A federal appeals court ruled Tuesday that foes of state tuition tax credits for private and parochial schools are entitled to try to prove they are unconstitutional.
Judge Raymond Fisher, writing for the unanimous 9th Circuit Court of Appeals said a district judge was wrong to throw the case out even before a trial. Fisher said the allegations of opponents in the lawsuit, if proven at a trial, provide sufficient basis to question the constitutionality of the credits.
Tuesday's ruling does not, at this point, void the credits. But it is significant because it is the first time any state or federal court has called the credits into question.
The law allows individuals to donate up to $500 -- $1,000 for married couples -- to organizations that provide scholarships for students to attend private and parochial schools. There is no actual cost to the donors as they can deduct the amount contributed on a dollar-for-dollar basis from their state income tax liability.
In 2007, the most recent year for which numbers are available, Arizona residents diverted more than $54 million to these tuition organizations that otherwise would go to the state treasury.
Foes filed suit, saying the plan is unconstitutional because the law has the effect of giving most of the money to religious schools.
In 2005, U.S. District Court Judge Earl Carroll said that may be true. But he said as long as donors are free to decide without state interference where to give money, and parents decide where to send their children to school, there is no constitutional violation.
In Tuesday's ruling, Fisher said that, on paper, the scholarships allow students to attend any school of their choice. But the judge noted there was evidence showing that is not actually the case.
For example, Fisher said, the Catholic Tuition Organization of the Phoenix Diocese limits scholarships to Catholic schools like St. Mary's "which advertises its mission as being 'to provide a quality Catholic education by developing and sustaining a rich tradition grounded in Gospel and family values.'' The Tucson diocese has a similar program.
And Fisher said the Arizona Christian School Tuition Organization restricts its scholarships to be used at "evangelical'' Christian schools.
The two organizations are the largest recipients of the tax-deductible donations. There are various smaller programs, including some that do not limit their scholarship aid to religious schools.
What all that means, Fisher said, is the law could be interpreted as having the effect of government aid of religious instruction, which would be unconstitutional.
Paul Bender, an Arizona State University law professor who argued against the credits' legality, said he believes Tuesday's decision sets the stage for courts eventually voiding them.
He said a prior U.S. Supreme Court ruling has maintained these kinds of scholarships are legal only if given out "without reference to religion and if the parents have free choice to use the scholarships at whatever school they want.''
"The large majority of scholarships in the Arizona program are not given out on a religiously neutral basis,'' Bender said, but by organizations that limit where they can be used.
But attorney Tim Keller of the Institute for Justice, which defends the scholarships, said the fact that most of the cash goes to sending children to religious schools is legally irrelevant.
He said nothing in the 1997 law denies Arizona parents of the right to send their children to any school they want. And Keller said challengers would have to prove parents are being "coerced to choose religious schools'' because of the way the program is set up, something he said the law does not do.
Jeremy Tedesco of the Alliance Defense Fund, representing the Arizona Christian School Tuition Organization, said there is no state coercion of any sort. He said individuals, not the state, decide to which tuition organization they want to donate, and parents decide from which group to seek scholarships.
And Tedesco said any group of parents is free to set up its own scholarship organization, get the same kind of donations and decide at which kind of schools those scholarships can be used.