After years of tip-toeing through a veritable minefield of pay-to-play (P2P) statutes, regulations and ordinances, individuals and business entities doing business and seeking to do business with state and local government in New Jersey may now be able to breathe a marginal sigh of compliance relief. This regulatory respite is a direct result of a new piece of legislation recently signed into law by Governor Phil Murphy, which preempts all local, municipal, and county P2P ordinances that previously limited the award of public contracts to business entities making and facilitating particular political contributions. This important statutory change passed as part of the larger Elections Transparency Act (“the Act”), which made several updates to New Jersey’s existing P2P framework and amended a host of other significant campaign finance reforms covered in a recent edition of the Dentons Political Law Playbook. With the Elections Transparency Act now in effect, businesses with government contracts across the Garden State will now be able to measure compliance against a single statewide compliance framework and will no longer have to juggle a patchwork of 160 local ordinances layered on top of often contradictory state-level rules and regulations.
In addition to sunsetting all local New Jersey ordinances imposing P2P limitations on business entities seeking and holding public contracts across the state, the newly-enacted Elections Transparency Act makes several notable updates to the existing state compliance framework. Specifically, the Act tightens the contribution prohibition applicable to contractors doing business or seeking to do business with state and local governments by lowering the threshold for reportable contributions from $300 to $200. Simultaneous with that change, the Act also eliminated the applicability of the state-level P2P restrictions to contributions made by public contractors or their covered associates to state, county, and municipal party committees or legislative leadership committees, which were both previously prohibited recipients. The Act’s amendments also expand the scope of the existing “fair and open process” exception to the P2P rules to executive branch contracts, as opposed to its previous application only to legislative and local contract settings. This exception has been oft-criticized as creating a loophole in the state’s anti-corruption legislation, as it allows government procurement agents to award contracts to business entities who would have otherwise been disqualified for their campaign contributions so long as the contract was awarded via a “fair and open process.” The Act further clarifies the scope of the exception to include the public bidding and competitive contracting processes.
Aside from these updates, New Jersey’s state pay-to-play laws remain largely unchanged. Business entities with public contracts will still generally be subject to contribution prohibitions for the 18 months prior to entering into a contract with the state and for the duration of such agreement. For contracts with agencies of the legislative branch, counties, and municipalities, the contribution prohibition period is abbreviated from 18 months to a one-year period prior to entering such contract. State pay-to-play laws will continue to govern business entities with contracts exceeding $17,500, redevelopment agreements with state redevelopment entities, and executive, legislative, county, and municipal contracts over $17,500 not awarded through a fair and open process. Also still in place are certification requirements for contractors confirming compliance with pay-to-pay laws and annual reporting requirements for businesses receiving $50,000 or more from public contracts in any calendar year.
In addition to modernizing New Jersey’s pay-to-play framework, the Act also updates the state’s campaign contribution limits, implements new reporting requirements for campaign contributions and independent expenditures, and makes several changes to the makeup and operation of the Election Law Enforcement Commission (ELEC). The Act, including its new P2P provisions, went into effect retroactively on January 1, 2023. The broad scope of these reforms will have significant implications for entities and individuals doing business or participating in politics across New Jersey this year and beyond. For any questions on how these changes will affect your operations in the state, please do not hesitate to reach out to Dentons Political Law team for guidance.
