Commenters Express Concern and Confusion Over Arizona’s Prop 211

November 26, 2023 | Brian Hawkins

The Arizona Citizens Clean Elections Commission (CCEC) has spent the autumn enacting regulations enforcing Proposition 211, an intrusive donor disclosure regime approved via ballot initiative last November. In public comments to the Commission, People United for Privacy (PUFP) warned that the complex statute is a compliance nightmare for nonprofits that discuss public policy in Arizona. In response, PUFP urged the Commission to delay issuing rules until the courts have settled ongoing litigation challenging the law. Unfortunately, the Commission did not heed this advice and proceeded to issue byzantine rules. The public comment period has revealed that the statute and subsequent rules pose significant burdens for nonprofits across the spectrum attempting to comply with the expansive law.

The Proposed Rules

Prop 211’s backers sought to empower the CCEC to force more groups, including nonprofits, to expose the identities of their supporters – and their supporters’ supporters – when speaking about policy issues and the actions of Arizona elected officials. In pursuit of this goal, the law broadly defines a new category of speech called “campaign media spending” that covers not only direct calls to support or oppose a candidate, but also speech deemed to “promote, attack, support, or oppose” a candidate and common speech about policy issues that has no connection to an election. The muddying of the waters between political advocacy and issue advocacy raises serious constitutional questions that regulators charged with implementing the law now must face.

Though the required disclosures are chilling enough on free speech, the burden is compounded by the complex criteria that might or might not trigger disclosure, leaving nonprofits confused about not just how to speak on issues of public importance but about what sensitive information they may have to expose to government officials. The Commission ultimately issued two sets of rules: one allowing donors to opt out of contributing to “campaign media spending” and another to establish investigatory procedures for alleged violations of the law.

Opt-Out Notifications

The rule regarding donor opt-outs requires covered entities to notify donors that they may opt-out from their contributions being used to pay for “campaign media spending.” But this seemingly straightforward rule presents a variety of complications for nonprofits trying to make sense of the law.

In a public comment, the Phoenix-based law firm Statecraft PLLC asserts that Prop 211’s opt-out mechanism conflicts with existing state campaign finance laws requiring political action committees (PACs) to disclose their donors. Statecraft predicts that this conflict will cause PACs to err toward over-compliance by disclosing more donors than necessary, even if a donor opts out of using their contribution for campaign media spending. To fix this issue, Statecraft suggested an additional rule requiring PACs to notify donors that a conflicting campaign finance law requires the committee to report all contributions despite the option to opt out of campaign media spending. The Commission, however, did not agree that a conflict exists to necessitate further rulemaking.

Meanwhile, both Campaign Legal Center (CLC), a nonprofit that supports Prop 211 and opposes nonprofit donor privacy protections, and Phoenix-based law firm, Herrera Arellano LLP, which frequently represents Democratic candidates and causes, argued that the complex law will overwhelm regulated entities. Herrera Arellano suggested an additional provision allowing entities to implement “any reasonable accounting system” to track contributions from donors. The firm and its clients fear that organizations will be consumed trying to separate contributions earmarked for campaign media spending from contributions by those who have opted out. Herrera Arellano recommended that the rule should only trigger disclosure once the campaign media spending has been disbursed, rather than when the donor makes the contribution.

Campaign Legal Center noted that the law requires a covered person to act if a donor exercises their opt-out right after the 21-day notice period has expired, but this may be impossible if the money has already been spent. As Herrera Arellano similarly noted, covered persons may struggle to manage constant opt-out requests. CLC suggested removing the section in its entirety. In response, the Commission argued that a notification received after the notice period has expired would not have to be acted upon. However, a donor request to opt-out of subsequent disclosures would have to occur after the initial notice period. CLC’s commentary is notable considering their affiliated 501(c)(4), Campaign Legal Center Action, drafted the statute and is defending the law in federal court.

Marc Elias’s law firm, the Elias Law Group, which frequently represents Democratic candidates and causes, also took umbrage with the ambiguity of the statute. In their public comment, Elias Law Group argued that the law’s definition of “campaign media spending” is overly broad, covering activities that would categorize donors themselves as a covered person that must file reports to the Commission. Furthermore, the firm argued that the Commission’s interpretation of the law would consider contributions towards a wide range of regular logistical activities unrelated to political activity a campaign media spend that would trigger the law’s disclosure mandates. To remedy this overbreadth, Elias Law Group asked the Commission to narrow the scope of qualifying “activities” constituting campaign media spending to only those actions “aimed externally at voters to support or oppose a political party.”

Philanthropy Roundtable similarly submitted comments expressing concern about the breadth of activities subject to reporting requirements under Prop 211. The Roundtable’s public comment urges additional rulemaking to explicitly exempt issue advocacy from the law’s disclosure mandates. Despite similar confusion from other commenters, the Commission deemed the suggestion unnecessary, according to their reading of the law.

Investigations and Enforcement Proceedings

On the second rulemaking on investigations and enforcement proceedings, the CCEC was more receptive to implementing commenter’s suggestions. For background, Proposition 211 allows any organization to file a complaint against another organization alleging violations of the law. The statute requires the Commission to investigate the allegation and determine if there’s evidence of wrongdoing.

In their public comment, Statecraft disputed the Commission’s authority to issue a rule on this topic altogether and further claimed that the enforcement process will chill advice from attorneys to their clients. The proposed rule prohibits an attorney from advising their client to willfully violate the law. But Statecraft argues that the current wording punishes good faith interpretations of the law that might conflict with the Commission’s preferred regulatory prerogatives, consequently incentivizing weaponization of the law against one’s political opponents. The Commission rejected the challenge to their rulemaking authority but conceded the potential chilling effect of the proposed rule and withdrew the offending section altogether.

Campaign Legal Center offered two suggestions to the Commission’s rule interpreting investigatory and enforcement proceedings under Prop 211. First, they sought to broaden the scope of who can file a complaint accusing an entity of violating the law to include organizations, along with individuals. The Commission responded that this was already implied by the current drafting of the rule but will nonetheless add that specificity. CLC also suggested that the Commission should be required to issue a public statement explaining why they dismissed a complaint. The CCEC agreed with the suggestion and adopted CLC’s proposed language into the final rule.

Diverse Consensus on Advisory Opinion

Finally, a request for an advisory opinion by the Service Employees International Union reinforced how concerns about complying with Prop 211 transcends ideological differences. The SEIU submitted an advisory opinion request seeking advice on whether cash or in-kind contributions towards a ballot committee’s signature collection efforts constitutes campaign media spending. The SEIU argued that signature gathering for a ballot initiative is not a public communication, therefore the activity should not trigger disclosure as a campaign media spend. SEIU reasons that Arizona’s definition of a “public communication” mirrors the federal definition, and according to the Federal Election Commission, these activities (canvassing, manning a campaign office, traditional grassroots activities, and other staff overhead costs) are not public communications, therefore the Commission should rule similarly. Ballot Initiative Strategy Center Foundation, Center for Arizona Policy Action, and eQual Public Benefit Corp. all supported SEIU’s position. Bowing to decisive bipartisan support for this clarification, the Commission responded positively to the SEIU’s advisory opinion request and affirmed the SEIU’s position that contributions toward signature gathering for ballot petitions do not constitute campaign media spending.

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Judging from the active public comment period and dynamic litigation environment, the Citizens Clean Elections Commission has a lot of work to do to ensure the law is clear and transparent for nonprofits and their supporters. Arizona is destined to be the center of much national attention in 2024, and it is critical that the advocacy community has clarity in understanding how this expansive initiative will hamper advocacy on issues important to Arizonans. In the absence of clarity, groups will self-censor, and all Arizonans will suffer from the silencing of voices important to communities across the state.