10/31/2009 4:05:00 PM Supreme Court keeps state law on private school tax donati0ns in place
By Howard Fischer Capitol Media Services
PHOENIX -- The state's high court on Tuesday upheld a 3-year-old law that lets corporations divert some of their state income taxes to help students attend private and parochial schools.
Without comment, the Arizona Supreme Court rejected arguments by the Arizona Education Association and other foes of the law that the law amounts to the state providing illegal aid to these schools. The justices also apparently were unswayed by arguments that the law amounts to the state advancing religion, as most of the dollars collected end up in the coffers of parochial schools.
Tuesday's ruling is the second time the high court has ruled that the system of credits does not run afoul of state constitutional provisions which bar state funds from being used in aid of private schools. The justices previously upheld a similar tax credit for individuals.
But the decision does not mean the end of the fight: Just last week the full 9th Circuit Court of Appeals ruled that groups challenging the credits on federal constitutional grounds have the right to make their case in court. Unless overturned by the U.S. Supreme Court, that decision paves the way for a trial in federal court on the issue.
The original law, which dates back a more than decade, gives individuals get a dollar-for-dollar credit against their state income taxes for donations to organizations that provide scholarships for students to attend private and parochial schools. That credit is capped at $500 for people filing as single or married but filing a separate return, and $1,000 for couples.
Hoping to generate more funds, legislators in 2006 agreed to allow corporations the same kind of dollar-for-dollar tax credits for money given to the scholarship organizations.
But as part of the deal, lawmakers required that the funds from corporate donations be used to give scholarships to students whose parents' income meets certain restrictions.
In the most recent fiscal year, corporations donated nearly $10.5 million to the organizations that administer the scholarships, money they otherwise would have paid to the state in taxes. That compares with about $55 million in individual income tax credits.
In the majority appellate court ruling earlier this year, Judge John Gemmill said the 2006 law contained language saying its express intent was to encourage businesses to direct some of their taxes to the scholarship organizations "in order to improve education by raising tuition scholarships for students in this state.'
And Gemmill said the income restriction on families who would benefit from the corporate dollars "evidences a clear desire on the part of our Legislature to provide an educational choice to parents who probably could not otherwise afford to send their children to a private school.'
Gemmill rejected arguments that the state is fostering religion or religious instruction. He said parents are the ones who choose where to send their children to school and, only then, apply for scholarship aid.
But Judge Donn Kessler, in his dissent, said his colleagues were glossing over important evidence, including that the organizations which get the diverted tax dollars are allowed to deny scholarships to children if the parents do not subscribe to certain religious beliefs. He said the majority seeks to get around that constitutional problem -- he believes incorrectly -- by noting that the tuition scholarship organizations are the ones that discriminate, not the state.
