Lawmakers grew fund for non-citizens, minorities despite constitution warning

Congressional candidate Janelle Bynum and attorney general candidate Dan Rayfield knew state attorney said program unconstitutional, increased funding anyway

Dan Rayfield, left, and Janelle Bynum, right funded a program focused on non-citizens and racial minorities despite legislative attorney’s opinion the program is unconstitutional.

Earlier this year, Oregon legislators plowed an additional $8 million into a controversial state program to provide “disadvantaged” persons with “culturally responsive services” to build wealth and economic stability, despite receiving a state legislative attorney’s opinion that the program is very likely unconstitutional. Leading the charge was State Representative and congressional candidate Janelle Bynum (D-Happy Valley), with assistance from Democratic attorney general candidate and then-Speaker Dan Rayfield.

The grant program, named the Economic Equity Investment Program and administered by the Oregon Business Development Department, also known as Business Oregon, came under fire in recent weeks after one of its grantee organizations, Hacienda Community Development Corporation, advertised that it offered $30,000 in down payment assistance from the EEIP only for non-citizens. The advertisement was first highlighted by citizen journalist Oregon Citizen on the social media platform X, formerly known as Twitter. The story was then picked up by The Daily Caller.

The EEIP’s challenges, however, extend beyond catering to non-citizens. Its very constitutionality is dubious, as opined by a state attorney paid by taxpayers to advise legislators about legal matters.

The EEIP was created during the 2022 legislative session via a bill, SB 1579, cosponsored by Bynum. The bill pushed $15 million into the new program. To qualify, nonprofits and other service providers had to demonstrate that they would use EEIP grant funds to benefit Oregonians “whose future is at risk” due to possessing two or more “economic equity risk factors,” defined as

(a)           Experience of discrimination because of race or ethnicity;

(b)           English language proficiency;

(c)           Citizenship status;

(d)           Socioeconomic status; or

(e)           Residence or operation in a rural location.

The Oregon Business Development Department issued an EEIP grant in the amount of $692,775 to Hacienda in 2023, for the nonprofit to disburse $30,000 down payment assistance grants to 21 families via four credit unions offering mortgages to borrowers using Individual Taxpayer Identification Numbers, an alternative to Social Security Numbers available to non-citizens. Hacienda then advertised the grants as available only to “people who are not American citizens.”

Following news coverage of the advertisement last month, officials for Business Oregon said the Hacienda advertisement was incorrect, and that non-citizen status confers only half of the required criteria for qualification for EEIP funding.

The challenges for EEIP extend beyond the Hacienda advertisement. In the 2024 legislative session the House Interim Committee on Economic Development and Small Business, chaired by Bynum, introduced a bill, HB 4041, to put an additional $30 million from the state’s general fund into EEIP, and to add to the economic equity criteria membership in an Indian tribe.

The bill was referred to the Committee on Economic Development and Small Business, also chaired by Bynum, and a hearing was scheduled for February 8, 2024. In preparation for the hearing, committee vice-chair Representative Ed Diehl (R-Stayton), requested from the nonpartisan Legislative Counsel an opinion regarding the constitutionality of the EEIP.

On February 2, Legislative Counsel issued its opinion, penned by senior attorney Alan Dale of that office. The opinion concluded the EEIP, if challenged in court, would likely be found unconstitutional under the U.S. Supreme Court’s interpretation of the Fourteenth Amendment’s Equal Protection Clause in its recent Students for Fair Admissions v. Harvard case. In that case, the Supreme Court held the Fourteenth Amendment prohibits the use of racial criteria in college admissions regardless of which race would benefit: “Eliminating racial discrimination means eliminating all of it.”

Legislative Counsel, noting Students for Fair Admissions applies to government functions outside college admissions, wrote it believed the EEIP “would not survive the test” applied in the case. In other words, Legislative Counsel told the legislature the EEIP would very likely be stricken down as unconstitutionally discriminatory if challenged. In reaching its conclusion, Legislative Counsel used the following hypothetical to establish the racial discrimination in EEIP:

Two individuals, one black and one white, each operating a business in a rural location (economic equity risk factor (e)), do not qualify for services provided by organizations awarded state-funded grants under any of the other economic equity risk factors. Nevertheless, the black individual, having the requisite two economic equity risk factors of (a) and (e), will qualify to receive the services, while the white individual, having only economic equity risk factor (e), will not, and the difference is entirely due to the race of the otherwise similarly situated applicants.

The Supreme Court held that form of discrimination is almost always forbidden under the Equal Protection Clause, adopted in 1868 after the Union victory in the Civil War ended America’s most blatant example of state-sponsored racial discrimination. The clause provides, “No State shall . . . deny to any person within its jurisdiction the equal protection of the laws.”

Diehl submitted the letter as an exhibit for the hearing, but says he was not allowed to ask witnesses questions about the constitutionality of the bill and the EEIP generally. “Asking questions is my job,” Diehl said in an interview with Oregon Roundup.

According to Diehl, he and Bynum were then summoned to the “principal’s office,” i.e. the office of House Speaker Dan Rayfield. There, Diehl says, he, Bynum, Rayfield, Democratic majority leader Julie Fahey and Republican minority leader Jeff Helfrich convened to discuss the bill, and Legislative Counsel’s opinion that EEIP was very likely unconstitutional. Shortly thereafter, HB 4041 was taken off the committee’s agenda and disappeared into the Salem ether.

The EEIP was not, however, slain. In fact, weeks later, hidden away in the 2024 end-of-session “Christmas Tree bill” was an $8 million transfer from the general fund to the EEIP. The EEIP provision appears in Section 492 of the mammoth bill, which is often a repository for spending legislators prefer not to highlight as stand-alone bills, or that would not garner majority support in a straight up or down vote.

The Christmas Tree bill passed, and the EEIP was infused with an additional $8 million by legislators who had been warned the EEIP was very likely unconstitutional by the very lawyer paid by taxpayers to advise legislators regarding the constitutionality of what they want to do.

Diehl says Rayfield, as Speaker, and Bynum, as chair of the committee of jurisdiction and sponsor of HB 4041, must have known about the $8 million for EEIP in the Christmas Tree bill.

“I could not imagine this going through without [Bynum’s] knowledge. Nothing goes into the Christmas Tree bill without the Speaker’s consent,” Diehl said.

Diehl plans to introduce a bill in the 2025 legislative session to strip the unconstitutional provisions from EEIP.

The EEIP is not Oregon’s first foray into costly and unconstitutionally discriminatory programs. In 2020, the legislature created the Oregon Cares Fund to distribute funds to black business owners. Plaintiffs challenged the constitutionality of the Fund on equal protection grounds, and the state was forced to settle. The state set aside $3.5 million to pay people who were damaged by its unconstitutionally discriminatory program.

Bynum is challenging first-term Republican Lori Chavez-Deremer in Oregon’s closely-watched 5th Congressional District, which is one of a handful of races in the country that will help determine which party controls the U.S. House of Representatives.

Rayfield, an attorney, is running to be Oregon’s next attorney general against Republican Will Lathrop. Oregon’s attorney general is charged with representing and advising state government agencies in legal matters, including constitutional challenges to state programs.