Can Arkansas redirect rice checkoff funds to a trade association that lobbies for the rice industry?

Plain-English summary

State Senator Ronald Caldwell asked whether legislation allowing Arkansas rice checkoff money to go to a trade association for policy advocacy would raise legal concerns. The AG said he could not judge the constitutionality of legislation that had not been drafted. He identified two issues for lawmakers to consider: compelled funding of private speech under the First Amendment, and Arkansas's requirement that public funds serve a public purpose.

For the First Amendment issue, the opinion discusses Johanns v. Livestock Marketing Association. The U.S. Supreme Court upheld the federal beef checkoff's promotional speech because the federal government effectively controlled it. The AG suggested significant government oversight of any proposed Arkansas program, including memoranda of understanding, goals, and reporting. He also said state-funded advocacy directed at state government could draw a challenge and suggested that lawmakers consider limiting funded advocacy to national or international policy.

For the public-purpose issue, the AG said courts consider who benefits from the expenditure and give great weight to legislative findings of public purpose, while retaining the final say. He suggested an express legislative finding and a prohibition on campaign contributions. The opinion does not say that those provisions would make a bill constitutional, and it does not address refunds or other remedies if a program were challenged.

What this means for you

Arkansas legislators considering a rice checkoff bill

The opinion identifies government control over funded speech and a public purpose for spending as questions a proposed bill would have to address. The AG offered oversight requirements, a public-purpose finding, and a campaign-contribution restriction as possible ways to reduce challenge risk. He gave no final answer about any bill's validity.

Rice producers and buyers paying assessments

The opinion describes assessments of 1.35 cents per bushel from both the producer and the first buyer. It does not decide whether those funds may be used for a future trade-association advocacy program, or whether contributors would be entitled to refunds after a legal challenge.

Trade associations and state boards

The AG's discussion of Johanns stresses effective government control over the funded message. It identifies a possible First Amendment objection to using checkoff money to lobby the state government itself. The opinion gives no approval for a specific agreement between the Board and a trade association.

Common questions

Did the AG approve using Arkansas rice checkoff money for lobbying?
No. He said the constitutionality of hypothetical legislation would depend on its drafting and implementation, which he could not review in this opinion.

What First Amendment concern did the opinion identify?
Compelling contributors to fund private speech they disagree with can trigger a First Amendment challenge. The AG discussed Johanns, where government control made the federal beef program's promotional message government speech.

Would a legislative finding of public purpose settle the issue?
The opinion says courts give such findings great weight, but courts ultimately decide whether the spending serves a public purpose. The AG suggested a finding as one possible provision to reduce challenge risk.

Could assessments be refunded if a future program is struck down?
The opinion does not discuss refunds or retroactive reductions.

Background and statutory framework

The opinion cites A.C.A. § 2-20-507(a)(1) and (2) for the rice assessments and §§ 2-20-507(d) and 2-20-510 for their use in research, extension, market development, and promotion. It discusses Johanns and government speech under the First Amendment, then Arkansas's public-purpose doctrine through Chandler and Turner. Its footnotes point to Louisiana and Mississippi rice statutes as examples of limits on funded policy advocacy and political activity. Those examples are legislative options, not a holding that any Arkansas proposal passes constitutional review.

Citations

• A.C.A. § 2-20-507(a)(1) and (2) (rice assessments)
• A.C.A. §§ 2-20-507(d), 2-20-510 (uses of funds)
• Johanns v. Livestock Marketing Association, 544 U.S. 550 (2005) (government speech in beef checkoff)
• Pleasant Grove City v. Summum, 555 U.S. 460 (2009) (government speech)
• Chandler v. Bd. of Trs. of Teacher Ret. Sys., 236 Ark. 256, 365 S.W.2d 447 (1963) (public purpose)
• Turner v. Woodruff, 286 Ark. 66, 698 S.W.2d 527 (1985) (weight given legislative findings)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2023-007
April 27, 2023
The Honorable Ronald Caldwell
State Senator
120 CR 393
Wynne, Arkansas 72396

Dear Senator Caldwell:

I am writing in response to your request for an official opinion regarding rice checkoff funds. As background for your question, you state:

It is my understanding the Arkansas Department of Finance and Administration collects rice check-off funds from rice farmers and the first purchasers of Arkansas rice. Currently, these funds are appropriated/restricted with ½ of the proceeds spent on research and ½ spent on promotion.

Against this background, you ask: "Would there be any constitutional/legal concerns if legislation was enacted to allow for portions of the proceeds to be provided to a state trade association to include services that advocate and influence the development and implementation of policy affecting the Arkansas rice industry?"

RESPONSE

Because the constitutionality of your proposed legislation will depend on how it is crafted and implemented, you will likely want to draft the legislation so that it is considered "government speech" under the First Amendment and that it complies with the public-purpose doctrine.

DISCUSSION

Arkansas law currently levies assessments on the sale of rice grown in Arkansas. These assessments, commonly known as "checkoffs" or "checkoff funds," are set at 1.35¢ per bushel to be paid by the rice producer and at 1.35¢ per bushel to be paid by the buyer at the first point of sale. The Arkansas Rice Research and Promotion Board ("the Board") then uses these funds for rice research, extension, market development, and the promotion of Arkansas's rice industry.

I understand your question as asking whether it would be constitutional to expand the rice checkoff program in two ways: (1) by allowing the assessments to be spent on lobbying and (2) by allowing a private entity to receive and spend those assessments. While I cannot opine on the constitutionality of hypothetical legislation, the substance of which is impossible to review, I have identified two areas of constitutional law that you should consider when drafting legislation to allow rice checkoff funds to be used by a trade association to influence policy: the First Amendment to the U.S. Constitution and the public-purpose doctrine grounded in our state constitution.

I. First Amendment & Government Speech

The First Amendment to the U.S. Constitution, which applies to each state through the Fourteenth Amendment, prohibits the legislature from enacting laws that abridge the freedom of speech. The U.S. Supreme Court has held that, with a few exceptions, a statute is rebuttably presumed to abridge the freedom of speech if the statute requires a citizen to fund private speech with which the citizen disagrees. But since "the Free Speech Clause restricts government regulation of private speech," the clause "does not regulate government speech." Consequently, a proponent of the legislation you describe will likely want to ensure the bill is drafted so that the checkoff funds are used to fund government speech rather than private speech.

The leading government-speech case in the context of checkoff funds is Johanns v. Livestock Marketing Association. Johanns rejected a First Amendment compelled-subsidy challenge to a beef checkoff program, holding that beef promotional campaigns paid for with beef checkoff funds were government speech. The individuals and associations challenging the checkoff program argued that the advertisements were not government speech because they were developed and controlled by the Cattlemen's Beef Promotion and Research Board and the Beef Board's Operating Committee, an arguably nongovernmental entity. However, the Court rejected this argument, reasoning that the promotional campaigns were "effectively controlled by the Federal Government" through the Beef Promotion and Research Act of 1985 (the authorizing legislation), federal regulations, and the Secretary of Agriculture's oversight authority and appointment and removal powers. Thus, it did not matter whether the federal government solicited assistance from a nongovernmental entity in developing the advertisements' specific messages; the messages were still protected as government speech, allowing them to survive a First Amendment challenge.

Johanns provides some guidance for the optimal way to draft the legislation you describe. While I cannot definitively say whether the hypothetical legislation you envision would survive a First Amendment challenge, I do believe there are steps that the General Assembly and the Board can take to reduce the likelihood that such a challenge would succeed. These steps include requiring significant government oversight of the funds' use, such as memoranda of understanding, clear goals and objectives, and reporting requirements. It is also possible that the state's use of checkoff funds to influence policy and legislation at the state level could invite a First Amendment challenge, as a challenger might argue that speech used to lobby state government cannot also be the state government's own speech. Therefore, the General Assembly may wish to include language in proposed legislation that allows for checkoff funds to be used for influencing national or international policy but prevents them from being used to influence policy at the state level.

II. The Public Purpose Doctrine

Legislation directing checkoff funds to a trade association for influencing and developing policy would also need to be drafted to ensure it withstood a challenge under the "public-purpose doctrine." This doctrine, which the Arkansas Supreme Court has rooted in due process, requires that the appropriation and expenditure of public funds be for a public purpose.

In determining whether an expenditure of public funds violates the public-purpose doctrine, courts have displayed at least three patterns of decisions. First, courts will consider whether those who paid the tax receive the intended benefit of that tax or, by contrast, whether some other private individual or entity receives the benefit. Second, even though the judiciary ultimately determines whether an expenditure of public funds meets the public-purpose test, courts afford "great weight" to "legislative determinations of public purposes." That is because the legislature is tasked with determining whether a particular expenditure is for a public purpose. Finally, while courts have reached different conclusions regarding the propriety of the use of public funds to support political activities, most are reluctant to sanction the expenditure of public funds for such purposes.

Given these criteria, there are certain provisions that potential legislation can include to reduce the likelihood of being struck down as a violation of the public-purpose doctrine. Perhaps most importantly, the legislature can include a statement that explicitly finds and declares the expenditure of funds for the purpose of influencing the development and implementation of policy affecting the Arkansas rice industry to be for a public purpose. Additionally, the legislation can prohibit the use of funds to make political campaign contributions.

Senior Assistant Attorney General Kelly Summerside prepared this opinion, which I hereby approve.

Sincerely,

TIM GRIFFIN
Attorney General

1 A.C.A. § 2-20-507(a)(2) (Supp. 2021).

2 A.C.A. § 2-20-507(a)(1).

3 See A.C.A. §§ 2-20-507(d), 2-20-510 (Repl. 2017).

4 E.g., Thornhill v. Alabama, 310 U.S. 88, 95 (1940).

5 See Janus v. AFSCME 31, 138 S.Ct. 2448, 2459–2460 (2018) (holding that an Illinois statute compelling public sector employees to pay agency fees to a union was unconstitutional); Keller v. State Bar of Cal., 496 U.S. 1, 2 (1990) (holding that the use of compulsory attorney dues to finance political and ideological activities with which petitioners disagreed violated their First Amendment free speech rights); see also Eugene Volokh, The Law of Compelled Speech, 97 Tex. L. Rev. 335, 370 (2018).

6 Pleasant Grove City v. Summum, 555 U.S. 460, 467 (2009) (emphases added).

7 544 U.S. 550 (2005).

8 See id. at 562 (“Citizens may challenge compelled support of private speech, but have no First Amendment right not to fund government speech.”).

9 Id. at 560.

10 Id. at 551.

11 Id. at 562.

12 See, e.g., La. Rev. Stat. Ann. §§ 3:3538(D), 3:3548(D) (authorizing Louisiana’s Rice Promotion Board and Rice Research Board to expend a portion of Louisiana’s rice checkoff funds for the purpose of influencing the development and implementation of national and international policy affecting the marketing of rice produced by farmers Louisiana farmer but prohibiting the expenditure of funds for the purpose of influencing any legislative action on the state level).

13 See Chandler v. Bd. of Trs. of Teacher Ret. Sys., 236 Ark. 256, 258, 365 S.W.2d 447, 448 (1963) (“No principle of constitutional law is more fundamental or more firmly established than the rule that the State cannot, within the limits of due process, appropriate public funds to a private purpose.”).

14 See id. at 258, 365 S.W.2d at 448–49 (“The objects for which money is raised by taxation must be public, and such as subserve the common interest and well being of the community required to contribute.”) (citation omitted).

15 Turner v. Woodruff, 286 Ark. 66, 72, 698 S.W.2d 527, 530–31 (1985).

16 Id. at 72, 698 S.W.2d at 530.

17 See, e.g., Kidwell v. City of Union, F.3d 620 (6th Cir. 2006) (holding that the city could expend public funds to advocate on issues germane to the mechanics of its function but distinguishing these permissible uses from impermissible ones, such as expending public funds to advocate for a particular candidate); Stanson v. Mott, 17 Cal.3d 206, 130 Cal.Rptr. 697, 551 P.2d 1 (1976) (holding that although the California Department of Parks and Recreation possessed statutory authority to disseminate information to the public relating to a bond election, the Department was obligated to provide a fair representation of the facts and could not expend public funds for promotional purposes); see also A.C.A. §§ 7-1-111(b) (Repl. 2018) (prohibiting a public servant or a governmental body from expending or permitting the expenditure of public funds to support or oppose a ballot measure); 7-9-406(c) (Repl. 2018) (requiring that an elected official who expends more than $500 in public funds to advocate for or against a ballot or legislative question must file financial reports with the Arkansas Ethics Commission).

18 Mississippi prohibits the use of rice checkoff funds “for the purpose of influencing any political activity.” See Miss. Code Ann. § 69-10-9(2)(d).