High court tosses out challenge to Arizona tuition tax credit program

WASHINGTON – The Supreme Court April 4 tossed out a challenge to Arizona’s tuition tax credit program – which directs money to scholarships for students at mostly Catholic nonpublic schools – saying that because no direct state expenditures are involved, taxpayers have no legal basis for suing.

The 5-4 ruling written by Justice Anthony Kennedy held that because the arrangement is for taxpayers to receive tax credits for their donations to tuition scholarship organizations, no actual state spending is involved and that therefore taxpayers in general lack jurisdiction for challenging the program.

“In an era of frequent litigation, class actions, sweeping injunctions with prospective effect, and continuing jurisdiction to enforce judicial remedies, courts must be more careful to insist on the formal rules of standing, not less so,” wrote Kennedy. He was joined in the decision by Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas and Samuel Alito. Scalia also wrote a brief concurring opinion.

In a strong dissent, Justice Elena Kagan said that because of the program the state has lost an estimated $350 million in revenue that never got into government coffers since the 1997 law took effect.

The program allows tax credits of up to $500 for individuals and $1,000 for couples who donate money to a scholarship tuition organization, which in turn uses the money to fund scholarships for students who attend private schools, including religious schools. The vast majority of such scholarships have gone to students who attend religious schools.

“The court’s arbitrary distinction threatens to eliminate all occasions for a taxpayer to contest the government’s monetary support of religion. Precisely because appropriations and tax breaks can achieve identical objectives,” wrote Kagan, “the government can easily substitute one for the other.

“Today’s opinion thus enables the government to end-run (a previous ruling that guaranteed) access to the judiciary. From now on, the government need follow just one simple rule – subsidize through the tax system to preclude taxpayer challenges to state funding of religion.”

The case is a joint hearing of two related lawsuits, Arizona Christian School Tuition Organization v. Winn and the Arizona Department of Revenue v. Winn. Kathleen M. Winn and other taxpayers brought the suit.

Paul Bender, the attorney for the people who sued to stop the program, told reporters that because the court did not address whether the law itself is constitutional, the door remains open for another lawsuit, assuming a plaintiff can be found who the court would accept as having been harmed by the program.

Ron Johnson, executive director of the Arizona Catholic Conference, told Catholic News Service that Kagan’s conclusion that the program costs the state money overlooks how much Arizona saves by not having to pay for educating the thousands of children who get scholarships to nonpublic schools.

Johnson said the average credit – or the amount that doesn’t go into state coffers – is $2,000, while the average cost to the state to educate a child is $9,000 to $10,000 a year. The difference of $7,000 to $8,000 per child is an expenditure the state doesn’t have to make for that student. Johnson said private schools typically have lower per-student costs, and the balance of the expense is covered by the parents and by the parishes or other private organizations that sponsor the schools.

The 2010 annual report of the Catholic Tuition Support Organization of the Diocese of Tucson says it provided scholarships for 3,378 students in 26 schools in seven counties of southern Arizona, including 11 schools in economically depressed areas. Forty-seven percent of the students enrolled in those schools benefited. And 34 percent of the individual scholarships went to families headed by a single mother, it said, and the average income of recipient families is less than $35,000.

There are more than 50 such tuition support organizations in the state, representing religious and nonreligious schools, Johnson said. The vast majority of the scholarship beneficiaries are students who go to Catholic schools.

The Phoenix Diocese’s Catholic Tuition Support Organization awarded 6,019 scholarships for the 2008-2009 school year, and more than $9 million worth of scholarships during the 2008 tax year, according to the most recent information on its website.

Johnson said the program has made it possible for Arizona’s private schools to keep up steady enrollment at a time when the state’s economy was among the worst in the nation and parochial schools nationwide have been closing because of shrinking enrollment.

“The tuition tax credit is helping keep schools open, primarily those in inner-city areas,” he said. If those schools closed and the students were pushed into neighborhood public schools, “it would cost the government even more money than they’re not getting because of these tax credits.”

“I think the ruling was outstanding,” Johnson added. “because they said this isn’t government money.”

Catholic Review

Catholic Review

The Catholic Review is the official publication of the Archdiocese of Baltimore.