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Public Money in Public Hands for the Public Good: The Public Trust Doctrine, Public Well-Being, and Government Budget

Public Money in Public Hands for the Public Good: The Public Trust Doctrine, Public Well-Being and Government Budgets

Carolyn Raffensperger

Last year a group of Iowa environmentalists convened by SEHN and the Iowa Chapter of the Sierra Club began studying the Iowa budget because some state spending seemed peculiar: the state was giving away money to big corporations like Apple but slashing the budget for things like clean water.  If Iowa was a pristine environmental state lacking in business, those give-aways might make some sense.  But Iowa is the most ecologically damaged state in the Union with about 2% of its land base left in any kind of ecological wholeness.  We’ve paved and plowed all of Iowa and reduced its biodiversity to four species: pigs, corn, soybeans and humans.  Or maybe five species if we add in concrete.  So why would we cut money for university research on clean water but give tax rebates to corporations that simply conduct research?  Why would we hand over millions of dollars to big tech companies and starve the Department of Natural Resources?

To find the answer to those questions we would have to go back to a 1971 memo written by Lewis Powell to the U.S. Chamber of Commerce.  He essentially laid out one theory of government: free enterprise is the real foundation of the United States and government is an impediment to the economy.  Consumer protections and environmental regulations impede free enterprise, Powell believed.  Powell set an agenda that became the playbook of industry and led to Newt Gingrich’s Contract with America (1994), numerous conservative think tanks, and what now seems like an irrefutable assumption that government’s primary role is to grow the economy. 

Some years ago we at SEHN worked with various state and municipal agencies to develop the precautionary principle for decision-making.  Precaution is the logical way to make policy when great harm is probable (or is already occurring), but the science on cause-and-effect isn’t yet conclusive.  How much did we need to know before we took action to protect babies’ brains from neurotoxic pesticides?   Agency after agency told us that even though their mandate was to protect public health and the environment they couldn’t use the precautionary principle because the economy got the benefit of the doubt, not children.

We began casting about for different approaches to government.  If the economy was dethroned, what could take its place?  The ancient legal idea called the public trust doctrine gave us an answer: the common wealth,  public health, and public well-being. What if we expanded the public trust doctrine from its limited role in ensuring that people had access to shorelines to a new understanding of governance?  What if instead of primarily protecting private property, business and the economy, government’s job was to be the trustee of all the things that contribute to public well-being— air, water, parks, roads, public schools, wildlife, public health and more?

So we Iowa environmentalists set out to compare the existing state budget under the two ideas of what government should do: grow the economy or advance public well-being?  We began by looking at the 2019 governor’s budget to see how it was put together.  We discovered that the governor had 4 goals that included:

  • Creating a Competitive Business Environment;

  • Developing the Most Innovative Energy Policy in the World;

  • Educating our Children for the Knowledge Economy;

  • Training Iowans for the Jobs of Tomorrow.

 We couldn’t find even a single mention of clean water in the governor’s goals in spite of the millions of pigs and the filthy rivers that plague our state.  We were stunned to learn that we actually wrote checks to corporations as tax rebates for merely conducting research.  At the same time the tuition and debt of students at our 3 state universities was overwhelming and public funding for research at these institutions was being cut.

We discovered other things that surprised us.  Wells Fargo, a bank that willfully and aggressively funded the Dakota Access crude oil pipeline (which runs through Iowa), and just as important, has been sanctioned for fraud, is the main bank that held the state’s money.  There are other options.  The Iowa state constitution mentions a state bank so there is nothing stopping us from having a public bank, just like North Dakota.  

The reason that we were appalled that Wells Fargo, a bank that has committed fraud not once, but repeatedly, holds our state’s money, is that governments as trustees have a fiduciary duty to the beneficiaries of the state’s goods--which include both money and the commons.  Keeping the money in Wells Fargo is a breach of that fiduciary duty.  But then again, so is allowing industrial agriculture to trash our rivers and air.  

The outcome of our investigation was a report which can be found here:

We made wide-ranging recommendations, including:

  1. Setting goals is the first step in government fulfilling its fiduciary responsibility to care for the common assets and public money. This is what governors do when they submit their budget proposals to the legislature.  We proposed goals for the state of Iowa that reflect the fiduciary responsibilities of government to care for the things we share and to ensure equal access to benefits like health, clean water, roads, schools and everything else in the common wealth. 

Here are 6 budget goals that reflect the true needs of Iowa and that are based on the basic recipe of keeping public funds in public hands for the public good.  By working to meet these goals, we will be able to build the foundation of a regenerative economy and a sustainable Iowa, which fosters the health and well-being of the land and people.

  • World-class public education, from kindergarten to college, with emphasis on continuing education and student-centered education, including ecological, civic, holistic education, and development of social skills and working cooperatively

  • Support physical and mental health from birth to death, including prevention and public health, for the greatest good for all people in Iowa, while creating the healthiest people and robust public health; publicly and not privately, funded and, managed

  • Re-wild Iowa to protect, preserve, expand water, air and wildlands and natural areas in Iowa, including restoration, preservation, regeneration.

  • Agriculture that feeds Iowans first and cares for the land, water, community; urban agriculture; reinvent the cooperative model and transitioning from the industrial model.

  • Develop and support energy for the future and a healthy environment; creating the world’s most innovative energy policy; focused on renewables, energy efficiency, distributed generation; equitable and people-centered; while avoiding, mitigating, and adapting to climate change.

  • Charging research and public university institutions with a public interest research agenda rather than a private corporate research agenda.

2. Designate a legal guardian for future generations who would review regulations and the budget for their impact on the common assets such as water, state parks, transportation, public health, and public schools.

3. Have state agencies evaluate the common assets they manage and determine the costs for adequate care as a first step in setting the budget. 

4. Each agency should set measurable goals for the protection, restoration and enhancement of common assets.

5. Require the state auditor to audit the state’s common assets and the success of public expenditures in protecting the common assets, and report to the legislature.

6. Create a program to repair and restore public assets, specifically restoring prairie, woodland, and river ecosystems, modeled on the Works Progress Administration (WPA). The WPA was a program begun in 1933 that put about 3 million people to work building or restoring public roads, buildings, theaters and airports.  An Iowa WPA would focus on restoring ecological integrity.

7. Establish robust funding for essential government services, particularly the judicial branch of government and education, both of which have been neglected in recent years’ budgets.

8. Eliminate other financial give-aways to corporations and use those funds for environmental programs.

9. Establish the environment and public health as key state budget goals, prioritizing clean water.

10. The Department of Natural Resources and the Department of Public Health should develop ways to measure the health impacts of Iowa’s contaminated water.

11. Establish the corporate tax rate at an appropriate level to fund the key state budget goals.  A start would be to return them to pre-2018 levels. 

12. Eliminate corporate tax incentives such as the research tax credit and re-allocate the refunds from the research credit to the public universities. The research tax credit creates refunds when tax credit exceeds a company's or individual's state tax liability and no state income tax is owed.  In 2017, those checks for companies and individuals totaled $46 million, the department of revenue reports.   Much of the tax credits in 2017 went to big corporations, including:

  • Rockwell Collins, which claimed $13.9 million in R&D tax credits

  • Deere & Co., which claimed $7.5 million in R&D tax credits

  • Green Plains Inc., which claimed $5.3 million in R&D tax credits

  • Pioneer DuPont, which claimed $2.6 million in R&D tax credits

13. Hold public meetings around the state after state agencies have made their budget proposals.  Solicit public input on the condition of the local commons and the finances needed to protect or restore them.

14. Provide the public with clear information about where money comes from and how it is spent.   At present, it is almost impossible to understand what money comes from the federal government, excise taxes, or special funds, or to understand where the money goes.  Data is not up to date and the budget numbers are not all in one place.

15. Establish a state bank, as North Dakota has done. At present, a large percentage of Iowa’s public money is housed at Wells Fargo, a private bank that has been sanctioned for fraud.  Creating a state bank would provide financial mechanisms for ensuring that Iowa’s money could be leveraged for Iowa goals. 

16. Finally, it would guarantee Iowa could fulfill its fiduciary duty to manage the public’s money for the public good.