Conflicts of Interest Legislation Roundup: Changes to Contribution Threshold and Familial Relationship Rules
October 2024
Number 44
The Legislature recently passed several bills affecting conflicts of interest under the Political Reform Act of 1974 (“PRA”) and Government Code section 1090 et seq. (“Section 1090”). First, Senate Bill (“SB”) 1243 increases the threshold for contributions to an officer of an agency that would disqualify the officer from participating in decisions for certain proceedings. Second, in enacting SB 1111, the Legislature, for the first time, recognizes a public official may have a financial interest in adult children for purposes of Section 1090, but characterizes the interest as a “remote interest” allowing recusal. Finally, under Assembly Bill (“AB”) 3130, the Legislature similarly added a requirement to disclose financial interests of a broad range of family relationships for members of county boards of supervisors.
Changes to the PRA - SB 1243
Recent changes to the PRA prohibit officers of an agency from participating in decisions involving a license, permit, or other entitlement for use, if the officer knowingly received a contribution of more than $250 from a party to the proceeding. The officer has the opportunity to cure the violation by returning the contribution or the portion in excess of $250, within 14 days of accepting it. (See 2022 Client News Brief number 56)
SB 1243 amends the PRA by:
Section 1090 specifically prohibits certain public officials, including state, county, city, or district officers and employees, from having any financial interest in contracts they participate in making on behalf of the agency. While the term “financial interest” is not defined by Section 1090, cases have long held that a public official’s financial interests include the financial interests of immediate family members, particularly spouses and dependent children. Notably, the California Attorney General previously issued an opinion that non-dependent adult children were not a source of financial interests for public officials under Section 1090.
SB 1111 adds a new “remote interest” exception to Section 1090 for adult children that are an officer or director of, or have an ownership interest of 10% or more in, a party to a contract entered into by the body or board of which the officer is a member, provided the public official has actual knowledge of this interest. Remote interest exceptions are financial interests that the Legislature has determined are so remote that the public official may recuse themselves and allow the rest of the agency to move forward with the contract. Accordingly, SB 1111 allows board members to recuse themselves pursuant to the statutory procedures, and for the agency to move forward with a contract for which the public official’s adult children have the specified financial interests. Notably, the Legislature’s decision to add a remote interest exception for certain adult children calls into question the traditional interpretation that the financial interests of public officials do not include those of adult children, especially where the public official has actual knowledge of their adult child’s interest in the contracting party.
County Board of Supervisor Disclosure – AB 3130
AB 3130 similarly addresses conflicts of interest arising from the financial interests of family members. However, AB 3130 extends beyond just immediate family to include any “relationship by blood, adoption, marriage, domestic partnership, or cohabitation.” This bill requires members of county boards of supervisors to disclose a known family relationship, as broadly defined above, with an officer or employee of a nonprofit organization before it appropriates money to the nonprofit. The disclosure of such information would include announcing the relationship in an open and public meeting and noting it in the official records of the board of supervisors, but the law does not require recusal.
Takeaways
Because conflicts can exist under the PRA, Section 1090, or both, every potential conflict should be treated seriously to avoid penalties, which can be severe. It remains essential that public officials are vigilant in the soliciting or accepting of financial contributions from persons involved in any proceeding concerning a license, permit, or other entitlement for use based on the new threshold provided by SB 1243. Additionally, public officials need to be mindful of potential conflicts arising from the financial interests of their immediate family members, now including non-dependent adult children and beyond, and address the issue appropriately.
If you have any questions about SB 1243, SB 1111, AB 3130, or conflicts of interest in general, please contact the authors of this Client News Brief or any attorney at one of our eight offices located statewide. You can also subscribe to our podcasts, follow us on Facebook, Twitter and LinkedIn or download our mobile app.
Number 44
The Legislature recently passed several bills affecting conflicts of interest under the Political Reform Act of 1974 (“PRA”) and Government Code section 1090 et seq. (“Section 1090”). First, Senate Bill (“SB”) 1243 increases the threshold for contributions to an officer of an agency that would disqualify the officer from participating in decisions for certain proceedings. Second, in enacting SB 1111, the Legislature, for the first time, recognizes a public official may have a financial interest in adult children for purposes of Section 1090, but characterizes the interest as a “remote interest” allowing recusal. Finally, under Assembly Bill (“AB”) 3130, the Legislature similarly added a requirement to disclose financial interests of a broad range of family relationships for members of county boards of supervisors.
Changes to the PRA - SB 1243
Recent changes to the PRA prohibit officers of an agency from participating in decisions involving a license, permit, or other entitlement for use, if the officer knowingly received a contribution of more than $250 from a party to the proceeding. The officer has the opportunity to cure the violation by returning the contribution or the portion in excess of $250, within 14 days of accepting it. (See 2022 Client News Brief number 56)
SB 1243 amends the PRA by:
- Raising the threshold for regulated contributions from $250 to $500.
- Extending the period to cure a violation from 14 days to 30 days after accepting, soliciting, or directing the contribution, whichever is latest.
- Exempting the following types of contracts from the conflict restrictions:
- Contracts valued under $50,000.
- Contracts between two or more government agencies.
- Contracts where no party receives financial compensation.
- Periodic review and renewal of development agreements, unless a material modification or amendment is proposed.
Section 1090 specifically prohibits certain public officials, including state, county, city, or district officers and employees, from having any financial interest in contracts they participate in making on behalf of the agency. While the term “financial interest” is not defined by Section 1090, cases have long held that a public official’s financial interests include the financial interests of immediate family members, particularly spouses and dependent children. Notably, the California Attorney General previously issued an opinion that non-dependent adult children were not a source of financial interests for public officials under Section 1090.
SB 1111 adds a new “remote interest” exception to Section 1090 for adult children that are an officer or director of, or have an ownership interest of 10% or more in, a party to a contract entered into by the body or board of which the officer is a member, provided the public official has actual knowledge of this interest. Remote interest exceptions are financial interests that the Legislature has determined are so remote that the public official may recuse themselves and allow the rest of the agency to move forward with the contract. Accordingly, SB 1111 allows board members to recuse themselves pursuant to the statutory procedures, and for the agency to move forward with a contract for which the public official’s adult children have the specified financial interests. Notably, the Legislature’s decision to add a remote interest exception for certain adult children calls into question the traditional interpretation that the financial interests of public officials do not include those of adult children, especially where the public official has actual knowledge of their adult child’s interest in the contracting party.
County Board of Supervisor Disclosure – AB 3130
AB 3130 similarly addresses conflicts of interest arising from the financial interests of family members. However, AB 3130 extends beyond just immediate family to include any “relationship by blood, adoption, marriage, domestic partnership, or cohabitation.” This bill requires members of county boards of supervisors to disclose a known family relationship, as broadly defined above, with an officer or employee of a nonprofit organization before it appropriates money to the nonprofit. The disclosure of such information would include announcing the relationship in an open and public meeting and noting it in the official records of the board of supervisors, but the law does not require recusal.
Takeaways
Because conflicts can exist under the PRA, Section 1090, or both, every potential conflict should be treated seriously to avoid penalties, which can be severe. It remains essential that public officials are vigilant in the soliciting or accepting of financial contributions from persons involved in any proceeding concerning a license, permit, or other entitlement for use based on the new threshold provided by SB 1243. Additionally, public officials need to be mindful of potential conflicts arising from the financial interests of their immediate family members, now including non-dependent adult children and beyond, and address the issue appropriately.
If you have any questions about SB 1243, SB 1111, AB 3130, or conflicts of interest in general, please contact the authors of this Client News Brief or any attorney at one of our eight offices located statewide. You can also subscribe to our podcasts, follow us on Facebook, Twitter and LinkedIn or download our mobile app.
As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.
