Craig A. Steele
T 213.626.8484
F 213.626.0078
E [email protected]
350 South Grand Avenue
37th Floor
Los Angeles, CA 90071
rwglaw.com
MEMORANDUM
TO: Honorable Mayor and Members of the City Council
CC: Robert Fabela, City Attorney
Theresa Bass, City Clerk
FROM: Craig A. Steele
DATE: January 18, 2024
SUBJECT: Potential Campaign Finance Regulations - Responses to Questions This memorandum responds to questions and concepts regarding potential campaign finance regulations that members of the City Council raised during the discussion at the November 28, 2023 City Council meeting.
Some background regarding the law of campaign finance will help provide context for the responses below. As Councilmembers are aware, the role of money in local political campaigns is generally broken down into the concepts of contributions1, expenditures2, and independent expenditures3. All three concepts are defined separately in the Political Reform Act, and the distinctions between the three are critical to courts’ consideration of the validity campaign finance regulations. Very generally summarized, a contribution is a payment to a political candidate or committee for political purposes. An expenditure can be a variety of payments made from a political candidate or committee for political purposes. An independent expenditure is a payment made by anyone to urge a particular result in an election, which “is not made to or at the behest of the candidate or committee.” As the constitutional and statutory legal framework has developed over the past almost 50 years, the definition of the payment tends to determine the level of government regulation that may constitutionally be applied.
1 Defined in Government Code § 82015 and 2 Cal. Code of Regs. § 18215 2 Defined in Government Code Section 82025
3 Defined in Government Code Section 82031 and multiple regulations Honorable Mayor and Members of the City
Council
January 18, 2024 Page | 2
The United States Supreme Court has long viewed spending money on politics as political speech, and that government regulation of such speech “operate[s] in an area of the most fundamental First Amendment activities4.” As to contributions, the Supreme Court has held that the governmental interest in eliminating actual corruption and the appearance of corruption associated with large contributions to a candidate justifies contribution limits that are closely drawn to limit unnecessary abridgment of First Amendment rights5. This means that government may limit the amount of money a contributor may contribute if necessary to avoid corruption or the appearance of corruption, or a quid pro quo arrangement between the contributor and candidate. Anaheim has such contribution limits in the Municipal Code currently. The concept of leveling the playing field - equalizing as much as possible the money available to candidates for campaign activity - is not a constitutionally valid justification for contribution limits.
When it comes to limiting expenditures and independent expenditures, the Constitutional considerations are much more difficult to overcome. Constitutionally valid expenditure limits would require a much more significant justification because the Supreme Court has held political expenditures do not create the same possibility of corruption as contributions, which are payments directly to a candidate or committee6. Independent expenditures are even more difficult to limit because, the Supreme Court has held, the absence of coordination between the individual or organization that makes the expenditure and a candidate essentially eliminates the possibility of corruption or the appearance of corruption7.
Whether that lack of connection is true in practice has been the subject of some debate among academics and others but, to date, these precedents have not been overruled. State law forbids coordination between candidates and their controlled committees and independent expenditures8. If a candidate or committee coordinates with an independent expenditure committee or funder, or directs or requests the independent expenditure, those acts violate the Political Reform Act and may be prosecuted administratively or as misdemeanors. In addition, such coordination turns the “independent” expenditure into a contribution to the candidate or committee, and may violate contribution limits9.
4 Buckley v. Valeo, (1976) 424 U.S. 1, 14
5 Id. at 29
6 See, e.g., FEC v. Massachusetts Citizens for Life, Inc., (1986) 479 U.S. 238 7 Citizens United v. FEC, (2010) 558 U.S. 310, 360-61
8 See, Government Code §§ 85500 and 85501
9 Id.
Honorable Mayor and Members of the City
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With the foregoing context, we will respond to the major questions and concepts raised by the Mayor and Members of the City Council during your previous discussion of these issues on November 28, 2023.
1. Whether the City may impose restrictions on independent expenditure campaigns.
Local limits on the amount spent on independent expenditures would likely be held to be unconstitutional. While invalidating federal limits on independent expenditures by corporations, the Supreme Court held that “[t]he absence of prearrangement and coordination of an expenditure with the candidate or his agent not only undermines the value of the expenditure to the candidate, but also alleviates the danger that expenditures will be given as a quid pro quo for improper commitments from the candidate10.” It might be possible for local jurisdictions to justify regulating independent expenditures based on local proof of illegal coordination or actual evidence of quid pro quo. However, finding a different constitutionally valid justification for limiting contributions to independent expenditure committees has not succeeded11. And the Supreme Court in Citizens United, in striking down restrictions on corporate independent expenditures, rejected justifications such as limiting the appearance of favoritism, access, or perceived influence12.
2. Whether the City may require that the beneficiaries of independent expenditures recuse themselves from decisions that would have an effect on the funders of independent expenditures.
Whether government may impose a recusal requirement on elected officials who are the beneficiaries of independent expenditures is a question that has not, to our knowledge, been decided in a reported appellate court decision. Although this is an idea that, as the City Attorney previously stated, has been the subject of some academic writings, it is not clear that the City could properly justify such a requirement in a way that would pass constitutional muster. Although the Supreme Court has ruled that a legislator has no personal First Amendment right to vote on legislation13, any requirement that an officeholder must recuse themselves from proceedings that effect the funders of independent expenditures could potentially burden the speech and associational rights of the officeholder, the funders, and, possibly, the officeholder’s constituents. The constitutional justifications for such a requirement - theoretically reducing the funder’s ability to “buy” access or favoritism in public
10 Buckley, supra, 424 U.S. at 47; see also, Citizens United v. FEC, (2010) 558 U.S. 310, 357 11 Citizens Against Rent Control/Coalition for Fair Housing v. City of Berkeley (1981) 454 U.S. 290 12 Citizens United, supra
13 Nevada Comm’n on Ethics v. Carrigan (2011) 546 U.S. 117 Honorable Mayor and Members of the City
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January 18, 2024 Page | 4
decisions - has already been rejected by the Citizens United court. Other justifications, such as leveling the playing field or eliminating outside money from politics, have not been upheld.
Further, there are some serious practical considerations that would come with this type of requirement. The proposal would burden the beneficiary of an independent expenditure with the obligation to identify: 1) that an independent expenditure has occurred; 2) the identity of the funders of the independent expenditure; and 3) that a pending City decision could affect one or more of the funders in some material way. All of that knowledge would be dependent on accurate and timely public reporting by the maker of the independent expenditure. There is no other reliable way for the elected official to know all of the information that would require recusal. Further, unlike the new provisions of the Levine Act, the beneficiary could never avoid the recusal requirement or liability by returning a contribution they do not control. The way to mitigate liability for the elected official based on incomplete information would be to impose liability only for what the elected official knew or should have known based on reports.
However, this could create an incentive for independent expenditure committees to under- report, report late, or fail to report at all. On the other side of that coin is the possibility that interested parties could make an independent expenditure for the purpose of disqualifying a decision-maker. Some decisions in Anaheim are so consequential that it is not difficult to see how one side in a disputed decision might consider it a good investment to make an independent expenditure for the strategic purpose of eliminating a decision maker with an opposing view.
Putting the practical concerns aside, it seems relatively clear that this type of new requirement would subject the City to a constitutional challenge. Without binding authority to support the concept political interests and advocates would have a significant interest in litigating the validity of this concept. We respectively suggest that the City Council consider whether becoming a “test case” is worth the perceived benefit this proposal would bring.
Some heightened disclosure requirements for contributions to independent expenditure and other committees have been upheld, despite the fact that they burden constitutional rights, because they generally educate the voters about interests that favor the candidate and they help enforce contribution limits. California already has in place disclosure requirements for independent expenditure committees, including the identification of major donors.
Honorable Mayor and Members of the City
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3. Whether the City may limit the amount of a candidate’s personal funds they may loan to their campaign, or otherwise limit fundraising for debt repayment.
Any use of the candidate’s own money for a campaign, including a loan, is considered a contribution to the campaign14. Generally, the amounts a candidate may contribute to the candidate’s campaign have not been subject to limits because the Supreme Court has held, essentially, that a candidate cannot corrupt themselves by using their own money. In practice, however, candidates often reduce their debt by raising money after they are elected and it could be argued that deductions to retire the candidate’s personal debt might be more corrupting because those contributions effectively are direct payments to the candidate.
Debt reduction is already limited in the Municipal Code and the recent changes to the Levine Act. Under Anaheim Municipal Code Section 1.09.050.020, post-election contributions for the purpose of retiring campaign debt are subject to the same aggregate contribution limits applicable to the election. In addition, Government Code Section 84308 now requires officers to disclose and recuse themselves from proceedings that could affect contributors of more than $250 in any given year, which reduces the possibility that a large post-election contributor could influence a governmental decision.
Recently, in a statute not currently applicable to Anaheim, the Legislature added Government Code Section 85307(b) to limit the amount of personal funds a candidate may loan their own campaign to $100,000. Candidates also are prohibited from charging interest to their campaigns. These limits are not applicable in local jurisdictions that have adopted lower contribution limits than State law, like Anaheim, but could be made applicable in the Municipal Code. Although we are not aware of any cases that have upheld Section 85307 since it was adopted, the City Council may wish to adopt the same limitations. Further, we are aware that some cities have a imposed a post-election time period during which fundraising for debt reduction is allowed. In this example, the candidate is allowed to raise funds to retire debt for some period - say 12 months - following the election, after which the debt must be forgiven.
This may tend to discourage candidates from making large loans to their campaigns or accepting them from others.
4. Whether the City could require more reporting from independent expenditure committees, such as by extending the reporting periods prior to elections.
If a person or entity makes independent expenditures (as defined) totaling $1,000 or more in support of or opposition to a candidate or measure, that person or entity becomes a
14 2 Cal. Code Regs. § 18215(b)(2)
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committee and must file campaign reports on a typical pre-election schedule. If the expenditure is made within a specified period of time prior to the election, the independent expenditure committee also must file a late independent expenditure report within 24 hours15.
Some local agencies require more timely reporting from independent expenditure committees, and we think that Anaheim could increase reporting requirements for independent expenditures in various ways if the City Council believes that would be beneficial. One way would be to require additional pre-election reporting such as a report within a certain short period after any independent expenditure. Another way might be to reduce the threshold for qualifying as an independent expenditure committee from the current $1,000 if smaller, unreported, expenditures have occurred in Anaheim.
In general, requiring additional disclosure at the local level is permitted, as long as the additional requirements do not prevent or excuse the subject of the regulation from complying with the Political Reform Act16.
5. Whether the City may lower the threshold for independent expenditure committees to disclose major funders.
Currently, committees that disseminate political advertising [as defined] are required to report the expenditures for that advertising, any contributions that paid for the communications, the major funder or sponsor of the committee and/or major contributors.
This is a very confusing area of state law because the identification thresholds can change based on the nature or form of the communication. However, $50,000 is a common threshold for some disclosure requirements. So, if an independent expenditure committee makes an expenditure above a specified amount for communications, the identity of the major funder may be required on the communication itself, on independent expenditure reports, in the name of the committee, and/or in contribution reports filed by the independent expenditure committee.
As we stated above, additional disclosure requirements are generally favored because the government can demonstrate more important governmental interests that justify the slightly increased burden on the political “speaker.” Additionally, such requirements may not prevent committees from complying with State law requirements.
If the City Council determines that more disclosure of the funders of independent expenditures is necessary, the City should determine the dollar threshold that is necessary to
15 Government Code Sections 82036.5 and 84204
16 Government Code Section 81013
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meet the constitutional requirement that the law be drawn narrowly to meet the governmental interest. Reporting thresholds that are too low may have the effect of unconstitutionally burdening political speech because potential speakers may decide that reporting is not worth the benefit of the speech. The City will want to identify the purpose of the additional identification or reporting requirements and decide at what level of expenditure those additional requirements are justified. In large part, this determination could be based on past history of independent expenditure amounts in the City.
We hope that the City Council finds these responses to be helpful in your further consideration of these issues. Other issues the City Council raised with staff are addressed in the staff report.
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