Libertarian activist and attorney Jim Ostrowski had been spearheading a lawsuit brought against several corporations, Empire State Development, and the state of New York, alleging that state business development incentives were violative of the state constitution. The New York State Court of Appeals put an end to that suit in a decision released today.
§8. 1. The money of the state shall not be given or loaned to or in aid of any private corporation or association, or private undertaking; nor shall the credit of the state be given or loaned to or in aid of any individual, or public or private corporation or association, or private undertaking, but the foregoing provisions shall not apply to any fund or property now held or which may hereafter be held by the state for educational, mental health or mental retardation purposes.
Ostrowski filed suit, and the defendants won a motion to dismiss, which was then reversed on appeal to the Appellate Division. At issue in the fight was whether state would continue to have a right to grant money and incentives to various private entities in order to help businesses and create jobs – it goes to the very heart of contemporary state business development strategies.
The Court explains how constitutionality is not only presumed, but that a violation must be found “beyond reasonable doubt”, because the Court had found as far back as 1976 that it will uphold “public funding programs essential to addressing the problems of modern life, unless such programs are ‘patently illegal'” The current prohibition was devised throughout the 19th century to prevent the state from being required to bail out and insure businesses who have received public monies, and to “insulate the state from the burden of long-term debt”. This is why the state created public benefit corporations and authorities. Case law has repeatedly found that public benefit corporations operate independently from the state, and that the state can grant money to them for lawful public purposes.
Because public benefit corporations are independent from the state, the Court finds that Article VII Section 8(1) does not apply to them gifting or loaning money the state has provided to them.
The Court also affirmed grants of public money to benefit things like stadiums, which may provide a private entity with a monetary benefit but also serves a public purpose. As such, county subsidies to the Bills and Rich Stadium may continue unimpeded by constitutional uncertainty. Justices Pigott and Smith offer dissenting opinions, arguing that longstanding practice does not magically render the unconstitutional, constitutional, and that the system merely rewards the well-connected at society’s expense.
It’s quite an interesting read (if you’re used to reading legal opinions) and, absent a constitutional convention, the end of the road for this particular argument.