and provided funding to states to help implement its provisions. Of the nearly $400 million in federal funds that California received as a result of HAVA, $195 million was allocated to counties to help cover the costs of voting system upgrades.

In addition to providing funding for voting system upgrades, policy changes made at the state and federal level meant that many counties had to purchase new voting equipment, or to make modifications to their existing voting systems. At the state level, the SOS decertified two punch card voting systems due to concerns that such systems resulted in high levels of invalid votes. At the time they were decertified, those two systems were being used in nine California counties, with more than half of California voters residing in those counties. Additionally, the state and federal government both enacted new accessibility requirements for voting systems.

In order to comply with these new requirements, many counties purchased new electronic voting systems using the state and federal funding available for voting system upgrades. In 2007, however, then-Secretary of State Debra Bowen conducted a "top-to-bottom" review of many of the voting systems certified for use in California. According to Secretary Bowen, the review was "designed to restore the public's confidence in the integrity of the electoral process and to ensure that California voters cast their ballots on machines that are secure, accurate, reliable, and accessible." Secretary Bowen reported that the review uncovered a "number of security vulnerabilities in all the voting systems…tested."

Following the review, the SOS decertified and conditionally recertified electronic voting systems that were being used in numerous California counties. As a result, many of the affected counties were unable to use their electronic voting systems for general polling place voting, and replaced them with paper-based optical scan voting systems. A "Frequently Asked Questions" document that was released by the SOS shortly after the completion of the top-to-bottom review noted that the conditional recertification of voting systems had significantly restricted the use of polling place voting systems used by 21 counties. As a result, the document noted that "[e]xcept for the single [voting unit] allowed per polling place [in order to comply with state and federal accessibility requirements], these counties will have to adopt a new Election Day voting system."

Notwithstanding the fact that many counties were forced to acquire new voting systems after the 2007 top-to-bottom review, according to information compiled by the office of the SOS, the majority of California counties are using at least some voting equipment purchased in 2006 or earlier, with a few counties using equipment that is even older (according to this information, Los Angeles County still uses some voting equipment that was purchased in 1968). Most of the VMBA and HAVA funding for voting system replacement has been spent, though about $96 million in funding remains between those two sources. Of the remaining funding available, however, nearly three-quarters is funding that remains in allocations set aside for Los Angeles County (approximately $56 million remaining) and San Diego County (approximately $15 million remaining). By contrast, 21 counties have exhausted all of the funding allocated to them under the VMBA and HAVA, while another 13 counties have less than 10% of their total allocated funding remaining.

Related/Prior Legislation

AB 56 (Shelley & Hertzberg, 2001) enacted the VMBA, which authorized, for purposes of assisting counties in the purchase of updated voting systems, the issuance, pursuant to the State General Obligation Bond Law, of bonds in the amount of $200,000,000. The act was approved by the voters at the March 5, 2002, statewide election.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee:

• Bond costs: Total principal and interest costs of approximately $541 million to retire the bonds ($450 million in principal and $91 million in interest), with average annual debt service payments of $54 million (General Fund), assuming a 10-year maturity and an interest rate of 3.5 percent (the current rate for tax-exempt, 10-year issuances).
• Administrative costs: The SOS would incur minor and absorbable costs to implement its provisions of the bill.
  
• Ballot costs: One-time costs in the range of $414,000 to $552,000 to SOS for printing and mailing costs to place the measure on the ballot in the June, 2018 primary election. (General Fund)

SUPPORT: (Verified 9/1/17)

Secretary of State Alex Padilla (source)

African American Voter Registration, Education, and Participation

California Association of Clerks and Election Officials

California Association of Counties

California Labor Federation

California League of United Latin American Citizens

California Nurses Association / National Nurses United

California Professional Firefighters

California Special Districts Association

California State Association of Counties

Citizens’ Oversight Project

City and County of San Francisco

Courage Campaign

Dean Logan, Los Angeles County Registrar-Recorder/County Clerk

Del Norte County Board of Supervisors

Disability Rights California

Fresno County Board of Supervisors

Inyo County Board of Supervisors

League of Women Voters of California

Los Angeles Board of Supervisors

Madera County Board of Supervisors

Madera County Clerk-Recorder & Registrar of Voters

Marin County Board of Supervisors

Merced County Board of Supervisors

Mono County Board of Supervisors

Monterey County

Napa County Board of Supervisors

National Association of Latino Elected and Appointed Officials

Riverside County Board of Supervisors

Rock the Vote

Rural County Representatives of California

Sacramento County Board of Supervisors

San Benito County Board of Supervisors

Santa Clara County Board of Supervisors

Santa Cruz County Clerk

Shasta County Clerk / Registrar of Voters

Sonoma County Board of Supervisors

Urban Counties of California

Voto Latino

OPPOSITION: (Verified 9/1/17)

California Association of Voting Officials

Howard Jarvis Taxpayers Association

ARGUMENTS IN SUPPORT: According to the author, “California’s voting machines are becoming outdated and nearing the end of their useful ‘lives’. Many voting machines are a decade old or even more. These systems need to be modernized in order to ensure our elections continue to be reliable. As voting systems age, the risks of failures or crashes increase. It is essential that investments in upgrading technology are made now, rather than waiting for our machinery to fail and possibly jeopardize electoral outcomes.

In addition to aging equipment and software, counties looking to transition to the vote center model of elections allowed under SB 450 (Allen) of 2016 will be able to save money in the long run but may need investments now in new systems for this new model of elections.

“After the 2000 presidential election’s controversies over equipment malfunctions in Florida, the federal government passed the Help America Vote Act to help fund system modernization throughout the states. California counties received about $195 million in HAVA funds and also passed a $200 million bond to further help counties pay for new equipment.

“Now, is seems unlikely that California’s counties will see similar help from the federal government again. It is time for the state to step up on behalf of fair, reliable and secure elections.

“Current law does not provide the financial support needed by counties to upgrade their voting infrastructure. This bill would enable every county to make sure their elections systems are up to date and compliant with regulations, and consequently provide benefits for voters across the state.”

ARGUMENTS IN OPPOSITION: In a letter of opposition to this bill the Howard Jarvis Taxpayers Association stated the following:

“AB 668 would place a $450 million dollar General Obligation bond on the 2018 statewide ballot to fund new voting machines.

“California needs to continue to be prudent about its debt obligations. Currently, the state has a debt service ratio of about six percent.  That means paying off G.O. bond debt interest consumes about six percent of General Fund resources, money that cannot go to other important priorities. Prioritizing our debt obligations is especially important after voters approved a $9 billion school bond last November.

“But even beyond debt concerns, more technical issues need to be discussed.  A recent Sacramento Bee article on this bill noted that the last statewide voting machine bond approved by the electorate (Proposition 41, 2002) allocated resources to be spent on voting machines that were later decertified and some were never used.  Amendments should be taken in this bill to better protect taxpayer dollars.

“In addition, AB 668 fails to address the issue of life cycle costs.  Bonds are appropriate if they are issued to fund projects that will last at least the 30-40 year length of most bonds. This is certainly not true for voting machines which have an average useful life of 10-15 years. It would be more fiscally appropriate for these machines to be purchased using our record high General Fund revenues.”

ASSEMBLY FLOOR: 56-19, 5/31/17

AYES: Aguiar-Curry, Arambula, Berman, Bigelow, Bloom, Bocanegra, Bonta, Burke, Caballero, Calderon, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Cunningham, Dababneh, Daly, Frazier, Friedman, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Levine, Limón, Low, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Wood, Rendon

NOES: Travis Allen, Baker, Brough, Chávez, Chen, Dahle, Fong, Gallagher, Harper, Kiley, Lackey, Maienschein, Mathis, Mayes, Obernolte, Patterson, Steinorth, Voepel, Waldron

NO VOTE RECORDED: Acosta, Choi, Eggman, Flora, Melendez

Prepared by:

9/4/17 12:33:34

**** END ****

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

AB 668 (Gonzalez Fletcher) - Voting Modernization Bond Act of 2018

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

The following information is revised to reflect amendments

adopted by the committee on September 1, 2017

Bill Summary:

SB 668 would (1) place a $450 million bond act on the June 5, 2018, statewide primary election ballot, and (2) authorize the use of those bond funds for the purchase of specified voting equipment and related technology.

Fiscal Impact:

• Bond costs: Total principal and interest costs of approximately $541 million to retire the bonds ($450 million in principal and $91 million in interest), with average annual debt service payments of $54 million (General Fund), assuming a 10-year maturity and an interest rate of 3.5 percent (the current rate for tax-exempt, 10-year issuances).
• Administrative costs: The Secretary of State (SOS) would incur minor and absorbable costs to implement its provisions of the bill.
  
• Ballot costs: One-time costs in the range of $414,000 to $552,000 to SOS for printing and mailing costs to place the measure on the ballot in the June, 2018 primary election. (General Fund)

Author Amendments:

Make revisions related to the disbursement of bond proceeds.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

AB 668 (Gonzalez Fletcher) - Voting Modernization Bond Act of 2018

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

Bill Summary:

SB 668 would (1) place a $450 million bond act on the June 5, 2018, statewide primary election ballot, and (2) authorize the use of those bond funds for the purchase of specified voting equipment and related technology.

Fiscal Impact:

• Bond costs: Total principal and interest costs of approximately $541 million to retire the bonds ($450 million in principal and $91 million in interest), with average annual debt service payments of $54 million (General Fund), assuming a 10-year maturity and an interest rate of 3.5 percent (the current rate for tax-exempt, 10-year issuances).
• Administrative costs: The Secretary of State (SOS) would incur minor and absorbable costs to implement its provisions of the bill.
  
• Ballot costs: One-time costs in the range of $414,000 to $552,000 to SOS for printing and mailing costs to place the measure on the ballot in the June, 2018 primary election. (General Fund)

Background:

In the wake of the 2000 General Election, California and the federal government enacted legislation designed to modernize elections, including providing significant new funding to replace voting systems. In California, AB 56 (Shelley, Ch. 902, Statutes of 2001), established the Voting Modernization Bond Act (VMBA), which authorized the sale of $200 million in general obligation bonds for counties to use for the purchase of updated voting systems. At the federal level, the Help America Vote Act (HAVA) established new standards for federal elections and provided funding to states to help implement its provisions. Of the nearly $400 million in federal funds that California received as a result of HAVA, nearly half was allocated to counties to help pay for voting system upgrades.

In addition, policy changes made at the state and federal level meant that many counties had to purchase new voting equipment, or to make modifications to their existing voting systems. At the state level, SOS decertified two punch card voting systems due to concerns that they resulted in high levels of invalid votes. At the time they were decertified, those two systems were being used in nine California counties accounting for more than half of the State’s voters. Additionally, the state and federal government both enacted new accessibility requirements for voting systems.

In order to comply with these new requirements, many counties purchased new electronic voting systems using the state and federal funding available for voting system upgrades. In 2007, however, then-Secretary of State Debra Bowen conducted a "top-to-bottom" review of many of the voting systems certified for use in California. The review was "designed to restore the public's confidence in the integrity of the electoral process and to ensure that California voters cast their ballots on machines that are secure, accurate, reliable, and accessible." Secretary Bowen reported that the review uncovered a "number of security vulnerabilities in all the voting systems…tested."

Following the review, SOS decertified and conditionally recertified electronic voting systems that were being used in numerous California counties. As a result, many of the affected counties were unable to use their electronic voting systems for general polling place voting, and replaced them with paper-based optical scan voting systems. A "Frequently Asked Questions" document that was released by SOS shortly after the completion of the top-to-bottom review noted that the conditional recertification of voting systems had significantly restricted the use of polling place voting systems used by 21 counties. As a result, the document noted that "[e]xcept for the single [voting unit] allowed per polling place [in order to comply with state and federal accessibility requirements], these counties will have to adopt a new Election Day voting system."

Notwithstanding the fact that many counties were forced to acquire new voting systems after the 2007 top-to-bottom review, according to information compiled by the office of the SOS, the majority of California counties are using at least some voting equipment purchased in 2006 or earlier, with a few counties using equipment that is even older (according to this information, Los Angeles County still uses some voting equipment that was purchased in 1968). Most of the VMBA and HAVA funding for voting system replacement has been spent, though about $96 million in funding remains between those two sources. Of the remaining funding available, however, nearly three-quarters is funding that remains in allocations set aside for Los Angeles County (approximately $56 million remaining) and San Diego County (approximately $15 million remaining). By contrast, 21 counties have exhausted all of the funding allocated to them under the VMBA and HAVA, while another 13 counties have less than 10% of their total allocated funding remaining.

Proposed Law:

This bill would, among other things, do the following:

• Enact the Voting Modernization Bond Act of 2018, which would allow the sale of up to $450 million in general obligation bonds to fund improvements to voting systems, contingent on the approval of voters at the June, 2018, statewide direct primary election. The bonds are required to be repaid in 10 years of the date of issuance.
• Provide that a county may apply for funds if it has agreed to pay expenses for specified equipment, and continues to pay on the date the voters approve the bond. Counties that choose to conduct elections under the California Voters Choice Act may receive $3 from the Fund for every $1 they pay, while counties that do not only receive $2 for every $1 they spend. Counties may use funds for specified purposes.
• Provide that counties may also use funds to contract and pay for:
  • Research and development of new voting systems not certified by SOS, if it uses nonproprietary software and firmware with disclosed source code, except for off-the-shelf unmodified commercial software and firmware.
  • Manufacture of the minimum number of voting system units reasonably necessary to test and seek certification or conditional approval, or testing and demonstrating the capabilities of the system or part of the system in a pilot program.
• Require that any voting system paid for with bond funds must produce a paper version or representation of the voted ballot or of all the ballots cast on a unit of that system at the time the voter votes or when the polls close, if it does not require the voter to directly mark on the ballot. The paper copy shall not be given to the voter but is instead retained by the elections official.

Related Legislation:

AB 56 (Shelley, Chapter 902, Statutes of 2001) enacted the Voting Modernization Bond Act of 2002, which authorized $200 million for purposes of assisting counties in the purchase of updated voting systems. The act was approved by the voters at the March 5, 2002, statewide election.

Staff Comments:

The actual cost of debt service would depend on a variety of factors, including: (1) the amount and the timing of issuances, (2) the tax status of the bonds issued, (3) market interest rates at the time of issuance, and (4) the bond’s amortization structure.

The State Treasurer recently sold nearly $2.8 billion in general obligation bonds (including refinancing $2.28 billion in existing bond debt), and indicated that the sale was a success, considering recent interest rate increases. The yield on new 30-year bonds sold on March 9, 2017 was 3.9 percent. The interest rate on a shorter, 10-year issuance would likely be lower, in the vicinity of 3.5 percent.

SOS indicates that printing and mailing costs associated with placing a measure on the statewide ballot are approximately $69,000 per page, depending on the length of the ballot. The fiscal estimates noted above reflect the addition of 6-8 pages in the Voter Information Guide. Actual costs would depend upon the length of the title and summary, analysis by the Legislative Analyst’s Office, proponent and opponent arguments, and text of the proposal.

Of the $144 billion in general obligation bonds that voters have authorized, more than $32.9 billion hasn’t been issued yet. The state still hasn’t issued more than $7.5 billion to fund high speed rail, $7.3 billion from the recent Proposition 1 water bond (AB 1471, Rendon of 2014), and $9 billion in education facility bonds (Proposition 51, 2016), among others. While the state has made great progress reducing the amount of authorized but unissued bonds in recent years, many bond-funded projects have not yet received required approvals. As a result, even if the Legislature enacts and the voters approve this measure, as well as some of the other bonds approved by the Senate earlier this year, many of its purposes may have to wait several years for funding as projects funded by previously authorized bonds get up and running.

-- END --

SENATE COMMITTEE ON

ELECTIONS AND CONSTITUTIONAL AMENDMENTS

Senator Henry Stern, Chair

2017 - 2018 Regular

Bill No: 668 Hearing Date: 7/12/17

Subject:

DIGEST

This bill would place a $450 million bond act on the June 5, 2018, statewide primary election ballot and authorizes the use of those bond funds for the purchase of specified voting equipment and related technology.

ANALYSIS

Existing law:

1) Requires the Secretary of State (SOS) to adopt regulations governing the use of voting systems, electronic poll books, ballot on demand systems, and remote accessible vote by mail (VBM) systems.

2) Prohibits a jurisdiction from using a voting system, electronic poll book, ballot on demand system, or remote accessible VBM system in an election unless it has been previously approved by the SOS, as specified.

3) Requires the SOS to adopt regulations establishing guidelines based on best practices for security measures for the use of VBM ballot drop boxes, as specified.

4) Establishes the Voting Modernization Bond Act of 2002 (VMBA), which authorized the issuance and sale of bonds not to exceed $200 million, for the purpose of assisting counties in the purchase of updated voting systems.

6) Creates the Voting Modernization Board, consisting of three members selected by the Governor and two members selected by the SOS, and makes it responsible for administering the fund that contains the proceeds of the bonds issued pursuant to the VMBA and also creates the Voting Modernization Finance Committee consisting of the Controller, the Director of Finance, and the Treasurer, for the purpose of authorizing the issuance and sale, pursuant to the State General Obligation Bond Law, of the bonds.

7) Permits counties, pursuant to the California Voter’s Choice Act (CVCA), to conduct elections in which every voter is mailed a ballot and vote centers and ballot drop-off locations are available prior to and on election day, in lieu of operating polling places for the election, subject to specified conditions.

This bill:

1. Enacts the Voting Modernization Bond Act of 2018, which allows the sale of up to $450 million in general obligation bonds to fund improvements to voting systems, contingent on the approval of voters at the June, 2018, statewide direct primary election.
2. Provides that counties may apply for funds if it has agreed to pay expenses for any of the voting equipment listed below, and continues to pay on the date the voters approve the bond. Counties that choose to conduct elections under the CVCA may receive $3 from the Fund for every $1 they pay, while counties that do not only receive $2 for every $1 they spend. Counties may use funds for any of the following:
3. Voting systems certified or conditionally approved by the SOS that do not use pre-scored punch card ballots,
   
4. Electronic poll books certified by the SOS,
   
5. Ballot on demand systems certified by the SOS,
   
6. Remote accessible VBM systems certified or conditionally approved by the SOS,
   
7. Vote by mail drop boxes that comply with regulations promulgated by the SOS,
   
8. Technology to facilitate electronic connection between polling places, vote centers, and the office of the county elections official or the SOS’s office, and
   
9. Vote by mail ballot sorting and processing equipment.
10. Provides that counties may also use funds to contract and pay for:
11. Research and development of new voting systems not certified by the SOS, if it uses nonproprietary software and firmware with disclosed source code, except for off-the-shelf unmodified commercial software and firmware.
12. Manufacture of the minimum number of voting system units reasonably necessary to test and seek certification or conditional approval, or testing and demonstrating the capabilities of the system or part of the system in a pilot program.
13. Requires that any voting system paid for with bond funds must produce a paper version or representation of the voted ballot or of all the ballots cast on a unit of that system at the time the voter votes or when the polls close, if it does not require the voter to directly mark on the ballot. The paper copy shall not be given to the voter but is instead retained by the elections official.
14. Provides that the Legislature may alter county eligibility requirements, amounts of matching funds, or allowable uses of bond funds by 2/3 vote, if the change is consistent with the purposes of the act.
    
15. Makes other technical and conforming changes to existing law in order to carry out the provisions of this bill.

BACKGROUND

State of Voting Equipment in California: In the aftermath of the 2000 Presidential election, California and the federal government enacted legislation designed to modernize elections, including providing significant new funding to replace voting systems. In California, AB 56 (Shelley, Ch. 902, Statutes of 2001), established the VMBA, which authorized the sale of $200 million in bonds for counties to use for the purchase of updated voting systems. At the federal level, the Help America Vote Act (HAVA) established new standards for federal elections and provided funding to states to help implement its provisions. Of the nearly $400 million in federal funds that California received as a result of HAVA, $195 million was allocated to counties to help cover the costs of voting system upgrades.

In addition to providing funding for voting system upgrades, policy changes made at the state and federal level meant that many counties had to purchase new voting equipment, or to make modifications to their existing voting systems. At the state level, the SOS decertified two punch card voting systems due to concerns that such systems resulted in high levels of invalid votes. At the time they were decertified, those two systems were being used in nine California counties, with more than half of California voters residing in those counties. Additionally, the state and federal government both enacted new accessibility requirements for voting systems.

In order to comply with these new requirements, many counties purchased new electronic voting systems using the state and federal funding available for voting system upgrades. In 2007, however, then-Secretary of State Debra Bowen conducted a "top-to-bottom" review of many of the voting systems certified for use in California. According to Secretary Bowen, the review was "designed to restore the public's confidence in the integrity of the electoral process and to ensure that California voters cast their ballots on machines that are secure, accurate, reliable, and accessible." Secretary Bowen reported that the review uncovered a "number of security vulnerabilities in all the voting systems…tested."

Following the review, the SOS decertified and conditionally recertified electronic voting systems that were being used in numerous California counties. As a result, many of the affected counties were unable to use their electronic voting systems for general polling place voting, and replaced them with paper-based optical scan voting systems. A "Frequently Asked Questions" document that was released by the SOS shortly after the completion of the top-to-bottom review noted that the conditional recertification of voting systems had significantly restricted the use of polling place voting systems used by 21 counties. As a result, the document noted that "[e]xcept for the single [voting unit] allowed per polling place [in order to comply with state and federal accessibility requirements], these counties will have to adopt a new Election Day voting system."

Notwithstanding the fact that many counties were forced to acquire new voting systems after the 2007 top-to-bottom review, according to information compiled by the office of the SOS, the majority of California counties are using at least some voting equipment purchased in 2006 or earlier, with a few counties using equipment that is even older (according to this information, Los Angeles County still uses some voting equipment that was purchased in 1968). Most of the VMBA and HAVA funding for voting system replacement has been spent, though about $96 million in funding remains between those two sources. Of the remaining funding available, however, nearly three-quarters

is funding that remains in allocations set aside for Los Angeles County (approximately $56 million remaining) and San Diego County (approximately $15 million remaining). By contrast, 21 counties have exhausted all of the funding allocated to them under the VMBA and HAVA, while another 13 counties have less than 10% of their total allocated funding remaining.

The Legislative Analyst's Office (LAO) recently released a report in connection with the 2017-2018 budget process titled Considering the State's Role in Elections. In that report, the LAO noted that county governments are responsible for administering most local, state, and federal elections in California. While counties can bill other local governments for their share of the costs of administering elections (with some exceptions), the state and federal governments generally do not pay the proportional share of costs for administering state and federal elections. The report noted that while the state and federal government have occasionally provided one-time funding for elections costs (including funding for voting equipment through the VMBA and HAVA), the state has not provided regular ongoing funding for election administration. One of the recommendations in the LAO report was that the Legislature should consider one-time support to replace counties' voting systems.

Slow Development of New Voting Technology: The use of aging voting equipment is

not unique to California. In 2014, the bipartisan Presidential Commission on Election Administration (Commission), which was established by President Obama after the 2012 Presidential election, warned of an "impending crisis in voting technology." The Commission, which was co-chaired by the former General Counsel to President Obama's 2012 re-election campaign and by the former National Counsel to Mitt Romney's 2012 campaign for President, noted that a large portion of the voting systems that were purchased using HAVA funds are reaching the end of their usable lives. The Commission's report further noted that for a number of reasons, including a federal voting system standard-setting and certification process that the Commission described as "unworkable," the voting system options available did not meet the needs of election administrators and did not "employ the sorts of advances that have become commonplace in consumer products and other industries."

In fact, concerns about the federal voting system review process prompted California to change its process for reviewing and approving voting systems for use in the state. Until 2014, California's voting system review process was designed to augment the federal voting system review and approval process. Prior to undergoing state review, electronic voting systems were required to be approved at the federal level. In 2013, however, due in part to frustration with the federal voting system certification process, the Legislature approved and the Governor signed SB 360 (Padilla, Ch. 602, Statutes of 2013), which removed the requirement that electronic voting systems had to be approved at the federal level before undergoing state review, and instead required voting systems to undergo more extensive and thorough testing and review by the SOS prior to being used in the state.

SB 360 also was designed to facilitate a project that was then underway in Los Angeles County —the Voting Systems Assessment Project (VSAP). Because of Los Angeles County's size, diversity, and complexity, the County found that the commercial off-the-shelf voting systems available for purchase did not meet the county's needs. As a result, the county established VSAP to identify and implement a new voting system

by first defining the kind of voting system it wanted, and then being directly involved in the system's development. Accordingly, SB 360 established a voting system review and approval process that envisioned a situation where a local jurisdiction might be involved in the research and development of a new voting system, rather than having a review and approval process designed around the assumption that all voting systems would be developed by private vendors that would then sell or lease their products to local jurisdictions. In addition to the VSAP in Los Angeles County, the City and County of San Francisco currently is considering developing its own voting system.

California Voter's Choice Act and Voting Equipment: In addition to the fact that many counties are using voting equipment that is reaching the end of its useful life, recent changes to state law are likely to change the types of voting equipment that California counties will use to conduct elections in the future. SB 450 (Allen, Ch. 832, Statutes of 2016), enacted the CVCA, which permits counties to conduct elections in which all voters are mailed ballots, and voters have the opportunity to vote on those ballots or to vote in person at a vote center for a period of 10 days leading up to election day. Fourteen specified counties are permitted to conduct elections under this system in 2018, while the remaining counties may use this system beginning in 2020.

Because the CVCA generally requires counties that conduct elections pursuant to its provisions to mail ballots to all registered voters, the CVCA will increase the use of VBM ballots. That, in turn, may increase counties' needs for VBM ballot processing equipment. The CVCA also requires counties to establish VBM ballot drop-off locations; many counties are likely to comply with this requirement by using VBM ballot drop boxes, which those counties may need to purchase. Additionally, counties that conduct elections under the CVCA are required to provide VBM ballots in an accessible format, which may require counties to purchase or otherwise procure remote accessible VBM systems.

Furthermore, the CVCA eliminates the requirement for counties to establish polling places for elections, but instead requires counties to establish vote centers. Vote centers are polling locations at which any registered voter in a county can cast a regular (i.e., non-provisional) ballot, regardless of the voter's precinct. Because the number of required vote centers is less than the number of polling places, the number of voting machines that a county has to purchase to accommodate in-person voting may be reduced under the CVCA. On the other hand, because voters have the option of casting a ballot at any vote center in the county, vote centers need to have a system that can provide any eligible voter in the county with the appropriate ballot. While smaller counties that have fewer ballot styles may be able to accommodate that need using pre-printed paper ballots, vote centers in larger jurisdictions likely will feature electronic voting systems that are pre-loaded with all the ballot types in the county, or ballot-on-demand printers that can produce the appropriate paper ballots as needed.

Finally, in order to verify the registration of voters, determine the correct ballot type for each voter, and ensure that a voter has not already cast a ballot, vote centers must have a mechanism to verify voter registration information. In addition, vote centers are required to offer same day voter registration for voters in the jurisdiction. In most jurisdictions, these requirements are likely to be met through the use of electronic poll books that can communicate with county and state election systems in real-time. As a result, in addition to purchasing electronic poll books, elections officials may need to purchase or lease equipment to facilitate electronic connectivity between vote centers and elections officials' offices.

This bill includes an incentive for counties to conduct elections under the CVCA by providing $3 in state funds for every $1 in local funds for counties that conduct elections using the CVCA. Counties that do not use the CVCA would still be eligible for state funding for voting equipment under this bill, but the state's match of local spending would be lower: $2 in state funds for every $1 in local funds.

Bond Discussion. According to the Senate Committee on Governance and Finance:

When public agencies issue bonds, they borrow money from investors, who provide cash in exchange for the agencies’ commitment to repay the principal amount of the bond plus interest. Bonds are usually either revenue bonds, which repay investors out of revenue generated from the project the agency buys with bond proceeds, or general obligation bonds, which the public agency pays out of general revenues and are guaranteed by its full faith and credit.

Section One of Article XVI of the California Constitution and the state’s General Obligation Bond Law guide the issuance of the state’s general obligation debt. The Constitution allows the Legislature to place general obligation bonds on the ballot for specific purposes with a two-thirds vote of the Assembly and Senate. Voters also can place bonds on the ballot by initiative, as they have for parks, water projects, high-speed rail, and stem cell research, among others. Either way, general obligation bonds must be ratified by majority vote of the state’s electorate. Unlike local general obligation bonds, approval by the state’s electorate doesn’t automatically trigger an increased tax to repay the bond. The Constitution commits the state to repay investors from general revenues above all other claims, except payments to public education. California voters approved $38.4 billion of general obligation bonds between 1974 and 1999, and approximately $112 billion since 2000.

Should the voters approve the bond act, the Legislature usually appropriates funds to the chosen agencies to fund projects consistent with the criteria, generally as part of the Budget Act. The Department of Finance then surveys agencies to determine the need for bond funds based on a project’s readiness, and then asks the State Treasurer to sell bonds in a specified amount. After the bond sale, the Department of Finance determines which bond acts and agencies receive bond proceeds.

Setting the right amount of state general obligation debt is difficult; both the State Treasurer and the LAO state that there’s no correct amount. Instead, experts suggest that states should look at three criteria: affordability, comparability, and optimality.

California currently has $74.5 billion of general obligation and $9.4 billion of lease revenue debt outstanding, which is affordable. The Governor’s 2017 Five-Year Infrastructure Plan states that the Debt Service Ratio, or the ratio between debt service and general fund revenues, as 6.48% in 2016-17 and 6.54% in 2017-18. The State Treasurer calculates a debt service ratio of 5.24% in 2016-17 and 5.01% in 2017-18; the percentages differ because the State Treasurer accounts for offsets of federal government subsidies or transfers from special funds. Annual expenditures on debt service have grown from $2.9 billion in 2000-01 to $7.7 billion in 2016-17. Additionally, 95% of outstanding debt is fixed rate, and the state holds no interest rate swaps or other derivatives. While debt service percentages are reasonable, every dollar spent on debt service reduces the funding that is available for other priorities, and debt service is one of the fastest growing state costs in recent years, according to the Plan. The Plan proposes only $338 million in new general obligation bonds. California’s comparability to other states is less favorable, but improving. Determining optimality or whether government is investing in the quantity and quality of public capital desired by residents, and financing the appropriate share with debt, is more difficult. LAO recommends that the Legislature consider the Five-Year Infrastructure Plan as a starting point to developing a coordinated approach to infrastructure funding, and establish a committee to focus on statewide infrastructure.

The good news? Ratings issued from the three major credit ratings agencies often inform investors and the public regarding the state’s creditworthiness, and assess any investment risk from investing in California general obligation bonds. Ratings agencies Fitch, Standard and Poor’s, and Moody’s praise California’s deep and diverse economy, recent balanced and on-time budgets, reduced budget deficits, and improving reserves and liquidity. However, the agencies also state that California faces challenges: a highly volatile revenue system, constitutionally imposed governance restrictions, lack of significant reserves, high housing costs that threaten economic growth, minimal prefunding of retiree health care benefits, and a large backlog of maintenance and infrastructure needs, among others. Once considered an outlier, the difference between California bonds and other states as measured by the benchmark 30-year Municipal Market Data Index has tightened from a high of more than 150 basis points at the end of 2009 to around 10 basis points at the end of June 2016. On March 9th, the State Treasurer sold almost $2.8 billion in bonds: new borrowing accounted for $513.2 million, while refunding of existing bonds at lower interest rates totaled $2.279 billion, creating about $295 million in present value savings to taxpayers and $406 million in debt service nominal savings over the remaining lives of the bonds. With interest rates climbing recently, the State Treasurer stated that the sale was a success, with an overall true interest cost was 3.56 percent, and yields ranging from 0.6 percent for the 2017 bonds to 3.9 percent for the 2046 bonds.

The bad news? California has a distinct problem: of the $144 billion in general obligation bonds that voters have authorized, more than $32.9 billion hasn’t been issued yet. The state still hasn’t issued more than $7.5 billion to fund high speed rail, $7.3 billion from the recent Proposition 1 water bond (AB 1471, Rendon of 2014), and $9 billion in education facility bonds (Proposition 51, 2016), among others. While the state has made great progress reducing the amount of authorized but unissued bonds in recent years, many bond-funded projects have not yet received required approvals. As a result, even if the Legislature enacts and the voters approve this measure, as well as some of the other bonds approved by the Senate earlier this year, many of its purposes may have to wait several years for funding as projects funded by previously authorized bonds get up and running.

COMMENTS

1. According to the author: California’s voting machines are becoming outdated and nearing the end of their useful “lives”. Many voting machines are a decade old or even more. These systems need to be modernized in order to ensure our elections continue to be reliable. As voting systems age, the risks of failures or crashes increase. It is essential that investments in upgrading technology are made now, rather than waiting for our machinery to fail and possibly jeopardize electoral outcomes.

In addition to aging equipment and software, counties looking to transition to the vote center model of elections allowed under SB 450 (Allen) of 2016 will be able to save money in the long run but may need investments now in new systems for this new model of elections.

After the 2000 presidential election’s controversies over equipment malfunctions in Florida, the federal government passed the Help America Vote Act to help fund system modernization throughout the states. California counties received about $195 million in HAVA funds and also passed a $200 million bond to further help counties pay for new equipment.

Now, is seems unlikely that California’s counties will see similar help from the federal government again. It is time for the state to step up on behalf of fair, reliable and secure elections.

Current law does not provide the financial support needed by counties to upgrade their voting infrastructure. This bill would enable every county to make sure their elections systems are up to date and compliant with regulations, and consequently provide benefits for voters across the state.

1. Opposition Argument. In a letter of opposition to this bill the Howard Jarvis Taxpayers Association stated the following:

AB 668 would place a $450 million dollar General Obligation bond on the

2018 statewide ballot to fund new voting machines.

California needs to continue to be prudent about its debt

obligations. Currently, the state has a debt service ratio of about six percent.  That means paying off G.O. bond debt interest consumes about

six percent of General Fund resources, money that cannot go to other

important priorities. Prioritizing our debt obligations is especially important

after voters approved a $9 billion school bond last November.

But even beyond debt concerns, more technical issues need to be

discussed.  A recent Sacramento Bee article on this bill noted that the last statewide voting machine bond approved by the electorate (Proposition

41, 2002) allocated resources to be spent on voting machines that were

later decertified and some were never used.  Amendments should be

taken in this bill to better protect taxpayer dollars.

In addition, AB 668 fails to address the issue of life cycle costs.  Bonds are appropriate if they are issued to fund projects that will last at least the 30-

40 year length of most bonds. This is certainly not true for voting

machines which have an average useful life of 10-15 years. It would be

more fiscally appropriate for these machines to be purchased using our

record high General Fund revenues.

RELATED/PRIOR LEGISLATION

AB 56 (Shelley & Hertzberg of 2001) enacted the Voting Modernization Bond Act of 2002, which authorized, for purposes of assisting counties in the purchase of updated voting systems, the issuance, pursuant to the State General Obligation Bond Law, of bonds in the amount of $200,000,000. The act was approved by the voters at the March 5, 2002, statewide election.

PRIOR ACTION

POSITIONS

Sponsor: Secretary of State, Alex Padilla

Support: African American Voter Registration, Education, and Participation

California Association of Clerks and Election Officials

California Association of Counties

California Labor Federation

California League of United Latin American Citizens

California Nurses Association / National Nurses United

California Professional Firefighters

California Special Districts Association

California State Association of Counties

Citizens’ Oversight Project

City and County of San Francisco

County of Del Norte Board of Supervisors

County of Los Angeles Board of Supervisors

County of Sacramento Board of Supervisors

Courage Campaign

Dean Logan, Los Angeles County Registrar-Recorder/County Clerk

Disability Rights California

Fresno County Board of Supervisors

Inyo County Board of Supervisors

League of Women Voters of California

Madera County Board of Supervisors

Madera County Clerk-Recorder & Registrar of Voters

Marin County Board of Supervisors

Merced County Board of Supervisors

Mono County Board of Supervisors

Monterey County

Napa County Board of Supervisors

National Association of Latino Elected and Appointed Officials (NALEO)

Riverside County Board of Supervisors

Rock the Vote

Rural County Representatives of California

San Benito County Board of Supervisors

Santa Clara County Board of Supervisors

Santa Cruz County Clerk

Shasta County Clerk / Registrar of Voters

Sonoma County Board of Supervisors

Urban Counties of California

Voto Latino

Oppose: California Association of Voting Officials

Howard Jarvis Taxpayers Association

-- END --

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

Voting Modernization Bond Act of 2018

Enacts the Voting Modernization Bond Act of 2016, which places a general obligation bond of up to $450 million to fund improvements to voting systems at the June, 2018, statewide direct primary election.

Background

Bonds. When public agencies issue bonds, they borrow money from investors, who provide cash in exchange for the agencies’ commitment to repay the principal amount of the bond plus interest. Bonds are usually either revenue bonds, which repay investors out of revenue generated from the project the agency buys with bond proceeds, or general obligation bonds, which the public agency pays out of general revenues and are guaranteed by its full faith and credit.

Section One of Article XVI of the California Constitution and the state’s General Obligation Bond Law guide the issuance of the state’s general obligation debt. The Constitution allows the Legislature to place general obligation bonds on the ballot for specific purposes with a two-thirds vote of the Assembly and Senate. Voters also can place bonds on the ballot by initiative, as they have for parks, water projects, high-speed rail, and stem cell research, among others. Either way, general obligation bonds must be ratified by majority vote of the state’s electorate. Unlike local general obligation bonds, approval by the state’s electorate doesn’t automatically trigger an increased tax to repay the bond. The Constitution commits the state to repay investors from general revenues above all other claims, except payments to public education. California voters approved $38.4 billion of general obligation bonds between 1974 and 1999, and approximately $112 billion since 2000.

Bond acts have standard provisions that authorize the State Treasurer to sell a specified amount of bonds, and generally include several uniform provisions that:

• Establish the state’s obligation to repay them, and pledge its full faith and credit to repayment,
• Set forth issuance procedures, and link the bond act to the state’s General Obligation Bond Law,
• Create a finance committee with specified membership, chaired by the State Treasurer,
• Charge the committee to determine whether it is “necessary or desirable” to issue the bonds, and
• Add other mechanisms necessary for the State Treasurer and the Department of Finance to implement the bond act, including allowing the board to request a loan from the Pooled Money Investment Board to advance funds for bond-funded programs prior to the bond sale, among others.

In bond acts, the Legislature generally:

• Sets forth categories of projects eligible for bond funds, such as library construction or school facility modernization,
• Chooses or creates an administrative entity to award the funds, such as the State Librarian or the State Allocation Board,
• Details the criteria to guide the administrative agency’s funding in each category,
• Enacts enforcement and audit provisions, and
• Provides for an election to approve the bond act.

Should the voters approve the bond act, the Legislature usually appropriates funds to the chosen agencies to fund projects consistent with the criteria, generally as part of the Budget Act. The Department of Finance then surveys agencies to determine the need for bond funds based on a project’s readiness, and then asks the State Treasurer to sell bonds in a specified amount. After the bond sale, the Department of Finance determines which bond acts and agencies receive bond proceeds.

Voting machines. In 2002, the Legislature approved the Voting Modernization Bond Act of 2002, also known as the Shelley-Hertzberg Act, which allowed the sale of $200 million in general obligation bonds to fund improvements for county voting equipment (AB 56, Shelley). Voters approved the measure as Proposition 41 at the March, 2002, statewide primary election. The State Treasurer reports that all but $64,495 of those bonds have been issued. These bond funds were supplemented at the time by federal funds appropriated under the Help America Vote Act, but little to no other direct funding for voting infrastructure improvement has been approved since.

Last year, the Legislature allowed counties to conduct elections in which every voter is mailed a ballot, with vote centers and ballot drop-off locations available prior to and on election day, in lieu of operating polling places for the election, subject to certain conditions (SB 450, Allen). That measure allowed Calaveras, Inyo, Madera, Napa, Nevada, Orange, Sacramento, San Luis Obispo, San Mateo, Santa Clara, Shasta, Sierra, Sutter, and Tuolumne, on or after January 1, 2018, and all other counties, on or after January 1, 2020.

Given aging voter machines, exhausted bond funds, and the potential for growth in vote by mail elections, Secretary of State Alex Padilla wants the state to issue general obligation bonds to fund improvements in voting equipment.

Proposed Law

Assembly Bill 668 enacts the Voting Modernization Bond Act of 2016, which allows the sale of up to $450 million in general obligation bonds to fund improvements to voting systems, contingent on the approval of voters at the June, 2018, statewide direct primary election.

AB 668 imports the Voter Modernization Finance Committee from the Voter Modernization Bond Act of 2002, consisting of the Treasurer as Chair, the Controller, and the Director of Finance. The Committee determines whether it is necessary and desirable to issue bonds, which when sold, the proceeds of which must be deposited in the Voting Modernization Fund of 2018, which is established by the bill.

The bill imports the Voting Modernization Board from the Voter Modernization Bond Act of 2002, consisting of three members selected by the Governor, and two by the Secretary of State, to consider applications from counties for funds from the bond sale. The Board can reject any application for fund money it deems inappropriate, excessive, or that does not comply with the bill. If rejected, a county may submit an amended application.

Counties can apply for funds if it has agreed to pay expenses for any of the voting equipment listed below, and continues to pay on the date the voters approve the bond. Counties that choose to conduct elections under SB 450 may receive three dollars from the Fund for every one dollar they pay, while counties that do not only receive two dollars for every one dollar they spend. Counties may use funds for:

• Voting systems certified or conditionally approved by the Secretary of State that do not use prescored punch card ballots,
• Electronic poll books certified by the Secretary of State,
• Ballot on demand systems certified by the Secretary of State,
• Remote accessible vote by mail systems certified or conditionally approved by the Secretary of State,
• Vote by mail drop boxes that comply with regulations promulgated by the Secretary of State,
• Technology to facilitate electronic connection between polling places, vote centers, and the office of the county elections official or the Secretary of State’s Office, and
• Vote by mail ballot sorting and processing equipment.

Counties may also use funds to contract and pay for:

• Research and development of new voting systems not certified by the Secretary of State, if it uses nonproprietary software and firmware with disclosed source code, except for off-the-shelf unmodified commercial software and firmware.
• Manufacture of the minimum number of voting system units reasonably necessary to test and seek certification or conditional approval, or testing and demonstrating the capabilities of the system in a pilot program.

Any voting system paid for with bond funds must produce a paper version or representation of the voted ballot or of all the ballots cast on a unit of that system at the time the voter votes or when the polls close, if it does not require the voter to directly mark on the ballot. The paper copy shall not be given to the voter but is instead retained by the elections official.

The Legislature may alter county eligibility requirements, amounts of matching funds, or allowable uses of bond funds by 2/3 vote, if the change is consistent with the purposes of the act.

The measure also incorporates standard provisions in general obligation bond law, either explicitly or by reference, with some modifications, like limiting repayment for each bond to ten years, and allowing bonds to be sold at less than par value up to a three percent discount, among others. The measure also defines several of its terms.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “California’s voting machines are becoming outdated and nearing the end of their useful ‘lives. Many voting machines are a decade old or even more. These systems need to be modernized in order to ensure our elections continue to be reliable and secure. As voting systems age, the risks of failures or crashes increase, and systems may not even meet regulatory standards. It is essential that investments in upgrading technology are made now, rather than waiting for our machinery to fail and possibly jeopardize electoral outcomes. After the 2000 presidential election’s controversies over equipment malfunctions in Florida, the federal government passed the Help America Vote Act to help fund system modernization throughout the states, which was coupled with a bond act in California. Now, is seems unlikely that California’s counties will see similar help from the federal government again despite growing public sentiment to make our elections systems more secure. AB 668, if approved by the voters, would provide funding for every county in California to upgrade their systems in order to ensure fair, reliable, and secure elections.”

2. Sixteen tons. Setting the right amount of state general obligation debt is difficult; both the State Treasurer and the Legislative Analyst’s Office state that there’s no correct amount. Instead, experts suggest that states should look at three criteria: affordability, comparability, and optimality:^[1]

California currently has $74.5 billion of general obligation and $9.4 billion of lease revenue debt outstanding, which is affordable. The Governor’s 2017 Five-Year Infrastructure Plan states that the Debt Service Ratio, or the ratio between debt service and general fund revenues, as 6.48% in 2016-17 and 6.54% in 2017-18. The State Treasurer calculates a debt service ratio of 5.24% in 2016-17 and 5.01% in 2017-18; the percentages differ because the State Treasurer accounts for offsets of federal government subsidies or transfers from special funds. Annual expenditures on debt service have grown from $2.9 billion in 2000-01 to $7.7 billion in 2016-17. Additionally, 95% of outstanding debt is fixed rate, and the state holds no interest rate swaps or other derivatives. While debt service percentages are reasonable, every dollar spent on debt service reduces the funding that is available for other priorities, and debt service is one of the fastest growing state costs in recent years, according to the Plan. The Plan proposes only $338 million in new general obligation bonds.

California’s comparability to other states is less favorable, but improving. The State Treasurer’s 2016 Debt Affordability Report, issued last October, contains the following chart:

Determining optimality or whether government is investing in the quantity and quality of public capital desired by residents, and financing the appropriate share with debt, is more difficult. LAO recommends that the Legislature consider the Five-Year Infrastructure Plan as a starting point to developing a coordinated approach to infrastructure funding, and establish a committee to focus on statewide infrastructure.

3. The good news. Ratings issued from the three major credit ratings agencies often inform investors and the public regarding the state’s creditworthiness, and assess any investment risk from investing in California general obligation bonds. Ratings agencies Fitch, Standard and Poor’s, and Moody’s praise California’s deep and diverse economy, recent balanced and on-time budgets, reduced budget deficits, and improving reserves and liquidity. However, the agencies also state that California faces challenges: a highly volatile revenue system, constitutionally-imposed governance restrictions, lack of significant reserves, high housing costs that threaten economic growth, minimal prefunding of retiree health care benefits, and a large backlog of maintenance and infrastructure needs, among others. Once considered an outlier, the difference between California bonds and other states as measured by the benchmark 30-year Municipal Market Data Index has tightened from a high of more than 150 basis points at the end of 2009 to around 10 basis points at the end of June 2016. On March 9^th, the State Treasurer sold almost $2.8 billion in bonds: new borrowing accounted for $513.2 million, while refunding of existing bonds at lower interest rates totaled $2.279 billion, creating about $295 million in present value savings to taxpayers and $406 million in debt service nominal savings over the remaining lives of the bonds. With interest rates climbing recently, the State Treasurer stated that the sale was a success, with an overall true interest cost was 3.56 percent, and yields ranging from 0.6 percent for the 2017 bonds to 3.9 percent for the 2046 bonds.

4. The bad news. California has a distinct problem: of the $144 billion in general obligation bonds that voters have authorized, more than $32.9 billion hasn’t been issued yet. The state still hasn’t issued more than $7.5 billion to fund high speed rail, $7.3 billion from the recent Proposition 1 water bond (AB 1471, Rendon, 2014), and $9 billion in education facility bonds (Proposition 51, 2016), among others. While the state has made great progress reducing the amount of authorized but unissued bonds in recent years, many bond-funded projects have not yet received required approvals. As a result, even if the Legislature enacts and the voters approve this measure, as well as some of the other bonds approved by the Senate earlier this year, many of its purposes may have to wait several years for funding as projects funded by previously authorized bonds get up and running.

5. Tax exemption. Ever since the inception of the federal income tax, the federal government has subsidized the cost of state and local agency-issued debt by excluding interest income from tax; the State does the same (Article XIII, Section 26). The tax exemption lowers the cost of capital for government agencies seeking to finance public improvements. However, federal law requires bond proceeds to be used for a public purpose for the tax exemption to apply, namely that less than 10% of the proceeds are used directly or indirectly by a non-governmental entity; or less than 10% of the bond proceeds are secured directly or indirectly by property used in a trade or business. However, municipal bond experts warn that the federal government may be reconsidering allowing this interest exemption: former President Obama proposed limiting the exclusion for higher-income individuals, and most observers believe that the current Congress may pursue broad tax reform which may include ending the exemption.

6. Related Legislation. Additionally, four other general obligation bond proposals have been approved by the Committee:

• The Affordable Housing Bond Act of 2018, which the Committee approved at its 3/22 hearing (SB 3, Beall).
• The Goods Movement and Clean Trucks Bond Act (SB 4, Mendoza), which the Committee approved at its 4/19 hearing.
• The California Drought, Water, Parks, Climate, Coastal Protection, and Outdoor Access for All Act of 2018 (SB 5, De Leon), which the Committee approved at its 3/22 hearing.
• The Higher Education Facilities Bond Act of 2018 (SB 483, Glazer), approved at its 4/26 hearing.
• The Salton Sea Obligations Act of 2018 (SB 701, Hueso), approved at its 5/10 hearing.

Except for SB 483, the Senate approved all of the above Bond Acts, which are currently pending in the Assembly.

7. Double-referred. The Senate Rules Committee ordered a double-referral of AB 668, first to the Committee on Governance and Finance, and second to the Committee on Elections and Constitutional Amendments.

8. Technicals. Committee Staff recommend the following technical amendments:

• Instead of using code sections for the board and finance committee from Proposition 41, create new code sections.
• On P. 3, L. 13, after “law,” insert “as amended from time to time, apply to the bonds and”
• On P. 3, L. 14, strike out “included in” and insert “incorporated into,” and after “full,” insert “in this chapter.”
• Strike out “adopting the provisions of the State General Obligation Bond Law,” on P. 3, L. 23-24.
• Strike out “and adopting the provision of the State General Obligation Bond Law by reference,” on P.3, L. 26-27.
• Add “(exclusive of refunding bonds issued pursuant to Section 19410) after bonds on P.4, L. 12.
• Add “issued” after “sold” on P. 6, L. 6.
• Strike out “and interest thereof,” and insert “of, and interest on, the bonds as that interest becomes due and payable.” On P. 6, L.7.
• On P.6, strike out lines 16 through 34.
• On P.7, L.11, after “Treasurer,” insert “Bonds shall be sold upon the terms and conditions specified in one or more resolutions adopted by the committee pursuant to Section 16731 of the Government Code.”
• Add provisions allowing Director of Finance to authorize funds in advance of sale, permission to request a loan from the Pooled Money Investment Account, and requirement that any moneys derived from premium and accrued interest are available as a transfer to the General Fund to pay costs of issuance or as a credit to bond interest expenditures.
• Add defeasement language to the end of 19410 on P. 7, L. 30.

Assembly Actions

Assembly Elections and Redistricting: 5-1

Assembly Appropriations Committee: 13-4

Assembly Floor: 56-19

Support and Opposition

(6/23/17)

Support: Los Angeles Registrar-Recorder/County Clerk Dean Logan; Madera County Clerk-Recorder and Registrar of Voters Rebecca Martinez; San Benito County Clerk, Auditor, Recorder and Registrar of Voters Joe Gonzales; Santa Cruz County Clerk and Registrar of Voters Gail Pellerin; Shasta County Clerk and Registrar of Voters Cathy Darling Allen; California Association of Clerks and Elections Official;, California Labor Federation; California League of United Latin American Citizens; California Nurses Association; California Professional Firefighter; California Special Districts Association; California State Association of Counties; County of Fresno; County of Inyo; County of Los Angeles; County of Madera; County of Marin; County of Merced; County of Mono; County of Monterey; County of Riverside; County of Sacramento; County of San Benito; County of Santa Clara; Courage Campaign; League of Women Voters of California; NALEO Educational Fund; Rock the Vote; Rural County Representatives of California; Urban Counties of California; Voto Latino

Opposition: Unknown.

-- END --

1. Robert Wassmer and Ronald Fisher “Debt Burdens of California State and Local Governments: Past, Present and Future.” As requested and supported by the California Debt and Investment Advisory Commission. July 2011. ↑

ASSEMBLY THIRD READING

ATR Bill Id:AB 668

Author:(Gonzalez Fletcher)

As Amended Ver:May 2, 2017

2/3 vote

SUMMARY: Places a $450 million bond act on the June 5, 2018, statewide primary election ballot and authorizes the use of those bond funds for the purchase of specified voting equipment and related technology. Specifically, this bill:

1. Authorizes the issuance and sale of bonds not to exceed $450 million to assist counties in paying for voting equipment and related technology. Requires bonds issued pursuant to this bill to be repaid within 10 years after being issued.
2. Makes bond funds available to match expenditures by counties at the following ratios:
   1. If the county conducts elections pursuant to the California Voter's Choice Act (CVCA), a ratio of $3 of bond fund money for every $1 of county money; and,
   2. If the county does not conduct elections pursuant to the CVCA, a ratio of $2 of bond fund money for every $1 of county money.
3. Provides that bond fund moneys may be used for specified equipment purchased or leased by a county on or after January 1, 2017, for which the county continues to make payments on the date the bond measure is approved by the voters. Permits a county to use bond funds to pay for research and development of a new voting system if certain conditions are met.
4. Requires the provisions of this bill authorizing the issuance of bonds to be submitted to the voters at the June 5, 2018, statewide direct primary election.
5. Makes corresponding and technical changes.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. General Fund (GF) debt service costs in the tens of millions of dollars annually if voters approve the bond act, depending on the timing of when bonds are issued and interest rates at that time. For example, assuming $100 million of the bonds are sold the first year, and the remaining $350 million are sold at an even rate over the following 10 years, at a rate of 5% interest, the repayment of the bonds would cost about $13 million in the first year and grow annually until reaching a maximum of almost $55 million annually in ten years. The debt service costs would then decline annually thereafter for the next ten years until the bonds are fully repaid.
2. One-time GF costs of several hundred thousands of dollars for printing and mailing costs to place the measure on the ballot on June 5, 2018. For example, at a cost of $69,000 per page in the voter guide, assuming a total of six pages, the cost would be $414,000 to place this measure on the ballot. The actual costs would depend on the length of the title and summary, analysis by the Legislative Analyst's Office, proponent and opponent arguments, and text of the proposal.

COMMENTS: According to the author, "California's voting machines are becoming outdated and nearing the end of their useful 'lives.' Many voting machines are a decade old or even more, and need to be modernized in order to ensure our elections continue to be reliable. As voting systems age, the risks of failures or crashes increase. It is essential that investments in upgrading technology are made now, rather than waiting for our machinery to fail and possibly jeopardize electoral outcomes."

In the aftermath of the 2000 Presidential election, California and the federal government enacted legislation designed to modernize elections, including providing significant new funding to replace voting systems. In California, AB 56 (Shelley), Chapter 902, Statutes of 2001, established the Voting Modernization Bond Act of 2002 (VMBA), which authorized the sale of $200 million in bonds for counties to use for the purchase of updated voting systems. At the federal level, the federal Help America Vote Act of 2002 (HAVA) established new standards for federal elections and provided funding to states to help implement its provisions, including providing $195 million to counties to help cover the costs of voting system upgrades.

According to information compiled by the office of the Secretary of State, the majority of California counties are using at least some voting equipment purchased in 2006 or earlier, with a few counties using equipment that is even older. While approximately $96 million in funding is available for voting system replacement through the VMBA and HAVA, nearly three-quarters is funding that remains in allocations set aside for Los Angeles County and San Diego County. By contrast, 21 counties have exhausted all of the funding allocated to them under the VMBA and HAVA, while another 13 counties have less than 10% of their total allocated funding remaining.

In addition to the fact that many counties are using voting equipment that is reaching the end of its useful life, recent changes to state law are likely to change the types of voting equipment that California counties will use to conduct elections in the future. SB 450 (Allen), Chapter 832, Statutes of 2016, enacted the CVCA, which permits counties to conduct elections in which all voters are mailed ballots, and voters have the opportunity to vote on those ballots or to vote in person at a vote center for a period of 10 days leading up to election day. This bill includes an incentive for counties to conduct elections under the CVCA by providing $3 in state funds for every $1 in local funds for counties that conduct elections using the CVCA. Counties that do not use the CVCA would still be eligible for state funding for voting equipment under this bill, but the state's match of local spending would be lower: $2 in state funds for every $1 in local funds.

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

Analysis Prepared by: Ethan Jones / E. & R. / (916) 319-2094 FN: 0000623

Date of Hearing: May 10, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 668

Author:(Gonzalez Fletcher) – As Amended Ver:May 2, 2017

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

SUMMARY:

This bill places a $450 million bond act on the June 5, 2018, statewide primary election ballot and, upon voter approval, authorizes the use of those bond funds to match county funds for the purchase of specified voting equipment and related technology. These bonds are required to be repaid within 10 years of the date they are issued.

FISCAL EFFECT:

1. GF debt service costs in the tens of millions of dollars annually if voters approve the bond act, depending on the timing of when bonds are issued and interest rates at that time. For example, assuming $100 million of the bonds are sold the first year, and the remaining $350 million are sold at an even rate over the following 10 years, at a rate of 5 percent interest, the repayment of the bonds would cost about $13 million in the first year and grow annually until reaching a maximum of almost $55 million annually in ten years. The debt service costs would then decline annually thereafter for the next ten years until the bonds are fully repaid.
2. One-time GF costs of several hundred thousands of dollars for printing and mailing costs to place the measure on the ballot on June 5, 2018. For example, at a cost of $69,000 per page in the voter guide, assuming a total of six pages, the cost would be $414,000 to place this measure on the ballot. The actual costs would depend on the length of the title and summary, analysis by the Legislative Analyst’s Office, proponent and opponent arguments, and text of the proposal.

COMMENTS:

1. Background. After the 2000 Presidential election, California and the federal government enacted legislation designed to modernize elections, including providing significant new funding to replace voting systems. In California, AB 56 (Shelley), Chapter 902, Statutes of 2001, authorized the sale of $200 million in bonds for counties to use for the purchase of updated voting systems. In addition, the state received federal funds to replace voting systems.
2. Purpose. According to the author, “Many voting machines are a decade old or even more, and need to be modernized in order to ensure our elections continue to be reliable. As voting systems age, the risks of failures or crashes increase. It is essential that investments in upgrading technology are made now, rather than waiting for our machinery to fail and possibly jeopardize electoral outcomes.” The author also states, “In addition to aging equipment and software, counties looking to transition to the vote center model of elections allowed under SB 450 (Allen 2016) will be able to save money in the long run but may need investments now in new systems for this new model of elections.”

Analysis Prepared by: Jessica Peters / APPR. / (916) 319-2081

Date of Hearing: April 26, 2017

ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING

Marc Berman, Chair

ABPCA Bill Id:AB 668 (

Author:Gonzalez Fletcher) – As Amended Ver:April 6, 2017

AS PROPOSED TO BE AMENDED

SUBJECT: Voting Modernization Bond Act of 2018.

SUMMARY: Places a $450 million bond act on the June 5, 2018, statewide primary election ballot and authorizes the use of those bond funds for the purchase of specified voting equipment and related technology. Specifically, this bill:

1. Authorizes the issuance and sale of bonds not to exceed $450 million to assist counties in the purchase of voting equipment and related technology. Requires bonds issued pursuant to this bill to be repaid within 10 years after being issued.
2. Provides that bond fund moneys shall be available to match expenditures by counties at the following ratios:
   1. If the county conducts elections pursuant to the California Voter's Choice Act (CVCA), a ratio of $3 of bond fund money for every $1 of county money; and,
   2. If the county does not conduct elections pursuant to the CVCA, a ratio of $2 of bond fund money for every $1 of county money.
3. Provides that bond fund moneys may be used for equipment purchased by a county on or after January 1, 2017, for which the county continues to make payments on the date the bond measure is approved by the voters. Provides that bond funds may be used only for the purchase of the following equipment:
   1. Voting systems certified by the Secretary of State (SOS) that do not use prescored punch cards;
   2. Electronic poll books;
   3. Ballot on demand systems;
   4. Vote by mail (VBM) ballot drop boxes;
   5. Remote accessible VBM systems;
   6. VBM ballot sorting and processing equipment; and,
   7. Technology to facilitate electronic connection between polling places, vote centers, and the office of the county elections official or the office of the SOS.
4. Requires any voting system that is purchased using bond funds, and that does not require a voter to directly mark the ballot, to produce a paper version of the voted ballot or of all the ballots cast on the voting system. Requires the paper version to be retained by elections officials for use during the 1% manual tally of ballots cast or for any other recount, audit, or election contest.
5. Provides that the Voting Modernization Finance Committee (Finance Committee) is responsible for authorizing the issuance and sale of bonds authorized by this bill, and provides that the Voting Modernization Board (Modernization Board) is responsible for administering the fund into which bond proceeds are deposited.
6. Permits the Legislature to amend provisions of this bill regarding the county match required for bond funds, the purposes for which bond funds may be used, and the makeup and operations of the Modernization Board, by a statute approved by a two-thirds vote in each house of the Legislature if the statute is consistent with and furthers the purposes of this bill.
7. Includes related fiscal provisions regarding sales of bonds and implementation of this bill pursuant to the State General Obligation Bond Law.
8. Requires the provisions of this bill authorizing the issuance of bonds to be submitted to the voters at the June 5, 2018, statewide direct primary election, and provides that those provisions shall take effect upon approval by the voters.
9. Makes corresponding and technical changes.

EXISTING LAW:

1. Requires the SOS to adopt regulations governing the use of voting systems, electronic poll books, ballot on demand systems, and remote accessible VBM systems.
   
2. Prohibits a jurisdiction from using a voting system, electronic poll book, ballot on demand system, or remote accessible VBM system in an election unless it has been previously approved by the SOS, as specified.
   
3. Requires the SOS to adopt regulations establishing guidelines based on best practices for security measures for the use of VBM ballot drop boxes, as specified.
4. Establishes the Voting Modernization Bond Act of 2002 (VMBA), which authorized the issuance and sale of bonds not to exceed $200 million, for the purpose of assisting counties in the purchase of updated voting systems.
5. Creates the Finance Committee, consisting of the Controller, the Director of Finance, and the Treasurer, and makes it responsible for authorizing the issuance and sale of bonds authorized by the VMBA.
6. Creates the Modernization Board, consisting of three members selected by the Governor and two members selected by the SOS, and makes it responsible for administering the fund that contains the proceeds of the bonds issued pursuant to the VMBA.
7. Permits counties, pursuant to the CVCA, to conduct elections in which every voter is mailed a ballot and vote centers and ballot drop-off locations are available prior to and on election day, in lieu of operating polling places for the election, subject to certain conditions.

FISCAL EFFECT: Unknown

COMMENTS:

1. Author's Amendments: After the committee's deadline for pre-committee author's amendments, the author proposed amendments to allow bond funds to be used for the purchase of VBM ballot sorting and processing equipment. This analysis reflects those proposed author's amendments.
2. Purpose of the Bill: According to the author:

California's voting machines are becoming outdated and nearing the end of their useful "lives".

Many voting machines are a decade old or even more, and need to be modernized in order to ensure our elections continue to be reliable. As voting systems age, the risks of failures or crashes increase. It is essential that investments in upgrading technology are made now, rather than waiting for our machinery to fail and possibly jeopardize electoral outcomes.

In addition to aging equipment and software, counties looking to transition to the vote center model of elections allowed under SB 450 (Allen 2016) will be able to save money in the long run but may need investments now in new systems for this new model of elections.

After the 2000 presidential election's controversies over equipment malfunctions in Florida, the federal government passed the Help America Vote Act [HAVA] to help fund system modernization throughout the states. California counties received about $195 million in HAVA funds, and also passed a $200 million bond to further help counties pay for new equipment.

Now, it seems unlikely that California's counties will see similar help from the federal government again. It is time for the state to step up on behalf of fair, reliable, and secure elections.

1. State of Voting Equipment in California: In the aftermath of the 2000 Presidential election, California and the federal government enacted legislation designed to modernize elections, including providing significant new funding to replace voting systems. In California, AB 56 (Shelley), Chapter 902, Statutes of 2001, established the VMBA, which authorized the sale of $200 million in bonds for counties to use for the purchase of updated voting systems. At the federal level, HAVA established new standards for federal elections and provided funding to states to help implement its provisions. Of the nearly $400 million in federal funds that California received as a result of HAVA, $195 million was allocated to counties to help cover the costs of voting system upgrades.
   
   In addition to providing funding for voting system upgrades, policy changes made at the state and federal level meant that many counties had to purchase new voting equipment, or to make modifications to their existing voting systems. At the state level, the SOS decertified two punch card voting systems due to concerns that such systems resulted in high levels of invalid votes. At the time they were decertified, those two systems were being used in nine California counties, with more than half of California voters residing in those counties. Additionally, the state and federal government both enacted new accessibility requirements for voting systems.
   
   In order to comply with these new requirements, many counties purchased new electronic voting systems using the state and federal funding available for voting system upgrades. In 2007, however, then-Secretary of State Debra Bowen conducted a "top-to-bottom" review of many of the voting systems certified for use in California. According to Secretary Bowen, the review was "designed to restore the public's confidence in the integrity of the electoral process and to ensure that California voters cast their ballots on machines that are secure, accurate, reliable, and accessible." Secretary Bowen reported that the review uncovered a "number of security vulnerabilities in all the voting systems…tested."
   
   Following the review, the SOS decertified and conditionally recertified electronic voting systems that were being used in numerous California counties. As a result, many of the affected counties were unable to use their electronic voting systems for general polling place voting, and replaced them with paper-based optical scan voting systems. A "Frequently Asked Questions" document that was released by the SOS shortly after the completion of the top-to-bottom review noted that the conditional recertification of voting systems had significantly restricted the use of polling place voting systems used by 21 counties. As a result, the document noted that "[e]xcept for the single [voting unit] allowed per polling place [in order to comply with state and federal accessibility requirements], these counties will have to adopt a new Election Day voting system."
   
   Notwithstanding the fact that many counties were forced to acquire new voting systems after the 2007 top-to-bottom review, according to information compiled by the office of the SOS, the majority of California counties are using at least some voting equipment purchased in 2006 or earlier, with a few counties using equipment that is even older (according to this information, Los Angeles County still uses some voting equipment that was purchased in 1968). Most of the VMBA and HAVA funding for voting system replacement has been spent, though about $96 million in funding remains between those two sources. Of the remaining funding available, however, nearly three-quarters is funding that remains in allocations set aside for Los Angeles County (approximately $56 million remaining) and San Diego County (approximately $15 million remaining). By contrast, 21 counties have exhausted all of the funding allocated to them under the VMBA and HAVA, while another 13 counties have less than 10% of their total allocated funding remaining.
   
   Last month, the Legislative Analyst's Office (LAO) released a report in connection with the 2017-2018 budget process titled Considering the State's Role in Elections. In that report, the LAO noted that county governments are responsible for administering most local, state, and federal elections in California. While counties can bill other local governments for their share of the costs of administering elections (with some exceptions), the state and federal governments generally do not pay the proportional share of costs for administering state and federal elections. The report noted that while the state and federal government have occasionally provided one-time funding for elections costs (including funding for voting equipment through the VMBA and HAVA), the state has not provided regular ongoing funding for election administration. One of the recommendations in the LAO report was that the Legislature should consider one-time support to replace counties' voting systems.
   
2. Slow Development of New Voting Technology: The use of aging voting equipment is not unique to California. In 2014, the bipartisan Presidential Commission on Election Administration (Commission), which was established by President Obama after the 2012 Presidential election, warned of an "impending crisis in voting technology." The Commission, which was co-chaired by the former General Counsel to President Obama's 2012 re-election campaign and by the former National Counsel to Mitt Romney's 2012 campaign for President, noted that a large portion of the voting systems that were purchased using HAVA funds are reaching the end of their usable lives. The Commission's report further noted that for a number of reasons, including a federal voting system standard-setting and certification process that the Commission described as "unworkable," the voting system options available did not meet the needs of election administrators and did not "employ the sorts of advances that have become commonplace in consumer products and other industries."
   
   In fact, concerns about the federal voting system review process prompted California to change its process for reviewing and approving voting systems for use in the state. Until 2014, California's voting system review process was designed to augment the federal voting system review and approval process. Prior to undergoing state review, electronic voting systems were required to be approved at the federal level. In 2013, however, due in part to frustration with the federal voting system certification process, the Legislature approved and the Governor signed SB 360 (Padilla), Chapter 602, Statutes of 2013, which removed the requirement that electronic voting systems had to be approved at the federal level before undergoing state review, and instead required voting systems to undergo more extensive and thorough testing and review by the SOS prior to being used in the state.
   
   SB 360 also was designed to facilitate a project that was then underway in Los Angeles County —the Voting Systems Assessment Project (VSAP). Because of Los Angeles County's size, diversity, and complexity, the County found that the commercial off-the-shelf voting systems available for purchase did not meet the county's needs. As a result, the county established VSAP to identify and implement a new voting system by first defining the kind of voting system it wanted, and then being directly involved in the system's development. Accordingly, SB 360 established a voting system review and approval process that envisioned a situation where a local jurisdiction might be involved in the research and development of a new voting system, rather than having a review and approval process designed around the assumption that all voting systems would be developed by private vendors that would then sell or lease their products to local jurisdictions. In addition to the VSAP in Los Angeles County, the City and County of San Francisco currently is considering developing its own voting system.
   
3. California Voter's Choice Act and Voting Equipment: In addition to the fact that many counties are using voting equipment that is reaching the end of its useful life, recent changes to state law are likely to change the types of voting equipment that California counties will use to conduct elections in the future. SB 450 (Allen), Chapter 832, Statutes of 2016, enacted the CVCA, which permits counties to conduct elections in which all voters are mailed ballots, and voters have the opportunity to vote on those ballots or to vote in person at a vote center for a period of 10 days leading up to election day. Fourteen specified counties are permitted to conduct elections under this system in 2018, while the remaining counties may use this system beginning in 2020.
   
   Because the CVCA generally requires counties that conduct elections pursuant to its provisions to mail ballots to all registered voters, the CVCA likely will increase the use of VBM ballots. That, in turn, may increase counties' needs for VBM ballot processing equipment. The CVCA also requires counties to establish VBM ballot drop-off locations; many counties are likely to comply with this requirement by using VBM ballot drop boxes, which those counties may need to purchase. Additionally, counties that conduct elections under the CVCA are required to provide VBM ballots in an accessible format, which may require counties to purchase or otherwise procure remote accessible VBM systems.
   
   Furthermore, the CVCA eliminates the requirement for counties to establish polling places for elections, but instead requires counties to establish vote centers. Vote centers are polling locations at which any registered voter in a county can cast a regular (i.e., non-provisional) ballot, regardless of the voter's precinct. Because the number of required vote centers is less than the number of polling places, the number of voting machines that a county has to purchase to accommodate in-person voting may be reduced under the CVCA. On the other hand, because voters have the option of casting a ballot at any vote center in the county, vote centers need to have a system that can provide any eligible voter in the county with the appropriate ballot. While smaller counties that have fewer ballot styles may be able to accommodate that need using pre-printed paper ballots, vote centers in larger jurisdictions likely will feature electronic voting systems that are pre-loaded with all the ballot types in the county, or ballot-on-demand printers that can produce the appropriate paper ballots as needed.
   
   Finally, in order to verify the registration of voters, determine the correct ballot type for each voter, and ensure that a voter has not already cast a ballot, vote centers must have a mechanism to verify voter registration information. In addition, vote centers are required to offer same day voter registration for voters in the jurisdiction. In most jurisdictions, these requirements are likely to be met through the use of electronic poll books that can communicate with county and state election systems in real-time. As a result, in addition to purchasing electronic poll books, elections officials may need to purchase or lease equipment to facilitate electronic connectivity between vote centers and elections officials' offices.
   
   This bill includes an incentive for counties to conduct elections under the CVCA by providing $3 in state funds for every $1 in local funds for counties that conduct elections using the CVCA. Counties that do not use the CVCA would still be eligible for state funding for voting equipment under this bill, but the state's match of local spending would be lower: $2 in state funds for every $1 in local funds.
4. Money for Voting System Development & Potential Amendments: As detailed above, at least two California counties are developing or considering developing their own voting systems, due in part to concerns that the commercially available voting systems that have been developed by private vendors do not adequately address those counties' voting system needs. In recognition of this situation, SB 360 sought to allow counties to use VMBA funding for research and development of voting systems. After the passage of SB 360, the Modernization Board voted to approve $11.5 million in VMBA funds for Los Angeles County for costs associated with research and development of a new voting system. A lawsuit was filed challenging that approval, however, in which the plaintiffs alleged that the provisions of SB 360 that sought to permit the use of VMBA funds for research and development of voting systems were invalid. After the lawsuit was filed, the Modernization Board revoked its approval of VMBA funds for Los Angeles County's costs associated with the research and development of a new voting system, and the lawsuit was settled.
   
   The language of this bill, which mirrors the original language of the VMBA, does not expressly permit funding made available by this bill to be used for voting system research and development. In light of the fact that multiple California counties have sought to develop their own voting systems due in part to a lack of adequate commercially available voting systems, and in light of the fact that the Legislature previously approved SB 360 in an attempt to allow state voting modernization funds to be used for voting system research and development, committee staff recommends that the author and the committee consider amending this bill to expressly permit the bond funds made available under this bill to be used for research and development of new voting systems, subject to the general conditions and rules established by SB 360. Additionally, to reflect the fact that counties increasingly have chosen to lease voting equipment, rather than purchase it outright, committee staff recommends that the author and the committee consider amending this bill to allow equipment to be either purchased or leased using bond funds.
5. Secretary of State Equipment Approvals and Suggested Amendments: As detailed above, existing law prohibits jurisdictions from using a voting system, electronic poll book, ballot on demand system, or remote accessible VBM system in an election in California unless it has been previously approved by the SOS. Additionally, existing law requires the SOS to adopt regulations establishing guidelines based on best practices for security measures for the use of VBM ballot drop boxes, though local jurisdictions that use VBM ballot drop boxes are not explicitly required to comply with those regulations.
   
   When the state previously authorized the use of bond funds for voting system upgrades, it required that any voting system purchased using bond funds had to be certified by the SOS for use in state elections. Committee staff recommends that this bill be amended to similarly provide that bond funds will be available only for electronic poll books, ballot on demand systems, and remote accessible VBM systems that have been approved for use in California by the SOS. Additionally, committee staff recommends that this bill be amended to require any VBM ballot drop boxes that are procured using the bond funds authorized by this bill to comply with the regulations adopted by the SOS detailing the best practices and security measures for those drop boxes. Finally, to reflect changes made to the voting system certification process as part of SB 360, committee staff recommends that this bill be amended to permit the bond funds authorized by this bill to be used for voting systems that are either certified by the SOS, or that have been conditionally approved by the SOS.
6. Technical Amendments: Committee staff recommends the following technical amendments to this bill:
   
   On page 5, line 5, after "mail" insert "ballot"
   
   On page 5, line 16, strike out "recount or other" and insert "tally described in Section 15360, or any"
7. Amendments Requested: The San Francisco Elections Commission, which does not have a formal position on this bill, has requested amendments to do the following:
   1. Match costs associated with the development and certification of open source voting systems at a ratio of $4 of state bond funds for every $1 in local funds;
   2. Set aside $2 million of the bond funds to cover the cost of certifying open source voting systems; and,
   3. Cover not only the purchase, but also the leasing of voting systems.
8. Arguments in Support: In support of this bill, the California State Association of Counties writes:

Elections administration is a basic and important duty assigned to counties on behalf of the state for candidate contests and policy decisions at all levels of government, from the smallest school district to the national stage. While counties can recover direct costs for conducting elections from local agencies this does not contribute to their overall voting system needs. The last major investment in voting systems was in 2002… Most California counties used their funding to purchase new voting equipment prior to the 2006 election cycle. However, most systems were based on technology of the 1990's and still today rely on rapidly aging equipment and out-of-date technology.

Earlier this year, a report by the Legislative Analyst's Office examined voting administration and offered that the state has a clear interest in secure, timely, and uniform elections. They noted that while the state reaps regular benefits from county elections administration, it only sporadically provides funding to counties for election activities. We have every confidence that counties will continue to faithfully and expertly administer elections on behalf of the state to the best of their ability. However, we strongly believe a one-time investment now is critical to ensuring successful outcomes for all who are involved, including elections officials, state and local agencies, and the voters of California.

1. Arguments in Opposition: Six individuals submitted letters of opposition to this bill, all arguing that the bill should be amended to exclude funding for voting systems that do not use open source software. Five of those letters included text that is substantially similar to the following:

It should be noted that although [AB 668] does not preclude open source (coined "non-proprietary") voting system funding ,the fact the wording does not plainly state funding for the development, certification and deployment of specifically GPLv3 open source election systems raises flags and triggers alarms. The language should specifically INCLUDE open source voting systems, and exclude "secret software" voting systems. The people of California, as well as the people of the United States and the rest of the world, do not want corporations controlling the vote counting process.

Recent history until today shows an obvious resistance by government to open source as proprietary, vendors, lobbyists and interests fight for protection and retention of market share. With the current status of Federal investigative conclusion regarding foreign interference with United States elections, these efforts are now in direct conflict with national security. Proprietary code, whether disclosed or not, has no place in appropriately secure modern elections.

To state fund the current vendors, with criminal backgrounds and documented conduct violating law and ethic, to enable further deployment of voting systems concluded insecure by government study, is problematic as setting inappropriate precedent for national security. Other [states follow] California, and the bill in its current form is a nod toward security deficient, over-priced voting systems. The vendors are knowledgeable regarding their current "lock-in" of the market, and are opportunistically price-gauging. This bill caters to that scheme.

REGISTERED SUPPORT / OPPOSITION:

Support

Secretary of State Alex Padilla (sponsor)

California Association of Clerks and Election Officials

California League of United Latin American Citizens

California Nurses Association / National Nurses United

California Professional Firefighters

California State Association of Counties

Courage Campaign

Disability Rights California

Madera County Board of Supervisors

Madera County Clerk-Recorder & Registrar of Voters

Monterey County

National Association of Latino Elected and Appointed Officials (NALEO) Educational Fund

Rock the Vote

Santa Barbara County Registrar of Voters

Santa Cruz County Clerk

Shasta County Clerk / Registrar of Voters

Urban Counties of California

Voto Latino

Opposition

Howard Jarvis Taxpayers Association

Six Individuals

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