On the same day that it was announced that Kim Guadagno and Phil Murphy both qualified for public matching funds in New Jersey’s 2017 gubernatorial election, the New Jersey Election Law Enforcement Commission issued a News Release reporting that independent spending reached an all-time high in New Jersey’s 2017 primary election. This means that, as we look toward the general election, our gubernatorial candidates will be limited in what they can spend in the general election ($13.8 million to be precise) while independent groups will not be subject to contribution or expenditure limits—this type of “outside spending,” which arises from sources other than candidates, is likely to become increasingly important in the 2017 gubernatorial election.
Under the First Amendment, independent groups are permitted to spend unlimited amounts of money in connection with an election provided they do not coordinate their activities with a candidate, his or her agents, or his or her campaign. Many think that Super PACs and independent-expenditure only committees are the only outside groups that play a role in elections; however, individuals, corporations, labor organizations and trade associations are also free to engage in the process and spend unlimited funds in New Jersey elections so long as there is no coordination with the candidate, his or her agents, or his or her campaign. Especially in New Jersey, home to strict pay-to-play restrictions that limit contributions to no more than $300 per election to a gubernatorial candidate and no more than $300 per calendar year to a party committee by a government contractor (and certain individuals associated with that contractor), independent spending is likely to play a big role in the upcoming general election.
For more information on how you or your company may participate in the political process, please contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at firstname.lastname@example.org or 973-230-2075.
Since 1911, New Jersey law has prohibited the making of political contributions by such highly regulated industries as banks, utilities, and insurance companies. The reasoning underlying this prohibition was clarified by a New Jersey Attorney General Advisory Opinion, which explained that these “[c]omprehensive regulatory programs, vital to the protection of the public, could become prime targets of elected officials seeking to satisfy perceived debts to corporate benefactors affiliated within a regulated industry.” For more than a century, this law has remained in effect. But new legal developments raise questions about the constitutional validity of this ban on regulated-industry political contributions.
In early May of 2017, in Free and Fair Election Fund, et al. v. Missouri Ethics Commission, et al., the U.S. District Court for the Western District of Missouri declared unconstitutional a provision of Missouri campaign-finance law that prohibited banks, insurance companies, and telephone companies from making any political contributions to PACs. (Missouri law already prohibitions all contributions to candidates and political parties from corporations, without regard to whether the corporations in engaged in a heavily regulated industry.) The court determined that this complete ban on contributions from heavily regulated industries is unconstitutional because the law was not closely drawn to avoid abridging First Amendment rights to engage in the political process. This decision was based in part on the U.S. Supreme Court’s recognition that “there is not the same risk of quid pro quo corruption or its appearance when money flows through independent actors to a candidate, as when a donor contributes to a candidate directly.” In this case, making contributions to PACs did not give rise to the same risks of quid pro quo corruption or the appearance thereof because the PACs were independent entities that could determine for themselves how to use funds received from a contributor. This lessened risk was not reason, in the eyes of the court, to prohibit certain corporations from participating in the political process.
This issue is far from settled, as Missouri’s Attorney General announced that he will appeal the court’s decision, and there are key differences between New Jersey’s regulated-industry ban and Missouri’s regulated-industry ban and New Jersey campaign-finance law and Missouri campaign-finance law. However, the Free and Fair Election Fund decision begs the question whether New Jersey’s regulated-industry ban is ripe for challenge.