Campaign Finance 101

Campaign Finance 101 AMCA Election Training July 2019 For City and Town Clerks Presented by Cris Meyer City Attorney, City of Phoenix

OVERVIEW • The Law and Resources • Overview of All Clerk Responsibilities • Political Committees • Registration of Political Committees • Contribution Limitations

OVERVIEW • Disclosure in Campaign Literature & Advertisements • Reporting Contributions & Expenditures • Termination of Committees • Enforcement of Report Filing • Enforcement of Other Violations

CONTENT • Duties and issues for local filing officers • NOT details on contribution & expenditures • Offered in SOS Workshops for candidates • Only a Summary – does not cover all details • Always refer to statutes • Not legal advice

THE LAW – Legal Counsel • Important to consult with your attorney • Campaign Finance regulation increasingly complex • Law and duties unclear in many cases – conflicts exist • Legal opinions differ – know your attorney’s position • Responding to Questions • Interpreting unclear law is often legal advice • Filing officer role – provide information, not advice • An opponent or public could challenge your advice • Appropriate response - "You need to discuss that with your attorney or campaign advisor."

THE LAW • Arizona Constitution Art VII, Sec 16 • Arizona Revised Statutes (ARS) Title 16, Chapter 6 • Election Procedures Manual (SOS) Chapter 8 – Campaign Finance

THE LAW Arizona Constitution, Art VII, Sec 16 “The legislature, at its first session, shall enact a law providingfor a general publicity, before and after election, ofall campaign contributions to, and expenditures of campaign committees and candidates for public office.”

THE LAW ARS - Title 16, Chapter 6 • Campaign Finance (Article I) • §16-901 through §16-938 • Clean Elections (Article II) • §16-940 through §16-961 • Not applicable to cities and towns

THE LAW – New Organization Arizona Revised Statutes - Title 16, Chapter 6 Campaign Finance (Article I) • Article 1 – Definitions, §16-901 • Art. 1.1 – Establishment of Committee, §16-905 – 908 • Art. 1.2 – Contributions, §16-911 – 917 • Art. 1.3 – Expenditures, §16-921 – 922 • Art. 1.4 – Reporting and Disclosure, §16-925 – 928 • Art. 1.5 – Biennial Financial Adjustments, §16-931 • Art. 1.6 – Committee Termination, §16-933 – 934 • Art. 1.7 – Enforcement, §16-937 – 938

THE LAW - Resources • Arizona Election Law Pamphlet • Gray Book (Oct 2018), 2019 Supplement (Oct) • Constitution • Title 16 (Elections and Campaign Finance) • Title 19 (Initiative, Referendum & Recall) • Title 38 (Public Officers) (Filing, Resignation, Vacancy, Financial Disclosure) • TIP • In Book, line thru sections updated in Supplement

THE LAW - Resources • Attorney General Opinions (Advisory, not Law) • Secretary of State (materials online) • Election Procedures Manual (Provisions are Law) • Must be updated by Dec 31 of odd years (New 2019) • Campaign Finance Handbook (2018) • League of Cities and Towns • Municipal Election Manual (MEM) • Campaign Finance Reports Handbook • League General Counsel Opinions

LAW – Purpose & Limits • Purpose of Regulation • Public disclosure of contributions & expenditures • Protect public contributions from misuse • Limit big money influence in candidate races (declining) • Limitation on Regulation • First Amendment (political speech) • U.S. Supreme Court decisions – Striking restrictions on spending, upholding disclosure – Exploring when anonymity / non-disclosure is necessary • Arizona has followed Court on spending, but has also reduced disclosure (not required by Court decisions)

LAW - Enforcement • Public Disclosure of Information • Public, candidates & media identify issues • Voters enforce by casting ballots • Filing Officers Enforce Report Filing • Ensures that public disclosure occurs • Filing Officers Enforce Other CF Violations • Determine “reasonable cause” • Increased Clerk Role – sole authority to initiate! • Complaints being used as campaign tactic

Summary of Clerk Responsibilities • “Filing Officer” for campaign finance documents for your city or town • Keep old documents for retention period! ($500 TES) • Assign Committee ID numbers & keep Log • Must provide Notice of CF laws and Statement of Org to applicants for Initiative, Referendum & Recall petitions (also provide Title 19 Pamphlet)

Summary of Clerk Responsibilities • Receive Campaign Finance Documents • Campaign Financing & Reporting Statement • Statement they have read campaign finance law • Candidates – with nomination paper (part of form) • Committee officers – with registration (in SO form) • Committee Registration Documents • Statement of Org only (No $500 Exemption anymore) • Termination Statements • Periodic Reports • Contribution & Expenditure Reports • If No Activity – report! (Summary page, check box)

Summary of Clerk Responsibilities • Electronic Filing • Filing officer must provide e-filing option • Online database not required (yet) • May comply by using fillable pdf forms filed by email or upload • May comply by opting into State system when available to cities and towns (2021?)

Summary of Clerk Responsibilities • Post CF Documents on Internet • Who must Post documents on Internet? • ALL filing officers (before 2016, only if Pop over 2500) • What Documents must be Posted? • ALL campaign finance statements and reports • Registrations, Terminations, Reports • Posting NOT Required for other documents • Financial Disclosure Statements (Yet) (Some Post) • Where to Post • On city / town web site (all have)

Summary of Clerk Responsibilities • Enforce Campaign Finance Reporting • Determine Failure to File (Report filed on time?) • Send Failure to File Notices (By email within 5 days) • Refer to attorney if not filed within 30 days • Enforcement of other CF Violations • Written complaint from 3rd party now required • Only Filing Officer authorized to initiate investigations • If determine “reasonable cause” to believe someone is violating CF law, must notify attorney • City / Town Attorney is Enforcement Officer • Attorney issues Notices of Violation

Responsibility Issues • Compliance is ultimately the responsibility of the candidates & committees • Law & scope of duties unclear • Interpretation and opinions differ • Some actions not required, but are appropriate for the Clerk role and further the purposes of the law • Example: Sending reminders of filing deadlines

Political Committees • Definition – “Committee” means: • A Candidate Committee • A Political Action Committee (PAC) • A Political Party • Must register as a committee if meet the requirements in §16-905

Political Committees Candidate Committee - Cities and Towns New 2018 – HB 2078 • A candidate must register a committee IF: • The candidate receives contributions or makes expenditures (in any combination) of at least $500 in connection with that candidacy • Any combination: Receive $250 and spend it! • $500 does NOT increase $100 in Jan odd years • Candidate limited to 1 committee for same office during an election cycle

Political Committees Candidate Committees (Except cities/towns) • Candidate must register a committee IF: • The candidate receives contributions or makes expenditures (in any combination) of at least $1200 in connection with that candidacy • “Any combination” - If receive $600 and spend it! • $1200 increases $100 in Jan odd years (2019) • Candidate limited to 1 committee for same office during an election cycle

Political Committees Political Action Committee (PAC) • Applies to ALL jurisdictions – including cities/towns • An entity must register as a PAC IF: • Entity is organized for the “primary purpose” of influencing an election; AND • Entity knowingly receives contributions or makes expenditures (in any combination) of at least $1200 in connection with any election during a calendar year • “Any combination” of spend / receive $1200 • If receive $600 and spend it – required to register • $1200 threshold increases $100 in Jan odd years • Increased from $1100 to $1200 in Jan 2019

Political Committees Political Action Committee (Cont) • “Primary purpose” is to influence elections • Excludes many entities - Chamber, Trade Assn • §16-905(D) provides presumption of when it IS • §16-905(E) lists when it is NOT (501 Charitable orgs) • During a “calendar year” (not an election cycle) • Entity can receive / spend $1199 annually even if its primary purpose is influencing elections, and not have to register or report ($2398 during an election cycle) • Amount low for state, significant in smaller jurisdictions

Political Committees Political Action Committee (Cont) • Separate Segregated Fund • Corporations & Labor orgs cannot contribute to candidates • May establish a fund to receive voluntary contributions from employees to use for contributions to candidates • A Fund must register as a PAC • Permitted contributions by Corp & Labor Org • Contributions / expenditures on ballot measures • Independent Expenditures in candidate elections • Not required to “register” or provide notices of expenditures • Instead, IE activity reported on a schedule of a CF report

Political Committees? • Specific Situations . . . is it a committee? • A candidate? • Individual (not a candidate) acting alone? • Corporation that makes independent expenditures supporting a candidate? • Business / organization involved in a ballot measure? • A person or entity that files an argument on a ballot measure & pays deposit?

Political Committees? • Specific Situations . . . is it a committee? • Business or organization whose primary purpose is influencing elections that spends more than $1200 to support or oppose a ballot measure? • A person or entity that files an argument on a ballot measure & pays deposit? • A public utility spending its own money supporting its franchise measure?

Political Committees - Definition • When to raise question about committee. . . • Inquiry about candidacy (always upon 1st contact) • Inquiry about making contributions to candidates • Inquiry about initiative, referendum or recall (1st contact) • Upon filing an argument on a ballot measure • Not for filing argument, but may be other activities • Inquiry about making contributions to influence a ballot measure

Political Committee Registration When to Register? • Within 10 days of qualifying as a committee • Not required before engaging in activity • Accepting contributions or making expenditures • Distributing campaign literature or ads • Circulating petitions (Not required by CF law) • But . . . signatures on Initiative and Referendum petitions invalid

Political Committee Registration How to Register? • File Statement of Organization with Filing Officer • Stmt Org is now the ONLY registration document • No $500 Threshold Exemption Statement • Upon registration, PAC may engage in any lawful activity • Not required to establish separate committees for different activities (e.g. circulate petition, support candidates) • Not required to identify activities on registration statement • Note: A person or entity must track all activity and report on its first report after qualifying as a committee

Candidate Committees • Candidate may be chairman and treasurer • Committee name must include candidate name (first or last) • Committee name must include office if candidate has committees for multiple offices • Candidate may have only one committee for same office during same election cycle • No longer required to designate a committee for each election (can only have one) • No Exploratory Committees anymore

Other Political Committees • Chairman & Treasurer must be different people • Committee name must identify the "sponsoring" organization, if any • Committees registered outside of AZ • Unclear if / how register in AZ (old provision repealed) • Probably can register in AZ • No statute regarding using money received before register in AZ so probably can

Ballot Measure Committees • Most special requirements for committees acting to support or oppose a ballot measure repealed • Committee name not required to include: • The petition serial number (or Prop number) • Whether committee supports or opposes the measure • Committees can spend on any measures • Committees now must report activity on ballot measures in campaign finance reports • Report must identify the ballot measure to which each transaction relates

Recall Committees • Is a Recall committee a ballot measure committee? • Statue unclear, but AG Opinion advises No • Recall is not a ballot measure (results in a candidate election, not a Prop on a ballot) • A recall committee is a committee to influence a candidate election • Implications • Contribution limitations would apply to recall committees if not a ballot measure committee • Corporate money would also be prohibited

Standing Political Committees • Eligibility to be “Standing” Committee • Active in more than 1 jurisdiction (for “1 yr” repealed) • File a Statement of Organization with the SOS and a copy in each jurisdiction in which the committee is active • Registration Statement no longer has to be notarized • Only SOS assigns ID number • Also needs to file copy of amended Stmt of Org in each jurisdiction • Files Reports only with the Secretary of State • Standing Committees cannot sponsor candidate or other committees

Penalty for Failure to Register Civil Penalty • Presumptive penalty is the amount received or expended while not registered • Penalty can be up to 3 times the amount received or expended while not registered if there are special circumstances • Special circumstances include the severity, extent and willfulness of the violation

Penalty for Failure to Register Initiative & Referendum petition sigs invalid? • Title 16 • Committee registration only required if meet requirements (Primary purpose, exceed $1200) • Title 19 • Must register when file application for petition • Filing officer cannot accept application without a Stmt Org • Signatures invalid if obtained before committee registered • Consult with your attorney • Safest for proponent to register to circulate a petition • Title 19 (more specific provision) probably trumps Title 16

Penalty for Failure to Register Recall petition signatures invalid? • Title 16 • Only required to register a committee if meet the requirements in Title 16 (primary purpose, exceed $1200 in calendar year) • Title 19 • Recall different than Init and Ref - §19-202 (in 2016) • Applicant NOT required to file Stmt Org with application • Filing officer can accept petition without registration • No provision that Recall signatures are invalid if obtained before committee registered

Penalty for Failure to Register Nomination petition signatures? • No statute invalidating nomination signatures obtained before registration (only in Title 19 for Init & Ref) • Filing officers have no authority to invalidate signatures • Candidate is not always required to register a committee • Registration required if candidate exceeds $500 ($1200) • Superior Court decisions • Since 2006, Superior Courts have invalidated signatures on nomination petitions if committee was not registered • No appellate court decision affirming for legal precedent • Consult with your attorney – probably let Court invalidate

Statement of Organization Contents • Type committee, name, address, website, phone • Email address (must agree to receive all notices) • Candidate: Name (first or last) and office sought • PAC: Sponsor name or any common nickname • Sponsor contact information, including email • Officers names, address, occupation, employer • Statement by Chairman and Treasurer that have read all CF laws (part of form) • Designation of financial institutions to hold funds

Statement of Organization • Clerk issues ID number • Notarization not required (even for standing) • All filing officers must now post copy on Internet • Amendments to SO • Required for any change in required information • Must file within 10 days after change (previously 5) • No specified penalty in law for failure to amend timely

Treasurer Duties • Principal officer – has virtually all duties • Authorize all expenditures, keep records • Track details of all contributions and expenditures • File Reports • Use best efforts to obtain donor info • At least 1 documented written or oral attempt • Preserve committee records - 2 years • Maintain separate segregated bank accounts • Personal money, Recall, Corporate / Other contributions • Must produce records required to be kept • At request of filing or enforcement officer

Contribution Limits • Limits apply to contributions to Candidates ONLY! • And possibly Recall committees (per AG Opinion) • Current Limit: $6,450 per election cycle • Limits increase $100 in Jan of odd years • Limits apply to an election cycle, not the term office • In 2015 and 2016, applied to term office (4 year cycle) • Cycle is two years – General (2nd) to General (2nd) • Cycle includes the primary and general elections • There are two election cycles in a four-year term • Candidates can accept up to the limit every two years

Contribution Limits “Election Cycle” - §16-901(18) • Regular scheduled elections • Two year period between General (2nd) Elections • Start and end dates aligned with CF reporting periods • Ends last day of calendar quarter of the election (Nov or May) • Begins first day of next calendar quarter (Jan 1 or July 1) • For Fall elections, ends Dec 31 after election, next begins Jan 1 • For Spring, ends June 30 after May election, next begins July 1

Contribution Limits “Election Cycle” - §16-901(18) • For Special Election • From date election called to last day of calendar quarter when election held • For Recall Election • From when issue serial # to the end of the “Recall” (Certify insufficient, resignation, or election date) • Contributions for recall can’t be used for other elections

Contribution Limits No Limits on: Cumulative total amount an individual can give to all candidates Total a candidate can receive from PACs Amount candidate’s own money used Foreign Contributions prohibited (Fed law) Includes anything of value (info about opponent)

Contribution Limits Candidate Committees • No limit on amount candidate committees can transfer to other committees for same candidate • Exception – City / town candidates can’t transfer to committee for a state office • Transfers are contributions – individual donor limits apply • Candidate committees can contribute to other political committees (other than candidate) • Candidate committee can’t give to other candidates • Except – if terminating, can contribute surplus to other candidates

Contribution Limits Candidate Committee Transfers • A candidate committee can transfer money to other committees for the same candidate without limit • Exception: City / town candidate committee can’t transfer to a candidate committee for a state office • City / town candidates can transfer to committee for county office (but then cannot transfer for a state office for 2 years) • Efforts to amend to remove the restriction in 2018 & 2019 unsuccessful

Contribution Limits “Excess” Contributions – CAN Committee • Candidates can’t knowingly accept more than limit • If unknowingly accept an “Excess Contribution” • Must refund excess within 60 days; OR • May reattribute the excess to a different donor if both of the following apply: • The contribution was from an individual; and • The contributor authorizes the committee to reattribute the excess to another individual • The other individual must be a joint account holder on the instrument used to make the contribution

Contribution Limits PAC Contributions • Limit for PAC: $6450 • Limit for Mega PAC (state qualified): $12,900 (2X) • PAC contributions to candidates • Only with money received from individuals, partnerships, political committees or political party • Not with money from corporations, labor org Political Party Contributions • A political party can’t give to non-partisan candidates (only to “nominees” of a party)

Campaign Finance 101