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

This bill would revise the dollar amounts associated with these ranges to provide for 8 total ranges of fair market value of investments and real property interests and 10 total ranges of aggregate value of income.

A violation of the acts provision is punishable as a misdemeanor. By expanding the scope of an existing crime, this bill would impose a state-mandated local program.

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

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

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

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

SENATE THIRD READING

STR Bill Id:SB 24

Author:(Portantino)

As Introduced Ver:December 5, 2016

2/3 vote

SENATE VOTE: 40-0

SUMMARY: Revises the monetary ranges that public officials, public employees, and candidates, when filing a statement of economic interests (SEI), use to describe the value of their investments, interests in real property, and income, in a manner that generally provides greater specificity about the value of such interests.

FISCAL EFFECT: According to the Assembly Appropriations Committee, minor and absorbable costs to the Fair Political Practices Commission (FPPC) to enforce the provisions of this bill.

COMMENTS: According to the author, "By revising the dollar amounts associated with the ranges in the Political Reform Act to accurately reflect today's economic value, SB 24 would make the necessary changes that would more accurately reflect the needs of the public to understand where potential conflicts of interest might arise for public officials and required reporting public employees."

As part of the Political Reform Act's (PRA) comprehensive scheme to prevent conflicts of interest by state and local public officials, existing law identifies certain elected and other high-level state and local officials who must file SEIs, which are sometimes referred to as "Form 700s." Similarly, candidates for those positions must file SEIs. Other state and local public officials and employees are required to file SEIs if the position they hold is designated in an agency's conflict of interest code. A position is required to be designated in an agency's conflict of interest code when the position entails the making or participation in the making of governmental decisions that may foreseeably have a material financial effect on the decision maker's financial interests.

Under existing law, when a person is required to disclose a financial interest on his or her SEI, the filer is not required to disclose the exact value of the interest, but instead must select a monetary range that describes the value of the interest. As noted above, this bill revises the monetary ranges that public officials use to describe the values of their financial interests on SEIs. In most cases, the revised disclosure categories in this bill would provide greater specificity about the values of financial interests held by public officials.

AB 10 (Gatto) of 2015, would have revised the monetary ranges that specified public officials or candidates, when filing an SEI, use to describe the value of their investments, interests in real property, and income, among other provisions. AB 10 was vetoed by Governor Brown. In his veto message, the Governor stated that "The Political Reform Act already requires public officials to disclose their income, investments and business activities with enough particularity so that conflicts of interest can be identified. This bill adds yet more complexity to existing reporting requirements without commensurate benefit, and I am not convinced that this bill will provide more useful information to the public."

AB 2162 (Portantino) of 2012, which was substantially similar to this bill, was vetoed by Governor Brown. The veto message for AB 2162 was similar to the veto message for AB 10 of 2015, as detailed above.

California voters passed an initiative, Proposition 9, in 1974 that created the FPPC and codified significant restrictions and prohibitions on candidates, officeholders and lobbyists. That initiative is commonly known as the PRA. Amendments to the PRA that are not submitted to the voters, such as those contained in this bill, must further the purposes of the initiative and require a two-thirds vote of both houses of the Legislature.

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

Analysis Prepared by: Ethan Jones / E. & R. / (916) 319-2094 FN: 0001474

Date of Hearing: August 23, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 24

Author:(Portantino) – As Introduced Ver:December 5, 2016

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

SUMMARY:

This bill expands and revises the monetary ranges that public officials, public employees, and candidates use to describe the value of their investments, interests in real property, and income when filing a statement of economic interests (SEI).

FISCAL EFFECT:

Minor and absorbable costs to the Fair Political Practices Commission to enforce the provisions of this bill.

COMMENTS:

1. Background. Existing law requires specified public officials, candidates, and public employees to file SEIs disclosing their financial interests. Filers are required to file their SEIs annually and at other periods of time, such as when assuming or leaving office. When reporting the value of financial interests (such as investments, real property, other income, and loans), existing law requires filers to select monetary range with the amounts in each range established in state law. For example, investments and real property are reported from: $2,000 to $10,000; more than $10,000 to $100,000; more than $100,000 to $1 million; and more than $1 million.
2. Purpose. The purpose of this bill is to increase the number of monetary range categories for financial interests that are reportable on an SEI and to update the amounts. According to the author, "By revising the dollar amounts associated with the ranges in the Political Reform Act to accurately reflect today’s economic value, SB 24 would make the necessary changes that would more accurately reflect the needs of the public to understand where potential conflicts of interest might arise for public officials and required reporting public employees."
3. Previous Legislation. AB 10 (Gatto), of the 2015-16 Legislative Session, would have revised the monetary ranges that specified public officials or candidates use to describe the value of their investments, interests in real property, and income when filing an SEI, among other provisions. AB 10 was vetoed by Governor Brown. In his veto message, the Governor stated that "The Political Reform Act already requires public officials to disclose their income, investments and business activities with enough particularity so that conflicts of interest can be identified. This bill adds yet more complexity to existing reporting requirements without commensurate benefit, and I am not convinced that this bill will provide more useful information to the public."
   
   AB 2162 (Portantino) of the 2011-2012 Legislative Session, which was substantially similar to this bill, was vetoed by Governor Brown. The veto message for AB 2162 was similar to the veto message for AB 10 of 2015, as detailed above.
   

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

Date of Hearing: July 12, 2017

ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING

Marc Berman, Chair

SBPCA Bill Id:SB 24

Author:(Portantino) – As Introduced Ver:December 5, 2016

SENATE VOTE: 40-0

SUBJECT: Political Reform Act of 1974: economic interest disclosure.

SUMMARY: Revises the monetary ranges that public officials, public employees, and candidates, when filing a statement of economic interests (SEI), use to describe the value of their investments, interests in real property, and income. Specifically, this bill:

1. Requires public officials, public employees, and candidates, when they are required to report an investment or interest in real property on an SEI, to select one of the following monetary ranges that describes the fair market value of the investment or interest in real property:
   
   1. $2,000 to $25,000;
      
   2. More than $25,000 to $100,000;
      
   3. More than $100,000 to $250,000;
      
   4. More than $250,000 to $500,000;
      
   5. More than $500,000 to $1 million;
      
   6. More than $1 million to $5 million;
      
   7. More than $5 million to $10 million; or,
      
   8. More than $10 million.
      
2. Requires public officials, public employees, and candidates, when they are required to report a source of income or loan on an SEI, to select one of the following monetary ranges that describes the aggregate value of income from the source, or in the case of a loan, the highest amount owed to the source:
   
   1. $500 to $1,000;
      
   2. More than $1,000 to $10,000;
      
   3. More than $10,000 to $25,000;
      
   4. More than $25,000 to $100,000;
      
   5. More than $100,000 to $250,000;
      
   6. More than $250,000 to $500,000;
      
   7. More than $500,000 to $1 million;
      
   8. More than $1 million to $5 million;
      
   9. More than $5 million to $10 million; or,
      
   10. More than $10 million.
       
3. Makes technical, non-substantive changes.
   

EXISTING LAW:

1. Creates the Fair Political Practices Commission (FPPC), and makes it responsible for the impartial, effective administration and implementation of the Political Reform Act (PRA).
   
2. Requires candidates for, and current holders of, specified elected or appointed state and local offices, and designated employees of state and local agencies, to file SEIs disclosing their financial interests, including investments, real property interests, and income. Requires filers to file the SEIs annually and at other periods of time, such as when assuming or leaving office.
   
3. Requires the filers stated above, when required to report an investment or interest in real property on an SEI, to disclose the fair market value of the investment or real property interest by selecting one of the following monetary ranges:
   
   1. $2,000 to $10,000;
      
   2. More than $10,000 to $100,000;
      
   3. More than $100,000 to $1 million; or,
      
   4. More than $1 million.
      
4. Requires the filers stated above, when required to report a source of income or a loan on an SEI, to disclose the aggregate value of income from the source, or in the case of a loan, the highest amount owed to the source, by selecting one of the following monetary ranges, except as specified:
   
   1. $500 to $1,000;
      
   2. More than $1,000 to $10,000;
      
   3. More than $10,000 to $100,000; or,
      
   4. More than $100,000.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS:

1. Purpose of the Bill: According to the author, "By revising the dollar amounts associated with the ranges in the Political Reform Act to accurately reflect today’s economic value, SB 24 would make the necessary changes that would more accurately reflect the needs of the public to understand where potential conflicts of interest might arise for public officials and required reporting public employees."
2. Statements of Economic Interests: As part of the PRA's comprehensive scheme to prevent conflicts of interest by state and local public officials, existing law identifies certain elected and other high-level state and local officials who must file SEIs, which are sometimes referred to as "Form 700s." Similarly, candidates for those positions must file SEIs. Other state and local public officials and employees are required to file SEIs if the position they hold is designated in an agency's conflict of interest code. A position is designated in an agency's conflict of interest code when the position entails the making or participation in the making of governmental decisions that may foreseeably have a material financial effect on the decision maker's financial interests. While the exact number of people that are required to file SEIs is unknown, the FPPC has estimated that the number exceeds 200,000 officials and employees statewide.
   
   The information that must be disclosed on an SEI, and the location at which an SEI is filed, varies depending on the position held by the individual who is required to file an SEI. Although there are some exceptions, individuals who are required to file an SEI typically must file that document with the agency of which they are an elected official or by which they are employed.
3. Financial Interests: Under existing law, when a public official, public employee, or candidate for public office is required to disclose a financial interest on his or her SEI, the filer is not required to disclose the exact value of the interest, but instead must select a monetary range that describes the value of the interest. As noted above, this bill revises the monetary ranges that public officials use to describe the values of their financial interests on SEIs. In most cases, the revised disclosure categories in this bill would provide greater specificity about the values of financial interests held by public officials.

The changes to the disclosure categories that are proposed by this bill are detailed below:

1. Is More Disclosure Always Better? One of the purposes of the PRA is to ensure that public officials disclose income and assets that could be affected by official actions, and disqualify themselves from participating in decisions when they have conflicts of interest. In the background material provided by the author's office, the author argues that, due to inflation and economic changes, the monetary ranges of disclosure on SEIs should be updated so that the public better understands potential conflicts of interest by public officials and employees.
   
   If a public official or a candidate reports that he or she receives income of more than $1 million from a single source, isn't that sufficient information to determine whether there could be a possible conflict of interest regarding related public policy issues? If this bill becomes law, would increasing the threshold to illustrate income of more than $10 million help to illustrate whether there is a potential conflict of interest, or simply illustrate the person's wealth? On the other hand, if a public official or candidate's net worth exceeds tens or hundreds of millions of dollars, disclosure of that information may seem reasonable. Determining appropriate financial disclosure rules is a subjective task, and the committee may wish to consider whether the benefit of the increased specificity proposed by this bill outweighs the additional burdens that such increased specificity imposes for those who are required to file financial disclosure reports.
2. Previous Legislation: AB 10 (Gatto) of 2015, would have revised the monetary ranges that specified public officials or candidates, when filing an SEI, use to describe the value of their investments, interests in real property, and income, among other provisions. AB 10 was vetoed by Governor Brown. In his veto message, the Governor stated that "The Political Reform Act already requires public officials to disclose their income, investments and business activities with enough particularity so that conflicts of interest can be identified. This bill adds yet more complexity to existing reporting requirements without commensurate benefit, and I am not convinced that this bill will provide more useful information to the public."
   
   AB 2162 (Portantino) of 2012, which was substantially similar to this bill, was vetoed by Governor Brown. The veto message for AB 2162 was similar to the veto message for AB 10 of 2015, as detailed above.
   
3. Arguments in Support: In support of this bill, the California Newspaper Publishers Association writes:

SB 24 would update the Form 700 to provide additional threshold reporting requirements, which would give the public more detailed information about the extent of candidates' and officials' income and investments. Greater disclosure requirements create a greater understanding of the financial interests that may impact a lawmaker's decisions. More specifically, the increase in disclosure requirements would make the data the state collects more accurate and telling, and provide journalists who analyze this data with more exact information than the current scheme.

SB 24 is a measure that promotes transparency by giving the public more information about an official's financial holdings. It also contributes to the creation of a more robust database of this information for journalists to analyze election and political data.

1. Political Reform Act of 1974: California voters passed an initiative, Proposition 9, in 1974 that created the FPPC and codified significant restrictions and prohibitions on candidates, officeholders and lobbyists. That initiative is commonly known as the PRA. Amendments to the PRA that are not submitted to the voters, such as those contained in this bill, must further the purposes of the initiative and require a two-thirds vote of both houses of the Legislature.

REGISTERED SUPPORT / OPPOSITION:

Support

California Common Cause

California Newspaper Publishers Association

Opposition

None on file.

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

 THIRD READING  

Bill No: SB 24

Author:

:

Vote:

SENATE ELECTIONS & C.A. COMMITTEE: 5-0, 3/21/17

AYES: Stern, Anderson, Allen, Hertzberg, Leyva

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT:

SOURCE: Author

DIGEST: This bill amends the Political Reform Act (PRA) by adjusting the dollar increments for investments, interests in real property, and income that are to be used by public officials in filing a Statement of Economic Interest (SEI).

ANALYSIS:

Existing law:

1. Requires that candidates for, and current holders of, specified elected or appointed state and local offices and designated employees of state and local agencies file SEIs disclosing their financial interests, including investments, real property interests, and income. Filers must file the SEIs annually and at other periods of time, including when they assume or leave office.
2. Requires these filers, when required to report an investment or interest in real property on an SEI, to disclose the fair market value of the investment or real property interest by selecting one of the following thresholds:
   1. Equals or exceeds $2,000 but does not exceed $10,000;
   2. Exceeds $10,000 but does not exceed $100,000;
   3. Exceeds $100,000 but does not exceed $1,000,000; or
   4. Exceeds $1,000,000.
3. Requires these filers, when required to report a source of income or a loan on an SEI, to disclose the aggregate value of income from the source, or in the case of a loan, the highest amount owed to the source, by selecting one of the following thresholds:
   1. At least $500 but not greater than $1,000;
   2. More than $1,000 but not greater than $10,000;
   3. More than $10,000 but not greater than $100,000; or,
   4. More than $100,000.

This bill:

1. Requires specified public officials or candidates, when required to report an investment or interest in real property, to disclose the fair market value by selecting one of the following increments:
   1. At least $2,000 but not greater than $25,000;
   2. More than $25,000 but not greater than $100,000;
   3. More than $100,000 but not greater than $250,000;
   4. More than$250,000 but not greater than $500,000;
   5. More than $500,000 but not greater than $1 million;
   6. More than $1 million but not greater than $5 million;
   7. More than $5 million but not greater than $10 million; or,
   8. More than $10 million.
2. Requires specified public officials or candidates, when required to report a source of income or loan on an SEI, to disclose the aggregate value of income from the source, or in the case of a loan, the highest amount owed to the source, by selecting one of the following increments:
   1. At least $500 but not greater than $1,000;
   2. More than $1,000 but not greater than $10,000;
   3. More than $10,000 but not greater than $25,000;
   4. More than $25,000 but not greater than $100,000;
   5. More than $100,000 but not greater than $250,000;
   6. More than $250,000 but not greater than $500,000;
   7. More than $500,000 but not greater than $1 million;
   8. More than $1 million but not greater than $5 million;
   9. More than $5 million but not greater than $10 million; or
   10. More than $10 million.

Background

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

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

SEIs contain reporting thresholds that are detailed for lesser amounts of income but give little specificity for large amounts of income - the top current threshold is "over $100,000." It is common for wealthy individuals to seek elective state office, thereby rendering the current income reporting thresholds - which were established in the 1970’s - somewhat dated. Million-dollar salaries for business executives and others are now not uncommon, especially in California.

Comments

1. According to the author, by revising the dollar amounts associated with the ranges in the PRA to accurately reflect today’s economic value, SB 24 makes the necessary changes that would more accurately reflect the needs of the public to understand where potential conflicts of interest might arise for public officials and required reporting public employees.

Due to the inflation and economic changes, the current thresholds are not adequately serving the purpose for which the PRA was passed and therefore need to be changed.

Related/Prior Legislation

This bill is similar to AB 2162 (Portantino, 2012), which was vetoed by the Governor. In his veto message the Governor stated the following:

The law already requires public officials to disclose their income and investments with enough particularity so that conflicts of interest can be identified. I am not convinced that this bill will provide more useful information to the public.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 4/4/17)

California Common Cause

California Newspaper Publishers Association

OPPOSITION: (Verified 4/4/17)

None received

Prepared by:

4/5/17 14:56:29

**** END ****

SENATE COMMITTEE ON

ELECTIONS AND CONSTITUTIONAL AMENDMENTS

Senator Henry Stern, Chair

2017 - 2018 Regular

Bill No: SB Hearing Date: 3/21/17

Subject: Political Reform Act of 1974: economic interest disclosure

DIGEST

This bill amends the Political Reform Act (PRA) by adjusting the dollar increments for investments, interests in real property, and income that are to be used by public officials in filing a Statement of Economic Interest (SEI).

ANALYSIS

Existing law:

1. Requires that candidates for, and current holders of, specified elected or appointed state and local offices and designated employees of state and local agencies file SEIs disclosing their financial interests, including investments, real property interests, and income. Filers must file the SEIs annually and at other periods of time, including when they assume or leave office.
2. Requires these filers, when required to report an investment or interest in real property on an SEI, to disclose the fair market value of the investment or real property interest by selecting one of the following thresholds:
3. Equals or exceeds $2,000 but does not exceed $10,000;
4. Exceeds $10,000 but does not exceed $100,000;
5. Exceeds $100,000 but does not exceed $1,000,000; or
6. Exceeds $1,000,000.
7. Requires these filers, when required to report a source of income or a loan on an SEI, to disclose the aggregate value of income from the source, or in the case of a loan, the highest amount owed to the source, by selecting one of the following thresholds:
8. At least $500 but not greater than $1,000;
9. More than $1,000 but not greater than $10,000;
10. More than $10,000 but not greater than $100,000; or,
11. More than $100,000.

This bill:

1. Requires specified public officials or candidates, when required to report an investment or interest in real property, to disclose the fair market value by selecting one of the following increments:
   1. At least $2,000 but not greater than $25,000;
   2. More than $25,000 but not greater than $100,000;
   3. More than $100,000 but not greater than $250,000;
   4. More than$250,000 but not greater than $500,000;
   5. More than $500,000 but not greater than $1 million;
   6. More than $1 million but not greater than $5 million;
   7. More than $5 million but not greater than $10 million; or,
   8. More than $10 million.
2. Requires specified public officials or candidates, when required to report a source of income or loan on an SEI, to disclose the aggregate value of income from the source, or in the case of a loan, the highest amount owed to the source, by selecting one of the following increments:
   1. At least $500 but not greater than $1,000;
   2. More than $1,000 but not greater than $10,000;
   3. More than $10,000 but not greater than $25,000;
   4. More than $25,000 but not greater than $100,000;
   5. More than $100,000 but not greater than $250,000;
   6. More than $250,000 but not greater than $500,000;
   7. More than $500,000 but not greater than $1 million;
   8. More than $1 million but not greater than $5 million;
   9. More than $5 million but not greater than $10 million; or
   10. More than $10 million.

BACKGROUND

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

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

SEIs contain reporting thresholds that are detailed for lesser amounts of income but give little specificity for large amounts of income - the top current threshold is "over $100,000." It is common for wealthy individuals to seek elective state office, thereby rendering the current income reporting thresholds - which were established in the 1970’s - somewhat dated. Million-dollar salaries for business executives and others are now not uncommon, especially in California.

COMMENTS

1. According to the Author: By revising the dollar amounts associated with the ranges in the Political Reform Act to accurately reflect today’s economic value, SB 24 would make the necessary changes that would more accurately reflect the needs of the public to understand where potential conflicts of interest might arise for public officials and required reporting public employees.
   
   Due to the inflation and economic changes, the current thresholds are not adequately serving the purpose for which the Political Reform Act of 1974 was passed and therefore need to be changed.
   

RELATED/PRIOR LEGISLATION

This bill is similar to AB 2162 (Portantino) of 2012, which was vetoed by the Governor. In his veto message the Governor stated the following:

“The law already requires public officials to disclose their income and investments with enough particularity so that conflicts of interest can be identified.  I am not convinced that this bill will provide more useful information to the public.” 

POSITIONS

Sponsor: Author

Support: California Common Cause

California Newspaper Publishers Association

Oppose: None received

-- END --