Two years ago, Gov. Jan Brewer abolished the Arizona Department of Commerce. It wasn’t an act of getting rid of government waste or excess, but rather making way for a new entity: the “quasi-public” Arizona Commerce Authority.
The Authority was designed to be a “deal-closing” entity, wherein government and private officials possessing greater wisdom than market forces, can deploy resources to lure businesses to Arizona and create new ones. A nice concept, perhaps, but in most states such entities merely dole out subsidies to favored businesses.
That isn’t supposed to happen in Arizona. Our Constitution prohibits gifts to private entities “by subsidy or otherwise.” In Turken v. Gordon, litigated by the Goldwater Institute, the Arizona Supreme Court held that government can assist specific businesses only if they receive direct, tangible, commensurate, and enforceable benefits in return.
That leaves the Authority plenty of latitude—but not for what it tried to do a few weeks ago. At a ceremony honoring businesses competing in the Authority’s “innovative challenge” program, the Authority’s CEO Don Cardon decided to dole out $5,000 “stipends” to 15 unsuccessful applicants. Given that the stipends were after-the-fact, it would be impossible for the state to demand anything in return.
That’s exactly what the Institute said in a letter to Cardon, declaring that the payments looked more like a “slush fund” than the limited quid pro quo agreements the Authority is permitted to make. On May 11, the Authority relented and decided the stipends will not be paid.
It is a small victory for taxpayers, but an important one, for it calls the Authority’s attention to the constitutional limits on its powers—and to the fact that its actions will be watched closely.
Arizona Supreme Court: Turken v. Gordon (PDF)
Goldwater Institute: The Path to Jobs is Not Through the Red Ribbon
Goldwater Institute: Research Shows States Don’t Stimulate Job Growth With Taxpayer Handouts
Arizona Commerce Authority: Public Meeting Agenda and Minutes