SB 17-CAMPAIGN CONTRIBUTIONS  2:00:15 PM CHAIR CLAMAN announced the consideration of SENATE BILL NO. 17 "An Act relating to political contributions; and providing for an effective date." [This is the first hearing of this bill in the Senate Judiciary Committee.] CHAIR CLAMAN invited Senator Kawasaki and Mr. Hayes to identify themselves for the record and begin their remarks. 2:01:22 PM SENATOR SCOTT KAWASAKI, District P, Alaska State Legislature, Fairbanks, Alaska, sponsor of SB 17, presented the following sponsor statement: [Original punctuation provided.] Sponsor Statement Alaska has long regulated campaign contributions and limited the amount that can be donated to political campaigns. Following the VECO scandal in 2006, the people of Alaska approved a ballot initiative that established strict contribution limits. Part of the argument behind that initiative was that limiting the amount of money candidates can raise would curb the type of corruption seen during VECO. In 2019 the 9th Circuit Court of Appeals overturned some of Alaska's political contribution limits in the case Thompson v. Hebdon. The Thompson decision struck down the limits, including the limits on contributions from individuals, nongroup entities, nonpolitical party entities, and joint campaigns for Governor and Lieutenant Governor. This bill establishes new campaign contribution limits compliant with the Thompson decision. It increases these limits such that they are nearly indexed for the rate of inflation between 2006 and 2023. The limits are rounded to the nearest hundred. Here are the new limits: • Individual contribution limits from $500 to $700 • Nonpolitical party group limits from $1,000 to $1,400 • Nongroup entity limits from $1,000 to $1,400 • Individual limits to a joint candidacy for Governor and Lieutenant Gov. from $1,000 to $1,400 • Group limits to a joint candidacy for Governor and Lieutenant Gov. from $2,000 to $2,800 The Thompson decision also stipulated that contribution limits must be indexed for inflation. SB 17 requires APOC to index contribution limits for inflation by regulation starting in 2024 and after subsequent terms of four years. I respectfully urge your support for SB17 to help limit corruption by establishing new campaign contribution limits. Please reach out to my office with any questions or concerns. 2:04:47 PM SENATOR KAUFMAN asked how the VECO Corporation scandal was connected to campaign contribution limits. SENATOR KAWASAKI replied that the public has embraced the concept of having campaign contribution limits. He said that most people would probably be astounded to hear that Alaska used to have a $500 limit, adding most of the contributors he talks to donate in the $10 range. People are pretty shocked to learn how much money can get into campaigns, especially at the federal level. He said that most competitive congressional races are at the $1 million to $1.5 million level, which does not seem like a practical number for most of the public. He said that the VECO scandal was something that just happened. He asserted that the public prefers to see some limitations placed on the amount of money in individual elections and transparency in the amount involved. 2:06:18 PM SENATOR KAUFMAN shared an issue of concern. He explained that contributions to candidates are limited, and they are all fairly transparent. The State requires candidates to adhere to extensive reporting requirements for contributions and expenses through the Alaska Public Offices Commission (APOC) system, which is rather strident in its reporting requirements. It tabulates everything a candidate takes in and spends against either the political organization or the candidate. He compared the reporting requirements of APOC to independent expenditure requirements, stating they do not have that transparency. He asked whether SB 17 addresses this issue. SENATOR KAWASAKI answered SB 17 only addresses the Thompson v. Hebdon case. It deals with individual limits, political parties, and political action committees. He said a different part of the law governs independent expenditure groups. 2:07:31 PM SENATOR KAUFMAN said that while this limits the transparent reporting process for candidates, it leaves the obscure, independent expenditure process wide open. He pointed out this creates a very asymmetrical playing field. SENATOR KAWASAKI reassured the committee that SB 17 does not impose limitations on transparency. According to APOC, the level of transparency remains unchanged. Candidates will continue to report contributions over a certain amount and for: - the 30-day filing, - the 10-day filing, and - the 24-hour report if the contribution is over a $500 aggregate. These requirements remain in effect regardless of whether SB 17 passes. If the bill passes, it will restrict the total contribution amount specified in the sponsor statement. 2:08:29 PM SENATOR KAUFMAN clarified that his intention was not to suggest that this bill limits transparency. He clarified that it limits funding going into the most transparent system that Alaska has. The APOC reporting requirements have a higher transparency threshold compared to the independent expenditure process. He asked about the transparency imbalance between the two reporting requirements. SENATOR KAWASAKI replied that he is willing to look into the issue further. He said the public wants to know where every campaign dollar comes from and whether the money comes from outside or inside the state. Since 2019, different versions of this bill have had various types of filing requirements. This bill is more simplified. 2:09:36 PM SENATOR TOBIN drew attention to slide 4 of the presentation "SB 17 Campaign Contributions." It indicates the process of limiting campaign contributions dates back to 1995. She asked about the contribution limits in SB 17 and their likelihood of withstanding further litigation. SENATOR KAWASAKI replied that he took the $500 individual contribution limit and indexed it, based on inflation, over time since 2006. He expressed his belief the dollar amount is roughly accurate. 2:10:42 PM SENATOR KIEHL drew attention to slide 4 of the presentation. He conjectured that while Alaskans would agree to lower the campaign contribution limit to $50 if asked the question, courts ask a different question to examine contribution limits. The question is not whether people want to enrich themselves with politics. He expressed his belief the question has to do with quid pro quo corruption or its appearance. He asked the sponsor to elaborate on the difference between contributions where an individual hands a candidate a direct, discreet amount of money versus something indirect, disconnected, and uncoordinated like the independent expenditures Senator Kaufman mentioned. SENATOR KAWASAKI answered that independent expenditure campaigns exist and are legal under current law, but they cannot coordinate with the candidate they support. They are not allowed to work with the candidate's campaign committee. 2:12:32 PM SENATOR KIEHL asked whether he agreed with the viewpoint that the risk of quid pro quo corruption associated with contributions diminishes if the donor cannot coordinate with the candidate. He asked whether this viewpoint is relevant as a defensible approach in court. SENATOR KAWASAKI replied yes, that is a fairly definitive difference. He revisited a prior question concerning attachments to independent expenditure campaigns; he said he would like to this happen. He expressed a mutual concern with the public to know where the source of donated dollars originated. He said Alaska has had sunshine laws and transparency laws on third- party groups. For instance, groups that advocate for or against an initiative must disclose their top three donors. He stated that although SB 17 does not deal specifically with these issues, he is open to discussions. 2:13:54 PM CHAIR CLAMAN asked why SB 17 proposes annual limits rather than campaign limits. SENATOR KAWASAKI replied that he did not draft the bill that way. He expressed his belief that a spokesperson for the ballot initiative may want to speak to the question. CHAIR CLAMAN asked about the policy rationale behind opting for annual limits over campaign limits in drafting the bill. He highlighted that federal campaigns consider campaign limits rather than annual limits. SENATOR KAWASAKI answered he drafted the legislation four years ago. He expressed familiarity with Alaska's typical contribution deadlines and said that he had not taken campaign limits into account. He said that Mr. Hayes, his aide, has a brief presentation on SB 17. CHAIR CLAMAN invited Mr. Hayes to begin. 2:15:53 PM JOE HAYES, Staff, Senator Scott Kawasaki, Alaska State Legislature, Juneau, Alaska, presented the sectional analysis and delivered a presentation on SB 17. The sectional analysis follows: [Original punctuation provided.] Sectional Analysis Section 1. AS 15.13.070(b) This amends the statute by increasing the individual contribution limit from $500 to $700. This applies to individuals donating to nongroup entities, candidates, write-in candidates, or nonpolitical party groups. Section 2. AS 15.13.070(c) Amends the statute by increasing the contribution limit for groups that are not political parties from $1,000 to $1,400. This applies to nonpolitical party groups donating to a candidate, a write-in candidate, to another group, a nongroup entity, or to a political party. Section 3. AS 15.13.070(f) This section amends the statute by increasing the amount nongroup entities can donate from $1,000 to $1,400. This applies to nongroup entities donating to another nongroup entity, to candidates, to write-in candidates, to groups, or to political parties. Section 4. AS 15.13.070(g) This amends the statute by increasing the amount individuals and groups can donate to joint Gubernatorial and Lieutenant Gubernatorial campaigns. It increases the amount individuals can donate from $1,000 to $1,400, and groups from $2,000 to $2,800. Section 5. AS 15.13.070(h) This section adds a new subsection that indexes these campaign limits to inflation. Starting in 2024, and every term of four years thereafter, the commission shall by regulation adjust these contribution limits to account for inflation. Section 6. Provides this bill with an immediate effective date. 2:17:57 PM MR. HAYES presented a slideshow titled "Senate Bill 17 Campaign Contributions." MR. HAYES moved to slide 2: Increasing the Limits on Campaign Contributions Section 1: Individuals: $500 >> $700 per year Section 2: A non political party group: $1000 >> $1,400 per year Section 3: Nongroup entity (such as XXX): $1000 >> $1,400 per year Section 4 Concerning Governor and Lt. Governor campaigns: Individuals $1,000 >> $1,400; Groups $2,000 >> $2,800 per year MR. HAYES explained the calculation method used to determine contribution limits on slide 3: Effective Date and CPI Increases Section 5: Beginning in the first quarter of calendar year 2024 and every four years thereafter, the commission shall, by regulation, adjust the contribution limitations set out in this section by a percentage equal to the percentage of increase over the preceding four-year period in all items of the Consumer Price Index for all urban consumers for Anchorage, Alaska, rounded to the nearest $10 increment. 2:18:29 PM MR. HAYES reviewed a brief history of campaign limits on slides 4 and 5: A Brief History • In 1995, citizens filed an initiative that included lowering the limits on individual campaign contributions from $1000 to $500. • The legislature heard the call of the people and enacted a new law before the initiative came to fruition. The stated purpose of the new law was "to restore the public's trust in the electoral process and to foster good government." • Years later, the legislature raised the limit back to $1,000. • In 2006, the people once again filed an initiative, and this time it came to be, lowering the limits again to $500 with 73% support. • In 2021, the U.S. Ninth Circuit Court of Appeals ruled the limit unconstitutional. • The Court argued that because $500 was unusually low, applied to all state races, and was not indexed with inflation to grow over time, that it infringed on donors' freedom of speech and gave an unfair advantage to incumbents. • In the aftermath of the decision, Alaska's Public Office Commission set the individual- to-candidate limit at $1,500. SB 17's ceilings would roughly track inflation for what Alaskans approved in 2006, though are a bit higher. 2:20:01 PM MR. HAYES read slide 6: How it Could Survive Legal Challenge To review, The Ninth Circuit Court argued that, since $500 was unusually low, applied to all state races, and was not indexed with inflation to grow over time, it infringed on donors' freedom of speech and gave an unfair advantage to incumbents. SB 17's limits are not unusually low and are indexed with inflation to grow over time. Thus, it follows from that ruling that these would survive a challenge made on the same grounds as the last one. In the 40 states that do have limits on contributions to legislative candidates, the average is $2,848 per election, ranging from $180 in Montana to $13,704. Ours would be slightly higher or lower depending on the source of the contributionnot unusual. 2:20:54 PM MR. HAYES moved to slide 7: Reviewing the Increases Section 1: Individuals: $500 >> $700 per year Section 2: A non-political party group: $1000 >> $1,400 per year Section 3: Nongroup entity (such as XXX): $1000 >> $1,400 per year Section 4 Concerning Governor and Lt. Governor campaigns: Individuals $1,000 >> $1,400; Groups $2,000 >> $2,800 per year 2:21:08 PM MR. HAYES read slide 8: You may be familiar with some related cases In McCutcheon v. Federal Election Commission (2014), the court held that states cannot place limits on aggregate contributions (the total of all contributions to all candidates) by individuals or groups. Existing limits on per-candidate contributions were not addressed and thus not changed. (NCSL) In Citizens United v. Federal Election Commission (2010), independent expenditures were at hand. SB 17 would not limit those. 2:21:43 PM MR. HAYES moved to slides 10 11 pertaining to definitions: Definition of Nongroup entities 15.13.400 (14) "nongroup entity" means a person, other than an individual, that takes action the major purpose of which is to influence the outcome of an election, and that (A) cannot participate in business activities; (B) does not have shareholders who have a claim on corporate earnings; and (C) is independent from the influence of business corporations. "Group that is not a political party" 15.13.400 (9) "group" means (A) every state and regional executive committee of a political party; (B) any combination of two or more individuals acting jointly who organize for the principal purpose of influencing the outcome of one or more elections and who take action the major purpose of which is to influence the outcome of an election; a group that makes expenditures or receives contributions with the authorization or consent, express or implied, or under the control, direct or indirect, of a candidate shall be considered to be controlled by that candidate; a group whose major purpose is to further the nomination, election, or candidacy of only one individual, or intends to expend more than 50 percent of its money on a single candidate, shall be considered to be controlled by that candidate and its actions done with the candidate's knowledge and consent unless, within 10 days from the date the candidate learns of the existence of the group the candidate files with the commission, on a form provided by the commission, an affidavit that the group is operating without the candidate's control; a group organized for more than one year preceding an election and endorsing candidates for more than one office or more than one political party is presumed not to be controlled by a candidate; however, a group that contributes more than 50 percent of its money to or on behalf of one candidate shall be considered to support only one candidate for purposes of AS 15.13.070, whether or not control of the group has been disclaimed by the candidate; and (C) any combination of two or more individuals acting jointly who organize for the principal purpose of filing an initiative proposal application under AS 15.45.020 or who file an initiative proposal application under AS 15.45.020; I should repeat that this law would not apply to independent expenditures. 2:21:55 PM CHAIR CLAMAN invited questions from committee members. 2:21:59 PM SENATOR TOBIN drew attention to slide 3 and asked why the Consumer Price Index (CPI) for Anchorage was selected for calculating the contribution limit when the cost-of-living disparity between urban and rural districts is rather high. SENATOR KAWASAKI replied that Anchorage is the only place in Alaska where the CPI is consistently calculated. He said the Fairbanks City Council uses it for its labor contracts. He acknowledged that it is probably not the best measure, but it is the most consistent information gathered and evaluated. 2:23:11 PM SENATOR TOBIN drew attention to slide 6 and asked three questions: 1. The slide indicates that $500 is an unusually low contribution limit. She asked about potential legal implications based on the use of this figure. 2. She sought clarification about whether per election, in the 3rd paragraph, means a combined total for state and gubernatorial elections. 3. The 3rd paragraph indicates that among the 40 states with contribution limits, the range spans from $180 to $13,704. She asked what the calculated average for Alaska is and where it falls in this range. SENATOR KAWASAKI said he would do some calculations and get back to the committee. 2:25:12 PM SENATOR KAUFMAN reported that the U.S. Senate and House of Representatives campaign finance limits are $3300 per election. He contended that the lieutenant governor and governor have the same burden in mounting a statewide campaign as those running for a U.S. Senate or House seat. He questioned why their contribution limits are a third below those running for a U.S. Senate or House seat. He suggested defaulting to the federal limits, which are already inflation-adjusted. SENATOR KAWASAKI replied that the state has always had limits different from the federal limits. He said that he understood the elements of running a statewide campaign but opined these were distinctly different races. SENATOR KAUFMAN suggested further discussion offline. He expressed the effort and cost associated with the races are aligned. 2:27:30 PM CHAIR CLAMAN opened public testimony on SB 17. 2:27:52 PM PAT RACE, representing self, Juneau, Alaska, testified in support of SB 17. He addressed a previous question about the VECO scandal, stating that the VECO scandal was not a one-time incident. It was a long-running scandal. Bill Allen illegally donated to campaigns under his employees' names and was found guilty of that. He contributed about $41,000 through 415 employees. The idea of campaign limits is tied directly to the history of the VECO scandal. MR. RACE clarified that the ballot proposition mentioned above failed to get enough signatures in time for this election. However, it continues to collect signatures and will go on the ballot if the legislature does not act. He recommended the legislature act on this matter. He said he has retired judges, legislators, and his mom out gathering signatures in the cold. He expressed his belief that this is work they should not have to do. It is work the legislature should do inside the Capitol. Seventy-three percent of Alaskan voters passed campaign contribution limits in 2006. Voters spoke in 2006 and the initiative and signature-gathering process should not be reoccurring. Legislators should establish campaign contribution limits this year. MR. RACE changed focus to federal rules, asserting these rules create a cloudy miasma of shadowy dark money donors. He pointed out that the problem of not having campaign limits is that money wins elections. He said he is not married to any particular number and trusts the legislature to decide on a good contribution limit. 2:30:50 PM JIM SYKES, representing self, Palmer, Alaska, testified in support of SB 17. Alaskans like small limits, and it is a good idea to have contribution limits. Alaskans do not like outside money in state politics. He expressed his belief that there is less bad political influence with limits, and most Alaskans will support it. 2:32:02 PM CHAIR CLAMAN closed public testimony on SB 17. CHAIR CLAMAN held SB 17 in committee.