Legislative Panel Orders Audit of FPPC

Acting on complaints that the demands of the watchdog Fair Political Practices Commission are out of control, a legislative committee Wednesday ordered an election-year investigation of the agency’s performance.

Lawmakers have charged that the FPPC’s oversight system is so intrusive that officials must publicly report the value of personal items such as wedding gifts and political candidates must retain costly lawyers and accountants merely to stay within the laws governing required paperwork.

At a hearing Wednesday, the committee directed the state auditor to complete a “performance audit” by mid-May, when the commission’s budget is up for a final review by the Legislature.

The action was condemned by supporters of the FPPC as a clear attempt to cripple an agency that has drawn national attention as a model for enforcing political reform.

“It is in their interest to weaken any kind of agency that monitors their finances. That is what the Legislature is doing,” said Craig Holman, executive director of the independent Californians for Political Reform Foundation.

First-term Assemblywoman Lynne Leach (R-Walnut Creek), a committee member, said she was concerned that ordering an election-year investigation would invite criticism that the Legislature was paying “undue attention to an agency we are very much involved with.” But she nevertheless ended up voting for the audit.

Commission Chairman James Hall, an appointee of Gov. Pete Wilson, appeared at the hearing and promised cooperation with the audit, but warned it could “interfere” with the commission’s work just as primary election campaigns begin in earnest.

“We will make ourselves adequately available,” Hall told the committee.

The decision by the Joint Legislative Audit Committee added a new episode to a long history of friction between the FPPC, which enforces the Watergate-era state Political Reform Act, and the Legislature, whose members are subject to its authority and approve its budget.

It is unclear how far-reaching the consequences of the audit might be, but any legislation to rewrite the political reform law would require a two-thirds vote of the Legislature.

The commission was created in 1974 when voters enacted Proposition 9, a landmark political reform initiative that required full disclosure of campaign donors, sought to expose potential conflicts of interest by publicly listing officeholders’ personal financial information and enacted a system of fines for violations.

For years, FPPC officials have complained about occasional cuts in the commission budget. Lawmakers have denied that the cuts were politically motivated or retaliatory.

The performance audit ordered Wednesday will examine whether FPPC funds are being spent appropriately to enforce political disclosure and other reform laws, or whether the agency has ventured into regulatory excess.

State Auditor Kurt R. Sjoberg told the committee that his audit would examine the FPPC’s “management efficiency” and track expenditures to determine whether the commission was meeting its goals and objectives. Sjoberg did not indicate how far back his investigators would look.

The lawmaker pushing for the probe is Assemblyman Lou Papan (D-Millbrae), a veteran who has spent 16 years in the Legislature over three decades.

Papan noted that the performance of the FPPC has never been audited, although its first budget of $1.5 million has increased over the past quarter of a century to about $5 million. The commission has 81 employees.

“We’ve got to know how [the FPPC] money is being spent, where it is being spent,” Papan said. He claimed that the investigation is “necessary for the Legislature to bring the FPPC expenditures and over-regulation under control.”

Holman, whose foundation defends Proposition 9 against legal and political attacks, said that legislators are exploiting the uncertainty over another reform initiative, Proposition 208, to attack the FPPC.

Proposition 208, which limited campaign contributions, was approved by voters in 1996 but overturned as unconstitutional by a federal judge in January. The FPPC has appealed the decision to the U.S. 9th Circuit Court of Appeals.

“Papan has seized on some of the confusion that is going on and is attempting to really throw the finances of the FPPC out of whack,” Holman charged. “This is designed to weaken the monitoring abilities of the FPPC.”

Part of the controversy is over an extra $1 million that the commission acquired to enforce Proposition 208. The funds were spent to hire more investigators and staff attorneys.

A $500,000 appropriation authorized by Proposition 208 is due to expire on July 1, the start of the new state budget year. Sources who asked not to be named said the FPPC wants all or part of the appropriation renewed while some legislators favor using it for other purposes.

Papan’s proposal was endorsed by nine Democratic and Republican committee members. Sen. Steve Peace (D-El Cajon) was the lone defender of the commission.

Peace insisted that candidates’ decisions to hire attorneys and accountants was not caused by FPPC regulatory actions. Instead, he said, those professionals have persuaded politicians that they are campaign necessities.

“I don’t think we ought to blame the FPPC,” Peace said.

Papan said he had “‘no problem” with the original political reform law but asserted that subsequent FPPC regulations have become so burdensome that candidates for state and local office routinely must retain attorneys and certified public accountants merely to stay within the law.

“There are a lot of people out there who are very upset and very nervous about whether they are meeting the law or not,” Papan told the committee.

Veteran Sen. Ken Maddy (R-Fresno) told the committee he favors complete and timely disclosure of campaign finances, but said a requirement that officials annually report private matters such as mortgage rates and wedding gifts goes too far.

For example, Maddy recalled that after Sen. Charles Calderon (D-Whittier) got married last year, he had to call friends and ask the price of their wedding gifts so the value could be reported. “It’s offensive to list that kind of stuff,” Maddy said.

The intent of Proposition 9, Papan said, was to have politicians publicly disclose their sources of campaign contributions and to list how the money was spent. “It shouldn’t require an attorney and an accountant to do that,” he said.

Papan and Assemblyman Don Perata (D-Oakland) complained that hiring such professionals not only drives up the cost of campaigning but also discourages newcomers from seeking office. Perata estimated his campaign routinely spends up to $10,000 a year for legal and accounting purposes. “This [audit] is long overdue,” he said.

The Legislature has been “frightened to death” of making any substantial changes in the reform laws, but the time may be right for “a bill that makes it simpler,” Maddy said.

The Political Reform Act authorized the commission to adopt regulations to implement the reform law. The five members of the commission are appointed by the governor, the state controller and the secretary of state.