Court Opinion

ID: 9782565
Source: CourtListenerOpinion
Date Created: 2023-08-30 18:57:15.473853+00
Date Added: 2024-06-11T07:35:05.243224
License: Public Domain

Pigott, J. (dissenting).
Unconstitutional acts do not become constitutional by virtue of repetition, custom or passage of time. *319But that is what the majority opinion holds today. The arguments made by these defendants are precisely the kind of claims that sully taxpayers’ view of our state government. It is unfortunate that the majority gives credence to those arguments and, as a result, deprives these plaintiffs—50 New York State taxpayers who are attempting to exercise their right to air their grievances—of an opportunity to conduct the most basic discovery to support their claims.
Far from being complex, article VII, § 8 (1) of the New York State Constitution (the Gift Clause) explicitly forbids what plaintiffs claim the State defendants are doing in this case. It states:
“1. The money of the state shall not be given or loaned to or in aid of any private corporation or association, or private undertaking-, nor shall the credit of the state be given or loaned to or in aid of any individual, or public or private corporation or association, or private undertaking, but the foregoing provisions shall not apply to any fund or property now held or which may hereafter be held by the state for educational, mental health or mental retardation purposes” (emphasis supplied).
According plaintiffs’ complaint a fair reading, it is clear that they assert that money of the State is being “given or loaned to or in aid of . . . private corporation^] ” for the purpose of economic development. Defendants’ assertion that the appropriations serve the “public purpose of promoting economic development” contravenes not only our case law but the underlying purpose of the Gift Clause itself. Our State Constitution’s prohibition against giving or loaning money to private corporations dates back to 1874,1 when the citizenry adopted an amendment that read, in pertinent part, as follows: “[Credit or money of the State not to be given.] Neither the credit nor the money of the State shall be given or loaned to or in aid of any association, corporation or private undertaking” (1846 NY Const, art VIII, § 10, as amended by Const Amends of 1874 [emphasis supplied]; Problems Relating to Taxation and Finance, 1938 Rep of *320NY Constitutional Convention Comm, vol 10, at 114). We examined that amendment in People v Westchester County Natl. Bank of Peekskill, N.Y. and, although that case involved the gift of the State’s credit to soldiers who served during World War I, not to satisfy an obligation owed to them but rather as a gratuity, I find the Court’s interpretation of that amendment instructive to defendants’ collective arguments here that the Empire State Development Corporation’s (ESDC) distribution of taxpayer dollars to private corporations should be upheld as serving a public purpose:
“Whether the purpose [of the gift or loan of credit] is a public one ... is no longer the sole test as to the proper use of the state’s credit. Such a purpose may not be served in one particular way. However important, however useful the objects designed by the [L]egislature, they may not be accomplished by a gift or a loan of credit to an individual or to a corporation. It will not do to say that the character of the act is to be judged by its main object—that because the purpose is public, the means adopted cannot be called a gift or a loan. To do so would be to make meaningless the provision adopted by the convention of 1846. Gifts of credit to railroads served an important public purpose. That purpose was distinctly before the [L]egislatures that made them. Yet they were still gifts and so were prohibited” (231 NY 465, 475 [1921] [emphasis supplied]).
Perhaps most telling is that Judge Cardozo disagreed with the majority’s holding that the proposed payments to the returning soldiers violated the Gift Clause, and elucidated that the true purpose of the clause was not to prohibit the Legislature from pledging the credit of the State “in recognition of an honorable obligation” but rather “was to put an end to the use of the credit of the state in fostering the growth of private enterprise and business” (id. at 483-484 [Cardozo, J., dissenting]). And this is what plaintiffs have asserted in their complaint. The fact that the Westchester County Natl. Bank case dealt with the gift of credit as opposed to a gift of money is irrelevant; it is evident from that case that, even if the Legislature had proposed paying cash to the World War I veterans instead of using the State’s bonding authority, the outcome would have been the same, because the issue was whether the issuance of bonds on behalf of the veterans was a gift, irrespective of its form.
*321In 1967, the voters rejected a proposed amendment to the State Constitution that would have allowed the distribution of funds to private businesses for the purpose of economic development in the same manner the ESDC is distributing funds now. The proposed (and subsequently rejected) amendment stated as follows:
“The state, any local government and any other public corporation may grant to any person, association or private corporation in any year or periodically by contract, or loan its money for economic and community development purposes,[2] but the proceeds of indebtedness contracted for any such purpose shall be used only for loans for capital construction” (12 Proceedings of 1967 NY Constitutional Convention, at 31 [emphasis supplied], quoting Proposed Constitution, art X, § 12 [b]).
The rejection of this amendment did nothing to deter the State’s current practice of distributing taxpayer funds to foster the growth of private industry, which defendants call “economic development.” Defendants make the specious assertion that the appropriations here do not violate the Gift Clause because the monies are not made “directly” to private companies but, rather, are first funneled through public corporations, which then distribute the funds to private entities. In other words, because the State distributes taxpayer funds through an intermediary like the ESDC, it is not the State that is loaning money to a private corporation or undertaking, but rather a public corporation that is loaning money to private enterprise. But we have cautioned on more than one occasion that “[w]hen the main purpose of a statute, or of part of a statute, is to evade the Constitution by effecting indirectly that which cannot be done directly, the act is to that extent void, because it violates the spirit of the fundamental law” (People ex rel. Burby v Howland, 155 NY 270, 280 [1898]; see also Wein v State of New York, 39 NY2d 136, 145 [1976]).
Here, plaintiffs state a valid claim that the disbursement of funds through intermediaries constitutes gifts of money “in aid *322of” private corporations and that the disbursements are not cloaked in validity and constitutionality merely because the State may not have “directly” given the monies to these private entities. There seems to me no fundamental difference between the State directly giving monies to such private enterprises and the State creating a public corporation with the express intention of doing so.3 For these reasons, the majority errs in holding that the Legislature may do indirectly, through a public corporation conduit, what the Constitution forbids it to do directly. But this error is apparently of only academic importance, because the majority, after discussing the indirect appropriations at length, goes on to hold that the Legislature may also do directly what the Constitution forbids. Some of the appropriations that plaintiffs challenge do not go through conduits, but are routed directly to trade associations made up of private firms—and the majority upholds these also. Either overruling Westchester County Natl. Bank or shrinking it beyond recognition, the majority seemingly decides that any gift or loan of money to private recipients is valid as long as it has “a predominantly public purpose” (majority op at 318). It is hard to see what is left of the constitutional prohibition. Accordingly, I would answer the certified question in the negative.

. The prohibition against loaning the credit of the state “to, or in aid of any individual, association or corporation” goes back even farther, to 1846 (1846 NY Const, art VII, § 9). That prohibition was, in part, in response to the state utilization of the public credit to finance failing and/or insolvent private railroads (see 2 Lincoln, Constitutional History of New York, at 91-101, 179-182, 552 [1994]).

. The phrase “economic and community development purposes” is defined in the proposed amendment as including “the renewal and rebuilding of communities, the development of new communities, and programs and facilities to enhance the physical environment, health and social well-being of, and to encourage the expansion of economic opportunity for, the people of the state” (12 Proceedings of 1967 NY Constitutional Convention, at 31, quoting Proposed Constitution, art X, § 12 [a]).

. Although the majority places significant emphasis on our holdings in Schulz v State of New York (84 NY2d 231 [1994]) and Wein (39 NY2d 136 [1976]) in support of their contentions that public benefit corporations and authorities are not arms of the State and therefore are constitutionally permitted to receive public funds from the State for a public purpose (majority op at 316), it is significant that Schulz involved the funding of public works projects through the Thruway and Metropolitan Transportation Authorities, and Wein involved state assistance to a financially-struggling New York City in 1975. Neither one of those cases sanctions the granting of state money through an intermediary for distribution to a private concern.