NJ’s Gubernatorial Election – Public Matching Funds and the Role of Outside Money

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 rfreed@genovaburns.com or 973-230-2075.

New York State Issues Guidance on Prohibited Coordination with Super PACs

After Citizens United and its progeny paved the way for independent expenditure activity and unlimited contributions to Independent Expenditure Only committees (better known as Super PACs), one key question in campaign-finance law has become how to determine whether Super PACs are coordinating their activities with candidates, party committees, and their agents.

Although the FEC has issued guidance on what constitutes prohibited coordination under federal law, many states have yet to offer their own interpretation of the types of coordination that would be prohibited for Super PACs active in state or local elections. It is under this backdrop that the State of New York has defined for the first time what types of activities will give rise to a finding of prohibited coordination.

These factors include (but are not limited to):

  • Whether a candidate formed an entity that later makes expenditures benefitting the candidate;
  • Whether a candidate raised funds on behalf of an entity that later makes expenditures benefitting the candidate;
  • Whether an entity making expenditures benefitting a candidate is operated by former staffers or immediate family members of the candidate;
  • Whether a communication reproduces material prepared by a candidate’s campaign, such as b-roll footage;
  • Whether an entity making expenditures benefitting a candidate engages in strategic discussions with the candidate’s campaign regarding the campaign’s strategy;
  • Whether an entity making expenditures benefitting a candidate shares vendors or space with the candidate’s campaign; and
  • Whether a donor to a candidate also provides a material portion of total funding to an entity making expenditures benefitting the candidate.

As Citizens United develops from a new phenomenon to established law, it is likely that additional individual states will offer their own guidance on the definition of coordination. The state of New York is one of the first to establish factors for regulators to consider. New Jersey, through several bills currently under consideration in the Assembly, may be attempting to do the same. These types of definitions and the role that Super PACs may play will be felt in the 2016 presidential election, New Jersey’s 2017 gubernatorial election, and beyond.

Allison Benz, a summer associate at Genova Burns, assisted in the preparation of this post.

Independence, Coordination & Super PACs in the 2016 Presidential Election

Yesterday we celebrated Independence Day. In the next three weeks, the Nation will focus on the Republican and Democratic National Conventions. We cannot turn on the television without catching a political ad. Some ads will be run by the candidates themselves. Based on recent reports filed with the Federal Election Commission (“FEC”), there is a good chance that many ads will be run by Super PACs.

Although Super PACs are required to disclose their donors, it is not always clear who is behind a Super PAC ad and whether a Super PAC is truly independent from a candidate, a party or their agents. The FEC has, therefore, adopted a three-prong test to determine whether a Super PAC is acting independently and is, therefore, entitled to receive unlimited contributions.

Under the FEC’s coordination test, when an election-related communication (content prong) has been paid for by a third-party (payment prong), the FEC will ask the following questions (conduct prong) to determine whether the ad was coordinated:

  • Was the communication created, produced or distributed at the request or suggestion of the candidate, party or their agents?
  • Was the candidate, party committee or their agents materially involved in decisions related to the ad’s content, intended audience, mode of communications, etc.?
  • Were there substantial discussions between the Super PAC and the candidate, party or their agents?
  • Does the Super PAC share a common vendor with the candidate, party or their agents?
  • Does the Super PAC employ an employee or independent contractor who worked for the candidate or party committee during the previous 120 days?

Because proving an ad was not coordinated, isn’t always as easy as 1-2-3, it is not too late for Super PACs involved in the 2016 presidential election to develop policies, procedures and protocols to help protect against potential allegations of coordination.