Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Judiciary and Hawaiian Affairs and Transportation, Military Affairs, and Government Operations, to which was referred S.B. No. 459 entitled:

beg leave to report as follows:

The purpose of this measure is to reform several provisions of the Campaign Spending Law to enhance transparency, accountability, and public confidence in our elected officials. Specifically, the primary purposes of this measure are:

Your Committees received testimony in support of this measure from the Hawaii Pro-Democracy Initiative and the League of Women Voters of Hawaii. The Campaign Spending Commission (Commission) submitted comments on this measure.

During the 2002 Regular Session, the Legislature passed a comprehensive campaign spending reform measure, S.B. No. 2431 C.D. 1, which was vetoed by Governor Cayetano on June 25, 2002. Despite that setback, your Committees remain committed to campaign finance reform, and many of the provisions in this measure are similar to provisions in the bill vetoed last year.

Your Committees support all of the provisions contained in this measure as introduced. Your Committees are particularly concerned about large entities that can afford to make large contributions that could be interpreted as influencing an elected official. Even the appearance of impropriety compromises the public's view on how a public official votes on an issue.

This measure is intended to correct the imbalances and inequities in the existing law, by limiting the amount that a person or entity may contribute except through separate segregated funds. Such funds, commonly known as PACs, promote greater transparency and accountability due to the fact that they are established for the sole purpose of collecting, holding, and distributing campaign contributions. Therefore, it is relatively simple to track donations.

After much deliberation, your Committees have amended this measure further. First, your Committees inserted provisions to prohibit government contractors from contributing to candidates for elective office.

When persons and entities that receive government contracts contribute to the campaigns of elected officials, there is a potential for abuse of the democratic process; at the very least, the appearance of impropriety is raised.

Your Committees believe that public confidence in the integrity of the electoral system will be greatly enhanced by prohibiting contributions by contractors. Unlike last year's measure, which exempted legislators from the prohibition, your Committee's amendments apply to all elected officials.

Your Committees also amended this measure to allow candidates to make donations of campaign funds for charitable purposes; such donations shall be considered "expenditures" and not "contributions." Apparently the Commission has advised that certain donations to charitable causes from campaign funds are illegal under existing law. Regardless of whether that interpretation is correct or not, your Committees want to make clear that donations from campaign funds to charitable causes shall be considered expenditures, and not contributions.

Your Committees also amended this measure to address the issue of "bundling." Under existing law, as interpreted by the Commission, if a person distributes fundraiser tickets on behalf of a candidate, or receives donations from several persons and transmits them to a candidate, that practice is deemed illegal by the Commission.

Your Committees believe that it should be permissible for a person who wants to distribute fundraiser tickets on behalf of a friend who is a candidate to do so. At the same time, if a person is required to do so, by any means, your Committees agree that such coercion should be illegal. Therefore, your Committees have included a definition of "bundling" to reflect this common-sense approach.

Under the Campaign Spending Law as amended, it will still be illegal for a corporation to require its employees to donate to a candidate.

As affirmed by the records of votes of the members of your Committees on Judiciary and Hawaiian Affairs and Transportation, Military Affairs, and Government Operations that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 459, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 459, S.D. 1, and be placed on the calendar for Third Reading.