1 week Ago By Blaze Lovell
The bill is heading to conference committee where some details still need to be hashed out between the House and the Senate. Lawmakers are working to outlaw political donations from people who win government contracts. But key supporters of the legislation still need to come to an agreement on critical points including how contractors and nonprofit organizations will have to report who their officers and close family members are and whether that information will be kept secret from the public.
House Bill 371 would ban donations from state and county contractors, their officers and immediate family members. Those bans would also apply to officers of nonprofits receiving state and county grants. The bill is one of the most significant political reform measures under consideration in the Legislature this year and is seen as an important step to helping rein in pay-to-play politics in Hawaiʻi.
A Civil Beat/New York Times investigation last year found that donations from contractors accounted for nearly 20% of all campaign contributions since 2006. Lawmakers introduced several bills in January aimed at cracking down on contractor and grantee donations. HB 371, the Campaign Spending Commission’s proposal, is the last measure alive.
Kristin Izumi-Nitao, the commission’s executive director, has called it a “very important bill” for her office. This would be the third year in a row that the Legislature has tried to close a pay-to-play loophole that has allowed people with ties to contractors to donate to campaigns. Following a series of scandals in the early 2000s, lawmakers passed a law in 2005 banning campaign contributions from contractors.
But the ban didn’t apply to owners and officers. Privacy Concerns Under the current draft of the bill, information on the officers and their family members would only be made available to candidates on a page maintained by the Campaign Spending Commission. The campaigns would be given login credentials to access those names.
That differs from the House draft, which would require the commission to post those names and businesses on its website. Sen. Karl Rhoads, the Judiciary Committee chairman who inserted the password provision into the bill after it came over from the House, said he was considering the privacy interests of people who may not have made any contributions.
“I certainly don’t see any advantage to the public having oversight of that list that outweighs the privacy concerns of everyone who is a family member of a contractor,” he said. If an officer or one of their family members did make a donation in violation of the law, that information would be made public after the commission investigates the illicit contribution, Rhoads said. But gathering the information to enforce those provisions may prove difficult.
Unlike other states, Hawaiʻi does not have a centralized database of contracts, contractors and their owners or officers. Determining who those people’s family members are would also take some detective work. The Campaign Spending Commission, tasked with implementing the provisions of the bill, would need to cobble all of that information together from various state and county agencies that issue contracts.
Izumi-Nitao said that she has been in contact with state attorneys to include a reporting form for contractors as part of a contract’s standard terms and conditions. The contractor would complete that form and list the names of their officers and family members. They would also need to sign an agreement saying none of those people would make campaign donations during the contract period.
Violating those terms – in this case, making campaign donations – could result in the contract being terminated. Izumi-NItao hopes that the threat of losing the contract forces companies into compliance. “The reality is, if they get it wrong, we’re really not going to know,” she said.
The commission has a staff of five employees, although this year’s proposed state budget would add two staffers. Izumi-Nitao said the commission would like to hire an investigator for one of those positions to monitor donations coming from people tied to contractors. Other States Make Contractors Do The Work Other states make information on officers and their family members public, and they require the contractors to report that information directly to various agencies tasked with regulating elections and campaign spending laws.
Connecticut publishes monthly lists of companies whose officers are banned from making donations. In Illinois, a business registry allows the public to see officers and their family members. It also includes a search function that gathers data on campaign donations from those individuals.
New Jersey publishes detailed “ pay-to-play reports ” – forms filed annually by contractors that detail campaign contributions from the business, its related entities or subsidiaries, their officers and family members. Those forms are filed directly with the state’s Election Law Enforcement Commission, which has a staff of more than 50 and an annual budget of over $5 million. The commission spent hundreds of thousands of dollars nearly two decades ago to overhaul its website, according to Joseph Donahue, the commission’s deputy director.
The website allows contractors to file those forms electronically and makes that information available to the public. It also compiles the information into searchable databases. “The biggest work is all upfront with setting up the systems,” Donahue said.
New Jersey’s law set a $300 limit for contractors contributing to candidates for governor and political party committees. Counties and other municipalities had their own pay-to-play restrictions. Most of those provisions including the donation limit were eliminated in 2023 through a law that opened up donations to contractors.
Hawaiʻi’s total ban on donations from state and county contractors would be one of the most restrictive in the nation. That raised concern in public hearings that expansion of the donations ban could violate an individual’s First Amendment rights to political speech. The state Attorney General’s Office hasn’t yet weighed in on the bill.
In 2010, the 2nd U.S. Circuit Court of Appeals upheld provisions of Connecticut’s law that banned donations from spouses and children of government contracts.
While the court said that it is unlikely children and spouses would themselves donate to influence the outcome of a contract, the state’s corruption scandals demonstrated that “contractors are willing to resort to varied forms of misconduct to secure contracts with the state.” Striking down those provisions could “invite the very circumvention that the General Assembly was trying to prevent,” the court wrote in its opinion on the case. The 9th U.
S. Circuit Court of Appeals cited that Connecticut opinion when it upheld Hawaiʻi’s current ban on donations from businesses that have contracts with the government in 2015. Eliminating Donations The Senate draft of HB 371 covers contracts for goods and services over $100,000 and construction contracts over $250,000.
Those restrictions would still cover the vast majority of large contracts. While hundreds of awards fall below those thresholds, most of the money the state spends on contracts every year — about 98% — come from contracts that exceed those thresholds. Though the ban is less expansive than other iterations proposed this session (previous versions would have expanded the prohibition to companies that compete for contracts, too), it could still wipe out a large number of donations from contractors.
Take the engineering firm R.M. Towill, for example.
In the last three years, executives of the company have contributed more than $45,000 to campaigns in Hawaiʻi. The company has been involved in various government contracts for the same time period, with all of its awards well over the threshold. If the law were in place now, all of those donations would be banned.
The new law would also cover recipients of state and county grants, which have become a life raft for nonprofits worried about federal funding cuts. The Hawaiʻi Alliance of Nonprofit Organizations asked legislators to exempt volunteer board members who don’t receive any compensation for their service on a nonprofit board. Jodi Robinson, HANO’s government affairs director, said that the nonprofit worried that those bans on donations may discourage people from volunteering on nonprofit boards.
But, she said executives who are paid by nonprofits should still be covered under the law banning campaign contributions because they have a direct financial stake in winning grant funds. “I think it’s very fair that if you are paid by an organization; there’s a direct conflict of interest,” Robinson said. “But if you are not receiving a benefit, and you are trying to benefit a nonprofit, your civic engagement on a board shouldn’t be hindered.
” The House has formally disagreed with the Senate’s changes on HB 371, but Rhoads said passage is likely this year and he doesn’t think the House and Senate are too far apart on the measure. His counterpart, Rep. David Tarnas, agreed and said he doesn’t see a “deal killer” in the bill.
Tarnas said he is examining the provisions Rhoads added on collecting the contractor information on a password-protected website as well as the contract thresholds. He said he is talking with the Campaign Spending Commission to decide how to move forward. “I don’t really have a clear path on what my desired outcome is, other than I’d like us to pass a bill on this because it’s critically needed,” Tarnas said.
One other issue to work out is who should be considered an “officer,” which Rhoads said is not yet defined in the bill. HB 371 will now head to a conference committee between members of the House and Senate to negotiate a final draft of the bill. The deadline for all bills to clear their conference committee is April 25.
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