Part of North Dakota's Constitution assumes the state doesn't have banking laws and can regulate the printing of money. It bans mergers of competing railroads and gives the Legislature jurisdiction over railroad sleeper cars and telegraph lines.
The article was approved in 1889, the same year North Dakota became a state, and hasn't been touched since. It predates the modern web of state and federal laws that regulate railroads, banks and corporations.
On Tuesday, North Dakota voters will have a chance to abolish some of the constitution's dated references by approving Measure 2, one of two proposed amendments that the Legislature has placed on the primary ballot. The other, Measure 1, is unrelated and affects the North Dakota National Guard.
A less ambitious version of the amendment, which erased a requirement that North Dakota corporations give more influence to minority stockholders, was defeated two years ago, with 58 percent of the voters saying no.
Its supporters blamed the defeat on the measure's narrow focus and arcane language, and they are now offering a more comprehensive measure. Unlike most legislative proposals, the new Measure 2 makes the state's law books a wee bit thinner. It abolishes 11 of the 17 sections of the constitution's Article 12, which regulates corporations.
One of the amendment's benefits, says former Gov. Ed Schafer, is that it should make it more attractive for companies to incorporate in North Dakota.
While the constitution now requires North Dakota-based companies to favor minority stockholders, the amendment would allow a corporation's founders to decide how it should be run.
Schafer became acquainted with the provision when he was helping to start Extend America, a telecommunications company, after serving eight years as governor. The founders incorporated Extend America in North Dakota, despite advice from attorneys that it would be foolish to do so because of the unfavorable constitutional provision.
"They said if our efforts were to start a company and eventually take it public, then the place to go is not North Dakota," Schafer said. "We were all North Dakotans being told that we shouldn't incorporate in our own state … We had to override our attorneys, and go through a very expensive and lengthy legal process."
Kelvin Hullett, president of the Bismarck-Mandan Chamber of Commerce, said the amendment "will not be taking power away from anyone."
"If you want to start a public company in North Dakota, (the constitution) is one of the inhibitors," Hullett said. "This would allow corporations to choose what kind of structure they would like to have."
The amendment met little opposition in the Legislature, winning approval in the House (82-3) and the Senate (43-2). Opponents said since voters rejected a proposal to change the constitution's corporate regulations only two years before, their judgment should be respected.
Four sections the new amendment would abolish once affected railroads, whose regulation has been the province of the federal government for decades.
The North Dakota Constitution's current language allows the state to regulate a railroad's rates for hauling intrastate freight and passengers. Sleeping cars and telegraph lines "are declared to be common carriers, and subject to legislative control," it says.
It gives railroads the explicit right to link with each other's tracks, at a time when several different railroads competed for business. It directs railroads to "receive and transport each other's passengers, tonnage and cars, loaded or empty, without delay or discrimination."
Should the state approve a general banking law, the constitution now says, a state officer must co-sign "all notes or bills designed for circulation," which must be backed by "ample security," a reference to gold or silver.
William L. Guy III, a son of North Dakota's former governor and a specialist in North Dakota's corporate law, said the regulatory responsibilities mentioned in the amendment are already being handled by the state and federal government.
In any case, corporate regulation is better left to Congress and state legislatures, rather than putting rules into the North Dakota Constitution, Guy said.
"I'm sure, at the time, the railroads were a very substantial economic force within the state, and there was felt to be a need to regulate them at the constitutional level," Guy said. "Now that regulation has been passed over to the Public Service Commission … or to the federal government."
When the Legislature was debating last year whether to put the amendment on the ballot again, business interests promised to mount a public campaign on its behalf.
Aside from a few letters to the editor, that hasn't happened, which worries Schafer and Secretary of State Al Jaeger.
"We're in the same boat we were two years ago," Schafer said.
Said Jaeger: "I was kind of led to believe that there would be more support from the business community this time around. I'm a little nervous about what's going to happen."
Posted in State-and-regional on Saturday, June 10, 2006 7:00 pm Updated: 9:59 am.
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