Topic:
CONTRACTS; CAMPAIGN FINANCE; LEGISLATION; GOVERNMENT PURCHASING; NON-PROFIT ORGANIZATIONS;
Location:
CAMPAIGNS - FINANCE; NONPROFIT ORGANIZATIONS;

OLR Research Report


February 11, 2008

 

2008-R-0097

CONTRIBUTIONS FROM EMPLOYEES OF NONPROFIT STATE CONTRACTORS UNDER RECENT CAMPAIGN FINANCE LEGISLATION

By: Kristin Sullivan, Associate Analyst

You want to know when employees of nonprofit organizations with state contracts may make campaign contributions to statewide and legislative office candidates and when they are prohibited from doing so.

SUMMARY

Recent campaign finance legislation (PA 05-5, October 25 Special Session, as amended by PA 06-137 and PA 07-1) establishes, among other things, (1) the Citizens' Election Program as a voluntary system of public campaign financing for statewide and legislative office candidates and (2) a state contractor contribution and solicitation ban. (The legislation also establishes a similar ban that applies to communicator lobbyists.) It thereby restricts the circumstances under which some, but not all, employees of nonprofit organizations with state contracts meeting certain criteria may make contributions to statewide and legislative office candidates.

The legislation generally prohibits principals of current and prospective state contractors, including pre-qualified contractors, from making contributions if the contracting business or nonprofit organization has (1) a single contract with a state agency in the executive or legislative branch, or any quasi-public agency, valued at $50,000 or more or (2) a series of such contracts in a calendar year valued at

$100,000 or more. The prohibition covers a wide range of contracts, including those for the rendition of any service or furnishing of any goods or items. Judicial branch contracts are exempt.

The prohibition on contributions by principals to candidates who participate in the Citizens' Election Program applies without regard to the branch of government awarding the contract. Conversely, the prohibition on principals' contributions to candidates who do not participate, is branch-specific.

PARTICIPATING CANDIDATES

Candidates who participate in the Citizens' Election Program, “participating candidates,” must qualify by raising a specified amount from individual donors in qualifying contributions of no more than $100. Qualifying contributions are small monetary contributions from individuals, and do not include in-kind contributions, personal funds, or loans.

The law specifically bans principals of current and prospective state contractors, including contractors pre-qualified by the Department of Administrative Services (DAS), from making qualifying contributions to any participating candidate. This prohibition applies regardless of whether the candidate is running for an office in the same branch of government as the agency letting the contract (CGS 9-704(c)).

NONPARTICIPATING CANDIDATES

Candidates who do not participate in the program, “nonparticipating candidates,” may raise campaign contributions, without limitation, using traditional fundraising methods. However, the law bans statewide and legislative office candidates from soliciting contributions from principals of current and prospective state contractors, including contractors pre-qualified by DAS. It likewise bans principals from making or soliciting contributions to or on behalf of such candidates (CGS 9-612(g)). (Principals are also prohibited from making or soliciting contributions to or on behalf of (1) political committees (known as PACs) authorized to make contributions to or spend on behalf of candidates for statewide or legislative office or (2) party committees.)

For those contractors with executive branch agency or quasi-public agency contracts or responding to such state contract solicitations (i.e., bids, proposals, quotes, or other types of submittals), the contractor contribution and solicitation ban applies to statewide office candidates. For those with General Assembly contracts or responding to such state contract solicitations, it applies to legislative candidates.

PRINCIPALS OF STATE OR PROSPECTIVE STATE CONTRACTORS

Principals of current and prospective state contractors cannot make (1) qualifying contributions to any participating candidate or (2) campaign contributions to nonparticipating candidates running for an office in the same branch of government as the awarding agency. For all types of nonprofit organizations, regardless of their tax-exempt status, the law defines the following employees as principals, thus subjecting them to these prohibitions:

1. chief executive officers or officers with comparable duties,

2. employees performing managerial or discretionary duties with respect to that particular contract negotiation, and

3. spouses or dependent children of any of the above (CGS 9-612(g)(1)(F)).

The law specifically exempts nonprofit board members from the definition. (On the contrary, board members of businesses with state contracts are included.)

In addition, a PAC is considered a principal if it is established or controlled by the nonprofit organization or by any of the above-referenced individuals. A “dependent child” is a child who is at least age 18 and residing in an individual's house and who that individual may legally claim as dependent on his or her federal income tax return. A child who is under age 18 is not considered a principal but may not contribute more than $30 to any candidate or committee (CGS 9-611(e)).

VALUE OF THE CONTRACT OR CONTRACT SOLICITATION

The campaign finance law defines “state contract,” in part, as an agreement or contract with a state agency in the executive or legislative branch of government or any quasi-public agency valued at $50,000 or more, or a combination or series of such agreements or contracts valued at $100,000 or more in a calendar year (CGS 9-612(g)(1)(C)). A principal of a nonprofit organization that is a current state contractor is covered by the campaign finance prohibitions only if the value of the contract or contracts meets the applicable threshold. Similarly, a principal of a nonprofit that is a prospective state contractor is subject to the prohibitions if the value of its state contract solicitation with a single state agency is $50,000 or more, or an aggregate of $100,000 or more with all agencies in a calendar year.

TYPE OF CONTRACTS

The law covers principals of nonprofit organizations holding several types of contracts, including those for (1) the rendition of any service; (2) goods, material, supplies, or equipment; (3) the construction, alteration, or repair of any public building or public work; (4) the acquisition, sale, or lease of any land, building, or public work; (5) a licensing arrangement; or (6) a grant, loan, or loan guarantee (CGS 9-612(g)(1)(C)). The law defines “rendition of services” to mean the provision of any service to a state or quasi-public agency in exchange for a fee, remuneration, or compensation of any kind from the state or through an arrangement with the state (CGS 9-612(g)(1)(I)). According to the State Elections Enforcement Commission, if a business or nonprofit receives a fee or remuneration from a third party as a result of the business' or nonprofit's agreement with the state, the agreement would constitute a state contract (provided the financial threshold is satisfied) even if the state does not pay the fee or remuneration directly.

PERMISSIBLE CONTRIBUTIONS

Tables 1 through 3 indicate whether specified employees of a nonprofit organization with a state contract can make qualifying or campaign contributions to participating or nonparticipating candidates, depending on the branch of government. We assume that the nonprofit organization holds a contract satisfying the definition of “state contract,” including the financial threshold.

Table 1: Qualifying Contributions to Participating Candidates from Employees of Nonprofit Organizations with State Contracts*

Nonprofit Employee

Participating Candidate

Statewide Office

Legislative Office

Board member

Allowed

Allowed

Chief executive officer, their spouse, and dependent children

Prohibited

Prohibited

Employees performing managerial or discretionary duties with respect to the contract negotiation, their spouses, and dependent children

Prohibited

Prohibited

All other employees

Allowed

Allowed

PAC established or controlled by the nonprofit

Prohibited

Prohibited

PAC established or controlled by the CEO, managerial or discretionary employees, their spouses, or dependent children

Prohibited

Prohibited

* Includes contracts with the executive or legislative branch of state government, or any quasi-public agency

Table 2: Contributions to Non-Participating Candidates from Employees of Nonprofit Organizations with Executive Branch or Quasi-Public Agency Contracts

Nonprofit Employee

Nonparticipating Candidate

Statewide Office

Legislative Office

Board member

Allowed

Allowed

Chief executive officer, their spouse, and dependent children

Prohibited

Allowed

Employees performing managerial or discretionary duties with respect to the contract negotiation, their spouses, and dependent children

Prohibited

Allowed

All other employees

Allowed

Allowed

PAC established or controlled by the nonprofit

Prohibited

Allowed

PAC established or controlled by the CEO, managerial or discretionary employees, their spouses, or dependent children

Prohibited

Allowed

Table 3: Contributions to Non-Participating Candidates from Employees of Nonprofit Organizations with Legislative Branch Contracts

Nonprofit Employee

Nonparticipating Candidate

Statewide Office

Legislative Office

Board member

Allowed

Allowed

Chief executive officer, their spouse, and dependent children

Allowed

Prohibited

Employees performing managerial or discretionary duties with respect to the contract negotiation, their spouses, and dependent children

Allowed

Prohibited

All other employees

Allowed

Allowed

PAC established or controlled by the nonprofit

Allowed

Prohibited

PAC established or controlled by the CEO, managerial or discretionary employees, their spouses, or dependent children

Allowed

Prohibited

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