State Constitution Prohibits Corporate Welfare

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State Constitution Prohibits Corporate Welfare

by Ari Armstrong, October 1, 2005

Colorado's Economic Development Commission publishes its annual reports from 1999 through 2005 on its web page. In its reports, EDC lists grants to corporations such as Kodak, Mexicana Airlines, Echostar, Red Robin Gourmet Burgers Inc., and many more (I include a partial list in my paper on wasteful spending.) In budget documents from recent years, EDC is shown receiving money exclusively from the general fund, which is where John Ziegler of the Joint Budget Committee said the EDC grants come from. But regardless of the source of funding, the grants -- along with grants from other state agencies -- on their face violate Colorado's Constitution.

In his September 25 column for The Denver Post, Ed Quillen writes, "Ari Armstrong, a Libertarian [not anymore] who produces the Colorado Freedom Report, has done some useful research into state spending. Naturally, he questions the need for a state arts council, but he also delves into Colorado's corporate welfare system when he examines wasteful state spending... [The 2004 EDC report] does not mention Article XI, Section 2 of our state constitution: 'Neither the state, nor any county, city, town, township, or school district shall make any donation or grant to... any corporation or company'." Quillen notes that "our state government is handing out money to corporations in what looks like a violation of the state constitution..." I don't know how it can be interpreted any other way (though I've few doubts that leftist judges will figure out why a state grant to a corporation is not really a state grant to a corporation.)

Here's what the complete section states: "Neither the state, nor any county, city, town, township, or school district shall make any donation or grant to, or in aid of, or become a subscriber to, or shareholder in any corporation or company or a joint owner with any person, company, or corporation, public or private, in or out of the state, except as to such ownership as may accrue to the state by escheat, or by forfeiture, by operation or provision of law; and except as to such ownership as may accrue to the state, or to any county, city, town, township, or school district, or to either or any of them, jointly with any person, company, or corporation, by forfeiture or sale of real estate for nonpayment of taxes, or by donation or devise for public use, or by purchase by or on behalf of any or either of them, jointly with any or either of them, under execution in cases of fines, penalties, or forfeiture of recognizance, breach of condition of official bond, or of bond to secure public moneys, or the performance of any contract in which they or any of them may be jointly or severally interested. Nothing in this section shall be construed to prohibit any city or town from becoming a subscriber or shareholder in any corporation or company, public or private, or a joint owner with any person, company, or corporation, public or private, in order to effect the development of energy resources after discovery, or production, transportation, or transmission of energy in whole or in part for the benefit of the inhabitants of such city or town."

The annotations point to a couple of potential clues as to how the flagrant violation of the constitution may have come to be rationalized: "Notwithstanding the apparent absolute prohibition of this section, a 'public purpose' exception has evolved. In re House Bill 91S-1005, 814 P.2d 875 (Colo. 1991). Statute, on its face, does not violate this section if it provides for appropriations from a designated state fund to a political subdivision which may benefit a private corporation but does not require a grant or donation from the state to a private corporation or company. In re House Bill 91S-1005, 814 P.2d 875 (Colo. 1991)."

I close hoping that some politician or bureaucrat will write in to explain why the state government is violating the state constitution. I mean, just what in the hell is going on here?

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