| MAY 29, 2019

NJ Spotlight


New Direction New Jersey, an organization that supports Gov. Phil Murphy’s agenda, is mounting a new ad campaign that has raised concerns about the group’s lack of transparency and renewed calls for overriding Murphy’s recent conditional veto of a bill that would require groups like this one to disclose their contributors.

Last week, New Direction announced a $1 million campaign on cable and digital media, along with an online petition New Jerseyans can sign to support Murphy’s budget plan, including a millionaires tax. The first ad of the campaign, “Let’s Talk,” is already running and has angered the Democratic leaders of both houses of the Legislature.

The new ad follows close on the heels of Murphy’s conditional veto of a bill that would require politically active nonprofits like New Direction — social welfare groups organized under the 501(c)(4) section of the Internal Revenue Code — to disclose their contributors. These “dark money” groups have no obligation to report their donors and limited requirements for reporting their spending.

New Direction had initially pledged to voluntarily disclose its funders but then changed its mind at the beginning of the year, citing a “toxic political environment.”

Frustrated by coordination

Several legislators, among them Senate President Steve Sweeney (D-Gloucester), are even more upset because both Murphy’s office and New Direction recently admitted they coordinate — at the very least, Murphy appears in New Direction’s ads. That’s something legislators say they have been warned not to do.

“You can’t coordinate,” Sweeney told the NJ Spotlight editorial board last week. “You can’t do those things ... There’s absolute walls put in place.”

The governor’s office declined to comment. A spokesman for New Direction said there is nothing to prevent coordination between Murphy and the group, whose website says it “is dedicated to a simple yet powerful idea — to build a stronger & fairer economy for every New Jersey family.”

“New Direction New Jersey has always followed all federal and state election laws, and there is no merit to any suggestion to the contrary,” said Phil Swibinski, a New Direction spokesman. “The governor is legally permitted to coordinate with New Direction NJ, but he doesn’t exercise any control over the organization or participate in its day-to-day decisions.”

New Direction did file a report on its grassroots lobbying efforts last year, as required by state law. In it, the group reported spending about $504,000, nearly all of that on cable TV and internet ads.

Not asking for votes

There are scenarios under which coordination between New Direction and Murphy would be prohibited. If the group’s ads urged people to vote for Murphy or other candidates or if they were running during a gubernatorial election year, they would be subject to greater reporting rules under state law.

“It’s very complicated stuff,” said Jeff Brindle, head of the New Jersey Election Law Enforcement Commission.

He said that New Direction’s actions, while angering other powerful Democrats, do not violate any current state law.

“At this point, it’s issue advocacy and not electioneering,” Brindle said, referring to the state law that does require reporting when an organization specifically urges support or rejection of a candidate or ballot question.

No harm, no foul?

Federal election laws would apply only if the group got involved in federal issues and coordinated with a candidate for federal office. But none of these would appear to apply.

“If the 501(c)(4) nonprofit is only mentioning or targeting state-level candidates like the governor, then it would be subject to some rules at the federal level from the IRS in order to have tax-exempt status,” said Anna Massoglia of the Center for Responsive Politics, which operates the OpenSecrets website that focuses on campaign fundraising and spending. “It is not as likely to be covered by federal campaign finance regulations governed by the FEC (Federal Election Commission), which is where coordination rules limiting coordination between outside groups spending on express advocacy and federal candidates they support are found.”

There is a possibility that New Direction might have to disclose its donors if or when Murphy runs for re-election. State law requires that a gubernatorial candidate who was involved with a 501(c)(4) within four years of running for office has to disclose its activities. Murphy filed reports for New Way for New Jersey and New Start New Jersey, two groups he founded or operated before running for governor. But the governor neither founded nor materially operates New Direction.

No chance of peace

News about New Direction’s actions appears to be only further inflaming the Trenton Democrats’ civil war.

Politico New Jersey reported last week that the New Jersey Education Association is at least one of New Direction’s major funders, having given it $2.5 million. Swibinski would not confirm the amount, but said the organization “is proud to have received support from the New Jersey Education Association because we share many of the same goals, from increasing funding for public schools to making sure teachers receive the respect and financial support they deserve and were all too often denied under the Christie administration.”

The New Jersey Globe reported on Monday that a former Murphy campaign consultant paid the Murphy for Governor committee $1,800 to buy film footage the consulting firm shot for the governor’s 2017 campaign. It is assumed the footage has been or will be used by New Direction, because Steve DeMicco, as a partner in the New Brunswick consulting firm Message and Media, was involved in shooting it and now is one of the principals in New Direction. Murphy’s April 2019 quarterly report shows the $1,800 as income from Message and Media of New Brunswick for “purchase of campaign assets” on January 1, 2019.

The confusion over questions involving dark money groups makes it all the more crucial for the state to put in place laws defining disclosure for groups like New Direction, said Sen. Troy Singleton (D-Burlington), the prime Senate sponsor of the conditionally vetoed bill, S-1500. Essentially, that measure would require politically active nonprofits or 501(c)(4) groups to disclose their high-dollar contributors — those giving at least $10,000 — when these groups spend at least $3,000 to influence an election, legislation, or regulations.

Maintaining a firewall

“There is supposed to be, whether through the FEC or ELEC, there has to be a very specific firewall between independent expenditure groups and candidates,” he said.

Singleton said he has not made up his mind yet about whether to seek an override of Murphy’s 20-page conditional veto, which he said went too far because it included recommendations that had little or nothing to do with independent expenditures.

“We can’t let politics cloud us and prohibit us from moving forward,” he said, adding that he plans to “take the temperature” of the Democratic caucus when the Senate meets on Thursday to decide how to proceed. Sweeney said he “would love for” Singleton to seek an override but is leaving it up to him, as bill sponsor.

If lawmakers override the veto with two-thirds majorities in both houses, the bill as originally passed would become law. If they vote by a simple majority in both houses to agree to Murphy’s conditions, which include narrowing disclosure by dark money groups to cover only election-related spending, Murphy’s version of the bill becomes law. They can also take no action, in which case the status quo remains.

The Senate voted 33-0 to pass the bill two months ago. Even if Murphy loyalists in the caucus were to refuse to override the governor, there may be enough Republican votes to help the Democrats do so. A spokesman for Sen. Tom Kean Jr. (R-Union), the GOP leader in the upper house, noted that some Republicans voted for the bill — 11, including Kean, supported it, while three abstained or were absent — but declined to speculate on whether Republicans would vote to override.

Serious money

New Jersey’s election watchdog has been calling for some disclosure by dark money groups, which now are not required to report who is funding them. As of 2016, 23 states had enacted laws covering electioneering expenditures, according to the Campaign Finance Institute. The Election Law Enforcement Commission reported that dark money groups spent almost $50 million to influence the gubernatorial and legislative races in New Jersey in 2017.

While the feud between Sweeney and Murphy is the highest profile one, Assembly Speaker Craig Coughlin (D-Middlesex) was also unhappy with the new ad boosting the governor’s policies.

“I am disappointed that allies of the governor continue to spend money from undisclosed donors for the purpose of dividing legislators,” he said. “For my part, I will continue to advance fiscally responsible legislation and to work with my colleagues to craft a state budget, without being distracted by negative political ads, especially when funded by outside special interest groups.”

New Direction’s latest ad also gives a shout-out, if a small one, to lawmakers. In it, Murphy says that “together with good people in the Legislature we’re investing in the middle class” and touts some of his accomplishments. But then he calls for the enactment of his plan for a millionaires tax, which both Sweeney and Coughlin have said they oppose. Murphy’s followup line: “Next is having millionaires like me pay our fair share to reduce the burden for everyone else.”

The clear purpose of the ad is to try to pressure lawmakers to support that tax.

“The vast majority of New Jersey residents support tax fairness and we’re launching this initiative to channel that energy into action in Trenton and support for Gov. Murphy’s budget proposal,” Swibinski said. “The choice is clear — tax breaks for millionaires, or strengthening and growing New Jersey’s middle class.”

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