Campaign Finance 101

Campaign Finance 101 For City and Town Clerks Arizona Municipal Clerks Association Election Training July 2018 Presented by Cris Meyer City Clerk, City of Phoenix

OVERVIEW • Purpose / Content of Outline • The Law and Resources • Overview of 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 Campaign Finance Violations

PURPOSE and CONTENT • Content • Duties and issues for local filing officers • NOT details on contribution & expenditures • Offered in SOS Workshops for candidates • Reference Summary • Reference guide to apply law to situations • Only a Summary – does not cover all details • Always refer to statutes (references provided)

THE LAW – Legal Counsel • Important to consult with 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 • Law is unclear – interpreting 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 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 Arizona Revised Statutes 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 • “Camo” Book, Oct 2016, 2017 Supplement • Constitution • Title 16 (Elections and Campaign Finance • Title 19 (Initiative, Referendum & Recall) • Title 38 (Public Officers) (Filing, Resignation, Vacancy, Financial Disclosure) • CAUTIONS • Includes entire old & new Title 16! (p. 624 / p. 719) • Advice – In Book, line thru sections updated in Supp

THE LAW - Resources • Attorney General Opinions (not Law) • Secretary of State (materials online) • Campaign Finance Handbook (2018) • Election Procedures Manual (Law) (2018 version) (Pending Approval of Governor and Attorney General) • 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 • State has followed Court on spending, but has also reduced disclosure

LAW - Enforcement • Public Disclosure of Information • Public, candidates & media identify issues • Voters enforce by casting ballots • Filing Officers Enforce Report Filing • Ensure 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

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)

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 ($500 Exemption Repealed) • Termination Statements • Periodic Reports • Contribution & Expenditure Reports • Must report if No Activity – summary page, check box

Clerk Responsibilities • Campaign Finance Docs – Repealed • No Activity Statement – Repealed • Candidate Annual No Activity Statement – Repealed • Candidate Notice of Large Contributions – Repealed • Notices of receipt of $1000 or more from a single source within 20 days before election • “10K” Notices – Repealed • Large contributions / expenditures by Prop & Recall • Registrations & Notices of Independent Expenditures by Corporations, LLCs & Labor Orgs – Repealed

Clerk Responsibilities • Electronic Filing • Filing officers must provide electronic filing option • Online database not required (yet) • Comply using fillable pdf forms filed by email or upload • May comply by opting into State System (2018?) • Who must Post documents on Internet? • All filing officers • Prior to 2016 - only required if Pop over 2500

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)

Clerk Responsibilities • Enforce Campaign Finance Reporting • Determine Failure to File (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

Clerk Responsibilities Enforce Filing of Registrations & Notices of Independent Expenditures - Repealed Previously Required for Corps, LLCs and Labor Orgs making independent expenditures in candidate elections Must “Register” for each election cycle Must file Notice of Expenditures Clerk must verify whether entity has registered If Not – categorize “unverified” & contact entity

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

Political Committees • No general definition applicable to all committees • Previously definitions for several committee types • Candidates and the committees they designate • Exploratory committee • Separate segregated fund (Corps & Labor Orgs) • Political party or political organization • Groups that circulate a petition for a ballot measure or recall (but not groups that support or oppose measure) • Was separate test for all other groups

Political Committees • New Definition – “Committee” means: • A Candidate Committee • A Political Action Committee (PAC) • A Political Party • Registration of a committee is required if an entity meets the requirements in §16-905

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 $1100 in connection with that candidacy • $1100 increases $100 in Jan odd years (2017) • Any combination: Receive $550 and spend it! • Candidate limited to 1 committee for same office during an election cycle (must combine any old)

Political Committees Candidate Committee - Cities and Towns • New 2018 – HB 2078 • 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 $300 and spend it! • $500 DOES NOT increase $100 in Jan odd years! • Candidate limited to 1 committee for same office during an election cycle (must combine any old)

Political Committees Political Action Committee (PAC) • 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 $1100 in connection with any election during a calendar year • Applies to ALL jurisdictions – including cities and towns • “Any combination” of spend / receive $1100 • Receive $550 and spend it – required to register • $1100 threshold increases $100 in Jan odd years • Increased from $1000 in Jan 2017

Political Committees Political Action Committee (Cont) • “Primary purpose” to influence elections • Excludes many entities - Chamber, Trade Assn • Provision for when it is NOT (501 Charitable orgs) • Provision with a presumption of when it IS • During a “calendar year” (not an election cycle) • Entity can receive or spend $1099 annually ($2198 in an election cycle), even if its primary purpose is influencing elections, and not have to register or report • 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 for making contributions to candidates • A Fund must register as a PAC • Permitted contributions by Corporation / 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? • An entity that files an argument on ballot measure & pays deposit?

Political Committees? • Specific Situations . . . is it a committee? • Business / organization involved in a ballot measure? • Business or organization that spends more than $1100 to support or oppose a ballot measure? • Public utility spending its own money supporting its franchise measure? • Religious assembly or institution that spends $2500 influencing an election?

Political Committees - Definition • When to raise question . . . • 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 "political 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 • $500 Threshold Exemption Statement - Repealed • Upon registration, PAC may engage in any lawful activity • Not required to establish separate committees for different activities (e.g. circulate petition and support candidates) • Not required to identify activities on registration statement • Note: A person or entity must track activity and report on its first report after qualify 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!) • Exploratory Committees - Repealed

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 statutory provision regarding using money received before register in AZ

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 support or oppose the measure • Committees can spend on any measures • 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? • AG Opinion: 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 • 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 • Committees cannot sponsor candidate or other committee

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 find there are special circumstances (e.g. intent, $$$)

Penalty for Failure to Register Initiative & Referendum petition sigs invalid? • Title 16 • Committee registration only required if meet requirements (Primary purpose, exceed $1100) • 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 attorney • Registration probably required to circulate 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 requirements in Title 16 (primary purpose, exceed $1100) • Title 19 • Recall different than Init and Ref - §19-202 (change 2016) • Applicant NOT required to file Stmt Org with application • Filing officer can accept petition without registration • No provision that Recall signatures 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 • Registration required if candidate exceeds $500 ($1100) • Superior Court decisions • A candidate not always required to register a committee • Since 2006, Superior Courts have invalidated signatures on nomination petitions if committee not registered • No appellate court decision 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 • Required for any change in required information • Must file within 10 days after change (previously 5) • No specific penalty 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 and 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 (AG Opinion) • Current Limit: $6350 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 • For Special Election • From date election called to last day of calendar quarter of election • For Recall Election • From when issue serial # to the end of the “Recall” (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 Use of candidate’s own money 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 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) • Some city candidates registered a committee for state office and transferred surplus before effective date (no restriction on transfer from a committee for state offices) • Not amended in 2018

Campaign Finance 101