Analysis by the Legislative Analyst

BACKGROUND

Political Reform Laws. The Political Reform Act of 1974, approved by California voters in that year, established campaign finance disclosure requirements. Specifically, it required candidates for state and local offices, proponents and opponents of ballot measures, and other campaign organizations to report contributions received and expenditures made during campaigns. These reports are filed with the Secretary of State's office, local election officials, or both. The Fair Political Practices Commission (FPPC) is the state agency primarily responsible for enforcing the law.

In November 1996, California voters approved Proposition 208, an initiative that amended the Political Reform Act, to establish limits on campaign contributions to candidates, voluntary limits on campaign spending, and rules on when fund-raising can occur. The measure also required identification of certain donors in campaign advertisements for and against ballot measures and contained various other provisions regulating political campaigns.

A lawsuit challenging Proposition 208 resulted in a court order in January 1998 blocking enforcement of its provisions. At the time this analysis was prepared, the lawsuit was still pending. Until the case is resolved, it is unclear which, if any, provisions of Proposition 208 will be implemented. At this time generally no contribution and expenditure limits are in place for campaigns for state elective offices.

Ballot Pamphlet and Sample Ballot. Before each statewide election, a ballot pamphlet prepared by the Secretary of State is mailed to each household with a registered California voter. It contains information on propositions placed on the ballot by the Legislature as well as ballot initiative and referendum measures placed before voters through signature gathering. State law also directs county elections officials to prepare and mail to each voter a sample ballot listing the federal, state, and local candidates and ballot measures.

On-Line Campaign Reporting. State law requires certain candidates and campaign organizations involved in elections for state elective office or ballot propositions to file campaign finance information on-line or in electronic formats with the Secretary of State. Information from those campaign finance reports is then made available for public review through the Internet.

PROPOSAL

This measure revises state laws on political campaigns for state and local elective offices and ballot propositions. Most of these changes would take effect beginning in 2001. Campaigns for statewide elective office, such as Governor, would generally not be affected by the provisions of the measure until after the November 2002 election. This measure does not affect campaigns for federal office, such as the U.S. Congress and generally does not affect the contribution limits now enforced for local offices. The major provisions of this measure include the following:

– Repeals the campaign contribution and voluntary spending limits for state and local elective offices enacted by Proposition 208. Establishes new contribution and voluntary campaign spending limits, with higher dollar amounts than those contained in Proposition 208, for state elective offices.

– Enacts new campaign disclosure requirements, including on-line or electronic reporting in a timely manner of campaign contributions and expenditures of $1,000 or more.

– Increases penalties for campaign law violations to the same levels as Proposition 208.

These major provisions of the measure are described in more detail below.

   Campaign Contribution Limits

This measure establishes limits on contributions to candidates for state elective office. The limits vary according to the state office sought by the candidate and the source of the contribution, as shown in Figure 1. The limits would be adjusted every two years for inflation.

Figure 1:

Proposition 34 Campaign Contribution Limits
	Candidate for:
		Statewide Office
Contributor	Legislature	Other Than Governor	Governor
Individual	$3,000	$5,000	$20,000
Small Contributor Committee a	6,000	10,000	20,000
Lobbyist b	Prohibited	Prohibited	Prohibited
Political party	No limit	No limit	No limit
a Defined as a committee in existence for at least six months with 100 or more members, none of whom contribute more than $200 to the committee in a year, and which contributes to five or more candidates. b Prohibition applies to lobbyists only in certain circumstances.

This measure repeals the contribution limits contained in Proposition 208 and replaces them with limits that are generally higher than those contained in Proposition 208. For example, this measure limits contributions from an individual to a candidate for the Legislature to $3,000 per election and repeals the Proposition 208 limit of $250 per election for such contributions.

The measure also limits contributions by an individual to a political party for the support or defeat of candidates for elective state office. The contributions would be limited to $25,000 per calendar year, although additional sums could be given to support other party activities. This measure does not limit the contributions political parties could make to candidates.

The measure also establishes contribution limits both for small contributor committees and for the transfer of funds left over from prior campaigns to the same candidate. In addition, it prohibits contributions from lobbyists to state elective officials or candidates under certain conditions. This measure also repeals a provision in Proposition 208 limiting contributions to political committees which operate independently of a candidate's campaign committee.

Under this measure, candidates would be allowed to give unlimited amounts of their own money to their campaigns. However, the amount candidates could loan to their campaigns would be limited to $100,000 and the earning of interest on any such loan would be prohibited.

This measure repeals a provision of Proposition 208 that bans transfers of funds from any state or local candidate or officeholder to another candidate, but establishes limits on such transfers from state candidates. The measure also repeals a provision of Proposition 208 that prohibits candidates for state and local elective office from fund-raising in nonelection years.

   Voluntary Spending Limits

Proposition 208 enacted voluntary campaign spending limits for state elective offices. Candidates who accepted those limits would (1) be entitled to obtain larger campaign contributions than otherwise; (2) be identified in the state ballot pamphlet, county sample ballot materials, and on the ballot as having accepted the limits; and (3) receive free space for a statement in support of his or her candidacy in the state ballot pamphlet or in county ballot materials (depending upon the office sought).

This measure repeals those provisions and enacts a new set of voluntary spending limits. Candidates who accepted these limits would (1) be identified in the state ballot pamphlet as having accepted the limits and (2) be eligible to purchase space in the state ballot pamphlet for a statement in support of his or her candidacy. The major spending limit provisions of this measure are shown in Figure 2. These voluntary limits, which would be adjusted every two years for inflation, are higher than the limits contained in Proposition 208. For example, this measure would repeal a voluntary expenditure limit of $100,000 for the primary election for an Assembly seat and instead establish a limit of $400,000 for such an election contest.

Figure 2:

Proposition 34 Voluntary Spending Limits
	Election
Election Contest	Primary	General
Assembly	$400,000	$700,000
Senate	600,000	900,000
State Board of Equalization	1 million	1.5 million
Other statewide offices, except Governor	4 million	6 million
Governor	6 million	10 million

Figure 3 shows some of the key changes made by Proposition 34.

Figure 3:

Key Changes Made by Proposition 34
This measure would enact new contribution and voluntary spending limits for candidates for state elective office. Two examples are shown below of how these provisions differ from the Political Reform Act, which is the current practice in regular elections, and Proposition 208, which has not been implemented because of a pending lawsuit.
Election Contest	Political Reform Act of 1974	Proposition 208	Proposition 34
Limits Per Election on Campaign Contributions by Individuals a
Assembly and Senate	No limits	$250	$3,000
Statewide offices (except Governor)	No limits	$500	$5,000
Governor	No limits	$500	$20,000
Voluntary Campaign Spending Limits b,c
Assembly
Primary:	No limits	$100,000	$400,000
General:	No limits	$200,000	$700,000
Senate
Primary:	No limits	$200,000	$600,000
General:	No limits	$400,000	$900,000
Board of Equalization
Primary:	No limits	$200,000	$1 million
General:	No limits	$400,000	$1.5 million
Statewide Office  (except Governor)
Primary:	No limits	$1 million	$4 million
General:	No limits	$2 million	$6 million
Governor
Primary:	No limits	$4 million	$6 million
General:	No limits	$8 million	$10 million
a Under Proposition 208, limits double if candidate agrees to voluntary cam-paign spending limit. b Under Proposition 208, limits can as much as triple under certain circum-stances defined in the measure. c Under Proposition 34, political party expenditures on behalf of a candidate do not count against voluntary spending limits.

   Campaign Disclosure Rules

Paid Endorsements. Under this measure, if a person appearing in a campaign advertisement for or against a state or local ballot proposition was paid, or will be paid $5,000 or more for the appearance, that fact would have to be disclosed in the advertisement.

On-Line Reporting. This measure requires that a candidate for state elective office or a committee supporting a state ballot measure make on-line or electronic reports to the Secretary of State within 24 hours of receiving a contribution of $1,000 or more during the 90 days before an election. Certain independently operating committees would similarly have to make on-line or electronic reports of expenditures of $1,000 or more related to a candidate for state elective office.

Advertising Payments. Under current law, if a person spends funds to directly advocate the election or defeat of a candidate for state office, such expenditures generally must be disclosed in a statement filed with the Secretary of State before the election. This measure would generally require an on-line or electronic report before the election when someone is purchasing campaign advertisements involving payments of $50,000 or more that clearly identify a candidate for state office but do not expressly advocate the candidate's election or defeat.

Slate Mailers. Slate mailers—mailed campaign advertisements containing lists of recommendations for voters—would have to include a written notice if they indicate an association with a political party but their recommended position on a ballot proposition or candidate differs from that political party's official position.

   Other Provisions

Fund-Raising by Appointees. This measure repeals a provision in Proposition 208 that would prohibit members of certain appointed public boards or commissions from contributing to or soliciting campaign contributions on behalf of the person who appointed them to that office.

Surplus Campaign Funds. This measure limits the use of surplus campaign funds to specified purposes, including repayment of campaign debts or political contributors, charitable donations, contributions to political parties, home security systems for candidates or officeholders subjected to threats, and payment of legal bills related to seeking or holding office. In so doing, the measure repeals a provision of Proposition 208 that generally requires, within 90 days after an election, the distribution of any surplus funds to political parties, political contributors, or to the state.

Penalties and Enforcement. This measure increases penalties for violations of campaign law to the same levels as Proposition 208. For example, the FPPC could impose a fine of up to $5,000 per violation, instead of the prior penalty of $2,000. Additionally, the measure repeals a provision of Proposition 208 allowing the FPPC to initiate criminal prosecution of alleged violations of campaign laws, and narrows the cases in which an alleged campaign law violation is subject to penalties.

FISCAL EFFECT

This measure would result in additional costs to the state primarily related to the publication of candidate statements in the state ballot pamphlet and the implementation and enforcement of various provisions of the measure. The additional state costs would be offset to an unknown extent by payments and fines from candidates and political committees. We estimate that the net costs to the state could potentially be as much as several million dollars annually. In addition, local governments would incur unknown, but probably not significant, costs to implement the voluntary spending limit provisions of the measure.