to take care of some things the Members are caring for out of the special accounts.

The House is not altogether predictable. How do we know that is going to be done?

Mr. Chairman, could we make a recommendation that the prohibition on unofficial office accounts should be contingent upon an increase in the regular account?

Chairman OBEY. I think this Commission can recommend anything it thinks is proper and correct.

Dr. HUITT. But the House doesn't have to do it.

Chairman OBEY. No, we don't. I don't know that we could recommend a change in that procedure.

Dr. HUITT. If the unofficial office account is abolished, where will these Members put their excess campaign funds? Here is a man who gets $60,000 that is not spent on the campaign. Where do these campaign funds go if they are not to be used in the office?

Chairman OBEY. If I could answer that—as a Member, I have a surplus. Under present law, it is required that that be revealed under the Federal Election Law, and you have to make periodic reports on it so the answer is that it stays right where it is right now, which is in the Member's campaign committee.

Dr. HUITT. Just to be stubborn about this, you are young enough that you almost surely will spend that on a campaign, but, suppose you plan to retire at the end of this 2 years and you have that money. What are you going to do with it? There is no requirement that you do anything with it, is there?

Chairman OBEY. I really don't know.

Mr. DUCHESSI. Would Dr. Huitt yield for a moment?
Dr. HUITTT. Surely.

Chairman OBEY. Mr. Potter wants to answer that.

Mr. DUCHESSI. Let me make this suggestion: I assume if I were to retire and I had $25,000 or $30,000, I could convert the money to my own personal use, report it as income and pay my Federal taxes on it.

Mr. POTTER. That certainly is one alternative, but the statute does suggest, in fact, that such funds could be contributed "to any organization described in Federal 26, United States Code", which has to do with charitable contributions, I guess.

Also, it could be contributed, of course, to party organizations or kept in the political system by contributions to other candidates.

Dr. HUITT. I am concerned here a little bit about the ethics of that. I contribute, not a lot, but to a lot of politicians on their campaign funds. I pick the ones I want to give to because actually I am solicited by, I'd say, half the Democratic party. I get solicitations from people I never saw and never heard of. I have to look them up in a book to find out what State they are from.

Now, you see, I give contributions to people who are friends who do things that I appreciate and that kind of thing, and I am damned if I want my contribution turned over to some committee that is going to give it to somebody I don't even know.

I would much rather know that one of these fellows had my money and was spending it on coffee than to have somebody I don't know spending it on campaigns.

Mr. SWANNER. Maybe I could shed a little more darkness on the question.

Those funds may be converted to personal use to the extent they are not funds on which the contributor took a tax deduction. Therefore, the balance in your campaign account would have to be separated into two categories: that which is tax eligible and that which is tax ineligible. That which is tax eligible are those funds from which the contributors took a tax deduction and which could be contributed only to charity or to another political organization or, in the last analysis, to permit them to be escheated.

Am I correct on that?

Mr. POTTER. I am advised that while our statute is not specific on that point, that there is an IRS practice that does require that. Mr. SWANNER. That is right.

Dr. HUITT. Mr. Cable, are there limitations on what these official accounts can be used for? For instance, could a Member give a party? Could he buy booze or something like that with an official account?

Mr. CABLE. The regulations granting the authority to the Members, that which is contained in the opening paragraph follows: "The allowances set forth in this part are to be used in the discharge of the Member's official and representational duties."

Dr. HUITT. Is a booze party representing people?

Mr. CABLE. I can answer the question that you can't buy it in D.C.

Dr. HUITT. Well, it is just a short trip.

Mr. CABLE. The question is answered in two ways: It seems like we are dealing with the IRS a lot, but is the expenditure an ordinary and necessary expense in the conduct of your official business? There are some well-established standards from tax cases that define that.

The second thing is an expansion-plus, all the expenditures are subject to the disclosure provisions that will be done quarterly this year and not every 6 months as has been the case in the past, and will be in a format that is much more identifiable to the Member.

I don't know if you have ever taken time to look at the Report of the Clerk, but the majority of expenditures are listed by chronological disbursement and are not collected under the name of David Obey, or Lloyd Meeds, or Bill Frenzel. The new report will be in that fashion. It will still be chronological, but under the name of the Member there will be the disbursements made on his behalf, so that the disclosure side of it is a much more real limiting, is a much more real disclosure, I guess, is the best way to say it.

Dr. HUITT. A practical way to put it would be, if Mr. Obey should give a party and serve some booze, which happily he would do if he gave a party, and he presented an invoice to the Clerk's office, would that invoice be honored? It is clearly labeled as liquor. Would that invoice be honored?

Mr. CABLE. If the Member signs a voucher and signs a receipt. that he expended those funds, the Member certifies this expenditure was incurred in the discharge of his official duties, and providing there was enough money in the allowance to pay for it, the Clerk would then honor the allowance. It would come up to the

House Administration Committee and the chairman would then approve it, in my judgment.

Chairman OBEY. If you would yield, Dr. Huitt.

Am I correct or incorrect on this: If you were to have a party such as that, then you could not pay for it, except if it was in the District of Columbia, could you?

Mr. CABLE. You could not.

Chairman OBEY. So you would have to be outside of the District of Columbia?

Mr. CABLE. That is correct.

Chairman OBEY. You could not hold an office party and collect for it. You could go to dinner at a restaurant in Rosslyn and charge it under the present system, which is where it is so silly.

Mr. CABLE. That is right. You can hold the party in your home, but you couldn't do it in your office.

Mr. FRENZEL. Would the gentleman yield?

Dr. HUITT. Yes.

Mr. FRENZEL. At the end of that current quarter that expenditure would be revealed to the world, would it not?

Mr. CABLE. Under the Congressman's name and with the vendor listed.

Dr. HUITT. I am relieved to know this, and also to know why so many Members live in the suburbs.

Mr. CABLE. That has only been in effect, Dr. Huitt, since January 3, 1977.

Dr. HuITT. What if some interest group pays for a party, buys the liquor and that kind of thing? What is that? Is that a gift, a lobbying expenditure, or what? Also for these people who are so strong on disclosure, would the throwing of a party by an interest group for a Member, would that be something you would have to disclose?

You see, this happens. When I first came to Washington to go with HEW, a Congressman friend of mine gave me a party. A very nice party. I found out about 3 weeks later who paid for it. I probably could not have gone for it had I known who they were because every damned one of them had some interests in HEW. I yield to the chairman the balance of my time.

Chairman OBEY. The next hearing will begin at 2 o'clock. I want to thank all the witnesses for coming. I appreciate the fact that you have shed a little light on a generally dark situation which confounds us in all of these areas. We appreciate your help in dealing with those this morning.

Mr. HUGHES. Mr. Chairman, could I impose upon you for just a minute?

This hearing, as is the case with most of these hearings, deals with financial conflicts of interest. I would just urge that the Commission not lose sight of the nonfinancial conflicts which are even more difficult to identify and keep track of, but which may be yet more serious in many instances.

I speak of the kinds of things, nonfinancial things, that lawyers are concerned about when they are selecting a jury and that the Congress is concerned about from time to time when it is confirming

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appointees in the executive branch. I think they are extremely important. They are very difficult to identify.

Again, I think they place a great burden on the right kind of disclosure and on vigilance on the part of all of us.

Chairman OBEY. I think we are all aware of that. Thank you. We will reconvene at 2 o'clock.

[Whereupon, at 12:35 p.m., the Commission adjourned, to reconvene at 2 p.m., the same day to hear the State legislature panel.]

STATE LEGISLATURE PANEL

FRIDAY, JANUARY 14, 1977

HOUSE OF REPRESENTATIVES,

COMMISSION ON ADMINISTRATIVE REVIEW,

Washington, D.C. The Commission met, pursuant to adjournment, at 2:20 p.m. in room 2212, Rayburn House Office Building, Hon. David R. Obey (Chairman of the Commission) presiding.

Chairman OBEY. The Commission will be in order.

This afternoon we will hear from four people who will explain to us how different States have attacked at least some of the problems with which we are dealing.

Gentlemen, I want to thank you for coming. We have been wrestling with some pretty tough problems which you have been wrestling with for a much longer time I know.

I will ask Mr. Lowenstein to begin and describe your experiences, your practices, and give us any advice you would care to give.

STATEMENT OF DANIEL H. LOWENSTEIN, CHAIRMAN, CALIFORNIA FAIR POLITICAL PRACTICES COMMISSION

Mr. LOWENSTEIN. Thank you very much.

Mr. Chairman and members of the Commission, my name is Daniel Lowenstein and I have served since January 7, 1975, as chairman of the California Fair Political Practices Commission. The commission administers California's Political Reform Act, of which I was one of the drafters in the 4 years I served as counsel to then Secretary of State Edmund G. Brown, Jr.

I welcome this opportunity to address the Commission on Administrative Review as you develop recommendations to raise and restore public confidence in the ethical standards of the House of Representatives.

I would like to describe briefly for you some of the provisions of the Political Reform Act that are relevant to your inquiry, to recount some of our experiences in administering our act, and to make some proposals to you based both on our experience and the obvious public demand for reform.

I might mention I have submitted to the staff, and I think it has been distributed to the members of the Commission, a much longer statement going into much more detail. [See page 288.]

The Political Reform Act was adopted as an initiative statute by voters of California in 1974. It is a comprehensive piece of direct legislation which regulates and requires the disclosure of campaign