Requested By: Representative Caren Robinson
Prepared By: Jenifer Kohout, Assistant Director
Date Issued: December 5, 1996
Subject: Repayment of existing campaign debts
from a previous
election during a transition period from January 1, 1997 until December 31, 1997
You have asked for guidance from the Alaska Public Offices Commission (the Commission) regarding repayment of campaign debts after the new Campaign Disclosure Law, AS 15.13, takes effect on January 1, 1997.I. SUMMARY
Specifically, you ask: "Am I prohibited from paying off existing campaign debts with personal funds after December 31, 1996? If the answer is yes, does that mean campaign creditors have no recourse after December 31, 1996 for unpaid debts?"
The new Campaign Disclosure Law will make significant changes to how campaigns are conducted. To facilitate these changes and alleviate unanticipated consequences of the new law during the transitional period from January 1, 1997 until December 31, 1997, the Commission adopts the response described below.
The new Campaign Disclosure law places strict new time limitations on the winding up of a campaign. AS 15.13.116. A candidate has 90 days after his or her last contested election to "pay bills incurred for expenditures reasonably related to the campaign and the winding up of the affairs of the campaign, and to pay expenditures associated with post-election fund raising that may be needed to raise funds to pay off campaign debts." AS 15.13.116(a)(1). Post-election fund raising ends no later than 45 days after an election, when the candidate may no longer accept campaign contributions. AS 15.13.074(c )(4).
The new law represents a significant change from past practices. Under the old law, Commission regulations permitted candidates until December 31 of the year after the election to "make post-election expenditures for the purpose of raising money to discharge a debt from a prior campaign". 2 AAC 50.401. After that point, a candidate could request an advisory opinion from the Commission if he or she had not filed for office but wished to continue to make fundraising expenditures to pay off campaign debts.
The new law does not specifically address repayment of pre-1997 campaign debts after December 31, 1996. The Attorney General's Office, however, has determined that because of the new limitation on acceptance of campaign contributions, former candidates may not fund raise after January 1, 1997 to retire old campaign debts. AS 15.13.072(c ); 15.13.074(c ).
The Definition of "Contribution"
It would appear that a candidate with existing debt on January 1, 1997 has two options: to not repay the debt or to repay the debt from personal funds. According to the Commission's past definition of "contribution," however, both options risk violating the prohibition on accepting contributions in a non-election year.
If the candidate fails to repay the debt, the amount owed becomes a contribution by the supplier under operation of law. According to 2 AAC 50.313(i), a debt owed by a candidate which is "forgiven or settled for less than the amount owed is a contribution." Similarly, the extension of credit by a person to a candidate for "a length of time beyond normal business practice is a contribution." 2 AAC 50.313(h). Thus, the business supplier who forgives debt or extends credit beyond "normal business practices" after January 1, 1997 risks making an illegal contribution to the candidate. The contribution would violate the timing limitation on the acceptance of campaign contributions. In addition, the supplier risks violating the prohibition on excess contributions if the amount forgiven exceeds the monetary limitation on campaign contributions.
On the other hand, the candidate's ability to repay the debt with personal funds may also be circumscribed by the new law. In the past, the Commission has considered use of personal funds by a candidate to be a contribution to the candidate's campaign. The candidate must disclose contributions of personal funds on schedule C of the campaign disclosure report form.
Interpreting the Campaign Disclosure Law to prohibit a candidate from repaying campaign debts with personal funds, however, makes no sense. Common sense and wise public policy counsel that candidates who attempt to be fiscally responsible and repay their debts with personal money should not be penalized. This is consistent with past Commission and judicial precedent recognizing that while the debt remains a campaign obligation subject to Campaign Disclosure reporting requirements, it is also the personal debt of the candidate.
There is no indication that the legislature intended to prohibit former candidates from repaying their campaign debts with personal money when it passed the new law. The new law is designed to limit the length and cost of campaigns. Providing candidates with a means to repay campaign debts does not contradict these goals. In fact, it facilitates public confidence in their elected officials by enabling candidates to act in a fiscally responsible manner and repay their financial obligations. Further, interpreting the law to prohibit candidates from repaying their debts will undermine the confidence of business vendors who provide services to candidates.
Repayment of Existing Campaign Debt with Personal Funds
The Commission recognizes that some former candidates may be unable to retire their campaign debts by January 1, 1997, when the new law takes effect. This situation is not surprising given the dynamics of the transitional period. Candidates are still assimilating the change from the existing provisions on post-election fundraising to the strict new time limitations on the acceptance of campaign contributions. In addition, the Commission recognizes that while candidates campaigned under the provisions of the old law, their campaign efforts and choices become subject to the new law on January 1, 1997.
By statute, the Commission has authority to implement and clarify the provisions of the Campaign Disclosure Law. AS 15.13.030. For the purposes of facilitating a transition from the old to the new law, the Commission interprets the law to permit candidates to repay existing campaign debts with personal money during the transitional period from January 1, 1997 until December 31, 1997. To avail themselves of this qualified permission, however, a candidate must demonstrate to the Commission that he or she will in fact use personal money to repay existing debts; that the debt will not be forgiven by the creditor[s] after January 1, 1997; and that credit will not be extended past the "normal business practice." To make this demonstration, a candidate must provide the Commission with the following information:
- a statement which declares a candidate's intention to
pay off his or her campaign debts with personal money
during the period from January 1, 1997 to December 31,
- letters from all businesses to which a candidate owes money. These letters must document the procedures the candidate's suppliers will pursue to ensure that the money is collected in the course of "normal business practices." These letters provide evidence that the suppliers are following "normal business practices" to collect the debt; that they have not forgiven the debt; and that they have not made excess contributions to the candidate. Under existing regulation, the Commission will consider if "the creditor has made a commercially reasonable attempt to collect the debt, or pursued remedies in a manner similar in intensity to that employed by the creditor in pursuit of a non-political debtor, including lawsuits if filed in similar circumstances." 2 AAC 50.313(h).
Once a candidate has satisfied the requirements described above and have filed the material requested with the Commission, he or she may act to repay debts with personal money. The material submitted will be part of the public record. It serves the function of disclosure and provides evidence that the candidate has acted in good faith. This advisory opinion does not protect a candidate in the event that a complaint is filed by the public or staff concerning a candidate's repayment circumstances. For example, the candidate will consider allegations that a candidate used funds other than personal funds to repay the debts; or that a supplier failed to act consistently with "normal business practice."
In addition, candidates should be aware that they may be prohibited from repaying with future campaign funds any personal loans they make to pay their debt consistent with this advisory opinion. The Attorney General's Office has interpreted the new law to prohibit repayment after December 31, 1996 of personal loans made to a campaign which occurred before January 1, 1997. Because you have not raised the issue in your request, this advisory opinion does not specifically address whether candidates who pay off existing campaign debts with personal money from January 1, 1997 to December 31, 1997 may repay themselves in the course of fundraising for their next campaign. Permitting this repayment, however, would appear to contradict the legislature's intent to reduce the length of campaigns.
Following the transitional period, the Commission will consider the issue of repayment of debt during their development of regulations.
The Commission approved this advisory opinion on December 5, 1996. The advice in this opinion applies only to the specific activity for which the advice was requested.
A copy of the original letter requesting the above advisory opinion is available upon request at the Alaska Public Offices Commission. (907) 276-4176.