On April 4, 2007, changes to Ohio’s political contribution laws take effect, and they will have a significant impact on all individuals and entities doing business with state and local governments. House Bill 694, enacted by the 126th General Assembly and signed by Governor Taft on January 2, 2007, imposes strict contribution limits for those who are currently parties to public contracts or those who will seek future public contracts. These new limits require strict compliance and close attention by all individuals and businesses performing or soliciting government contracts.
Strict Contribution Limits
The former law imposed campaign contribution limits only on those who held “no bid” government contracts. Under the new law, contribution limits apply to any individual or entity holding a public contract worth more than $500, including contracts awarded through a competitive bidding process. Contractors are limited to individual contributions of $1,000 over two calendar years to the public office responsible for awarding the contract. The law also imposes a cumulative contribution limit of $2,000 over two calendar years for all affiliated individuals and political action committees.
These contribution limits apply not only to current holders of the public office responsible for awarding contracts but also to candidates for the public office responsible for awarding the contract. Current contract-holders are prohibited from exceeding the contribution limits during the life of the contract and for a period of one calendar year following completion of the contract. Significantly, these limits also apply to individuals and businesses planning to seek future public contracts because the new law prohibits awarding a contract to an individual or business that has exceeded these contribution limits within the previous two calendar years.
The new law applies to political contributions made by individuals, partners or owners of partnerships or unincorporated businesses, association shareholders, estate administrators and executors, trustees, and owners of more than twenty percent (20%) of a corporation or business trust. The limits also apply to the spouses and minor children of these responsible parties as well as political action committees affiliated with public contractors. Individuals or entities soliciting public contracts are required to certify that all covered individuals, including spouses of responsible parties, are in compliance with the contribution limits.
Contracts awarded by any “agency or department of this state or any political subdivision” trigger the new contribution limits. When a contract is awarded by an appointee of the Governor or an appointee of the chief executive officer of a municipality, the limits apply to contributions to the Governor or the chief executive officer. While contracts with all state agencies are covered under the new law, the provisions are particularly strict with regard to the Bureau of Workers’ Compensation (BWC). In addition to limiting contributions to the Governor or Lieutenant Governor by those engaged in or seeking contracts from the BWC, the law also limits contributions by individuals or entities doing business worth more than $500 with the BWC, even where there is no contract.
Contracts awarded by municipal legislative authorities, boards of education, boards of county commissioners, boards of township trustees, and other boards and commissions also fall under the new law. Contracts awarded by the state Controlling Board are treated as having been awarded by the agency or department that submitted the contract to the Controlling Board. Although individual employment contracts with state or local governments do not trigger the new contribution limits, collective bargaining agreements with labor organizations are covered under the new law. Current contracts are treated as having been awarded on the day the new law becomes effective.
If a new contract is improperly awarded to an individual or entity that exceeded the contribution limits during the previous two calendar years, the agency, department, or political subdivision awarding the contract will be fined and the contract will be rescinded if it has not been completed. If an individual or entity violates the contribution limits after receiving a public contract, the individual or entity will be fined three times the amount of the excess contribution and the Elections Commission has authority to cancel the contract. The law further imposes criminal penalties for knowingly making a false statement in the certification of compliance required for those seeking government contracts. Under the law also provides for complaints to be filed with the Ohio Elections Commission, which may, where appropriate, refer the matter to the applicable county prosecutor.
The effects of the new campaign contribution limits are best demonstrated by illustration: Example 1: Mr. D is a sole proprietor who currently holds a contract to perform services worth more than $500 for the Governor’s Office. Under the new law, Mr. D is limited to a maximum of $1,000 over two years in contributions to the Governor’s campaign committee from now until one year after the contract is complete. Likewise, Mrs. D, his wife, is limited to $1,000 in contributions to the Governor. If Mr. and Mrs. D exceed these limits by each donating $2,000, they will be fined $6,000 (three times the amount of the excess contribution) and may lose the contract.
Example 2: XYZ Group, LLC, is a professional partnership composed of Mr. X, Mrs. Y, and Mr. Z. XYZ Group hopes to win a contract to provide services for the Mayor’s office. In order to remain eligible for the contract, the partners and their spouses are limited to $1,000 in individual contributions and $2,000 in total contributions to the Mayor’s campaign for the two years before the contract is awarded. Therefore, if Mr. X and Mrs. Y each donate $1,000 to the Mayor, then Mr. Z and all the partners’ spouses are forbidden to make any contributions to the Mayor. If they exceed these limits, XYZ Group will be ineligible for the contract.
Frequently Asked Questions
Q: How are contributions made before January 1, 2007 treated?
A: The new law specifically exempts contributions made before January 1, 2007. Current contracts are treated as if they were awarded on April 4, 2007 – the effective date of the new law. Therefore, a current contract holder is prohibited from exceeding the new limits during the life of the contract and for one calendar year after it is completed. Eligibility for future contracts is based on contributions during the previous two calendar years, but contributions made before January 1, 2007 do not trigger the exclusion.
Q: Does the new law apply to contracts awarded by local governments?
A: Yes, the new law applies to contracts awarded by agencies or departments of the “state or any political subdivision.”
Q: Will a partnership be penalized for contributions made by an incoming partner before he or she was a member of the partnership? What about contributions made by a partner’s spouse before they were married?
A: No, the law exempts contributions made by individuals who were not partners or owners at the time the contribution was made. Similarly, contributions made by a spouse before becoming married to the partner or owner do not trigger the exclusion.
Q: Will I be penalized for contributions made by my employees or their spouses?
A: No, the new law does not apply to employees’ contributions. It limits contributions by partners, owners, or shareholders of more than twenty percent of a corporation.
Q: Will my corporation be ineligible for government contracts because of the political contributions made by the corporation’s officers, such as its Chief Financial Officer?
A: No, unless the corporate officer owns more than twenty percent of the corporation. If the officer does hold an ownership stake of more than twenty percent, then he or she falls within the limits of the new law along with his or her spouse and minor children.
Q: What is an “affiliated” political action committee?
A: A political action committee (PAC) is considered to be “affiliated” with an individual or entity if, during the most recent required disclosure period, the PAC received more than half of its contributions from owners, partners, or other responsible individuals of a covered entity.