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Saturday, June 22, 2024 | Back issues
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Ariz. Taxpayers Can Sue Over Scholarship Program

(CN) - The 9th Circuit on Tuesday reinstated a lawsuit challenging an Arizona scholarship program funded by tax credits. The court ruled that taxpayers had adequately argued that many of the organizations responsible for disbursing the scholarship money unconstitutionally limited the scholarships to religious schools.

In 1997 the Arizona Legislature established a program that 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. Taxpayers may ask the organization to use their contributions to award a scholarship for a particular child, so long as the child is not the taxpayer's dependent.

The tuition organizations are required to give scholarships or tuition grants to students "to allow them to attend any qualified school of their parents' choice," according to the law.

But in practice, taxpayers claim that many organizations restrict the scholarships to use at religious schools. The three largest tuition organizations - the Catholic Tuition Organization of the Diocese of Phoenix, the Arizona Christian School Tuition Organization and the Brophy Community Foundation - each limit the use of their funds to schools of their respective denominations, the plaintiffs claim.

They also point out that the program bars tuition organizations from disbursing scholarship money to schools that discriminate on other grounds, such as disability or race, but says nothing about religion.

Taxpayers say this favors religious schools over secular schools, in violation of the Establishment Clause. They filed suit against the Arizona School Choice Trust, the Arizona Christian School Tuition Organizations and the director of the state Department of Revenue.

The defendants successfully moved to dismiss for failure to state a claim, but the 9th Circuit reversed.

Judge Fisher said the program's design "works against its purpose of providing Arizona students with equal access to a wide range of schooling options."

Although the program doesn't stop parents from creating new tuition organizations that would cater to their educational preferences, the court acknowledged that "this freedom provides little benefit to parents who do not have the time or capital to get others to support their (organization), given that these parents cannot use their tax credits to fund scholarships for their own children."

The three-judge panel concluded that the plaintiffs raised a legitimate claim and allowed the lawsuit to proceed.

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