Implementation of the stimilus will likely be marred by ‘pay-to-play’ laws

As Congress and the administration of President Obama prepare an economic stimulus package in an effort to jumpstart the economy, lawyers at a top political law firm warn that the so-called ‘pay-to-play’ laws at the state and local level could mar the process or require the government to contract with firms that bid higher for projects.

The momentum for ‘pay-to-play’ laws, which ban contractors, lobbyists and others connected with entities that receive contracts from a state from donating to state officials, has increased in state legislatures across the country in the wake of the Blagojevich scandal. The misguided laws curb the First Amendment freedoms of Americans guilty of nothing but engaging in their right to support the candidates and causes of their choice , and serve no practical purpose. There’s no evidence that ‘pay-to-play’ laws have any effect on limiting corruption.

In the most infamous recent case of ‘pay-to-play’ Illinois Gov. Rod Blagojevich allegedly shook down an official at an Illinois hospital for campaign contributions in order to receive state funds. The problem for those arguing "pay to play" would have prevented this: many entities, such as the hospital in question, unions, professional associations, and others that receive government funds, are not technically state contractors and "pay to play" laws don’t apply to them.

The political lawyers at Womble Carlyle write:

Any company seeking a piece of this action – IT, energy, construction firms and more – should prepare now for a confusing array of "pay-to-play" laws. These laws, found in a growing number of states, counties, and municipalities, prohibit campaign contributions from anyone doing business with a governmental agency, including the companies themselves, executives, and in some places, executives’ spouses and children.

So, under several states’ laws, if a company official’s wife contributed to a state candidate for the 2008 election, and then the company applies for a contract stemming from the stimulus plan (most of the money is likely to be distributed through state and local governments), that company will be rejected even if it provides the lowest bid. Such a maze of complicated laws is almost certain to raise the price of providing government services in states across the country that have enacted these pointless roadblocks. Whatever your opinion on the wisdom of government spending to stimulate the economy, most people would agree that spending should at least be efficient and achieve the best value for the lowest cost possible by going to the lowest qualified bidder.

Womble Carlyle again provides an example of the absurdity of this law in practice in New Jersey, where a court recently upheld a "pay-to-play" law:

The New Jersey ruling involved a contractor who submitted the lowest bid ($6.2 million) on a highway construction project, but was disqualified when it was discovered he had made a $1,500 campaign contribution to a county party committee. The contractor had actually discovered the violation on his own and asked for a refund within the 30-day statutory period for remedying a violation. But he didn’t get his money back until 41 days after making the contribution – 11 days too late in the view of the Court.

There’s no magic bullet solution to stopping the age-old problem of government corruption. The best prevention measures are a system of transparent, merit-based state contracting, a vigilant public that doesn’t tolerate a culture of corruption and a vibrant free press to expose wrongdoing. "Pay-to-play" laws provide a false solution to the problem of corruption and delay real reform.

The Center for Competitive Politics is now the Institute for Free Speech.