Pay-to-play laws, which now exist at the federal, state, and local levels, generally restrict or require disclosure of political contributions by firms seeking to do business with the government. Hedge funds, private equity funds, and asset management firms are particularly sensitive to such restrictions because of their reliance on investments from state and local government pension funds.
As things stand, navigating pay-to-play rules is already a tricky business. And it is likely to become more complicated as jurisdictions add new pay-to-play laws and revise existing ones. We’ve seen that at work in New Jersey, with Bergen County, Jersey City, Allendale, and Upper Township all recently taking action to maintain tighter controls or introduce new restrictions. Pay-to-play issues have also been receiving extensive attention outside New Jersey, including in the District of Columbia, in South Dakota, in election campaigns in Hawaii, and even in the presidential campaign.
Most pay-to-play rules have been focused on contributions made to politicians or officials who have some authority over contracting decisions. But that focus may be changing. Some jurisdictions appear to be considering ways to extend pay-to-play laws to apply to contributions made to independent expenditure-only committees, commonly known as Super PACs. An early mover in this effort is Gloucester Township, New Jersey, where this week residents overwhelmingly voted to adopt a pay-to-play ordinance requiring township vendors to disclose contributions to Super PACs.
Attempts to bring Super PACs within the ambit of pay-to-play laws may raise constitutional issues and could very well draw legal challenges. But we suspect Gloucester Township won’t be the last to try. And 2013 is likely to bring an array of new pay-to-play restrictions at every level of government.