Newsom Eliminates 40-Year-Old Exemption from California’s Pay-to-Play Law | Pillsbury Winthrop Shaw Pittman LLP

If an officer receives a disqualifying contribution and returns it within 30 days from the time the officer knows (or should have known) about the contribution and the proceeding, the officer may participate in the proceeding.

The law covers all elected and appointed officers of an “agency,” as well as candidates for elective public office. However, coverage is significantly narrowed by the definition of “agency,” which exempts the judicial branch, the Legislature, the Board of Equalization, constitutional officers, and local agencies whose members are elected by the voters. Because of this narrow exemption, the law typically only impacted appointed members of local boards and commissions, such as planning commissions.

Significant Changes to the Law

On September 29, 2022, Governor Newsom signed Senate Bill 1439 into law, which takes effect on January 1, 2023. This amends Section 84308 to no longer exclude local government agencies whose members are directly elected by the voters, such as city council members and county supervisors, and marks a sweeping change after 40 years of such local elected officials escaping coverage.

This means that now, a party seeking a license, permit or other entitlement for use may not contribute more than $250 to an officer of the agency (including city council members and county supervisors) while the proceeding is pending before that agency and for 12 months following the final decision, which is another change to the existing law—extending the contribution limit from three months following the final decision to 12 months.

Additionally, an officer (including city council members and county supervisors) must recuse him or herself from a decision involving a license, permit or other entitlement for use if the officer has received a contribution of more than $250 from a party, participant or his or her agent within the preceding 12 months. All contributions by covered donors are aggregated for purposes of the $250 restriction and recusal requirements.

The definitions of “party,” “participant” and “agent” were not changed by Senate Bill 1439.

  • “Party” means any person who files an application for, or is the subject of, a proceeding involving a license, permit, or other entitlement for use.
  • “Participant” means any person who is not a party but who actively supports or opposes a particular decision in a proceeding involving a license, permit or other entitlement for use and who has a financial interest in the decision. A person actively supports or opposes a particular decision in a proceeding if that person lobbies in person the officers or employees of the agency, testifies in person before the agency, or otherwise acts to influence officers of the agency.
  • An “agent” is an individual or firm who represents a party or a participant in a proceeding. If an agent is an employee or member of a law, architectural, engineering, consulting or similar firm, both the entity and the individual are considered agents.

Further, licenses, permits or other entitlements for use still includes proceedings on all business, profession, trade and land use licenses and permits, and other entitlements for use, including all entitlements for land use, all contracts (other than competitively bid, labor or personal employment contracts) and all franchises.

Compliance with the Amended Law

When the amended law takes effect on January 1, 2023, any relevant proceedings will be covered. While still unclear, it is likely that as of January 1, 2023, the 12-month lookback before a 2023 proceeding will consider contributions made in 2022 before the law became effective. As a result, now is a good time to look at contributions that have been made in 2022 and consider whether disqualification of a local elected official may potentially be required in 2023. The elected official may refund the contribution within 30 days from the time the officer knows about the contribution and the proceeding to enable his or her participation in the proceeding.

Entities doing business with elected bodies in California should ensure that compliance procedures are in place, including tracking and monitoring contributions that may implicate these restrictions, and make modifications to existing procedures to include local elected officials. Employees and agents can inadvertently violate the laws if they are not aware of the possible implications of making innocent personal contributions.