Legislature(2001 - 2002)

04/24/2001 03:45 PM Senate STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
           HB 177-CAMPAIGN FINANCE: GROUPS & DISCLOSURE                                                                     
CHAIRMAN  THERRIAULT said  it was not  his intent  to move the  bill                                                            
that day. He was  still digesting the legal decisions  made over the                                                            
last several  years that are pertinent  to the issue and  conversing                                                            
with  the legal  department  about  the limitations  placed  on  the                                                            
legislature as to what they can and cannot do.                                                                                  
During the  previous hearing, there  were questions about  the legal                                                            
opinions  written  on  HB  177. Tom  Amodio,  author  of  the  legal                                                            
opinion,  was on line to  answer questions  and was asked to  give a                                                            
synopsis of the April 13 memo.                                                                                                  
TOM  AMODIO,  Conservation  Council  legal  advisor,  explained  his                                                            
opinion was based  on the Alaska Supreme Court decision  in State v.                                                            
American Civil  Liberties Union (ACLU)  and the subsequent  advisory                                                            
opinion  by the Alaska  Public  Offices Commission  (APOC). In  that                                                            
opinion,  the Alaska Supreme  Court said  corporations that  have no                                                            
business  ties   are  permitted  to   engage  in  election   related                                                            
activities  and are  therefore exempt  from the  corporate ban.  The                                                            
court  also said  that  those  types of  organizations  have  rights                                                            
similar  to those  of  individuals.  This forms  the  basis for  the                                                            
following legal analysis.                                                                                                       
HB 177 purports  to do two things. First, it revises  the definition                                                            
of "group" to include organizations  such as the Alaska Conservation                                                            
Voters (ACV).  This presents  a problem because  ACV activities  are                                                            
primarily unrelated  to election activities. Incorporating  them and                                                            
similar organizations into  the definition of group subjects them to                                                            
reorganization  to all the restrictions  and reporting requirements                                                             
of a  group. They  have many  non-election related  activities  that                                                            
fall  outside  of APOC  jurisdiction  and  do  not come  within  the                                                            
statutory  campaign finance  laws found in  AS 15.13. For  instance,                                                            
ACV does lobbying  and education. HB 177 would affect  contributions                                                            
to ACV that are  for purposes other than to influence  elections. He                                                            
urged  greater   balance  because   they  are  entitled   to  accept                                                            
contributions  in  excess   of  $1,000  that  are  not  intended  to                                                            
influence the election or defeat of a candidate.                                                                                
If a narrow  interpretation of the  Supreme Court decision  is taken                                                            
to say only  the ACV political fund  is subject to the restrictions                                                             
and  reporting  requirements,  then  the  problem  is  it  basically                                                            
transforms  that fund  into a political  action  committee (PAC)  or                                                            
group. The  ACLU decision of the Supreme  Court upheld the  ban that                                                            
the organizers  of business  corporations may  form a PAC and  raise                                                            
money from  non-business sources and  participate in elections  that                                                            
way. The same people who  might form "Business Inc." could also form                                                            
"Business  PAC" and  participate in  elections that  way as long  as                                                            
"Business PAC" does not accept money from prohibited sources.                                                                   
The court could  have said the same  thing with relation  to ACV but                                                            
it  found  that,  constitutionally,  there  is  a  difference.  ACV,                                                            
although not established  for election related purposes, was created                                                            
to voice its  opinion on conservation  issues. It's not permissible                                                             
to restrict  those activities by declaring  it a PAC and  subjecting                                                            
it to all the group restrictions and reporting requirements.                                                                    
CHAIRMAN  THERRIAULT asked  about  the determination  that they  had                                                            
rights  similar   to  individuals:   Can  they  be  regulated   like                                                            
individuals? In state statutes  there are groups and individuals and                                                            
each has requirements.  Non-group  entities would be swept  into the                                                            
group classification  under HB 177.  It's questionable how  workable                                                            
that is but why couldn't they be limited like individuals?                                                                      
MR.  AMODIO said  there  is a  conceptual  problem.  Of course,  the                                                            
legislature  may   impose  limits  it  feels  are  appropriate   but                                                            
normally, an individual  may not accept money from  another in order                                                            
to engage in campaign  election related activities.  That changed an                                                            
individual  into a group or  an illegal conduit.  In the eye  of the                                                            
law,  a corporation  is  generally  viewed as  a single  entity  and                                                            
therefore an individual even though it has many shareholders.                                                                   
CHAIRMAN THERRIAULT asked  if there is any prohibition to creating a                                                            
category of regulation and oversight on non-group entities.                                                                     
MR. AMODIO thought  it was possible if it is done  properly and with                                                            
due care. Those  qualified organizations  are subject to  Alaska law                                                            
just like any others. He  just does not believe they can be put into                                                            
the group category as HB 177 presently does.                                                                                    
CHAIRMAN  THERRIAULT   asked  if  it  is  correct  that  the  Alaska                                                            
Conservation Foundation  is the umbrella group and is a 501(c)3 non-                                                            
profit and Alaska Conservation Voters is a (c)4 group.                                                                          
MR. AMODIO thought that was correct.                                                                                            
CHAIRMAN THERRIAULT asked  if it is correct that Alaska Conservation                                                            
Voters is a non-profit (c)4 that is formed as a group.                                                                          
MR. AMODIO said  no, not to his knowledge. Prior to  the issuance of                                                            
the State  v. ACLU decision,  APOC's view  was that merely  by being                                                            
Alaska   Conservation  Voters   Inc.  they   were  prohibited   from                                                            
participating in elections  so they did have a PAC at one time. They                                                            
report as a group  based on APOC's advisory opinion  and they report                                                            
funds spent  out of their separately  maintained political  election                                                            
related activity fund.                                                                                                          
CHAIRMAN  THERRIAULT asked  Mr. Amodio whether  he had advised  them                                                            
previously on the structure.                                                                                                    
MR. AMODIO  said he  advised them  on campaign  finance and  related                                                            
matters.  The filing of Alaska  Conservation  Foundation as a   non-                                                            
profit  was  prior to  his  involvement  and  it was  structured  in                                                            
accordance  with  federal  tax  laws,  which  is  not  his  area  of                                                            
expertise. He  has a general understanding of the  interplay but his                                                            
primary  role is to  understand the  campaign finance  laws as  they                                                            
pertain to them.  At one time, their only means of  participating in                                                            
a candidate election was  to form a PAC and they did that. Under the                                                            
ACLU decision,  they were permitted  to participate directly  in the                                                            
election. The APOC decision clarified that.                                                                                     
CHAIRMAN  THERRIAULT  asked whether  he  quoted Austin  v.  Michigan                                                            
Chamber of Commerce.                                                                                                            
MR. AMODIO  said he did not quote  from it but is familiar  with the                                                            
CHAIRMAN  THERRIAULT  commented  he drew  heavily from  the  Federal                                                            
Election Commission (FEC)  v. Massachusetts Citizens for Life (MCFL)                                                            
case. It seems  to him that Austin has paid particular  attention to                                                            
the use  of non-profits  general treasury  and the  possible  use of                                                            
such  non-profits  as conduits  for  money.  He asked  for  possible                                                            
application  in the Austin decision  as far as what may and  may not                                                            
be done.                                                                                                                        
MR. AMODIO thought Austin  also addresses the issue of money that is                                                            
prohibited  in  terms of  business.  He thought  he  remembered  the                                                            
Chamber  of Commerce  had strong ties  to business  entities  and so                                                            
although  it refined  the MCFL case  somewhat, it  is less  directly                                                            
relevant to  this case. The Alaska  Supreme Court interpretation  of                                                            
this issue  referred to MCFL in defining  non-business organization                                                             
as exempt from  the corporate ban  of participating in an  election.                                                            
CHAIRMAN THERRIAULT  said in Austin the courts found  the chamber of                                                            
commerce  was tied  to corporations  and could  not  be used as  the                                                            
conduit.  But, if the  Alaska Conservation  Foundation also  accepts                                                            
corporate contributions  and that  money is passed on to  the Alaska                                                            
Conservation Voters, wouldn't this be contrary to that decision?                                                                
MR. AMODIO  did not know  whether the foundation  accepts  corporate                                                            
contributions  or not. He did know the money from  the foundation is                                                            
restricted  funds  that  may  not  be  used  for  election   related                                                            
activities. It goes into  the general fund but must be accounted for                                                            
separately and may not be used to influence an election.                                                                        
CHAIRMAN THERRIAULT said  he had a sheet that shows $20,000 in group                                                            
contributions  to year 2000  candidates. He  asked for confirmation                                                             
that the  money is accounted  for separately  and none of the  money                                                            
flowing  from the  foundation  went to  contributions  given by  the                                                            
group. Can (c)3 funds be  passed to (c)4 or is there a line required                                                            
by federal law?                                                                                                                 
MR. AMODIO again  stressed this is not his area of  expertise but he                                                            
thought  (c)3  funds  could be  passed  to  (c)4  but there  may  be                                                            
restrictions on how they  may be used. In the case of ACV, it is his                                                            
understanding  that  they  may  not be  used  for  election  related                                                            
candidates   or  activities   but  he  wasn't   sure  about   ballot                                                            
propositions.  They  must be  used for  ACV  non-candidate  election                                                            
activities.  Under federal  law, more  that half  of ACV  activities                                                            
must be non-election related.                                                                                                   
CHAIRMAN THERRIAULT  asked for the name of an attorney  who works in                                                            
this area of the law.                                                                                                           
MR. AMODIO  said the  attorney ACV  uses for advice  on federal  tax                                                            
matters is Greg Colvin  from San Francisco. He would provide contact                                                            
CHAIRMAN  THERRIAULT affirmed  that the year  2000 financial  report                                                            
shows substantial  amounts of Alaska  Conservation Foundation  money                                                            
allocated  for education  and a  variety of  different programs.  He                                                            
would like to discuss federal restrictions with attorney Colvin.                                                                
Next, he asked about independent  expenditures and whether he agreed                                                            
that the  state has a right  to compel disclosure  on the source  of                                                            
the funds.                                                                                                                      
MR.  AMODIO  said   under  Buckley  v.  Vallejo  that   is  correct.                                                            
Independent  expenditures  can't be  restricted but  it can  require                                                            
reporting on the source.                                                                                                        
CHAIRMAN  THERRIAULT  asked whether  ACV  and the  foundation  share                                                            
office space and whether that is permissible.                                                                                   
MR. AMODIO could not say for sure.                                                                                              
CHAIRMAN THERRIAULT  said in the Austin case the court  talked about                                                            
the corporate  structure available to entities through  which wealth                                                            
may  be  accumulated.  Considerable   wealth  is being  accumulated                                                             
through  allowed  governmental  structures but  it  is difficult  to                                                            
track how much  is going into the political arm of  the organization                                                            
and how  much is allocated  for educational  purposes. He asked  why                                                            
the courts  or the  legislature should  not be  concerned with  that                                                            
when  they  were clearly  concerned  in  the  Austin  case.  Justice                                                            
Brennon wrote,  "Corporate wealth  can unfairly influence  elections                                                            
when it is  deployed in the form of  independent expenditures,  just                                                            
as it can when  it assumes the guise of political  contributions. We                                                            
therefore  hold  that  the  state  has  articulated  a sufficiently                                                             
compelling  rationale  to support  its  restriction  on independent                                                             
expenditures  by corporations." Why  would this not also  be applied                                                            
to ACV?                                                                                                                         
MR.  AMODIO  thought  it  was a  misunderstanding   of accumulating                                                             
wealth. The Austin  court was talking about companies  with business                                                            
activities  and  business  shareholders  and  using  that  to  amass                                                            
wealth.   British  Petroleum   and   similar  companies   would   be                                                            
appropriate  examples.  ACV and  similar entities  do  not have  any                                                            
business  activities. They  raise money  but it  is not through  the                                                            
operation of a business.  In addition, well over half of their money                                                            
goes to  non-election related  activities.  Clearly they fall  under                                                            
the  MCFL idea  that  they  are created  around  an issue.  In  this                                                            
instance  it is to disseminate  information  about conservation  and                                                            
conservation  related activities.  Under the  First Amendment,  they                                                            
have the right  to speak out on those  issues and to raise  money so                                                            
their voice can be heard.                                                                                                       
The Austin case does not  override that and the Alaska Supreme Court                                                            
in ACLU did not bar those activities.                                                                                           
CHAIRMAN THERRIAULT asked  whether the state would have a compelling                                                            
interest  if  most  of  the  money  were  coming  from  outside  the                                                            
boundaries of the electorate.  Would this give a greater requirement                                                            
for  disclosure and  placement  of restrictions  because  there  are                                                            
restrictions  on individual campaigns  soliciting funds from  out of                                                            
MR. AMODIO recalled  the Alaska Supreme Court upheld  those types of                                                            
CHAIRMAN  THERRIAULT  said  that  if these  entities  could  not  be                                                            
categorized as  a group and there are some difficulties  in treating                                                            
them as individuals  and another structure is created,  that applies                                                            
only  to  these  non-group  entities.  He  asked  if  ACV  could  be                                                            
restricted on  the amount of money that could come  to them from out                                                            
of state sources and then into political activities.                                                                            
MR.  AMODIO  said  it's  correct  for  money  going  into  political                                                            
activities  but  the  term political  may  mean  political  but  not                                                            
elections.  It would be correct to  say the legislature may  be able                                                            
to  impose  restrictions  on  money  for  election   candidates  and                                                            
election  related activities  coming  from out of  state. He  didn't                                                            
think restrictions  could  be imposed on  amounts received  for non-                                                            
election   related  activities   because   they   are  outside   the                                                            
jurisdiction of APOC and AS 15.13.                                                                                              
CHAIRMAN THERRIAULT asked  if he was referring to an event such as a                                                            
contribution  coming from an out of  state foundation to  support an                                                            
Earth Day activity.                                                                                                             
MR. AMODIO  said yes,  that type  of contribution  goes toward  non-                                                            
election related activities.                                                                                                    
CHAIRMAN  THERRIAULT  asked  if  he  differentiates   between  funds                                                            
flowing directly  through and to an  individual candidate  from soft                                                            
money expenditures in an election year.                                                                                         
MR. AMODIO  thought the  federal district  court recently made  that                                                            
type  of distinction  and his  letter was  written  just after  that                                                            
decision was made.  The court said the legislature  could not impose                                                            
restrictions  on  the amount  of  soft  money.  Alaska Conservation                                                             
Voters'  primary activities  are not for  influencing elections.  It                                                            
has  important  Earth   Day  activities,  lobbying  activities   and                                                            
education  activities that  speak out on  environmental issues  in a                                                            
non-candidate   election  forum.   The  legislature  cannot   impose                                                            
campaign  finance   restrictions   on  those  activities,   such  as                                                            
restricting the percentage of monies from out of state entities.                                                                
CHAIRMAN  THERRIAULT  asked  for  the contact  number  for  the  San                                                            
Francisco tax  attorney in case there  were questions regarding  tax                                                            
structure  and how money  has to  be accounted  for. The mixture  of                                                            
federal  law,  state  law  and  (c)3,  (c)4  requirements   is  more                                                            
complicated than anticipated.                                                                                                   
He asked if committee  members had any questions for  Mr. Amodio and                                                            
they did not.                                                                                                                   
Brooke Miles was on line  to answer questions. She had no additional                                                            
comments  since  the  last  meeting  and  there  were  no  questions                                                            
directed at her.                                                                                                                
Side B                                                                                                                          
MR. CONN,  Executive Director  of AkPIRG, asked  if there have  been                                                            
amendments  to  the  legislation  that  reflect  Judge  Singleton's                                                             
CHAIRMAN  THERRIAULT  said that  SB 103  is currently  in the  rules                                                            
committee.  They adopted  a rules committee  substitute after  Judge                                                            
Singleton's decision.                                                                                                           
MR. CONN  responded he  hopes the  inquiry directed  in HB 177  is a                                                            
good faith  attempt to react to a  court decision in a global  sense                                                            
and not a focused  investigation of the single entity  that has made                                                            
use of  an exemption  in the name  of a political  organization.  He                                                            
encouraged  members  to view  the  subject as  a moving  target.  He                                                            
     [He}  sees  a subject  that  is moving  to  some ultimate                                                                  
     resolution  in a bundled up sense  at a high court level.                                                                  
     In the mean  time, our own law has not been examined  by a                                                                 
     third   party  academic  institution   to  determine   for                                                                 
     everyone's  edification  whether or not  campaign finance                                                                  
     restrictions,  reforms and disclosures  have a bearing  on                                                                 
     the direction and participation  in the political process.                                                                 
CHAIRMAN THERRIAULT  said many of the questions are  centered on the                                                            
Alaska Conservation Alliance  and Alaska Conservation Voters because                                                            
they  have taken  this to  a level that  is unanticipated  in  state                                                            
statute.  He is also  looking at  other entities  in the state  that                                                            
might be using  a similar structure  in accumulating and  channeling                                                            
He asked Susan  Schrader whether she would answer  some questions on                                                            
structure and  flow and she agreed. He asked whether  he was correct                                                            
that the foundation  [Alaska Conservation Foundation]  is at the top                                                            
and  funds   flow  to   Alaska  Conservation   Voters.  The   Alaska                                                            
Conservation  Alliance is the  contact for  lots of the grass  roots                                                            
organizations around the state.                                                                                                 
SUSAN   SCHRADER,   Alaska  Conservation    Voters  representative,                                                             
disagreed.  She explained the Alaska  Conservation Foundation  makes                                                            
grants to  many different  non-profit entities.  Individuals  in the                                                            
conservation  field  in the state  don't  view them  as an  umbrella                                                            
group but as a  foundation. They are different than  the Rockefeller                                                            
Foundation in  that they get foundation money and  then they give it                                                            
out to Alaska conservation groups.                                                                                              
Alaska  Conservation  Alliance and  Alaska Conservation  Voters  are                                                            
more correctly  the umbrella groups  for all the other conservation                                                             
groups  in  the  state.  They  are  the  outgrowth   of  the  Alaska                                                            
Environmental Lobby and  the Alaska Environmental Assembly that have                                                            
been in  existence for  years. Alaska Conservation  Alliance  is the                                                            
(c)3  organization  and  Alaska  Conservation  Voters  is  the  (c)4                                                            
organization.  When  you call  either the  Juneau  or Anchorage  ACV                                                            
office,  the  phone  may  be answered   either Alaska  Conservation                                                             
Alliance  or Alaska  Conservation Voters.  All paid  staff work  for                                                            
both organizations and  office space is shared by both organizations                                                            
at  both  locations.  They  do  not  share  space  with  the  Alaska                                                            
Conservation Foundation.                                                                                                        
SENATOR HALFORD joined the meeting.                                                                                             
CHAIRMAN  THERRIAULT  asked  if  it  is correct  that  each  of  the                                                            
organizations solicit contributions themselves.                                                                                 
MS. SCHRADER  said that is  correct. There  are currently 44  member                                                            
organizations  and six or eight of them are associate  members. Some                                                            
of the  associate members  are businesses  and they  are members  of                                                            
ACA.  ACV has about  35 member  organizations,  none  of which  is a                                                            
business;  they are all  non-profits such  as Anchorage Audubon  and                                                            
Southeast Alaska Conservation Council.                                                                                          
CHAIRMAN  THERRIAULT  asked  for confirmation  that  the  foundation                                                            
provides   funding  for   grants  to  many   individuals   including                                                            
Conservation Alliance.                                                                                                          
MS. SCHRADER  said she  was not  particularly involved  in ACA  fund                                                            
raising so she is not sure  if monies from ACF is distributed to the                                                            
alliance or to the voters. She could find out however.                                                                          
CHAIRMAN  THERRIAULT said he  was puzzled how  any money could  come                                                            
from  a (c)3  and move  into  a (c)4  and be  used for  any kind  of                                                            
political activities  because the  (c)3 is educational and  strictly                                                            
non-political by the federal code.                                                                                              
MS. SCHRADER  said her understanding  is similar in that  a (c)3 may                                                            
not do any  type of candidate  work. Tom Amodio  said that  no money                                                            
from ACF is used for ACV's election-related activities.                                                                         
CHAIRMAN  THERRIAULT  asked  for examples  of  non-election  related                                                            
activities in which ACV participates.                                                                                           
MS.  SCHRADER said  most  of her  work is  done under  the  lobbying                                                            
efforts, there is a volunteer  lobbyist program and participants are                                                            
paid a small per  diem and travel expenses are paid,  the score card                                                            
and newspaper are produced.                                                                                                     
CHAIRMAN THERRIAULT asked  if those were activities (c)3 money could                                                            
flow through to.                                                                                                                
MS. SCHRADER  said she doesn't  know about  ACF funds but yes,  (c)3                                                            
money can be used.  For years Alaska Environmental  Lobby was a (c)4                                                            
and in the  1980s and early 1990s  many members were (c)3s  and they                                                            
would pay dues  to the (c)4 and the (c)4 lobbied on  behalf of those                                                            
member groups.  However,  Alaska Environmental  Lobby never  did any                                                            
candidate work.                                                                                                                 
CHAIRMAN THERRIAULT apologized  for grilling Ms. Schrader because it                                                            
isn't really  her job to answer these  types of questions.  He asked                                                            
if there was a  more appropriate individual to whom  he could direct                                                            
his questions.                                                                                                                  
MS.  SCHRADER  suggested contacting  the  executive  director,  Mary                                                            
CHAIRMAN THERRIAULT  read from a letter from Richard  Caulfield. "In                                                            
the past  year we  have achieved  this by raising  approximately  $5                                                            
million." It's  difficult for the state to figure  out how the money                                                            
is flowing through to educational  activities, Earth Day or lobbying                                                            
and how much  is for use in campaigns  or soft money contributions.                                                             
That is one of  the things the legislature is interested  in finding                                                            
out and  trying to track.  It's money that  has been gathered  under                                                            
the structure  that is allowed  by the government.  The Austin  case                                                            
has some implications for the state to consider.                                                                                
He  said the  bill would  be  held in  committee and  adjourned  the                                                            
meeting at 4:45 p.m.                                                                                                            

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