Legislature(1995 - 1996)
02/29/1996 08:08 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE February 29, 1996 8:08 a.m. MEMBERS PRESENT Representative Jeannette James, Chair Representative Joe Green Representative Ivan Ivan Representative Brian Porter Representative Caren Robinson Representative Ed Willis MEMBERS ABSENT Representative Scott Ogan, Vice Chair COMMITTEE CALENDAR HOUSE BILL NO. 368 "An Act relating to election campaigns, election campaign financing, the oversight and regulation of election campaigns by the Alaska Public Offices Commission, the activities of lobbyists that relate to election campaigns, and the definitions of offenses of campaign misconduct; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 317 "An Act relating to election campaigns, election campaign financing, the oversight and regulation of election campaigns by the Alaska Public Offices Commission, the activities of lobbyists that relate to election campaigns, and the definitions of offenses of campaign misconduct; and providing for an effective date." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 368 SHORT TITLE: ELECTION CAMPAIGN FINANCE REFORM SPONSOR(S): REPRESENTATIVE(S) JAMES JRN-DATE JRN-PG ACTION 12/29/95 2362 (H) PREFILE RELEASED 01/08/96 2362 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2362 (H) STA, JUDICIARY, FINANCE 01/25/96 (H) STA AT 8:00 AM CAPITOL 102 01/25/96 (H) MINUTE(STA) 01/30/96 (H) STA AT 8:00 AM CAPITOL 102 01/30/96 (H) MINUTE(STA) 02/01/96 (H) STA AT 8:00 AM CAPITOL 102 02/01/96 (H) MINUTE(STA) 02/29/96 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 317 SHORT TITLE: ELECTION CAMPAIGN FINANCE REFORM SPONSOR(S): REPRESENTATIVE(S) FINKELSTEIN JRN-DATE JRN-PG ACTION 04/21/95 1427 (H) READ THE FIRST TIME - REFERRAL(S) 04/21/95 1427 (H) STATE AFFAIRS, JUDICIARY, FINANCE 01/08/96 2358 (H) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS 01/08/96 2358 (H) STATE AFFAIRS, JUDICIARY, FINANCE 01/25/96 (H) STA AT 8:00 AM CAPITOL 102 01/25/96 (H) MINUTE(STA) 01/30/96 (H) STA AT 8:00 AM CAPITOL 102 01/30/96 (H) MINUTE(STA) 02/01/96 (H) STA AT 8:00 AM CAPITOL 102 02/01/96 (H) MINUTE(STA) 02/29/96 (H) STA AT 8:00 AM CAPITOL 102 WITNESS REGISTER REPRESENTATIVE DAVID FINKELSTEIN Alaska State Legislature State Capitol, Room 424 Juneau, Alaska 99801-1182 Telephone: (907) 465-2435 POSITION STATEMENT: Provided testimony on HB 317 and HB 368. MIKE FRANK, Chair Campaign Finance Reform Now 2224 Turnagain Parkway Anchorage, Alaska 99517 Telephone: (907) 248-5078 POSITION STATEMENT: Provided testimony on HB 317 and HB 368. ACTION NARRATIVE TAPE 96-25, SIDE A Number 0034 The House State Affairs Committee was called to order by Chair Jeannette James at 8:08 a.m. Members present at the call to order were Representatives Ivan, Porter, Willis and James. Members absent were Representatives Ogan, Green and Robinson. HB 368 - ELECTION CAMPAIGN FINANCE REFORM HB 317 - ELECTION CAMPAIGN FINANCE REFORM The first order of business to come before the House State Affairs Committee was HB 368 and HB 317. CHAIR JEANNETTE JAMES called on Representative David Finkelstein to discuss the sections in HB 368 and HB 317. Number 0062 REPRESENTATIVE DAVID FINKELSTEIN explained Section 9, "LIMITATIONS ON AMOUNT OF POLITICAL CONTRIBUTIONS," included the various contribution limitations. He cited the existing law was reduced from $1,000 to $500 as a maximum contribution from individuals to candidates, or from groups to candidates. He further cited the contribution maximum to groups was $250 with the exception of parties which was $5,000. The maximum from a group that was a party was $50,000 statewide or if the governor and lieutenant governor teamed up it was $100,000. Number 0253 REPRESENTATIVE BRIAN PORTER asked if Section 9 cut in-half the existing provisions in law? Number 0255 REPRESENTATIVE FINKELSTEIN replied, "no." The section also established new provisions as well. He cited currently there were no limits to groups or to parties, or from parties. Number 0277 CHAIR JAMES responded there was a $5,000 contribution limit applied to groups giving to candidates. Number 0294 REPRESENTATIVE FINKELSTEIN replied right now the $1,000 limit applied to groups giving to candidates. CHAIR JAMES reiterated there was not a limit to a party giving to a candidate right now, and there was not a limit to giving to a party either. Number 0310 REPRESENTATIVE PORTER wondered if the contribution was limited to the party the candidate was registered with, or a subgroup of the party. He questioned if each of the subgroups could give $5,000 to a candidate, or if, collectively, a candidate could accumulate a total of $5,000? Number 0371 REPRESENTATIVE FINKELSTEIN replied the intent was cumulative. The definition of a party in both HB 368 and HB 317 was in statute which required 3 percent of the total votes for a governor in an election. The group that received 3 percent was the umbrella group. That, he explained, was the only way to distinguish between a group and a party. The Libertarian Party complained according to the definition because they had not reached the 3 percent threshold in many years. The record reflected the arrival of Representative Caren Robinson at 8:10 a.m. Number 0457 REPRESENTATIVE PORTER said, if it was left alone, it would be left to speculation, and wondered if it should be clarified. Number 0471 REPRESENTATIVE FINKELSTEIN commented he thought it was clear. Number 0485 REPRESENTATIVE PORTER asked if "it" referred to the bill or the initiative? REPRESENTATIVE FINKELSTEIN replied the definition was tied to the political party definition. He reiterated he thought it was clear. He suggested asking Mike Frank, Chair, Campaign Finance Reform Now, the opinion of the initiative group. Number 0558 REPRESENTATIVE PORTER said, according to the Legislative Legal Department, it was a question open to debate. Number 0578 REPRESENTATIVE FINKELSTEIN referred the committee members to page 8 of the initiative and read, "a political party has a meaning given in AS 15.16.010.20." Number 0590 REPRESENTATIVE PORTER explained there was not an answer to the question, if all subgroups could contribute in total or up to $5,000. Number 0600 REPRESENTATIVE FINKELSTEIN said he thought he could convince the Legislative Legal Department according to the definition that the entities receiving 3 percent of the total votes should receive the higher maximum contributions. Number 0643 CHAIR JAMES asked if a subgroup could qualify as a group and give another $500? Number 0654 REPRESENTATIVE FINKELSTEIN replied that was an interesting question. There was a provision that said subdivisions were part of the group. He said a subdivision would probably be disinclined to separate from the group because it would then face the lower maximum donation contributions to itself. Number 0695 CHAIR JAMES did not agree with Representative Finkelstein because the main party could give $5,000 and a subgroup could give $500. She did not see the disadvantage. CHAIR JAMES called on the first witness via teleconference in Anchorage, Mike Frank, to respond. Number 0715 MIKE FRANK, Chair, Campaign Finance Reform Now, explained according to the initiative, a political party was allowed to give $5,000 to a candidate, and the other subdivisions were allowed to give $500 to a candidate, if they were not legally part of the party. If the subdivision was closely tied to the party, a contribution was an accounting transfer, and it would count against the $5,000 limit because it was not an independent group. He said the Legislative Legal Department was correct in the fact that there was a "gray area" involved. The gray area was whether or not a subdivision was closely tied to the party. Number 0809 CHAIR JAMES said based on her experience subgroups gave money to the party and seldom did the party give money to the subgroups. She said the subgroups raised and spent their own money, and were only part of the party in name and affiliation. Number 0849 MR. FRANK stated based on the explanation by Chair James, the group would be subject to the $500 contribution limit. Number 860 CHAIR JAMES agreed with Mr. Frank, because it acted separately and qualified as a group and did not decrease the $5,000 that the party could give to a candidate. Number 0902 REPRESENTATIVE FINKELSTEIN moving forward explained Section 10, "RESTRICTIONS ON SOLICITATION AND ACCEPTANCE OF CONTRIBUTIONS," restricted contributions from nonresidents and out of district contributions from lobbyists. He cited the cash limit was reduced to $25 in HB 368, whereas in HB 317 it remained as stated in current statute. Section 10 also addressed time limits, he explained. House Bill 368 allowed the collection of money 11 months before an election and up to 30 days after an election. The section also banned honorariums. The section also addressed family member loans. House Bill 368 included the family member loan while HB 317 did not. He called it an exception to the out-of-state rule. CHAIR JAMES asked for clarification. She wondered if a family member loan was included in the initiative. REPRESENTATIVE FINKELSTEIN replied, "yes," it was in the initiative. CHAIR JAMES responded, therefore, because it was in the initiative it was allowed in HB 368. Number 1040 REPRESENTATIVE FINKELSTEIN explained there were limits for the first time in HB 368 and HB 317 for candidates recovering loans that exceed $10,000 for a House or Senate race, $25,000 for a governor or lieutenant governor race, and $5,000 for other races. Number 1101 REPRESENTATIVE PORTER asked if Section 10 precluded the acceptance of money in non-election years also? Number 1113 REPRESENTATIVE FINKELSTEIN replied, "that's correct." It set the time limits for the first time of starting and ending points in a campaign. Number 1119 CHAIR JAMES asked if it was 11 months before any election? Number 1150 REPRESENTATIVE FINKELSTEIN replied, "that's correct." He said the Alaska Public Offices Commission (APOC) recommended a shorter period up front and a longer period after the election. Number 1166 CHAIR JAMES said the subcommittee recommended shortening the time limit to allow contributions during the legislative session for legislators. Currently, a legislator could not receive contributions, but a challenger could during the legislative session. The idea was to level the playing field between the challenger and the incumbent. She believed, however, there never would be a level playing field for the incumbent, and cited name recognition, contacts and constituent satisfaction as advantages for an incumbent over a challenger. She said this gave the incumbent an edge and should not be legislated. Number 1245 REPRESENTATIVE PORTER replied, "conversely, if you've never had to push the buttons, you can say just about anything." Number 1249 CHAIR JAMES further replied a candidate could make promises and commitments unknowingly. REPRESENTATIVE CAREN ROBINSON said, "we all learned." Number 1259 REPRESENTATIVE FINKELSTEIN said the citizens of Alaska liked short campaigns and was concerned about constitutional protections, because short campaigns could restrict the right of free speech. Therefore, there was a balance issue as well. Number 1291 CHAIR JAMES replied, if the time was to be shortened for contributions, the people would be "hammered" by the candidates. She agreed with Representative Finkelstein a constitutional challenge would be made based on the right of free speech because it would be inhibited, however. Number 1339 REPRESENTATIVE FINKELSTEIN moving forward explained Section 11, "STATEMENT BY CONTRIBUTOR," was an interpretation problem. He cited a copy of the $250 filing statement needed to be given to the candidate as well as APOC. He called it an "odd provision" in the law. The reports were not enforced and generally not given to the candidates. CHAIR JAMES asked if Section 11 did not require a report filed to the candidate but only with APOC? REPRESENTATIVE FINKELSTEIN replied, "that's correct." Number 1447 REPRESENTATIVE PORTER asked if that was in the initiative? Number 1451 REPRESENTATIVE FINKELSTEIN asked Mr. Frank if that provision was in the initiative? Number 1460 MR. FRANK said he did not remember, and wondered if it was suggested by APOC. Number 1468 REPRESENTATIVE FINKELSTEIN replied the extra requirement was taken out in HB 317 but remained in the initiative. The law remained unchanged, he explained, a copy of the report was still required to be given to the candidate. Number 1498 REPRESENTATIVE ROBINSON asked why an individual was required to give a copy of a report to a candidate when a candidate already filed it on his report? Number 1535 REPRESENTATIVE FINKELSTEIN replied it was a relatively inexpensive way for APOC to receive information from a non-group. It was a double check because it was reported by the candidate who received the money and by the group who gave the money. He further said the initiative added a provision that required individuals to give a copy of the report to the candidates towards the end of a campaign. Number 1612 REPRESENTATIVE ROBINSON wondered what was gained. She asked if it was a check and balance? Number 1646 REPRESENTATIVE FINKELSTEIN said one of the problems with campaign finance reform was that no one was privy to the information. Therefore, enforcement was difficult, and this was one provision that could be used to check if a transaction occurred. He said in practice many people did not file, however. He cited one-half did not turn the forms in. He said he was describing the goal, and it would be useful information in an investigation. Number 1717 REPRESENTATIVE IVAN IVAN said he spent a good 50 percent of his time trying to comply with the APOC reporting requirements as a first time candidate. He said he understood the intent, however. Number 1760 CHAIR JAMES said she discovered a gap before the final report, a contribution of over $250 did not have to be reported. She wondered if the gap had been closed? REPRESENTATIVE FINKELSTEIN replied a bill closed the gap in a previous legislative session. Number 1798 REPRESENTATIVE FINKELSTEIN said the initiative actually removed reporting requirements. He cited the removal of the over $250 contributor report and groups at the low end that were exempted from filing a report. The initiative increased the filing requirements to $1,000, and HB 317 removed the 24 hour expenditure reporting requirements. Number 1857 CHAIR JAMES said the APOC reporting requirements were difficult, and suggested a computerized filing system. The information would also be available for everyone to see as an example or for general public information. REPRESENTATIVE PORTER asked if that was going to happen? Number 1915 REPRESENTATIVE FINKELSTEIN said there was money in the APOC budget, but compatibility problems needed to be solved before proceeding. He said most candidates would probably still file their reports on paper so a transition system was needed. He reiterated the money was there, but there were more problems than originally believed and it was taking longer than expected. Number 1965 CHAIR JAMES said it would help computer users to produce reports. REPRESENTATIVE FINKELSTEIN said the key was to make the computer screen look like the current form used. CHAIR JAMES said the biggest problem was that there was not enough space to write-in on the reports. REPRESENTATIVE FINKELSTEIN responded a computerized system would solve that problem. REPRESENTATIVE ED WILLIS said he was still trying to determine how to find books in the library. Number 2038 REPRESENTATIVE FINKELSTEIN moving forward explained Section 15, "USES OF CAMPAIGN CONTRIBUTIONS HELD BY CANDIDATE OR GROUP," was the next section with any content to discuss. He explained Section 15 described the use of campaign contributions held by a candidate or group. He said the provision of personal use was eliminated. He further explained contributions could be used to pay a civil fine if the candidate did not cause or participate in an activity that lead to a violation. Number 2111 CHAIR JAMES asked Representative Finkelstein to list the places where a candidate could not use the contributions. Number 2116 REPRESENTATIVE PORTER commented personal campaign money could not be given to another candidate or group, but it could be given to a party. Number 2130 REPRESENTATIVE FINKELSTEIN replied that was correct. He explained it was a new restriction. CHAIR JAMES asked which was a new restriction? REPRESENTATIVE FINKELSTEIN replied the theory was that the individual giving might not support the third party. Number 2138 CHAIR JAMES read the following provisions from HB 368, page 13, Sec. 15.13.112, "loaned to a person, knowing used to pay more than the fair market value for goods or services purchased for the campaign, used to pay a criminal fine, used to pay civil penalties; however, campaign contributions held by a candidate or group may be used to pay a civil penalty assessed under this chapter if authorized by the commission after it first determines that a candidate did not cause or participate in the violation, and/or that the candidate cooperated in the revelation of the violation, and cannot be used to make a contribution to another candidate or group." She explained that would be only if political parties were parties, and that subdivisions of political parties were groups. Therefore, money would not be given to the subdivision. Number 2192 REPRESENTATIVE PORTER commented the assumption that what the committee members decided was not always true for everyone. Number 2199 REPRESENTATIVE FINKELSTEIN replied the committee members needed to consider the use of surplus campaign funds, which did allow unlimited amounts to be given to a party. Taken literally, this read, a group included a party. Thus contributions could be made from a candidate to a group. This area could be open to different approaches, however. CHAIR JAMES suggested addressing the surplus provisions in the bills. Number 2225 REPRESENTATIVE PORTER reiterated campaign contributions held by a candidate or group could not be used to make contributions to another candidate or a group. Number 2330 REPRESENTATIVE FINKELSTEIN replied, "right." The next section, Sec. 15.13.116, "DISBURSEMENT OF CAMPAIGN ASSETS AFTER ELECTION," said surplus campaign money could be given to a political party. Number 2249 CHAIR JAMES responded there was a contradiction. Number 2241 REPRESENTATIVE PORTER agreed with Chair James. He said, "you can't have it both ways." He asserted either the subgroups were part of the party and limited to a total of $5,000 and could not give another $500 as a group, or not. Number 2256 REPRESENTATIVE FINKELSTEIN replied a group could choose another approach. The section said, prior to the election, contributions could not be made with campaign funds. After the election, the funds could be given to a party or a charity, for example. REPRESENTATIVE PORTER said a consistent definition was needed for a party. He cited the District 20 Republicans did not fall under the category of a party, therefore, it was classified as a group. According to Section 15, he could not contribute funds to it from his campaign, but he could to the party. REPRESENTATIVE FINKELSTEIN asked if Representative Porter was referring to Sec. 15.13.116? REPRESENTATIVE PORTER replied, according to Sec. 15.13.116, he could make donations without conditions to a political party. He explained that did not mean the District 20 Republicans. Number 2308 REPRESENTATIVE FINKELSTEIN agreed the subdivision issue was confusing. He said the subdivision had options, however. If a subdivision chose to be a group, it could only give a certain amount under current law and under the initiative. If it chose to be part of the party, it could give higher amounts, however. Number 2343 CHAIR JAMES asked how that was possible? Where was the benefit to remain as part of the party, if the maximum contribution limit was $5,000? Number 2352 REPRESENTATIVE FINKELSTEIN replied it could also "receive" a larger amount from a contributor as a party. There was the possibility a subdivision could organize as a non-party group because it allowed an additional $500 contribution limit. He said Mr. Frank acknowledged that as a possibility. He explained the subdivision could chose to remain as part of the party to allow the $5,000 contribution limit from anyone. He said that level was rarely reached by most contributors, however. Number 2377 CHAIR JAMES replied the money would not be useful if it could not be given to a campaign. Number 2380 REPRESENTATIVE FINKELSTEIN responded there were plenty of campaigns and campaign activities for the common good of all a party's candidates to contribute to and cited polling as an example. Number 2389 CHAIR JAMES commented if it was part of the party, then the contributions could be given to the party and the party could give it to all the subdivisions. Number 2400 REPRESENTATIVE FINKELSTEIN replied, "up to a cumulative maximum of $5,000." He reiterated the maximum was rarely reached, however. Number 2403 CHAIR JAMES said it would not be advantageous for a subgroup to be part of the party because the $5,000 was tallied up with the other money the party could contribute. Number 2435 REPRESENTATIVE FINKELSTEIN commented it depended if the candidates already received the maximum amount. He reiterated there was still the option for a subdivision to be a non-party group. However, he believed most subdivision would continue to be party subdivisions. Number 2449 CHAIR JAMES replied the advantage for a subdivision would be the ability to select the candidate to contribute money to rather than the state party deciding. Number 2467 REPRESENTATIVE PORTER stated this issue needed to be clarified. He explained the District 20 Republicans could be a group, and the District 21 Republicans could be a party subdivision. In this explanation two similar entities fell under different rules. He reiterated, this issued needed to be clarified. TAPE 96-25, SIDE B Number 0027 REPRESENTATIVE FINKELSTEIN replied, "it is a good point." He said he had not thought about this issue to any great degree. He explained under current laws the entities had the same choice. He called it a simple choice because there were not any restricts on parties and most chose to be a subdivision of the party. He reiterated, he believed, most entities would remain as part of the party. The contribution limit difference was enough incentive to remain part of the party, he cited. Number 0058 REPRESENTATIVE PORTER asserted there was not language that mentioned the cumulative contribution limit. He said it was assumed. Number 0065 REPRESENTATIVE FINKELSTEIN reiterated, if a party was defined as an entity that received 3 percent of the total votes in the last election for governor, that party could spread out the opportunities to the subdivisions. Number 0086 CHAIR JAMES replied that did not give a subdivision an advantage to remain part of the party. The advantage would be to be a group to maintain the decision making advantages. She said the issue was not clear and suggested looking at various scenarios for clarification. CHAIR JAMES explained the reason she filed HB 368 was to encourage discussion among the legislators and the public. She stated if HB 317 and HB 368 were not filed, the initiative would not be discussed here in Juneau. She commented she did not want to change the initiative, but discuss the problems and fix them. She said the underlying question was whether or not a bill was necessary. There were a lot of people who wanted the initiative to go directly to the ballot. She asserted she was not trying to usurp the authority of the initiative movement, but was trying to create an environment for further discussion. She asked Representative Finkelstein to respond. Number 0216 REPRESENTATIVE FINKELSTEIN said Chair James described the situation well. He said all the concerns were legitimate concerns, and an adjustment or a change might be in the best interest of the public. He stated no one claimed the one and only answer. He explained his preference was for campaign public financing with voluntary limits. He said he would toss HB 317 in a second if there was an amendment proposed for public financing. He said this was a subject where reasonable people could disagree. Number 264 CHAIR JAMES asked Mr. Frank to respond to her comments also. Number 0268 MR. FRANK said Chair James should not feel defensive about the committee's approach. He called it a positive and problem solving approach. He further said he was very encouraged when he heard that bills were being introduced to contribute to the initiative. He agreed with Representative Finkelstein that there were many approaches. He said he also preferred campaign public financing, but it could not be done by an initiative. He said the issue of subdivisions was debated while drafting the initiative. It was decided the initiative group did not want to dictate to local party committees. He called it a gray area, and several approaches were possible. Number 0264 CHAIR JAMES thanked Mr. Frank, and commented she was feeling frustrated and wanted to reiterate the goal of the exercise today. Number 0343 REPRESENTATIVE PORTER commented, if HB 317 and HB 368 did not make it through the system, and the initiative was enacted, he asked how the gray issue would be resolved? He wondered if it would be resolved by APOC or by a court case, for example. Number 0371 REPRESENTATIVE FINKELSTEIN replied APOC would issue regulations on anything put forward. He said there was not a prohibition on regulations. Moreover, if someone was unhappy they could sue. Number 0384 REPRESENTATIVE FINKELSTEIN further stated there were two points involved regarding the subdivision issue. He cited a bill could not stop an entity from deciding whether it could be a group or a subdivision. It could simply reorganize under a new name, for example. He also cited this issue would probably not be a big issue in practice because the maximums would not be reached, based on past contribution records. Number 0455 REPRESENTATIVE PORTER said some apparent subdivisions did not even know the address of the main party. He wondered if any entity could be a subdivision of a party without its knowledge. Number 0468 REPRESENTATIVE FINKELSTEIN replied, that was an interesting question. He wondered if a party could reject a group. Currently, a group could reject a party, but again wondered if a party could reject a subdivision. He said the Commission recognized a central party and the rules emanated from there. He said the initiative confirmed that because it referenced the 3 percent definition. He said a party did not have to take a subdivision just because it wanted to sign-up. Number 0513 REPRESENTATIVE PORTER said it was necessary to forget about logic sometimes. He agreed with Representative Finkelstein, logically, and was concerned about someone else interpreting it differently. REPRESENTATIVE FINKELSTEIN replied he needed to look at the issue again. Number 0531 CHAIR JAMES said there were many different groups and cited the College Republicans as an example. She said it was affiliated with the party, but not part of the party. She explained subdivisions were generally managed by the elected officials of the party. It was clear in that case the subdivision was part of the party. However, the affiliated groups such as the College Republicans were not managed by the party. Number 0580 REPRESENTATIVE FINKELSTEIN said it was confusing. He cited approval was needed from the Democratic Party to be a subdivision as well as donate a certain percentage of money raised to the main party. There was a straight forward tie otherwise it did not exist. CHAIR JAMES said this was a good discussion and suggested moving forward. Number 0605 REPRESENTATIVE FINKELSTEIN moving forward referred the committee members to page 14, Sec. 15.13.116, "DISBURSEMENT OF CAMPAIGN ASSETS AFTER ELECTION." The subsection explained what could be done with the money after a campaign. He stated in the initiative and in HB 368, 60 days were given, while in HB 317, 90 days were given. A legislator, however, was given until February 15 because it was the reporting date. He explained the distribution could be made to pay bills, hold a party, make donations to a political party, charity or to the state of Alaska, repay loans, establish a fund for legal fees, and pass forward property up to $2,500 for future campaigns, such as computers. If failed to distribute the funds as described in the subsection, the disbursements went to the general fund. Number 0662 CHAIR JAMES asked what of value went onto the computers? Number 0667 REPRESENTATIVE FINKELSTEIN explained in the cases of "in kind" contributions, such as the donation of a computer, the candidate did not have to use the purchase price but rather an assessment. He called it the fair market value. He said it would be up to APOC to issue a regulation to make this area more specific. Number 0703 CHAIR JAMES asked about campaign materials such as signs and buttons, for example? She commented they did not have any value except to the candidate. Number 0713 REPRESENTATIVE FINKELSTEIN replied campaign materials had nominal value. He said it was hard to get into that level of detail and reiterated the APOC would need to issue regulations to make it more specific. Number 0725 CHAIR JAMES reiterated campaign materials did not have any value, unless the candidate turned out to be someone famous. CHAIR JAMES announced she had a problem with relying on regulations because the statutes were not written clear enough. She said this was true in every area of the government. The legislature wrote things very vague so that the Administration had to decide how to implement it creating an interpretation problem. In effect, this created a situation where the Administration was making the law when it should be making the application of the law. Number 0813 REPRESENTATIVE FINKELSTEIN said he agreed with Chair James, but in this area of the law it was difficult to "jam" all the details into a bill. The initiative group already complained the bill was too long. He said there were other areas that her comment applied to, but in this area the fair market value concept would probably not be misinterpreted. Number 0840 REPRESENTATIVE PORTER asked what the carry over value was again to a non-election year? Number 0858 REPRESENTATIVE FINKELSTEIN replied, it was zero. He said it was reasonable to allow some funds carried forward. He said it was an area for discussion, however. Number 0873 REPRESENTATIVE PORTER wondered about returning contributions to the original donors. Number 0892 REPRESENTATIVE FINKELSTEIN said that provision was included in HB 317, and not HB 368. It was addressed in HB 317 on a pro-rata basis, whereby an approximation would be calculated. Number 0911 CHAIR JAMES replied that would be difficult because she received $2 and $5 contributions, for example. Number 0919 REPRESENTATIVE FINKELSTEIN responded it was an approximation. He said contributions could be eliminated below a certain level. The intent was to eliminate the return of funds to a friend, for example. Number 0928 REPRESENTATIVE ROBINSON explained when she left the City and Borough of Juneau Assembly she had a campaign account of which either a check was made to the donator or to a candidate of their choice. The leftover amount was given to the Police Department for the Teddy Bear Program. She asked if she would be able to do that according to HB 368 and HB 317? Number 0954 REPRESENTATIVE FINKELSTEIN replied, "no." He explained she could give the money back to the donor, give it to a party of their choice, or give it back to the donor so he could give it to a candidate of his choice. Number 0965 REPRESENTATIVE ROBINSON said it was double paperwork. She said it was just as easy for her to write the check and let it be known where the money came from. REPRESENTATIVE FINKELSTEIN replied it could be done if it was a charity case. Number 0986 CHAIR JAMES commented the approach was different in HB 317 and HB 368. REPRESENTATIVE FINKELSTEIN said Chair James was correct. CHAIR JAMES said the contributions could be returned to the donators in HB 317, but not in the initiative and not in HB 368. Number 1014 REPRESENTATIVE FINKELSTEIN explained he had been focusing his comments on the initiative. CHAIR JAMES replied it was important to note the changes in HB 317 because it indicated second thoughts and a clean-up on your part. She agreed it was also important to focus on the initiative as it might become law of the land. Number 1082 REPRESENTATIVE FINKELSTEIN moving forward referred the committee members to Sec. 15.13.125, "CIVIL PENALTIES." He explained in HB 368 there was an alternative for a citizen suit. He said there were higher penalties imposed for administrative decisions. He cited in HB 368 a new set of standards was also included. They were: knowing violations, negligent violations, and aggravating and mitigating factors. He cited in HB 317 a more simple approach was taken which increased the penalties incurred. He further said in the event a citizen chose to go to court, the court was authorized to fine at a level three times higher than what the penalty would have been. The winner of the case could win reasonable attorney fees and cost from the loser. Furthermore, the winner could receive one-half of the amount of the penalty according to HB 368. He cited in HB 317 the violations were at a lower level. He said in the initiative and HB 368 the violations called for a class C felony for an intentional violation, whereas in HB 317 the violations called for a class A misdemeanor for the worst penalty. Number 1229 REPRESENTATIVE PORTER asked what the violation was for a class C felony in the initiative? Number 1238 REPRESENTATIVE FINKELSTEIN replied, "an intentional violation." He called on Mr. Frank to further address the question. Number 1246 MR. FRANK said all the intentional violations were subject to a class C felony. He explained under current law, the violations were classified as an unclassified misdemeanor. The initiative tried to tie the violations to the existing criminal codes with a graduated step-down approach to a class C felony for intentional violations and so forth. The idea was to treat the matter seriously, if a someone tried to cheat the voter. He further said a lower contribution level was included as a possible deterrent to violate the laws. The record reflected the arrival of Representative Joe Green at 9:20 a.m. Number 1325 REPRESENTATIVE PORTER wondered if it was a knowingly intentional violation of a provision rather than an intentional act that violated a provision. He cited, if he accepted a check, for example, then discovered it was improper, did he committed a felony? Number 1359 REPRESENTATIVE FINKELSTEIN replied the language in the bill called for an "intentional" violation of a provision. Therefore, Representative Porter's interpretation was correct. He said a candidate did not have to intentionally act in a way that violated a provision, but intentionally violate it. Number 1370 MR. FRANK replied a candidate needed to cognitively violate the law. He said the act of accepting the check in Representative Porter's example was not in violation. Number 1390 REPRESENTATIVE FINKELSTEIN said he had received more complaints and concerns about this section compared to any other section from legislators. He cited the problems expressed were potential abuse of citizen suits before an election. Furthermore, it was believed that the system now worked and wondered why a new one was necessary. CHAIR JAMES announced for the record that Representative Joe Green was present. CHAIR JAMES further announced Representatives Robinson and Willis need to leave shortly. Number 1474 REPRESENTATIVE FINKELSTEIN referred the committee members to subsection 15.13.135, "INDEPENDENT EXPENDITURES FOR OR AGAINST CANDIDATES." He explained based on the Buckley v. Valeo decision, an independent expenditure could not be limited. He stated an individual could give an unlimited amount, however. A requirement was added to HB 317 and HB 368 based on a suggestion by APOC to include the following disclaimer statement to a piece of communication. "This NOTICE TO VOTERS is required by Alaska law. (I/we) certify that this (mailing/literature/advertisement) is not authorized, paid for, or approved by the candidate." REPRESENTATIVE FINKELSTEIN explained the disclaimer was needed to make it clear it was an independent expenditure. Number 1518 CHAIR JAMES stated an individual could not be denied to place an add in the paper of which the candidate had nothing to do with it. Number 1530 REPRESENTATIVE FINKELSTEIN further stated a group or a party could place an add in the paper of which the candidate had nothing to do with it. Number 1538 CHAIR JAMES commented a disclaimer would have to be present on the notice that it was not authorized by the candidate. REPRESENTATIVE FINKELSTEIN replied, "exactly." Number 1550 REPRESENTATIVE PORTER wondered if an independent expenditure could be the financing of a television spot for a candidate the last two weeks of its exposure, for example. Number 1563 REPRESENTATIVE FINKELSTEIN replied only if it was not done in concert with the campaign. He said it was highly unlikely, however, and no one had tried something that blatant before. Number 1579 CHAIR JAMES further commented there was nothing stopping an independent expenditure from placing an ad against a candidate. She wondered if the disclaimer would apply to that scenario as well. Number 1599 REPRESENTATIVE FINKELSTEIN said the suggestion from APOC was to add the language "all candidates" which would address the scenario Chair James presented. REPRESENTATIVE PORTER wondered if it said that in the initiative. REPRESENTATIVE FINKELSTEIN replied, the initiative read, "...is not authorized, paid for, or approved by "the" candidate." Leaving the question of who was the candidate unanswered. Number 1634 REPRESENTATIVE FINKELSTEIN moving forward referred the committee members to Sec. 15.13.145, "MONEY OF THE STATE AND ITS POLITICAL SUBDIVISION." He explained the approach was to allow money spent by a government entity on ballot propositions based on the approval of the local government body. He cited a civic concern was a possible issue, however. The subsection banned contributions from government entities to candidates. He explained there was a case where a local government body gave a contribution to a candidate. He explained most felt it was inappropriate. REPRESENTATIVE ROBINSON announced she was sorry, but she needed to leave the meeting. REPRESENTATIVE FINKELSTEIN moving forward referred the committee members to Sec. 15.13.150, "ELECTION EDUCATIONAL ACTIVITIES NOT PROHIBITED." The subsection described the activities not prohibited, and cited the publication of the date and location of an election, educating the public, and sponsoring forums, as examples. He explained that included get-out-the-vote and voter registration as well. Number 1751 REPRESENTATIVE FINKELSTEIN moving forward referred the committee members to Sec. 15.13.400, "DEFINITIONS." He explained the subsection addressed the area of honorarium. He cited HB 317 incorporated the existing honorarium approach that the legislature followed which differentiated an honorarium speech based on subject content. He further explained the subsection clarified the words "individual" which meant a natural person and "person" which meant the same as in AS 01.10.060 and labor union. He called it a technical issue. Number 1870 REPRESENTATIVE JOE GREEN wondered if a speech made at a luncheon was in violation of the honorarium provisions in the initiative. Number 1930 REPRESENTATIVE FINKELSTEIN reiterated HB 317 was in compliance with the ethics code. He said Representative Green's concern could be a problem according to HB 368, however. He said it needed to be clarified further and remain consistent with the ethics code. Number 2093 REPRESENTATIVE PORTER wondered if the key chain he received from the State Chamber of Commerce which was something of value was in violation? REPRESENTATIVE FINKELSTEIN replied, "I suppose." He said it was a good point and the intention was to exempt a gift such as a key chain, however. Number 2122 REPRESENTATIVE FINKELSTEIN moving forward referred the committee members to Sec. 15.56.012, 15.56.014, and 15.56.016, "CAMPAIGN MISCONDUCT IN THE FIRST, SECOND AND THIRD DEGREE." He said these sections were discussed and mentioned earlier. Number 2147 REPRESENTATIVE FINKELSTEIN moving forward referred the committee members to Section 21 addressing lobbyists. He explained the section allowed contributions from lobbyists who lived in the candidates own district, statewide candidates, and parties. Number 2194 CHAIR JAMES wondered about the spouse of a lobbyist. Number 2202 REPRESENTATIVE FINKELSTEIN replied the spouse of a lobbyist could make contributions using their own money. He said it was a potential problem, and when the ethics code was passed in 1992 that banned lobbyists from holding fund raisers everyone assumed the spouse would host the fund raiser instead. The reason it did not turn out that way was because the lobbyist had an image to preserve. The Alaska State Constitution said "we shall regulate lobbying," and not the spouses. He said there was a direct connection between the behavior of a lobbyist and the Alaska State Constitution. Number 2364 CHAIR JAMES said she was pleased to hear that lobbyists were concerned about following the law, because that was not the perception of the public. She said lobbyists were careful about what they could and could not do according to her experiences. REPRESENTATIVE FINKELSTEIN said after the 1992 ethics code was passed, the lobbyists were very concerned about what was allowed and not allowed. He said HB 368 said a lobbyist could not "directly or indirectly collect contributions for, or deliver contributions to, a candidate." He explained that was the interpretation of APOC and it was added to HB 368 for clarification. TAPE 96-26, SIDE A Number 0000 REPRESENTATIVE PORTER explained, according to the initiative, the penalties also applied to the members of the public. Therefore, if an illegal donation was made, the individual was subject to prosecution. Number 0037 CHAIR JAMES replied, "it's pretty scary." REPRESENTATIVE GREEN replied, "It's very scary." Number 0046 REPRESENTATIVE FINKELSTEIN moving forward referred the committee members to Section 26, "This Act takes effect immediately under AS 01.10.070(c)." He explained the initiative was governed by the Alaska State Constitution. He stated the logical effective date would be January 1 which was also recommended by APOC. Number 0105 CHAIR JAMES said HB 368 read, "This Act takes effect immediately under AS 01.10.070(c)." REPRESENTATIVE FINKELSTEIN replied it was the best the bill drafter could do to match the initiative. He agreed it was not be logical to use any other date than January 1. Number 0142 CHAIR JAMES said it would be unfair to restrict or make these changes in an election year. REPRESENTATIVE GREEN said there was already a conflict because this was an election year. Number 0183 REPRESENTATIVE PORTER wondered if the provisions would be retroactive. Number 0199 REPRESENTATIVE FINKELSTEIN replied the issue of surplus addressed about $1.5 million to $2.0 million, a big amount of money prior to the 1996 fund raising season. He explained the current law would apply until the effective date of the new law. Therefore, candidates could quit and take their surplus, or give it away, for example. However, if money was retained until the effective date of the new law it would be subject to those provisions. Number 0281 CHAIR JAMES said, if the effective date was January 1, the surplus would need to be eliminated by December 31. Number 0295 REPRESENTATIVE FINKELSTEIN replied, "right." He cited the federal government addressed this same issue and incorporated a phase-out period of which one-third of the candidates quit and took the money, while two-thirds remained. Number 0356 REPRESENTATIVE PORTER asked what the effective date would be if the initiative passed? REPRESENTATIVE FINKELSTEIN replied approximately March. He explained the date was directly related to the election certification process. Number 0391 CHAIR JAMES said there would be a period of time before the initiative went into effect to collect contributions in the first part of January because it would be a non-election year. Number 0426 REPRESENTATIVE PORTER said the money would be available for lawful expenditure until December 31. CHAIR JAMES replied, "that's correct," and the expenditures could only be campaign related. REPRESENTATIVE PORTER replied, "or legislative related." CHAIR JAMES replied she was not sure if it said legislative related. REPRESENTATIVE FINKELSTEIN replied it would require an amendment to allow a transfer to an office account. CHAIR JAMES cited an example whereby there was a fund raiser in the first part of January. She explained the money could not be spent in a non-election year. Number 0479 REPRESENTATIVE FINKELSTEIN explained the bills did not restrict spending, it only restricted fund raising. He said the funds could be expended at any time in the scenario Chair James presented. Number 0492 CHAIR JAMES said there was a specific list that detailed the spending prohibitions. Number 0529 REPRESENTATIVE FINKELSTEIN answered, he thought Chair James was referring to campaign activities. Number 0556 CHAIR JAMES referred to the prohibition against spending funds for personal benefit. She said it would include legislative expenses. Number 0560 REPRESENTATIVE FINKELSTEIN replied he did not completely agree with Chair James. He said the best way was to transfer the funds was to an office account to separate the expenditures. Number 0568 CHAIR JAMES asked Representative Finkelstein if he agreed the initiative did not allow surplus funds to be spent until campaign time? REPRESENTATIVE FINKELSTEIN replied, "no." The initiative allowed spending on campaign related activities at any time. CHAIR JAMES asked if she could buy signs and campaign buttons for example? REPRESENTATIVE FINKELSTEIN reiterated the only limitations were on the fund raising periods. Furthermore, a candidate could always spend his own money. Number 0587 CHAIR JAMES asked if a newsletter could be sent, for example? Number 0593 REPRESENTATIVE FINKELSTEIN said a newsletter was in the gray area. He explained, if the disclaimer was included, it was appropriate. Number 0659 MR. FRANK said the effective date was controlled by the Alaska State Constitution. He said legislation, however, could be used to affect the transition period. In conclusion, he thanked the committee members for the discussion today. CHAIR JAMES announced HB 317 and HB 368 were scheduled again for Saturday, March 9, 1996. She commented a comparison of the provisions would be helpful for further analysis. She stated she would like to work on the bills further and offer a possible committee substitute. Number 0798 REPRESENTATIVE GREEN said he was concerned about the potential consequences of such a bill. Number 0835 CHAIR JAMES replied there was nothing in HB 317 or HB 368 that could not be amended before passing it to the floor. She reiterated there still was the possibility the initiative would move forward. There was also the possibility of the initiative moving forward along with a bill of which would create conflicts and confusion. Therefore, it was important to include all the parties involved. Number 1014 ADJOURNMENT CHAIR JAMES adjourned the House State Affairs Committee meeting at 9:55 a.m.