Pay-to-play ban working ... some say too well.  Analysis shows many once-generous companies have cut back on donations in N.J.
Sunday, June 11, 2006
Star-Ledger Staff

ACS State & Local Solutions once was a great source of campaign cash for New Jersey politicians.

The company, which operates the state's E-ZPass toll collection system and also is a major contractor with the Department of Human Services, sank $250,000 into political war chests in 2002 through 2004 -- most of it to ruling Democrats.

All that changed in September 2004, when Gov. James E. McGreevey issued an executive order, which later became law, broadening curbs on political donations by state, county and local contractors.

ACS hasn't given a dime since. And it is not alone.

A new Star-Ledger analysis shows many major contractors have slashed their political giving or stopped altogether since the state adopted rules to end pay-to-play, the practice in which those who make big donations get big contracts.

The newspaper's review found the rules have had a wide-ranging impact:

• All donations to the Democratic State Committee, a political action committee controlled by the governor, dropped 78 percent from its recent peak in 2001 through 2005, and contractor donations to the PAC plunged 86 percent in the same period. In 2004, one-third of the money the DSC raised came from contractors; last year, it was 6 percent.
• Contractor contributions to the "big six" fundraising committees -- the two state party committees and four legislative leadership PACs -- fell from $5.4 million in 2001 to $1.8 million last year.
• Late last year Schoor DePalma, a Manalapan engineering firm that donated more than $2.8million to both parties since 1990, ceased all donations.
• G-Tech, which runs the lottery system and has been a steady donor to both parties since 1997, stopped all donations in 2004.
• Parsons Transportation Group, a poster child for pay-to-play criticism in the 1990s when it gave heavily to the Republican Party and got a $500 million state auto emissions testing contract, gave $25,000 to the Democratic State Committee in 2003 and 2004 but nothing since.

The historic reforms were meant to discourage donations to gubernatorial candidates and the ruling governor's party, because the state's chief executive awards contracts. Businesses with government contracts of more than $17,500 are forbidden to make donations larger than $300 to gubernatorial candidates and party committees.

Not everyone is happy.

Breaking from Gov. Jon Corzine, several leading Democrats say the rules are cutting too deeply into their ability to raise money, and thereby favor candidates who can finance their own campaigns.

Democratic State Committee Chairman Joe Cryan said he soon will propose legislation to make it easier for contractors to donate. And Bergen County Democratic Chairman Joseph Ferriero is preparing a lawsuit to try to end the contractor restrictions, his law partner says.

For their part, many contractors said they stopped donating because they don't want to unintentionally break complex rules and lose state contracts. Along with the state laws enacted in 2004 and 2005, dozens of municipalities have their own limits.

"ACS has not contributed because it would restrict our ability to do business in New Jersey," said company spokesman Tom Clary.

And Anthony Cimino, a former assemblyman who works for Schoor DePalma, said his firm "wanted to ensure that we did not jeopardize our ability to pursue work."

THE CRITICS

Good-government groups had pushed for pay-to-play reform for most of this decade. With questions about government ethics swirling in 2004, political leaders made reform a priority.

That year, more than half of the $819 million in no-bid government contracts awarded by the 29 public authorities went to frequent political contributors, The Star-Ledger review found.

In 2005, the 10 largest campaign contributors among the contractors cut their donations by more than 50 percent.

Harry Pozycki, a former Common Cause chairman who pushed for reform, said many state contractors donated because they felt it kept alive their chances to land government contracts. "The government contractors don't want to make these embezzlement-sized donations," he said.

But Cryan maintains the rules have devastated party fundraising. "It's hurt us quite a lot," he said. "You know what hasn't changed is the cost of elections. They are still going up."

This month Cryan, an assemblyman from Union County, plans to introduce a bill that would allow all state contractors to give.

He said his bill would permit donations not just by contractors but by other groups that long have been banned from giving, including state-regulated industries such as banks and insurance companies. A ban would remain for Atlantic City's casinos.

The bill would set an annual limit on donations -- Cryan pegs it at about $40,000 -- and demand quick, detailed disclosure of the donations on the Internet and stiff fines for violating the rules.

Cryan said the restrictions are "chasing good people from the process. It's as if we've made participating in the process something wrong, something un-American."

Meanwhile, Ferriero, the Bergen County Democratic chairman, is preparing a lawsuit to try to end the contractor restrictions, according to his law partner, Donald Scarinci.

Because some contractors have stopped giving altogether, Scarinci said local fundraising is also down. "Getting money for the state Democratic committee is just impossible," he said.

Scarinci, a major state Democratic fundraiser, said restrictions on private donors give a bigger advantage to candidates like Corzine and his 2005 opponent for governor, Republican Doug Forrester, who are wealthy enough to bankroll their own campaigns.

"Why do we call that reform when only a rich guy could run for governor? I think reform is full disclosure, 48-hour disclosure with a stiff penalty for noncompliance," Scarinci said.

Corzine doesn't agree.

"I believe in the stronger pay-to-play rules that we have at the state level. I think it's pretty transparent that I've taken a pro-reform stance and an anti-corruption stance on most things since I've been in Trenton," the governor said last week.

THE LOOPHOLE

The rules haven't chased all contractors from the donation game.

Even though firms that want to keep big government contracts are banned from giving to gubernatorial candidates and committees run by the two parties, they still can donate to leaders of the state Legislature. Some are merely shifting their giving: For example, contractor donations to a committee run by Assembly Speaker Joseph Roberts (D-Camden) more than doubled last year, to $822,260.

And while some law firms have cut back on their political activism, others have taken advantage of a loophole that allows individual law partners to donate without retribution if they own less than 10 percent of the firm.

Archer & Greiner, a Haddonfield law firm that earned $292,000 as New Jersey counsel to the Delaware River Port Authority in 2004, didn't give any money as a firm last year, but its partners donated $116,500 to the major fundraising committees -- including $94,000 to the Democratic State Committee. They also gave $33,000 to Corzine's campaign.

Chris Gibson, a member of Archer & Greiner's board of directors who served on the Corzine fundraising committee last year, said none of the partners "remotely" owns 10 percent of the firm and each was free to donate.

He said the firm doesn't donate to try to get public work. Instead, "it helps us be part of the political process and support candidates we like and be visible in the political arena and to make a difference in New Jersey."

Corzine wants to extend the contractor ban to political committees run by leaders of the Legislature. He also wants to close the under-10-percent loophole for law partners and add developers to the ban.

In addition, he wants to prohibit parties from transferring donations from one committee to another -- a practice called "wheeling," which critics say makes it easy to get around limits on individual contributions. Corzine expects to press for these changes after the budget process, said his spokesman Anthony Coley.

Assemblyman Kevin O'Toole, the Essex County Republican chairman, said Democrats should be strengthening pay-to-play rules, not weakening them.

"The Republicans are anxiously awaiting the porthole to be slammed shut," he said.