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                                                       Calendar No. 508

112th Congress                                                   Report

 2d Session                      SENATE                         112-211
_______________________________________________________________________

 
                  HATCH ACT MODERNIZATION ACT OF 2012

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                S. 2170

   TO AMEND THE PROVISIONS OF TITLE 5, UNITED STATES CODE, WHICH ARE 
 COMMONLY REFERRED TO AS THE ``HATCH ACT'' TO ELIMINATE THE PROVISION 
  PREVENTING CERTAIN STATE AND LOCAL EMPLOYEES FROM SEEKING ELECTIVE 
 OFFICE, CLARIFY THE APPLICATION OF CERTAIN PROVISIONS TO THE DISTRICT 
OF COLUMBIA, AND MODIFY THE PENALTIES WHICH MAY BE IMPOSED FOR CERTAIN 
      VIOLATIONS UNDER SUBCHAPTER III OF CHAPTER 73 OF THAT TITLE




               September 13, 2012.--Ordered to be printed
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  JERRY MORAN, Kansas

                  Michael L. Alexander, Staff Director
       Beth M. Grossman, Deputy Staff Director and Chief Counsel
   Lawrence B. Novey, Associate Staff Director and Chief Counsel for 
                          Governmental Affairs
             Elyse F. Greenwald, Professional Staff Member
  Bryan G. Polisuk, Counsel, Subcommittee on Oversight of Government 
                              Management,
          the Federal Workforce, and the District of Columbia
               Nicholas A. Rossi, Minority Staff Director
                Mark B. LeDuc, Minority General Counsel
          Richard H. Houghton, Minority Deputy General Counsel
                  Trina Driessnack Tyrer, Chief Clerk
                                                       Calendar No. 508
112th Congress                                                   Report
                                 SENATE
 2d Session                                                     112-211

======================================================================




                  HATCH ACT MODERNIZATION ACT OF 2012

                                _______
                                

               September 13, 2012.--Ordered to be printed

                                _______
                                

Mr. Lieberman, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 2170]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 2170) to amend the 
provisions of title 5, United States Code, which are commonly 
referred to as the ``Hatch Act'' to eliminate the provision 
preventing certain State and local employees from seeking 
elective office, clarify the application of certain provisions 
to the District of Columbia, and modify the penalties which may 
be imposed for certain violations under subchapter III of 
chapter 73 of that title, having considered the same, reports 
favorably thereon with an amendment and an amendment to the 
title and recommends that the bill, as amended, do pass.


                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................7
 IV. Section-by-Section Analysis......................................8
  V. Estimated Cost of Legislation....................................9
 VI. Evaluation of Regulatory Impact.................................10
VII. Changes in Existing Law.........................................10

                         I. Purpose and Summary

    The Hatch Act prohibits certain federal, state, and local 
government employees from running for partisan political office 
and from engaging in certain other partisan political 
activities.\1\ S. 2170, as reported by this Committee, will 
update the Hatch Act by (1) removing the prohibition on certain 
state and local employees running for partisan elective office 
unless their salary is paid entirely from federal funding; (2) 
providing more flexibility with respect to penalties that may 
be imposed on federal employees for Hatch Act violations; (3) 
applying to D.C. government employees the same Hatch Act 
provisions that apply to state and local government employees; 
and (4) giving federal employees who are residents of the 
District of Columbia the same right to participate in municipal 
political management and political campaigns that federal 
employees residing in nearby areas of Maryland and Virginia now 
have.
---------------------------------------------------------------------------
    \1\The Hatch Act is codified at 5 U.S.C. Sec. Sec. 1501-1508 
(applicable to state and local employees) and 5 U.S.C. Sec. Sec. 7321-
7326 (applicable to federal employees).
---------------------------------------------------------------------------

                II. Background and Need for Legislation


               A. HISTORICAL DEVELOPMENT OF THE HATCH ACT

    Federal employees have faced restrictions on their 
political activities since the earliest days of the Republic. 
The Jefferson Administration, for example, issued an order 
stating--

          [although it is the] right of any officer to give his 
        vote at elections as a qualified citizen . . . it is 
        expected that he will not attempt to influence the 
        votes of others nor take any part in the business of 
        electioneering, that being deemed inconsistent with the 
        spirit of the Constitution.\2\

    \2\A Compilation of the Messages and Papers of the Presidents, 
Volume 10, at 98-99 (1899).
---------------------------------------------------------------------------
    In 1939, increased concerns about partisan political 
activity of certain federal employees led Congress to pass what 
has become known as the ``Hatch Act.''\3\ The legislation was 
enacted in response to concerns that officials administering 
certain New Deal relief programs might use their powers for 
partisan ends, including by inducing political activities by 
workers employed through the programs.\4\ As originally 
enacted, the legislation restricted the political activities of 
federal executive branch employees, but one year later, in 
1940, Congress amended the law to also impose restrictions on 
political activities of state and local government employees 
who work ``in connection'' with federally funded activities.\5\
---------------------------------------------------------------------------
    \3\Public Law No. 76-252 (Aug. 2, 1939) (commonly referred to as 
the ``Hatch Act,'' after its sponsor, Senator Carl Hatch of New 
Mexico).
    \4\See S. Rep. No. 76-1 (1939); see, also, H.R. Rep. No. 103-16, at 
7-13 (1993).
    \5\Public Law No. 76-753 (1940), 54 Stat. 767, Sec. 4.
---------------------------------------------------------------------------
    In 1974, Congress amended the Hatch Act to remove the 
federal restriction on state and local employees actively 
participating in political campaigns.\6\ Congress most recently 
reformed the Hatch Act in 1993, allowing most federal employees 
to engage in voluntary, partisan political activities as long 
as those activities take place during their own free time, away 
from their federal jobs, and off of federal premises.\7\
---------------------------------------------------------------------------
    \6\Federal Election Campaign Act Amendments, Sec. 401, Public Law 
93-443 (Oct. 15, 1974).
    \7\Hatch Act Reform Amendments of 1993, Sec. 2, Public Law 103-94 
(Oct. 6, 1993).
---------------------------------------------------------------------------
    Under Hatch Act provisions now applicable to state and 
local government employees,\8\ those whose employment is in 
connection with activities receiving federal funding may not 
use their official authority to influence an election or 
nomination, may not pressure or advise another state or local 
employee to make a political contribution, and generally may 
not run for partisan elective office. The prohibition against 
running for partisan office does not apply to state governors 
and lieutenant governors, city mayors, certain other top state 
and local officials, and others holding elective office. In 
addition, employees of educational or research agencies and 
institutions are exempt from all coverage under the Hatch Act.
---------------------------------------------------------------------------
    \8\5 U.S.C. Sec. Sec. 1501-1508.
---------------------------------------------------------------------------
    Other provisions of the Hatch Act\9\ apply to federal 
employees in executive branch agencies (as well as to federal 
employees in other branches holding positions designated as 
being in the ``competitive service''), and also now apply to 
employees in the government of the District of Columbia. 
Employees covered by these provisions may not use their 
official authority to influence or affect an election and may 
not knowingly help in political fundraising, run for partisan 
elective office, knowingly solicit or discourage political 
activity by persons with certain business before the agency, or 
engage in political activity on government time or using 
government resources. Employees at certain listed agencies are 
further forbidden to take any active part in political 
management or political campaigns. Exceptions apply for the 
President and Vice President and for certain other top 
officials.
---------------------------------------------------------------------------
    \9\5 U.S.C. Sec. Sec. 7321-7326.
---------------------------------------------------------------------------
    The Special Counsel, who heads a small executive branch 
agency entitled the Office of Special Counsel (OSC), is 
responsible for investigating violations of the Hatch Act and 
for bringing charges of violations before the Merit Systems 
Protection Board (MSPB or the Board).\10\ A Hatch Act case is 
then adjudicated before the MSPB, which decides whether a 
violation occurred and, if so, determines the penalty.\11\
---------------------------------------------------------------------------
    \10\5 U.S.C. Sec. Sec. 1216, 1504-1506, 7326.
    \11\Id.
---------------------------------------------------------------------------

            B. HATCH ACT PROVISIONS BEING UPDATED BY S. 2170

    S. 2170 amends several provisions of the Hatch Act that the 
Committee has concluded are out of date and need to be 
modernized.

1. Candidacy for partisan political office by state and local employees

    Carolyn Lerner, who, as Special Counsel and head of the 
Office of Special Counsel is responsible for enforcement of the 
Hatch Act, advised this Committee by letter\12\ and hearing 
testimony\13\ that the Hatch Act provision enacted in 1940 
forbidding certain state and local employees to run for 
partisan office now covers too many employees and has become 
confusing and inequitable, and she urged Congress to repeal it. 
As discussed below, the Committee decided against complete 
repeal, but instead decided to scale the prohibition back to 
apply only to those state and local employees whose salary 
comes completely from federal funding.
---------------------------------------------------------------------------
    \12\Identical letters from Special Counsel Carolyn N. Lerner to 
each of Chairman Lieberman and Ranking Member Collins, Committee on 
Homeland Security and Governmental Affairs, and Chairman Akaka and 
Ranking Member Johnson of its Subcommittee on Oversight of Government 
Management, the Federal Workforce, and the District of Columbia (OGM), 
October 6, 2011.
    \13\Testimony of Special Counsel Carolyn N. Lerner at the hearing 
entitled ``A Review of the Office of Special Counsel and Merit Systems 
Protection Board'' before the OGM Subcommittee, 112th Congress, 2nd 
Session, March 20, 2012 (``Senate hearing''). See also Testimony of 
Special Counsel Carolyn N. Lerner at the hearing entitled: ``The Hatch 
Act: Options for Reform'' before the United States House of 
Representatives Committee on Oversight and Government Reform, 
Subcommittee on the Federal Workforce, U.S. Postal Service and Labor 
Policy, 112th Congress, 2nd Session, May 16, 2012 (``House hearing'').
---------------------------------------------------------------------------
    The increase in the size and scope of federal funding of 
state and local programs since 1940 has vastly expanded the 
numbers and kinds of state and local employees forbidden by the 
Hatch Act to run for partisan office. As Special Counsel Lerner 
explained, hundreds of thousands of state and local employees 
in every part of the country and in many occupations--law 
enforcement officers, first responders, healthcare workers, and 
many others--are now forbidden to run for partisan office.\14\
---------------------------------------------------------------------------
    \14\Letter from Special Counsel Lerner, note 12 above; testimony of 
Special Counsel Lerner at House hearing, note 12 above.
---------------------------------------------------------------------------
    A number of recent examples illustrate that some state and 
local employees covered by the Hatch Act have only a tenuous 
connection to federal funds. For example, in 2011 a transit 
police officer was forced to abandon his candidacy for a seat 
on the local school board after OSC advised him that he was 
covered by the Hatch Act because he was assisted by a police 
dog partially financed by a Department of Homeland Security 
grant.\15\ That same year, OSC concluded that a county District 
Attorney had violated the Hatch Act when she had campaigned for 
that position while employed as a first assistant district 
attorney, the office having received a 2007 federal grant to 
battle drug crimes and domestic violence.\16\ As a third 
example, OSC recently advised a paramedic in South Carolina 
that the Hatch Act prohibited him from running for the office 
of county coroner while holding his current position, because 
Medicaid funded the healthcare of some of the patients he 
transported in his ambulance.\17\
---------------------------------------------------------------------------
    \15\OSC Case No. HA-11-3066; see also Joan Hellyer, Arlen Drops Out 
of the School Board Race, phillyburbs.com, July 27, 2011, available at: 
http://www.phillyburbs.com/my_town/yardley/arlen-drops-out-of-school-
board-race/article_b8330b6a-44df-5c5c-8c54-b57333fe737b.html.
    \16\OSC Case No. HA-10-2919; see also Jeremy Roebuck, Some Say 
Hatch Act is too Vague, Want to see it Changed, The Inquirer, July 4, 
2011, available at: http://articles.philly.com/2011-07-04/news/
29736213_1_hatch-act-election-law-federal-employees.
    \17\OSC Case No. AD-11-0140. See written statement of Carolyn 
Lerner, House Hearing, note 13 above.
---------------------------------------------------------------------------
    Moreover, the Hatch Act injects the federal government in a 
way that weakens state and local government by forbidding 
otherwise qualified individuals from running and serving in 
elected office. Special Counsel Lerner explained that the Hatch 
Act has a particularly troubling effect on elections for 
sheriff in some communities.\18\ Because of the great influx of 
federal grant money to local police departments after the 
terrorist attacks of September 11, 2001, OSC must frequently 
advise deputy sheriffs that they may not run for sheriff. As 
Lerner has stated, ``This is a disservice to local communities 
because the most qualified candidates for law enforcement and 
other positions are commonly disqualified from participating in 
a local election.''\19\
---------------------------------------------------------------------------
    \18\Written statement of Carolyn Lerner, House Hearing, note 13 
above.
    \19\Id.
---------------------------------------------------------------------------
    Scaling back the prohibition on running for partisan 
political office will not diminish OSC's ability to enforce the 
Hatch Act in situations where state or local employees actually 
misuse their authority or engage in coercive conduct for 
political purposes. Under S. 2170, the Hatch Act will continue 
to forbid state and local employees whose employment is ``in 
connection with'' an activity supported by any federal funding 
to use their official authority to affect an election or 
nomination or to coerce or advise another state or local 
employee to make a political contribution.
    Furthermore, as the Special Counsel Lerner pointed out in 
her October 6, 2011, letter, cutting back the prohibition on 
state and local employees running for office will allow OSC to 
focus more of its resources on these more serious matters.\20\ 
She reported that 45 percent of the Hatch Act Unit's cases and 
the vast majority of the Hatch Act Unit's advisory opinions 
involve state and local political campaign cases that lack any 
allegation of coercive or abusive political conduct.\21\ S. 
2170 will greatly reduce the amount of resources OSC must 
divert to these matters that have little or no value for 
reducing corruption.
---------------------------------------------------------------------------
    \20\Letter from Special Counsel Lerner, note 12 above.
    \21\Written statement of Carolyn Lerner, House Hearing, note 13 
above.
---------------------------------------------------------------------------
    In light of the limited connection of many state and local 
employees' work to federal funding and the more targeted 
prohibitions available under the Hatch Act for remedying any 
political abuse associated with federal programs, the Committee 
concludes that a broad federal restriction on these state and 
local employees' ability to run for office, and on the 
electorate's opportunity to decide whether to elect them, is 
not justified.

2. Penalty provision for federal employees

    In her October 6, 2011, letter to this Committee,\22\ 
Special Counsel Lerner also recommended that Congress rewrite 
the Hatch Act's penalty provision for federal employees. 
Current law requires that, if a federal employee is found to 
have violated the Hatch Act, the employee must be removed from 
office unless the MSPB unanimously finds that the violation 
does not warrant termination, in which case the employee must 
be suspended for at least 30 days without pay.\23\ According to 
Special Counsel Lerner, this structure is overly restrictive, 
can lead to unjust results, and, therefore, may actually deter 
agencies from referring potential violations to OSC.\24\
---------------------------------------------------------------------------
    \22\Letter from Special Counsel Lerner, note 12 above.
    \23\5 U.S.C. Sec. 7326.
    \24\Letter from Special Counsel Lerner, note 12 above.
---------------------------------------------------------------------------
    Lerner recommended that Congress amend the Hatch Act 
penalty provisions to mirror the range of penalties authorized 
for other disciplinary actions under OSC's jurisdiction.\25\ 
Under that authority, depending on the severity of the 
violation and other aggravating or mitigating factors, the MSPB 
may select from a range of penalties consisting of removal, 
reduction in grade, debarment from federal employment for a 
period not to exceed five years, suspension, reprimand, or a 
civil penalty not to exceed $1,000.\26\
---------------------------------------------------------------------------
    \25\Id. (recommending the penalty provisions in 5 U.S.C. Sec. 1215 
be adopted for Hatch Act cases).
    \26\5 U.S.C. Sec. 1215(a)(3).
---------------------------------------------------------------------------
    The Committee agrees that the Hatch Act's penalty provision 
should be modified to allow the MSPB to impose a broader range 
of penalties, and S. 2170 amends the Hatch Act to authorize the 
same range of penalties authorized for other disciplinary 
actions under OSC's jurisdiction. Further, the Committee 
expects that, in selecting a penalty for a Hatch Act violation, 
the Board will consider the severity of the violation and other 
aggravating or mitigating factors, as the Board does with 
respect to non-Hatch Act violations.

3. District of Columbia employees

    In 1940 Congress placed employees of the government of the 
District of Columbia under the same provisions of the Hatch Act 
that governed federal employees rather than under the 
provisions that governed state and local employees, at a time 
when Congress exercised direct control over the District of 
Columbia.\27\ However, the role of the D.C. government, and 
therefore of its employees, has evolved significantly since 
1940. A series of changes culminating in the landmark District 
of Columbia Home Rule Act of 1973 have provided the District 
the powers of local self-government\28\ and have made D.C. 
government employees' relationship to the federal government 
more like that of state and local employees than of federal 
employees.
---------------------------------------------------------------------------
    \27\Public Law No. 76-753 (1940) (codified at 5 U.S.C. 
Sec. 7322(1)(C)).
    \28\Public Law No. 93-198 (1973) (codified at D.C. Code Sec. 1-
201.01 et seq.).
---------------------------------------------------------------------------
    Congress has previously recognized the need for the Hatch 
Act to accommodate the unique nature of the D.C. government and 
its employees. In 1940, at the same time that Congress placed 
D.C. government employees under Hatch Act coverage, it exempted 
``commissioners'' and ``the Recorder of Deeds of the District 
of Columbia.''\29\ Moreover, one year after enacting the D.C. 
Home Rule law in 1973, Congress amended the Hatch Act to exempt 
the newly-created positions of Mayor of the District of 
Columbia and members of the City Council.\30\ These exemptions 
enacted in 1974 for certain D.C. officials are similar to those 
that had previously been enacted\31\ for elected state and 
local officials.
---------------------------------------------------------------------------
    \29\Public Law No. 76-753 (1940) (codified at 5 U.S.C. 
Sec. 7322(1)(C)).
    \30\Public Law No. 93-268 (1974) (codified at 5 U.S.C. 
Sec. 7322(1)(C)).
    \31\Public Law No. 76-753 (1940) (codified at 5 U.S.C. 
Sec. 1502(c)).
---------------------------------------------------------------------------
    The Committee concludes that it is now time to more 
precisely align the Hatch Act's mandates with the current 
structure of the D.C. government. Accordingly, S. 2170 amends 
the Hatch Act to remove employees of the District of Columbia 
from coverage under the provisions that apply to federal 
employees and place them under the provisions of the Hatch Act 
that apply to state and local government employees.

4. Designated localities

    Notwithstanding the general prohibition against federal 
employees running for partisan elective office or engaging in 
political fundraising, the Hatch Act authorizes the Office of 
Personnel Management (OPM) to prescribe regulations allowing 
federal employees to take an active part in political 
management or in political campaigns involving the municipality 
or political subdivision in which they reside under certain 
circumstances.\32\ For OPM to authorize federal employees to 
participate in local elections in this manner, either the 
municipality or political subdivision must be in Maryland or 
Virginia and in the immediate vicinity of the District of 
Columbia, or a majority of the voters in the municipality must 
be federal employees. OPM must also determine that, because of 
special circumstances, it is in the interest of employees to 
allow them to actively participate in local political 
campaigns.
---------------------------------------------------------------------------
    \32\5 U.S.C. Sec. 7325.
---------------------------------------------------------------------------
    Soon after enactment of the District of Columbia Home Rule 
Act of 1973, which enabled District residents to elect a local 
mayor and city council,\33\ the Civil Service Commission--which 
then exercised the authorities now vested in OPM--sought by 
regulation to add the District to the list of localities in 
which federal employees could participate in local 
elections.\34\ However, after lengthy litigation, the U.S. 
Court of Appeals for the District of Columbia invalidated the 
Commission's efforts, since a majority of District voters are 
not federal employees and the District of Columbia is not ``in 
Maryland or Virginia in the immediately vicinity of the 
District of Columbia.''\35\
---------------------------------------------------------------------------
    \33\Public Law No. 93-198 (1973) (codified at D.C. Code Sec. 1-
201.01 et seq.).
    \34\39 Fed. Reg. 18761 (1974); 42 Fed. Reg. 23160 (1977).
    \35\Joseph v. Civil Service Commission, 554 F.2d 1140, 1144 (D.C. 
Cir. 1977); Ward Three Democratic Committee v. United States, 609 F.2d 
10, 12 (D.C. Cir. 1979).
---------------------------------------------------------------------------
    The anomaly that federal employees may participate in local 
elections if they live ``in the immediate vicinity of the 
District of Columbia'' but not actually within D.C. itself was 
not lost on the appeals court, which explained the situation 
this way:

          Admittedly the failure to include areas within the 
        District may well have been due to the fact that there 
        were no elective positions within the District 
        government in 1940 when the [Civil Service] Commission 
        was given its exemption authority. . . . [A]lthough a 
        court should interpret the meaning of statutory 
        language in light of the intent of its drafters, we 
        cannot rewrite the statute to compensate for unforeseen 
        circumstances. That power belongs to the legislature 
        alone.\36\
---------------------------------------------------------------------------
    \36\Joseph v. Civil Service Commission, 554 F.2d at 1154-1155.

    Recognizing that the District government now has a number 
of partisan elective positions, this Committee has concluded 
that the Hatch Act should be amended to grant federal employees 
who reside in D.C. the same ability to run for local office and 
otherwise to actively participate in local elections as federal 
employees residing in nearby communities in Virginia and 
Maryland.

                        III. Legislative History

    In the 111th Congress, this Committee considered H.R. 1345, 
which would have amended the Hatch Act to apply to D.C. 
government employees the same provisions of the Hatch Act that 
govern state and local employees rather than those governing 
federal employees. H.R. 1345 had passed the House of 
Representatives on September 8, 2009, by voice vote, and this 
Committee approved H.R. 1345 by voice vote and on September 28, 
2010, favorably reported the bill. However, the 111th Congress 
ended without the Senate having considered the bill further.
    In this 112th Congress, on March 7, 2012, Senator Akaka 
introduced S. 2170, which was cosponsored by Senators 
Lieberman, Levin, and Lee, and was referred to the Committee on 
Homeland Security and Governmental Affairs and further referred 
to the OGM Subcommittee. On March 22, 2012, the OGM 
Subcommittee polled the bill out favorably, and at a business 
meeting on April 25, 2012, the Committee considered the bill. 
During the business meeting, Senator Collins expressed concern 
about the provision in S. 2170, as introduced, that would have 
completely repealed the prohibition on state and local 
employees running for partisan elective office, and the 
Committee agreed to hold over the bill to the next markup to 
enable the Senators to address that concern.
    The Committee again considered the bill at a business 
meeting held on June 27 and continued on June 29, 2012. Senator 
Akaka offered an amendment in the nature of a substitute on 
behalf of himself and Senator Lieberman. Rather than repealing 
the Hatch Act provision forbidding certain state and local 
employees to run for partisan office as the original bill had 
done, the amendment limited the prohibition to those state and 
local employees whose salary comes entirely from federal 
funding. The amendment also added a provision enabling federal 
employees who reside in the District to be allowed to run for 
local elective office and made technical changes to the 
legislation. The Committee agreed to the substitute amendment 
and ordered the bill reported favorably, as amended, en bloc by 
a voice vote. Members present were: Lieberman, Levin, Akaka, 
Carper, Pryor, Landrieu, Tester, Begich, Collins, Brown, 
McCain, Johnson, Portman, and Moran.

                    IV. Section-by-Section Analysis


Section 1. Short title

    The short title of this bill is the ``Hatch Act 
Modernization Act of 2012.''

Section 2. Permitting state and local employees to be candidates for 
        elective office

    Section 2 of the bill amends 5 U.S.C. Sec. 1502(a)(3) to 
scale back the provision forbidding state or local employees 
employed in connection with a federally supported activity to 
run for partisan elective office. Such state or local employees 
will be allowed to run for elective office unless the 
employee's salary is paid completely, directly or indirectly, 
by loans or grants made by the United States or a federal 
agency.

Section 3. Applicability of provisions relating to state and local 
        employees

    Section 3 amends several provisions of the Hatch Act to 
subject employees of the government of the District of Columbia 
to the same restrictions on partisan political activity that 
currently apply under the Hatch Act to state and local 
government employees.
    Subsection (a) amends 5 U.S.C. Sec. 1501(2) to add the 
executive branch of the District of Columbia, or an agency or 
department of the District of Columbia, to the definition of a 
``state or local agency.''
    Subsection (b) amends 5 U.S.C. Sec. 1501(4) to exempt 
individuals employed by an educational or research institution, 
establishment, agency, or system supported in whole or in part 
by the District of Columbia from the Hatch Act. The Hatch Act 
now provides such an exemption for similarly-situated employees 
of state and local governments.
    Subsection (c) amends 5 U.S.C. Sec. 1502(c)(3) to exclude 
the duly elected head of an executive department of the 
District of Columbia who is not classified under an applicable 
merit or civil-service system from the prohibition against 
running for elective office. The Hatch Act now provides such an 
exclusion for similarly-situated executive-department heads in 
state and local governments.
    Subsection (d) amends 5 U.S.C. Sec. 1506(a)(2) to require 
the MSPB to issue an order to withhold federal funds from an 
agency of the District of Columbia if the Board finds that an 
employee ordered removed for violating the Hatch Act has been 
reappointed in the District of Columbia within 18 months. The 
Hatch Act now provides such a requirement for state and local 
agencies under similar circumstances.
    Subsection (e) amends 5 U.S.C. Sec. 7322(1) to remove 
individuals employed or holding office in the government of the 
District of Columbia from provisions of the Hatch Act 
applicable to federal employees.
    Subsection (f) amends 5 U.S.C. Sec. 7325(1) to provide 
federal employees living in the District of Columbia the same 
permission to participate in local politics that the Hatch Act 
now provides to those living in nearby areas of Maryland or 
Virginia. The statute now authorizes OPM to prescribe 
regulations to permit federal employees who live in Maryland or 
Virginia in the immediate vicinity of the District of Columbia 
to take an active part in political management and political 
campaigns in the municipality or political subdivision where 
they live. Subsection (f) authorizes OPM to grant the same 
rights to federal employees who reside in the District.

Section 4. Hatch Act penalties for federal employees

    Section 4 of the bill strikes and replaces 5 U.S.C. 
Sec. 7326, which provides the penalty for federal employees who 
violate the Hatch Act. The statute now requires that a federal 
employee who violates the Hatch Act must be removed from 
office, unless the MSPB unanimously finds that the violation 
does not warrant removal, in which case the Board must impose a 
penalty of no less than 30 days' suspension without pay. Under 
the bill, a federal employee who violates the Hatch Act will be 
subject to removal, reduction in grade, debarment from federal 
employment for a period not to exceed five years, suspension, 
reprimand, or an assessment of a civil penalty not to exceed 
$1,000.

Section 5. Effective date

    Subsection (a) provides that this legislation will take 
effect 30 days after the date of enactment.
    Subsection (b) provides that the new penalty provisions for 
federal employees shall apply to any violation occurring 
before, on, or after the effective date of the Act unless, 
before the effective date, either (1) the OSC has presented a 
complaint for disciplinary action pursuant to 5 U.S.C. 
Sec. 1215 with respect to the alleged violation, or (2) the 
federal employee alleged to have violated the Hatch Act has 
entered into a signed settlement agreement with the OSC with 
respect to the alleged violation.

                       V. Cost of the Legislation

                                                     July 11, 2012.
Hon. Joseph I. Lieberman,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2170, the Hatch Act 
Modernization Act of 2012.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

S. 2170--Hatch Act Modernization Act of 2012

    S. 2170 would amend the Hatch Act, which covers the 
political activities of public employees. The legislation would 
remove some restrictions on the political activities of most 
District of Columbia government employees and many other state 
and local officials. In addition, S. 2170 would establish civil 
penalties for federal employees that violate the Hatch Act.
    Under current law, state and local government employees are 
prohibited from running for a partisan political office if 
their employment relates to an activity at least partly 
financed with federal funds. Under S. 2170, many state and 
local employees, including those from the District of Columbia, 
could run for partisan office. Based on information from the 
Office of Special Counsel, CBO estimates that implementing 
those provisions would have no significant impact on the 
federal budget.
    Because enacting S. 2170 could increase revenues from civil 
fines that could be imposed on federal employees who violate 
the Hatch Act, pay-as-you-go procedures apply. However, CBO 
expects that any additional revenues collected would not be 
significant in any year. Enacting the bill would not affect 
direct spending.
    S. 2170 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved by Peter H. Fontaine, 
Assistant Director for Budget Analysis.

                  VI. Evaluation of Regulatory Impact

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this bill. The Committee 
agrees with the Congressional Budget Office (CBO), which states 
that there are no intergovernmental or private-sector mandates 
as defined in the Unfunded Mandates Reform Act and no costs on 
State, local, or tribal governments. The legislation contains 
no other regulatory impact.

                      VII. Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic and existing law, in which no 
change is proposed, is shown in roman):

   TITLE 5, UNITED STATES CODE: GOVERNMENT ORGANIZATION AND EMPLOYEES

         PART II--CIVIL SERVICE FUNCTIONS AND RESPONSIBILITIES

  CHAPTER 15--POLITICAL ACTIVITY OF CERTAIN STATE AND LOCAL EMPLOYEES


SEC. 1501. DEFINITIONS.

    For the purpose of this chapter--

           *       *       *       *       *       *       *

          (2) ``State or local agency'' means the executive 
        branch of a State, municipality, or other political 
        subdivision of a State, or an agency or department 
        thereof, or the executive branch of the District of 
        Columbia, or an agency or department thereof;

           *       *       *       *       *       *       *

          (4) ``State or local officer or employee'' means an 
        individual employed by a State or local agency whose 
        principal employment is in connection with an activity 
        which is financed in whole or in part by loans or 
        grants made by the United States or a Federal agency, 
        but does not include--
                  (A) an individual who exercises no functions 
                in connection with that activity; or
                  [(B) an individual employed by an educational 
                or research institution, establishment, agency, 
                or system which is supported in whole or in 
                part by a State or political subdivision 
                thereof, or by a recognized religious, 
                philanthropic, or cultural organization]
                  (B) an individual employed by an educational 
                or research institution, establishment, agency, 
                or system which is supported in whole or in 
                part by--
                          (i) a State or political subdivision 
                        thereof;
                          (ii) the District of Columbia; or
                          (iii) a recognized religious, 
                        philanthropic, or cultural 
                        organization.

SEC. 1502. INFLUENCING ELECTIONS; TAKING PART IN POLITICAL CAMPAIGNS; 
                    PROHIBITIONS; EXCEPTIONS.

    (a) A State or local officer may not--

           *       *       *       *       *       *       *

          (3) [be a candidate for elective office] if the 
        salary of the employee is paid completely, directly or 
        indirectly, by loans or grants made by the United 
        States or a Federal agency, be a candidate for elective 
        office.

           *       *       *       *       *       *       *

    (c) Subsection (a)(3) of this section does not apply to--
          (1) the Governor or Lieutenant Governor of a State or 
        an individual authorized by law to act as Governor;
          (2) the mayor of a city;
          (3) a duly elected head of an executive department of 
        a State [or municipality], municipality, or the 
        District of Columbia who is not classified under a 
        State [or municipal], municipal, or the District of 
        Columbia merit or civil-service system; or
          (4) an individual holding elective office.

SEC. 1506. ORDERS; WITHOLDING LOANS OR GRANTS; LIMITATIONS

    (a) When the Merit Systems Protection Board finds--
          (1) that a State or local officer or employee has not 
        been removed from his office or employment within 30 
        days after notice of a determination by the Board that 
        he has violated section 1502 of this title and that the 
        violation warrants removal; or
          (2) that the State or local officer or employee has 
        been removed and has been appointed within 18 months 
        after his removal to an office or employment in the 
        same State (or in the case of the District of Columbia, 
        in the District of Columbia) in a State or local agency 
        which does not receive loans or grants from a Federal 
        agency;
the Board shall make and certify to the appropriate Federal 
agency an order requiring that agency to withhold from its 
loans or grants to the State or local agency to which notice 
was given an amount equal to 2 years' pay at the rate the 
officer or employee was receiving at the time of the violation. 
When the State or local agency to which appointment within 18 
months after removal has been made is one that receives loans 
or grants from a Federal agency, the Board order shall direct 
that the withholding be made from that State or local agency.

           *       *       *       *       *       *       *


                          PART III--EMPLOYEES

             CHAPTER 73--SUITABILITY, SECURITY, AND CONDUCT


                  Subchapter II--Political Activities


SEC. 7322. DEFINITIONS.

    For the purpose of this subchapter--
          (1) ``employee'' means any individual, other than the 
        President and the Vice President, employed or holding 
        office in--
                  (A) an Executive agency other than the 
                Government Accountability Office; or
                  (B) a position within the competitive service 
                which is not in an Executive agency; [or]
                  [(C) the government of the District of 
                Columbia, other than the Mayor or a member of 
                the City Council or the Recorder of Deeds;]
        but does not include a member of the uniformed 
        [services;] services or an individual employed or 
        holding office in the government of the District of 
        Columbia;

SEC. 7325. POLITICAL ACTIVITY PERMITTED; EMPLOYEES RESIDING IN CERTAIN 
                    MUNICIPALITIES.

    The Office of Personnel Management may prescribe 
regulations permitting employees, without regard to the 
prohibitions in paragraphs (2) and (3) of section 7323(a) and 
paragraph (2) of section 7323(b) of this title, to take an 
active part in political management and political campaigns 
involving the municipality or other political subdivision in 
which they reside, to the extent the Office considers it to be 
in their domestic interest, when--
          [(1) the municipality or political subdivision is in 
        Maryland or Virginia and in the immediate vicinity of 
        the District of Columbia, or is a municipality in which 
        the majority of voters are employed by the Government 
        of the United States; and]
          (1) the municipality or political subdivision is--
                  (A) the District of Columbia;
                  (B) in Maryland or Virginia and in the 
                immediate vicinity of the District of Columbia; 
                or
                  (C) a municipality in which the majority of 
                voters are employed by the Government of the 
                United States; and

           *       *       *       *       *       *       *


[SEC. 7326. POLITICAL ACTIVITY PERMITTED; EMPLOYEES RESIDING IN CERTAIN 
                    MUNICIPALITIES.

    [An employee or individual who violates section 7323 or 
7324 of this title shall be removed from his position, and 
funds appropriated for the position from which removed 
thereafter may not be sued to pay the employee or individual. 
However, if the Merit System Protection Board finds by 
unanimous vote that the violation does not warrant removal, a 
penalty of not less than 30 days' suspension without pay shall 
be imposed by direction of the Board.]

SEC. 7326. PENALTIES.

    An employee or individual who violates section 7323 or 7324 
shall be subject to removal, reduction in grade, debarment from 
Federal employment for a period not to exceed 5 years, 
suspension, reprimand, or an assessment of a civil penalty not 
to exceed $1,000.