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California Amends Pay-to-Play Law for Local Officials

As previously reported in our weekly Essential Ethics blog, California’s SB 1439 (Glazer) was signed by Governor Gavin Newsom on September 29, 2022. The bill, which goes into effect January 1, 2023, amends California’s pay-to-play law in the Political Reform Act to apply to contributions to local elected officials making decisions involving a “license, permit, or other entitlement for use.”

  • SB 1439 removes the exception for “local government agencies whose members are directly elected by the voters,” thereby extending the provisions of Government Code 84308 to all officers of local agencies, whether appointed or elected.
  • The law extends the existing prohibition on contributions from 3 to 12 months following the date a final decision is rendered in the proceeding. It continues to allow an officer to avoid disqualification by returning a contribution within 30 days, provided certain other conditions are met.

Nielsen Merksamer is seeking action by the state’s Fair Political Practices Commission (“FPPC”) to resolve the following issues:

  • Whether the 12-Month Lookback Period for Contributions to Newly Covered Elected Officials of Local Agencies Will Be Applied Retroactively. If the law does apply to pre-2023 contributions, local public officials such as candidates for city council and boards of supervisors who received contributions related to the coming 2022 general election and as far back as January 2022 would be disqualified from participating in proceedings involving parties or participants who, directly or through their agents, made contributions of more than $250 at a time where there was no such restriction in the law. Such a retroactive application could have a dramatic impact on a wide variety of businesses, nonprofits, law firms, consultants and other organizations that would face the prospect of having their licenses, permits, entitlements, and contracts considered by reconfigured decision-making bodies.
  • Pay-to-play restrictions and disclosure requirements have long been a feature of federal, state and local laws and have largely been upheld. However, a retroactive application of such a law is strongly disfavored by extensive precedent, the text and legislative history of the statute does not indicate the Legislature intended to disqualify officials based on pre-enactment date contributions, and such an interpretation would depart from recent precedents and infringe due process principles and the exercise of core political speech. The FPPC considered the potentially retroactive impact of another law impacting local contributions in 2021.
  • Notably, after the 1982 passage of the original version of § 84038, part of a bill known as the “Levine Act,” the FPPC promptly adopted a regulation specifying that “the prohibitions and requirements of Government Code Section 84308 do not apply to contributions made or received prior to January 1, 1983 [the effective date of the law].” (2 CCR § 18438 (1983), emphasis added.) Immediate adoption of a similar regulation by the FPPC in 2022 would resolve concerns and ambiguities about retroactivity.
  • Whether the Period for Return of Contributions to Avoid Disqualification Works Under a Retroactive Interpretation. A covered public official can avoid disqualification by returning a contribution within 30 days of the time the officer “knows, or should have known, about the contribution and the proceeding.” Unless the issue of retroactive application is promptly resolved via advice or regulation from the FPPC, this provision raises issues for officials who were not previously covered by the law and therefore accepted, prior to the effective date of the law, a contribution from a party to an ongoing or upcoming proceeding. This issue is most easily resolved by FPPC advice or regulation specifying that contributions made prior to the effective date of the amended law, January 1, 2023, are not covered.
  • Whether the Amendments Expanded Disclosure Requirements for Contributors. Disclosure of contributions has been an existing feature of Government Code § 84308 but has always been limited to disclosure of contributions to members of the covered agency. The amended law inexplicably drops the language specifying that the disclosure requirement applies only to contributions to “any officer of the agency” in a new section (e)(1) that otherwise largely mirrors the old lawA review of the legislative history suggests that the phrase was inadvertently removed when editing previously proposed provisions involving spouses, and therefore that the Legislature did not intent to enact a substantive change that would vastly expand the scope of a contributor’s disclosure obligations in covered proceedings.

We have prepared a detailed analysis for clients regarding the unclear impact of the law, proposed resolutions, including the prospect for litigation, and the short-term precautions that should be taken by contributors and agencies. Others in the regulated community have also sought guidance and provided interim advice.