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CARSON CITY — Nevada’s Catalyst Fund, administered by the Governor’s Office of Economic Development, provides unconstitutional taxpayer subsidies to private businesses, charges a new lawsuit filed today by NPRI’s Center for Justice and Constitutional Litigation.

CJCL filed the lawsuit on behalf of Michael Little, an alternative-energy entrepreneur and a taxpayer whose alternative-energy competitor, SolarCity, has received a commitment from GOED to provide it with a $1.2 million taxpayer-funded subsidy. Named defendants in the lawsuit include the State of Nevada, the Governor’s Office of Economic Development, and GOED Executive Director Steven Hill.

State subsidies to a private business, according to the complaint, violate Article 8, Sections 9 and 10, of the Nevada Constitution. Article 8, Section 9 reads, “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.”

“Nevada’s constitution clearly states that state government has no business picking winners and losers in the economy by subsidizing the favored,” said Joseph Becker, chief legal officer and director of the Center for Justice and Constitutional Litigation. “Subsidies from state government to private businesses are unconstitutional and directly harm both taxpayers and competing businesses.

“Fully aware that Nevada’s constitution prohibits business subsidies by state government, politicians have tried to circumvent this constitutional prohibition by routing Catalyst Fund payments through local government agencies that it itself authorized to provide handouts. But GOED is still selecting and approving the subsidy-fund recipients and may not contract with or delegate to others authority it itself does not have.

“Having a so-called regional development authority or a local government give money it received from the state to a private business doesn’t change the fact that state taxpayer dollars are going to private businesses in violation of Nevada’s constitution,” said Becker.

In 1992, 1996 and 2000, Nevada voters overwhelmingly rejected proposed constitutional amendments that would have allowed government loans or gifts to, or so-called “investments” in, private businesses.

“Unable to get the voting public to change Nevada’s constitution, politicians have resorted to law-circumventing pass-through entities to dole out these subsidies. Nevada’s constitutional protections will be rendered meaningless if state politicians can avoid them by creating a local government agency for the express purpose of taking constitutionally prohibited actions,” said Becker.

“We urge the court to uphold and defend Nevada’s constitution by holding that subsidies through the Catalyst Fund are unconstitutional.”

Becker also noted that forcing a business to subsidize its competitor is fundamentally unjust and that similar programs in other states have led to charges of political favoritism.

“Taxpayers, at the federal level and in states like Texas, have given hundreds of millions in loans and subsidies to the companies of politically connected donors,” said Becker. “After receiving taxpayer handouts, numerous companies, including Solyndra, Abound Solar, Fiskar and ThromboVision, have gone belly-up. Along with being unconstitutional and unjust, GOED subsidies are bad economics.”

The lawsuit calls for the court to:

• Declare all defendants, in operating the Catalyst Fund, are violating the Nevada Constitution
• Enjoin all defendants from continuing the Catalyst Fund program or any such program that subsidizes private entities under the guise of economic development or any such label

Case documents:

• An unofficial copy of the complaint is available here: http://www.npri.org/docLib/20140219_CJCLCOMPLAINTGOEDFINAL.pdf
• A fact sheet on the case is available here: http://www.npri.org/docLib/20140219_CJCLFactSheet-GOED.pdf

The Center for Justice and Constitutional Litigation is a public-interest law organization that litigates when necessary to protect the fundamental rights of individuals as set forth in the state and federal constitutions.

Learn more about the Center for Justice and Constitutional Litigation and this case at http://npri.org/litigation/.

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LAS VEGAS — Graduating Clark County high school students who show the potential to make a significant contribution to the cause of economic liberty should seek a $2,500 college scholarship being awarded by the Nevada Policy Research Institute.

This is the fourth year that the Professor R.S. Nigam & NPRI Freedom Scholarship is being offered. It is open to all Clark County high school students — whether they attend a public, private, online or home school — who plan to attend college beginning in the fall of 2014.

This year students interested in applying for the scholarship are asked to write a two-page essay on this topic:

Downtown sports arena: public or private funding?

The Las Vegas City Council is considering a proposal to give government handouts to a private company to build a downtown sports arena. Should Las Vegas subsidize a sports arena? What pitfalls could come from the government picking winners and losers in the economy? Provide examples of similar projects from around the country, and how those projects turned out.

“This scholarship provides a great opportunity for the next generation of thinkers to begin thinking about and formulating arguments in favor of free markets,” said Swadeep Nigam, who funded the scholarship program in the name of his father, an advocate of freedom and a professor of business in India and Nevada.

While the idea of the government picking winners and losers in the economy is always a relevant topic, the essay question of publicly subsidized sports arenas is particularly timely given the Las Vegas City Council’s ongoing consideration of such a plan, Nigam added.

All applicants must have a grade point average of at least 3.2 and complete an application, which includes the above essay question.

To be eligible, a student’s parents must have earned less than $125,000 in income in 2013, and the student must plan to attend a four-year degree program in business, economics, political science, public administration or a related field, at an accredited college or university.

Professor R.S. Nigam was a director of the Delhi School of Economics at the University of Delhi, a visiting professor at the College of Business at the University of Nevada, Las Vegas, and a senior fellow at the University of Wisconsin, in addition to academic engagements in Europe, the West Indies and Asia, including North Korea.

“This scholarship is a fitting way to honor Professor R.S. Nigam, who was devoted not only to free-market thinking, but education,” NPRI President Andy Matthews said of the professor who taught at UNLV, among other institutions across the globe. “We appreciate the opportunity to help an upcoming Clark County graduate further his or her education and honor Professor Nigam.”

Essays and applications are due to NPRI by April 5, 2014.

Full details of the scholarship and applicant requirements are available at: http://www.npri.org/docLib/20140218_ScholarshipApplication2014.docx

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