Law & Courts

High Court Case Tests Religious Schools’ Use of Tax-Credit Scholarships

By Mark Walsh — September 30, 2019 11 min read
Kelsey and Dusty Jones walk with their daughter, Cali, at Stillwater Christian School in Kalispell, Mont. Three different parents at Stillwater are plaintiffs in a case to be heard by the U.S. Supreme Court over Montana’s tax-credit scholarship program.
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A national debate that has simmered for 200 years—whether public funds may go to the coffers of religious schools—is set to take center stage at the U.S. Supreme Court in a case that originated in this small Montana city over a state tax credit for donations to groups providing private school scholarships.

The dispute, Espinoza v. Montana Department of Revenue (Case No. 18-1195), which will be argued in the term that starts Oct. 7, is potentially the most significant high court case for K-12 education in years.

A ruling in favor of parents seeking to use the scholarships at religious schools could affect state constitutional provisions in at least 37 states that bar the inclusion of religious schools in educational choice programs such as vouchers, tax credits for scholarship donations, individual tax credits or deductions, and education savings accounts.

The Montana program, passed by a Republican-majority legislature in 2015 and modeled on similar programs in 18 other states, is quite small, authorizing $150 annual tax credits for scholarship contributions. Big Sky Scholarships, the only scholarship organization to emerge so far, provides $500 scholarships each year to about 40 families.

Still, the families receiving the aid do not discount it.

“For many families out there, $500 is huge,” said Kendra Espinoza, a 47-year-old single mother who has two daughters attending Stillwater Christian School here and who is the lead plaintiff in the lawsuit. “Even though it is a drop in the bucket compared to the tuition, every little bit makes a difference.”

“Even though this is a drop in the bucket compared to the tuition, every little bit makes a difference,” says Kendra Espinoza, 47, whose daughters Naomi, 13, left, and Sarah, 11, attend Stillwater Christian School in Kalispell, Mont. Espinoza is the lead plaintiff in a lawsuit over the state’s tax-credit scholarship program.

Espinoza hopes to receive the scholarships in the future to guarantee that her daughters can remain at the school.

Most of the other tax-credit scholarship programs around the country are far more generous and extensive. The Georgia Goal Scholarship Program, for example, provides tax credits of as much as $1,000 for an individual donor and $10,000 for qualified corporate donors, and has scholarship organizations providing aid of as much as $10,387 per student.

Revenue Department Rule

The Montana tax credit was passed with an inherent paradox. The measure defined “qualified education provider” to include any private schools, but the legislature instructed the Montana Department of Revenue to implement the program in compliance with provisions of the state constitution that bar any direct or indirect aid to churches or religious schools. The department issued an administrative rule that barred the scholarships from being used at religious schools.

That rule was challenged by Espinoza and two other mothers, and their children, under the U.S. Constitution’s guarantees of free exercise of religion and equal protection of the law.

“For the state to say we cannot access these funds because my kids go to a religious school, I feel is very discriminatory,” said Espinoza.

The families won in a state trial court in this northwest Montana city of 22,000 that lies in the Flathead Valley, which is home to 100,000 people and is the jumping-off point for visitors to nearby Glacier National Park.

The Montana Supreme Court ruled 5-2 last year that the tax-credit program violated Article X, Section 6 of the 1972 state constitution, which provides that the legislature and other government entities “shall not make any direct or indirect appropriation or payment from any public fund or monies ... for any sectarian purpose or to aid any church, school, academy, seminary, college, university, or other literary or scientific institution, controlled in whole or in part by any church, sect, or denomination.”

The provision is little changed from the state’s constitution of 1889, the year Montana joined the Union.

Montana was one of four states admitted under the federal Enabling Act of 1889, which also admitted Washington state and split the Dakota Territory into the new states of North Dakota and South Dakota. The federal statute required that those new states adopt state constitutions that prohibited proceeds from federal land grants from being used “for the support of any sectarian or denominational school, college, or university.”

Such state constitutional provisions are known as Blaine amendments, after James Blaine, a 19th century U.S. representative and senator from Maine who in 1875 introduced a federal constitutional amendment to bar public school funding from being used for the schools of any “religious sect or denomination.”

The federal amendment failed, but 37 states have language barring aid to religious schools, with the debates over such requirements going back to the 1820s. But the federal Blaine amendment and those enacted in the late 19th century have long considered to be motivated at least in part by anti-Catholic feeling, a response to the waves of Catholic immigrants who objected to the Protestant nature of the public schools of that era and sought public aid for their own parochial schools.

The Institute for Justice, an Arlington, Va.-based legal organization that represents Espinoza and other families seeking to use the tax-credit scholarships in religious schools, argues that anti-Catholic sentiment was present in Montana in the 1870s and 80s.

“Discrimination and anti-Catholicism was a substantial motivating factor behind Article X, Section 6" of Montana’s constitution, said Erica J. Smith, a lawyer representing the Montana parents for the Institute for Justice.

The state and its allies fiercely disagree.

The state revenue department, which is defending the Montana high court judgment in the U.S. Supreme Court, says in a court brief that the framers of the state’s 1972 Constitution re-adopted the 1889 language barring aid to religious schools “out of broader concerns to protect public education funds from diversion to private schools, and it was ratified by the people of Montana on that basis.”

“Once state funds go into private hands, there is no guarantee they will be spent with oversight and transparency,” says Dianne Burke, the executive director of the Montana Quality Education Coalition.

Dianne Burke, the executive director of the Montana Quality Education Coalition, a Helena-based consortium of public educators and groups, agreed that the state constitution was designed to support public education.

“I see that as a responsibility to the taxpayers as to how their money is spent,” she said. “Once state funds go into private hands, there is no guarantee they will be spent with oversight and transparency.”

Eric Feaver, the president of the powerful Montana Federation of Public Employees, which includes the state affiliates of both the American Federation of Teachers and the National Education Association, also rejects arguments that those who drafted the 1972 constitution were motived by any anti-Catholic bias.

“This is a very Catholic state,” said Feaver, who rose up through the ranks of the teachers’ unions in the state. “If you read the proceedings of the 1972 constitutional convention, you’ll see that you had a bunch of Catholics who said we should not allow public funding for religious education.”

Proponents of school choice, he said, “are out to destroy public education as we know it.”

“This is a very Catholic state. If you read the proceedings of the 1972 constitutional convention, you’ll see that you had a bunch of Catholics who said we should not allow public funding for religious education,” says Eric Feaver, the president of the Montana Federation of Public Employees.

Concerns on Ballot Measure

Advocates of tax credits and other school choice measures have long argued that the traditional public school system could benefit from such ideas.

Kris Hansen, a Republican state senator in Montana in 2015 who co-sponsored the tax-credit program, said supporters worked with national organizations such as EdChoice, an Indianapolis-based group formerly known as the Friedman Foundation for Educational Choice, on a range of school choice bills in Montana before 2015.

She said the measures were vetoed time after time by Gov. Steve Bullock, a Democrat who is currently running for president, including a similar tax-credit provision in 2013.

But in 2015, then-Sen. Llew Jones proposed the tax credit anew and suggested that he would push for a ballot initiative if a legislative bill was unsuccessful.

“We just worked it until we got it through,” said Hansen. “The idea was it would be a $5,000 or a $10,000 or an unlimited, dollar-for-dollar tax credit. But obviously, budget-wise, that’s a pretty big sell.”

Bullock allowed the $150 tax credit to become law without his signature.

“It was made clear to me that if I didn’t allow that to go into law, they were going to run it as a referendum, and they had the votes already to do it,” Bullock said in a brief interview with Education Week in September after an appearance at AFT headquarters in Washington.

A referendum, if it had been held in 2016, would have turned out more Republican voters in a year when Bullock was seeking reelection. Bullock won by about 4 percentage points in 2016, even as Donald Trump won the state’s presidential vote by 20 points.

Hansen has since left the legislature and helped start Big Sky Scholarships, the lone scholarship organization accepting donations eligible for the tax credit. (Even though the Montana Supreme Court struck down the entire tax credit program, the program has continued under a stay of the ruling.)

While the state law authorizes as much as $3 million in tax credits, the results in the first few years have been somewhat humbling.

“It seems like we’ve had about $20,000 to award each year,” said Hansen, who believes that legal uncertainties over the program have hampered donations. Big Sky settled on a $500 scholarship amount for the time being.

“Our board just has to evaluate how much money we have and give out as many scholarships as is feasible,” Hansen said. “We made the determination that a $500 scholarship would be helpful to a family.”

A 6th Grader’s Legal Analysis

Some of the first families to receive the scholarships attend Stillwater Christian School here, a 425-student pre-K-12 non-denominational religious school founded in 1980.

Tuition is as high as $7,735 for grades 1-8 and $8,620 for high school, but the school offers variable tuition rates based on family need, said Jeremy Marsh, the headmaster.

On a recent morning, some students were dropped off for school by parents driving pickup trucks with farm equipment in the back, while others emerged from SUVs with canoes strapped to the roof.

Espinoza, who brought the lawsuit challenging the exclusion of religious schools, chose Stillwater for her two daughters, Naomi, in 8th grade, and Sarah, a 6th grader. Espinoza had home-schooled them until her husband left the family in 2011, when she had to go to work as a bookkeeper. Their home went into foreclosure, and the girls entered public school.

Espinoza was not satisfied with the local public schools, and she enrolled her daughters at Stillwater Christian.

“Initially it was the religious education and that values-based education that I wanted them to have,” she said, also citing the school’s challenging academics and spirit of camaraderie.

“You see the high school kids interacting with the little kids,” Espinoza said. “They’re not too cool for them. My kids have been mentored by some of the older kids.”

She works two jobs as an office manager and bookkeeper this year, after dropping a third job doing janitorial work so she could have some time to shuttle her daughters to their activities. Like other parents receiving various forms of financial aid from the school, she volunteers a set number of hours per school year. Her daughters have not yet received scholarships from Big Sky, but Espinoza wants to apply in the future.

Another plaintiff in the suit, Jeri Anderson, is a 51-year-old single mother whose daughter, Emma, is also in 6th grade. Emma has received the $500 scholarships in the last two years.

“We’re not trying to take away from the public schools,” Anderson said. “We’re just asking for assistance on the same basis as parents who send their children to public schools.”

Emma Anderson has been studying the case herself, sometimes Googling unfamiliar legal concepts.

“I actually looked up the state constitution,” she said. “Although it says government funds should not be going to a religious organization, I think they are going to the families of the children in the school. It is more funding the family than the school.”

Many legal observers predict that the conservative majority of the Supreme Court may be inclined to rule for the parents.

In 2019, the U.S. Supreme Court said Missouri violated the U.S. Constitution’s guarantee of free exercise of religion when it denied a church participation in a state program to improve the safety of playgrounds.

The ruling in Trinity Lutheran Church of Columbia v. Comer was important in several respects, but Chief Justice John G. Roberts Jr. sought to limit its scope with a famous footnote that said the case was about religious discrimination “with respect to playground resurfacing” and not about “religious uses of funding.”

Two justices in the 7-2 majority for the outcome in the case declined to sign that footnote and anticipated a case involving free-exercise claims in public funding of religious schools.

The state revenue department, which declined an interview request, and its allies will file their merits briefs in November, and the case is likely to be argued in January.

Bullock, who supports the Montana Supreme Court decision, was asked whether he had any regrets about allowing the tax-credit measure to become law, given that the small program may lead to a major U.S. Supreme Court ruling on the no-aid principle. He said he did not, given the high probability a ballot measure would have resulted and lead to the same legal clash.

“I certainly hope it doesn’t change the landscape, but I didn’t think that ... it would have been good to be on the ballot either,” he said.

Coverage of how parents work with educators, community leaders and policymakers to make informed decisions about their children’s education is supported by a grant from the Walton Family Foundation, at Education Week retains sole editorial control over the content of this coverage.
A version of this article appeared in the October 02, 2019 edition of Education Week as High Court Case Tests Faith-Based Use of Tax Credits


This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
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