SB 5-POLITICAL CONTRIBUTION LIMITS/PROHIBITION  2:12:05 PM CHAIR COGHILL reconvened the meeting and announced the consideration of SB 5. [CSSB 5(STA), 30-LS0112\U, was before the committee.] 2:12:19 PM SENATOR MEYER, sponsor of SB 5, introduced the legislation paraphrasing the following sponsor statement: In an effort to restore public trust and reduce corruption, or the appearance of corruption, in our campaign finance system, in 1996 the Alaska legislature passed sweeping campaign finance reforms. Included in legislation was a prohibition on all contributions by lobbyists to candidates outside of their own election district. What was not anticipated or addressed by the 1996 reforms, and is an issue that arose during this last election cycle, is the ability for a lobbyist to contribute to a political action group that is controlled by a legislator or other candidate for the legislature. This loophole in the law allows a sitting legislator, or a candidate for the legislature, to solicit, raise, and disperse funds from lobbyists, on behalf of a group that they control, thus circumventing the limit on lobbyists' contributions to candidates. Further, our state statutes explicitly state that a legislator may not solicit or accept funds in order to influence a state election during a regular or special session, however, there is no clear prohibition against a political action group controlled by a legislator doing so. In addition, SB 5 includes a prohibition on dispersing funds during a legislative session. Senate Bill 5 will amend our state statutes to bolster our campaign finance laws by: 1. Closing the loophole that allows lobbyists to make political campaign contributions to groups headed by current lawmakers and candidates for the legislature outside of their district, and 2. Preventing groups controlled by a legislator or candidate for the legislature from soliciting, raising, or dispersing funds during a regular or special legislative session. This measure is intended to protect against corruption- or the appearance of corruption- and restore the public's confidence in our campaign finance structure. 2:15:26 PM EDRA MORLEDGE, Staff, Senator Kevin Meyer, said the original version of SB 5 contained a drafting error and the State Affairs CS corrected it. She suggested that the easiest way to explain the drafting error is to go through the sectional summary. She reviewed the following: Section 1 is a new section which places restrictions on solicitation and acceptance of contributions by groups controlled by legislators or candidates for the state legislature during a legislative session. The original version also included in that section the restriction on expending funds during a legislative session, which we still have in the bill. It's just that those were both contained in the same section in the original bill and they needed to be broken apart because they're two different sections of this chapter. Section 2 is rewritten to prohibit lobbyist contributions to candidates for the state legislature or to groups that are controlled by a sitting legislator or a candidate for the legislature. Section 3 regards prohibited contributions and this is the new section. This section makes an exception for contributions by lobbyists eligible to vote only in that candidate's district, which is part of current law but for the purpose of drafting this bill, they're broken out into these new sections. Section 4 is limitations on expenditures. This is a new section pertaining just to these groups controlled by legislators or candidates for state legislature. This basically brings these groups in line with how individual candidates operate, which is no expenditures during a legislative session. Section 5 is the definition section. One sentence or some words that were added to the introduction of the definitions, which is on page 2, line 28 and 29, the drafter of the bill put in the words "unless the context requires otherwise" and then goes on into the definitions. That's just to remove any sort of legal ambiguity that might be construed by the definitions so they apply just to this chapter. CHAIR COGHILL summarized that, at this point, contributions are within context of what is in current law. MS. MORLEDGE replied that's correct. 2:19:24 PM SENATOR COSTELLO referred to the language in the new subsection (j) on page 2, lines 9-11, and questioned whether the phrase "is eligible to vote" is tight enough to prohibit certain lobbyist contributions. She pointed out that there is a difference between eligible to vote and able to vote. She also asked Ms. Morledge if she had discussed with the drafter whether the word "controlled by" that appears on page 1, line7, and page 2, line 2, is the appropriate word. "I think that the intent is that the person is a part of this political action committee, but 'controlled by' indicates they might have just control of it but they may not be listed as a participating member." MS. MORLEDGE said the language regarding lobbyist contributions is existing law. Currently it is in subsection (g) and SB 5 places it in a new subsection (j). She added, "We didn't contemplate, perhaps, a lobbyist moving to a new district." Regarding the second question, she said she did ask for clarification and guidance from the drafter as to how the Alaska Public Offices Commission might interpret the word "controlled by." CHAIR COGHILL noted that Mr. Bullard with Legal Services and Heather Hebdon from APOC are available to answer questions. 2:22:52 PM SENATOR COSTELLO asked Mr. Bullard if the words "controlled by" is adequate for the intention of the bill. ALPHEUS BULLARD, Legislative Counsel, Legislative Legal Services, Legislative Affairs Agency, said the phrase "controlled by" is not defined for purposes of the bill so it is left to APOC to define it in regulation. "If the legislature chooses not to provide a specific definition for the purposes of the bill's provisions, I don't think it's too great a grant of legislative discretion to allow the commission to decide what 'controlled by' might mean in this instance." He added that it could also be defined on the facts of each case. 2:24:16 PM SENATOR WIELECHOWSKI asked if the bill would still allow political action committees to contribute to legislators who are controlling PACS. MS. MORLEDGE said yes. SENATOR WIELECHOWSKI asked: 1) if contributions from out of state would still be prohibited, and 2) what the contribution limits would be. MS. MORLEDGE deferred the question to APOC. 2:25:05 PM SENATOR WIELECHOWSKI asked how much money a PAC that is set up by a legislator can accept from out of state and if they can accept money from an out of state PAC. HEATHER HEBDON, Executive Director, Alaska Public Offices Commission (APOC), Anchorage, Alaska, confirmed that a legislator who has formed a PAC could accept money from other groups. As far as groups based outside of Alaska, there are limits that pertain to those as well. Generally, groups outside of Alaska are not permitted to contribute to a candidate, but they could form the group and register the group from out of state. However, 90 percent of their contributions must be from Alaska residents. It would not change the group's contribution limits. They would be able to accept $500 from individuals, but 90 percent of their contributions must be from Alaska residents. SENATOR WIELECHOWSKI asked if political action committees outside of Alaska, could contribute that 10 percent of outside funds. MS. HEBDON answered yes but they would be limited to a $1,000 contribution limit from that outside PAC. 2:28:02 PM SENATOR WIELECHOWSKI asked if a legislator could contribute money to his/her campaign or make an independent expenditure for his/her campaign, using funds from the political action committee he/she controls. MS HEBDON answered yes. Contributions a legislator makes to his/her own campaign would be limited to $1,000, whereas making independent expenditures on behalf of his/her own campaign would be unlimited. SENATOR WIELECHOWSKI said his understanding has been that a legislator could not coordinate between independent expenditure groups and the candidate. "If a legislator controls the PAC, isn't that coordination?" MS HEBDON replied that is part of the concern APOC has with the bill. It does not define "controlled by." 2:29:24 PM CHAIR COGHILL said that is an excellent point and something the committee should ponder SENATOR WIELECHOWSKI asked the sponsor if there is a reason for not simply banning these groups from forming. MS. MORLEDGE opined that banning these groups would infringe on an individual's First Amendment right to free speech. The sponsor researched that initially and placing sideboards seemed to be the best option. There was no contemplation of overhauling the entire campaign finance structure. The intent was to close the loophole that came to light last year. 2:30:56 PM SENATOR WIELECHOWSKI noted he saw a legal opinion that talks about legitimate government interest in restricting campaign contributions, and it seems that it would be a legitimate government interest to say candidates cannot have their own political action committees. He asked to hear from Mr. Bullard. MR. BULLARD explained that if a legislator forms a PAC and it makes contributions or expenditures that help the legislator's own campaign, then that group will be defined as the candidate under AS 15.13.400(1)(A) or AS 15.13.400(1)(B)(v). Contributions to that group will be aggregated with contributions to the candidate for purposes of the campaign finance statutes. That group is no longer just a political action committee, it is a political action committee that is one and the same with the candidate's campaign. That situation is addressed in existing law. CHAIR COGHILL observed that it's not a question of arm's length because once they do that combination they can't be considered an independent expenditure. MR. BULLARD replied that is his conclusion. As to whether it would be a narrowly tailored remedy to prohibit all legislative PACs, he said the only rationale accepted by the U.S. Supreme Court for limiting campaign contributions is corruption and the threat of corruption. A PAC that can skirt existing contribution limits to legislators poses the threat of corruption. For example, if a legislator wishes to raise money towards a ballot initiative, he didn't believe a court would find that preventing the existence of a group that relates to that ballot proposition could be construed to be narrowly tailored to prevent corruption. 2:34:39 PM SENATOR WIELECHOWSKI asked if the bill could be narrowly tailored enough to prohibit collecting campaign contributions to give to other candidates. MR. BULLARD said he hadn't looked at that question and didn't know what a court would find. 2:35:29 PM SENATOR COSTELLO referenced page 1, line 9, and page 2, lines 4 and 26, that specifically talks about the legislature. She asked if he had contemplated using a broader term, such as a person who files for public office. MR. BULLARD suggested he ask the sponsor. 2:36:47 PM SENATOR MEYER said he wouldn't be opposed to changing the reference. SENATOR COSTELLO suggested changing the wording on page 2, line 4, to reference "an individual who becomes a candidate." CHAIR COGHILL suggested replacing the words "the state legislature" to "public office." He opined that transparency of reporting requirements are a large part of accountability. Finding no further questions, he stated he would hold SB 5 in committee for further consideration.