10/31/2005 Research Memo 05 RM 083 Date: October 31, 2005 Author: Joy N. Hill, Associate Research Analyst Re: Comparison of Wyoming and Other States’ Constitutional Prohibition Against Loans and Gifts to Individuals, Private Entities, etc. QUESTION 1. With respect to providing public assistance to individuals and private entities, do western states, particularly Arizona, have a Constitutional prohibition similar to Wyoming Constitution Article 16, Section 6? 2. What has Wyoming, or western states, done in an attempt to circumvent this prohibition? ANSWER 1. Most of the western states reviewed do have Constitutional prohibitions similar to Wyoming’s Article 16, Section 6, which states, in part: Neither the state nor any county, city, township, town, school district, or any other political subdivision, shall loan or give its credit or make donations to or in aid of any individual, association or corporation, except for necessary support of the poor...1 To begin, it would be helpful to provide a brief background on the creation of the Wyoming Constitution: Wyoming’s desire to come into statehood was exemplified by the fact that the framers of the Wyoming Constitution took only 25 days to write the document. The document was a compilation of provisions from various other state Constitutions, particularly from those states admitted to the union just prior to Wyoming. These states- North Dakota, South Dakota, Montana, Idaho, and Washington-were the states Wyoming framers borrowed most heavily from, but included Colorado’s Constitution as well.2 For purposes of this request, it is important to note that Arizona was not admitted to the union until 1912, whereas the above- referenced states were admitted prior to 1890, with Wyoming being admitted in that year. Below is a brief synopsis of the prohibitions similar to Article 16, Section 6 from the constitutions of the states referenced above, as well as other western states. 1 Please also note Article 1, Section 19, which prohibits appropriations to sectarian or religious societies or institutions; and Article 3, Section 36, which prohibits appropriations for “…charitable, industrial, educational or benevolent purposes to any person, corporation or community not under the absolute control of the state, nor to any denominational or sectarian institution or association.” 2 Keiter, Robert B., Newcomb, Tim, The Wyoming State Constitution: A Reference Guide, 1993; Prien, Richard Kenneth, “The Background of the Wyoming Constitution,” 1956. WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX (307) 777-5466 • EMAIL • [email protected] • WEBSITE http://legisweb.state.wy.us PAGE 2 OF 5 North Dakota Constitution. Article X, Section 18 Finance and Public Debt: “The state, any county or city may make internal improvements and may engage in any industry, enterprise or business, not prohibited by article XX of the constitution, but neither the state nor any political subdivision thereof shall otherwise loan or give its credit or make donations to or in aid of any individual, association or corporation except for reasonable support of the poor…” South Dakota Constitution. Article XIII Public Indebtedness does not speak directly to providing funds in aid to individuals, associations or corporations, but states as follows: Section 1 - “For the purposes of developing the resources and improving the economic facilities of South Dakota, the state may engage in works of internal improvement, may own and conduct proper business enterprises, may loan or give its credit to, or in aid of, any association, or corporation, organized for such purposes.” In addition, South Dakota also has a provision, Article XIII, Section 17, which provides for home loans by the state: “The state may establish and maintain a system of credits for assisting in the building of homes by the people of the state, and therefor may loan money and extend credit to the people of the state upon real estate security in such manner and upon such terms and conditions as may be prescribed by general law.” Montana Constitution. Montana held a Constitutional Convention in 1971-1972 to revise their Constitution. The revised Constitution does not appear to have any language speaking to either provision of aid to individuals, association or corporations, or an economic development or other provision similar to Wyoming Constitution Article 16, Section 6 et seq. However, Article 5, Section 35 of the 1889 Montana Constitution states: “No appropriation shall be made for charitable, industrial, educational or benevolent purposes to any person, corporation or community not under the absolute control of the state, nor to any denominational or sectarian institution or association.” Idaho Constitution. Article VIII Public Indebtedness and Subsidies: Section 2 - “(1) The credit of the state shall not, in any manner, be given, or loaned to, or in aid of any individual, association, municipality or corporation;” Section 4 - “No county, city, town, township, board of education, or school district, or other subdivision, shall lend, or pledge, the credit of faith thereof directly or indirectly, in any manner, to or in aid of any individual, association, or corporation, for any amount or for any purpose whatever or become responsible for any debt, contract, or liability of any individual, association or corporation in or out of this state.” Washington State Constitution. Article VIII State, County, and Municipal Indebtedness: Section 5 - “The credit of the state shall not, in any manner be given or loaned to, or in aid of, any individual, association, company or corporation.” Section 7 - “No county, city, town or other municipal corporation shall hereafter give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm…” Colorado Constitution. Article XI, Section 1 Pledging credit of state, county, city, town or school district forbidden: “Neither the state, nor any county, city, town, township or school district shall lend or pledge the credit or faith thereof, directly or indirectly, in any manner to, or in aid of, any person, company or corporation, public or private, for any amount, or for any purpose whatever;” Arizona Constitution. Article 9, Section 7 Gift or loan of credit; subsidies; stock ownership; joint ownership: “Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation…” WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX (307) 777-5466 • EMAIL • [email protected] • WEBSITE http://legisweb.state.wy.us PAGE 3 OF 5 New Mexico Constitution. Article IX, Section 14 Aid to private enterprise; veterans’ scholarship program; student loans: “Neither the state, nor any county, school district, or municipality, except as otherwise provided in this constitution, shall directly or indirectly lend or pledge its credit, or make any donation in aid of any person, association or public or private corporation…nothing herein shall be construed to prohibit the state or any county or municipality from making provision for the care and maintenance of sick and indigent persons…The state may also establish by law a program of loans to students of the healing arts…” Nevada Constitution. Article VIII, Section 9 Gifts or loans of public money to certain corporations prohibited: “The State shall not donate or loan money, or its credit, subscribe to or be, interested in the Stock of any company, association, or corporation, except corporations formed for educational or charitable purposes.” Annotations for this section include opinions of the Nevada Attorney General’s office, including one that specifically states, “This Article relates entirely to municipal and other corporations and does not prohibit loans to individuals.” AGO 35 (3-28-1919). LSO research did not identify an Article or portion of the Nevada Constitution that prohibits loans to individuals. Utah Constitution. Article VI, Section 29 Lending public credit and subscribing to stock or bonds forbidden - exception: “(1) Neither the State nor any county, city, town, school district , or other political subdivision of the State may lend its credit or, except as provided in Subsection (2), subscribe to stock or bonds in aid of any private individual or corporate enterprise or undertaking.” OPINIONS OF THE WYOMING ATTORNEY GENERAL Attached to this memo are two opinions from the Attorney General’s office regarding Article 16 issues. Attachment A, issued December 3, 1986, discusses the constitutionality of counties and municipalities providing funds in aid of private organizations and charities, and the improvement of the economic climate. At that time, according to the attorney general’s opinion, counties and municipalities were constitutionally prohibited from utilizing funds to aid private organizations and charities. The question of improvement of the economic climate was not addressed due to the broad scope of the question. The Attorney General’s Office stated in their conclusion, “There are no easy answers to be found when one is attempting to address questions dealing with the propriety of expending public funds.” The opinion goes on further to quote from Witzenburger v. State ex.