The usual suspects had predictable reactions this week after a federal trial jury convicted three upstate real-estate developers and the State University’s onetime nanotech czar, Alain Kaloyeros, on charges of bid-rigging tied to Gov. Andrew Cuomo’s upstate economic-development projects.

Cuomo’s harshest critics jumped on the verdict in the Buffalo Billion case as further evidence that, in the gleefully overwrought phrase of a state GOP release, he is “the most crooked, corrupt governor New Yorkers have seen in more than a century.” The governor portrayed the trial’s outcome as a run-of-the-mill criminal matter. “The jury has spoken and justice has been done,” he said. Nonpartisan good-government advocates saw the case as further proof of the need for laws to ensure more transparency and accountability in government, as well as campaign-finance reform.

But the focus on Albany corruption misses an important point. The overarching scandal here wasn’t bid-rigging or the pay-to-play pattern in the developers’ contributions to the governor’s reelection campaign. At the root was a simply awful public policy — corporate welfare on steroids — that neither Cuomo nor most of his critics have definitively renounced, even now.

Most states offer tax breaks, low-interest loans, grants and other subsidies to companies they hope to attract and retain. But Cuomo has moved beyond that to state ownership of the means of production.

This intertwining of government and corporate interests was the brainchild of Kaloyeros, a Lebanese-born physicist who founded the SUNY Polytechnic Institute. Kaloyeros pioneered the use of a college-controlled nonprofit real-estate subsidiary to build, manage and own facilities shared with private corporate tenants at SUNY Poly’s gleaming, futuristic campus in Albany.

Cuomo embraced that model, expanding SUNY Poly’s institutional footprint across upstate to include, among other state-financed facilities, a $90 million LED light-bulb plant and a $14 million film-production “hub” near Syracuse.

The linchpin of the Buffalo Billion initiative is a $750 million, 1.2 million-square-foot, state-built and -equipped “Gigafactory” for SolarCity, the solar-panel company co-founded by Elon Musk and since merged into his Tesla Inc.

The Kaloyeros trial centered on allegations that the former SUNY Poly president conspired with former lobbyist and Cuomo crony Todd Howe to steer the Buffalo and Syracuse construction contracts to companies whose executives were major contributors to the governor’s campaign.

Meanwhile, the Syracuse and Buffalo projects haven’t panned out on their own economic-development terms. The original tenant of the Syracuse area light-bulb plant walked away from the project, into which Cuomo has plowed still more state cash to attract a startup semiconductor manufacturer. The little-used film hub failed to produce any permanent jobs and was recently conveyed by the state — for $1 — to Onondaga County.

As for Buffalo, the completed Tesla-SolarCity plant is now run in partnership with Panasonic. By all accounts, production is ramping up slowly. But from the start, the project’s shifting job-creation targets were inflated by solar-panel sales jobs that Tesla recently eliminated.

Even if this had all worked out as planned — and even if Kaloyeros had run a squeaky-clean, above-board procurement process — Cuomo’s economic-development model would be indefensible. In the final analysis, state government has no business building and equipping plants for private corporations, much less exposing taxpayers to potentially enormous losses if (or when) these investments fail to pan out.

The primary focus of government, in New York as in any state, should be to create a climate in which private enterprise can flourish. Cuomo is not without some accomplishments in this area, including his first-term corporate tax cut and property-tax cap. But the governor’s regulatory policies — especially those touching on energy, the environment and employee wage and hour rules — are making New York state a more costly, less hospitable place to do business.

The good news: Since 1846, the state Constitution has banned any gift or loan of government money to private corporations — a provision that generations of politicians have bypassed via public authorities and development corporations.

It’s time to breathe new life into that wise old law. Boondoggles like the Buffalo Billion can’t be “reformed.” They need to be outlawed.

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

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