Christina Sivret (Executive Director, Vermont Ethics Commission) presented to the Senate Government Operations Committee on Wednesday a proposal to add language to H.429 surrounding candidate financial disclosures and the compliance with such requirements.

She shared that financial disclosure requirements are relatively new to Vermont, with candidate and executive officer financial disclosure requirements only coming into force in 2017 (thanks to Campaign for Vermont!). The implementation of these requirements came on the heels of Vermont receiving an “F” grade from the Center for Public Integrity for judicial, legislative, and executive accountability. At the time, Vermont was ranked 49^th out of 50 states for legislative accountability. Only Michigan, which had no legislative financial disclosure requirement at all, ranked lower.[1]

Financial disclosure is an important and necessary part of any governmental ethics program, according to Sivret. It provides transparency and ensures public trust and confidence in governmental decision-making. Further, it provides an opportunity for government officials, and candidates for public office, to recognize and cure potential conflicts of interest before they turn into actual, problematic conflicts.

Vermont now requires modest financial disclosures for certain categories of public servants, including candidates for statewide office, candidates for state legislature, statewide elected officers, and executive officers. However, among the 48 states that currently require disclosures, Vermont is the only one that provides no statutory sanctions at all for failure to file a required financial disclosures. 

Despite financial disclosure being a legal requirement, the lack of a penalty creates a system of voluntary compliance, which does "not always" provide the desired results. For example, in 2018, the first election cycle after the financial disclosure requirement was implemented, approximately one fifth of all House members failed to file their candidate disclosure forms on time.[2] In 2023, the Ethics Commission received only a handful of executive officer disclosures prior to the statutory deadline.

The amendment to H.429 she is asking for would propose modest penalties for candidates who fail to file a required financial disclosure on time:

• Following notice of delinquency sent by the State Ethics Commission the filer will have five (5) working days from the date of notice to cure the delinquency.

• Beginning six (6) working days from the date of notice, the delinquent filer shall pay a $10 penalty for each day the disclosure remains delinquent, with a cap of $1,000.

• The Commission may reduce or waive any financial penalty for good cause.

• The language clarifies that any candidate who fails to file a financial disclosure with intent to defraud, falsify, conceal or cover up a material fact, or files a financial disclosure with false, incomplete, or misleading information with intent to defraud, falsify, conceal or cover up a material fact, will be violation of 13 V.S.A. § 3016, and existing criminal statute related to false claims.

• Any future complaints alleging potential violations of 13 V.S.A. § 3016 will be referred to the Attorney General for possible investigation. 

The Ethics Commission considers the establishment of a penalty framework for required financial disclosures to be an "essential next step" as Vermont builds its governmental ethics framework. When the Commission was established in 2017, the vision was for it to have independent investigatory and enforcement powers tied to a robust state code of ethics. Six years later, the Commission has no investigatory or enforcement powers, and only within the last ten months has a non-binding state Code of Ethics gone into effect. While this is something to celebrate, the Ethics Commission urges the Committee not to lose sight of the fact that Vermont remains "far, far behind" other states when it comes to governmental ethics. The proposed penalties for failure to file are modest penalties tied to a simple form. Because of this, Sivret claimed, a lack of action on this issue would signal that governmental ethics are not a priority in Vermont. 

Next, Sivret dove into what financial disclosure requirements are important. Financial disclosure requirements satisfy a number of democratic and “good government” principles, she said. For example, they:

1. Reinforce public confidence in the integrity of government decisions.
2. Allow public servants and members of the public the opportunity to recognize and identify potential conflicts in advance.
3. Allow public servants opportunity to “cure” potential conflicts of interest before they manifest into full-blown issues.
4. Serve as general reminder to public servants of principles of governmental ethics.
5. Through the publication of the financial disclosures, allow a public “check” on accountability, further enhancing public confidence in governmental decision-making.
6. For elective candidates – particularly those who would be new to Vermont government service – disclosure provides an introduction to the state’s ethics requirements and assists those candidates in self- identifying financial interests that may give rise to a future conflict of interest or the appearance of a conflict of interest.

As stated by the American Law Institute:

“Disclosure by public servants of financial and other information is a key component of most government ethics systems. Disclosure reminds public servants of ethics principles, detects and deters conflicts of interests, facilitates enforcement of ethics rules, and promotes public confidence in government. Transparency is one of the most important principles underlying a representative democracy, and ethics rules that enhance transparency not only improve the quality of government and the ethical commitments of public servants but also reinforce public confidence in government. Public confidence in government in turn is critical to the continued public support that is the ultimate foundation of our representative democracy.”

American Law Institute, Principles of Law: Government Ethics, Tentative Draft No. 3, Ch. 6 (Disclosure), Introductory Note (April 9, 2021).

Sivret shared that in a majority of states, financial disclosure forms – including those of legislators and/or candidates for legislature – are filed with either an independent state agency, or with an office of the executive branch. In a minority of states, legislative financial disclosure forms are filed with the legislative chamber of the filer.

In New England, for example, all other states require that legislators (and/or candidates for legislature) file their financial disclosure with an independent agency, or with the Secretary of State. New Hampshire – which does not have an independent commission – requires filing with the Secretary of State, but allows legislators to opt to file with their respective chambers, which then forwards copies to the Secretary of State for publication.

In a majority of states, filings for legislators (or candidates for legislature) are enforced by an independent agency or an office of the executive branch.

Nearly all states have statutory provisions that state that “knowing” or “willful” violations may be addressed criminally. Thus, in nearly all states, intentional failures to file are enforced by the criminal authorities, which typically fall under the executive branch.

A majority of the states also enforce the filings administratively – the independent agency or executive branch agency may impose a fine for the failure to file the for as required.

In New England, Connecticut, Maine, Massachusetts, and Rhode Island enforce their filing requirement through independent agencies. The independent agencies have the authority to impose fines on required filers, including legislators. In each of these states, the independent agency falls nominally under the executive branch. New Hampshire, which does not have an independent agency, does not enforce forms through an administrative process. The only enforcement in New Hampshire is through the criminal process. 

After Sivret was done presenting, there was a general discussion about the forms and how it would be handled if someone intentionally defrauded the state by providing misinformation or hiding information. Senator Clarkson asked how someone would be held accountable. Sivret pointed out that, currently, there was nothing that she could do because the Commission has not enforcement powers.

The Committee moved on to the next speaker with no discussion of whether this language would be added to H.429 or not.

[1] Through a public ballot initiative, Michigan now requires financial disclosures of public servants and candidates. In a more recent survey by the Center for Integrity (one that took place in 2020, after Vermont established the Ethics Commission), Vermont ranked 41^st in the national SWAMP index of anti-corruption laws.

[2] See article, “Some Legislators’ Financial Disclosure Forms Were Late,” Seven Day (Flanders, C.; Jan. 7, 2020). More recent numbers on late filing are not available.