making local government more ethical

Responding to Arguments Against Significant Restrictions on Pay-to-Play

This week, the Pay to Play Law Blog took a snapshot of the status of pay-to-play laws across the country, breaking them down into four categories:  jurisdictions that impose significant restrictions, including debarment; jurisdictions that require disclosure; jurisdictions with limited requirements; and jurisdictions that are considering pay-to-play laws.

I don't intend to summarize these categories; the post is short and clear. What I would like to do is look at arguments made on both sides for the two principal categories, significant restrictions and disclosure only.

A discussion of these two alternatives occurred on the Pay to Play Law Blog in November 2009, with respect to a Common Cause Georgia proposal for Atlanta pay-to-play legislation. Here's how Common Cause Georgia described its proposal:
    People can either contribute freely to the campaigns of candidates, or they can qualify to receive contract work with the City of Atlanta. They cannot do both. All companies submitting bids and continuing contracting arrangements with the City would be asked to certify that they had not contributed more than a minimal amount to candidates for Mayor or City Council in the previous 12 months. Enforcement would rest with the contracting office. Companies or individuals violating the statute would be disqualified from further business with the City.
The Importance of City Employee Birthday Gifts
The Pay to Play Law Blog, which is written by lawyers for a firm that represents officials and companies in government ethics matters, criticized the proposal's requirement that everyone from executives to employees not be able to make contributions or gifts to Atlanta officials or employees aggregating more than $250:
    Imagine being the compliance office who has to tell your boss the CEO that her company’s life-blood contract with the City of Atlanta has been terminated for cause, and the company is liable to the City of Atlanta for all damages resulting from the termination, because the aggregate of all the contributions to a City of Atlanta politician by all of the company’s officers, directors, partners and salaried employees of the company exceeded $250, or because a competitor alleged that the company made a single “indirect” gift “for the benefit” of an employee of the City of Atlanta. One can envision that birthday parties for City of Atlanta employees would be lonely places indeed.
The first thing that struck me about this argument was the fact that the public's trust in government was being balanced against the need to give birthday gifts to city employees, and even against the odd idea that contractors (and others) who don't give presents wouldn't even go to city employees' birthday parties. This picture provides a very sad view of what is important in city government, and what is important about birthday parties. It was clearly intended to be humorous, but it seemed pretty inappropriate to me (see a blog post on a recent Atlanta retirement party scandal).

The Pay to Play Law Blog supports disclosure instead. But many jurisdictions require contributors to disclose what they do, and yet contractors keep giving large contributions anyway. And those they give them to keep getting elected. Disclosure is not an effective solution.

And wouldn't full disclosure mean that there wouldn't be any surprise contributions or gifts that might unfairly terminate a "life-blood contract"? There is no doubt that such pay-to-play legislation would be impossible for companies to follow if there were not a strong disclosure program, internally or government-required. And there is no doubt that this would be more difficult for larger companies. But they already have excellent compliance programs to deal with these matters. Smaller companies would, in this sense, be at a disadvantage but, luckily, they have many fewer individuals to keep track of.

Essentially, the difference between disclosure and enforcement is that disclosure alone requires enforcement by the public, which would somehow, almost miraculously, be able to translate numerous contributions and gifts by companies into votes for or against government officials. Enforcement places the burden on a city's contracting office (in the Common Cause proposal), an ethics commission, inspector general, or other office.

Compliance Costs vs. Pay-to-Play Costs
What confuses me the most about the Pay to Play Blog's arguments is that I thought pay-to-play was bad for companies, that it was the way some politicians coerce those who want to do business with their cities into giving them large contributions and any sort of gifts they can get away with. I can see that there is a cost to complying with pay-to-play laws, but is that cost more than complying with greedy politicians, including the cost of losing contracts to more dishonest, desperate, and better-connected companies?

The Goals of Pay-to-Play Laws
Certainly, there should be protection from loss of a contract or debarment for minor violations. No penalty should be completely automatic. The principal goal of enforcement in a pay-to-play context should not be Gotcha! It should be to make it clear to politicians that pay-to-play won't work because no one will be in a position to play along. It just won't be in their interest anymore. The goal should be to ensure that each contractor and subcontractor's interest is to make the government ethics program work. The goal should be to make the contracting process work fairly and in the public interest, and to look fair and in the public interest.

Disclosure alone does not accomplish these goals. As Georgia Common Cause points out in its comment to the blog post, there is lots of Atlanta campaign finance information on the Money Watch and Common Cause websites, and still the problems exist.

The Realities of Our Political System
A central problem in this debate is the reality of the situation. As Georgia Common Cause says in its comment to the blog post, "Very few corporations or other for-profit business enterprises make significant expenditures to candidates in the City of Atlanta for altruistic reasons or out of civic pride or a general interest in good government." This counters the argument against restricting contributions by contractors, because their contributions are free speech. That simply isn't reflective of reality. It's usually a business decision.

More important, the reality is that most local incumbents and party committees get most of their money from those doing business with the local government and those who work for the local government. As the Pay to Play Law Blog says in another blog post, with respect to the proposed rule to not allow those who make campaign contributions to bid on a contract for the following year, "Restricting contribution amounts in this manner would undoubtedly chill the making of political contributions for City of Atlanta elections altogether."

The Alternative of Public Financing of Elections
The Blog also says that "the specter of campaign contributions to procurement officials from those seeking city contracts can be unseemly; but so can the prospect of a system in which only individuals wealthy enough to self-fund their campaigns have the means to seek elected office."

Are these really the only alternatives? If they are, we are really in trouble. It means that our political system is based on the need for those doing business with a local government to fund political races. And since they usually support incumbents or insider replacements, it means that our political system not only favors incumbents, but does so in a way that seems and is corrupt.

Fortunately, there is at least one other alternative. If what the Pay to Play Law Blog says is true, and a law such as Atlanta's will mean that only rich candidates can successfully run for office, this would mean that everyone else would strongly support the public financing of elections.

But the reality is uglier. They do not support public financing either. The same people who oppose restrictions on contractors making campaign contributions also oppose giving money to publicly financed candidates running against wealthy candidates. Or, as in the case of the Pay to Play Law Blog, they simply ignore the alternative. In short, they don't want a solution to a central problem in our political system. They want things to remain as they are.

Those Who Influence and Those Who Pay-to-Play
People who really hate pay-to-play are those who are forced to pay to get contracts or permits, or to keep their job in local government. They would love to be prevented from making campaign contributions. It would save them money. If they merely have to disclose their contributions, they would still have to pay up. Those who feel coerced should be the first to support public financing.

But those who are seeking to influence would be the first to oppose it. Herein lies a very important distinction in government ethics, a distinction that is central to who supports which remedies to which problems. You can't go by the language, of influence or pay-to-play. You have to look at what they support and what they oppose.

A Lack of Resources and a False Sense of Security
A more interesting argument is that of Rick Thompson in a comment to the blog post. Thompson had just come over from the Georgia Ethics Commission to the law firm that does the Pay to Play Blog.
    Pay-to-play legislation can give a false sense of security to the public that the prohibited practice of pay-to-play is not happening. Sometimes members of the public blindly place faith with a regulatory agency to ensure any activity strictly prohibited by law is not occurring. However, the reality is most agencies do not have the resources to monitor an over encompassing prohibition on a large scale, such as pay-to-play. Many agencies are forced to utilize their resources in manners to be reactive and do not have the ability to be proactive. In order for pay-to-play laws to be effective it would require the agency to be proactive and unless substantial resources are allocated specifically to the endeavor then the prohibition would be extremely difficult to enforce.
This is another sad reality, the lack of resources in government ethics oversight. But Georgia did not have a very effective government ethics programs. Cities such as Los Angeles and New York have much more resources, and there is no reason that Atlanta's oversight agency could not have sufficient resources. The reality Thompson points out is one that can be changed. It can be changed not only by spending more money, but also by requiring prospective contractors to take an online training course, including all rules in bid documents, providing advice, and being easier on contractors during the first couple of years so that a cooperative rather than antagonistic relationship develops. An annual fee could also be charged to those who win contracts. Lack of resources is not an argument for disclosure alone.

As Thompson says, a false sense of security can be a serious problem, but that problem is most serious when there is an ethics commission, but it does very little. Often ethics commissions don't even meet, with or without resources. Few people actually know much about the specific laws. An ethics commission without good laws does create a false sense of security. Good laws that are not fully enforced are also a problem, but at least they can be the basis of an argument for obtaining more resources. Who needs more resources if there is nothing to do with them?

Robert Wechsler
Director of Research, City Ethics