With Linguistic Acrobatics, The ND Supreme Court Upholds Crony Capitalism
Today the North Dakota Supreme Court ruled on a lawsuit brought by Curly Haugland and backed by the North Dakota Policy Council challenging the City of Bismarck’s use of TIF (tax increment finance) districts for the purposes of economic development. Haugland’s case relied, in part, on the North Dakota constitution’s prohibition on the state giving money to private entities.
Article X, Section 18 of the state constitution reads:
The state, any county or city may make internal improvements and may engage in any industry, enterprise or business, not prohibited by article XX of the constitution, but neither the state nor any political subdivision thereof shall otherwise loan or give its credit or make donations to or in aid of any individual, association or corporation except for reasonable support of the poor, nor subscribe to or become the owner of capital stock in any association or corporation.
The meaning of these words is straight forward. The state, and political subdivisions thereof, may engage in “industry, enterprise or business.” Which the state does, obviously, given the presence of the Bank of North Dakota and the State Mill. These are both examples of businesses owned and managed by the state. Where the sections limits the state is in granting the resources of the taxpayers to a private entity to engage in “industry, enterprise or business.”
As an example, the state may own and operate a grocery store, but it may not give a private individual or corporation a loan to own and operate a grocery store.
Critics of economic development practices in North Dakota, such as myself, have long held that this section makes the government’s practice of granting loans and other tax favors on private businesses/individuals for economic development illegal. But the court disagreed, arguing that this section of the constitution is contradictory. They ruled that the section cannot both allow the state to engage in “any industry, enterprise or business” and prohibit giving loans or credit or donations because the former necessitates the latter.
The court’s decision cites an earlier opinion from 1960 called Northwestern Bell Tel. Co. v. Wentz which states:
It is common knowledge that a state or anyone else cannot successfully engage in an industry, an enterprise or a business without in some manner being involved in a loan, the giving of its credit or the making of donations, and that in some circumstances it might be advisable to become the owner of capital stock in an association or corporation.
Thus the court is arguing that Article X Section 18 doesn’t prohibit the state from certain economic development activities like TIF districts because it is impossible for the state to engage in “industry, enterprise or business” without “loan or give its credit or make donations.”
Which means, if we follow the linguistic acrobatics of the court, Article X Section 18 doesn’t mean anything. The state supreme court has nullified the intent of the framers of the state constitution by parsing this provision to death.
They wouldn’t answer if asked, but I wonder what the justices would say Article X Section 18 of the state constitution means if not a prohibition on the state giving aid to private businesses?
There is a second case challenging the state’s use of economic development policy still before the court. Arguments in that case were heard the same day as this case, but so far a ruling hasn’t been handed down.
Tags: curly haugland, economic development, North Dakota News, north dakota policy council, north dakota supreme court
