February 24, 2016
Opinion No. 2016-01
Sen. Anthony Hensley
2226 SE Virginia Avenue
Topeka, Kansas 66605
Synopsis: Under the facts provided, a candidate for elected office may use campaign contributions in their campaign account as collateral to secure a personal loan, if the proceeds, in turn, are loaned to the campaign for reelection.
Cited herein: K.S.A. 25-4157a.
Dear Sen. Hensley,
We understand that you request this opinion as an incumbent Kansas senator standing for reelection in 2016. Our opinion regarding application of the Kansas campaign finance act, K.S.A. 25-4119e, et seq., (act) responds to your letter request received January 25, 2016. Pursuant to K.S.A. 75-4303a(a), jurisdiction of the Kansas Governmental Ethics Commission (commission) is limited to applicability of the act. The commission’s opinion does not address whether some other statutory system, common law theory, or agency rule or regulation applies to your inquiry.
QUESTION
“…[A]s a candidate for elected office, may [I] use campaign contributions in my campaign account as collateral to secure a personal loan that I would then loan to my campaign for re-election?”
ANALYSIS AND OPINION
Having appointed a treasurer and made a public announcement of intention to seek reelection to the Kansas Senate for District 19, you are a candidate subject to the Kansas campaign finance act pursuant to K.S.A. 25-4143(a)(1), (2), (m), and 25-2505. A candidate’s use of monetary campaign contributions is limited by the act. In pertinent part K.S.A. 25-4157a(a) provides:
(a) No moneys received by any candidate or candidate committee of any candidate as a contribution under this act shall be used or be made available for the personal use of the candidate and no such moneys shall be used by such candidate or the candidate committee of such candidate except for:
(1) Legitimate campaign purposes;
…
For the purpose of this subsection, expenditures for "personal use" shall include expenditures to defray normal living expenses for the candidate or the candidate's family and expenditures for the personal benefit of the candidate having no direct connection with or effect upon the campaign of the candidate or the holding of public office.
We first look to whether the use of contribution moneys is for a purpose enumerated in K.S.A. 25-4157a(a). Subparagraph (a)(1) allows contribution moneys to be used for a legitimate campaign purpose. Your inquiry proposes a use of contribution moneys as collateral to secure a personal loan. Loan proceeds will then be loaned back to the campaign for reelection. This is a use for campaign purposes. We next determine whether it is legitimate.
An overarching use limitation is “[n]o moneys…received as a contribution…shall be used or be made available for the personal use of the candidate…” (K.S.A. 25-4157a[a]). Use of contribution moneys as collateral to secure a personal loan of the candidate is an inherently personal use. Yet subsection (a) of K.S.A. 25-4157a contains its own definition of “personal use.” It specifies as a personal use “expenditures for the personal benefit of the candidate having no direct connection with or effect upon the campaign of the candidate or the holding of public office.” The direct implication by defining such as “personal use” is that the inverse is excluded from the personal use definition. In other words, an expenditure that does not personally benefit the candidate and which is directly connected with and effects the campaign is not a personal use. Under your inquiry, any benefit from the collateralization use of contribution moneys received by the campaign is not personal and is directly connected with and effects your campaign. Thus, the use of contribution moneys as collateral, as specified in your inquiry, is for a legitimate campaign purpose. It does not violate K.S.A. 25-4157a(a).
We now must consider whether the use of contribution moneys for collateral violates K.S.A. 25-4157a(b) which provides:
No moneys received by any candidate or candidate committee of any candidate as a contribution shall be used to pay interest or any other finance charges upon moneys loaned to the campaign by such candidate or the spouse of such candidate.
In lending agreements, collateral is a borrower’s pledge of specific property to a lender to secure repayment of a loan. Should the borrower default, the lender may take collateral for repayment. Terms of such lending agreements may, and typically do, require collateral to repay not only the loan principal but also any interest or finance charges. Default and consequential use of collateralized contribution moneys for repayment of interest or finance charges violates K.S.A. 25-4157a(b). Mere use of contribution moneys as collateral does not since no payment of interest or finance charges occurs.
Sincerely,
G. Daniel Harden, Chairman
By Direction of the Commission
GDH:BB:dlw
