A little-noticed sentence in a bill sitting on New Jersey Governor Chris Christie’s desk could, if it becomes law, threaten to curtail the ability of national party committees to raise money from Wall Street and financial industry executives.  The Republican and Democratic Governors Associations, the Republican National Committee, the Democratic National Committee, and the federal congressional party committees could all be impacted.

New Jersey State Investment Council rules prevent the state pension fund from hiring an investment management firm if, within the two years prior, certain executives and professionals at the investment firm made a covered “political contribution or payment to a political party.”  The term “political party” means “any political party or political committee organized in the State” but does not include “a Federal or national campaign committee or a non-State political committee.”

The bill recently passed by the state legislature, however, would change that.  The bill—which we  flagged when it was making its way through the legislature—provides: “Regulations adopted by the council that address political contributions shall apply equally to contributions to any federal or national committee or a non-State political committee as to any other committee covered thereby.”

This poorly drafted provision could be read to apply only to political parties “organized in the State” such as the federal account of a New Jersey political party.  But it could also be read to apply to all federal or national party committees such as the RGA and the DNC.  Indeed, on passage, a sponsor stated that “the legislation would require the investment council to put in place a rule prohibiting firms it selects to invest pension funds from making contributions to any national political organization.”

The statute could therefore restrict federal and national political contributions in ways that reach further than any other pay-to-play law in the country.  Moreover the State Investment Council chairman suggested that the state would have to liquidate existing investments if executives from those investment firms made contributions to national party organizations, even if the contributions were permissible at the time.

Governor Christie has not said whether he plans to sign the bill.  If the law passes, the State Investment Council may promulgate regulations interpreting the law more narrowly.  And even if the law is interpreted to bar contributions to federal party committees and groups like the RGA and DGA, it seems highly vulnerable to challenge on First Amendment and federal preemption grounds.  But in the meantime, as we approach a Presidential election, the political contributions of many on Wall Street and in the financial industry could be chilled and fundraising for national party committees may take a hit.