Constitution Specifically Prohibits Deals with Transportation Companies

By David B. Kopel

June 1991. More by Kopel on corporate welfare.

Close your eyes for a moment, and think about the United Airlines giveaway. Can you hear a faint whirring in the distance? Does it sound a little like an airplane propeller? More likely, it's the sound of 39 people spinning in their graves -- the framers of the Colorado constitution.

There is almost no act of government that could be more repugnant to the framers of Colorado's constitution than the United subsidy.

Section after section of the constitution specifically outlaws the kind of corporate welfare envisioned in the United deal: the government may not "make any donation or grant to...any corporation." "No appropriation shall be made for...industrial...purposes to any...corporation." "The power to tax corporations...shall never be relinquished or suspended."

The Constitutional language on corporate subsidies is always powerful and absolute: "The general assembly shall not pass local or special laws...granting to any corporation...any special or exclusive privilege." No branch of government may "pledge the credit or faith thereof, directly or indirectly, in any manner to, or in aid of, any...corporation...for any amount, or for any purpose whatever."

Why were the Constitutional provisions regarding aid to corporations written in such broad and unequivocal language? Because, as the delegates explained in a report to the People, "no subject has come before the Convention causing more anxiety and concern."

The anxiety about donations to corporations grew from direct experience. "The legislatures of other States have," the Convention noted, "been found unequal to the task of preventing abuses and protecting people from the grasping and monopolizing tendencies of railroads and other corporations."

As the Colorado Supreme Court later observed, when the Convention met, the taxing of citizens for the benefit of railroads "had become a mania, particularly in the west." To prevent such abuses from occurring in Colorado, "it was the intention of the framers of the constitution to prohibit all public aid to the railroads and to establish that policy in fundamental law."

The Colorado Convention of 1876 met in the aftermath of the worst financial scandal thus far in American history, caused by a railroad's cozy relationship with government.

In 1872, the public learned that a sham construction company called the Crédit Mobilier had milked outrageous fees from the Union Pacific Railroad. The fees went to insiders who controlled both the Crédit Mobilier and the Union Pacific.

One of the bribe-takers, by the way, was Speaker of the House and later Vice-President Schuyler Colfax, for whom Denver's Colfax Avenue was (prematurely) named.

Have circumstances changed, making the Constitutional concerns no longer relevant? The Colorado Convention was afraid of the oligopoly power of the railroads; at the time, seven corporations owned 2/3 of the nation's entire rail network. The modern airline industry is even more concentrated in a few wealthy and powerful hands.

Colorado's elected officials have never been as corrupt as were U.S. Congressmen in the robber baron era. One reason Colorado has stayed relatively clean is the strict rule against giving public funds to corporations.

Does the fact that the United deal might lead to economic benefits matter? Not at all. The constitutional sections have no clause reading "except when the giveaway might make some money." Indeed, when the Colorado Supreme Court struck down a Boulder subsidy to a railroad, the Court affirmed that government aid was illegal "no matter what might be the public benefit and advantages flowing from the construction of such roads."

The purpose of having a written constitution is to put certain fundamental principles beyond the transitory whims of any branch of government. No matter how cleverly the Colorado legislature or the Denver City Council attempt to disguise the United giveaway, bribing a transportation company to do business in the state was the very evil the constitution was designed to prevent.

 

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