LOS ANGELES -- The California Public Securities Association has decided not to disband its political action committee despite a sharp decline in bond dealer contributions.

Donations by the group's PAC fell to $4,500 in the first half of 1994, compared with full-year contributions of $32,250 in 1993, $34,300 in 1992, and $33,750 in 1991.

The severe reduction in contributions was blamed on the Municipal Securities Rulemaking Board's Rule G-37, the new industry guideline restricting political contributions to local public officials, said Douglas L. Charchenko, the state organization's chairman and a senior vice president for Kidder, Peabody & Co.

The 113-member San Francisco-based association, which is commonly called Cal PSA, reacted to the decline in PAC contributions by considering a ban on political donations, Charchenko said.

But Cal PSA's 11-member board "determined the PAC served a purpose and we should keep it in place as long as we follow Rule G-37," Charchenko said.

Though Cal PSA was incorporated in 1981, its political action committee was not formed until January 1989.

Cal PSA is an independent affiliate of the Public Securities Association, the national trade group that is based in New York City. PSA has similar affiliations with municipal bond organizations around the country.

The national group operates a political action committee that "raises and spends about $60,000 to $70,000 a year," PSA executive vice president Micah S. Green said yesterday. "This year, we're pretty much on track to do that again."

But, Green said, "it has been tougher" for the PSA's political action committee to raise money because firms "are being cautious."

MSRB Rule G-37, which took effect in April, bars municipal bond firms and their employees from doing business with any state or local issuer for two years after the employee, firm, or the firm's PAC makes a political contribution to any of the issuer's officials.

The rule is designed to avoid possible conflicts of interest and allegations of influence peddling.

The PAC run by the national PSA "participates solely in federal elections," Green said.

"We haven't seen [contributions] plummet because we have been able to define ourselves as a federal PAC," Green said. But, underscoring the industry confusion, Green said that he "has had to explain very clearly that we are not giving to state or local candidates."

By contrast, the political action committee operated by Cal PSA gives only to state and local candidates.

The average PAC contribution is $500, Charchenko said.

Proceeds earmarked to the political action committee are a relatively small percentage of Cal PSA's yearly operating budget, which ranges between $860,000 and $1 million, Charchenko said.

Cal PSA revenues are obtained from nominal dues and by assessing members 1 cent "for every bond they underwrite," he said.

"The penny pays for our lobbyist, educational forums, information materials," and industry studies such as a major report completed in 1992 on Mello-Roos bonds, Charchenko said.

In addition, he said, "a portion" of the penny is transferred to the political action committee.

Cal SAA members have the option of not allowing their assessments to fund the PAC.

"Certain firms will not permit any portion of their assessments to go to the PAC," Charchenko said, but he declined to reveal the number.

He said that PAC contributions should be viewed as a "total commitment on everybody's part" and disclosure of what percentage of members are funding the PAC would be counterproductive to Cal PSA's goals.

The decision to contribute is "entirely up to" each member, Charchenko said.

But "in no way will our PAC put any [member] at risk in terms of doing business in California" under Rule G-37, he said.

"We will not give to any individual who can impact or influence the award of business," Charchenko said.

Rule G-37 "says you can make contributions to people who by definition do not have the authority to award bond business," such as a state legislator, he said.

Cal PSA might donate to a legislator who chairs a local government committee, Charchenko said.

But the organization would not contribute to a state constitutional officer -- for example, the governor, treasurer, or controller. Those officers conceivably could award bond business or "appoint somebody who might sit on one of the [bond] authorities," he said.

Charchenko said that Cal PSA has not yet determined whether PAC contributions could be made to the California attorney general or insurance commissioner, both constitutional officers whose responsibilities occasionally affect the municipal bond business.

"The policy is very straightforward," Charchenko said. Contributions will be based upon "the job definition of the individual."

"If they could appoint somebody to an authority who awards business, we will not contribute to them," he said.

For example, Cal PSA's political action committee will not contribute to two candidates vying to replace Kathleen Brown as state treasurer: Republican Matt Fong and Democrat Phil Angelides.

Brown, a Democrat, is running for governor against Republican incumbent Pete Wilson.

The decision to forgo donations in the treasurer's race contrasts with the November 1990 election, when Cal PSA's PAC contributed roughly $2,000 to Brown and a similar amount to Republican incumbent Tom Hayes, Charchenko said.

In this election year, "the only people who will be seeing any contributions would be state legislators," he said.

Cat PSA directors believe the political action committee serves a legitimate purpose, Charchenko said.

"We want to have the ability to have our voice heard in front of those people who influence how we do business," he said. "There has to be a reason for us to contribute -- to make sure our point of view is heard."

To give it visibility, the organization recently hired a Sacramento lobbying firm, Aaron Read & Associates, which replaced Cat PSA's long-time lobbyist Jack Cruse, who retired in January. Aaron Read is a contract lobbyist who represents the California Highway Patrol, among other clients.

Cal PSA members are mostly "bankers by trade," Charchenko said. "We need somebody who is familiar with the [legislative] process." Read's "job is to get our point of view in front of the correct members of the legislature," he said.

For the moment, however, Charchenko said there are relatively few bills that Cat PSA is actively trying to use its influence to defeat or pass.

He said that Cat PSA was closely monitoring an attempt by a California taxpayers group to place on the statewide election ballot a measure requiring a two-thirds vote before most local bonds could be issued. The taxpayer group failed to gather enough signatures by last month's deadline.

As a result, "there isn't a hot button out there right now," Charchenko said. "We're not on alert right now. We like it that way."

Charchenko has been chairman of Cal PSA for 19 months. The low-profile organization has 74 broker-dealers and 39 associate members that include bond counsel firms, financial advisers, and others "associated with the industry," he said.

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