Subsidies to Private Business Targeted as Unconstitutional

A group of New York residents is suing the state in an attempt to end the government’s growth subsidies for private business, saying they violate the constitution.The more than $1 billion in state subsidies to stimulate or protect local businesses violate Article VII of the New York constitution, according to a lawyer representing the residents, James Ostrowski.Governor Paterson, the Legislature, the Empire State Development Corp., and the largest subsidy recipients are violating the state constitution, ratified in 1938, which prohibits “gift or loan of state credit or money,” except for state debts, public roads and building projects, taxation, and a few highly specific special projects, Mr. Ostrowski, who filed a lawsuit in Albany Monday, said. Because private subsidies, either to promote economic growth or stabilize businesses, are not enumerated, the plaintiffs term them illegal.Mr. Ostrowski said the suit, whose plaintiffs are led by an upstate businessman, Lee Bordeleau, took him three months to research and write, and that it is long overdue.State officials said they could not comment on pending litigation.The plaintiffs claim the subsidies corrupt legislators, waste funds, and prevent healthy political turnover. The suit discloses an incident in which an upstate candidate for state Assembly, whom the suit declined to name, petitioned a Greater New York Chamber of Commerce official for financial support and was refused because the incumbent directed state money to the bureau.In 2004, an Ohio lawsuit, Cuno v. Daimler Chrysler, dealt with a similar petition against unconstitutional subsidies. The case reached the Supreme Court, but it was denied standing under the “case or controversy” rule.Good Jobs New York, a policy think tank that analyzes major state subsidies for business retention, has identified hundreds of millions of dollars in public money that it claims is spent on ineffective or harmful measures. The project director of Good Jobs New York, Bettina Damiani, said she hadn’t read the litigation but was pleased with the attention it would draw to state giveaways.“It’s bad that we’re subsidizing firms to compete locally — that’s not the goal,” she said. For example, she said, upstate companies might receive subsidies to move to a neighboring county or town — a zero-sum game for the state.“The goal is to have a holistic regional economy with the businesses and infrastructure that the region needs to thrive,” she said. If successful, a lawsuit like this “would be monumental, certainly,” she said.Mr. Ostrowski said he would continue to litigate on the state level, in states such as Alabama with similar constitutional clauses. In New York State, he has a plan as well: lobbying the Legislature to cut the gas tax, thereby replacing the economic stimulus subsidies attempt to provide.

Subsidies to Private Business Targeted as Unconstitutional

Subsidies to Private Business Targeted as Unconstitutional

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