Transportation bill takes aim at 'pay to play'

Every five years Congress passes a massive transportation funding bill that is often filled with so much pork the legislation is usually embraced by nearly every congressman and senator.

But this year, besides the $283.9 billion to be spent in the bill - which passed the House last week - there's at least one amendment that is trying to make it easier for states to forestall corruption.

The change entails the effort by states to end what is termed "pay to play," that is the giving of political contributions by companies seeking government contracts. What makes this amendment even more unusual is that it's sponsored by three congressmen from New Jersey, a state that seems to wake up every morning to another round of indicted officials. The legislation, say its sponsors, will narrow the potential for graft. And it might actually lower the cost of repaving all those freeways.

"There's less of an opportunity for a wink and a blink, and the contracts may be saving people money," says Rep. Bill Pascrell (D), who cosponsored the amendment with Rep. Robert Menendez (D), and Rep. Frank LoBiondo (R).

The federal amendment became necessary after New Jersey passed legislation banning pay to play in the state last fall. But the Federal Highway Administration warned the state was in danger of losing $260 million in federal funds if it implemented the legislation. The reason: The new law might cut down on the number of companies bidding on contracts using federal dollars.

To some extent an increasing number of states, including Connecticut, West Virginia, South Carolina, and Illinois have passed similar types of laws. The legislation has also passed in individual towns and counties. New Jersey's law, however, is the most far-reaching. "Every other state allows people who contribute at the state level to apply for federal low-bid contracts," says Marc LaVorgna, director of communications for the New Jersey Department of Transportation.

In the name of saving the taxpayer money, the federal rules have existed for some time. For example, in the 1980s, opponents of apartheid failed to prevent companies who were doing business in South Africa from bidding on federal projects. "No matter how noble the cause, it would take an act of Congress to change the law," says Mr. LaVorgna.

In fact, in recent times, the courts have generally upheld certain "pay to play" prohibitions. These include an SEC ruling in the mid-1990s that municipal bond underwriters could not contribute to government officials who award contracts. And the contribution prohibitions have been extended to casinos and insurance companies. New Jersey was hoping to extend these prohibitions to almost everyone who does business with the state.

The impetus for this push came after a series of high-profile scandals, especially under New Jersey's last governor, Jim McGreevey. His former chief of staff and a counsel made a lot of money on a billboard scheme. A top contributor to Mr. McGreevey's campaign was found guilty of tax violations, fraud, and retaliating against a federal witness.

At the same time New Jersey residents read about no-bid contracts for the state's E-ZPass program as well as politically connected law firms who could steer no-bid contracts to the right people. The contributions went to both political parties.

In an attempt to change this culture, four months ago, acting Gov. Richard Codey appointed an ethics counsel, who was expected to announce recommendations Monday to improve the rules for state employees.

Last fall, Governor McGreevey signed an executive order banning pay-to-play activities. The state, however, had to back off from its reform efforts once the Federal Highway Administration said it could lose its federal funding. As a major corridor state, it counts on federal dollars for its infrastructure.

According to state officials, at risk was $750 million a year in highway funds and $250 million in mass-transit projects. This would come to almost half the state's spending on transportation. "It would have been devastating," says LaVorgna.

To try to resolve the situation, last January acting Governor Codey changed the executive order to not apply to state highway contracts. Representative Pascrell met with transportation secretary Norman Minetta to try to convince him the state shouldn't be hurt by its ethics reforms. Yet it became clear that it would take a change in the federal law. This prompted Pascrell's amendment. One of New Jersey's senators, Frank Lautenberg (D), who is also on the Senate Transportation Committee, plans to add it to the Senate version of the bill.