(CN) - The 9th Circuit on Wednesday refused to reconsider its reinstatement of a lawsuit challenging an Arizona scholarship program funded by tax credits. Taxpayers said the program funnels public money into religious schools in violation of the Constitution's separation of church and state.
The program, established by the state Legislature in 1997, gives taxpayers a dollar-for-dollar tax credit for contributions to "school tuition organizations," or private nonprofit groups that allocate at least 90 percent of their funds to tuition grants and scholarships.
The groups then give the scholarships and grants to students "to allow them to attend any qualified school of their parents' choice," according to the law.
But taxpayers claimed that some tuition organizations, including the three largest, force parents to use the scholarships at religious schools.
They sued the Arizona School Choice Trust, the Arizona Christian School Tuition Organizations and the director of the state Department of Revenue for alleged violations of the Establishment Clause.
The district court dismissed the case, but a three-judge panel in Pasadena, Calif., reversed.
The 9th Circuit turned down three petitions to hear the case en banc.
The panel judges vigorously defended their April decision, saying Arizona's program has the elements of religious discrimination in disguise.
"Parents who are unwilling to send their child to a religious school may be denied access to program benefits because, as plaintiffs allege, there are not a sufficient number of scholarships available for use at secular schools," Judge D.W. Nelson wrote in a concurrence joined by judges Reinhardt and Fisher.
"Accordingly, these parents are shut out of the program altogether, and at the very least their chances of receiving benefits are harmed by their choice to send their child to a secular school."
The eight dissenting judges argued that the program involves private choice, not state action advancing religion. Judge O'Scannlain said the money reaches religious schools based solely on the decisions made by parents, not the state.
"I must confess that I am at a loss to understand how a reasonable observer ... could conclude that the 'government itself' has endorsed religion in this case," he wrote (emphasis in original).
Both sides relied heavily on the Supreme Court's decision in Zelman v. Simmons-Harris, which upheld an Ohio voucher program for need-based tuition aid. Parents could use the vouchers at any participating school - private or public. The high court ruled that such a "neutral program of private choice" does not violate the Constitution.
Judge Nelson pointed out that Arizona's program, though seemingly neutral, creates an "overwhelming disparity" in the number of scholarships available at religious schools versus secular schools, because it lets tuition groups favor religious schools.
Under such a system, parents do not have a "genuine and independent private choice," Nelson wrote.
Chief Judge Kozinski and judges Kleinfeld, Gould, Tallman, Bea, Bybee and N.R. Smith joined O'Scannlain's dissent.
Attorneys defending the tax credits said they will appeal to the U.S. Supreme Court.
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