ELEC Issues August Newsletter

The New Jersey Election Law Enforcement Commission has issued its August newsletter. The newsletter discusses the role of public financing in New Jersey’s gubernatorial election, trends on independent spending by outside groups and fundraising by the “Big Six” Committees in the second quarter of 2013. The newsletter also discusses the pending appeal in Wagner v. Federal Election Commission (a challenge to the long-standing federal contractor ban) and the impact that the ultimate decision in that case may have on New Jersey’s own pay-to-play laws.

The U.S. Court of Appeals for the District of Columbia (DC) is scheduled to hear oral arguments in Wagner v. FEC on Monday, September 30, 2013.

Potential Pitfalls of Volunteer Employee Political Activity

As the New Jersey 2013 gubernatorial and legislative general election season kicks into high gear and as the State is preparing for a special primary and general federal election, New Jersey employees may get caught up in the momentum and decide that they want to volunteer their time or services for a campaign.

True volunteer activity that takes place outside of working hours and without the use of company resources may not be of concern to an employer, but if an employee volunteers for a political campaign during working hours and uses company resources, the company could be making an in-kind contribution to a campaign.  This could be of particular concern on the federal level where corporate contributions are prohibited or in New Jersey where stringent pay-to-play restrictions are in effect and where certain companies (i.e., banks, utilities, insurance companies and casinos) are subject to the regulated industry ban.

For example, if an employee decides to host a fundraiser for a New Jersey gubernatorial candidate and uses company resources (email, letterhead, staff, copy machines, postage, etc.) in connection with his or her individual political activity, the company could be making an in-kind contribution in excess of the $300 per election limit applicable under New Jersey’s Executive Branch pay-to-play restrictions.  Similarly, if an employee decides to volunteer his or her time for a candidate for US Senate during working hours and spends more than 1 hour per week or 4 hours per month on his or her volunteer activities, the employer could be making a prohibited in-kind contribution to the US Senate campaign.  Further, if the employee decides to engage in fundraising activities and uses company resources in connection with his or her efforts, the employee could be subjecting his or her employer to financial liability in the form of civil penalties.

Although employers need to recognize that their employees have a First Amendment right to engage in political activity, employers should also be proactive during this election season to make sure their employees are properly educated on the potential pitfalls of their volunteer political activity.

New Jersey Now Says Yes to SuperPACs

On July 17, 2013, the New Jersey Election Law Enforcement Commission (“ELEC”) announced that an agreement reached on July 11 between itself and Fund For Jobs, Growth & Security (“Fund”) was approved by the United States District Court for the District of New Jersey. Under the agreement, the Fund was granted a permanent injunction that permits unrestricted fundraising by political committees that plan to make only independent expenditures.

The permanent injunction overturns an Advisory Opinion in which ELEC determined that the Fund had to abide by New Jersey campaign finance limits. The ELEC Advisory Opinion 01-2013 has now been withdrawn pursuant to the permanent injunction.   As a result, New Jersey’s treatment of SuperPACs now appears to follow the federal model – a complete reversal.

ELEC reiterates that political committees that intend to spend in excess of $2,400 on a New Jersey election, whose major purpose is for more than half of its funds to be spent in New Jersey, must register as a political committee with ELEC and comply with all relevant regulations and reporting requirements.

Finally, the permanent injunction instructs ELEC to “recommend to the Legislature that it amend N.J.S.A. 19:44A-11.5 to cure the infirmities in the statute raised by this litigation, so that the Commission may adopt regulations consistent herewith.” Stay tuned.

Genova Burns served as co-counsel to Fund For Jobs, Growth & Security in this litigation. 

New Bergen County Pay-to-Play Ordinance Requires County Vendors to File “REVUE 2” Form Today

Bergen County has now issued updated Political Contribution Disclosure Forms with which County vendors must comply. The “Sunshine” Form must be submitted with each proposal and the “REVUE 2” Form must be submitted to the County on January 1st and July 1st of each year. Bergen County vendors should, therefore, determine whether they are required to submit a “REVUE 2” Form today.

The new forms implement Bergen County’s new pay-to-play ordinance. Although the new Ordinance (#13-06) was passed 6-1, the ordinance had to overcome a number of vetoes by the County Executive in order to become law.

The new ordinance contains reduced contribution limits of $300.00 per election cycle only for candidates for and holders of Bergen County-wide office (i.e., Freeholder, Sheriff, Clerk, Surrogate and County Executive). The new ordinance applies a $2,600.00 aggregate annual limit only to contributions to candidates for and holders of Bergen County-wide office . It is not clear, however, under the ordinance whether the aggregate limit applies to pre-effective date contributions covered under the previous version of the Bergen County pay-to-play ordinance.

Some have criticized the new ordinance for allowing contributions of up to $5,200.00 per calendar year to a Bergen County party committee (the old ordinance contained a limit of $300.00 per calendar year). But this criticism ignores that many vendors will choose to contribute no more than $300.00 per calendar year to a Bergen County party committee in order to preserve their legal eligibility for state government contracts.

Although the County is currently requiring vendors to submit these new forms, questions remain about the content of the required disclosures, which relate back to interpretation of the ordinance.

Contributions and Casinos, Perfect Together?

Long ago, New Jersey said no. 

As for New York, a Constitutional amendment will be on the ballot this year to authorize casino gambling.  Enabling legislation passed at the close of the legislative session did not, in the end, include any restrictions on political contributions from the casino industry.  This omission contrasts with the regulation of casinos in New Jersey.

The 1977 Casino Control Act implemented the referendum New Jersey voters approved permitting casinos.  This law flatly prohibits any political contribution to New Jersey candidates or committees by casino license holders or applicants, by their holding or subsidiary companies and by their officers, directors, casino key employees or principal employees.  (A 2009 amendment makes a narrow exception for Atlantic City municipal candidates contributing to their own campaigns.)

Might, however, industry-specific contribution prohibitions be vulnerable to constitutional challenge?  In 1989, the constitutionality of the New Jersey prohibitions was challenged by a casino employee on Free Speech and Equal Protection grounds.  An appellate court, relying in part on Buckley v. Valeo, upheld the statute as a permissible exercise of government regulation over an industry with a history of links to organized crime.   The New Jersey Supreme Court and the U.S. Supreme Court declined to review.

New Jersey Statewide Pay to Play Reform to be Introduced in the Senate Today

This afternoon, Senate Democrats plan to introduce legislation aimed to overhaul “loopholes” in New Jersey’s current pay-to-play laws.  One of the goals of this legislation is to direct local governments to follow the same rules that currently apply to State government contractors.  If municipal and county governments are required to follow restrictions similar to those in place at the State Executive Branch level of government, the “fair and open process” exception to the local contracting process may become obsolete.  Another goal set by the proposed legislation is to broaden political contribution disclosure requirements for public government contractors and to require political candidates and non-profit advocacy groups to disclose all donors (regardless of the amount of their contribution or donation).  Another significant potential change is that the broadened disclosure brings non-profit advocacy groups into the ambit of New Jersey’s pay-to-play regime.  If this bill moves forward, it will likely present the most significant changes to New Jersey’s pay-to-play laws since their inception in 2004.

New Jersey says No to SuperPACs

Today, the New Jersey Election Law Enforcement Commission issued Advisory Opinion 01-2013  holding that a committee organized under Section 527 of the IRS code and intending to make solely independent expenditures (i.e., expenditures not coordinated with candidates or parties) of $2,400 or more in the 2013 New Jersey legislative elections must be classified as a political committee under New Jersey law, subject to registration, reporting, and contribution limits, if over half of its total activity is for that purpose.  The Fund for Jobs and Growth represented that it is an organization incorporated in the District of Columbia that will make only independent expenditures in support of legislative candidates in New Jersey elections in 2013 and that more than  half of its spending will be in support of that independent expenditure program in New Jersey.

ELEC held that independent expenditure activity comes within the meaning of “aid or promote” the election or defeat of a candidate as used in the definition of “political committee” under New Jersey law because that definition does not differentiate between activity that is “coordinated” and activity that is “independent” of a candidate.  ELEC applied the “major purpose” test derived from Buckley v. Valeo (1976) in concluding that spending in excess of half of the Fund’s total spending on independent expenditures in New Jersey elections would constitute a “major purpose” of supporting New Jersey candidates in 2013 elections.

Because the Fund is a “political committee,” ELEC stated it must observe New Jersey law with respect to contribution limits in addition to registration and contributor reporting requirements.  Specifically, the Fund may receive no more than $7,200 per election from a contributor (except for contributions from political party committees and legislative leadership committees).  ELEC reached this result notwithstanding the Fund’s representation that since the time of the U.S. Supreme Court opinion in Citizens United v. FEC (2010) and the subsequent Court of Appeals opinion in Speechnow.org v. FEC (D.C. Cir. 2010) (en banc), no court has upheld a government restriction on the amount that an independent expenditure-only committee (more popularly known as a super PAC) may receive as a contribution.

Will this ELEC Advisory Opinion become the subject of a court challenge?  Stay tuned.

Genova Burns Of Counsel Gregory E. Nagy assisted with this post. 

Pay-to-Play Resolutions for 2013

Out with the old, in with the new. Here are a few practical tips government vendors in New Jersey should add to their list of resolutions:

As a final resolution, be proactive. Don’t wait for problems to arise before you give attention to your compliance plan. The pennies you invest today in prevention will avert draining your dollars in hope of a cure tomorrow.

Jersey City Adopts Increasingly Stringent Pay-to-Play Ordinance

Since 2008, Jersey City’s pay-to-play Ordinance has remained one of the most stringent in the State of New Jersey. In fact, the Jersey City Ordinance served as a model for the transitional aid pay-to-play ordinances, which many municipalities and cities have been required to adopt in recent years.

On December 19, 2012, the Jersey City Council adopted an increasingly restrictive pay-to-play Ordinance.  Adopted by a vote of 5-4, the new provisions of the Ordinance restrict vendors from entering into contracts with the City if, within one calendar year prior to award, the vendor or certain persons and entities associated with the vendor made a contribution in excess of $200 per calendar year to:

  • A candidate  for Jersey City municipal office
  • A candidate for Jersey City Board of Education
  • A candidate for Assembly or Senate whose district encompasses Jersey City (currently District 31) and has contributed any funds to any Jersey City elective municipal office in the twelve months prior to award of the contract
  • Every county political party committee
  • Every state political party committee
  • Every legislative leadership committee
  • Any political committee  or continuing political committee (“CPC”) that is registered with ELEC and has, in the twelve (12) months prior to the award of the contract: (1) contributed in excess of $200 to any candidate committee for Jersey City municipal election; (2) transferred more than 5% of its assets to a candidate committee for a Jersey City municipal election; (3) advertised express support or advocacy for the election of any candidate committee for Jersey City municipal election; (4) engaged in voter identification initiatives within the City of Jersey City; or (5) engaged in voter registration or get-out-the-vote activities within the City of Jersey City.

Although the list of covered recipient committees is very broad and includes “every” state party committee, county party committee and legislative leadership committee, the Ordinance does contain a clarification, which seems to suggest that these recipient committee are covered only where, in the past calendar year, they have provided financial or in-kind support in excess of $200 to certain Jersey City or Hudson County recipients.

The Ordinance also contains a $2,500 aggregate annual limit, which covers all contributions by the vendor itself and certain persons and entities associated with the vendor that fall within the Ordinance’s definition of a “business entity”.  For example, the Ordinance covers any person that received compensation or income in excess of $100,000 from the vendor within the past calendar year.  Thus, an employee who does not own an interest in the vendor company, but has an annual salary of more than $100,000, appears to be covered by the Jersey City Ordinance.

The Ordinance contains three key deviations from statewide pay-to-play restrictions.  First, it covers subcontractors. Second, it reduces the contribution limit to $200 per calendar year, which is a deviation from the $300 reportable threshold under New Jersey campaign finance law. Third, it subjects joint candidate committees to a single $200 per calendar year limit regardless of how many candidates are participating.

Once a contract has been awarded, a vendor is prohibited from making a contribution, in any amount, to a recipient covered by the Jersey City Ordinance.

The intricacies of this Ordinance should not be taken lightly.  Whether a recipient committee is covered may depend almost entirely on the activities in which that recipient committee engages. For example, before writing a check greater than $200 to a county political party committee outside of Hudson County, a vendor may need to review that party’s ELEC reports for the past twelve (12) months to determine whether the county party committee engaged in any support of Jersey City recipients.

The Ordinance is prospective only. If signed by the Mayor, the Ordinance will take effect twenty (20) days thereafter.

Update: On December 28, Mayor Healy vetoed the pay-to-play ordinance passed by the Jersey City Council on December 19 citing legal and constitutional concerns. The Council may override the Mayor’s veto with six votes but the Ordinance only passed with five votes. If the Council does not override the Mayor’s veto, the original ordinance, enacted in 2008, will remain in effect.