Hawaii will need to do more than ban officers and family members of contracted businesses from contributing to political campaigns if it wants to rein in pay-to-play practices, a review of other states’ policies shows.

Hawaii would need to implement a robust contract tracking system and enact significant penalties for violators, experts said. Banning companies competing for contracts from contributing could also significantly reduce the amount of political money coming from special interests.

The state banned contractors from donating to campaigns in 2005, but a New York Times and Civil Beat analysis found that a loophole applying that ban only to corporate entities and not officers or family members has allowed more than $24 million from people tied to contractors to flow to local campaign coffers. 

Recent attempts by the Legislature to close that loophole have failed, although some lawmakers as well as government watchdog groups say they plan to examine new pay-to-play proposals in light of the Times’ and Civil Beat’s findings.

The state Campaign Spending Commission is set to discuss contractor donations at its meeting Wednesday while the state Ethics Commission also plans to take up the pay-to-play issue later this month.

Connecticut, Illinois and New Jersey have some of the strongest pay-to-play laws in the U.S., all enacted after contract and campaign donation scandals in each state. They based their laws on model legislation from lobbyist Craig Holman, a government ethics and campaign finance advocate.

He also worked on Hawaii’s law in 2005, warning officials that the loopholes they enacted would make it ineffective.

“I made it really clear they need to go further and include the restrictions on senior executive officials, that if you just apply it to the companies, it’s so loophole-ridden it won’t do much,” Holman said. “The officials knew that and didn’t go there anyway.”

Hawaii’s law came after a yearslong investigation of campaign donations in the early 2000s. Honolulu prosecutors found that many executives of engineering and professional services firms doing business with the city were funneling illegal donations to former Mayor Jeremy Harris’ campaign. Harris was never charged in the investigation.

In Connecticut, the reform measures were spurred by the conviction of former Gov. John Rowland, who pleaded guilty to accepting illegal gifts from one of his donors who owned a contracting business.

In addition to officers and their immediate family members, Connecticut also bans principals of prospective bidders, people competing for contracts and political action committees controlled by contractors from donating, too.

“There’s a huge swath of the business community that can’t give now,” said Joshua Foley, a lawyer for Connecticut’s State Elections Enforcement Commission.

He said contractors used to call the commission saying that politicians were asking them for campaign donations. They were thankful when the commission told them they were prohibited from donating.

The ban on contractor contributions passed as part of a “grand bargain” in 2005, Foley said. The legislature simultaneously created a system for comprehensive publicly funded elections.

“If you’re going to cut off that source it has to be supplanted somehow,” Foley said.

The program in Connecticut has been popular.

In Illinois, a survey found that 94% of the elected members in Illinois’ General Assembly participated in the public funding program. Two-thirds of its state legislature are Democrats.

Illinois has a robust system that allows election officials to keep track of contractors.

Any vendor that is competing for at least $50,000 in government work must register with the state Board of Elections. Business registration forms must list officers and spouses as well as information on subsidiary companies. After registering with the board, the vendor is then allowed access to a procurement website that allows it to bid on contracts. 

If a business isn’t registered with the board, procurement officials won’t allow it to bid, according to division director Tom Newman.

New Jersey’s once-tough pay-to-play laws discouraged donations from business executives. From 2004 to 2022, New Jersey had tough pay-to-play laws that discouraged donations from business executives.

People tied to contractors were limited to donating no more than $300, far below the limit for New Jersey candidates. Donations to the so-called “Big Six” political party and legislative leadership committees that were also hamstrung, dropping more than 90% between 1999 and 2019, according to the New Jersey Election Law Enforcement Commission.

Lawrence Norton, a lawyer who has represented clients navigating New Jersey’s laws, said many companies have self-imposed restrictions on political contributions from their employees.

The penalties can be severe, including losing a contract or being liable for contract costs. The policies made executives hyperaware.

“Pay-to-play laws strike at the bottom line,” Norton said. “People don’t think intuitively that if they write a personal political contribution or if their spouse does, it could actually jeopardize a bid or contract with the government.”

The state and its local governments enacted a patchwork of regulations after a contracting scandal involving the state’s vehicle inspection program in the early 2000s.

But last year, an attempt to unify what had become a complex series of state laws and local ordinances resulted in a controversial measure that, among other provisions, expanded a loophole statewide that would exclude contractors from the limits on donations as long as their awards were publicly advertised.

“They’ve just dismantled it,” Holman, the campaign finance advocate, said.

Meanwhile, California has taken a different approach to pay-to-pay. A 2022 law limited the donations from developers while also requiring elected officials to recuse themselves from taking action on measures that directly affect their donors. California’s law, as well as others regulating contributions from contractors and others seeking government action, have so far withstood lawsuits.

“When it comes to pay-to-play, the courts tend to defer to the regulators on that,” Holman said. “It’s not always seen as a campaign finance law … It’s more of an effort to clean up the government contract process.”

Efforts in Hawaii to implement a comprehensive and publicly funded elections program similar to those in Connecticut, Arizona and Maine stalled in the House this year.

Locally, advocates see a clean elections program as one way to reduce the influence of money in politics.

“Publicly financed elections won’t single-handedly solve the problems we’re seeing with pay-to-play, but it’s a natural progression for any state looking to take on pay-to-play corruption,” said Camron Hurt, program director for Common Cause Hawaii.

A publicly funded elections program would need to be accompanied by increased voter participation and laws on public disclosure to be effective, Hurt said.