How the Arizona Constitution Protects Taxpayers: The Importance of Safeguarding Article IX

Submitted by rhino on October 12, 2004

Goldwater Institute Policy Report #196

October 12, 2004

EXECUTIVE SUMMARY

In 1965, the University of Florida football team faced a potentially devastating enemy-dehydration. University doctors set out to make a drink that would keep the team hydrated and winning. The product they made is now known the world over as Gatorade. Not only did Gatorade energize dehydrated football players, but once licensed to a soft drink company, it reaped handsome profits for the University of Florida and sparked an ongoing race for universities to discover more profitable products.

But how do discoveries like Gatorade make it to market and turn profits for universities? In most states, including Arizona, universities profit from their research by licensing or selling discoveries to private companies, like the University of Florida did with Gatorade. In fact, Arizona universities enjoy some of the most flexible, permissive licensing options in the nation. In 2003 alone, Arizona universities signed 124 licensing agreements.

The Arizona Board of Regents (ABOR), which oversees the universities, has requested another mechanism for commercializing university products. Its proposal would allow the state government, through public universities, to receive ownership interests or stock in private companies in exchange for university-developed products. However, the Arizona Constitution currently prohibits such an ownership scheme.

Article IX, section 7 of the state constitution was designed to end a long history of corrupt local governments and the wasting of public funds in speculative ventures. Without this prohibition, officials can enter into sweetheart deals with private companies. For instance, a company in which a regent or university official may have a financial interest-or even a personal friendship-could be unfairly granted the use of a university product.

Importantly, the ABOR proposal would permit state entities to essentially subsidize favored companies that compete with private businesses. Ultimately, the proposed amendment would erase an important protection for taxpayers, open the door to public corruption, and give private corporations an unfair business advantage.

Read How the Arizona Constitution Protects Taxpayers here.