Campaign Spending Commission

HAWAII CAMPAIGN SPENDING COMMISSION
ANNUAL REPORT
Fiscal Year July 1, 2009 to June 30, 2010

(Objectives completed in previous years are not listed.)

Focus for FY 2010

1.  Blades.  Move to a virtual environment.  Obtain Blade virtual servers and software to increase capacity and speed for the CFS and NCFS, along with sufficient redundancy for backup purposes.

2.  Subscribe-Unsubscribe.  Initiate a subscribe-unsubscribe system on our website to reduce costs and staff time currently used for mailing out deadline reminders, the Campaign Spending Commission Bulletin, and other information.  Transition candidates, treasurers, noncandidate committees, chairpersons, and other users from mail-out reminders and information to an e-mail system; users would be responsible for subscribing, unsubscribing, and maintaining updated addresses.

3.  Hawaii County Council Comprehensive Public Funding Project.  Continue development of the Hawaii County Council Comprehensive Public Funding Project, provide notice to the public on the start of the program, develop a Guidebook, a electronic filing system Guidebook, a training video, research, draft and post FAQs, create new forms, provide training, coordinate with the Hawaii County Clerk’s Office and the State of Hawaii Budget and Finance’s Treasury Division, execute the program, monitor independent expenditures and noncandidate committee expenditures, audit usage of funding, initiate investigations when necessary, negotiate conciliations, prepare cases for presentation to the Commission as necessary.  Keep and post project statistics on our website as required by Act 244.

4.  2010 Elections.  Facilitate and carryout all aspects of the Commission’s responsibilities in the 2010 elections.

5.  Recodification.  Reintroduce the Recodification bill in the 2010 legislative session.  Draft updated bill, meet with Governor’s policy office, set and attend multiple meetings with legislators before and during session, provide written and oral testimony, respond to requests for information and data.

Additional Challenges:

Building Explosion and Closure.  In August of 2009, an explosion tore out a portion of the building wall on the floor below the Commission office in the State Office Building and caused the closure of the building for two work days and two weekend days.  The Commission staff immediately implemented its continuity of operations plan and secured new temporary office space to be used if the State Office Building was not going to re-open in a short time.  Communications remained open between staff members and the Commission.  We immediately posted a notice on our website for the public as to our status and provided timely updates.  Our plans were in place to move to the new location in the Kalanimoku Building, run our operations via wireless laptops, and use cell phones for public contact, but the building and our office reopened by the third workday following a weekend. 

Honolulu City Council District 5 Special Election.

Preparation for the District 5 Special Election began in FY 09 in June with the untimely passing of Councilmember Duke Bainum on June 9, 2009.  In FY 10, two candidate classes were scheduled, advertised, and taught on June 24 and June 26, 2009.  The Commission staff provided Special election candidates assistance with compliance with the laws and rules, and with filing reports.  The election was held on August 7, 2009 with 14 candidates.  Preliminary Special Election disclosure reports and Final Special Elections reports were filed by candidates and reviewed by the staff.

Award

2009 DAGS TEAM OF THE YEAR AWARD– The Commission staff nominated the Noncandidate Committee Filing System team (Jimmy Thai, Michael Teshima, Don Hongo, Kyle Muranaka, all of the State of Hawaii Information and Communication Services Division (ICSD), and Tony Baldomero from the Commission staff) for the 2009 DAGS Team of the Year Award.  This team won the award and went on to be recognized at the State of Hawaii Awards ceremony for their excellent work.

Goal #1 – To simplify and clarify campaign spending laws in order to improve implementation and compliance.

1.  The Recodification of the campaign finance law was passed by the 2009 legislature as House Bill 128 C.D.2, however, the Governor vetoed the bill because of 4 issues.  The Commission staff met with the Governor’s staff in January, 2010 prior to the start of the 2010 legislature to discuss the Governor’s concerns in her veto message regarding the 2009 Recodification bill (House Bill 128 HD1 SD1 CD2).  The 2010 Recodification bill was introduced into the 2010 Legislature as Senate Bill 2251 and House Bill 2003.

The Commission’s staff’s efforts to have the bill passed included attending over 5 meetings, 19 legislative hearings (including decisionmaking hearings), providing written and oral testimony, and complying with 2 requests from Representatives for specific letters for the record.  The Recodification was passed by the Legislature and was transmitted to the Governor on 5-3-10.  The Recodification was enacted into law on July 6, 2010 without the Governor’s signature, as Act 211, Session Laws of Hawaii 2010.

2.  Additionally, we drafted and sought introduction of Senate Bill 2252 and House Bill 2004regarding ballot issue committees, automated phone call disclaimers, reporting by corporations making contributions, and a few technical clarifications.  The sections on ballot issue committees, reporting by corporations making contributions, and clarifying the Commission’s discretion in imposing fines were incorporated into House Bill 2003, while the remaining sections died in committee.

3.  Other legislation that we provided written and oral testimony and/or tracked included House Bill 2376 regarding the Board of Education constitutional amendment, House Bill 2377 regarding Board of Education appointments and House Bill 2397 regarding the change in the primary election date.  All three bills were transmitted to the Governor on May 3, 2010.  These bills will impact our reporting tools (i.e., forms, guidebooks, e-learning videos, Candidate Filing System, Noncandidate Committee Filing System).

Also, House Bill 1985 which passed as Act 59 repeals the state tax deduction for political contributions, which had benefited candidates who voluntarily agreed to expenditure limits.

Further, we provided oral and written testimony at the Senate Ways and Means Committee and the House Finance Committee regarding the budget bill, and tracked its progress.

4.  New Hawaii Administrative Rules for the Hawaii County Council Comprehensive Public Funding project were drafted.  Notice was provided and a public hearing was held by Commission staff in Hilo on January 27, 2010.  After the Commission and the Governor approved the rules, the rules were transmitted to the Lieutenant Governor’s office for filing and became effective March 8, 2010.

5.  New Hawaii Administrative Rules, replacing current Title 2, Chapters 14.1 and 14.2, were amended to address changes in the campaign finance laws, to provide examples, and to make technical changes.  Notice was provided and a public hearing was held on April 19, 2010.  The Commission adopted the rules on May 12, 2010, the Governor signed the rules, and under Title 3, new Chapters 160 and 161 became effective May 29, 2010.

6.  Researched, drafted, and approved 2 Advisory Opinions:

Advisory Opinion 09-01, regarding whether federal excess campaign funds could be transferred to a state gubernatorial campaign, involved extensive research, numerous drafts, and several Commission meetings to formulate and decide.  The Advisory opinion was approved on August 11, 2009.

Advisory Opinion 09-02 clarified that a contributor could make a qualifying contribution of $100 in the primary and $100 in the general, for purposes of a candidate receiving partial public financing.

7.  Unfunded mandate by the Legislature– The 2008 legislature imposed an unfunded mandate on the Commission to create the Hawaii County Council Comprehensive Public Funding project.  The 2009 legislature attempted to delay the start of the project until 2014, but the bill died in committee.  The Commission staff spent well over 600 hours building the project and expenses were over $3,900 for advertisements, travel and office supplies.  Additionally, $55,676.90 of public funding was provided to certified candidates.

8.  Attended the Council on Governmental Ethics Laws (COGEL) Conference 2009 in Phoenix, Arizona at the personal expense of the staff.  Registration was paid by the Commission.  This conference covers the latest appellate court campaign finance cases, as well as providing best practices from other Commissions.  We were invited to speak on a panel, “Timing of Campaign Enforcement: What should the public know and when?” Additionally, our General Counsel was asked to facilitate the Breakfast Table Topics for General Counsel.  The conference provides the latest information on First Amendment challenges to campaign finance laws and public financing laws, among other hot topics.  This information helps us to keep our laws current to prevent unnecessary, time-consuming and costly legal challenges.

Goal #2 – To increase public education, awareness and access.

1.  Hold periodic public seminars to highlight important issues.

The following organizations invited us to make a presentation on various aspects of campaign finance law:

a.  American Council of Engineering Companies of Hawaii, January 7, 2010, Ala Moana Hotel.

b.  William S. Richardson School of Law and Alumni Association, January 14, 2010 Ethical Lobbying and Campaign Spending, Hawaii State Capitol.

c.  Trinity Broadcasting, Trinity Broadcasting Network- KAAH-TV, February 16, 2010, Smith Street.

d.  Common Cause Hawaii, League of Women Voters, Voter Owned Hawaii, Americans for Democratic Action, and Progressive Democrats held a panel on “Corporate Money in Politics—HowCitizens United v. FEC Will Impact Hawaii’s Campaigns,” Hawaii State Capitol Auditorium, April 12, 2010.

e.  PBS Hawaii, Elections and Corporate Donations hosted by Dan Boylan, April 29, 2010.

f.  Building Industry Association and General Contractors Association, May 28, 2010, Waipahu.

2.  Improve web-based information.

Three of our training videos were updated by redesigning the powerpoint slides, updating information, and re-taping each program for 2010 on:  Candidates and Candidate Committees, Partial Public Financing, and Noncandidate Committees.

3.  Develop capacity for regular public information releases during the electoral season on contributions and expenditures.

The Candidate Committee Guidebook and Noncandidate Committee Guidebook were updated, redrafted, and posted on our website.  The Candidate Filing System Administrator’s Guide was updated after extensive review, taking into consideration common filing errors and questions that were routinely asked when candidates file reports.

In August, 2009, the Commission FY09 and FY08 Annual reports were posted on our website.

On September 4, 2009, pursuant to Act 244, we posted newspaper ads stating there was $3.5 million in the Hawaii Election Campaign Fund to run the Hawaii County Council Comprehensive Public Funding project.  Advertisements were placed in the Honolulu Star-Bulletin, Hawaii Tribune Herald, West Hawaii Today, Maui News, and Garden Island newspapers.  Also announced was the start of the program on January 1, 2010.

In October, 2009, January, 2010 and February, 2010, training class advertisements were placed in the Honolulu Advertiser, neighbor Island papers, and various electronic community calendars.

Advertisements were also placed in various newspapers providing notice regarding rulemaking for the Hawaii County Council Comprehensive Public Funding project, and for repeal of current rules in Chapters 14.1 and 14.2, and adoption of new Chapters 160 and 161.

Contribution limits for the 2010 election have been posted on our website since November, 2008.

Goal #3 – Increase the technological capacity to improve access, reduce paperwork, and increase compliance.

4.  Keep the system updated, and current.

a. Two Blade servers, software, licenses, and maintenance renewals were purchased for approximately $77,000.  The Blade servers and DB2 database software will increase capacity to handle a larger load on the Candidate Filing System and Noncandidate Committee Filing System and will increase processing power speed.  Blade servers, software, licenses, and maintenance renewals arrived in July, 2009 and were taken to ICSD.  After searching for a rack for the Blades, ICSD reported moving the Candidate Filing System and Noncandidate Committee Filing System and associated data to the CSC Blade servers.  Testing of the systems commenced.  Software needed to be upgraded to maximize the Blades’ CPU power. The Candidate Filing System and Noncandidate Committee Filing Systems were migrated to the new Blades between June 1, 2010 and June 4, 2010 by ICSD.

b. Now that the Blade servers are in place, ICSD can begin work on the subscribe-unsubscribe program to reduce postage costs and staff time folding 750 mailers and stuffing envelopes.  It will be developed to allow users to subscribe and to unsubscribe themselves.

c. A request for a large number of modifications (business requirements) to the Candidate Filing System and Noncandidate Committee Filing System for the Hawaii County Council Comprehensive Public Funding Project was submitted to  ICSD in June, 2009.  From July, 2009 through December, 2009 several meetings and phone conferences were held to ascertain the progress on the modifications and to work through any technical difficulties.

d. In July, 2009, ICSD made changes to the Candidate Filing System and Noncandidate Committee Filing System Help menus, added direct links to the Candidate Committee guidebook and the Noncandidate Committee guidebook respectively, and filmed and edited training videos for the project.

e. In September, 2009, a staff member attended training regarding Microsoft Project and the software was purchased to track large projects.

Goal #4 – Upgrade the training for and ability of the committees to comply with campaign spending laws.

1.  Develop a comprehensive curriculum, with training modules on most asked, most problematic, and new provisions.

a.  A Hawaii County Council Comprehensive Public Funding Candidate, Noncandidate Committee, and Independent Expenditures Guidebook was created and edited several times, then duplicated for participants and those wanting to learn the process.  The guidebook was updated throughout the fiscal year.

b.  Classes for Candidates, Noncandidate Committees, Partial Public Financing, and Hawaii County Council Comprehensive Public Funding were held in November, 2009, as follows:

Date	Island	Attendees  3 classes presented	Attendees  5 classes presented	Attendees   1 class presented	Including    CPAs	Total
11/3/09	Kaua’i	2				2
11/5/09	Hilo		52		1	52
11/10/09	Hilo			7		7
11/17/09	Maui	13				13
11/30/09	O’ahu	28			4	32
					Grand Total	106

c.  Our instructor certification to provide Continuing Professional Education credits for Certified Public Accountants was renewed by the Board of Accountancy through December, 2011.  Chair Paul Kuramoto is our sponsor.

d.  Classes for Candidates, Noncandidate Committees, Partial Public Financing, Hawaii County Council Comprehensive Public Funding, Candidate Filing System, and Noncandidate Committee Filing System were held in February, 2010.  The attendance is steadily increasing on all islands.  We are also now including the attendees in the electronic filing classes to our statistics, as follows:

Date	Island	Attendees 5 classes presented	Attendees 6* classes presented	Including     CPAs	Total
2/3/10	Kaua’i	17			17
2/8/10	Maui	44			44
2/19/10	Hilo		14		14
2/25/10	O’ahu	39			39
					Grand Total	114

*The Hawaii County Council Comprehensive Public Funding project is an additional class provided in Hilo.

2.  Establish a goal for minimum competency of each committee through testing and/or training.

No legislation proposed for this objective as of yet.  The Recodification of the campaign finance laws has been our priority and was passed by the 2010 legislature.

3.  Create new methods for training and disseminating information, including virtual training (i.e. web-based).

a.  Video for the HCCCPF project was drafted and filmed in November/December 2009.  The video was then uploaded to the Commission website for viewing 24/7.

4.  Hold periodic public discussions to highlight important issues. 

The 2009 National Campaign Finance Laws Forum was suspended due to the challenging economic conditions. All speakers and our location partner were contacted and informed of the need to suspend the forum until better economic times.

Goal #5 – Encourage compliance.   

1.  Develop system for automatic on-line, email, and postal notifications.

ICSD informed us that they would need the Blade servers tested and in-place before they could begin work on the subscribe-unsubscribe e-mail system.  The Blades were tested from June 1 –  June 4, 2010 and are now in place.  ICSD will begin work on the subscribe-unsubscribe system.  ICSD lost approximately 50 of 150 employees due to budget reductions, yet have remained very responsive to our needs.

2.  Develop escalating penalties for repeat and gross violations.

Late reports fines were increased through the passage of legislation in 2008.  On 4-12-10, the Commission imposed a $50,000 fine on a candidate, the highest fine on an individual in the Commission’s history.

3.  Simplify, expedite disposition of offenses.

Docket 09-01  John Lester v. Don Couch– a fine of $375 was imposed via Conciliation Agreement 09-04 for two excess non-resident contributions.

Docket No. 09-03  F.M. Scotty Anderson v. Leon Rouse– complaint regarding alleged fundraising in a government facility was investigated and later dismissed.

Docket No. 09-04 Eric Ryan v. John Carroll, Citizens for Carroll, Pam Smith, Gayle Gardner– A complaint by Mr. Eric Ryan against Mr. John Carroll, Citizens for Carroll, Gayle Gardner, and Pam Smith alleging 19 violations including unreported loans, contributions, and expenditures.  John Carroll was fined $100 for failing to register his committee within 10 days of receiving contributions or making expenditures more than $100 and for failing to deposit contributions in a depository institution with 7 days of receipt.  The other 17 allegations were dismissed.

Docket No. 10-01  Lynne Matusow v. David Chang- A complaint by Ms. Lynne Matusow against Mr. David Chang alleging the late filing of a Supplemental report; the failure to deposit contributions into a depository institution within 7 days of receipt or in the alternative to list the depository institution on the Organizational report, and to list the Committee’s website address on the Organizational report.  Mr. Chang was fined $50 for failure to amend his Organizational report within 10 days of obtaining a bank account and website address.

Docket No. 10-02  Lynne Matusow v. Friends of David Chang- A complaint by Ms. Lynne Matusow against Mr. David Chang alleging the failure to file a Notice of Intent to Hold Fundraiser form pursuant to Hawaii Revised Statutes §11-203(b).  A fine of $50 was imposed.

Conciliation Agreement 09-03  In Re The Matter of the Gas Company L.L.C Conciliation agreement regarding prohibited contributions by a government contractor, a self-reported case, with a fine of $675 imposed.

Conciliation Agreement 10-01  In Re the Matter of John Henry Felix, Felix for City Council– Conciliation agreement approved imposing $50,000 fine in regards to receiving 6 excess loans and filing two false reports.

Conciliation Agreement 10-02 In Re the Matter of Seina Properties, L.L.C. Conciliation agreement approved imposing a $560 fine regarding one excess contribution.

Conciliation Agreement 10-03 In Re the Matter of Friends for Gil Riviere
Conciliation agreement approved imposing a $300 fine for one late report.

Conciliation Agreement 10-04 In Re the Matter of Friends of Waipa Purdy
Conciliation agreement approved imposing a $250 fine for one late report.

Timely Review of Reports for Compliance

A total of 565 reports were reviewed for compliance, including supplemental reports and reports for the District 5 Special Election and District 3 Special Election.

Late report fines of $9,218.54 were imposed, including Conciliation Agreements 10-03 and 10-04.  Total fines of $500 were imposed (including the fine in Docket No. 10-02 above) on ten candidates for late fundraiser notices.

Total Fines Imposed in FY10- $61,478.54

4.  Automate tracking and follow up communications.

As ICSD is able to complete our current requests for modifications to the CFS and NCFS, a request to automate the identification of late report filers and the automatic generation of late report letters will be submitted.

Goal #6 – Increase and stabilize CSC’s institutional capacity to carry out its mission.

1.  In anticipation of continued annual reductions in the annual tax check-off, develop proposals to stabilize funding, including a general appropriation to be made into the trust fund at 4 to 6 year intervals.

With the Legislature amending the law in 2008 so that fines imposed by the Commission are deposited into the General fund rather than the Hawaii Election Campaign Fund, one of the primary sources of revenue was lost.  While the legislature increased the state tax check-off for the HECF from $2 to $3, and revenues from the increased check-off increased slightly in 2009, the number of check-offs continued to decline.

The Hawaii County Council Comprehensive Public Funding project may deplete as much as $1 million from the HECF for the 2010, 2012, and 2013 elections.  As the balance of the fund declines, the interest on the fund (another primary source of revenue) is also rapidly declining.  Additionally, it is projected that several Lieutenant Governor candidates may take partial public financing in the 2010 election, which may further deplete the HECF up to $1 million.

It is projected that an appropriation will be needed by at least 2014, if not sooner.

2.  Articulate the philosophy of fines as fines, not as a dependable or primary funding source for CSC operations.  Completed.

The 2008 legislature amended the law so that fines are no longer deposited in the Hawaii Election Campaign Fund, but instead are deposited into the General fund.  Thus, fines are no longer a source of revenue for the Commission.

3.  Plan for potential staff transitions (beyond 2012).

a.  Approximately 35 procedures have been drafted or modified and inserted into the position binders.

4.  Continue Commissioner development through periodic discussions, and preparing a Commissioner handbook.

Commissioners were provided information from the 2009 annual Council on Governmental Ethics Laws conference, and information on the latest campaign finance court cases nationally, including Citizens United v. Federal Election Commission.

5.  Document procedures.

See No. 3 above.

6.  Evaluate space needs for possible staff expansion due to potential for increased statutory responsibilities.

Should the need arise, having additional staff located in a separate office and potentially on a different floor is highly undesirable because of the need for constant communication between staff members.  This will be explored in more depth if and when the public decides the Comprehensive Public Funding program can be adequately funded and should be expanded.

7.  Develop contingency plans for public funding scenarios.

We continued to emphasize in our legislative oral testimony and in meetings with legislators that the Arizona, Maine and Connecticut clean election programs all have substantial revenue for their programs coming primarily from sources other than the state tax check-off.  Hawaii does not.  The staff has to balance hiring, drafting contracts, and then training and supervising temporary contract hires every two years to assist with the comprehensive public funding program versus extending the staff’s work day and working weekends and furlough days as needed to get the work done.

Focus for FY 2011

1.  Legislation– Propose corrections to Act 211, SLH 2010, the Recodification.  The legislature is aware of and has acknowledged the need for these corrections.  Add reporting requirement for new candidates prior to the First Preliminary Primary report.

2.  Develop Electronic Signatures for Each Disclosure Report Filed-  Develop technology within the Candidate Filing System and Noncandidate Filing System for candidates and treasurers to electronically sign the disclosure reports, attesting that each report is true and correct.  The technology should also accommodate instances where the treasurer electronically signs and forwards it to the Candidate, the candidate makes changes, then signs, so that the report will go back to the Treasurer for a new electronic signature after changes are made.

3.  Data Visualization– Public Understanding of Campaign Spending Highlight Statistics at a Glance using charts (similar to the F.E.C.).

4.  Review 2,000+ Disclosure Reports Submitted in the 2010 Elections for Discrepancies, Deficiencies and Violations.

5.  Step Up Institutionalization of Commission Staff Positions By Completion of Position Binders.