Fair Political Practices Commission
Interested Persons Meeting
8th Floor Hearing Room
428 J Street, Sacramento, CA 95814
June 20, 2006, at 10:00 a.m.

 Item Two:  Hard and Soft Money Accounts               

These subjects were explored separately at interested persons’ meetings last year, and were most recently discussed in Commission meetings in February, 2006 and December, 2005 (respectively).  These topics will return for discussion at the Commission’s upcoming meeting on July 12, 2006.  Because the questions raised by these proposed regulations hold particular interest for many of the same persons, they will be discussed together at one meeting.  

1.  Receipts and Expenditures Reportable Under Both State and Federal Law

The purpose here is to solicit public input on state law reporting rules for monies received into or expended from the accounts of political party committees which are also subject to federal reporting rules, including the “Levin Amendment” to the federal Bipartisan Campaign Reform Act of 2002 (“BCRA”), which amended the Federal Election Campaign Act of 1971 (“FECA”). 

BCRA provides that most federal election activities must be funded by “hard money” contributions which, unlike “soft money,” are raised under federal source and amount limitations. The Levin Amendment reasserts the place of soft money in the federal system by reaffirming the permissible use of soft money by political party committees in traditional “party building” and “get out the vote” activities.  The Levin Amendment governs state and local political parties which engage in certain federal election activities, and imposes reporting obligations on receipts and disbursements of some funds that might otherwise be reportable under California law. 

Some expenditures jointly relating to federal and state or local elections are not governed by the Levin Amendment, but raise similar questions, as illustrated by the Bolling Advice Letter, No. A-04-212.  This letter addressed California reporting obligations when federal law permitted partial (but less than full) reimbursement to a federal account by a state account, for the cost of an advertisement initially paid from the federal account. The Commission advised that the sum owing under state law, which could not be reimbursed under federal law, should be reported as a contribution by the federal to the state account.

The Commission would welcome public comment on any of the following topics: 

• Whether the purposes of the Act would be advanced by a requirement that receipts and disbursements of Levin funds be subject to the Act’s reporting rules;
  
  
• If the answer to the foregoing question is “yes,” should all such receipts and disbursements be made reportable under the Act, or should such requirements be limited;
  
  
• To the extent that reporting of particular receipts or disbursements is required, can they be reported on existing forms, or will it be necessary to modify existing forms or draft new ones;
  
  
• What burdens would such reporting obligations impose on state and local committees, and can these burdens be mitigated without impacting the public interest in disclosure;
  
  
• Are there any other issues raised by the use of Levin funds in California;
  
  
• Are there other areas, not governed by the Levin Amendment, where similar reporting rules should be enacted? 
  
  
• Is there ground for concern that federal law may preempt a state regulation that requires reporting of some receipts and expenditures that are reported differently under federal law?

2.  Hard and Soft Money Accounts

Government Code section 85303 (a) and (b) sets calendar-year limits on contributions to recipient committees and political party committees when the contributions are made for the purpose of making contributions to candidates for elective state office.  Section 85303(c) then states the corollary, that there are no limits on contributions to these committees when the contributions are made for purposes other than making contributions to candidates for elective state office.  

The Commission would welcome public comment on any of the following topics: 

• To ensure that contributions which are not limited under section 85303 cannot be treated as contributions which are limited, should the Commission require that recipient committees and political party committees establish a non-candidate support (NCS) account for deposit of contributions which are not made for the purpose of making contributions to candidates for elective state office?  Or would it suffice to require that such committees employ accounting methods that would segregate unlimited NCS funds?
  
  
•  Assuming the need for some means of distinguishing and tracking contributions that are subject to limits, are additional rules needed to further the purposes of section 85303, such as prohibitions on transfers from one kind of account to another, or notice to recipients on the type of account from which a transfer is made?
  
  
• What purely practical concerns, such as naming the accounts, timing and methods of deposit, the use of one account as the default account for “over limit” contributions, and any similar matters, should be addressed in the regulation?
  
  
• The FEC suggested that staff should include in its regulations a rule specifying the activities that would qualify as “get-out-the-vote” activities.  Should any FPPC regulatory action be deferred until the federal rulemaking process on the same subject is complete?

In addition to attendance at this meeting, interested persons may contact the Commission by letter at the address listed above.  If you have any questions on this meeting, please call Lawrence T. Woodlock at (916) 322-5660.