NPRI seeks summary judgment against Governor’s Office of Economic Development

CARSON CITY The Nevada Policy Research Institute’s Center for Justice and Constitutional Litigation has just filed its motion for summary judgment in its legal challenge to the Nevada Catalyst Fund, administered by the Governor’s Office of Economic Development.

As detailed in the motion filed yesterday afternoon, the fact that state government subsidies violate the Nevada Constitution has even been acknowledged by GOED Executive Director Steven Hill during depositions.

CJCL Director Joseph Becker released the following statement after filing the motion with the First Judicial District Court:

That the Nevada Legislature has asked voters not once, not twice, but three times to allow the state to fund private corporations for economic development demonstrates that those legislatures were well aware that the Catalyst Fund is unconstitutional.

But, if there were any question as to that belief, GOED’s Executive Director Steven Hill admitted as much under sworn testimony. Hill stated that it would be unconstitutional for state government to give taxpayer money directly to private businesses.

Therefore, the court has but one issue to decide: whether the gifting of state funds to private companies becomes constitutional simply because the state uses intermediaries to disperse the funds. If the state can create political subdivisions and then delegate to those subdivisions authority it itself does not have, the Nevada Constitution becomes meaningless and lost.

In February, on behalf of plaintiff Michael Little, CJCL filed a complaint against GOED, against Hill in his official capacity, and against the State of Nevada over the Catalyst Fund —created by the State to dole out millions of public dollars to those  private corporations favored by GOED staff.  In April, the Nevada Legislature, at its request, sought and was granted intervention as an additional defendant in the suit. Through the unconstitutional program, Little, an alternative-energy entrepreneur, is compelled to subsidize his green energy competitor SolarCity, which received a $1.2 million subsidy.

Aside from the program being unjust in that it forces taxpaying business owners to subsidize their politically well-connected competitors, the Catalyst Fund is expressly prohibited by the Nevada Constitution.

Article 8, Section 9 reads:

Gifts or loans of public money to certain corporations prohibited. The State shall not donate or loan money, or its credit, subscribe to or be, interested in the Stock of any company, association, or corporation, except corporations formed for educational or charitable purposes.

To date, the state has argued that the fund is permissible because the state itself does not hand out the money, but rather, state-created political subdivisions distribute state-provided funds to state-chosen businesses. When asked why GOED does not “just enter an agreement with the recipient directly,” Hill responded, “[w]e [GOED] feel that that’s unconstitutional.”

In 1992, 1996 and 2000, Nevada voters overwhelmingly rejected proposed constitutional amendments that would have allowed government loans or gifts to, or so-called “investments” in, private businesses.

“Because voters were unwilling to amend Nevada’s Constitution, politicians have decided to circumvent the law by creating pass-through intermediaries to dole out state subsidies,” Becker said. “If politicians are not held accountable to the Constitution, there’s no limit to what they could do in the future.”

The case against GOED could have far-reaching effects. In addition to determining whether the State of Nevada can gift public funds to private companies, protecting GOED would jeopardize constitutionally protected freedoms.

From the motion for summary judgment:

It is an illusion — one that seems to have the persistence of original sin—that prosperity can be attained by taking money from taxpayers and handing it to favored businesses.

The idea of government intervention to influence the composition of a country's output has long been derided by economists for breeding inefficiency, reducing competition, encouraging lobbying and saddling countries with factories producing products nobody wants.

The Center for Justice and Constitutional Litigation asks the court to:

  • Declare that all defendants, in operating the Catalyst Fund, are violating the Nevada Constitution;
  • Enjoin all defendants from continuing the Catalyst Fund program or any such program that subsidizes private entities under the guise of economic development or any such label.

Case documents:

The Center for Justice and Constitutional Litigation is a public-interest law organization that litigates when necessary to protect the fundamental rights of individuals as set forth in the state and federal constitutions.

Learn more about the Center for Justice and Constitutional Litigation and this case at http://npri.org/litigation/.

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