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A Warning to Governments in Lone Star State: Public Funds are for Public Purposes

July 1, 2024

In a crucial win for taxpayers in the Lone Star State—and throughout the country—the Texas Supreme Court issued a decision on Friday that will curtail government contracts that fund lobbying by public-sector labor unions with taxpayer dollars. The decision, which involves a practice known as “release time” or “association business leave,” puts government entities and their special interest allies on notice that public funds cannot be devoted to private purposes.

The Goldwater Institute joined forces with our friends at the Texas Public Policy Institute to challenge the legality of “release time” in the case, which is called Borgelt v. City of Austin. We represented taxpayers in a challenge to a contract between the city of Austin and the Austin Firefighters’ Association (AFA), which funded the salaries of union officials who spent their time working, not for the city, but to advance the union’s own private interests.

That’s not uncommon. Release time is a type of government subsidy that allows government employees to be “released” from the duties they were hired to perform, and work instead for a labor union, even though they’re receiving taxpayer-funded salaries. While on release time, these government workers engage in partisan political activities, lobby lawmakers, solicit new union members, attend union conferences and meetings, and file costly grievances against the city.

For example, in Austin, the AFA’s President is released full-time from his firefighting duties, meaning he reports to union headquarters each day, not to city offices, and works exclusively for the union. And “released” employees spend their time—and your money—lobbying the government, supporting candidates in elections, and doing other things that are simply not proper activities for those working on the taxpayer’s dime.

We argued in the Borgelt case that this violates the Texas Constitution’s Gift Clauses—provisions that prohibit state and local governments from allocating public resources to private purposes. Specifically, in order for a government payment to satisfy this strict standard, the payment must be for a public purpose, the government must maintain control over the expenditures, and the government must receive fair value in return for public payments.

In an unusual ruling, a divided Texas Supreme Court held that lobbying, supporting candidates, and other private activities were actually not allowed under the Austin contract in the first place.

Instead, although there was plentiful evidence proven at trial that the union used release time for such improper purposes, the Supreme Court held that it could not consider what it called the “factbound questions of whether or to what extent any particular example of [release time] use was proper or improper.” In other words, the justices focused only on interpreting the contract in principle, and held that it did not authorize lobbying or other kinds of political activities.

Nor could it—because the court went on to observe that a contract that did allow such things would be unconstitutional under the Gift Clause. That constitutional provision, the court said, “bars the government from handing over property for nothing, with or without a contract.” The government cannot give away taxpayer money to a private entity, and it can’t spend money on things that don’t “serve a legitimate public purpose and afford a clear public benefit.” More simply, the Austin contract does not permit union officials to engage in lobbying, political, and other private activities with taxpayer money—meaning that if they do so in the future, it’s illegal.

Justice Brett Busby was even more direct in his separate opinion. Unlike his colleagues, he was willing to review the evidence from the trial, which, he said, conclusively demonstrates that many actual uses of this paid time off either fall outside the agreement’s broad definition of association business or otherwise promote the association’s private interests. For example, association representatives have used paid leave to attend association PAC meetings and to support and oppose candidates for public office.”

While the justices differed over whether the Austin contract actually did allow for that sort of lobbying and political activities, they all agreed that doing so violates the Texas Constitution’s crucial protections for the rights of taxpayers. That’s particularly important in the context of government unions, which are some of the most powerful special interests in Texas and throughout the United States. In this case, the Austin firefighters union made an arrangement whereby taxpayers do receive no fair return for their expenditures, where the city does not exercise control over paid release time, and where the union president is, in Justice Busby’s words, “in essence a publicly funded full-time employee of the Association who did no work for the Fire Department.” As a result, release time “grants public funds to aid a private association without implementing controls to ensure that the funds predominantly serve legitimate public purposes”—something all the justices agreed would be illegal.

The Borgelt decision marks a critical turning point—the first time in decades that a state supreme court has said that it violates constitutional anti-subsidy provisions when the government funds political, lobbying, and other private activities by a public-sector union. As Justice Busby wrote, “The Gift Clauses of the Texas Constitution exist to protect citizens from their government, which our history shows is vulnerable to capture by private special interests who seek to use public funds for their own ends.”

This case sends a clear message that such expenditures will not be permitted in the future.

Jon Riches is the Vice President for Litigation at the Goldwater Institute.

 

 

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