The Oklahoma Constitution, as well as many other state constitutions, provides certain limitations on what many consider to be corporate welfare.

For example, the Oklahoma Constitution provides that “taxes shall be levied and collected by general laws, and for public purposes only.” The next section, sometimes referred to as the “gift clause,” states, in part, “the credit of the State shall not be given, pledged, or loaned to any individual, company, corporation, or association, municipality, or political subdivision of the State, nor shall the State become an owner or stockholder in, nor make donation by gift, subscription to stock, by tax, or otherwise, to any company, association, or corporation.”

Those two provisions seemingly prohibit the state from giving away goodies to businesses without some public purpose. Many states require three elements in order to uphold such a gift; (1) a public purpose, (2) adequate consideration, and (3) some level of control by the government.

Oklahoma’s jurisprudence here is a mess. For starters, all three elements can be found throughout various cases, but I couldn’t find a single case that required all three. The first two elements often get confused or combined. Finally, and most troubling, the Oklahoma Supreme Court has essentially carved out a massive exception for gifts that provide “economic development.”

I bring all this up because a hotly debated bill making its way through the Legislature is SB 608—the “Filmed in Oklahoma Act of 2021.” It’s essentially corporate welfare for the film industry. The program allows film companies a 35% cash rebate on a long list of qualifying expenses if the project meets certain other requirements like a minimum production budget. And the Legislature is looking to increase the amount spent on the program. Some lawmakers have referred to the program as a “magical piece of legislation,” but it’s unclear that the rebate can even pass constitutional muster.

I submit that the “Filmed in Oklahoma Act of 2021” would make an interesting test case for the Oklahoma Supreme Court to revisit the constitutional limits on corporate welfare. Because most of the cases center on whether the handout serves a “public purpose,” that would likely be the linchpin of any challenge to the film rebate. The Oklahoma Supreme Court is very deferential to the Legislature on this issue, having previously held economic development is a public purpose for which the government may spend public funds.

But what about when “economic development” doesn’t result in a net benefit for the state? As OCPA has pointed out, the claim that the rebate pays dividends to the state is far from settled. One analysis shows the film credits resulting in a mere $0.13 for every dollar spent. With a record to rely on, can the promise of economic development without a record of return be enough to overcome a court challenge? If the Legislature elects to increase the amount, we may find out.

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