New rules, new risks: Breaking down state’s new campaign finance and pay-to-play laws

Genova Burns attorneys Moll Freed, Parikh and Kelin explain impact of Elections Transparency Act

The Elections Transparency Act that Gov. Phil Murphy signed into law last week marked the first major and sweeping changes to New Jersey’s campaign-finance and pay-to-play laws in almost two decades – when statewide pay-to-play laws first came on the scene). With the law, comes a myriad of new rules, risks, and perhaps even some uncertainty for contributors, government contractors, 501(c) organizations and campaigns.

The ETA has received its fair share of attention, criticism, and support since it was first introduced in the New Jersey Legislature in June of 2022. And, although those following the legislation over these past months have witnessed many revisions along the way, like it or not, the ETA is now here to stay. New Jersey’s campaign-finance laws have broad reach, and thus the community as a whole will need to understand the ETA and its provisions.

Here are what we see as the key takeaways from the new law as it applies to companies, government contractors, individuals, organizations, and committees that are involved in New Jersey’s political process:

Contribution limits

The basics: Traditional contribution limits have generally doubled, but in some cases (think state political party committees, county political party committees and legislative leadership committees), those limits have more than doubled.

Worth noting: Under the ETA you may contribute up to $75,000 per calendar year to a state political party committee, legislative leadership committee or a county political party committee? Even if you are a state government contractor (more on that later…)

Reporting threshold

The basics: The reportable threshold has been reduced from $300 to $200.

Worth noting: If your preference is to stay off of ELEC reports, under the ETA, you will need to keep your contributions to $200 or less each, rather than to the $300 limit that many have grown accustomed to over the years. (It is also not clear how this change will be measured for the 2023 calendar year given that this change takes effect after the 2023 primary.)

Pay-to-pay laws

The basics: Pay-to-play laws are becoming more streamlined, but there may be a greater emphasis on real-time compliance. The ETA changes the definition of which recipient committees are covered for executive branch pay-to-play eligibility, and it also will introduce greater uniformity at the local level as many local restrictions will now be sun-setted. However, the law does require the imposition of monetary penalties for the failure to disclose a contribution or a government contract.

Worth noting: Even though New Jersey’s pay-to-play laws have been streamlined, entities that hold (or wish to hold) government contracts cannot push pay-to-play compliance to the backburner. It is just as important as ever to have a system in place for reviewing, vetting and tracking contributions by the business entity and all covered individuals to ensure accurate and timely reporting so that you are not subject to a fine.

Housekeeping accounts

The basics: State and county political party committees may now establish housekeeping accounts that will exist and will be subject to limits outside of traditional campaign-finance limits for expenses such as legal activity, compliance, accounting, human resources, collective bargaining, and capital expenses.

Worth noting: Many other states already permit housekeeping accounts so New Jersey was a little behind the times in this regard. With these new accounts (and based on the fact that party committee contributions are no longer subject to pay-to-play restrictions), a company that was accustomed to contributing $300 to a state party committee’s state (non-federal) account over the years, may contribute up to $112,500 to a state party committee’s state accounts under the ETA (which includes the max to the state party committee account and the max to the housekeeping account).

Independent expenditure committees

The basics: Independent expenditure committees are now required to report campaign contributions received in excess of $7,500 and all independent expenditures to ELEC.

Worth noting: Did you know that the definition of an “independent expenditure committee” may be broader than you think so all outside groups making independent expenditures in New Jersey — even 501(c)(4) social-welfare organizations and 501(c)(6) trade associations — need to be aware of these new rules.

Timing of pre-election reports

The basics: The timing of pre-election reports for activities in the weeks leading up to an election now varies from 72-hour reporting to 24-hour reporting depending on when the activity occurs. The concept of 48-hour reporting no longer exists.

Worth noting: Did you know that, even though those engaging in elections will have more time to file reports in certain circumstances, in the 7 days before an election, reports of certain activities during that time must be reported to ELEC within 24 hours which makes having well-established reporting procedures in place more important than ever!.

Timing and implementation

The basics: Although certain provisions of the ETA take effect immediately (like the sunsetting of local pay-to-play ordinances), other provisions (like the increase in traditional contribution limits or the change in the reportable threshold) do not take effect until after the June 2023 primary elections.

Worth noting: The ETA also provides the Governor with the power to directly appoint ELEC Commissioners and provides ELEC with one full year to put systems in place to implement many of the changes in the law.

Rebecca Moll Freed, Raj Parikh and Avi Kelin are attorneys at Genova Burns in Newark.