Good Deed, Punished

A noble notion to limit state contractors from contributing to political campaigns put New Jersey crosswise with the feds.
March 2005
By Jonathan Walters  |  Senior Editor
A Senior Editor of Governing, Jonathan has been covering state and local public policy and administration for more than 30 years.

In a state that has seen its fair share of ethics-related shenanigans, it seemed like a step in the right direction: Last fall, New Jersey's then-Governor James E. McGreevey signed Executive Order 134, banning anyone with a state contract worth more than $17,500 from contributing more than $300 to a county or state political campaign. Little did McGreevey know that such a noble notion would quickly alienate the federal government.

Shortly after the signing of E.O. 134, a not-so-funny thing happened: About $70 million owed the state by the Federal Highway Administration for authorized construction contracts failed to show up. NJDOT officials, naturally, were curious about why and sent FHWA a letter asking. The response came back that the U.S. Department of Transportation was concerned that E.O. 134 violated federal contracting law and that all federal transportation money for New Jersey was being put in a locked box pending U.S. DOT review of the governor's order.

The results of that review were outlined to New Jersey transportation officials in a January 7, 2005, memo from a U.S. DOT lawyer. The memo contended that E.O. 134 violated Section 112 of Title 23 U.S.C., which, according to the memo "mandates that competitive bidding exists for Federal-aid construction contracts. This means that potential bidders may not be excluded from the competitive process for reasons not directly related to their responsibility."

While the language in the memo might have been a masterpiece of legal muddiness, FHWA's basic stance on the matter was clear as spring water: No money for New Jersey as long as E.O. 134 was in force. In other words, the feds were saying that asking contractors who want to bid on big jobs to refrain from pouring unlimited cash into a state or county campaign is anti-competitive. Never mind that any contractor who wants to bid on those big jobs in New Jersey can simply refrain from contributing more than $300 to any one politician's campaign and can at the same time, of course, get lots of company employees to contribute $300, too. They know how the game is played.

Having been handed this news, New Jersey didn't go down without a fight. The state challenged the U.S. DOT position in federal court and, as a New Jersey DOT spokesman notes, got massacred. It's not that the judge in the case was not sympathetic to New Jersey's motivations. "He said he thought it was a noble idea," says Marc Lavorgna with NJDOT. But he still bought U.S. DOT's argument that the U.S. secretary of transportation can only allow exceptions from federal bidding rules in cases where "some other method is more cost-effective" or "an emergency exists."

Some, of course, believe that an emergency of sorts does exist. As more state and local work is contracted out, the issue of pay-to-play has become increasingly visible and stories of abuse more numerous. Some describe private-sector contracts as the new patronage, with high-level government officials all too frequently rewarding generous campaign contributors with work. In fact, just up the road from Trenton, and a couple months prior to the McGreevey executive order, Connecticut Governor John Rowland was packing his bags on account of some contractor-related ethical-financial misjudgments. He is just one of a string of high-level state and local officials who have been caught on the dark side of pay to play.

Which is why more states and localities are now wrestling with how to balance campaigning with contracting--with deciding what laws or executive orders they might put in place to tighten up ethics rules around both practices. Having to worry that by adopting tighter pay- to-play laws they jeopardize federal money seems as silly as the federal assumption that campaign money represents any part of an above-board (read "competitive") contracting equation.

By the time the federal court rendered its decision, the FHWA had nearly $350 million in New Jersey transportation assistance for 29 projects in the deep freeze. Not surprisingly, cash-strapped, transportation-challenged New Jersey did the sensible thing: It threw in the towel. Late in January, acting Governor Richard Codey issued a new executive order allowing state transportation officials to go back to awarding contracts to any and all qualified road construction and engineering firms, including ones that have shown particular generosity toward elected officials.

New Jersey's transportation secretary, Jack Lettiere, noted that his department would continue to award contracts in an above-board fashion. At the same time, Lettiere said, he still believes that controls on political donations from contractors would help boost public trust in government.

The state continues to pursue the matter. State officials have asked the New Jersey congressional delegation to look into amending federal contracting law in a way that would allow New Jersey-like restrictions on campaign contributions by contractors.