Are Tax Credit Scholarships Constitutional?

Last session, House Majority Leader Paul “ Skip” Stam, (R-Wake) introduced legislation (HB 1104) to provide tax credits to businesses that contribute to scholarship funding organizations (SFOs).  SFOs then distribute  the scholarships to eligible students who could use the awards to enroll at the public or private school of their choice.

The legislation, although supported strongly by the school choice community, never made it out of committee.  Why?  There are numerous reasons why the bill may have stalled.  Concern over the looming debate on tax reform may have given some legislators pause. Still  this isn’t the time to debate or consider all the reasons.  Suffice it to say, strong support from the school choice community, makes it likely some version of the bill will likely be reintroduced next  spring.

One constant in the continuing debate over such legislation is the claim by critics that the bill violates the first amendment of the U.S. Constitution because students use public funds to attend religious schools.

Jeanette Doran, Executive Director and General Counsel, of the North Carolina Institute for Constitutional Law, tackles the claim in a paper released earlier today.   Doran writes:

In Zelman [Zelman v. Simmons-Harris] the Supreme Court upheld the use of public money for nonpublic schools, including religious schools, selected by parents.  It is most likely that the courts would uphold both scholarships for students and scholarship tax credit programs for corporations in which the relationship between government and religious schools is even more remote than the direct relationship created by so-called voucher programs.   The Supreme Court has a history of considering the role that a state’s government plays in the education of children as contradistinguished from the independent judgment of parents when the Court evaluates First Amendment challenges to both vouchers and tax credit programs.  If the court were to apply the three-prong test from Lemon and the precedents set in both Zelman and Mueller to scholarship programs, individual tax credits or scholarship tax credits for corporations, any such program would likely survive constitutional scrutiny provided the state remains neutral as to the use of vouchers or scholarships for religiously affiliated schools and otherwise avoids entangling the government with religion.

The  point:  If crafted consistent with relevant court rulings, the Court will likely permit, state aid to private and religious schools.  Doran’s piece is another reason why law makers should feel confident in the constitutionality of tax credit scholarships and seriously consider legislation to expand educational opportunities for students who lack access to quality schools.