New Jersey’s Pay-to-Play Law

New Jersey enacted the Campaign Contributions and Expenditure Reporting Act, N.J.S.A. 19:44A-20.13 et seq. (“Chapter 51”) to limit abuses of pay-to-play.

Among other things, Chapter 51 prohibits a State agency from awarding a State contract whose value exceeds $17,500 to a business entity that contributed more than $300 to the Governor, a candidate for Governor, or any State or county political party committee in the preceding 18 months.

On January 15, 2009, the New Jersey Supreme Court issued a unanimous opinion upholding the constitutionality of Chapter 51 and rejecting arguments that it violated free speech and free association constitutional rights. In the Matter of the Appeal by Earle Asphalt Company, ____ N.J. ____ (2009).

Chapter 51 also provides that a company that makes a contribution that would otherwise render it ineligible to receive State contracts will retain its eligibility so long as it receives reimbursement of the contribution within 30 days of making it. In the Earle Asphalt case, the president of a company made a $1,500 contribution to a county political party committee. Upon realizing that the contribution would render the company ineligible for State contracts, the president requested that the contribution be returned. Although he made that request 20 days after the contribution, he did not receive the reimbursement until 41 days after the contribution. The Supreme Court rejected the company’s argument that it should not be disqualified from receiving State contracts because it had attempted to obtain return of the contribution within the 30-day window. Instead, the Court, employing a strict and literal interpretation of the provision, concluded that the company was not entitled to the exemption because it did not receive the reimbursement within 30 days of making the contribution.

The lesson from the Earle Asphalt decision is that failure to comply with the provisions of a pay-to-play law could result in crippling financial consequences to a company that depends on public contracts if the company’s breach results in it being disqualified from receiving those contracts.