Governor Right to Veto OMSI Bailout

Oregon Constitution prohibits corporate welfare
By Kurt T. Weber

Governor Kulongoski reportedly was close to vetoing yet another mult-million dollar bailout for the Oregon Museum of Science and Industry (“OMSI bailout veto looks likely,” The Oregonian, July 31, 2007). Whatever his reasons for the veto, no more tax dollars, no form of government aid, should go to this private institution. OMSI should be left to sink or swim on its own in accordance with the Oregon Constitution.

OMSI is a private institution. Like the 1991 bailout debate, the current discussion appears to lack this simple point: our State Constitution, like many other states, explicitly prohibits government aid to private corporations.

Government bailouts, economic development programs and tax breaks for businesses are unconstitutional, notes Dale F. Rubin, JD in his provocative report “Public Subsidies, Private Gain: Stop Violating the Oregon Constitution.” Rubin’s report cites a tradition of Oregon and other state’s rulings against what have now become tolerated political practices to provide relief for private organizations.

Locally, Rubin anchors his arguments in the Oregon Constitution, Article XI, Sections 7 and 9. Section 7’s title is telling: “Credit of State not to be loaned-limitation upon power of contracting debts.” It begins, “The legislative Assembly shall not lend the credit of the state…”

Section 9’s title reads, “Limitations on powers of county or city to assist corporations.” It continues, “No county, city, town or other municipal corporation, by vote of its citizens, or otherwise, shall become a stockholder in any joint company, corporation or association, whatever, or raise money for, or loan its credit to, or in aid of, any such company, corporation or association.”

Sections 7 and 9, Rubin asserts, “prohibit the State and its political subdivisions from pledging their credit in aid of any public or private person, company or corporation, or making any donation or grant to such persons or entities.” Early Oregon Supreme Court decisions and Attorney General Office opinions concurred. For example,

In Hauke v. Ten Brook (1927), Oregon’s high court invalidated an Astoria city charter amendment that the city cited to justify a financial bail out of a private business ravaged by fire. The Court held, “there are well defined limitations beyond which the city cannot go…We hold the charter amendment wholly void and of no effect.”

-In 1962 the Oregon Attorney General’s Office was asked by a government agency if contributions to an industrial park development association, a private corporation, were in accordance with the constitutional lending of credit provisions. The answer: “…Article XI [section] 9, was intended to prevent the union of public and private capital in any enterprise whatever.”

Government economic development programs, select tax breaks, and other forms of corporate welfare (OMSI is a corporation) are continually justified today by invoking the “Public Purpose Doctrine”. However, says Rubin, the doctrine’s purpose is to limit public expenditures to public, not private, purposes.

“The doctrine was not created to provide legislators an excuse to spend taxpayer dollars on whatever project they choose,” Rubin argues. “The Oregon Constitution contains clear and unambiguous clauses that explicitly prohibit the legislature and political subdivisions from giving any aid to private individuals or corporations.”