Constitution v. jobs

Nevada, as we all know, has one of the highest unemployment rates in the nation.

Were it not for Rhode Island (at 9.1 percent), Nevada’s 8.8 percent rate would lead the nation. The problem has led to Republicans and Democrats working together for relief, whether by extending unemployment insurance in Washington, D.C., or working side-by-side in Carson City to find new ways to spur private-sector job creation.

One of those ways: The Catalyst Fund, an $11.5 million account aimed at assisting private companies that set up shop in Nevada, so long as they hire employees, pay them a good wage and provide health insurance.

So far, about $8 million has been committed under 12 contracts approved by the board of the Governor’s Office of Economic Development, which oversees the Catalyst Fund. That represents more than 3,000 new jobs. But here’s the thing: Under Catalyst Fund contracts, no money gets handed out until people are actually hired. And if a company doesn’t create as many jobs as it anticipated, it only gets a portion of the grant money.

So what’s the problem? According to a lawsuit filed by the Nevada Policy Research Institute, the entire scheme violates the state constitution.

To be sure, Article 8, Section 9 of the Nevada Constitution says “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 …” And the very next section adds “no county, city, town, or other municipal corporation shall become a stockholder in any joint stock company, corporation or association whatever, or loan its credit in aid of any such company …”

The NPRI Center for Justice and Constitutional Litigation represents Michael Little, owner of Landfill Alternative, a company that converts recycled landscape trimmings into biomass energy. The lawsuit contends a pending $1.2 million grant to a company called SolarCity unfairly forces Little to subsidize a rival, in addition to being unconstitutional.

A few facts:

First, Little hasn’t applied for a Catalyst Fund grant himself, and thus no one can say for sure whether his company would have been approved for grant money. Second, since no money has actually been spent (remember, Catalyst Fund grants are only disbursed after the state has determined that jobs were actually created), the lawsuit may be premature.

And third, state lawmakers went out of their way to comply with the constitution by enlisting local governments to help. Under the program, a company applies to a local government for Catalyst Fund help. If the locals approve, they forward the application to the Governor’s Office of Economic Development, where a board examines the idea and accepts or rejects it. If approved, contracts are signed, one between the private business and the local government, and one between the government and the state. When the funds finally do start flowing, they’ll go from the state to the local government, and then to the private company.

Where NPRI sees an unconstitutional money-laundering scheme, a bipartisan majority of state lawmakers saw a way to create jobs that complies with the letter of the law. If the framers of the constitution had intended to prohibit local governments from giving money to private companies, they could simply have said so; instead, they put restrictions on the state that don’t pertain to local governments.

There are plenty of job-creation programs that lend themselves to boondoggles. But the Catalyst Fund seems to be an exception: It’s small, it only rewards demonstrated results, and it already appears to be working. Whether it violates the constitution is something for the courts to weigh, but when they do, they should take into consideration that leaving Nevada’s recovery entirely up to the vagaries of what’s colloquially but inaccurately known as the free market is a course that Republicans and Democrats together decided was unacceptable.

Steve Sebelius is a Review-Journal political columnist who blogs at SlashPolitics.com. Follow him on Twitter (@SteveSebelius) or reach him at 387-5276 or SSebelius@reviewjournal.com.