Advisory Opinion 04-06

     This Advisory Opinion provides guidance to a candidate who asked whether amounts paid in the current election period to repay a loan made to the candidate’s committee in the prior election period are considered in determining whether the candidate qualifies for partial public financing in the current election period.

     The Campaign Spending Commission (Commission) responds in the negative.

I.  In general

     A candidate may receive contributions,1 loan proceeds,2 or public financing to pay for campaign expenditures.

     Partial public financing may be provided if the candidate:

• Agrees to limit the "candidate’s campaign expenditures and those of the candidate’s committee or committees and the candidate’s party in the candidate’s behalf" to the amounts allowed in section 11-209, Hawaii Revised Statutes (HRS);3
• Obtains a minimum amount of "qualifying campaign contributions" during a "matching payment period;"4
• Timely files an intent to seek qualifying contributions, and an application for such funds;5
• Has an opponent for nomination or election;6 and
• Meets specified accounting, expenditure and auditing requirements.7

II.  Amounts paid in the current election period to repay a loan made in the prior election period are not campaign expenditures for purposes of the expenditure limits in sections 11-208 and 11-209, HRS

     Hawaii’s public financing laws were passed by the Legislature because of the high cost of a political campaign and the importance of legislators voting "according to their perception of the public interest rather than by their need to gather funds for the campaign."8 The purpose of the partial public funding system is to "remedy the unhealthy influence of money in politics and to restore competition in political campaigns." The system is therefore intended to "facilitate political competition and reduce the dependence on large contributions."9

     The campaign expenditure limit and the amount of public financing available to a candidate varies depending on office that the candidate is seeking and the number of registered votes in the last preceding general election. For example, 2004 candidates who agree to limit their campaign expenditures to $11,039 in House District 42 may receive $1,656. Candidates in House District 17 who limit their expenditures to $19,415 may receive $2,912.10

     We understand that the candidate who posed the question used the loan proceeds for campaign expenditures in the prior "election period."11 The loan, expenditures, and public financing were reported to the Commission in the prior election period.12

     The provisions of the Hawaii campaign spending law are construed in pari materia.13 One of the requirements for public financing is that a candidate obtain qualifying campaign contributions during a "matching payment period" which is defined in section 11-191, HRS, as follows:

     "(1) For a primary election, from January 1 of the year of a general election through the day of the primary election, or nine months prior to a special election through the day of a special election; and

     (2) For a general election, from January 1 of the year of a general election through the day of the general election."

     The Commission, therefore, determined in Advisory Opinion 00-09 that public funds had to be applied to expenditures arising during the primary or special primary election and could not be carried forward and expended during the subsequent general election period.

     This definition of a "matching period" appears to be drawn from the matching principle, which is an accounting convention that all costs and expenses incurred in generating revenues must be recognized during the same period that the revenue is recognized.

     Thus, the loan proceeds received in the prior election period are matched with expenditures incurred in the prior election period and those expenditures are considered in determining whether the candidate met the expenditure limits in sections 11-208 and 11-209, HRS, in the prior election period. Amounts paid in the current election period to repay a loan that was made in the prior election period are not carried back to the prior election period and are not again considered as expenditures for purposes of determining whether the candidate has met the expenditure limits in sections 11-208 and 11-209, HRS, for the current election period.

     The law would produce an absurd result if the term "expenditure"14 were interpreted to include the use of loan proceeds in both the prior election period and the repayment of the loan in the current election period.15

     Moreover, such an interpretation would make it harder for candidates to qualify for public financing, thereby discouraging the use of public financing and contrary to the Legislature’s intent when it enacted the public financing statutes.

     This Advisory Opinion is provided by the Commission as a means of stating its current interpretation of the Hawaii Election Campaign Contributions and Expenditures laws provided under HRS section 11-191, et seq. and the administrative rules of the Commission provided in chapter 2-14, Hawaii Administrative Rules. The Commission may adopt, revise, or revoke this Advisory Opinion upon the enactment of amendments to the Hawaii Revised Statutes or the adoption of administrative rules by the Commission.

Dated: Honolulu, Hawaii, November 12, 2004.

CAMPAIGN SPENDING COMMISSION

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A. Duane Black
Chairperson

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Steven E. Olbrich
Commissioner

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Gino L. Gabrio
Commissioner

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Paul Kuramoto
Commissioner

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Dean Robb
Commissioner

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1 Section 11-204, HRS.

2 Section 11-205.6, HRS.

3 Sections 11-208, 11-220(b)(1), HRS.

4 Section 11-219, HRS.

5 Section 11-222, HRS.

6 Section 11-221, HRS.

7 Sections 11-223; 11-225, HRS. See, also sections 11-220; Advisory Opinions No. 98-04, No. 98-07, No. 00-09, and No. 02-06

8 Conf. Com. Rep. No. 78, relating to H.B. No. 1671, H.D.1, S.D.2, C.D.1 which was enacted as Act 224, SLH 1979.

9 H. Stand. Com. Rep. No. 670, 1979 Haw. House Journal.

10 Campaign Spending Commission Public Funding Guidebook.

11 "Election period" means the two-year period between general election days if a candidate is seeking nomination or election to a two-year office and the four-year time period between general election days if a candidate is seeking nomination or election to a four-year office. See section 11-191, HRS.

12 Sections 11-212 and 213, HRS.

13 Section 1-16, HRS.

14 "Expenditure" means:
(1) Any purchase or transfer of money or anything of value, or promise or agreement to purchase or transfer money or anything of value, or payment incurred or made, or the use or consumption of a nonmonetary contribution for the purpose of:
(A) Influencing the nomination for election, or election of any person seeking nomination for election, or election , to office whether or not the person has filed the person’s nomination paper;
(B) Influencing the outcome of any question or issue that has been certified to appear on the ballot at the next applicable election; or
(C) Use by any party or committee for the purposes set out in subparagraph (A) or (B);
(2) The payment, by any person other than a candidate or committee, or compensation for the personal services of another person that are rendered to the candidate or committee for any of the purposes mentioned in paragraph (1); or
(3) The expenditure by a candidate of the candidate’s own funds for the purposes set out in paragraph (1).

(4) The term does not include volunteer personal services and voter registration efforts that are not partisan. See, section 11-191, HRS.

15 Section 1-15(3), HRS.