February 13, 2009

by Paul Josephson, Esquire

January 2006 will bring more than a change in Administration in Trenton. This month also ushers in important new laws and regulations that will drastically alter the way citizens and business entities interact with their state, county and local governments.

A new law, P.L. 2005, chapter 51, will greatly limit or prohibit political contributions by individuals, businesses, developers and even nonprofits who engage in even minor business transactions with the State. See, http://www.njleg.state.nj.us/2004/Bills/PL05/51_.PDF. While based on Executive Order 134, the new law contains minute but significant differences that should be reviewed now by anyone who may consider entering any kind of contract with the State in the near future.

Likewise, P.L. 2004, chapter 19, the Local Unit Pay to Play Law, will similarly restrict political contributors to county and local candidates from certain contracts with county and local governments. See, http://www.nj.gov/dca/lgs/p2p/ for this law and related guidance documents. The law applicable to county and local units is similar to its State counterpart, but differs in material aspects.

Consequently, for-profit and non-profit contractors and grant recipients need to review these sister laws in view of their state, county and local political activities. In addition, developers and landowners who may need to enter land contracts with the government entities (for example, leasing land or office space to government, purchasing land, easements and tidelands grants from government, and entering development or redevelopment agreements) should consider the law's impacts and consequences on them.

Unlike traditional campaign finance laws that effectively imposed the burden of legal compliance on the candidate receiving the contribution, the new law squarely places that burden on the giver. That is because the new law does not prohibit a candidate or political committee from taking such a contribution; rather, when a covered contribution is made the impact is on the giver, typically disqualifying the giver from entering into a contract with the State.

In addition, in 2006 the State's century-old ban on political contributions by certain highly regulated industries such as banks, insurers, utilities and others having significant interests in Trenton may be subject to new interpretations or revisions as it undergoes scrutiny arising from developments in regulatory law in the meanwhile.

But the impacts are not just on political contributors, the traditional focus of ethics reforms. Stopping contributions altogether will not eliminate compliance issues. Indeed, many of the very 'good government' groups that advocated these reforms will find themselves subject to new levels of regulatory oversight and public reporting as a result of their advocacy efforts.

Newly expanded lobbying regulations adopted by the Election Law Enforcement Commission (ELEC) become operative on January 1, 2006, implementing reform legislation passed in late 2004. See, http://www.elec.state.nj.us/Regulations/OAL_Adopt_11142005.pdf. A far broader range of individuals, businesses, nonprofits, advocacy organizations, trade associations -- even lawyers -- will now need to consider whether they need to register and report their activities as 'government affairs agents.'

Despite successful efforts by the New Jersey State Bar Association to limit the incursion of these rules on traditional attorney advocacy activities, even lawyers may now be considered 'government affairs agents' for certain lawyering activities, such as rate setting proceedings and permit application processes.

Equally important, a far broader range of activities are now covered by the new lobbying rules, and contacts with State officials never before considered lobbying will now invoke lobbying registration and reporting obligations.

And even 'grassroots lobbying' by citizens' groups urging the general public to contact State officials to take action is now subject to annual financial reporting.

How these rules are implemented over the next year or two will determine your First Amendment rights to free speech, free association, and to 'petition the government for redress of grievances.' This is a notoriously murky area in which well-intentioned laws rarely emerge unscathed after navigating the Scylla of the Supreme Court's First Amendment jurisprudence and the Charybdis of the law of unintended consequences.

The results are often confusing and even confounding. It is an area in which past good government reforms, like political action committees and legislative leadership committees, become the latest evil to be eliminated.

The tone set by the Governor, and the enforcement and compliance strategies of the Attorney General, the Treasurer, and ELEC will drive the law as much as, if not more than, the courts.

In 2006, ELEC will be ruling on dozens of advisory opinion requests concerning the impact of its new rules on virtually every business and interest group that regularly appears in Trenton before executive or legislative bodies. These opinions will shape the future of life in Trenton more than a year's worth of editorials.

Avoiding Trenton is not an option. The State's regulatory power over most aspects of modern life, especially in a state as densely populated as ours, is simply too great to ignore.

As the State moves into a brave new era of ethics regulation in Trenton, those who interact with any aspect of the State's executive or legislative hierarchies, or county and local governments, must likewise review and retool for this new era. In addition to reviewing and modifying past policies and practices, developing compliance and reporting functions and training personnel are essential steps to making peace with these new laws and rules.

In short, it's time for an ethics check up.

This article provides information of general interest and is not intended, and should not be used, as a substitute for consultation with legal counsel. Any questions regarding the specific issues raised in this article should be directed to Paul Josephson Esq. (609) 734-6319 or by email: info@hillwallack.com