Bill to close pay-to-play loophole in Hawaii moves to full House

Associated Press

06-02-2025

State legislators are seeking to close a 20-year-old loophole that has allowed government contractors to donate to politicians despite a law that purports to ban such contributions.
Last year, an investigation by Civil Beat and The New York Times found that people with ties to contractors contributed $24 million to political campaigns — about $1 in every $5 donated since 2006 — and the donations often coincided with key decisions by lawmakers regarding the contracts.
On Wednesday, lawmakers moved closer to closing the loophole, which banned donations from companies with government contracts, but not from company officers or their families.
The House Judiciary and Hawaiian Affairs Committee voted unanimously to send House Bill 371 for a full vote in the House. The legislation would prohibit campaign contributions from officers and immediate family members of contractors as well as recipients of government grants.
State and county agencies would be required to send the Campaign Spending Commission lists of contractors as well as their officers and immediate family members. The commission, which is tasked with regulating political donations in Hawaiʻi, would use that information to enforce the new prohibitions.
Rep. David Tarnas, the chairman of the Judiciary Committee, said he included that provision to help address concerns from lawmakers, who were worried about accepting illicit contributions in the future.
'We're trying to make the information available to the public and to the candidates,' Tarnas said.
HB 371 goes further, banning people tied to contractors from donating to noncandidate committees, which in Hawaiʻi could include super PACs that have no limits on fundraising from any one source and no limits on spending to support or oppose candidates.
Experts have said the provisions targeting PACs are likely to be challenged in court.
The prohibitions would last for the duration of the government contract. Any donations made in violation of the new law would need to be returned to the donor in 30 days. Otherwise, those funds would go to the state.
Efforts to close the loophole and ban donations from company executives and family members failed in the last two legislative sessions.
Lost In Translation
Tarnas chose to advance HB 371 out of his committee over another proposal that promised more sweeping reforms.
That bill, House Bill 894, sought to ban prospective bidders, subcontractors, and pre-qualified bidders from contributing to campaigns. Tarnas, who sponsored the bill, based it on laws from Connecticut, but found that not everything from Connecticut could work in Hawaiʻi. For example, Hawaiʻi doesn't have a statewide system for prequalifying contractors.
'It just doesn't translate well to our system,' Tarnas said during a hearing on the measures.
State Procurement Officer Bonnie Kahakui told lawmakers that provisions in the Connecticut proposal requiring agencies to send lists of contractors and bidders to the Campaign Spending Commission could be 'administratively burdensome.'
For example, Kahakui estimated that state agencies received nearly 8,000 proposals last year in response to solicitations.
She suggested an alternative: Instead of sending the commission that information, the agencies could collect information on officers, immediate family members and subcontractors of winning bidders and post them to a public database.
'It could be done,' Kahakui told lawmakers. 'It would just take more effort on the agencies' part to collect that information from vendors.'
Lawmakers are separately proposing to increase staffing for the Campaign Spending Commission, which is tasked with regulating millions of dollars in campaign funds every election cycle.
Gov. Josh Green has included funding in his budget proposal to add staff to the commission, which currently has just five employees. A separate bill would give the commission, which is tasked with investigating campaign spending violations, an investigator. It currently doesn't have one.
Craig Holman, a Washington D.C. lobbyist and expert on campaign finance, applauded the proposals. 'It sounds like a very good law,' he said in an interview.
But he said that Hawai'i also needs to include provisions in contracts that would allow the government to cancel a deal if a contractor violates the campaign spending provisions. The threat of losing potentially lucrative contracts should be enough to force businesses to police themselves, Holman said.
Targeting Super PACs Would Be Difficult
Efforts to end contractor contributions to super PACs will likely run into legal challenges related to the U.S. Supreme Court's 2010 Citizens United ruling.
Citizens United established that business entities have rights to political speech and essentially defanged states' attempts to limit spending by super PACs, which are called independent expenditure committees in Hawaiʻi.
For example, even with stronger restrictions than those in Hawaiʻi, government contractors in Connecticut continued donating to campaigns through outside super PACs, according to media reports.
Jim Hochberg, a lawyer who challenged Hawaiʻi's campaign spending laws shortly after the Citizens United ruling, called the Legislature's latest attempt to prohibit donations from contractors 'ridiculous.'
'If I was still in Hawaiʻi, I'd sue them,' Hochberg said, adding that political speech 'is the most important speech we have.'
Since 2012, independent expenditure committees in Hawaiʻi spent more than $12.4 million to sway elections, according to data from the Campaign Spending Commission. Some of those efforts have been funded by government contractors.
In 2016, Dennis Mitsunaga, president of the engineering firm Mitsunaga & Associates, provided financial backing to a super PAC that supported Honolulu Mayor Kirk Caldwell's reelection campaign. Mitsunaga's family members also contributed to the PAC, called Save Our City.
The PAC and its chairwoman at the time, bar owner Sarah Houghtailing, were fined $15,000 in 2019 for misreporting the group's flow of money. Mitsunaga was acquitted of federal charges last year.
In 2020, seven employees of the engineering firm R.M. Towill, a major state contractor, contributed to a PAC set up to support Democratic candidates for the House. The company also has its own PAC called the Kilohana Corporation, which contributed to the campaigns of more than three dozen candidates between 2008 and 2023.
Holman, the D.C. lobbyist, acknowledging that the outside spending restrictions in the bill could be challenged in court, recommended that lawmakers include a severability clause in measures this year. Such a clause would keep the new bans on contractor donations intact even if the provisions on PACs are deemed illegal.
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