Field of cash: If you offer, they will take

Trey Kovacs Labor Policy Analyst, CEI
Font Size:

It has become a familiar ritual. Wealthy professional sports team owners ask state and local governments to subsidize their venues, threatening to skip town if taxpayers don’t pony up. As Bloomberg News reports, 64 professional sports arenas around the nation currently receive either public financing or tax breaks. Despite national, state, and local fiscal woes, elected officials continue to spend or forgo billions of tax dollars on professional sports stadiums owned by millionaires and billionaires. Thankfully, taxpayers in 47 states have a weapon at their disposal: state constitutional provisions that restrict government aid to business. It’s time they used them.

Minnesota, home of the Vikings of the National Football League, faces a projected $1 billion-plus 2013 deficit, in addition to just overcoming last summer’s $5 billion budget shortfall and near-government shutdown. Yet that hasn’t deterred Governor Mark Dayton (D) and elected officials on both sides of the aisle from bestowing millions of taxpayer dollars upon billionaire Vikings owner Zygi Wilf to construct a new football stadium — which the NFL says is necessary to keep the Vikings in Minnesota. In May, Dayton authorized $348 million for the stadium. Combined with the $150 million the city of Minneapolis had already chipped in, that brought the total public funding for the stadium to $498 million, or 51 percent of the stadium’s estimated cost. On September 14, the Minnesota Sports Facility Authority began spending the taxpayer funds, awarding multiple deals to contractors for construction.

Sadly, this is an old game. Throughout the 19th century, state and local governments routinely offered subsidies to railroad tycoons and other one-percenters of the time. Concurrently, those industrialists played the various public offers against each other to garner even more taxpayer dollars. Naturally, businesses happily took the taxpayers’ money.

Ultimately, governments offered so many subsidies to private enterprise that eight states and the then-territory of Florida defaulted on debt obligations during 1841-1842, as numerous cities went bankrupt — leaving taxpayers with the bill.

To address this problem, the public pressured governments to eliminate public spending for private profit. Between 1846 and 1886, nearly every state amended its constitution to restrict government aid to private enterprise. These bans, known as “Gift Clauses,” are intended to build a wall of separation between government and business.

So how, despite state Gift Clauses, do elected officials justify subsidizing billionaire professional sports team owners? The enduring explanation from politicians for awarding tax dollars to private enterprise is that it serves a “public purpose.” This is a blatant misapplication of the legal philosophy known as the “public purpose doctrine.” As law professor and Gift Clause expert Dale Rubin explains, “The doctrine was not created to provide legislators an excuse to spend taxpayer dollars on whatever project they choose.”

The Minnesota Supreme Court, in its decision in Visina v. Freeman (1958), set the legal precedent for determining whether state government expenditures pass the public purpose doctrine. The court stated, “What is a ‘public purpose’ that will justify the expenditure of public money is not capable of a precise definition, but the courts generally construe it to mean such an activity as will serve as a benefit to the community as a body and which, at the same time, is directly related to the functions of government.” In other words, a public expenditure is illegal if it primarily promotes a private end.

In addition, elected officials’ explanations for such spending are utterly unconvincing. The law that finalized public funding for Vikings stadium, H.F. 2958, states, “The legislature finds … the expenditure of public money for this purpose is necessary and serves a public purpose.” It goes on to state “that government assistance to facilitate the presence of professional football provides to the state of Minnesota and its citizens highly valued intangible benefits that are virtually impossible to quantify.”

This clearly falls afoul of Minnesota’s Gift Clause (Constitution Article XI, Section 2), which clearly states, “The credit of the state shall not be given or loaned in aid of any individual, association or corporation except as hereinafter provided.” It goes without saying that Minnesota’s constitution does not provide for football stadiums.

Around the nation, state and local governments are struggling financially and need to cut spending somewhere. Cash contributions to America’s billionaires would be a good start.

Trey Kovacs is a labor policy analyst for the Competitive Enterprise Institute (CEI) and the editor of Newwallofseparation.org.