HBA-JEK C.S.H.B. 2 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 2 By: Gallego Elections 3/5/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE The amount of money invested in campaigns is a significant factor in many elections. It has been argued that the current campaign finance system discourages competition in elections and discourages small contributions from individuals. Current disclosure laws contain several loopholes which may prevent full disclosure of campaign contributions. C.S.H.B. 2 modifies provisions relating to the regulation and disclosure of certain political contributions and expenditures. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency or institution. ANALYSIS C.S.H.B. 2 amends the Election Code relating to the regulation of certain political contributions, political expenditures, and political advertising. Reports C.S.H.B. 2 increases from $50 to $200 each political contribution or expenditure which a committee or legislative caucus must report. The bill provides that a committee or caucus must report the total amount or a specific listing of political contributions and political expenditures of $200 or less. If a contributor of more than $200 is an individual, the report must include the person's principal occupation or job title and the full name of the individual's employer. The bill provides that reports on expenditures in the form of inkind contributions must include a description of any property or services contributed. The bill also provides that a report on a contribution from a child must include the full name and address of each of the child's parents, guardians, or other persons standing in parental relation to the person and, if the contributions are in-kind contributions, a description of the property or services contributed (SECTION 11, Sec. 254.031 and SECTION 12, Sec. 254.0311). C.S.H.B. 2 provides that a person, the person's campaign treasurer, or a legislative caucus is to use best efforts to obtain, maintain, and report the information required for an individual who contributes in excess of $200 (SECTION 11, Sec. 254.031; SECTION 12, Sec. 254.0311; and SECTION 13, Sec. 254.0312). The bill requires a candidate for statewide office, state senator, state representative, or a member of the State Board of Education, who receives contributions that in the aggregate exceed $1,000 to file additional reports during the period immediately preceding the election. The bill sets forth that this requirement also applies to a specific-purpose committee for supporting or opposing a candidate for these offices. The bill extends the period for which such a report is to be filed and reduces from 48 to 24 hours the time in which a contribution accepted in the period is required to be reported after it is accepted (SECTION 14, Sec. 254.038). The bill extends the period immediately preceding the election in which certain general-purpose committees are required to report direct campaign expenditures, and reduces from 48 to 24 hours the time in which an expenditure is required to be reported (SECTION 15, Sec. 254.039). C.S.H.B. 2 removes the provision that prohibits the Texas Ethics Commission (TEC) from making a filed report available to the public on the Internet until each candidate for that office and each applicable specific-purpose committee has filed a report for that reporting deadline (SECTION 16, Sec. 254.0401). The bill requires TEC to compile and maintain an index of information about persons making political contributions and to make the index available on the Internet (SECTION 17, Sec. 254.0403). The bill prohibits a person who does not file a required political report or a political committee whose campaign treasurer does not file a report from knowingly accepting a political contribution or knowingly making a political expenditure when the report is outstanding. The bill sets forth penalties for a violation of this provision (SECTION 19, Sec. 254.043). The bill sets forth penalties for a campaign treasurer who intentionally fails to file a report on time, include required information in the report, or include information that is substantial and material to a complete understanding of the committee's reportable activity (SECTION 18, Sec. 254.041). C.S.H.B. 2 provides that a report by the campaign treasurer of a general-purpose committee must include the identification of any contribution intended by the person to be used for administrative, overhead, or fund-raising expenses. The bill removes the provision that the report must include the principal occupation of each person whose contributions in the aggregate exceed $50 (SECTION 21, Sec. 254.151). The bill provides that a person is ineligible for appointment as a campaign treasurer if the person is the campaign treasurer of a political committee that does not file a report as required (SECTION 4, Sec. 252.0011). The bill provides that a person, including a candidate, officeholder, or political committee, commits an offense if that person uses coercion to assist an officeholder or influence the result of an election or uses or causes to be used anything of value obtained by coercion (SECTION 3, Sec. 253.006). The substitute repeals the provision that provides that an expenditure for the establishment of a general-purpose committee by a corporation or labor organization is not reportable as a political contribution (SECTION 28). The bill increases from $10 to $30 the maximum amount of a political contribution, expenditure, or loan that is not required to be individually reported by a general-purpose committee in its monthly report (SECTION 22, Sec. 254.156). Protection of Information C.S.H.B. 2 prohibits the sale or commercial use of contributor information required to be included in political reports without the express written consent of the filer. The bill authorizes the use of information that is obtained from political reports in newspapers, magazines, books, and other similar communications if the principal purpose of the communication is to educate the public and not to solicit contributions. The bill sets forth provisions regarding the use of pseudonyms in political reports and authorizes a person to submit up to 10 pseudonyms on each political report to protect against illegal use of names and addresses of contributors. The bill prohibits a filer from using these provisions to circumvent reporting requirements and sets forth penalties for violating these provisions (SECTION 2, Sec. 251.010). Out-of-state Political Committees C.S.H.B. 2 prohibits out-of-state political committees from making contributions or expenditures without filing a campaign treasurer appointment (SECTION 5, Sec. 253.031). The bill repeals law which provides that out-of-state political committees are not subject to the campaign treasurer and political reporting provisions of the Election Code. The bill also repeals provisions excluding out-of-state committees from the campaign treasurer and political reporting provisions that limit contributions by out-of-state committees and relate to officeholder contributions used in connection with a campaign (SECTION 28). The bill sets forth certain reporting requirements for political contributions accepted and political expenditures made by out-of-state political committees, but exempts from the requirements a committee that files reports with the Federal Election Commission and appropriately notifies TEC. The bill requires such an out-of-state political committee to provide TEC with the information necessary to locate the committee's report on the Federal Election Commission Internet website and requires TEC to promptly place a link to the report on its website (SECTION 11, Sec. 254.031 and SECTION 13, 254.0313). Reimbursement of Personal Funds and Payment of Loans C.S.H.B. 2 prohibits a judicial or nonjudicial candidate or officeholder from using political contributions to reimburse a political expenditure from the candidate's or officeholder's personal funds in an aggregate amount that exceeds: _$100,000 for governor; _$50,000 for statewide office; _$50,000 for statewide judicial office; _$25,000 for state senator or state representative; _$25,000 for the office of member, State Board of Education; _five times the applicable contribution limit for a judicial office to which the Judicial Campaign Fairness Act applies, other than a statewide judicial office; and _$10,000 for offices other than the above offices. The bill prohibits the total amount of reimbursements made by a candidate or officeholder from exceeding these amounts and prohibits a candidate or officeholder from paying interest on a loan from the personal funds of the candidate, officeholder, or a person related to the candidate or officeholder within the second degree by affinity or consanguinity. The bill prohibits a committee from using political contributions in an amount that exceeds these aggregate amounts to repay any loan or extension of credit for which the committee's judicial or nonjudicial candidate or officeholder is personally liable (SECTION 6, Sec. 253.042 and SECTION 10, Sec. 253.162). Corporations and Labor Organizations The bill provides that a corporation or labor organization may only make campaign contributions and direct campaign expenditures from its own property in connection with an election on a measure that occurs on a uniform election date (SECTION 7, Sec. 253.096 and SECTION 8, Sec. 253.097). The bill authorizes a corporation or labor organization to make one or more campaign expenditures from its own property for the purpose of permitting a candidate to appear at and speak to a meeting of its stockholders, members, or their families. The bill prohibits a corporation or labor organization from making such an expenditure for transportation or lodging (SECTION 9, Sec. 253.098). Retaining Certain Political Contributions, Assets, and Income C.S.H.B. 2 prohibits a person from retaining certain contributions, assets purchased with political contributions, or interest and other income earned on the contributions for either more than six years after the date the person leaves office or the date of the most recent election in which the person was a candidate, whichever is later (SECTION 23, Sec. 254.203). The bill requires a person who ceased to be an officeholder or who was last a candidate in an election before September 1, 1995 to dispose of unexpended contributions and assets and income related to contributions not later than January 1, 2002 (SECTION 29). Political Advertising and Campaign Communications C.S.H.B. 2 prohibits a person from knowingly entering into a contract or an agreement to print, copy, publish, or broadcast political advertising that does not, within the advertising itself, indicate that it is political advertising, and that does not include the full names and addresses of specified individuals and committees as set forth in the bill. The bill does not require a person to state the address of a campaign treasurer, candidate, officeholder, or political committee in a political advertisement broadcast on radio (SECTION 26, Sec. 255.001). C.S.H.B. 2 provides that advertising that contains express advocacy is presumed to be political advertising made for the purpose of influencing the election of a candidate. The bill authorizes a person who makes or authorizes an expenditure that is presumed to be for political advertising to file with TEC a signed affidavit stating that the expenditure was not made with the intent to influence an election. The bill requires TEC to determine whether an expenditure for which an affidavit was filed was made with the intent to influence an election (SECTION 27, Sec. 255.009). EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 2 differs from the original bill by removing the provisions related to principal political committees, reports by federally registered committees, criminal penalties for intentional failure to file a complete report, disclosure in advertising of unpaid civil penalties, restrictions on telephone advertising and polling, the fair campaign spending fund, the voter's guide, contributions or loans immediately before an election, and early voting ballots. The substitute requires that additional reports be filed for contributions in excess of $1,000 in the period immediately preceding the election, rather than at various contribution amounts as set forth in the original. The substitute adds that these reports may be filed electronically (SECTION 14, Sec. 254.038). C.S.H.B. 2 modifies provisions regarding contributions from out-of-state political committees and sets forth more in-depth reporting requirements for political contributions accepted and expenditures made by out-ofstate political committees that exceed $200 in the aggregate. The substitute adds provisions that exempt a committee that files an appropriate report with the Federal Election Commission from the TEC reporting requirements (SECTION 11, Sec. 254.031 and SECTION 13, Sec. 254.0313). C.S.H.B. 2 modifies the provisions regarding reporting requirements for contributions and expenditures to apply to contributions and expenditures in excess of $200 rather than $100. The substitute requires information about a contributor's occupation and employer to be reported for contributions to a legislative caucus from each person other than a caucus member that in the aggregate exceeds $200 rather than $1,000. The substitute sets forth reporting requirements for a contribution in excess of $200 received from a child and removes the limit on contributions by children (SECTION 11, Sec. 254.031 and SECTION 12, Sec. 254.0311). The substitute adds provisions related to contributions and expenditures by corporations or labor organizations (SECTION 9, Sec. 253.098). The substitute modifies the application of limits in the original that applied to reimbursing with contributions loans from a candidate's or officeholder's personal funds to apply to both the reimbursement of expenditures made from the candidate's or officeholder's personal funds and to the repayment of loans or credit for which the candidate or officeholder is personally liable (SECTION 6, Sec. 253.042). The substitute modifies the limit above which a candidate for a statewide judicial office may not reimburse from political contributions his or her personal funds to be an amount that in the aggregate exceeds $50,000, as opposed to $100,000. The substitute modifies the original to prohibit a judicial or nonjudicial candidate or officeholder from paying interest on a loan made from personal funds or the personal funds of certain related persons (SECTION 10, Sec. 253.162). C.S.H.B. 2 adds provisions to prohibit the use of coercion to obtain political contributions or other things of value and adds provisions regarding the protection of information included in required political reports (SECTION 2, Sec. 251.010 and SECTION 3, Sec. 253.006). The substitute also adds provisions regarding a TEC index of contributor information compiled from information included in political reports (SECTION 17, Sec. 254.0403). The substitute provides that a person who is campaign treasurer of a political committee that fails to file a report as required is ineligible for appointment as a campaign treasurer (SECTION 4, Sec. 252.0011). C.S.H.B. 2 adds provisions regarding advertising that contains express advocacy (SECTION 27, Sec. 255.009). The substitute does not repeal the provision authorizing an officeholder to use lawfully accepted contributions in connection with the officeholder's campaign after appointing a campaign treasurer. The substitute repeals the provision that provides that an expenditure for the creation of a general-purpose committee by a corporation or labor organization is not reportable as a political contribution (SECTION 28).