Will Taxpayers’ Stimulus Dollars Evaporate?

State contracts for sale in New Mexico, a Senate seat for auction in Illinois, blind eyes turned to underregulated mortgage and municipal bond markets, indictments of New York legislators. Each new scandal is a reminder that pay-to-play—the exchange of favors for campaign contributions to politicians—is alive and well in the halls of government.

The passage of an $800 billion stimulus package means that millions of tax payer dollars are sure to trickle to state governments—and into the pockets of state contractors who will try to purchase favors with campaign contributions.

So it is great news that last Friday, a federal court in New York upheld New York City’s pay-to-play laws: Ognibene v. Parkes, No. 08 Civ. 1335 (2009). In 2006, the City of New York enacted important new campaign finance reforms to combat the widely held perception that lobbyists and contractors wielded undue influence over elected officials by way of their campaign contributions. These reforms included:

• Lowering the contribution limits for certain natural persons who have business dealings with the city, including lobbyists;
• Extending the ban on corporate contributions to limited liability corporations and partnerships;
• and Prohibiting the matching of contributions, in the city’s public funding program, from contributors who have business dealings with the city, or are lobbyists or the spouse of a lobbyist.

The Honorable Laura Swain of the Southern District of New York held that any infringement on the First Amendment rights of contractors and lobbyists caused by these reforms were marginal and were justified by the compelling state interest in combating the public’s perception of corruption.

New York City’s victory comes on the tail of similar success in Connecticut. In December 2008, the Honorable Stefan Underhill upheld Connecticut’s ban on contributions by state contractors, “communicator lobbyists” (a subgroup of lobbyists who have actual contact with officials), and their immediate family members in its entirety. (A summary of that ruling is here). In the wake of their own pay-to-play scandals—scandals that earned the state the nickname “Corrupticut”, Connecticut passed the strongest pay-to-play prevention rules in the nation by prohibiting those with direct interests in governmental decision-making from effectively purchasing favors through campaign donations. The Court held that the ban did not violate the First Amendment and that any infringement of the rights of candidates or the lobbyists, state contractors and their immediate family members was justified by the state interest in curbing corruption or the appearance thereof.

The experience of Connecticut and New York exhibit the broad arsenal of legislative tools available to states to address the risk of such corruption. States should be emboldened by these victories—and follow New York City’s and Connecticut’s lead – by passing strong legislation that will reduce or eliminate the corrosive practice of pay-to-play.