Pay-to-Play is Bad for Business

Growing up, my father would often tell stories of his days as a professional musician. A major lesson he imparted on me is that a musician should never pay to perform. Venues charge artists in order to exploit young, inexperienced acts seeking an audience and recognition. Never let anyone take advantage of your ability, he would say.

In politics, however, pay-to-play systems are not only popular — they’re widely accepted.

Take Georgia, for example. As the Atlanta Journal-Constitution recently reported, since 2010, Governor Nathan Deal’s campaign and PACs “have collected more than $1.8 million from about 90 of the state’s biggest vendors or their executives and family members.” This sum includes hundreds of thousands from healthcare and investment firms, including $225,750 from United Health Services alone.

For major contractors, this kind of contribution pays dividends. United Health Services received almost $850 million from the state from 2010 to 2014. The similarly-named United Healthcare donated $62,800 and earned over $12.3 billion in state payments during the same period. The state paid Wellcare of Georgia, which administers Medicaid and Medicare plans, over $7.3 billion. Wellcare contributed $103,200 to Deal.

This isn’t to say that contracts were given in exchange for contributions. It is in these companies’ financial interest to maintain the status quo and cultivate friendships in the statehouse, but there is a real democratic cost to this patronage. Fairness in the vending process requires that contracts go to the companies with the best bids, not the highest political contributions.

The federal government bans contractors from contributing to political campaigns for this reason, and several states have pay-to-play restrictions. As the reform community seeks actionable solutions to limit the influence of money on the political system, these contractor contribution bans are important components. And as courts around the country are ruling, these laws are perfectly legal.

As Chief Justice Merrick Garland wrote earlier this month, the original federal ban “was itself the outgrowth of a decades-long congressional effort to prevent corruption and ensure the merit-based administration of the national government,” and that “the concerns that spurred the original bar remain as important today as when the statute was enacted.” The 11-judge court unanimously upheld these laws. Given that the federal judiciary has made several rulings striking down contribution restrictions over the past five years, this decision underscores the corruptive power contractor contributions have on the political process.

At the state level, the Ninth Circuit Court of Appeals upheld Hawaii’s ban on state contractors making political contributions. Judge Fisher, writing for the unanimous panel, declared that the restriction “serves sufficiently important governmental interests by combating both actual and the appearance of quid pro quo corruption.” This expansion to apparent corruption, the kind inherently tied to the pay-to-play system, is important, since explicit quid pro quo is hard to prove.

Independent expenditures are the name of the game in the super PAC-era. That’s why a growing coalition of reform organizations and investor groups are pressing President Obama to sign an executive order that would require all federal contractors to disclose any political spending they may do – to PACs, nonprofits, or campaigns.

It’s plain to see that states without laws banning contractor contributions need such measures. Georgia is just one example. Even states that have pay-to-play restrictions, like New Jersey, need to broaden their definition of political giving to include groups making the independent expenditures that have come to dominate the electoral system.

Even if every contract is given on the basis of merit, the appearance of corruption decreases trust in government. The business argument is crucial here, too. No company should feel obligated to make a political donation to ensure that their bid receives consideration. True democracy requires a system where everyone plays by the same rules.