Some Lawmakers Want NJ State Agencies to Get into the Business of Selling Online Ads

John Reitmeyer | February 4, 2020 | More Issues
Pilot program, to be overseen by Treasury, is seen as possible generator of revenue for cash-strapped Garden State
Credit: Gerd Altmann via Pixabay
Under a pilot program, the Department of Treasury would oversee the state’s entrée into the business of selling online ads.

State agencies would be able to generate new revenue for the perpetually strapped New Jersey budget under legislation that calls for allowing them to sell ad space on their official government websites.

The bill proposing establishment of a pilot program within the Department of Treasury to oversee the state’s entrée into the business of selling online ads was passed unanimously by a key state Assembly committee on Monday.

The legislation calls for certain restrictions, such as requiring that any ads be “consistent with the business mission of the entity.” Ads promoting the use of tobacco products or alcohol would be prohibited, as would any political advertising, according to the bill.

Proponents of the legislation are highlighting the state’s perennial budget problems, suggesting the sale of online ads presents an opportunity to bring in new revenue for the budget without putting a further burden on taxpayers. But others are speaking out against the proposal, saying it puts the state in direct competition with private businesses which also rely on ad sales while at the same time opening the state up to concerns that it could be endorsing the products that would be advertised on state-government websites.

Current budget is largest in state history

At $38.7 billion, the current New Jersey budget is the largest in state history. Yet several noteworthy line items are not being fully funded by Gov. Phil Murphy and lawmakers, including the annual public pension contribution and the state’s school-aid formula.

In addition, the dedication of revenue for specific purposes — such as the constitutional earmarking of all income-tax revenue to property-tax relief — has at times hurt efforts to provide robust funding for other priorities, including mass transit. A series of tax cuts that took effect in 2017, including a reduction of the sales-tax rate and the elimination of the estate tax in two phases, have also strained the budget’s General Fund in recent years.

Under the legislation (A-1126) that proposes letting state-government agencies begin selling ads on their official websites, the revenue generated would be deposited directly into the General Fund. Any agency that isn’t funded directly by the General Fund, such as the Economic Development Authority, would also have to turn over revenues from ad sales to the General Fund. Such agencies could hold onto revenues needed to cover the cost of selling the ads and up to 10% could be kept by the agency “for the purpose of innovation in operations, programs or services,” according to the bill.

An earlier version of the bill that stalled in the last legislative session named the EDA and the New Jersey Lottery as the two state agencies that could participate in the initial version of the proposed pilot program. But a new version of the bill that was introduced for the session that begin earlier this month includes amendments that strip out the Lottery while also allowing for “any state agency with a dot.com, dot.org, or dot.net, top-level domain name to establish a pilot program.”

The proposed pilot program would be administered by the Department of Treasury, which would also oversee all “policies, style and content guidelines,” the bill says. In addition to banning ads for tobacco products and alcohol, as well as any “political advocacy,” the measure would also prohibit agencies from publishing on their websites any ads that are “antithetical to the mission of the agency,” the bill says.

Christopher Emigholz, the New Jersey Business & Industry’s vice president of government affairs for taxation and economic development issues, pointed to the state’s ongoing budget problems and concerns about already high level of taxes while testifying in favor of the bill on Monday during a hearing held by the Assembly State and Local Government Committee. He also compared the proposed state-agency ads to New Jersey Transit’s current practice of selling ad space on its buses as a way of generating revenue to hold down fares.

Not everyone in favor

“What we can do to avoid a future tax increase (and) avoid a future fee increase, if this will help, then that’s great,” Emigholz said.

But opposing the bill during the same hearing was attorney Lauren James-Weir, who was speaking as a representative of the New Jersey Press Association. (Full disclosure: NJ Spotlight is a member of the NJPA).

James-Weir raised a number of concerns about government entering the ad-selling market, including putting state agencies in competition with newspapers for ad sales. She also said the display of ads on a government website could create the appearance that any goods or services advertised on the websites have the endorsement of the government agency, even if there is a disclaimer published alongside the ad.

James-Weir also challenged the comparison of selling ads on state-agency websites to the placement of billboards on the side of NJ Transit buses.

“These are sources of information for the public,” James-Weir said of the government websites. “When you’re reading an advertisement on a train or bus, you’re seeing an advertisement. Here, you’re going to a website for information about a state agency and you’re being directed or linked to these goods and services.

“I think there’s a distinction between the two,” she said.

Richard Vezza, editor and publisher of the Star-Ledger newspaper, also told committee members the bill could open state agencies to undue influence from advertisers. He cited his own experiences while suggesting advertisers could use the purchase of ads to seek favors from a government agency, or a threat to pull their ads whenever a government agency acts in way the advertiser doesn’t like.

“I understand the good intentions of this bill. Anything that can bring in revenue without raising taxes is something that is a good thing for the people of New Jersey,” Vezza said. “However, it has serious unintended consequences.”