State Capitol News
3:54 pm
Mon April 4, 2011

Nations Highest Court Upholds State Tax Credits to Help Students Attend Private and Parochial Schools

Phoenix, AZ – State law allows individuals to divert up to $500 a year in what they otherwise owe the state in income taxes to instead go to these scholarship organizations. Last tax year, Arizonans contributed more than $43 million for those scholarships, with the largest recipient groups funding only aid to go to a religious school. Foes led by the ACLU said this amounts to an illegal subsidy of religion. But in a 5-4 ruling the U.S. Supreme Court threw out the challenge, not on the constitutional argument but on the basis that individual Arizona taxpayers have no legal standing to sue because they cannot show individual harm. Justice Anthony Kennedy, writing for the majority, said that is because this is not a case of the government giving direct funds to the schools. That disappointed attorney Paul Bender who represents the ACLU.

(The Supreme Court says that taxpayers cannot challenge it because it doesn't hurt taxpayers, which is absurd. But that's what they hold. They distinguish tax expenditures like deductions and credits from appropriations, which taxpayers do have standing to challenge.)

But attorney Tim Keller who represents one of the tuition organizations getting the funds said the justices -- at least the majority -- got it right.

(The court in its decision seemed to be very clear that this is not state action. These are private dollars going to private organizations. And that nobody's going to look at this and see that the state is in any way funding these school tuition organizations.)

Kennedy said it might even be argued that the scholarships save money for taxpayers because they take kids out of public schools. That very point has been at the center of legislative debate over the credits. Nothing in the law requires the scholarships provided by the individual tax credits to be given to children based on need. Nor is there a mandate that students move from public schools, with funds equally available to those parents who would send their children to private schools with -- or without -- the aid. For Arizona Public Radio this is Howard Fischer.