In recent years, the U.S. Supreme Court has repeatedly addressed the constitutional boundaries of campaign finance regulation. If confirmed, Judge Sonia Sotomayor would bring to the Court real world experience as a campaign finance regulator – likely a first for the Court. Because it is an experience she and I shared, I wanted to offer a few reflections.

From 1988 – 1992, Judge Sotomayor was one of five founding members of the newly-created New York City Campaign Finance Board. (I then served as Counsel to the Board’s Executive Director.) I remember Judge Sotomayor as thoughtful, detail-oriented, and tough. She along with the other founding members were charged with making a new, untried law an effective and meaningful reform in an incredibly short timeframe. Board members and staff learned from experience. Regulations, opinions, and an approach to enforcement were continually refined – always with an eye toward striking the right balance between the broad aspirations of reform and the reality of trying to make the regime “livable” for candidates who could choose to participate, or not.

Judge Sotomayor never shied away from difficult issues or cases. Indeed, she struck me as utterly immune to external pressures. I also remember her as a quick study, with a clear appreciation for legal nuance.

Judge Sotomayor helped infuse the NYC Campaign Finance Board with qualities that have earned it a national reputation as perhaps the leading local campaign finance regulatory agency. She will therefore bring a unique real-world-tested knowledge of this subject area, as well as a demonstrated capacity for leadership in a collegial body.

On May 21, the New York City Conflicts of Interest Board issued an advisory opinion confirming that employees, trustees, and trustee-designated representatives of the five New York City pension funds are public servants subject to the City’s conflicts of interest law (NYC Charter Chapter 68). These five funds are: the New York City Employees’ Retirement System, the New York City Teachers’ Retirement System, the New York City Police Pension Fund, the New York City Fire Department Pension Fund, and the New York City Board of Education Retirement System.

Under NYC’s conflicts law, public servants may not, for example, accept any valuable gift from any person or firm which the public servant knows is or intends to become engaged in business dealings with New York City. Likewise, a public servant shall not solicit any position with any person or firm who or which is involved in a particular matter with the city, while such public servant is actively considering, directly concerned, or personally participating in that matter on behalf of the city.

Persons required to be listed on a NYC-lobbyist registration statement, such as the lobbyists, their spouses and domestic partners, and certain employees of lobbying organizations, may not offer or make a gift to a public servant. While the new opinion does not address the lobbyist gift ban directly, the implication is that lobbyists may not make gifts to employees, trustees, and trustee-designated representatives of the five NYC pension funds.

Since April 2007, the New Jersey State Investment Council has subjected firms seeking investment of state pension funds, and associated persons, to a ban on political contributions. The New Jersey regulation makes compliance with the ban a condition of eligibility for State investments. A proposal floated by New York Attorney General Andrew Cuomo appears intended to take New York State down the same path. New Jersey’s rules also prohibit solicitation of contributions – will that be a feature of AG Cuomo’s proposal?

In contrast, New York City’s “doing business” limits restrict candidates from accepting large contributions from certain persons associated with firms seeking the investment of City pension funds, but do not make the firm’s compliance a condition of eligibility for City investments. The New York City rules require candidates to disclose the intermediaries for particular contributions, which is defined to include successful solicitation, but do not restrict municipal finance professionals from soliciting contributions altogether.

As the case against former governor Rod Blagojevich moves forward , we take note of legislation effective January 1, 2009 that prohibits political contributions by business entities whose contracts with Illinois state agencies, in the aggregate, total more than $50,000. The law covers contributions to political committees promoting the candidacy of: (i) the officeholder responsible for awarding the contract (Governor, Lieutenant Governor, Attorney General, Secretary of State, Comptroller or Treasurer), or (ii) any other declared candidate for that office.

In the case of a State contractor, the prohibition applies for the duration of the term of office or for two years following the expiration or termination of the contract, whichever is longer. For business entities with aggregate bids or proposals (combined with the annual total value of current State contracts, if any) that total more than $50,000, the prohibition applies from the date the invitation for bids or RFP is issued through the date the contract is awarded.

The contribution prohibition is enforced through a requirement that the business entity register with the State Board of Elections. The registration must include the name and address of the business entity, any affiliated entity, and any affiliated person. Affiliated persons and entities are subject to the same contribution prohibition. Affiliated persons include persons with an ownership interest in excess of 7.5%, executive employees, and the spouse and minor children of such persons. Affiliated entities include subsidiaries, members of the same unitary business group, 501(c) organizations established by the business entity, affiliated person, or affiliated entity, and political committees for which the business entity or such 501(c) organization is the sponsoring entity.

Yesterday, Genova, Burns & Vernoia submitted an advisory opinion request to the NYC Campaign Finance Board (CFB) on behalf of New Yorkers for Bill Thompson, a mayoral committee in this year’s election.

The crux is that the NYC Campaign Finance Act requires the lifting of the $6,158,000 primary election spending limit that applies to candidates participating in the voluntary public financing program if a non-participating incumbent raises or spends more than three times the amount of the spending limit (i.e., more than $18,474,000) before the primary election.  Mayor Bloomberg can avoid this result simply by opting to become a “limited participant” who agrees to abide by the law’s spending limit (like all his opponents).

The opinion request is getting attention.  The request does not argue for an exception to current campaign finance law or seek to bend any rules.  Rather, the law is clear that expenditures made by an incumbent non-participating mayoral candidate through the date of a mayoral primary election are to be measured against the primary election spending limit.  And this is true regardless whether the non-participating mayoral candidate is a candidate in that primary election.

This is the first time this issue is being presented to the Campaign Finance Board.   The CFB has previously highlighted the threat free-spending non-participants pose to fair competition (see The Impact of High-Spending Non-Participants on the Campaign Finance Program).   The 2001 and 2005 Bloomberg mayoral campaigns are the most vivid examples of this problem.  An affirmative response would be a step toward a more level playing field.

Businesses with government contracts in New Jersey are subject to an annual disclosure requirement, which is due one week from today.  Here are a few things to keep in mind:

• The form is available on the New Jersey Election Law Enforcement Commission’s website and ELEC requires that the information be entered on its electronic form.

• Only “reportable” contributions need to be disclosed. A “reportable” contribution is one in excess of $300 in the aggregate per election to candidate committees and political committees; and $300 in the aggregate per calendar year to political party committees, legislative leadership committees, and continuing political committees.

• The $50,000 threshold relating to the receipt of government contracts is in the aggregate. This means that if your business received 5 government contracts worth $10,000 each (from the same or different governmental entities), you must file a report.

Pursuant to Chapter 271, a business entity that has received $50,000 or more in government contracts in a calendar year must file an annual disclosure statement electronically with New Jersey Election Law Enforcement Commission.  The disclosure form requires reporting contract information and reportable contributions that the business entity made in calendar year 2008.

The due date for the third annual disclosure report for calendar year 2008 is March 30, 2009.

Federal campaign finance limits and lobbying registration thresholds have increased due to changes in the Consumer Price Index.

See here for a chart on the 2009-2010 contribution limits applicable to federal contributions.

Additionally, the House and Senate recently posted revised guidance announcing adjustments to the federal lobbying registration thresholds, which are now as follows:

•    $3,000 (previously $2500) in lobbying income for lobbying firms, and
•    $11,500 (previously $10,000) in lobbying expenses for organizations that employ in-house lobbyists.

On Friday, Southern District Judge Laura Taylor Swain issued a decision in Ognibene v. Parkes upholding recent amendments to the New York City Campaign Finance Act.    The plaintiffs had sought an injunction against the enforcement of the doing business laws and the extension of the corporate contributions ban to LLCs and partnerships.  Analyzing the case under the standards set forth in Buckley v. Valeo, Judge Swain found that the City had presented “substantial evidence of the existence of a public perception of corruption or the potential of corruption by those doing business with the City” and that the limitations were closely drawn to comport  with that interest.

As we noted here in our previous discussion of the case, the Court specifically found that plaintiffs’ allegation that the doing business limits unconstitutionally burden the constitutional rights of the family members and employees of lobbyists was without basis because the Campaign Finance Board had clarified that the definition of “lobbyist” was narrow in scope such that family members and employers were excluded from the definition and therefore were not subject to the doing business limits.

Rebecca Moll Freed discusses Executive Order 117 and its changes to the NJ pay-to-play landscape in her article published in the winter volume of New Jersey Building Contractor Magazine.