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california legislation > SB 8

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SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session


SB 8 (Yee)
As Introduced
Hearing Date: March 29, 2011
Fiscal: No
Urgency: No
TW


SUBJECT

Public Records: Auxiliary Organizations

DESCRIPTION

This bill would require the auxiliary organizations of community
colleges, California State University, and University of
California to comply with the California Public Records Act
(CPRA). This bill would exempt from disclosure under the CPRA
information obtained in the process of soliciting potential
donors that has actual or potential independent economic value.
This bill also would exempt from disclosure the personal
information of an auxiliary organization donor or volunteer who
requests anonymity, unless the donor or volunteer receives, in a
quid pro quo arrangement, anything with a value of $500 or more
for the service or donation.

The bill would expressly reject the court's decision in
California State University, Fresno Assn., Inc. v. Superior
Court (2001) 90 Cal.App.4th 810 (CSU Fresno Assn.), in which the
court held that auxiliary organizations are not state agencies
and therefore are not subject to the disclosure requirements of
the CPRA.

BACKGROUND

Several situations have arisen on campuses of the California
State University involving the failure of these campuses to
disclose information to the public. The first situation was
presented in California State University, Fresno Assn., Inc. v.
Superior Court (2001) 90 Cal.App.4th 810. (See Comment 2.) In
that case, the Fresno Bee's CPRA request for information was
(more)



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made in October, 1999. In the second scenario, in 2008, a
non-profit corporation, University Enterprises, Inc (UEI), which
operates the student bookstore at CSU Sacramento, relied on the
CSU Fresno Assn. decision to deny a CPRA request made by a
student attempting to obtain textbook pricing information from
UEI. The student, a member of the student association's
bookstore advisory committee, sought the information contained
in the contracts between UEI and the book vendors to determine
whether UEI was complying with the College Textbook Transparency
Act (AB 1548, Solorio, Ch. 574, Stats. 2007).

In between the 2001 CSU Fresno Assn. decision and the 2008 CPRA
request, the voters of California passed Proposition 59 by an
overwhelming 83 percent vote in 2004. Proposition 59 guarantees
the constitutional right of the public to access public records,
favoring transparency, open disclosure, and the narrow reading
of exemptions from public disclosure provided by statute.
Proposition 59 is enshrined in the California Constitution as
Article I, Section 3.

SB 218 (Yee, 2009) and SB 330 (Yee, 2010) were introduced to
provide transparency regarding public funding of state community
colleges and universities. These bills were vetoed by Governor
Schwarzenegger for failing to adequately provide for donor
privacy. Responding to the Governor's veto messages (see
Comment 6), SB 8 would include revised exemption provisions for
the names of donors and volunteers. (See Comment 4.)
Otherwise, SB 8 is substantially similar to SB 218 and SB 330.

In 2010, the Attorney General audited the operations of
nonprofit organizations affiliated with the California State
University, in response to reports of improper use of funds
raised by the auxiliary organizations. The Attorney General's
investigation concluded that the Board of the California State
University Stanislaus Foundation (the Foundation) failed to
adequately exercise fiscal oversight over the Foundation's
charitable assets, raising the possibility that those assets
could be lost as a result of mismanagement or diversion.
(Attorney General Edmund G. Brown, Jr., Department of Justice,
letter to Robert S. Bower, Esq., Aug. 6, 2010.)

This bill, sponsored by California Newspaper Publishers
Association, California Faculty Association, and the American
Federation of State, County and Municipal Employees, AFL-CIO,
would require auxiliary organizations of state community
colleges and universities to comply with disclosure requirements




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of the CPRA, with specified exemptions.

CHANGES TO EXISTING LAW

Existing law , Article I, Section 3 of the California
Constitution, declares the people's right to transparency in
government. ("The people have the right of access to
information concerning the conduct of the people's business, and
therefore, the meetings of public bodies and the writings of
public officials and agencies shall be open to public
scrutiny....")

Existing law , the California Public Records Act, governs the
disclosure of information collected and maintained by public
agencies. (Gov. Code Sec. 6250 et seq.) Generally, all public
records are accessible to the public upon request, unless the
record requested is exempt from public disclosure. (Gov. Code
Sec. 6254.) There are 30 general categories of documents or
information that are exempt from disclosure, essentially due to
the character of the information, and unless it is shown that
the public's interest in disclosure outweighs the public's
interest in non-disclosure of the information, the exempt
information may be withheld by the public agency with custody of
the information.

Existing law provides that the person whose request for a public
record under the CPRA is denied may file an action in superior
court for an order requiring disclosure. (Gov. Code Sec. 6258.)
The test for a determination of whether a record may be withheld
from public access is whether the public's interest in
disclosure is outweighed by the public's interest in withholding
disclosure of the record. (Gov. Code Sec. 6255.)

Existing law defines state agency, for purposes of the CPRA, to
include every state officer, department, division, bureau,
board, and commission or other state body or agency, except for
the Legislature and the Judiciary. The California State
University, the University of California, and the California
Community Colleges are considered to be state agencies for this
purpose. (Gov. Code Sec. 6252.)

Existing law authorizes the California State University and the
California Community Colleges to form auxiliary organizations
for the various purposes related to their educational mission.
(Ed. Code Secs. 72670 and 89900 et seq.)





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Existing case law holds that a non-governmental association,
which was a nonprofit auxiliary corporation affiliated with a
state university and which operated a multi-purpose arena being
built on campus, was not a "state agency" for purposes of the
CPRA, and thus could not be compelled under the CPRA to disclose
requested information. (California State University, Fresno
Assn., Inc. v. Superior Court (2001) 90 Cal.App.4th 810.)

This bill would require auxiliary organizations to comply with
the disclosure requirements of the CPRA.

This bill
would exempt from disclosure under the CPRA
information obtained in the process of soliciting potential
donors that has actual or potential independent economic value
because it is not generally known to the public or because
individuals can obtain economic value from its disclosure or
use.

This bill
would exempt from disclosure under the CPRA the name,
address, or telephone number of a person who donates or
volunteers services to an auxiliary organization, if that person
requests anonymity, unless the donor or volunteer receives in a
quid pro quo arrangement anything in return that is valued at
$500 or more.

This bill would not exempt from disclosure the name, address, or
telephone number of donating board members.

This bill
would define an "auxiliary organization" of the
University of California (UC) to include various entities,
including an entity that operates a commercial service for the
benefit of a UC campus or other UC property, and an entity whose
"purpose is to promote or assist any campus of the University of
California, or to receive gifts, property, and funds to be used
for the benefit of that campus, or any person or organization
having an official relationship therewith."

This bill
would express the Legislature's intent to reject the
court's interpretation of state law regarding the application of
the CPRA to auxiliary bodies such as the CSU Fresno Association
described in California State University, Fresno Assn., Inc. v.
Superior Court (2001) 90 Cal.App.4th 810 and to construe and
clarify the meaning and effect of existing law.

COMMENT





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1. Stated need for the bill

The author writes:

In 2004, by an overwhelming margin of 83%, voters approved
Proposition 59 which dramatically improved public access to
government meetings and documents. Among the provisions now
enshrined in the constitution is the provision that directs
governmental agencies and the courts to increase public access
to meetings and documents by interpreting existing rules and
regulations broadly. . . .

Ensuring adequate transparency and oversight of all funding
sources is critically important, especially during tough
budget times. According to a 2007 report by the non-partisan
State Auditor, who was tasked with determining executive
compensation levels of CSU executives, "? because of the large
number of auxiliaries and potential outside sources of income,
we cannot be certain that we identified all additional
compensation ›given to CSU executives]."

This occurred despite assurances by the CSU that it
auxiliaries are held to "strict accountability and
transparency standards." According to the California State
University's own budget documents, 20% of their funding comes
from auxiliary organizations. This translates to $1.34
billion dollars that, according to the state auditor, lacks
adequate accountability.

Senate Bill 8 would update the California Public Records Act
to include auxiliary organizations at UC, CSU, and CCC
campuses. Placing state college and university auxiliaries
under the authority of the public records act will safeguard
the use of taxpayer funds and provide much needed
accountability and oversight to state policy makers.

2. Attorney General's audit and findings of inadequate fiscal
oversight

This bill would provide public access to information regarding
the handling of public funding to state community colleges and
universities. California Newspaper Publishers Association, a
co-sponsor of this bill, reports that "›a]uxiliary organizations
supporting California State University and University of
California campuses have relied on a loophole in the California
Public Records Act (CPRA) to shield their activities from public




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view . . . These organizations provide government services and
collect fees all while operating under the auspices of the
universities."

These auxiliary organizations manage monies for the benefit of
students at public colleges. Yet, the Attorney General's 2010
audit of the California State University Stanislaus Foundation,
one such auxiliary organization, found inadequate fiscal
oversight potentially resulting in future mismanagement or
diversion of funds. (See (Attorney General Edmund G. Brown,
Jr., Department of Justice, letter to Robert S. Bower, Esq.,
Aug. 6, 2010.) Given a demonstrated problem with fiscal
management by auxiliary organizations, the need for greater
transparency of these auxiliary organizations exists in order to
oversee and thereby protect public student funding.

3. Auxiliary organizations and the California Public Records Act
(CPRA)


a. This bill responds to the court's call to fix a problem
identified in CSU, Fresno Assn. Inc. v. Superior Court



This bill would provide that auxiliary organizations are
subject to disclosure under the CPRA. Doing so in fact would
answer the court's call in California State University, Fresno
Assn., Inc. v. Superior Court (2001) 90 Cal.App.4th 810 for
the Legislature to clarify its original intent and cure this
anomalous omission from those organizations covered by the
CPRA. The court based its conclusions on the CPRA as it
existed at that time and the comparisons it made of the CSU
Fresno Association to those groups in other states and the
federal government labeled "agencies" under their own versions
of the CPRA or the Freedom of Information Act (FOIA). The
court further stated:

We are fully cognizant of the fact that our conclusion
seems to be in direct conflict with the express purposes
of the CPRA - "to safeguard the accountability of
government to the public ?" (Citation omitted). The
Legislature's decision to narrowly define the
applicability of the CPRA, balanced against its sweeping
goal to safeguard the public, leaves us scratching our
judicial heads and asking, "What was the Legislature
thinking?" In many ways the Association can be
characterized as a "state-controlled" corporation that




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should be subject to the CPRA. (Citation omitted.)
However, courts "do not sit as super-legislatures to
determine the wisdom, desirability or propriety of
statutes enacted by the Legislature." (Citation omitted)
The rewriting of a statute is a legislative, rather
than a judicial function, a practice in which we will
not engage. (Citation omitted.)
(Id. at p. 830.)

This bill would express the Legislature's intent to reject the
CSU Fresno Assn. decision that held auxiliary organizations
are not state agencies and therefore are not subject to the
disclosure of public records requirements of the CPRA. It is
important to understand the factual background of CSU Fresno
Assn. in order to examine the impact of this bill on groups
affiliated with the publicly-funded universities and colleges
in the state.

When CSU Fresno built a multipurpose arena on its campus, it
was funded primarily by private donations and operated by the
CSU Fresno Association, a nonprofit corporation that operates
all of the university's commercial enterprises such as the
bookstore, food services, housing, and student union. In
exchange for generous gifts to the university's foundation (a
separate nonprofit corporation whose purpose is to manage all
aspects of the financial activities for grants, trust
accounts, investments, endowments, scholarships, gifts, loans,
and donations and to provide assistance to faculty and staff
with their grants and contracts), some donors obtained luxury
suites in the arena for a specified number of years pursuant
to licensing agreements between the donors and the CSU Fresno
Association. The Fresno Bee made a CPRA request for the
licensing agreements and other documents, in an attempt to
learn the identity of the donors and investigate whether the
donors received favorable treatment from any of the entities
involved. The association and the foundation denied the
request for information, claiming that they were not state
agencies as defined in the CPRA and therefore not subject to
the disclosure requirements of the act.

The Fresno Bee filed a superior court action to compel
disclosure, and the trial court ordered disclosure. The
appellate court reversed, concluding that the CPRA was not
written broadly enough to include either entity in the
definition.





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b. Auxiliary organizations are currently defined in statute

To be sure, state colleges and universities have formed
auxiliary organizations for the purpose of furthering the
educational mission of their institution. There are alumni
groups, student associations, faculty organizations, and other
groups bearing the name of the particular college or
university or campus, and for the most part these groups
operate as nonprofit associations or corporations, called
"foundations" in many instances, to imply their nonprofit
character.

In order to operate under the aegis of the university or
college however, an auxiliary organization must meet certain
standards of operation, such as: (1) auditing and financial
reporting procedures with oversight by a certified public
accountant; (2) expenditures that are in accordance with
policies delineated by the trustees; and (3) conformity of
operational procedures with regulations established by the
trustees. (Ed. Code Sec. 89900.)

An "auxiliary organization" is defined to include the
following:
(a) any entity in which any official of the university
participates as a director as part of his or her official
position; or
(b) any entity formed or operating as a student association;
or
(c) any entity which operates a commercial service for the
benefit of a campus of the university on a campus or other
property of the university; or
(d) any entity whose governing instrument shows its purpose
is to promote or assist any campus of the university, or to
receive gifts, property, and funds to be used for the
benefit of such campus or any person or organization having
an official relationship therewith and shows that any of
its directors, governors, or trustees are either appointed
or subject to the approval of an official of any campus of
the university or selected ex officio from the student body
or faculty or the administrative staff of the campus. (Ed.
Code Sec. 89901.)

The court's description of the auxiliary organization, the CSU
Fresno Association, petitioner in the case mentioned in
Comment 3a above, would place that organization squarely
within the statute. Thus, were such organizations expressly




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subject to disclosure requirements contained in the CPRA, they
would have been required to make their records subject to
public inspection, just as the California State University,
Fresno itself was required to do. The statute has not been
revised since 1991.

c. SB 8 would place auxiliary organizations under the CPRA

The court in CSU Fresno Assn. acknowledged that California
courts had, at that time, generally recognized that auxiliary
organizations are not part of the state body they aid or
assist. However, the court said, previous cases had not
addressed whether state university or community college
organizations are state agencies for purposes of the CPRA.
The court thus concluded that, under the legislative scheme of
that time, the courts were to develop the extent of the CPRA's
coverage on a case-by-case basis. This bill would provide
clarity and avoid this case-by-case analysis to determine
whether the CPRA covers auxiliary organizations by
specifically requiring these auxiliary organizations to comply
with the CPRA.

4. No public disclosure required for names of anonymous donors
and volunteers, unless a quid pro quo exchange is valued at
$500 or more

While it may be appropriate to expressly include auxiliary
organizations that engage, on behalf of or instead of the
university or campus, in the commercial-like enterprises of a
college or university's administration in furtherance of its
public goal to educate the state's citizens, debate over SB 218
(Yee, 2009) and SB 330 (Yee, 2010) centered around the exposure
of donors who give anonymous gifts to these institutions for
research or other academic pursuits, as well as other more
general reasons, through the "foundations" that do little more
than receive and administer gifts and trusts for the university
or college. It should be noted that in CSU Fresno Assn., the
court upheld the trial court's finding that the foundation, a
nonprofit entity that received the donations from private
parties, but was not involved in the commercial enterprise to
build the sports arena, was without question not subject to the
CPRA.

In response to the concerns raised during the SB 218 and SB 330
deliberations and to the Governor's veto messages (see Comment
6), this bill contains an exemption to protect from disclosure,




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under the CPRA, the name, address, and telephone number of an
auxiliary organization donor or volunteer who requests
anonymity, unless the donor or volunteer receives, in a quid pro
quo arrangement, anything that is valued at $500 or greater.

5. Opposition concerns

California State University, an opponent of this bill, argues
that "›s]ubjecting our auxiliaries to the PRA is a draconian
solution that will result in less non-state revenues; dollars we
need now more than ever given the state's fiscal challenges.
During the 2010-11 legislative session we offered amendments to
protect the status of our auxiliaries and increase access to
information as sought by the proponents to no avail. We still
believe it is possible to find a solution that balances the
needs for all of us but SB 8 is not it. We need to (1)
expressly protect the privacy of our donors and volunteers, (2)
protect proprietary information and (3) maintain the status of
the auxiliaries as separate and non-state entities. . . . As SB
8 is currently drafted it will result in at least $6.6 million
in reduced revenue for campus programs and services that would
otherwise be available because: (1) revenues would need to be
redirected to respond to PRA requests and related legal costs;
and, (2) reductions in our fundraising from individuals' and
corporations' response to the lack of clarity with regard to the
privacy rights of such individuals under the bill and current
statute." (Emphasis in original.) University of California
(UC), opposed to this bill unless it is amended, argues that the
bill will result in a potential $7.5 million loss in annual
revenue.

In response to these concerns, the author states that this bill
contains privacy protections by allowing donors and volunteers
to remain anonymous as long as there is no quid pro quo
arrangement in excess of $500. UC contends that board members,
generally large providers of UC financial support, are exempt
from the anonymity protection and the lack of anonymity
protection will result in individuals preying upon these large
financial donors. Staff notes, however, that this bill does not
require board members to provide their personal phone number and
address. Should board members want to protect their personal
phone number and address from disclosure, the board members may
simply provide their business or university address information.


With regard to CSU's concern for proprietary information




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protections, the author argues that this bill exempts from
disclosure proprietary information. As to the need to keep
auxiliaries as separate and non-state entities, the author notes
that this bill amends the Education Code rather than the CPRA.
As such, this bill maintains the status of the auxiliaries as
separate, non-state entities. As for a loss of revenue of $6.6
million by CSU and $7.5 million by UC, the author argues that
these figures are unsupported by any evidence and there is
nothing to suggest that compliance with this bill will result in
substantial revenue loss.

Additionally, UC has expressed concern that this bill fails to
sufficiently provide privacy protection for potential donor
financial and medical records. In the case of large monetary
donations, UC may request that a potential donor provide
financial records in order to substantiate the validity of the
potential donation. The bill provides protections for
"information obtained in the process of soliciting financial
donors that has actual or potential independent economic value
because it is not generally known to the public or because
individuals can obtain economic value from its disclosure or
use." In the case of medical records, these documents would be
subject to the confidentiality protections contained in the
Hospital Insurance Portability and Accountability Act (HIPAA)
(see P.L. 104-191) and the Confidentiality of Medical
Information Act (see Civil Code Sec. 56 et seq.).

UC and Valley Industry and Commerce Association (VICA), another
opponent of the bill, believe that this bill is duplicative of
existing state and federal laws. UC argues that "SB 8
unnecessarily includes a definition of UC 'auxiliary
organizations'. The inclusion of this definition in SB 8 does
not provide any additional transparency or accountability
because UC's existing auxiliary enterprises, which might include
campus bookstores, parking, and athletics, are not separate
legal entities but instead are operated by UC and are therefore
already fully subject to the ›CPRA]." In response, the author
argues that the definition of auxiliary organizations is
necessary because it will clearly establish transparency and
accountability requirements. Given the existing confusion over
whether auxiliary organizations are subject to the CPRA
demonstrated in CSU Fresno Assn., existing federal and state
laws are insufficient guidelines for transparency of auxiliary
organizations. Since UC claims already to be in compliance with
the CPRA, continued compliance under the terms of this bill
should not be a problem.




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6. Governor's vetoes of SB 218 (2009) and SB 330 (2010)

a. SB 218 (2009)

The enrolled version of SB 218 was similar to the current
version of SB 8. In vetoing SB 218, the governor stated:

While I am a firm believer in providing openness and
transparency when it involves public entities and public
funding, this bill inappropriately defines private
auxiliary organizations as a state or local public agency
for purposes of the California Public Records Act (CPRA).
Subjecting the altruistic activities of private donors and
volunteers to the CPRA will have a chilling effect on their
support and service, if they believe their personal privacy
could be compromised. Hindering private giving of time and
resources becomes a detriment to our higher education
institutions.

Enacting this bill would result in a loss of private
donations and volunteer activities supporting California
public institutions of higher education, at a time when the
University of California, California State University, and
Community college campuses are facing significant
reductions in state funding during this difficult fiscal
situation.

b. SB 330 (2010)

The enrolled version of SB 330 was similar to the current
version of SB 8. In vetoing SB 330, the governor stated:

While I am a firm believer in providing openness and
transparency when it involves public entities and public
funding, this bill inappropriately places private auxiliary
organizations that receive private funds, under the
provisions of the California Public Records Act. The focus
of our attention should be to greater transparency of how
the University of California and California State
University systems spend the public funds from taxpayers or
students. Instead, this bill would require disclosure of
private donors, those generous alumni whose giving,
especially in times of decreasing state funding, is helping
keep our public universities the best in the world.





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While the bill attempts to provide a veil of protection for
donors requesting anonymity, as crafted, it will not
provide sufficient protection for many who rightfully
deserve a level of privacy as part of their giving. Often
times, these generous private citizen donors do not want to
be in the glare of publicity, and I cannot support a bill
that makes it more difficult for our public universities to
raise private funds to maintain the quality educational
experience our students deserve, and parents expect, when
they send their children to the University of California
and California State University systems.

7. If approved, this bill should be sent back to the Senate
Rules Committee

The Senate Rules Committee has requested that, should this bill
be approved by this Committee, it should be sent back to the
Rules Committee for consideration of a request by the Senate
Education Committee to hear the bill.


Support
: Academic Professionals of California; California
Teachers Association; University of California Student
Association

Opposition : California State University; University of
California; Valley Industry and Commerce Association

HISTORY

Source : American Federation of State, County and Municipal
Employees, AFL-CIO; California Newspaper Publishers Association;
California Faculty Association

Related Pending Legislation : None Known

Prior Legislation : See Background.

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