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HomeMy WebLinkAboutCC AG PKT 2009-11-09 #BAGENDA STAFF REPORT DATE: November 9, 2009 TO: Honorable Mayor and City Council FROM: City Attorney SUBJECT: LOCAL CAMPAIGN FINANCING SUMMARY OF REQUEST: Staff seeks Council direction. BACKGROUND: The City Council directed the City Attorney to prepare a report on campaign finance laws and the City's ability to limit campaign contributions and expenditures. This report provides a brief overview of campaign finance law and the federal and state limits on California cities' ability to regulate campaign fundraising and expenditures in local elections. EXECUTIVE SUMMARY: A. Cities cannot limit expenditures. B. Cities may limit contributions of individuals or committees to local candidates and committees supporting candidates. C. Cities may: restrict the timing of fundraising cash contributions. o set lower limits on or prohibit cash contributions. set lower limits on anonymous contributions. impose additional reporting requirements for candidates and local committees (except those committees solely making independent expenditures). limit a candidate to one controlled committee and one campaign bank account. • require that a councilmember disclose on the record when a particular applicant or bidder before the Council has made a contribution to that councilmember. • limit the amount of contributions a candidate can accept from non - individual sources. Agenda Item B Page 2 DISCUSSION: A. First Amendment Limits on Campaign Finance Laws Laws limiting fundraising in elections affect free speech. Whether inspiring or caustic, informative or misleading, political speech gets the First Amendment's highest protection. As the U.S. Supreme Court stated in Buckley v. Valeo, 424 U.S. 1, 15 (1976), "it can hardly be doubted that the constitutional guarantee has its fullest and most urgent application precisely to the conduct of campaigns for political office. "). Political speech often requires money. Money is needed to advertise, travel, hold rallies, mail literature and hire staff. As a result, the U.S. Supreme Court has repeatedly struck down restrictions on campaign expenditures because they unjustifiably restrict political speech; limits on expenditures "reduc[e] the quantity of expression by restricting the number of issues discussed, the depth of their exploration, and the size of the audience reached." Buckley, supra, at 19 (1976). Or, as the Court put it more colorfully, "to engage in unlimited political expression subject to a ceiling on expenditures is like being free to drive an automobile as far and as often as one desires on a single tank of gasoline." Randall v. Sorrell, 548 U.S. 230, 241 -42 (2006). But money also corrupts. For over a century, the Supreme Court has recognized that large contributions from donors can corrupt legislators, and has permitted laws designed "to purge national politics of what was conceived to be the pernicious influence of 'big money' campaign contributions." United States v. Automobile Workers, 352 U.S. 567, 572 (1957). As a result, the Court applies a lower standard of scrutiny to laws limiting campaign contributions, since the goal of such laws is to limit corruption, or the appearance of corruption. Federal Election Comm'n v. Colorado Republican Federal Campaign Comm., 533 U.S. 431, 440 -41 (2001), McConnell v. Federal Election Comm'n, 540 U.S. 93 (2003). Limits on contributions have less of an effect on free speech than limits on campaign expenditures; they impose only "a marginal restriction upon the contributor's ability to engage in free communication." McConnell, supra, at 142. Thus, the Supreme Court has held that federal, state and local governments can (1) require campaigns to report expenditures, but not limit them, and (2) can impose some limits on the amount of and source of contributions. See generally McConnell, supra (upholding federal campaign law requiring such reporting and imposing contribution limits on contributions to candidates and political parties). Beyond these simple rules, campaign finance laws, like the elections they regulate, become complicated and contentious. For instance, there is widespread disagreement about how to regulate independent expenditures. Candidates are not the only people raising and spending money on elections; political parties, unions, business groups, and advocacy organizations all participate. Should their expenditures be regulated? CA - Staff Report - Local Campaign Financing Page 3 If a developer spends money on television commercials for Candidate Jones, is the risk that Candidate Jones will be or appear to be beholden to the developer the same as if the developer wrote a check directly to Candidate Jones' campaign? What about if a union sent 100 volunteers to knock on doors for Candidate Jones? Isn't this a type of "contribution" to Candidate Jones? Regulating these activities produces complicated rules about coordination of campaign activities between candidates and groups, in -kind contributions of volunteer labor, and campaign advertisements. These rules in turn are frequently challenged in the courts as restrictions on speech. Even seemingly simple contribution limits can become complicated' quickly. Why is a $250 contribution permissible when a $1,000 contribution is not? The importance of a particular contribution to a candidate depends on the race — a statewide campaign with two million eligible voters demands greater expenditures and contributions than a local campaign with ten thousand eligible voters. So a lower contribution limit may be appropriate for a local race, but not a statewide one. For instance, in Randall v. Sorrell, supra, (plurality opinion) the Supreme Court held that campaign contribution limits cannot be set so low as to "prevent candidates from "amassing the resources necessary for effective [campaign] advocacy' or to "magnify the advantages of incumbency to the point where they put challengers to a significant disadvantage." In that case, Vermont imposed contribution limits of roughly $200 a year for candidates for statewide office, $150 a year for state senator, and $100 a year for state representative, and these limits were not indexed for inflation. Given the number of voters in Vermont, the Court held that these limits hindered competition and were not justified by sufficient evidence. Randall, 548 U.S. at 260 -62 (2006) Making regulation even more difficult is the unsettled nature of recent Supreme Court campaign finance cases. In 2003, the Supreme Court (with Justice O'Connor on the bench) broadly upheld a far - ranging federal campaign finance law in McConnell, supra. But in 2007 (with Justice O'Connor replaced by Chief Justice Roberts) the Supreme Court reversed course and struck down part of the same campaign finance law in Federal Election Commission v. Wisconsin Right to Life, 551 U.S. 449 (2007). Now, in a pending case (Citizens United v. Federal Election Commission) to be argued in the 2009 -10 term, the Court is considering overruling the century-old ban on direct corporate contributions in election campaigns. (Under current federal and California law, corporations can only give contributions through special committees, known as political action committees or PACs). Given the flux in federal constitutional rules, it can be difficult for cities to impose consistent and long- lasting rules. B. Local Campaign Finance Rules Permitted by State and Federal Law State law grants cities some authority to regulate campaign contributions and impose reporting requirements. The Legislature, however, has shown CA - Staff Report - Local Campaign Financing Page 4 hostility towards restrictive local campaign ordinances. The following lists permissible restrictions that cities in California can impose: 1. Limitation of contribution amounts State law does not limit contributions to local candidates, so without local contribution limits, candidates may receive contributions of any amount. But cities have the power to limit the contributions of individuals or committees to local candidates and committees supporting candidates. Elections Code § 10202 ( "A city may, by ordinance or resolution, limit campaign contributions in municipal elections. ") These limits vary: cities have limits ranging from $50 to $1,500 (limits too low may be subject to constitutional challenge as discussed above). Cities may also limit "in- kind" donations of goods and services. Government Code § 82015; Buckley v. Valeo, supra. Contributions to ballot measure campaigns, however, cannot be limited. Citizens Against Rent Control /Coalition for Fair Housing v. City of Berkeley, 454 U.S. 290, 299 (1981). Recall elections are viewed like ballot measures, so contributions to recall proponents also cannot be limited. Citizens for Clean Government v. City of San Diego, 474 F.3d 647, 652 -53 (9th Cir. 2007). 2. Timing. Cities can limit (or prohibit) fundraising except in limited windows prior to or following an election or, conversely, limit contributions within a specified time prior to or following an election (the latter, to prevent the perceived evil of "late" unreported contributions). 3. Cash Contributions Cities can limit or prohibit cash contributions. State law already prohibits cash contributions or expenditures of $100 or more. Government Code § 84300. Cities can set lower limits. 4. Anonymous Contributions Cities can limit anonymous contributions. State law already limits anonymous contributions of $100 or more. Government Code § 84304. Cities can set lower limits. 5. Reporting and Disclosure State law imposes disclosure requirements upon candidates, committees, and those making independent expenditures. All these groups must file semi - annual statements, pre - election and post - election statements in election years, and late contribution statements within 24 hours for contributions of $1,000 or more occurring just before the election. See generally Government Code §§ 84200- 84225. Cities can create additional reporting requirements for candidates and local committees, except those committees solely making independent expenditures. Government Code § 81009.5(b). For example, cities can require more frequent pre - election campaign statements or late contribution reports. Or they can also require disclosure at lower thresholds: for example, a city could require disclosure of contributions of less than $100 — the amount at which state law requires disclosure — or impose late disclosure requirements on contributions of less than the state threshold of $1,000. Government Code § 81009.5(b). CA - Staff Report - Local Campaign Financing Page 5 6. Number of Controlled Committees and Bank Accounts Cities can limit a candidate to one controlled committee and one campaign bank account. Government Code § 85201; 2 California Code of Regulations § 18534. 7. Disclosure on the Record Cities can require that a councilmember disclose on the record when a particular applicant or bidder before the Council has made a contribution to that councilmember. Cf. Government Code § 84308 (requiring appointed officials to disclose and abstain from participating in decisions involving licensing, permitting or entitlements involving parties who have contributed $250 or more to the official in the preceding 12 months).' 8. Non - Individual Donors Cities can limit the amount of contributions a candidate can accept from non - individual sources, so as to ensure that companies and interest groups do not unduly influence an election. C. Practical Considerations — Enforcing Local Campaign Finance Laws Monitoring and enforcing local campaign laws can be challenging. The burden typically falls on the City Clerk to oversee reporting requirements and enforce contribution limits. The more complex the law, the more difficult it can be to interpret and enforce. Some large cities, particularly Los Angeles and San Diego, have elaborate campaign finance schemes designed to identify and deter the many ways lobbyists attempt to curry favor with the City Council or staff. These complex regimes require significant resources to enforce: full -time staff members and independent commissions oversee these ordinances. A simpler ordinance that sets local contribution limits while requiring disclosure of contributions and expenditures in the same manner as state law is easiest for cities to enforce. The City Clerk must still monitor candidates and committees to ensure that they are complying with disclosure requirements and following contribution limits. FINANCIAL IMPACT: There are no direct costs associated with the adoption of a campaign finance ordinance. However, enforcement could have a financial impact on the City. RECOMMENDATION: Staff seeks Council direction. CA - Staff Report - Local Campaign Financing