Earlier this year California expanded its “pay-to-play” restrictions to members of local elected agencies, including city councils and boards of supervisors, and extended from three to 12 months the length of a ban on ‘accepting, soliciting or directing’ a contribution of more than $250 after a final decision is rendered in a proceeding. One of the most consequential unanswered questions about these changes, made when Governor Newsom signed by SB 1439 into law, was whether they apply to contributions received in 2022, notwithstanding that the effective date of the bill is January 1, 2023. Staff at the implementing agency, the California Fair Political Practices Commission (FPPC), urged commission members to conclude that it does. However, on Thursday, November 17, the FPPC voted unanimously to direct staff to draft an opinion that SB 1439 does not apply retroactively to contributions received in 2022. This clarity brings much relief to the regulated community.

Current Law

California elected officials at all levels of government are subject to rigorous conflict of interest and ethics rules. Historically, the law had distinguished between campaign contributions and other financial interests that can be the source of a conflict of interest. The limited exception to this was Section 84308 of the Political Reform Act. This “pay-to-play” restriction prohibits “officers” of any state or local government agency, while serving on an appointed board or commission, from voting in a proceeding involving a license, permit or other entitlement for use that affects a “party” (e.g., the licensee or permit seeker), “participant” (supporters or opponents who lobby on the proceeding) or their agents who have contributed more than $250 to any of that officer’s campaign committees. Section 84308 did not apply to local elected bodies such as city councils or boards of supervisors.

What’s New

Under SB 1439’s expanded pay-to-play rules, there are three distinct prohibitions:

• Local elected and appointed officials are prohibited from voting on proceedings that involve a permit, license or other entitlement for use if the party or participant (or their agents) donated more than $250 to the official in the preceding 12 months and the official knows or has reason to know that the participant has a financial interest in the decision;
• Local elected and appointed officials are prohibited from accepting, soliciting or directing a contribution of more than $250 from any party, participant or a party or participant’s agent, while a proceeding involving a license, permit or other entitlement for use is pending before the agency; and
• Local elected and appointed officials are prohibited from accepting, soliciting or directing a contribution of more than $250 from any party, participant or a party or participant’s agent for 12 months following the date a final decision is rendered in the proceeding involving a license, permit or other entitlement for use if the officer knows or has reasons to know that the party or participant has a financial interest in the proceeding.

Safe Harbor Provision

SB 1439 provides a safe harbor if an official accepts, solicits or directs a contribution in the 12 months after a final decision is rendered in a proceeding. A violation may be cured by returning the contribution, or the portion of the contribution in excess of two hundred fifty dollars ($250), within 14 days of accepting, soliciting or directing the contribution, whichever comes latest. However, the safe harbor is only available if the officer did not knowingly and willfully accept, solicit or direct the prohibited contribution. SB 1439 did not change the existing rule that if an official returns a contribution (or the amount above $250) within 30 days from the time the official learns about the contribution and the decision involving a license, permit or other entitlement for use, the official may vote on the decision.

Going Forward

FPPC staff will bring a proposed regulatory package on SB 1439 in early 2023. Among the issues that may be addressed include how contributions by individuals and entities must be aggregated for purposes of the disqualification threshold and the manner of disqualification.

We will continue to monitor the FPPC’s interpretation and application of the expanded pay-to-play restrictions.