Petition for Writ of Certiorari — Kotterman v. Killian

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») FILED

no. 98171 GAPR 5 6 jog

Supreme Comet uf the Wuited States

OCTOBER TERM, 1998

PENNY KOTTERMAN, et al.,

. Petitioners,

MaRK W. KILLIAN, ef al.,

Respondents.

On Petition for Writ of Certiorari to the

Supreme Court of Arizona

PETITION FOR WRIT OF CERTIORARI

SUSAN G. SENDROW Rorert H. CHANIN

LIEBERMAN, DODGE, SENDROW (Counsel of Record)

& GERDING, Ltd. JOHN M. WEST

Valley Bank Tower, Suite 1801 ALICE O’BRIEN

3550 North Central Avenue BREDHOFF & KAISER, P.L.L.C.

Phoenix, Arizona 85012 1000 Connecticut Avenue, N.W.

(602) 277-3000 Suite 1300

ALICE FINN GARTELL Loong gee - 20056

ARIZONA EDUCATION ASSOCIATION a

100 West Clarendon Avenue ELLIOT M. MINCBERG

Suite 1600 JUDITH E. SCHAEFFER

Phoenix, Arizona 85013 PEOPLE FOR THE AMERICAN

(602) 264-1774 WAY FOUNDATION

2000 M Street, N.W., Suite 400

Washington, D.C. 20036

(202) 467-4999

THOMAS W. PICKRELL

ARIZONA SCHOOL BOARDS ASS’N

2100 North Central Avenue

Phoenix, Arizona 85004 STEVEN K. GREEN

(602) 254-1100 AMERICANS UNITED FOR

SEPARATION OF CHURCH

CAROLINE PILCH

ARIZONA FEDERATION OF

TEACHERS 1816 Jefferson Place, N.W.

Yen & Pace Washington, D.C. 20036

1420 East Missouri, Suite 101 (202) 466-3234

Phoenix, Arizona 85014

(602) 241-0474

AND STATE

Attorneys for Petitioners

del

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

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QUESTION PRESENTED

Whether, under the principles established by Mueller v.

Allen, 463 U.S. 388 (1983), and Committee for Public

Education v. Nyquist, 413 U.S. 756 (1973), the Establish-

ment Clause of the First Amendment is violated when a

state—by means of a dollar-for-dollar tax credit—redirects

funds from the state treasury to a class composed exclu-

sively of private elementary and sccondary schools, most

of which are sectarian and which may use the funds with-

Out restriction for religious purposes.

(i)

PARTIES

This Petition for Writ of Cetriorari is filed on behalf

of petitioners Penny Kotterman, Panfilo Contreras, Frieda

Baker, Rev. Dr. Gerald S. DeGrow, Joanne Hilde,

Michael J. Hoogendyk, Pastor Stanley Jones, Jann Renert,

James Ullman, and Rabbi Joseph Weizenbaum.

Respondents are Mark W. Killian, in his official capac-

ity as Director of the Arizona Department of Revenue;

Lisa Graham Keegan, in her capacity as Superintendent

of Public Instruction and as a parent and taxpayer;

Emmett McCoy, Sr. and Alfreda McCoy, in their own

behalves and as natural guardians of their children, Dallas

McCoy, Krystal McCoy, Sean McCoy, Brandi McCoy,

Daniel McCoy, and Priscilla McCoy; Tanya Phelps, in

her own behalf and as natural guardian of her children,

Tasha Phelps and Leanessa Phelps; Rita Samaniego, in

her own behalf and as natural guardian of her children,

Geraldo Wingate, Kristin Wingate, and Sarah Wingate;

Felipe Sandoval, in his own behalf and as natural guard-

ian of his children, Felicia Sandoval and Felipe Sandoval;

Sally Shanahan, in her own behalf and as natural guard-

ian of her children, Nathan Shanahan, Kaitlyn Shanahan,

Gabriel Shanahan, and Jacob Shanahan; Jeffry Flake and

Trent Franks, as taxpayers; Arizona School Choice Trust,

Inc.; and Lwuis Rhodes.

TABLE OF CONTENTS

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CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED ........... FRETS NEE: NO ae 2

STATEMENT OF THE CASE .........................000....-c0000---

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(iii)

TABLE OF AUTHORITIES

CASES ' Page

Board of Education v. Allen, 392 U.S. 286 (1968)... 10

Committee for Public Education v. Nyquist, 418

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Committee for Public Education v. Nyquist, 350

F. Supp. 655 (S.D.N.Y. 1972), aff'd in part,

rev'd in part, 413 U.S. 756 (1973) —........0........... 8

Everson v. Board of Education, 330 U.S. 1 (1947).. 10

Bob Jones University v. United States, 461 U.S.

FRR atir tal cerereinn MINE F tes SA one a 7

Lemon v. Kurtzman, 403 U.S. 602 (1971) Scene 5

Meek v. Pittenger, 421 U.S. 349 (1975) ........000.0....... 4

Mueller v. Allen, 468 U.S. 388 (1988) 0.00.00... passim

Texas Monthly, Inc. v. Bullock, 489 U.S. 1 (1989).. 7

Witters v. Washington Dep’t of Services for the

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CONSTITUTIONS, STATUTES, AND RULES

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A.R.S. § 48-1088 ...................... ree 13

A.R.S. § 48-1084 ........... eee ee PERI: LER ON hic 13

A.R.S. § 43-1085 FON NA Reo RN CRIS Se RD 14

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TABLE AUTHORITIES—Continued

Page

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1998

No. 98-

PENNY KOTTERMAN, ef al.,

. Petitioners,

MaRK W. KILLIAN, ef al.,

Respondents.

On Petition for Writ of Certiorari to the

Supreme Court of Arizona

PETITION FOR WRIT OF CERTIORARI

Petitioners respectfully request that a writ of certiorari

issue to review the judgment of the Supreme Court of

Arizona in Kotterman v. Killian, Ariz. -, 972

P.2d 606 (1999),

OPINION BELOW

The opinion of the Supreme Court of Arizona is re-

ported at Ariz. , 972 P.2d 606, and is repro-

duced in the Appendix to this Petition at la.

JURISDICTION

The judgment of the Supreme Court of Arizona was

entered on January 26, 1999. The jurisdiction of this

Court is invoked pursuant to 28 U.S.C. § 1257.

CONSTITUTIONAL PROVISIONS

AND STATUTES INVOLVED

The First Amendment to the United States Constitution

provides in pertinent part as follows: “Congress shall

make no law respecting an establishment of religion, or

prohibiting the free exercise thereof.”

Section 43-1089, Arizona Revised Statutes, provides as

follows:

A. For taxable years beginning from and after

December 31, 1997, a credit is allowed against the

taxes imposed by this title for the amount of volun-

tary cash contributions made by the taxpayer during

the taxable year to a school tuition organization, but

not exceeding five hundred dollars in any taxable

year. The five hundred dollar limitation also applies

to taxpayers who elect to file a joint return for the

taxable year. A husband and wife who file separate

returns for a taxable year in which they could have

filed a joint return may each claim only one-half of

the tax credit that would have been allowed for a

joint return.

B. If the allowable tax credit exceeds the taxes

otherwise due under this title on the claimant’s in-

come, or if there are no taxes due under this title,

the taxpayer may carry the amount of the claim not

used to offset the taxes under this title forward for

not more than five consecutive taxable years’ income

tax liability.

C. The credit allowed by this section is in lieu of

any deduction pursuant to section 170 of the in-

ternal revenue code and taken for state tax purposes.

D. The tax credit is not allowed if the taxpayer

designates the taxpayer’s donation to the school tui-

tion organization for the direct benefit of any de-

pendent of the taxpayer.

E. For purposes of this section:

1. “Qualified school” means a nongovern-

mental primary or secondary school in this state

that does not discriminate on the basis of race,

color, handicap, familial status or national

origin and that satisfies the requirements pre-

scribed by law for private schools in this state

on January 1, 1997.1

2. “School tuition organization” means a

charitable organization in this state that is ex-

empt from federal taxation under section

501(c)(3) of the internal revenue code and

that allocates at least ninety per cent of its an-

nual revenue for educational scholarships or tui-

tion grants to children to allow them to attend

any qualified school of their parents’ choice. In

addition, to qualify as a school tuition organiza-

tion the charitable organization shall provide

educational scholarships or tuition grants to

students without limiting availability to only

students of one school.

STATEMENT OF THE CASE

A. Statement of Facts

This action challenges the constitutionality of the Ari-

zona Private School Tax Credit, A.R.S. § 43-1089. En-

acted by the Arizona legislature in 1997, the Private

School Tax Credit allows Arizona taxpayers a dollar-

for-dollar credit of up to $500 against their state income

tax liability each year for contributions to “School Tuition

Organizations” (“STOs”). STOs are defined as charitable

Organizations that allocate at least 90% of their revenue

to scholarships for Arizona schoolchildren to attend “non-

1As originally enacted, § 43-1089(E)(1) also barred qualified

schools from discriminating on the basis of “sex.” This restriction

was removed by a 1998 amendment.

pant |

governmental” primary or secondary schools. A.R.S.

§ 43-1089(E).

The Private School Tax Credit does not limit recipient

private schools to nonsectarian institutions; private schools

that are affiliated with churches and other religious or-

ganizations or that include religious components in their

programs and operations are thus eligible to receive the

funds made available under the statute. Indeed, the vast ;

majority of such funds will flow to sectarian schools,

which enroll as much as 84% of Arizona’s total private-

school student population.”

Most of these recipient sectarian schools are “per-

vasively sectarian” in that the secular and sectarian aspects

of their educational programs are intertwined. These pro-

grams, which include religious indoctrination, worship,

and the inculcation of religious beliefs, are designed to

advance the religious missions of the sponsoring churches

or other religious organizations.* The “very purpose” of

these schools, as this Court has put it, “is to provide an

integrated secular and religious education.” Meek v.

Pittenger, 421 U.S. 349, 366 (1975).

The Private School Tax Credit places no limits on the

use that private schools may make of the funds they

receive. These funds may be used for any purpose the

private schools deem appropriate, which in the case of

sectarian schools could include the payment of salaries

and expenses of employees affiliated with the religious

mission of the schools, the purchase of literature and other

2See Appendix I to Response of Intervenors/Respondents Lisa

Graham Keegan, et al. to Petition for Special Action (reporting

data from Maricopa and Pima counties) ; see also Petitioners’ Ap-

pendix [to Petition for Special Action], Exhibit F.

3 See Petitioners’ Appendix [to Petition for Special Action], Ex-

hibits G-H.

materials identified with the religious mission of the

Schools, the maintenance and construction of facilities

used for religious purposes, and other expenditures that

support or maintain religious instruction, worship, and

other religious activities.

B. Proceedings Below

This action was commenced directly in the Supreme

Court of Arizona on Sept mber 29, 1997, as a “Special

Action” within that court’s original jurisdiction. The

Petition for Special Action asserted that the Private School

Tax Credit was unconstitutional under both the Establish-

ment Clause of the First Amendment to the United States

Constitution and multiple provisions of the Arizona Con-

stitution. The court accepted jurisdiction over the action

and, on January 26, 1999, issued its opinion—rejecting,

by a vote of 3-2, both the federal and state constitutional

challenges to the Private School Tax Credit. Appendix

to Petition for Certiorari (“App.”) la.

With regard to the constitutionality of the Private

School Tax Credit under the Establishment Clause, see

App. 4a-19a, the court below applied the three-pronged

inquiry called for in Lemon vy. Kurtzman, 403 U.S. 602

(1971). Finding that the Private School Tax Credit had

a secular purpose, App. 6a-7a, and did not foster ex-

cessive governmental entanglement with religion, App.

18a-19a, the court focused on the “primary effect” of the

Tax Credit. App. 7a-18a. Citing Mueller v. Allen, 463

U.S. 388 (1983), the court held that this prong of the

inquiry was satisfied because the Tax Credit was (a) “one

of an extensive assortment of tax-saving mechanisms avail-

able [to Arizona taxpayers] as part of a ‘genuine system

of tax laws,’” App. 10a (quoting Mueller, 463 U.S. at

396 n.6); (b) broadly “available to all taxpayers who

are willing to contribute to an STO,” App. 11a; and (c)

based on “multiple layers of private choice.” App. 13a.

As to the last point, the court concluded that “while

direct subsidies to sectarian schools may affront the Con-

stitution, . . . [p]rivate and sectarian schools are at best

only incidental beneficiaries of this tax credit... .”

App. 18a.

The Arizona court also rejected challenges under mul-

tiple provisions of the state constitution—including Article

II, § 12, which forbids the “appropriat[ion]” or “appli-

{cation]” of “public money” for “the support of any relli-

gious establishment,” and Article IX, § 10, which prohibits

the use of “public money .. . in aid of any . . . private

or sectarian school”—on the theory that funds channeled

to private education through the Private School Tax

Credit did not constitute “public money.” App. 19a-39a.

The two dissenting justices would have struck down

the Private School Tax Credit under both the Establish-

ment Clause and the Arizona Constitution. App. 40a-

87a.

REASONS FOR GRANTING THE WRIT

This Court has twice had occasion to address the con-

stitutionality under the Establishment Clause of programs

through which state tax codes are used as a means of

providing public financial support for students to attend

private—predominantly sectarian—primary and second-

ary schools. In Committee for Public Education v.

Nyquist, 413 U.S. 756 (1973), this Court struck down,

inter alia, that portion of a New York program that pro-

vided a tax deduction for parents of children attending

private schools. Ten years later, in Mueller v. Allen, 463

U.S. 388 (1983), this Court upheld a Minnesota tax

deduction for expenses—including, but not limited to,

tuition—incurred by parents in connection with the edu-

cation of their children at both public and private schools.

Since the time they were decided, Nyquist and Mueller

have been the leading precedents cited by opponents and

proponents, respectively, of public funding of private sec-

tarian education—and, in particular, of the provision of

such funding through manipulation of the tax code. And,

as the decision of the Arizona Supreme Court upholding

the Private School Tax Credit indicates, there is some con-

fusion as to the teaching of Nyquist and Mueller with

regard to this important question of Establishment Clause

jurisprudence. The instant action offers this Court a

timely and appropriate Opportunity to explain how its

holdings in Nyquist and Mueller can be harmonized, and

to clarify the line that this Court has drawn between per-

missible and impermissible uses of the tax code to support

sectarian private education.

This Court consistently has recognized that “tax ex-

penditures”—in the form of tax deductions, exemptions,

credits, and the like—come within the purview of the

Establishment Clause just as much as more direct govern-

mental appropriations: “Every tax exemption constitutes

a subsidy that affects nonqualifying taxpayers, forcing

them to become ‘indirect and vicarious “donors.” ’”

Texas Monthly, Inc. v. Bullock, 489 U.S. 1, 14 (1989)

(plurality) (quoting Bob Jones University v. United

States, 461 U.S. 574, 591 (1983)). This Court thus has

not hesitated to inquire into the constitutionality of tax-

code provisions such as deductions, exemptions, and

credits, that financially Support sectarian private educa-

tion at the expense of the public fisc.

At issue in Nyquist, supra, was a New York statute

that provided aid to private education in multiple forms

—including grants to private schools for the maintenance

and repair of their facilities, tuition reimbursement grants

rs Di clhns aO OS

to low-income parents of children attending private

schools, and tax benefits for parents of private-school chil-

dren who were not eligible for tuition reimbursement.

Observing that approximately 85% of the state’s non-

public schools were church-related, 413 U.S. at 768, this

Court struck down each of the three portions of the stat-

ute, concluding that “[i]n the absence of an effective

means of guaranteeing that the state aid derived from

public funds will be used exclusively for secular, neutral,

and nonideological purposes, it is clear from our cases

that direct aid in whatever form is invalid.” Jd. at 780.

This Court found the tax benefit provided by the New

York statute constitutionally indistinguishable from its

direct grants for tuition reimbursement. While the tax

benefit took the form of a tax deduction, this Court noted

that the amount of the deduction was not related to the

beneficiaries’ actual expenditures for tuition, but rather

was designed to yield a predetermined net tax saving in

the same amount as the tuition reimbursement grants. /d.

at 790. Under these circumstances, this Court agreed with

a lower-court judge that “[iJn both instances the money

involved represents a charge made upon the state for the

purpose of religious education.” Jd. at 791 (quoting 350

F. Supp. 655, 675 (S.D.N.Y. 1972) (Hays, J., dissenting

in part)). This Court specifically rejected the contention

that it was “of controlling significance that the grants or

credits are directed to the parents rather than to the

schools,” id.: “[F]ar from providing a per se immunity

from examination of the substance of the State’s program,

the fact that aid is disbursed to parents rather than to the

schools is only one among many factors to be considered.”

Id. at 781.

The Minnesota statute that was before this Court in

Mueller, supra, provided a tax benefit that—unlike the

tax benefit at issue in Nyquist—was not limited to the

parents of children attending private schools. Rather,

under the Minnesota statute all taxpayers who incurred

certain educational expenses for their children were en-

titled to deduct those expenses in calculating their state

income taxes. 463 U.S. at 391. The deductible expenses

included certain types of tuition that could be incurred

by both public and private school students, as well as

expenditures for such things as textbooks, transportation,

clothing for physical education classes, rental fees for

cameras, ice skates, calculators, musical instruments, ma-

terials for home economics, shop, and art classes, pencils,

and notebooks. /d. at 391-92 n.2.

In upholding the Minnesota statute, this Court pointed

to three factors that were critical to its conclusion that

the tax deduction did not have the primary effect of

advancing religion—and that distinguished it in this re-

gard from the tax benefit struck down in Nyquist.

First, this Court found it significant that Minnesota’s

tax deduction for education expenses was one of many

similar deductions available under the Minnesota tax code.

Id. at 396. That was not, by contrast, the case in Nyquist,

where New York had provided “thinly disguised ‘tax bene-

fits,’ actually amounting to tuition grants.” Id. at 394.

This Court noted in Mueller that it had “expressed con-

siderable doubt [in Nyquist] that the ‘tax benefits’ pro-

vided by New York law properly could be regarded as

parts of a genuine system of tax laws.” Id. at 396 n.6.

As the Mueller Court explained, this Court had not con-

sidered the tax benefit in Nyquist to be a “genuine tax

deduction,” and for that reason had not accorded it “the

traditional rule of deference accorded legislative classifica-

tions in tax statutes.” Id. at 397 n.6.

Second, and “[mJost importantly,” this Court empha-

sized that the tax deduction in Mueller was “available for

educational expenses incurred by all parents, including

those whose children attended public schools... .” Id.

at 397 (emphasis in original). This Court added:

In this respect, as well as others, this case is vitally

different from the scheme struck down in Nyquist.

There, public assistance amounting to tuition grants

was provided only to parents of children in nonpublic

schools. This fact had considerable bearing on our

decision striking down the New York statute at issue;

we explicitly distinguished both [Board of Education

v. Allen, 392 U.S. 236 (1968)] and [Everson v.

Board. of Education, 330 U.S. 1 (1947)] on the

grounds that “[i]n both cases the class of beneficiaries

included all schoolchildren, those in public as well as

those in private schools.”

463 U.S. at 398 (emphasis in original). After thus dis-

tinguishing Nyquist, this Court reiterated the key consid-

eration in upholding the Minnesota tax deduction: “Un-

like the assistance at issue in Nyquist, [the Minnesota stat-

ute] permits all parents—whether their children attend

public school or private—to deduct their children’s edu-

cational expenses.” Jd. (emphasis in original).

The third factor noted by the Mueller Court was that,

“by channeling whatever assistance it may provide to

parochial schools through individual parents, Minnesota

has reduced the Establishment Clause objections to which

its action is subject.” Jd. at 399. This Court made it

clear, however, that this factor standing alone was not

determinative. While “of some importance,” it was “ ‘only

one among many factors to be considered.’” /d. (quoting

Nyquist, 413 U.S. at 781). Doubtless for that reason,

this Court described the channeling of the financial assist-

ance through individual parents as having “reduced”—

not “eliminated”—the Establishment Clause objections to

such assistance. Indeed, this Court recognized in Mueller

that it had struck down the tax benefit in Nyquist not-

withstanding that New York also had channeled its aid

to sectarian schools through individual parents. Nyquist,

however, said this Court, was “distinguishable from this

case on other grounds.” Jd. Those “other grounds” were,

of course, the first two factors discussed above.

II.

Notwithstanding their opposing outcomes, Nyquist and

Mueller can and should be read harmoniously. The col-

lective teaching of these two cases with respect to the use

of the tax code to provide public funds to support sectar-

ian private education can be summarized in the following

three principles.

First, although the determination of a state legislature

that a tax benefit “fairly equalizes the tax burden of its

citizens and encourages desirable expenditures” is nor-

mally “entitled to substantial deference,” Mueller, 463

U.S. at 396, that will be true only with respect to tax

benefits that “properly [can] be regarded as parts of a

genuine system of tax laws,” id. at 396 n.6, rather than

outright governmental grants “thinly disguised,” id. at

394, as tax benefits.

Second, the key distinction between the kind of tax

benefit held unconstitutional in Nyquist, and the type of

tax benefit this Court found “vitally different” and con-

stitutionally permissible in Mueller, is whether the class

that actually receives the benefit of the funds made avail-

able is limited “only to parents of children in nonpublic

schools,” or consists of “all parents—whether their chil-

dren attend public school or private.” Id. at 398 (em-

phasis in original).

Third, a state can “reduce[] the Establishment Clause

objections to which its action is subject” by channeling

cal

its aid in such a way that state funds become available

to particular sectarian private schools only as the result

of “numerous private choices,” id. at 399, but that is

“only one among many factors to be considered.” Jd.

(quoting Nyquist, 413 U.S. at 781). It is not determina-

tive—as is illustrated by the opposite results reached by

this Court in Nyquist and Mueller.

This case offers this Court a timely and appropriate

opportunity to confirm that the foregoing principles ac-

curately reflect the collective teaching of Nyquist and

Mueller and, in so doing, to provide badly needed guid-

ance as to which uses of the tax code to provide financial

support for private sectarian education are constitutionally |

permissible. Although a full analysis of the Arizona Pri-

vate School Tax Credit under the Mueller/Nyquist prin-

ciples set forth above must be reserved for briefing on the

merits, a thumbnail sketch of the contours of such an

analysis makes clear that the decision of the Arizona

Supreme Court was erroneous and should be reversed.

me TY ew’

A. It is exceedingly difficult to view the Private School

Tax Credit as “part[] of a genuine system of tax laws.”

Mueller, 463 U.S. at 396 n.6. To the contrary, the Credit

is but a “thinly disguised,” id. at 394, use of the tax code

as a means of transferring public funds to the coffers of

private—mostly sectarian—schools. \

In Mueller, this Court pointed out that the tax deduc-

tion for education expenses was only one among many

deductions available to Minnesota taxpayers—including,

for example, deductions for medical expenses and for

charitable contributions. Jd. at 396. While at first glance

the Private School Tax Credit might appear to have much

in common with the deduction for charitable contributions

available under Arizona law, closer scrutiny demonstrates

that this Tax Credit is of a wholly different nature, and

that it has no precedent in any other Arizona tax credit

in existence at the time of its enactment.

It is important to emphasize the nature of the Private

School Tax Credit: every dollar that a taxpayer “con-

tributes” to an STO, he or she receives back through the

tax credit. Thus, unlike a legitimate tax deduction for

charitable contributions—which recognizes and rewards

private philanthropy—there is in the case of the Private

School Tax Credit no private contribution to a charitable

Organization. Rather, private giving is entirely replaced

by government funding. Whatever “contribution” the tax-

payer may choose to make up to the $500 limit is reim-

bursed in its entirety by the state, making this tax benefit

simply a vehicle for redirecting public money from the

public fisc to private education. Here, as in Nyquist, “the

money involved represents a charge made upon the state

for the purpose of religious education.” 413 U.S. at 791.

Nor, prior to 1997 when the Private School Tax Credit

was enacted, was there any precedent in Arizona law for

a tax credit through which the state reimbursed 100% of

a taxpayer's contribution to a private entity. Most of the

State’s tax credits provided a financial incentive—in the

form of a credit for a fixed dollar amount or a percentage

of the amount expended—for employers or other private

parties to engage in socially desirable private actions.* A

4 See A.R.S. § 43-1074 (credit for increased employment in en-

terprise zones, based on percentage of wages paid); A.R.S. § 43-

1076 (credit for 10% of the cost of recycling equipment); A.R.S.

§ 43-1077 (fixed-dollar credit for additional employment positions

created by defense contractors): A.R.S. § 48-1079 (fixed-dollar

credit for additional employment positions created in military reuse

zones); A.R.S. § 43-1080 (credit for 10% of construction cost of

environmental technology facilities); A.R.S. § 43-1081 (credit of

10% of purchase price of pollution control equipment); A.R.S.

§ 43-1082 (credit of 5% of purchase price of construction materials

for certain industrial facilities): A.R.S. § 43-1083 (credit of 25%

of cost of solar energy devices); A.R.S. § 43-1084 (credit of 75% of

smaller number of tax credits of 100% or less were

allowed for certain other taxes or fees paid to public

entities,>5 and one tax credit had the effect of increasing

the personal exemption for low-income families. But

with the Private School Tax Credit the state for the first

time adopted a tax credit that simply reimburses tax-

payers for their contributions to private third parties—

thus using the mechanism of a tax credit as a substitute

for direct legislative appropriations.’

Where a state has provided what in effect are “outright

grants,” Mueller, 463 U.S. at 396-97 n.6, to support sec-

tarian private education, this Court has not allowed the

fact that such “grants” are made through manipulation

of the tax code—rather than through direct legislative ap-

propriations—to affect its review of such public expendi-

tures under the Establishment Clause. The “tax credit”

at issue here is in effect such an outright grant—not a

legitimate “part[] of a genuine system of tax laws,” id.—

and thus requires exacting scrutiny.

expense of agricultural water conservation systems); A.R.S. § 43-

1085 (credit of 10% of cost of corrective action for underground

storage tanks); A.R.S. § 43-1086 (fixed-dollar credit for purchase

of alternative fuel vehicles and equipment); A.R.S. § 43-1087

(credit for increased employment of recipients of temporary as-

sistance for needy families, based on percentage of wages paid).

5 See A.R.S. § 43-1071 (100% credit for income taxes paid to

other states); A.R.S. § 43-1072 (property tax credit of up to 100%

for low-income elderly persons); A.R.S. § 43-1078 (percentage

credit for property taxes paid by defense contractors); A.R.S. § 43-

1089.01 (100° credit for fees paid to public schools for extra-

curricular activities).

6 See A.R.S. § 43-1073.

7In the same 1997 legislative session in which the Private School

Tax Credit was enacted, the Arizona legislature also enacted a 100%

tax credit for contributions of up to $200 to charitable organizations

that provide assistance to the working poor, A.R.S. § 43-1088, which

is similar in form to the Private School Tax Credit.

ee ne eae

B. The heart of the Mueller/Nyquist inquiry goes to

the issue of whether, in Mueller’s language, the benefit is

broadly “available for educational expenses incurred by

all parents,” 463 U.S. at 397 (emphasis in original)—

“whether their children attend public school or private,”

id. at 398—or, to the contrary, is “provided only to par-

ents of children in nonpublic schools.” Id. (emphasis in

original) .*

The court below disposed of this issue in a scant para-

graph, asserting that here the “class of beneficiaries is

even broader than that found acceptable in Mueller,”

App. lla, in that “the Arizona tuition credit is available

to all taxpayers who are willing to contribute to an STO.

Any individual, not just a parent, may donate to the

scholarship program.” Jd.

That analysis is defective in several respects. To begin

with, the taxpayers who contribute to STOs and receive

a reimbursement of their contributions through the Private

School Tax Credit are not the ones who derive the benefit

from this statute; the balance sheet is, for them, a “wash.”

The focus, therefore, must be on the breadth of the class

that actually receives the benefit of the funds made avail-

able through the Tax Credit.®

8 See also Witters v. Washington Dep't of Services for the Blind,

474 U.S. 481, 487-88 (1986) (upholding aid program “made avail-

able generally without regard to the sectarian-nonsectarian, or

public-nonpublic nature of the institution benefited”) (quoting

Nyquist, 413 U.S. at 782-83 n.38).

9 Even if one did focus on the taxpayers, moreover, the result

would still be the same as that outlined below: only those taxpay-

ers who wish to make contributions to support education at private

schools are entitled to the tax credit. Similarly, should one focus on

the STO pass-through entities, it is only organizations that provide

scholarships to “nongovernmental” schools that qualify as STOs

for purposes of the Private School Tax Credit. A.R.S. § 43-1089(E).

Whether one conceives of that benefit as flowing to the

private schools that ultimately receive the funds as tuition,

or rather to the parents of children who receive scholar-

ships to attend such schools, the class of those who benefit

is in either case limited to the sector of private—predomi-

nantly sectarian—education. See A.R.S. § 43-1089(E)(1)

(defining “qualified school” as a “nongovernmental” pri-

mary or secondary school). Here, as in Nyquist, the

“public assistance amounting to tuition grants [is] pro-

vided only to parents of children in nonpublic schools.”

Mueller, 463 U.S. at 398 (emphasis in original). Unlike

the situation in Mueller, where the statute on its face

provided a tax benefit that could be used by parents of

students in both public and private schools, and where

this Court accordingly declined to speculate as to what

percentage of that benefit was likely to be used by par-

ents in either sector, see 463 U.S. at 401, it is clear from

the face of A.R.S. § 43-1089 that all of the proceeds of

the Private School Tax Credit will go to private schools

and their students.

In short, the Private School Tax Credit benefits only

private (predominantly sectarian) schools and the students

who attend them, excluding public schools and their stu-

dents altogether. Accordingly, it falls on the same side

of the line as the statute struck down in Nyquist rather

than the one upheld in Mueller.’

C. In upholding the Private School Tax Credit, the

court below devoted the bulk of its attention to the “nu-

10The court below thought significant that a different tax

credit is available for taxpayers who pay up to $200 in fees to pub-

lic schools for certain extracurricular activities. See App. 17a (cit- °

ing A.R.S. § 43-1089.01). As noted above, see supra note 5, this is

one of a number of Arizona tax credits that reduce the taxpay-

er’s state income tax in compensation for certain other taxes and

fees paid to governmental entities. Unlike the Private School Tax

Credit, A.R.S. § 43-1089.01 does not reimburse taxpayers for their

voluntary contributions.

eR ANE ete RAE. OF tl BE

merous private choices” through which the funds provided

by the tax credit reach sectarian private schools. App.

12a (quoting Mueller, 463 US. at 399). The court’s

error in this regard was not in noting the point—which

this Court’s decisions have indicated is relevant—but in

according controlling significance to the fact that, to a

limited extent, “private individuals choose where the funds

will go.” App. 12a.

While it is true that private individuals do make choices

that determine the specific private schools to which funds

from the Private School Tax Credit will go, what the

court below overlooked is that the same was true of the

tax benefit struck down in Nyquist. In analyzing the tax

deduction at issue in Mueller, therefore, this Court ob-

served that private choice was “of some importance... ,

albeit ‘only one among many factors to be considered.’ ”

463 U.S. at 399 (emphasis added) (quoting Nyquist, 413

U.S. at 781). Thus, Minnesota “reduced”—but did not

eliminate—the Establishment Clause objections to its stat-

ute by “channeling whatever assistance it may provide to

parochial schools through individual parents.” 463 U.S.

at 399,

The specific choices made by private individuals that

determine which particular private schools will receive

funds under the Private School Tax Credit should not

obscure the fundamental choice—made by the state—

about where these public funds will go. The state has

chosen to channel these funds exclusively to private

schools, and the choices of private individuals must be

made within that restricted universe. This is the factor

that ultimately was determinative in Mueller; it was—

along with whether the tax benefit was part of “a genuine

system of tax laws”—the basis upon which this Court

distinguished the tax benefit it had struck down in Nyquist.

See 463 U.S. at 399.

The state’s choice to redirect public funds—via a unique

and unprecedented 100% tax credit—from the public fisc

exclusively to private schools is the critical choice for

purposes of analyzing the Private School Tax Credit.

This use of the tax code to channel unrestricted public

funds to a recipient class composed exclusively of private

schools, most of which are pervasively sectarian, “repre-

sents a charge made upon the state for the purpose of

religious education.” Nyquist, 413 U.S. at 791. The deci-

sion of the Arizona Supreme Court is, accordingly, incon-

sistent with the principles established by this Court in

Mueller and Nyquist, and it therefore should be reviewed

and reversed.

III.

Because the Arizona Supreme Court has decided the

important Establishment Clause question presented by the

Private School Tax Credit in a way that conflicts with

the collective teaching of Mueller and Nyquist, a grant

of certiorari is warranted under Supreme Court Rule

10(c). But the Arizona court’s decision also is sympto-

matic of a more generalized confusion as to the line that

this Court has drawn between permissible and impermis-

sible uses of the tax code to provide financial support for

sectarian private education. This case offers this Court

the opportunity to clarify that line by explaining how its

holdings in Mueller and Nyquist can be harmonized.

Guidance from this Court is important for practical as

well as doctrinal reasons. Estimates of the amount of

public funds that would be channeled to private, predomi-

nantly sectarian, education under the Private School Tax

Credit vary widely, but the Arizona Department of Reve-

nue has concluded that $75 million annually would be a

“not unreasonable” estimate, and that an estimate of $35

million would be “extremely conservative.” 44 Nor is the

significance of this issue by any means limited to Arizona.

Legislation pursuant to which the state tax code is used

in some way to provide public financial support for sec-

tarian private education has been introduced during this

year’s legislative sessions in at least twenty other states.

This Court should grant certiorari in order to provide

States that are considering this type of legislation with a

clear understanding as to its permissibility vel non under

the Establishment Clause.

CONCLUSION

The Petition for Writ of Certiorari should be granted.

SUSAN G. SENDROW

LIEBERMAN, DODGE, SENDROW

& GERDING, Ltd.

Valley Bank Tower, Suite 1801

3550 North Central Avenue

Phoenix, Arizona 85012

(602) 277-3000

ALICE FINN GARTELL

ARIZONA EDUCATION ASSOCIATION

100 West Clarendon Avenue

Suite 1600

Phoenix, Arizona 85013

(602) 264-1774

THOMAS W. PICKRELL

ARIZONA SCHOOL BoarRDs ASS’N

2100 North Central Avenue

Phoenix, Arizona 85004

(602) 254-1100

CAROLINE PILCH

ARIZONA FEDERATION OF

TEACHERS

YEN & PILCH

1420 East Missouri, Suite 101

Phoenix, Arizona 85014

(602) 241-0474

Respectfully submitted,

ROBERT H. CHANIN

(Counsel of Record)

JOHN M. WEST

ALICE O’BRIEN

BREDHOFF & KAISER, P.L.L.C.

1000 Connecticut Avenue, N.W.

Suite 1300

Washington, D.C. 20036

(202) 833-9340

ELLIOT M. MINCBERG

JUDITH E. SCHAEFFER

PEOPLE FOR THE AMERICAN

WAY FOUNDATION

2000 M Street, N.W., Suite 400

Washington, D.C. 20036

(202) 467-4999

STEVEN K. GREEN

AMERICANS UNITED FOR

SEPARATION OF CHURCH

AND STATE

1816 Jefferson Place, N.W.

Washington, D.C. 20036

(202) 466-3234

Attorneys for Petitioners

11 Petitioners’ Appendix [to Petition for Special Action], Ex-

hibit D.

APPENDIX

a i Net ae

APPENDIX

[Filed Jan. 26, 1999]

SUPREME COURT OF ARIZONA

En Banc

Supreme Court No. CV-97-0412-SA

PENNY KOTTERMAN, PANFILO CONTRERAS, FREIDA BAKER,

Rev. Dr. GERALD S. DEGROW, JOANNE HILDE,

MICHAEL J. HOooGENpyK, PASTOR STANLEY JONES,

JANN RENERT, Louis RHODES, JAMES ULLMAN, and

RABBI JOSEPH WEIZENBAUM,

Petitioners,

Mark W. KILLIAN, in his official Capacity as Director

of the Arizona Department of Revenue,

Respondent,

LisA GRAHAM KEEGAN, in her Capacity as Superintendent

of Public Instruction and as a parent and taxpayer;

EMMETT MCCoy, SR. and ALFREDA McCoy, in their

own behalves and as natural guardians of their children,

DALLAS McCoy, KRYSTAL McCoy, SEAN McCoy,

BRANDI McCoy, DANIEL McCoy, and PRISCILLA

McCoy; TANYA PHELPS, in her own behalf and as nat-

ural guardian of her children, TASHA PHELPS and

LEANESSA PHELPS: RITA SAMANIEGO, in her own behalf

and as natural guardian of her children, GERALDO

WINGATE, KRISTIN WINGATE, and SARAH WINGATE;

FELIPE SANDOVAL, in his own behalf and as natural

guardian of his children, FELICIA SANDOVAL and FELIPE

SANDOVAL; SALLY SHANAHAN, in her own behalf and as

natural guardian of her children, NATHAN SHANAHAN,

KAITLYN SHANAHAN, GABRIEL SHANAHAN, and JACOB

SHANAHAN; and JEFFREY FLAKE and TRENT FRANKS,

as taxpayers; ARIZONA SCHOOL CHOICE TRUST, INC.,

Intervenors/Respondents.

SPECIAL ACTION

JURISDICTION ACCEPTED, RELIEF DENIED

ZLAKET, Chief Justice.

{1 Petitioners challenge the constitutionality of A.R.S.

§ 43-1089 (1997), which allows a state tax credit of up

to $500 for those who donate to school tuition organiza-

tions (STOs). The statute reads as follows:

A. For taxable years beginning from and after De-

cember 31, 1997, a credit is allowed against the taxes

imposed by this title for the amount of voluntary cash

contributions made by the taxpayer during the taxable

year to a school tuition organization, but not exceed-

ing five hundred dollars in any taxable year. The five

hundred dollar limitation also applies to taxpayers

who elect to file a joint return for the taxable year.

A husband and wife who file separate returns for a

taxable year in which they could have filed a joint

return may each claim only one-half of the tax credit

that would have been allowed for a joint return.

B. If the allowable tax credit exceeds the taxes

otherwise due under this title on the claimant’s in-

come, or if there are no taxes due under this title, the

taxpayer may carry the amount of the claim not used

to offset the taxes under this title forward for not

” in

more than five consecutive taxable years’ income tax

liability.

C. The credit allowed by this section is in lieu of

any deduction pursuant to § 170 of the internal

revenue code and taken for state tax purposes.

D. The tax credit is not allowed if the taxpayer

designates the taxpayer’s donation to the school tui-

tion organization for the direct benefit of any depend-

ent of the taxpayer.

E. For purposes of this section:

1. “Qualified school” means a nongovernmental

primary or secondary school in this state that does

not discriminate on the basis of race, color, sex,

handicap, familia] status or national origin and that

satisfies the requirements prescribed by law for pri-

vate schools in this state on January 1, 1997.

2. “School tuition organization” means a chari-

table organization in this state that is exempt from

federal taxation under § 501(c)(3) of the internal

revenue code and that allocates at least ninety per-

cent of its annual revenue for educational scholar-

ships or tuition grants to children to allow them to

attend any qualified school of their parents’ choice.

In addition, to qualify as a school tuition organiza-

tion the charitable organization shall provide educa-

tional scholarships or tuition grants to students with-

out limiting availability to only students of one school.

A.R.S. § 43-1089 (footnotes omitted). Petitioners claim

that this law violates the Federal Establishment Clause

and three provisions of the Arizona Constitution. We

have original jurisdiction pursuant to Ariz. Const. art. VI,

§ 5(1) and Ariz. R. Spec. Act. 1(a) and 3(b).

FEDERAL CONSTITUTION

42 The Establishment Clause, applicable to the states

by authority of the Fourteenth Amendment, proclaims that

“Congress shall make no law respecting an establishment

of religion.” U.S. Const. amend. I; see also Everson v.

Board of Educ., 330 U.S. 1, 15, 67 S. Ct. 504, 511

(1947). The simplicity of this language belies its complex

and continually evolving interpretation by the United

States Supreme Court. See generally Kristin M. Engstrom,

Comment, Establishment Clause Jurisprudence: The Sour-

ing of Lemon and the Search for a New Test, 27 Pac. L.J.

121 (1995); see also Andrew A. Adams, Note, Cleve-

land, School Choice, and “Laws Respecting an Establish-

ment of Religion,” 2 Tex. Rev. L. & Pol. 165, 171-75

(1997). That Court’s decisions reflect an effort to steer

a course of “constitutional neutrality,” Walz v. Tax

Comm'n, 397 U.S. 664, 669, 90 S. Ct. 1409, 1411

(1970), aimed “between avoidance of religious establish-

ment on the one hand, and noninterference with religious

exercise on the other.” Leonard J. Henzke, Jr., The Con-

stitutionality of Federal Tuition Tax Credits, 56 Temp.

L.Q. 911, 924 (1983). “The clearest command of the

Establishment Clause is that one religious denomination

cannot be officially preferred over another.” Larson v.

Valente, 456 U.S. 228, 244, 102 S. Ct. 1673, 1683

(1982). Similarly, religion may not be preferred over

nonreligion. See Everson, 330 U.S. at 18, 67 S. Ct. at

513.

3 This emphasis on neutrality is apparent in a recent

line of Supreme Court cases upholding a variety of educa-

tional assistance programs. See Agostini v. Felton, 521

U.S. 203, , 117 S.Ct. 1997, 2016 (1997), overrul-

ing Aguilar v. Felton, 473 U.S. 402, 105 S. Ct. 3232

(1985) (public school teachers providing remedial educa-

ee ee

tion to disadvantaged children in parochial schools);

Rosenberger v. Rector & Visitors of the Univ. of Va.,

515 U.S. 819, 845-46, 115 S. Ct. 2510, 2524-25 (1995)

(state university funds used to pay printing costs of student

newspaper espousing religious viewpoint); Zobrest v. Cat-

alina Foothills Sch. Dist., 509 U.S. 1, 3, 113 S. Ct. 2462,

2464 (1993) (sign-language interpreter provided for deaf

student in sectarian high school); Witters v. Washington

Dep’t of Servs. for the Blind, 474 U.S. 481, 482, 106 S.

Ct. 748, 749 (1986) (state financial assistance to blind

student attending private Christian college); Mueller v.

Allen, 463 U.S. 388, 390-91, 103 S. Ct. 3062, 3064-65

(1983) (state income tax deduction for educational ex-

penses, including those incurred at sectarian schools).

€4 Other courts in recent years have also found state

educational aid programs to be in compliance with the

First Amendment. See Jackson v. Benson, 578 N.W.2d

602, 619 (Wis. 1998), cert. denied, US. , 119

S. Ct. 466 (1998) (distribution of tuition vouchers for

use in private, including sectarian, schools); Matthew J. v.

Massachusetts Dep’t of Educ., 989 F.Supp. 380, 391-92

(D. Mass. 1998) (reimbursement of special education

tuition costs at private sectarian school).

€5 In Lemon v. Kurtzman, 403 U.S. 602, 612-13, 91

S. Ct. 2105, 2111 (1971), the Supreme Court adopted a

three-pronged test for evaluating compliance with the

Establishment Clause. Simply stated, a statute does not

violate the First Amendment if (1) it serves a secular

purpose; (2) its principal or primary effect neither ad-

vances nor inhibits religion; and (3) it does not “foster

an excessive government entanglement with religion.” Id.

(quoting Walz, 397 U.S. at 674, 90 S. Ct. at 1414).

While other approaches have been considered by the

Court,! we believe that the “well settled” Lemon standard

provides an appropriate framework for our review. See

Mueller, 463 U.S. at 394, 103 S. Ct. at 3066.

Secular Purpose

"6 The Supreme Court rarely attributes an unconstitu-

tional motive to a legislative act such as this, “particularly

when a plausible secular purpose for the state’s program

may be discerned from the face of the statute.” Mueller,

463 U.S. at 394-95, 103 S. Ct. at 3067. The Minnesota

law at issue in Mueller permitted a tax deduction for tui-

tion, textbook, and transportation expenses of children

attending elementary or secondary schools. /d. at 391

103 S. Ct. at 3065. In upholding it, the Court said:

A state’s decision to defray the cost of educational

expenses incurred by parents—regardless of the type

of schools their children attend—evidences a purpose

that is both secular and understandable. An educated

populace is essential to the political and economic

health of any community, and a state’s efforts to as-

sist parents in meeting the rising cost of educational

expenses plainly serves this secular purpose of ensur-

ing that the state’s citizenry is well-educated.

Id. at 395, 103 S. Ct. at 3067.

“7 The Arizona Legislature has, in recent years, ex-

panded the options available in public education. See, e.g.,

A.R.S. § 15-181 (1994) (establishing charter schools in

1See Board of Educ. v. Grumet, 512 U.S. 687, 705, 114 S. Ct.

2481, 2492 (1994) (finding creation of special school district for

religious enclave violated “the requirement of government neutral-

ity”); Lee v. Weisman, 505 U.S. 577, 586-87, 112 S. Ct. 2649, 2655

(1992) (holding that graduation benedictions in public schools

coerce support for religion) ; Wallace v. Jaffree, 472 U.S. 38, 69-70,

105 S. Ct. 2479, 2496-97 (1985) (O’Connor, J., concurring) (setting

forth the “endorsement test’).

on ——_--- —-

———_—

order to “provide additional academic choices for parents

and pupils”); A.R.S. § 15-816.01(A) (1995) (requiring

all public school districts to “implement an open enroll-

ment program without charging tuition”). It now seeks

to bring private institutions into the mix of educational al-

ternatives open to the people of this state.

48 The encouragement of private schools, in itself, is

not unconstitutional. Such a policy can properly be used

to facilitate a state’s overall educational goals. As the

Mueller majority noted, private schools frequently serve

to stimulate public schools by relieving tax burdens and

producing healthy competition. 463 U.S. at 395, 103 S.

Ct. at 3067 (quoting Wolman v. Walter, 433 U.S. 229,

262, 97 S. Ct. 2593, 2613 (1977) (Powell, J., concur-

ring in part and dissenting in part) ). They also further the

objective of making quality education available to all

children within a state. Thus, the legislature may “con-

clude that there is a strong public interest in assuring the

continued financial health of private schools, both sec-

tarian and non-sectarian.” Id. at 395, 103 S. Ct. at 3067.

In our view, the secular purpose prong of Lemon is satis-

fied here.

Primary Effect

{9 We next examine whether the principal effect of the

law is to further “sectarian aims of the nonpublic schools.”

Id. at 396, 103 S. Ct. at 3067 (quoting Committee for

Pub. Educ. & Religious Liberty v. Regan, 444 U.S. 646,

662, 100 S. Ct. 840, 851 (1980)). We begin by noting

that the legislature’s taxing authority is very broad. See

Kelly v. Allen, 49 F.2d 876, 877 (9th Cir. 1931) (“The

power of the state to tax is unlimited.”); Tanque Verde

Enters. v. City of Tucson, 142 Ariz. 536, 542, 691 P.2d

302, 308 (1984) (“[S]etting tax rates is a legislative func-

tion.”). Therefore, courts extend considerable deference

and great latitude to the legislative creation of “classifica-

tions and distinctions in tax statutes.” Mueller, 463 U.S.

at 396, 103 S. Ct. at 3067 (quoting Regan v. Taxation

With Representation, 461 U.S. 540, 547, 103 S. Ct. 1997,

2002 (1983)).

{10 The Mueller Court identified certain significant fea-

tures of the Minnesota statute in upholding its consti-

tutionality, namely: (1) the deduction in question was one

of many allowed by the state; (2) it was open to all

parents incurring educational expenses; and (3) funds

were available “only as a result of numerous, private

choices of individual parents.” 463 U.S. at 396-400, 103

S. Ct. at 3067-70. In other words, aid was provided on

a neutral basis with any financial benefit to private schools

sufficiently attenuated.

One of Many

{11 Petitioners contend that credits are constitutionally

different from deductions, which they concede to be per-

fectly proper. At oral argument they asserted that a tax

credit is the “functional equivalent of depleting the state

treasury by a direct grant,” while a tax deduction merely

serves as “seed money” to encourage philanthropy. We

disagree.

412 It is true, of course, that there are mechanical dif-

ferences between deductions and credits. The former are

subtracted from gross income, reducing the net amount on

which a tax is assessed according to the taxpayer’s mar-

ginal rate, while the latter are taken directly from the tax

as tentatively calculated. Elizabeth A. Baergen, Note,

Tuition Tax Deductions and Credits in Light of Mueller v.

Allen, 31 Wayne L. Rev. 157, 172-73 (1984); see James

J. Freeland et al., Fundamentals of Federal Income Tax-

ation 969 (7th ed. 1991). Moreover, limits placed on

these benefits may be sharply divergent: We do not be-

lieve, however, that such distinctions are constitutionally

significant. Though amounts may vary, both credits and

deductions ultimately reduce state revenues, are intended

to serve policy goals, and clearly act to induce “socially

beneficial behavior” by taxpayers. Baergen, supra, at 173.

413 In Committee for Public Education & Religious

Liberty v. Nyquist, a case heavily relief upon by the peti-

tioners, the Supreme Court said that the constitutionality

of a tax benefit “does not turn in any event on the label

we accord it.” 413 U.S. 756, 789, 93 S. Ct. 2955, 2974

(1973). This statement is consistent with the Court’s

earlier observation in Lemon that the form of any tax

measure must be examined “for the light that it casts on

the substance,” 403 U.S. at 614, 91 S. Ct. at 2112. In

Nyquist, a New York statute provided state funds for the

maintenance and repair of private schools. It also con-

tained a tax deduction for parents of children attending

such schools. 413 U.S. at 762-64, 93 S. Ct. at 2960-61.

The Supreme Court struck down these provisions, holding

that they amounted to direct stipends having the primary

effect of impermissibly advancing religion. Id. at 779-80,

791, 93 S. Ct. at 2969, 2975. It is important to note,

however, that the New York “deduction,” based on a statu-

tory formula, was plainly designed to achieve a net per-

family gain. Id. at 790, 93 S. Ct. at 2974. This preset

benefit was offered to parents without regard for the

amount of expense they actually incurred. /d.

414 As the Mueller Court described a decade later,

Nyquist involved “thinly disguised ‘tax benefits,’ actually

amounting to tuition grants, to the parents of children

atending private schools.” 463 U.S. at 394, 103 S. Ct.

at 3066. The Court also observed that the New York de-

duction had been totally inconsistent with others allowed

under the laws of that state. Jd. at 396 n.6, 103 S. Ct.

10a

at 3068 n.6. In contrast, the Minnesota deduction for

actual school expenses was “only one among many” avail-

able under the state’s tax code, including those for medical

expenses and charitable contributions. Jd. at 396, 103 S.

Ct. at 3067. Unlike the measure in Nyquist, which was

likened to an outright grant, the Minnesota statute em-

bodied a “genuine tax deduction.” Jd. at 396 n.6, 103

S. Ct. at 3068 n.6.

€ 15 Deductions and credits are legitimate tools by which

government can ameliorate the tax burden while imple-

menting social and economic goals. See Baergen, supra,

at 172-76. We conclude that the Arizona school tuition

tax credit is one of an extensive assortment of tax-saving

mechanisms available as part of a “genuine system of tax

laws.” Mueller at 396 n.6, 103 S. Ct. at 3068 n.6. For

instance, the state permits its taxpayers to take the full

“amount of itemized deductions allowable” under the In-

ternal Revenue Code. A.R.S. § 43-1042(A). This, of

course, includes charitable contributions made directly to

churches, religious schools, and other § 501(c)(3) organ-

izations.” See 26 U.S.C. § 170(c)(2)(D). Arizona’s tax

2To qualify for § 501(c)(3) status an entity must be “organized

and operated exclusively” for certain statutorily defined purposes.

26 U.S.C. § 501(c)(3). These include “religious, charitable [and]

scientific” as well as “literary, or educational purposes.” Jd. The

Supreme Court has determined that “Congress sought to provide

tax benefits to charitable organizations, to encourage the develop-

ment of private institutions that serve a useful public purpose or

supplement or take the place of public institutions of the same

kind.” Davis v. United States, 495 U.S. 472, 482-83, 110 S. Ct.

2014, 2021 (1990) (quoting Bob Jones Univ. v. United States, 461

U.S. 574, 588, 103 S. Ct. 2017, 2026 (1983)). Consequently, under

both federal and state law, organizations unabashedly devoted to

promoting religion—churches and other religious institutions—

enjoy a number of direct economic tax benefits. These organiza-

tions escape income taxes, see A.R.S. § 43-1201(4), (11), and are

not required to file returns, see A.R.S. § 43-1242. Taxpayers who

lla

code also provides for numerous credits beyond those per-

mitted at the federal level, each operating in the same gen-

eral way. See A.R.S. §§ 43-1071 through 43-1090.01.

Among them is a credit for voluntary cash contributions

made to qualifying organizations that provide assistance

to the working poor. See A.R.S. § 43-1088. Such organi-

zations clearly count among their number churches, syna-

gogues, missions, and other sectarian institutions. Also

noteworthy in the context of the present discussion is a

$200 tax credit for public school extracurricular activity

fees, covering items such as band uniforms, athletic gear,

and scientific laboratory equipment. A.R.S. § 43-1089.01.

Thus, as in Minnesota, the Arizona tax benefit now under

consideration is “only one among many.” Mueller, 463

US. at 396, 103 S. Ct. at 3067.

Availability

{16 The Mueller Court placed particular emphasis on

the fact that the benefits of Minnesota’s tax deduction ex-

tended to a broad class of recipients, not just to the

parents of private school children as in Nyquist. 463 US.

at 397-98, 103 S. Ct. at 3068. By way of comparison,

the Arizona tuition credit is available to all taxpayers

who are wiling to contribute to an STO. Any individual,

not just a parent, may donate to the scholarship program.

Thus, Arizona’s class of beneficiaries is even broader than

that found acceptable in Mueller, and clearly achieves a

greater level of neutrality.

donate to them can deduct the contributions from their federal and

state income taxes. See 26 U.S.C. § 170; A.R.S. § 43-1042(A).

Additionally, many of these organizations are exempt from prop-

erty taxes, see Ariz. Const. art. IX, § 2(2), a direct government

benefit which has long been held nonviolative of the Establishment

Clause. See Walz, 397 U.S. at 672-73, 90 S. Ct. at 1413-14.

12a

Private Choices

417 The Supreme Court also stressed the means by

which funds reach sectarian schools and the importance

of “numerous, private choices” in contrast to direct state

financial aid. Mueller, 463 U.S. at 399, 103 S. Ct. at

3069. Where assistance to religious institutions is indirect

and attenuated, i.e., private individuals choose where the

funds will go, the Justices have generally been reluctant to

find a constitutional impediment. See Witters, 474 US. at

488, 106 S. Ct. at 752 (aid flowing to religious institu-

tions does so “only as a result of the genuinely inde-

pendent and private choices of aid recipients”); Zobrest,

509 U.S. at 10, 113 S. Ct. at 2467 (presence of govern-

ment-paid interpreter in sectarian school was result of the

“private decision of individual parents”).

€ 18 A recent decision by the Wisconsin Supreme Court

upholding the constitutionality of school vouchers pro-

vides further support. Jackson v. Benson, 578 N.W.2d

602 (Wis. 1998), cert. denied, US. , 119 S.

Ct. 466 (1998). In 1995, the Wisconsin Legislature

amended a statute requiring the state to pay the educa-

tional costs of low-income Milwaukee parents who de-

sired to send their children to private schools. Id. at 607-

08. Under the amended Milwaukee Parent choice Pro-

gram (MPCP), parents were permitted to select a private

school, which could be sectarian or secular, and received

a payment from the state to cover expenses. Id. at 608-09.

The check was sent directly to the school but was made

out to the parents, who endorsed it over to the educational

institution. 7d. at 609. No restrictions were placed on the

use to which the school could put the money.* Jd. The

3 The dissent believes that limits must be placed on the uses to

which schools may put tuition money coming from STOs. /nfra at

94. But Mueller itself, while disallowing a tax deduction for

the cost of textbooks used for religious instruction, placed no

13a

Wisconsin court held that the program was permissible

under both the federal and state constitutions, id. at 607,

stating in part:

In our assessment, the importance of our inquiry here

is not to ascertain the path upon which public funds

travel under the amended program, but rather to de-

termine who ultimately chooses that path. As with

the programs in Mueller and Witters, not one cent

flows from the State to a sectarian private school un-

der the amended MPCP except as a result of the

necessary and intervening choices of individual

parents.

Id. at 618.

419 Arizona’s statute provides multiple layers of pri-

vate choice. Important decisions are made by two dis-

tinct sets of beneficiaries—taxpayers taking the credit and

parents applying for scholarship aid in sending their

children to tuition-charging institutions. The donor/

taxpayer determines whether to make a contribution, its

amount, and the recipient STO. The taxpayer cannot re-

strict the gift for the benefit of his or her own child. A.R.S.

§ 43-1089(D). Parents independently select a school and

apply to an STO of their choice for a scholarship. Every

STO must allow its scholarship recipients to “attend any

qualified school of their parents’ choice,” and may not

restriction on the uses to which the schools conid put tuition pay-

ments qualifying for the deduction. See 463 U.S. at 390 n.1, 103

S. Ct. at 3064 n.1. In addition, the statute in Mueller contained no

“opt out” provision or requirement that schools admit students

without regard to religion, features that our dissenting colleague

finds so critical in Jackson. Infra at § 99. Our tax credit statute

is more like the tax deduction in Mueller than the voucher program

in Jackson. Even in Jackson, however, no limits were placed on the

uses to which the recipient schools could put the state aid. 578

N.W.2d at 609,

14a

limit grants to students of only one such institution. A.R.S.

§ 43-1089(E)(2) (emphasis added). Thus, schools are no

more than indirect recipients of taxpayer contributions,

with the final destination of these funds being determined

by individual parents.

420 The decision-making process is completely devoid

of state intervention or direction and protects against the

government “sponsorship, financial support, and active in-

volvement” that so concerned the framers of the Estab-

lishment Clause. Walz, 397 U.S. at 668, 90 S. Ct. at

1411. As the Mueller Court noted, “[t]he historic pur-

poses of the clause simply do not encompass the sort of

attenuated financial benefit, ultimately controlled by the

private choices of individual parents, that eventually flows

to parochial schools from the neutrally available tax bene-

fit.” 463 U.S. at 400, 103 S. Ct. at 3070. Under the cir-

cumstances, we believe that “[n]o reasonable observer is

likely to draw from [these facts] an inference that the

State itself is endorsing a religious practice or belief.”

Witters, 474 U.S. at 493, 106 S. Ct. at 755 (O’Connor,

J., concurring); see also Zobrest, 509 U.S. at 10, 113

S. Ct. at 2467.

421 The dissent essentially characterizes the option of-

fered to taxpayers as a sham because “there is no real

choice—one may contribute up to $500 to support private

schools or pay the same amount to the Arizona Depart-

ment of Revenue.”* Infra at § 90. Such an argument

plainly ignores the many other credits and deductions

available in Arizona. It also assumes that maximum tax

avoidance is the inescapable motive of taxpayers in every

decision they make. We know, however, that people fre-

4This statement, like so many others in the dissent, wrongly

gives the impression that private schools, rather than scholarship

recipients, are the primary beneficiaries of contributions.

15a

quently donate to causes or organizations offering limited

or no tax benefits. Moreover, while it seems a part of

human nature to bemoan taxes, their importance to so-

ciety is generally recognized. This tax credit may provide

incentive to donate, but there is no arm twisting here.

Those who do not wish to support the school tuition pro-

gram are not obligated to do so. They are free to take

advantage of a variety of other tax benefits, or none at all.

422 We see little difference in the levels of choice avail-

able to parents under the Minnesota and Arizona plans.

In both, parents are free to participate or not, to choose

the schools their children will attend, and to take advan-

tage of all other available benefits under the state tax

scheme. Moreover, these programs will undoubtedly bring

new options to many parents. Basic education is compul-

sory for children in Arizona, A.R.S. § 15-802(A), but

until now low-income parents may have been coerced into

accepting public education. These citizens have had few

choices and little control over the nature and quality of

their children’s schooling because they have been unable

to afford a private education that may be more compat-

ible with their own values and beliefs. Arizona’s tax

credit achieves a higher degree of parity by making pri-

vate schools more accessible and providing alternatives

to public education. See Mueller, 463 U.S. at 402, 103

S. Ct. at 3070-71 (educational expense deduction worked

as set-off against added financial burden faced by parents

of private school students); Jackson, 578 N.W.2d at 619

(school voucher program “place[d] on equal footing op-

tions of public and private school choice, and vest[ed]

power in the hands of parents to choose where to direct

the funds allocated for their children’s benefit”).

423 Petitioners argue that this law is fatally deficient

because religious schools are the practical beneficiaries of

the tax credit. They contend that the “pervasively sec-

16a

tarian” composition of private schools in this state pre-

sumes an inevitable constitutional breach. Like the appel-

lants in Mueller, petitioners purport to rely on a statis-

tical analysis of private school populations. See 463 U.S.

at 400-01, 103 S. Ct. at 3070. The Supreme Court dis-

missed this approach as follows:

We would be loath to adopt a rule grounding the

constitutionality of a facially neutral law on annual

reports reciting the extent to which various classes

of private citizens claimed benefits under the law.

Such an approach would scarcely provide the cer-

tainty that this field stands in need of, nor can we

perceive principled standards by which such statis-

tical evidence might be evaluated. Moreover, the

fact that private persons fail in a particular year to

claim the tax relief to which they are entitled—under

a facially neutral statute—should be of little impor-

tance in determining the constitutionality of the stat-

ute permitting such relief.

Id. at 401, 103 S. Ct. at 3070. According to the statis-

tics offered in Mueller, ninety-five percent of Minnesota’s

private school students attended sectarian schools. /d. at

391, 103 S. Ct. at 3065. Petitioners’ numbers reflect a

lower rate of religious school attendance in Arizona. Like

the Mueller Court, however, we refuse to hinge constitu-

tional scrutiny on such ephemeral numbers. School popu-

lations change, as does the quality of education. No one

yet knows how many taxpayers will take the credit, what

dollar amounts will be generated, or how many students

will receive tuition scholarships, let alone their statistical

distribution among schools. We also cannot predict how

this tax credit may affect the ratio of secular to sectarian

private institutions in the state.

§ 24 Both Minnesota and Arizona provide by statute

for free public education. See Minn. Stat. § 120.06

Tee

= ey

17a

(1959); A.R.S. § 15-816.01 (1995). Consequently, par-

ents of children seeking to attend tuition-charging schools

are those most in need of financial assistance. This does

not mean, however, that the statute unconstitutionally

benefits a narrow segment of the population. As we have

seen, the Arizona tax credit allows all taxpayers to give

their funds voluntarily in support of a multi-dimensional

educational system for the state, and its benefits flow in

virtually every direction.

q25 It is argued that A.R.S. § 43-1089 is unconstitu-

tional because it does not provide a credit for those who

wish to support public education. We disagree. A con-

temporaneous and related statute, A.R.S. § 43-1089.01,

allows a tax credit of up to $200 for fees paid by tax-

payers in support of public school extracurricular activi-

ties. The fact that this benefit is capped at $200 does

not render the $500 credit for STO donations unconstitu-

tional. The tuition expense of a private education is us-

ually greater than the fees associated with extracurricular

activities in a public school. The legislature’s decision to

set a lower amount for the latter is likely an acknowledg-

ment of that disparity. Moreover, it strikes us as mean-

ingless to offer a tax credit for tuition scholarships to

schools that charge no tuition. The taxpayers in this state

already pay for the establishment and operation of a pub-

lic school system. Even parents who send their children

to private schools must pay taxes in support of public

education. Finally, because the ultimate goal of educa-

tional assistance programs is to reimburse parents for ex-

penses incurred in schooling their children, a credit for

contributions to the “educational mission of the public

school system,” infra at 476, is both distinguishable and

unnecessary for purposes of our constitutional analysis.

426 The primary beneficiaries of this credit are tax-

payers who contribute to the STOs, parents who might

18a

otherwise be deprived of an opportunity to make mean-

ingful decisions about their children’s educations, and the

students themselves. We realize, of course, that the bene-

fits do not end there. The ripple effects can, when viewed

through a wide-angle lens, radiate to infinity. But while

direct subsidies to sectarian schools may affront the Con-

stitution, “the Establishment Clause is not violated every

time money previously in the possession of a State is con-

veyed to a religious institution.” Witters, 474 U.S. at 486,

106 S. Ct. at 751. Private and sectarian schools are at

best only incidental beneficiaries of this tax credit, a neu-

tral result that we believe is attenuated enough to satisfy

Mueller and the most recent Establishment Clause deci-

sions. See 463 U.S. at 399, 103 S. Ct. at 3069; Agostini,

521 USS. at , 117 S. Ct. at 2014; Zobrest, 509 US.

at 8, 113 S. Ct. at 2466; Witters, 474 U.S. at 488-89,

106 S. Ct. at 752; Matthew J., 989 F. Supp. at 392.

€{ 27 In summary, we conclude that the tuition tax credit

does not prefer one religion over another, or religion over

nonreligion. It aids a “broad spectrum of citizens,” Muel-

ler, 463 U.S. at 399, 103 S. Ct. at 3069, allows a wide

range of private choices, and does not have the primary

effect of either advancing or inhibiting religion.

Excessive Entanglement

€ 28 Finally, we find no “excessive government entan-

glement with religion.” Lemon, 403 U.S. at 613 (citation

omitted). The state does not involve itself in the distribu-

tion of funds or in monitoring their application. Its role

is entirely passive. Taxpayers who choose to participate

may deduct the amount of an STO contribution on their

tax returns. The STO operates free of government inter-

ference beyond ensuring that it qualifies for § 501(c)(3)

tax exempt status and complies with state requirements.

SS ee ee eee oes

19a

Any perceived state connection to private religious schools

is indirect and attenuated.

429 We are persuaded that § 43-1089 falls within the

parameters of the Establishment Clause.

ARIZONA CONSTITUTION

30 Petitioners argue that this tax credit channels pub-

lic money to private and sectarian schools in violation of

the state constitution. Specifically, they charge that the

law offends article II, § 12 and article IX, § 10 (the “re-

ligion clauses”), as well as article IX, §7 (the “anti-

gift clause”).

{31 Legislative enactments are presumptively constitu-

tional. Hall v. A.N.R. Freight Sys., 149 Ariz. 130, 133,

717 P.2d 434, 437 (1986). The party challenging a

statute bears the burden of demonstrating its invalidity,

State v. Arnett, 119 Ariz. 38, 48, 579 P.2d 542, 552

(1978), and we resolve all uncertainties in favor of con-

stitutionality. Arizona Downs v. Arizona Horsemen's

Found., 130 Ariz. 550, 554, 637 P.2d 1053, 1057

(1981).

Religion Clauses

q 32 Article II, § 12 states in part: “No public money

or property shall be appropriated for or applied to any

religious worship, exercise, or instruction, or to the sup-

port of any religious establishment.” Article IX, § 10

says, “No tax shall be laid or appropriation of public

money made in aid of any church, or private or sectarian

school, or any public service corporation.”

“Public Money or Property”

4 33 The parties are in considerable disagreement over

the meaning of “public money or property.” No defini-

20a

tion of these words appears in the Arizona Constitution

or in our statutes. We must therefore look to their “nat-

ural, obvious and ordinary meaning.” County of Apache

v. Southwest Lumber Mills, 92 Ariz. 323, 327, 376 P.2d

854, 856 (1962); see also McElhaney Cattle Co. v.

Smith, 132 Ariz. 286, 290, 645 P.2d 801, 805 (1982)

(“When the words of a constitutional provision are not

defined within it, the meaning to be ascribed to the words

is that which is generally understood and used by the

people.”); Dunn v. Industrial Comm’n, 177 Ariz. 190,

194, 866 P.2d 858, 862 (1994) (requiring court to give

clear and unambiguous statutory language its plain mean-

ing unless doing so would lead to absurd results).

€34 In McClead v. Pima County, our court of appeals

observed that “state funds” are those “raised by the oper-

ation of some general law and therefore belonging to the

state.” 174 Ariz. 348, 356, 849 P.2d 1378, 1386 (App.

1992). A decade earlier we identified “state money” as

“money in the state treasury credited to a particular fund

therein.” Grant v. Board of Regents, 133 Ariz. 527, 529,

652 P.2d 1374, 1376 (1982). State title to funds, how-

ever, does not always vest when money enters the state

treasury. For example, when the government is a mere

custodian or conduit, funds so held do not constitute

“state monies.” Navajo Tribe v. Arizona Dep’t of Admin.,

111 Ariz. 279, 280-81, 528 P.2d 623, 624-25 (1974).

€ 35 Other courts have reached similar conclusions.

See Philip Morris Inc. v. Glendening, 709 A.2d 1230,

1241 (Md. 1998) (“gross recovery from the tobacco liti-

gation is not ‘State’ or ‘public’ money” until deposited

into state treasury); State Bd. of Accounts v. Indiana

Univ. Found., 647 N.E.2d 342, 348 (Ind. Ct. App. 1995)

(private donations received by corporation for use or

benefit of state university were not public funds because

2la

they did not come into the possession of, and were not

entrusted to, a public officer); Sherard v. State, 509

N.W.2d 194, 199-200 (Neb. 1993) (money in workers’

compensation Second Injury Fund is not state property

because it is not raised by taxation and is held in trust

by custodian, State Treasurer); Parsons v. South Dakota

Lottery Comm'n, 504 N.W.2d 593, 596 (S.D. 1993)

(state lottery prize proceeds not public funds because

money does not revert to state’s general fund); McIntosh

v. Aubry, 18 Cal. Rptr. 2d 680, 688-89 (Cal. Ct. App.

1993) (rent forbearance and inspection cost waivers are

not public funds because they involve no payment of

funds out of county coffers); Wells v. Kentucky Local

Correctional Facilities Constr. Auth., 730 S.W.2d 951,

955 (Ky. Ct. App. 1987) (construction bond proceeds

do not constitute state monies because they are trust funds

not in control of any state organization); State ex rel.

Sego v. Kirkpatrick, 524 P.2d 975, 986 (N.M. 1974)

(private donations to state university under control of

Board of Regents are not subject to appropriation, there-

fore legislature has no power to limit use or disbursement

of these funds).

€36 According to Black’s Law Dictionary, “public

money” is “[rjevenue received from federal, state, and

local governments from taxes, fees, fines, etc.” Black's

Law Dictionary 1005 (6th ed. 1990). As respondents

note, however, no money ever enters the state’s control

as a result of this tax credit. Nothing is deposited in the

State treasury or other accounts under the management or

possession of governmental agencies or public officials.

Thus, under any common understanding of the words, we

are not here dealing with “public money.”

{37 Petitioners suggest, however, that because taxpayer

money could enter the treasury if it were not excluded

by way of the tax credit, the state effectively controls and

22a

exerts quasi-ownership over it. This expansive interpre-

tation is fraught with problems. Indeed, under such rea-

soning all taxpayer income could be viewed as belonging

to the state because it is subject to taxation by the legis-

lature. That body has plenary power to set tax rates,

categorize taxable income, and determine the type and

amount of adjustments including deductions, exemptions,

and credits. See Tanque Verde Enters., 142 Ariz. at 539-

40, 691 P.2d at 305-06 (recognizing the virtually unlim-

ited authority of taxing bodies to set rates of taxation).

€38 Equally problematic is the fact that petitioners’

contention directly contradicts the decades-long accept-

ance of tax deductions for charitable contributions, in-

cluding donations made directly to churches, religiously-

affiliated schools and institutions. If credits constitute

public funds, then so must other established tax policy

equivalents like deductions and exemptions. Indeed, it

seems to us that unless a constitutionally significant differ-

ence between credits and deductions can be demonstrated,

petitioners’ argument must fail. The dissent, recognizing

this dilemma, attempts to construct a distinction based on

an alleged disparity in the amount of benefits flowing

from credits and deductions. That, however, would ap-

pear to be a matter of form rather than substance. In

our judgment, neither the dissent nor petitioners have

offered a principled way in which to address this con-

tradition.

€39 The calculation of personal income tax can be

broken into several stages. First comes a determination

of adjusted gross income, achieved by combining all

sources of income and subtracting certain expenditures,

such as contributions to individual retirement and medical

savings accounts. See I.R.S. Form 1040, U.S. Individual

Income Tax Return, Lines 7 through 32 (1997): Arizona

Form 140, Resident Personal Income Tax Return, Lines

Sete eee

23a

11 through 14 (1997). Next, taxpayers may take certain

deductions and exemptions. The resulting subtotal is tax-

able income. See Arizona Form 140, Lines 15 through

26. This figure is then referenced to the tables for a de-

termination of preliminary tax liability. Jd. at Line 27.

But the process does not end there. In fact, this point

occurs about midway through the tax calculation and is,

at most, a determination of tentative, not actual, tax

liability. See Freeland, supra, at 969. The tax preparer

may continue to reduce this amount by subtracting credits

and other payments. Only after exhausting all of these

opportunities does the taxpayer arrive at the bottom of

the tax form and the inevitable—amount owed.

{40 We do not accept the proposition, implicit in pe-

titioners’ argument, that the tax return’s purpose is to re-

turn state money to taxpayers. For us to agree that a

tax credit constitutes public money would require a find-

ing that state ownership springs into existence at the point

where taxable income is first determined,® if not before.

The tax on that amount would then instantly become pub-

lic money. We believe that such a conclusion is both

artificial and premature. It is far more reasonable to say

that funds remain in the taxpayer’s ownership at least

until final calculation of the amount actually owed to the

government, and upon which the state has a legal claim.®

441 We realize that this view may conflict with the

“tax expenditure” approach advanced by the petitioners.

Nevertheless, it is consistent with the traditional method

5 This occurs at Line 26, Arizona Form 140, Resident Personal

Income Tax 1997. But we note that the amount finally owed by the

taxpayer does not appear until Line 55.

6 As previously noted, it can be argued that state ownership does

not arise until funds actually enter the state’s possession. However,

we need not make that determination here.

24a

of constitutional construction that accords to words their

plain and simple meaning. The tax expenditure theory is

of recent origin, having been first advanced by Professor

Stanley Surrey during the late 1960s and early *70s. See

Richard P. Davies, A Flat Tax Without Bumpy Philan-

thropy: Decreasing the Impact of a “Low, Single Rate”

on Individual Charitable Contributions, 70 S. Cal. L. Rev.

1749, 1767 (1997). Proponents of the concept argue

that deductions, credits, exemptions, and exclusions “con-

stitute a form of hidden spending in the tax code and

ought accordingly to be compared with equivalent non-

tax spending programs.” Michael A. Livingston, Rein-

venting Tax Scholarship: Lawyers, Economists, and the

Role of the Legal Academy, 83 Cornell L. Rev. 365, 377

n.30 (1998). This theory has been used by government

as a tool for analyzing budgetary policy.* See Jean

Harris, Tax Expenditures: Concept and Oversight, in

Public Budgeting and Finance 385, 397 (Robert T.

Golembiewski & Jack Rabin, eds., 4th rev. ed. 1997).

It has not, however, been universally accepted as a doc-

trine of judicial decision-making. Even the Supreme

Court’s treatment of the concept “changes depending on

the substantive area of law being considered.” Donna D.

Adler, The Internal Revenue Code, the Constitution, and

the Courts: The Use of Tax Expenditure Analysis in

Judicial Decision Making, 28 Wake Forest L. Rev. 855,

857 (1993). As the author notes:

7 Of course, as is true in any area of intellectual discourse, many

other competing theories exist. In economics these days, three of

the most prominent are the comprehensive tax base approach,

optimal tax theory, and fiscal exchange or public choice theory.

See Livingston, supra, at 381-83.

8Or even legislative decision-making, for that matter. “The

grant of dollars through the tax system is not widely perceived in

Congress as a disbursement of public funds.” Allen Schick, Con-

gress and Money: Budgeting, Spending and Taxing 550 (1980).

—e re ee a

25a

[T]he Court has fully accepted the equivalence of

direct spending programs and tax expenditures in the

area of Free Speech rights, but it has not fully ap-

plied this concept in the context of Establishment

Clause analysis... . [DJifferent constitutional stand-

ards have been applied to direct spending programs

and to tax expenditures that have the same economic

effect. For example, the refusal to treat tax expendi-

tures and direct spending programs in a consistent

manner allows benefits to flow to religious institu-

tions through the Internal Revenue Code when the

same benefits would be struck down if distributed in

a direct spending program.

Id. (citation omitted). In the same term of Court, now

Chief Justice Rehnquist wrote both Regan v. Taxation

With Representation, 461 U.S. 540, 103 S. Ct. 1997

(1983), a “Free Speech” case, and Mueller, an “Estab-

lishment Clause” decision. We assume it is no accident

that the tax expenditure thesis appears in the former opin-

ion, but not in the latter. The Court has generally re-

fused to recognize the tax expenditure concept where

religion is involved.* See Joseph M. Kuznicki, Comment,

Section 170, Tax Expenditures, and the First Amend-

ment: The Failure of Charitable Religious Contributions

for the Return of a Religious Benefit, 61 Temp. L. Rev.

443, 473 (1988).

442 Modern economic theory, under some circum-

stances, may be helpful to our understanding. As has

been shown, however, it does not necessarily govern con-

Stitutional interpretation. But see Opinion of the Justices

to the Senate, 514 N.E.2d 353, 355 (Mass. 1987) (ad-

visory opinion stating that “tax expenditures . . . are the

9The dissent relies on a one-justice concurring opinion in argu-

ing that a contrary view has been adopted by the Supreme Court.

Infra at 7 143.

26a

practicai equivalent of direct government grants”). More-

over, while the plain language of the provisions now

under consideration indicates that the framers opposed

direct public funding of religion, including sectarian

schools, we see no evidence of a similar concern for in-

direct benefits. One court has noted a similar distinction

in the context of a state Freedom of Information Act

(FOIA). Sebastian County Chapter of the Am. Red

Cross v. Weatherford, 846 S.W.2d 641 (Ark. 1993).

That court said:

Refusal to read indirect government benefits or

subsidies into the term “public funds” is not at odds

with a liberal construction of FOIA. Were we to

construe “public funds” to include an entirely sepa-

rate and new category of government support, we

would be amending the FOIA to expand its applica-

tion significantly.

Id. at 644,

€ 43 We also note with interest that Arizona’s framers

did not hesitate to extend tax-exempt status to churches.

See Ariz. Const. art. IX § 2(2). In fact, they uniformly

supported property tax exemptions for all “religious as-

sociations or institutions not used or held for profit.” Jd.;

see also The Records of the Arizona Constitutional Con-

vention of 1910 469-76, 850, 861, 891, 931, 933-34

(John S. Goff, ed. 1991) (hereinafter “Records’’).

Clearly, these exemptions constitute benefits to religious

organizations, suggesting either that the framers did not

regard such tax-saving measures as direct grants of “pub-

lic money,” or that their intent in prohibiting aid to reli-

gious institutions was not as all-encompassing as petition-

ers would have us hold.

27a

“Appropriated For or Applied To”

¢44 An appropriation “set[s] aside from the public:

revenue ... a certain sum of money for a specified ob-

ject, in such a manner that the executive officers of the

government are authorized to use that money.” Rios v.

Symington, 172 Ariz. 3, 6-7, 833 P.2d 20, 23-24 (1992)

(quoting Hunt v. Callaghan, 32 Ariz. 235, 239, 257 P.

648, 649 (1927)). The power of appropriation belongs

only to the legislature. Prideaux v. Frohmiller, 47 Ariz.

347, 357, 56 P.2d 628, 632 (1936).

945 Petitioners argue that the STO tax credit diverts

to private schools funds that would otherwise be state

revenue. This, they claim, has the same effect as an ap-

propriation. We agree that Community Council v. Jor-

dan, 102 Ariz. 448, 455, 432 P.2d 460, 467 (1967),

rejected a narrow interpretation of “appropriations,” find-

ing the word to encompass executive and administrative

contracts as well as disbursements. It does not follow,

however, that reducing a taxpayer’s liability is the equiva-

lent of spending a certain sum of money. An appropria-

tion earmarks funds from “the general revenue of the

state” for an identified purpose or destination. Black &

White Taxicab Co. v. Standard Oil Co., 25 Ariz. 381,

399, 218 P. 139, 145 (1923). Furthermore, we disagree

with petitioners’ characterization of this credit as public

money or property within the meaning of the Arizona

Constitution. Therefore, we are unwilling to hold that a

proscribed appropriation or application occurs by opera-

tion of this statute.

Religious worship, exercise, aid, or establishment

{46 Section 12 prohibits the use of public money for

religious worship, exercise, instruction, or to support any

religious establishment. Even if we were to agree that an

28a

appropriation of public funds was implicated here, we

would fail to see how the tax credit for donations to a

student tuition organization violates this clause. The way

in which an STO is limited, the range of choices reserved

to taxpayers, parents, and children, the neutrality built

into the system—all lead us to conclude that benefits to

religious schools are sufficiently attenuated to foreclose a

constitutional breach.

447 As discussed earlier, safeguards built into the stat-

ute ensure that the benefits accruing from this tax credit

fall generally to taxpayers making the donation, to fam-

ilies receiving assistance in sending children to schools of

their choice, and to the students themselves. See A.R.S.

43-1089(E)(2). Moreover, to qualify for § 501(c)(3)

tax treatment, the STO must supply the Internal Revenue

Service with copies of the scholarship application and pro-

gram brochures, rules of eligibility, selection criteria and _

scholarship processing procedures. I.R.S. Publication 557,

at 19 (Rev. May 1997).

448 The dissent expresses concern over the prospect

that an Arizona taxpayer might be able to make a profit

by taking both the state tuition credit and a charitable

deduction on the federal return. Infra at 4 148 n.17.

Whether or not such a maneuver would be possible or

allowable is a policy matter for the legislature and the

taxing authorities to address, rather than this court. It

in no way changes our constitutional analysis. Similarly,

our role is not to make judgments about the overall wis-

dom of the tax credit before us. That obligation falls to

the other branches of government. We hold that the

school tax credit does not violate article II, § 12 of the

Arizona Constitution.

449 As previously indicated, article IX, § 10 states that

“[nJo tax shall be laid or appropriation of any public

29a

money made in aid of any church, or private or sectarian

school, or any public service corporation.” It applies to

all private schools, whether sectarian or not.

450 We have already concluded that this tax credit is

not an appropriation of public money. Likewise, no tax

has been laid here. To the contrary, this measure reduces

the tax liability of those choosing to donate to STOs. We

cannot say that the legislature has somehow imposed a

tax by declining to collect potential revenue from its citi-

zens. Nor does this credit amount to the laying of a tax

by causing an increase in the tax liability of those not

taking advantage of it. Such a construction tortures the

plain meaning of the constitutional text. In addition, if

we were to conclude that this credit amounts to the lay-

ing of a tax, we would be hard pressed to identify the

citizens on whom it is assessed. Because we see no con-

stitutional difference between a credit and a deduction,

we would also be forced to rule that deductions for

, charitable contributions to private schools were unconsti-

tutional because they too, would amount to the laying of

a tax. This we decline to do. We find no violation of

article IX, § 10 of the Arizona Constitution.

Anti-Gift Clause

451 Under article IX, § 7, the state shall not “give or

loan its credit in the aid of, or make any donation or

grant, by subsidy or otherwise, to any individual, associa-

tion, or corporation.” We have upheld giving when the

State action served a public purpose and adequate con-

sideration was provided for the public benefit conferred.

See Wistuber v. Paradise Valley Unified Sch. Dist., 141

Ariz. 346, 348-49, 687 P.2d 354, 356-57 (1984) (hold-

ing that state payment of portion of teacher association

president’s salary did not violate anti-gift clause).

30a

452 This constitutional provision was historically in-

tended to protect against the “extravagant dissipation of

public funds” by government in subsidizing private enter-

prises such as railroad and canal building in the guise of

“public interest.” State v. Northwestern Mutual Ins. Co.,

86 Ariz. 50, 53, 340 P.2d 200, 201 (1959) (citation

omitted). Such “evils” do not exist here. Neither do we

agree with petitioners that a tax credit amounts to a “gift.”

One cannot make a gift of something that one does not

Own.

Framers’ Intent

453 Petitioners claim that Arizona’s founders intended

to implement a much more stringent prohibition against

aid to religion than did their federal counterparts. They

offer an historical analysis in support of this position. The

dissent, despite acknowledging the “explicit text” of the

constitution, infra at 4/73, advances a similar argument.

We are persuaded, however, that our textual analysis is

sufficient to decide the issues presented here.

454 “We interpret constitutional provisions by examin-

ing the text and, where necessary, history in an attempt

to determine the framers’ intent.” Boswell v. Phoenix

Newspapers, Inc., 152 Ariz. 9, 12, 730 P.2d 186, 189

(1986) (emphasis added). Even if we agreed that an

historical search for the framers’ intent was appropriate,

we would not conclude that the statute in question vio-

lates the Arizona Constitution. There is sparse recorded

evidence respecting the clauses at issue here, and any his-

torical analysis is necessarily filled with speculation. See

Thomas E. Sheridan, Arizona: A History 385 (1995)

(“There is also no comprehensive history of the Arizona

constitutional convention or the political milieu out of

which it arose.”). The verbatim transcript of the 1910

constitutional convention reveals little discussion on the

art itl I le a i

3la

convention floor about the religion clauses. See Records,

supra, at 660, 894, 940. “In reading through the pro-

ceedings one is impressed by the fact that major issues

were often glossed over with no debate or discussion.”

Records, supra, at iv. Our dissenting colleague has him-

self noted that “[t]his court has properly been skeptical

of some approaches to divining legislative intent.” Busi-

ness Realty v. Maricopa County, 181 Ariz. 551, 558, 892

P.2d 1340, 1347 (1995). We believe even greater skep-

ticism is called for in “divining” the intent of language

drafted almost 90 years ago and about which so little has

been recorded or preserved. Thus, we cannot subscribe

with any confidence to the “framers’ indisputable desire

to exceed the federal requirements” of the Establishment

Clause. Infra at § 130.

455 Moreover, the boundaries limiting judicial inter-

pretation of framers’ intent are amorphous and “subject

to continuous adjustment.” Terrance Sandalow, Consti-

tutional Interpretation, 79 Mich. L. Rev. 1033, 1033

(1981). A provision’s meaning is necessarily conditioned

by contemporary understandings of the drafters’ inten-

tions. Jd. at 1065. In practice, courts engaging in the

search for original intent often look for the “larger pur-

poses” to which the constitution gives expression, id. at

1037, mediating differences between the historical docu-

ment and the need to accommodate changing circum-

stances and the passage of time. See id. at 1036. Fur-

ther, “historical analysis does not suggest that the original

intent of the drafters—an uncertain concept at best—

governs or controls the interpretation of those clauses

today; it merely recognizes that the history of a constitu-

tional provision influences future interpretations to some

degree.” Robert F. Utter & Edward J. Larson, Church

and State on the Frontier: The History of the Establish-

32a

ment Clauses in the Washington State Constitution, 15

Hastings Const. L.Q. 451, 451 (1988).

456 For example, in Brown v. Board of Education, 347

U.S. 483, 74 S. Ct. 686 (1954), the Supreme Court con-

sidered the framers’ intent in adopting the Fourteenth

Amendment, including the political climate of the time

and long-standing practices of racial segregation. Id. at

489-90, 74 S. Ct. at 688-89. The Court stated:

In approaching this problem, we cannot turn the

clock back to 1868 when the Amendment was

adopted, or even to 1896 when Plessy v. Ferguson

was written. We must consider public education in

the light of its full development and its present place

in American life throughout the Nation. Only in this

way can it be determined if segregation in public

schools deprives these plaintiffs of the equal protec-

tion of the laws.

Id. at 492-93, 74S. Ct. at 691.

457 We have said as much ourselves in the very con-

text of Arizona’s religion clauses:

The state constitutional provisions must be viewed

in light of contemporaneous assumptions concerning

the appropriate sphere of action for each institution.

History is clear that as a state evolves from one dec-

ade to another the role of the state “transcends tradi-

tional boundaries and assumes new dimensions” ne-

cessitating a revision of the idiomatic meaning of

“separation” to align it with “the new realities if orig-

inal purposes and expectations are to be realized.”

Community Council, 102 Ariz. at 451-52, 432 P.2d at

463-64 (quoting Donald A. Giannella, Religious Liberty,

_ Nonestablishment, and Doctrinal Development, 80 Harv.

L. Rev. 1381, 1383 (1967)) (emphasis added).

io renee

33a

458 This court long ago rejected “the strict view that in

essence no public monies may be channeled through a

religious organization for any purpose whatsoever with-

out, in fact, aiding that church contrary to constitutional

mandate.” Community Council, 102 Ariz. at 451, 432

P.2d at 463. Instead, we said:

The prohibitions against the use of public assets for

religious purposes were included in the Arizona Con-

stitution to provide for the historical doctrine of

separation of church and state, the thrust of which

was to insure that there would be no state supported

religious institutions thus precluding governmental

preference and favoritism of one or more churches.

Id. In fact, as we review Arizona history and scan the

present day horizon, it is apparent that religion has never

been hermetically sealed off from other institutions in this

State, or the nation. See, e.g., Bauchman v. West High

Sch., 132 F.3d 542, 554 (10th Cir. 1997) (“Courts have

long recognized the historical, social and cultural signifi-

cance of religion in our lives and in the world, gener-

ally.”). Arizona’s motto, Ditat Deus, means “God en-

riches.” See Ariz. Const. art. XXII, § 20. And even

though, as we have noted, the transcripts of our constitu-

tional convention reveal almost nothing about the clauses

in question, they clearly reflect religion as part of the

proceedings. Each day’s session was opened by a prayer

from the convention chaplain, Rev. Seaborn Crutchfield.

Indeed, to this day Arizona legislative sessions begin with

a prayer delivered by the Chaplain of the Day. The con-

Stitutional delegates also negotiated over whether the pre-

amble should refer to “Almighty God,” the “Supreme

Being,” or “Almighty God for Liberty.” Records, supra,

at 41, 77, 82-83. They ultimately agreed that the pream-

ble should read, “We, the people of the State of Arizona,

34a

grateful to Almighty God for our liberties, do ordain this

Constitution.” Jd. at 1399.

459 In a more contemporary vein, tax codes, both state

and federal, permit churches and other religious institu-

tions to acquire tax-free status and allow deductions for

contributions made directly to such entities. See 26 U.S.C.

§§ 501(a), (c)(3), 170(a), (c)(2)(B); A.R.S. §§ 43-

1201, 43-1042. “[TJhe doctrine of separation of church

and state does not include the doctrine of total nonrecog-

nition of the church by the state and of the state by the

church.” Community Council, 102 Ariz. at 451, 432

P.2d at 463.

€60 Clearly, the state constitution forbids the creation

of a state church or religion. It also guarantees freedom

of worship and belief by demanding absolute neutrality in

the treatment of religious groups. “The State is mandated

by [article II, § 12] to be absolutely impartial when it

comes to the question of religious preference, and public

money or property may not be used to promote or favor

any particular religious sect or denomination or religion

generally.” Pratt v. Arizona Bd. of Regents, 110 Ariz.

466, 468, 520 P.2d 514, 516 (1974). There is no evi-

dence, however, that the framers intended to divorce com-

pletely any hint of religion from all conceivably state-

related functions, nor would such a goal be realistically

attainable in today’s world.

{61 We do know that the framers “took education

seriously,” as evidenced by their creation of a separate

constitutional article on the subject. John D. Leshy, The

Making of the Arizona Constitution, 20 Ariz. St. L.J. 1,

96 (1988). They expressed the belief that educated citi-

zens are vital to a free and united society. See Roosevelt

Elementary Sch. Dist. No. 66 v. Bishop, 179 Ariz. 233,

239, 877 P.2d 806, 812 (1994). Thus, Arizona compels

35a

its children to attend school—public, private, or home

school. See A.R.S. § 15-802(A). We must respect the

framers’ intent in this area as we decide the present issue.

462 One of the most enviable attributes of our consti-

tutional form of government is its adaptability to change

and innovation. As stated in Community Council, we

must view constitutional provisions “in light of contem-

poraneous assumptions.” 102 Ariz. at 451, 432 P.2d at

463. Today’s reality is that primary and secondary edu-

cation systems are facing nationwide reform. Many states

are exploring alternatives to traditional public education

—from charter schools to private school vouchers. See

Jo Ann Bodemer, Note, School Choice Through Vouch-

ers: Drawing Constitutional Lemon-Aid from the Lemon

Test, 70 St. John’s L. Rev. 273, 275-77 (1996). In

1994, Arizona authorized the creation of charter schools

supported by public funds. See A.R.S. §§ 15-181 through

15-189.02. In doing so, the legislature hoped to encour-

age the development of educational settings that would in-

vigorate learning, improve academic achievement, and

provide additional choices for parents and children. See

A.R.S. § 15-181(A). It has now adopted a tax policy

presumptively intended to further the same or similar

goals. The pursuit of such a strategy falls squarely within

the legislature’s prerogative.

{63 Some might argue that the statute in question runs

counter to these goals by encouraging more students to

attend private schools, thereby weakening the state’s pub-

lic school system. But that is a matter for the legislature,

as policy maker, to debate and decide. It is not for us

to pass on the wisdom of this or any other social policy.

Concerning ourselves only with matters of constitutional-

ity, we have concluded that the religion clauses of the

Arizona Constitution do not invalidate this attempt to

36a

keep pace with changing economic conditions and societal

goals.

Blaine Amendment and Washington State Constitution

464 The dissent relies to a great extent on external,

peripheral sources such as the Blaine amendment, intro-

duced in Congress more than 100 years ago, and the

Washington State Constitution. These do not control our

decision today.

€65 In 1875, Maine Congressman James Blaine intro-

duced a Constitutional amendment prohibiting the states

from granting public funds or taxes for the benefit of any

reiigious sect or denomination. Joseph P. Viteritti, Choos-

ing Equality: Religious Freedom and Educational Oppor-

tunity Under Constitutional Federalism, 15 Yale L. &

Pol'y Rev. 113, 144 (1996). The bill failed to muster

enough votes for passage, but was later resurrected in a

number of state constitutions. /d. at 146-47.

€66 The Blaine amendment was a clear manifestation

of religious bigotry, part of a crusade manufactured by

the contemporary Protestant establishment to counter

what was perceived as a growing “Catholic menace.”

Viteritti, supra, at 146; see also Stephen K. Green, The

Blaine Amendment Reconsidered, 36 Am. J. Legal Hist.

38, 54 (1992). Its supporters were neither shy nor secre-

tive about their motives. As one national publication

which supported the measure wrote:

Mr. Blaine did, indeed bring forward . . . a Consti-

tutional amendment directed against the Catholics,

but the anti-Catholic excitement was, as every one

knows now, a mere flurry; and all that Mr. Blaine

means to do or can do with his amendment is. not

to pass it but to use it in the campaign to catch anti-

Catholic votes.

37a

Green, supra, at 54 (quoting The Nation, Mar. 16, 1876,

at 173). Other contemporary sources labeled the amend-

ment part of a plan to “institute a general war against

the Catholic Church.” Green, supra, at 44 (quoting The

New York Tribune, July 8, 1875, at 4). While such ef-

forts were unsuccessful at the federal level, the jingoist

banner persisted in some states. By 1890, twenty-nine

states had incorporated at least some language reminiscent

of the Blaine amendment in their own constitutions.

Viteritti, supra, at 147. There is, however, no recorded

history directly linking the amendment with Arizona’s con-

stitutional convention. In our judgment, it requires sig-

nificant speculation to discern such a connection. In any

event, we would be hard pressed to divorce the amend-

ment’s language from the insidious discriminatory intent

that prompted it.

{67 The Arizona constitutional convention consumed a

mere two months from beginning to end. Leshy, supra,

at 40-41. As one of the last states admitted to the Union,

Arizona borrowed much from those that preceded it. See

Leshy, supra, at 5. Language was lifted from the consti-

tutions of Washington, Oregon, Texas, and Oklahoma, to

name a few. See, e.g., Records, supra, at 167, 179, 182,

660.

68 On several occasions we have acknowledged simi-

larities between provisions of the Washington Constitution

and our own. See Schultz v. City of Phoenix, 18 Ariz.

35, 42, 156 P. 75, 77 (1916); Faires v. Frohmiller, 49

Ariz. 366, 372, 67 P.2d 470, 472 (1937). Nevertheless,

while Washington’s judicial decisions may prove useful,

they certainly do not control Arizona law. We alone

must decide how persuasive the legal opinions of other

jurisdictions will be to our holdings. See Desert Waters,

Inc. v. Superior Court, 91 Ariz. 163, 167-68, 370 P.2d

652, 655 (1962) (noting that while a certain provision

38a

of Washington’s constitution was “identical” to Arizona’s,

“it becomes apparent that the same meaning and effect

was not intended by its adoption”). At least thirty states

have constitutions that contain provisions similar to one

or both of our religion clauses.” To our knowledge, none

of these jurisdictions has faced the precise issue before

us today.

€69 The dissent points to three Washington State cases

holding that state money could not be used to provide

financial assistance to students. See Witters v. Washing-

ton Comm'n for the Blind, 771 P.2d 1119 (Wash. 1989)

(direct financial aid for visually impaired student to pur-

sue religious studies at private bible college); Washington

State Higher Educ. Assistance Auth. v. Graham, 529 P.2d

1051 (Wash. 1974) (state agency purchasing and mak-

ing loans to students in post-secondary educational institu-

tions); Weiss v. Bruno, 509 P.2d 973 (Wash. 1973)

(direct financial assistance to students attending both pub-

lic and private elementary and high schools, as well as

private colleges and universities). In each instance, the

Washington Supreme Court found that the program vio-

lated the state’s constitutional prohibitions against using

public money to benefit sectarian schools. While these

cases are informative, they are also distinguishable on

10 See Alaska Const. art. VII, §1; Cal. Const. art. XVI, §5;

Colo. Const. art. IX, § 7; Del. Const. art. X, § 3; Fla. Const. art. I,

§ 3; Ga. Const. art. I, § 2, para. 7: Haw Const. art. X, § 1; Idaho

Const. art. IX, $5; Ill. Const. art. X, §3: Ind. Const. art. I, $6;

Mass. Const. amend. art. XVIII, § 2; Mich. Const. art. I, § 4: Minn.

Const. art. I, § 16; Miss. Const. art. VIII, § 208; Mo. Const. art.

IX, §8; Mont. Const. art. X, §6; Neb. Const. art. VII, § 11: N.H.

Const. Pt. II, art. 83; N.Y. Const. art. XI, §3; Okla. Const. art. IT,

§ 5; Or. Const. art. I, § 5; Pa. Const. art. III, § 29; S.C. Const. art.

XI, § 4; S.D. Const. art VI, § 3; Tex. Const. art. I, § 7; Utah Const.

arts. I, § 4 and X, §9; Va. Const. art. IV, § 16; Wash. Const. art. I,

§ 11; Wis. Const. art. I, § 18; Wyo. Const. art. I, § 19.

39a

their facts. In each instance, direct appropriations of

state monies were involved.

{70 It is also important to recall that Arizona and

Washington were founded under markedly different his-

torical circumstances, and their subsequent development

reflects those differences. It is difficult, if not impossible,

to apply the intent of one group of constitutional framers

to another operating at a different time and place. Thus,

we must cautiously view the constitutional decisions of

other state courts as we attempt to place our own founding

document in historical perspective. As the now Chief

Justice of the Wisconsin Supreme Court has so aptly said

in describing her approach to constitutional interpretation:

“I look at the peculiarities of my state—its land, its in-

dustry, its people, its history.” Shirley S$. Abrahamson,

Reincarnation of State Courts, 36 Sw. L.J. 951, 965

(1982).

{71 Washington State was carved from the British

Northwest Territories, controlled by the large fur trading

companies. Climate, geography and the abundance of

natural resources—timber, fish, and water—are reflected

in myriad ways in that state’s governmental institutions

and sources of economic power. The trans-Pacific influ-

ences are readily apparent to anyone who walks Seattle’s

waterfront or Chinatown. Arizona, in contrast, emerged

from an entirely different orientation reaching from Spain

and Mexico. Our founding documents are the Treaty of

Guadalupe Hidalgo and the Gadsden Purchase. Our first

settlers came looking for gold, silver, and copper, or range

land for cattle. The economic, political, and social ramifi-

cations of the lack of a resource such as water can hardly

be overestimated. In such vastly dissimilar milieus, even

identical words can carry with them a freight of startlingly

different meaning.

40a

CONCLUSION

€72 We hold that the tuition tax credit is a neutral ad-

justment mechanism for equalizing tax burdens and en-

couraging educational expenditures. Petitioners have

failed to demonstrate that it violates either the Federal or

the Arizona Constitution. We find it a valid exercise of

legislative prerogative. Relief denied.

THOMAS A. ZLAKET

Chief Justice

CONCURRING:

CHARLES E. JONES

Vice Chief Justice

FREDERICK J. MARTONE

Justice

FELDMAN, Justice, dissenting

“73 Believing A.R.S. § 43-1089 (the Arizona tax

credit) violates the explicit text of our state constitution

and the Establishment Clause of the federal constitution,

I respectfully dissent.

«74 Today’s decision upholding the use of a tax credit

to support private and sectarian schools is unfortunate in

several respects. First, the court allows the government

to provide assistance to private, predominantly sectarian

schools despite at clear-prohibition in article II, § 12 and

article IX, § 10 of the Arizona Constitution. Next, it

overlooks the historical background of these sections and

consequently ignores the framers’ plain intent. It then

confuses non-neutral, direct tax credits with neutral deduc-

4la

tions and benefits when there is, in fact, a clear difference

in their constitutionality. Fourth, it errs in suggesting that

funds derived from tax credits are not public funds. Fi-

nally, because the statute permits uncontrolled, govern-

ment-reimbursed grants to private, primarily religious in-

stitutions and denies similar grants to public institutions,

it directly subsidizes religious education and thus violates

the Establishment Clause of the First Amendment to the

United States Constitution.

THE ARIZONA TAX CREDIT PLAN

{75 This case does not deal with or question reference

to the deity in the state’s seal or preamble to the con-

stitution. Nor does it deal with public or charter schools,

voucher programs providing educational aid to low-income

families, or even charitable contributions. Constitutionality

in this case, as in most, turns on analysis of statutory

purpose and effect. The Arizona tax credit does not sur-

vive this analysis. The tax credit statute permits any tax-

Payer, not just parents of school children, a $500 direct

credit against taxes, but only to reimburse so-called con-

tributions to school tuition organizations (STOs) support-

ing nongovernmental schools. At least seventy-two per-

cent of these schools are sectarian. See Coffey, A Survey

of Arizona Private Schools (1993) (Appendix I of Inter-

venor Lisa Graham Keegan, Arizona Superintendent of

Public Instruction). Contributions to public schools will

not qualify for the credit because a “qualified school” is

limited to “a nongovernmental primary or secondary

school” of the “parents’ choice.” § 43-1089(E) (1 ), (2)

(emphasis added).

"76 It is true the public school system is tuition-free

and students at those schools therefore need no scholar-

ships or tuition grants, but provisions could have been

made for a tax credit for contributions supporting the

42a

educational mission of the public school system. This

would have put the state’s private, sectarian, and public

schools on the same basis. But § 43-1089.01 allows only

a maximum $200 credit for contributions to public schools

and is available only to reimburse fees paid for extracur-

ricular activities. The majority intimates that comparison

of the two school credits is “unnecessary” to the analysis

because the costs of public school establishment and op-

eration are already borne by the state. Slip op. at € 25.

The problem with that argument is apparent from reading

our own opinions on the deficiencies of state financing of

public schools and the underfinanced and unfilled educa-

tional missions of those schools. See, e.g., Roosevelt Elem.

Sch. Dist. v. Bishop, 179 Ariz. 233, 877 P.2d 806

(1994). If we are to consider equality or neutrality of

the two credits, we must bear in mind that public schools,

like private schools, need assistance to perform their edu-

cational mission.

€77 Notably, the private school tax credit does not re-

strict use of the grant money to secular purposes. Thus,

the recipient schools may use the government’s subsidy

for direct support of sectarian education or observance,

the very thing both our state and federal constitutions

lorbid. Further, while prohibiting the STOs from making

grants to “only students of one school,” the statute does

not prevent an STO from directing all of its grant money

to a group of schools that restrict enrollment or education

te a particular religion or sect. § 43-1089(E)(2). In

fact, a group of taxpayers who subscribe to a particular

religion may form an STO that will support only schools

of that religion. Worse, in defining the schools qualified

to receive STO grants, the Legislature excluded schools

that “discriminate on the basis of race, color, sex, handi-

cap, familial status, or national origin” but not those that

limit admission on the basis of religious adherence, pref-

net TP

eae, eile

ee a

ee ee

43a

erence, or observance. § 43-1089(E)(1). Indeed, STOs

are to use the grant money to “allow” children to “attend

any qualified school of their parents’ choice.” § 43-

1089(E)(2). Thus, nothing forbids an STO from limit-

ing its grants or scholarships to students who adhere to a

particular religion and will participate in the required

religious observance.

478 There is, of course, nothing bad and everything

good in private support for religious schools and sectarian

education. But both state and federal constitutions forbid

using the power of government to provide the type of

support encompassed by Arizona’s statute. I turn first to

the federal constitution.

THE FEDERAL CONSTITUTION

€ 79 The majority believes the standard of Lemon vy.

Kurtzman, 403 U.S. 602, 91 S.Ct. 2105 (1971), provides

an appropriate framework for its review of the constitu-

tionality of § 43-1089. Slip op. at 45. The second prong

of Lemon’s three-part test requires that a statute be “neu-

tral on its face and in its application” and not have the

“primary effect” of advancing sectarian aims of nonpublic

schools. See Mueller v. Allen, 463 U.S. 388, 392, 103

S.Ct. 3062, 3065 (1983); see also Committee for Pub.

Educ. & Religious Liberty v. Nyquist, 413 U.S. 756, 788,

93 S.Ct. 2955, 2973 (1973). To comply, “aid to sectar-

ian schools must be restricted to ensure that it may not be

used to further the religious mission of those [religious]

schools.” See Mueller, 463 U.S. at 406, 103 S.Ct. at

3073 (citing Wolman v. Walter, 433 U.S. 229, 250-51,

97 S.Ct. 2593, 2606-07 (1977)). I believe § 43-1089

fails this analysis.

44a

A. The primary effect of A.R.S. § 43-1089 is not neutral

4 80 The Establishment Clause issue turns on the United

States Supreme Court’s opinions in Nyquist and Mueller.

Arizona’s tax credit contains each of the factors that led

the Court to declare the credit unconstitutional in Nyquist

and none of the provisions that saved the deduction in

Mueller.

€ 81 The New York plan considered in Nyquist involved

a tuition grant program for low income families, together

with a tuition tax deduction program that varied by in-

come level. Both plans were limited to families whose

children attended private schools; neither program was

available for parents of children who attended public

schools.

“82 The Court noted that the private schools were pre-

dominantly religious and concluded that both tuition aid

programs violated the Establishment Clause.

[When] grants are offered as an incentive to parents

to send their children to sectarian schools by making

unrestricted cash payments to them, the Establish-

ment Clause is violated whether or not the actual

dollars given eventually find their way into the sec-

tarian institutions. Whether the grant is labeled a

reimbursement, a reward, or a subsidy, its substan-

tive impact is still the same.

413 US. at 786, 93 S.Ct. at 2972.

4 83 In Nyquist, New York issued vouchers redeemable

only at private schools. Arizona’s tax credit is available

only for private school contributions. The result is state

support of private, mostly sectarian schools. And con-

trary to the majority’s assertion, it is not affected even

though the “final destination” of the money is chosen by

aie TT ee Se I preity Gtr SE Teel

pw? tated ¥ —

Bey ow

45a

“individual parents,” not the state. Slip op. at 419. In

New York, the funds went first to the parents and then

to the school of their choice. /d. at 785-86, 93 S.Ct. at

2972. Similarly, under the Arizona plan, the money goes

first to the STO and then to the school of its choice. In

a footnote, the Nyquist Court made it clear that the re-

sult might be different if the scholarships and tuition

grants were neutrally “available without regard to the

sectarian-nonsectarian, or public-nonpublic nature of the

institution benefitted.” 413 U.S. at 782 n.38, 93 S.Ct.

at 2970 n.38. Arizona’s tax credit, however, may be used

only at private, mostly sectarian schools.

484 In Mueller, the Court upheld a Minnesota law al-

lowing a deduction, in part because it was “available for

educational expenses incurred by all parents including

those whose children attend public schools.” Making the

benefit available to this neutral and “broad class” is an

“important index of secular effect.” 463 U.S. at 397, 103

S.Ct. at 3068 (quoting Widmar v. Vincent, 454 U.S. 263,

274, 102 S.Ct. 269, 277 (1981)). The Court said the

Establishment Clause does “not encompass the sort of

attenuated financial benefit . . . that eventually flows to

parochial schools from the neutrally available tax benefit

at issue... .” ZId. at 400, 103 S.Ct. at 3070. Indeed,

the Mueller Court described Nyquist’s unconstitutional,

nonneutral, private school program in words directly ap-

plicable to the Arizona: “thinly disguised ‘tax benefits,’

actually amounting to tuition grants, to the parents of

children attending private schools,” the majority of which

were sectarian. 7d. at 394, 103 S.Ct. at 3066.

{85 This case is very like Nyquist and very unlike

Mueller. The Arizona tax credit is available only to

those who choose to support private, predominantly reli-

gious schools. Those who wish to contribute to public

schools are allowed only a $200 credit, and their contri-

46a

butions can be used only to reimburse fees paid for

extracurricular activities. Thus, the tax credit does not

offer the same or even similar benefits to all taxpayers,

is not neutral, and the “money involved represents a

charge made upon the state for the purpose of religious

education.” Nyquist, 413 U.S. at 791, 93 S.Ct. at 2974.

B. The tax credit is not one of a group of permissible,

generally available tax benefits

{86 The majority argues that “both credits and deduc-

tions . . . are intended to serve policy goals, and clearly

act to induce ‘socially beneficial behavior’ by taxpayers.”

Slip op. at 412 (quoting Elizabeth A. Baergen, Note,

Tuition Tax Deductions and Credits in Light of Mueller

v. Allen, 31 Wayne L. Rev. 157, 173 (1984)). The

court goes on to say there are “mechanical differences

between deductions and credits,” but “that these distinc-

tions are [not] constitutionally significant.” /d.

€87 I fear the court conflates personal philanthropy

with government grants. The difference is one of sub-

stance, not mechanics or labels. Unlike deductions al-

lowed for general charitable giving, the tax credit provides

a dollar-for-dollar reimbursement available only to those

who support our primarily sectarian private school system.

It is everything Nyquist held unconstitutional—a direct

stipend that has the primary effect of advancing religion

by tuition grants to religious schools. Nyquist, 413 U.S.

at 779-80, 791, 93 S.Ct. at 2969, 2974-75.

“88 The Court sees this quite benignly, as just one of

the “tools by which government can ameliorate the tax

burden while implementing social and economic goals.”

Slip op. at 415. But the Establishment Clause forbids

the government from promoting religious education by

special benefits unavailable for general, charitable giving.

Fe ee

ee Mn ee Re MO ee.

47a

This, of course, includes tax subsidies available only for

religious education. Nyquist, 413 U.S. at 782-83, 93

S.Ct. at 2970-71; see also Witters v. Washington Dep't

of Serv. for the Blind, 474 U.S. 481, 487-88, 106 S.Ct.

748, 751 (1986) (discussing impermissible direct sub-

sidies to religious education). As the Court recognized

in Nyquist’s companion case, a statute that implicates the

Establishment Clause cannot “single[] out a class of its

citizens for a special economic benefit.” Sloan v. Lemon,

413 U.S. 825, 832, 93 S.Ct. 2982, 2986 (1973). When

such a benefit acts as a tuition subsidy that helps only

children attending primarily sectarian schools, it supports

religiously oriented institutions. /d.

“89 Thus, in arguing that the Arizona tax credit is but

one of many tax credits provided by the Arizona Legisla-

ture, the court overlooks this crucial distinction: the

Establishment Clause is not implicated when the Legisla-

ture grants tax credits to support socially beneficial pro-

grams such as environmental cleanups or assistance to

the working poor. Slip op. at 415; see also §§ 43-1086,

43-1088. If it wished, the Legislature could, without con-

stitutional conflict, make direct appropriations for these

purposes. But credits that support religious education

implicate the religion clauses of both the state and federal

constitutions. //linois ex rel. McCollum v. Board of Educ..,

333 U.S. 203, 218-19, 68 S.Ct. 461, 468-69 (1948).

And when the tax credit is available only for support of

private, predominantly religious schools, the Establish-

ment Clause is not just implicated, it is violated. Nyquist,

413 US. at 793, 93 S.Ct. at 2975.

C. There is no real private choice—religious institutions

primarily benefit

“90 The court argues that the decision to contribute is

purely a matter of individual choice and that religious

48a :

institutions are only “incidental beneficiaries.” Slip op.

at 4 26. Under the provision upheld in Mueller, religious

schools benefitted only as a result of true choice made

among a wide selection of alternatives, both public and

private. 463 U.S. at 397-99, 103 S.Ct. at 3068-69. Under

the Arizona plan, there is no real choice—one may con-

tribute up to $500 to support private schools or pay the

same amount to the Arizona Department of Revenue. In

reality, this is not a choice but government action de-

signed to induce taxpayers to direct financial support to

predominantly religious schools. The majority seems to

argue that the “primary beneficiaries” of STO contribu-

tions are “scholarship recipients,” not the schools. Slip

op. at 421 n.4. No doubt the STOs, the students, the

schools, and those taxpayers wishing to support private

schools are all beneficiaries. The question, however, is

not who is a primary beneficiary but whether the state

may subsidize private, secular education, thus benefitting

any or all of these beneficiaries.

{91 The Supreme Court has assessed a law's effect by

examining the character of the institutions benefited to

determine whether they are predominantly religious. See,

e.g., Meek v. Pittenger, 421 U.S. 349, 363-64, 95 S.Ct.

1753, 1762-63 (1975). As the majority indicates, the

Mueller Court voiced concern over whether statistics could

be used to determine whether legislation will have a

predominantly religious effect. 463 U.S. at 401, 103

S.Ct. at 3070. But there is a big distinction between

Mueller and the present case. Because the Mueller stat-

ute was facially neutral and available for support of both

public and private schools, the Court chose not to examine

Statistics showing which taxpayers—those deducting for

private school expenses or those deducting for public

school expenses—actually took advantage of the tax bene-

fit. Id. “We would be loath to adopt a rule grounding

ee eee! ee

or Gre

49a

the constitutionality of a facially neutral law on annual

reports reciting the extent of various classes of private

citizens who claimed benefits under the law.” Jd. (em-

phasis added).

q¢ 92 The Arizona statute is not facially neutral because

its beneficiaries are supporters of Arizona’s private schools,

not parents who may take a deduction for either public

Or private school expenses. The Arizona tax credit, un-

like that in Mueller, is not limited to helping all parents

with school children but is available only to taxpayers

willing to direct the money to private schools. When the

benefit can flow only to private schools, the court must

determine what percentage of those private schools is sec-

tarian. This is the precise statistic the Court examined

in Meek, 421 U.S. at 364, 95 S.Ct. at 1762-63 (system

seventy-five percent sectarian); Nyquist, 413 U.S. at 757,

93 S.Ct. at 2957 (eighty-five percent sectarian); Sloan,

413 U.S. at 830, 93 S.Ct. at 2985-86 (ninety percent

sectarian); and Lemon, 403 U.S. at 610, 91 S.Ct. at 2110

(ninety-five percent sectarian ).

€93 In Meek, the Court described Pennsylvania’s sev-

enty-five percent sectarian private school system as “pre-

dominantly religious.” 421 U.S. at 363, 95 S.Ct. at 1762.

This phrase is, of course, applicable to Arizona’s private,

seventy-two percent sectarian schools. Thus, “it simply

defies reason to say that such a statute does not aid

sectarian schools.” Kosydar v. Wolman, 353 F.Supp.

744, 762 (S.D. Ohio 1972), aff'd sub nom. Grit v.

Wolman, 413 U.S. 901, 93 S.Ct. 3062 (1973). Con-

trary to the majority’s assertion, the statute promotes sup-

port of religious schools. It does this without prohibiting

use for sectarian instruction, thereby allowing direct state

subsidy of religious instruction and observance.

50a

D. A.R.S. § 43-1089 places no limitation on use of the

tuition grants

€94 The Establishment Clause is violated when state

aid is directed exclusively to private, mostly sectarian

schools without limitation on use. See Nyquist, 413 U.S.

at 780, 93 S.Ct. at 2969; Sloan, 413 U.S. at 829, 93

S.Ct. at 2985; Lemon, 403 U.S. at 616-17, 91 S.Ct. at

2113-14; see also Meek, 421 U.S. at 365-66, 95 S.Ct. at

1763-64. The Nyquist Court held that “[i]n the absence

of an effective means of guaranteeing that the state aid

derived from public funds will be used exclusively for

secular, neutral, and nonideological purposes, it is clear

from our cases that direct aid in whatever form is in-

valid.” 413 U.S. at 780, 93 S.Ct. at 2969 (emphasis

added). Mueller did not disapprove that statement. In

fact the Minnesota statute, unlike Arizona’s, disallowed

deductions for instructional books used to teach or “in-

culcate religious belief, tenets, doctrine, or worship.”

Mueller, 463 U.S. at 401, 103 S.Ct. at 3062. As the

majority notes, Mueller can be construed to allow some

types of unrestricted aid when neutrally available to both

public and private schools, but the Court has never per-

mitted unrestricted aid in a program, like Arizona’s, avail-

able only to private, mostly sectarian schools. Instead,

it has required mechanisms to restrict the aid to secular

uses. LAWRENCE H. TRIBE, AMERICAN CONSTITUTIONAL

Law § 14-10, at 1226 (2d ed. 1988). Those mechanisms

are absent from the Arizona statute.

E. The Arizona tax credit, unrestricted as to use, ex-

ceeds the boundaries set in the United States Supreme

Court’s Establishment Clause jurisprudence

€95 Because Arizona’s tax credit statute does not re-

quire that grant use be restricted to the secular aspects of

education, the STOs’ grants to private schools may be

ih ten amc

ae"...

Sla

used in any manner the recipient school wishes. Nor does

the statute prevent an STO from directing all of its grant

money to schools that restrict enrollment or education

to adherents of a particular religion or sect. Moreover,

there is no limit on the dollar amount the STO can give

to a school on behalf of a student. Thus, an STO could

pool several contributions and then pay the full tuition

for any student, group of students, or for that matter, all

students in any group of schools of a single religious

faith.

{96 None of the Court’s cases permits such a govern-

ment subsidy. The majority incorrectly relies on a num-

ber of cases that have built on Mueller. In Witters, for

example, the benefit was used to provide vocational re-

habilitation services for a blind student at a Christian

college, but the benefit was equally available to any eligi-

ble student at any school, public or private. 474 U.S. at

488, 106 S.Ct. at 752.

€97 In Zobrest v. Catalina Foothills School District,

the Court approved a school district’s provision of sign

language interpreters under a federal act benefitting in-

dividuals with disabilities. 509 U.S. 1, 113 S.Ct. 2462

(1993). Thus, interpreters were available for deaf stu-

dents attending classes at a Catholic high school, but also

for students attending public schools. The Court held

that the government had offered “a neutral service on the

premises of a sectarian school as part of a general pro-

gram that ‘is no way skewed toward religion’... .” Id.

at 10, 113 S.Ct. at 2467.

€98 In Agostini v. Felton, the Court held that grants

for general remedial services available to aid the educa-

tional, nonreligious function of religious and public schools

are not per se invalid. 521 U.S. 203, » 197 S.Ct.

1997, 2010 (1997). The Court relied on the principles

52a

established in Nyquist and Mueller: neutral government

benefits do not violate the Establishment Clause when

provided without regard to the sectarian-nonsectarian or

public-nonpublic nature of the institutions supported. /d.

at , 117 S.Ct. at 2011. The Arizona program, how-

ever, is available only to private schools and may be used

for sectarian instruction and observance.

€99 The majority today puts great reliance on the Wis-

consin case of Jackson v. Benson, 578 N.W.2d 602, cert.

denied, 119 S.Ct. 466 (1998). Slip op. at € 18. Even

if we are to assume that Jackson will eventually withstand

Establishment Clause analysis, it does not support the

majority’s result because the Wisconsin program is quite

different from Arizona’s. First, the Wisconsin statute con-

tains an “opt-out” provision by which students may be

excused from the religious aspects of sectarian education.

Second, Wisconsin requires schools receiving grants to

admit applicants without regard to religious/nonreligious

preference. Third, Wisconsin limits support to the private

institution’s educational programs. Finally, Wisconsin’s

program is designed to help low income families send

their children to private schools.

€ 100 Arizona’s statute, on the other hand, contains no

religious instruction opt-out provision, appears to permit

religious discrimination, permits funding of religious ob-

servance, and makes the tax credit available to all tax-

payers, those who have children in school and those who

do not, the rich and the poor. Further, our statute makes

no limitation on the amount of funding a school can re-

ceive from an STO for a particular student. Wisconsin,

in short, has made some attempt, successful or not, to

limit the use of state subsidies for religious instruction

and ceremony. Arizona’s program, on the other hand,

will inevitably and primarily benefit religious observance

and instruction.

53a

€101 The majority has cited Professor Baergen’s article

for several points. See, e.g., Slip op. at 12, 15. Pro-

fessor Baergen’s conclusion, however, provides a good

summation for the Establishment Clause issue:

Mueller v. Allen held that facially neutral income

tax deductions for educational expenses are not an

unconstitutional infringement of the Establishment

Clause. This note suggests that tax credit provisions,

which could entirely subsidize private sectarian edu-

cation, should be carefully scrutinized for an uncon-

stitutional legislative purpose. Such an impermissible

purpose should be found if the credit is limited to

private educational expenses or if the credit gives

such an unbalanced benefit to the parents of private

school children that it is clearly intended as a tax

incentive to subsidize private, primarily sectarian ed-

ucation. Likewise, a credit limited to private school

expenses would suffer an unconstitutional primary

effect of advancing religious education, unmitigated

by the deference shown by courts to true legislative

tax enactments [such as deductions] which equitably

allocate tax burdens based upon a definition of net

income. Moreover, tax credit provisions which are

facially neutral but only supply a [de minimis] bene-

fit to parents of public school children should be

subject to statistical analysis to determine the true

beneficiaries of the program and expose the facial

neutrality as a facade.

Baergen, supra, 31 WAYNE L. REv. at 184 (emphasis

added).

THE STATE CONSTITUTION

A. Historical background

€ 102 The Arizona tax credit violates the state constitu-

tion’s prohibition that “[n]o public money . . . shall be

54a

applied to any religious worship, exercise, or instruction

or to the support of any religious establishment.” Article

II, § 12. It also violates the prohibition on laying any

“tax ... in aid of any... private or sectarian school

; .” Article IX, § 10. The text is clear and unam-

biguous. Thus, the case should have ended there. But

for those who somehow find ambiguity in the quoted

words, we can turn to the intent of those who wrote our

constitution.

€ 103 The majority says we should use great “skepti-

We are to look instead for the framers’ “larger purposes.”

Slip op. at € 55. But this court has always prided itself

on its devotion to text and framers’ intent. E.g., Fain

Land & Cattle Co. v. Hassell, 163 Ariz. 587, 595, 790

P.2d 242, 250 (1990) (“The cardinal rule .. . is to

follow the text and the intent of the framers... .”).

Putting aside the explicit text, I believe the framers’ in-

tent is quite plain, even to our contemporary understand-

ing, and their larger purposes quite apparent from a closer

look at state history and the text of the relevant constitu-

tional clauses.

€ 104 The authors of the Arizona Constitution did not

adopt the religion clauses in a historical vacuum. Article

IT, § 12 and article IX, § 10 were the product of con-

temporary social forces and a national and local battle

over separation of church and state in public school in-

struction. The people who formed this state attempted

to save us from religious bigotry by separating religion

from state funding and support through our explicit reli-

gion clauses.

1. The national scene

€ 105 In the nineteenth century atmosphere. before the

Establishment Clause applied to the states, the emerging

S$Sa

public schools commonly included explicit religious in-

struction. The religious make-up of the United States was

predominantly Protestant, and public school instruction

reflected this majority religion. The latter half of the

nineteenth century, however, witnessed large Catholic im-

migration into the United States. Catholic church leaders

resisted the open Protestantism that pervaded public

school curriculum. As Catholic political power grew, so

did efforts to secure state aid to parochial schools. At

the same time, Protestants sought to “preserve the [Pro-

testant] religious aspects of the public school curriculum

and to protect the common culture from the growing

Catholic menace. The Blaine Amendment was a product

of that sentiment.” Joseph P. Viteritti, Choosing Equality:

Religious Freedom and Educational Opportunity Under

Constitutional Federalism, 15 YALE L. & Pot’y REv. 113,

145-46 (1996).

€ 106 These education-related contests between Protest-

ants and Catholics led to calls for stringent separation of

church and state in education finance. President Grant

took up the cause in an 1875 address to the Army of

Tennessee:

Let us then begin by guarding against every enemy

threatening this perpetuity of free republican institu-

tions. . . . The free school is the promoter of that

intelligence which is to preserve us... . Let us all

. . . [e]ncourage free schools and resolve that not

one dollar appropriated for their support shall be

appropriated to the support of any sectarian schools.

Resolve that either the state or the nation, or both

combined, shall support institutions of learning suffi-

cient to afford to every child growing up in the land

the opportunity of a good common school education,

unmixed with sectarian, pagan, or atheistical dogmas.

Leave the matter of religion to the family circle, the

56a

church, and the private school supported entirely by

private contributions. Keep the church and state for-

ever separate.

Se ee

CONRAD HENRY MOEHLMAN, THE AMERICAN CONSTITU-

TIONS AND RELIGION 16 (1938) (emphasis in original).

In his next message to Congress, President Grant recom-

mended a constitutional amendment to preclude state

funding of private (Catholic) schools, while permitting

continued Protestant influence in the public schools via

reading of the King James Bible. The proposal, named

after its sponsor, Rep. John Blaine, became known as the

Blaine Amendment.

€ 107 As passed by the House of Representatives, the

amendment provided, inter alia, that “no money raised

by taxation in any state, for the support of the public

schools or derived from any public fund therefor, shall

ever be under the control of any religious sect... .”

One of the Senate’s principal objections to the amendment

was that it “would only forbid school funds [from aiding

religion and denominational schools]; it would not pro-

hibit the States from using any other public funds for

religion or sectarian schools. To block every avenue, the

Senators wrote several new strictures into the House proj-

ect.” William O’Brien, The States and “No Establish-

ment”: Proposed Amendments to the Constitution Since

1798, 4 WASHBURN L. REv. 183, 193 (1965) (second

emphasis added; cites to Congressional Record omitted).

As a result, the version of the Blaine Amendment that

narrowly failed to receive Senate approval read:

No State shall make any law respecting an estab-

lishment of religion or prohibiting the free exercise

thereof; and no religious test shall ever be required

as a qualification to any office or public trust under

any State. No public property, and no public reve-

57a

nue of, nor any loan of credit by or under the au-

thority of, the United States, or any State, Territory,

District, or municipal corporation, shall be appro-

priated to, or made or used for, the support of any

school, educational or other institution, under the

control of any religious or antireligious sect, organi-

zation, or denomination, or wherein the particular

creed or tenets shall be read or taught in any school

or institution supported in whole or in part by such

revenue or loan of credit; and no such appropriation

or loan of credit shall be made to any religious or

anti-religious sect, organization, or denomination or

to promote its interests or tenets. This article shall

not be construed to prohibit the reading of the Bible

in any school or institution.

MOEHLMAN, supra, at 17 (emphasis added).

{108 While the Blaine Amendment, and similar pro-

posals," failed in Congress, it ultimately met with con-

siderable success in the states. Between 1877 and 1917,

its language was adopted in whole or in part in twenty-

nine states constitutions. Ann Marlow Grabiel, Comment,

Minnesota Public Money and Religious Schools: Clearing

the Federal and State Constitutional Hurdles, 17 HAMLINE

L. Rev. 203, 223 (1993). Ironically, however, the anti-

Catholic bigotry that inspired the Blaine Amendment was

displaced in many of those states by a principled commit-

ment to strict separation between church and state in edu-

11 Several congressmen continued to propose similar constitu-

tional amendments through 1888. See Frank J. Conklin & James M.

Vache, The Establishment Clause and the Free Exercise Clause of

the Washington Constitution: A Proposal to the Supreme Court,

8 U. PuGet SounpD L. REv. 411, 433 n.115 (1985). From 1889 on,

the Blaine agenda was advanced in Congress by inserting require-

ments in the enabling acts for prospective states that church/state

separation clauses be included in the constitutions of newly ad-

mitted states. See id. at 433.

58a

cation. “It is one of the great ironies of American con-

stitutional history that the Blaine Amendment, which

erupted out of a spirit of religious bigotry and a politics

that sought to promote Protestantism in public schools,

eventually became an emblem of religious freedom in

some states.” Viteritti, supra, 15 YaLte L. & Pou’y REv.

at 147. Arizona was one of those states.

2. ‘The Arizona scene

€ 109 Arizona’s Blaine Amendment clauses contain a

stringent proscription on educational aid, forbidding state

aid to all private schools, sectarian or secular. See Joun

D. LesHy, THE ARIZONA STATE CONSTITUTION: A REF-

ERENCE Guipe 216 (1993) (our article IX, § 10 “is a

more targeted (and potentially more stringent) specifica-

tion of the prohibition against subsidies to private enti-

ties”); Linda S$. Wendtland, Note, Beyond the Establish-

ment Clause: Enforcing Separation of Church and State

Through State Constitutional Provisions, 71 Va. L. REV.

625, 633 (1985). The history of Arizona public schools

and the pertinent legislation leading up to the constitu-

tional convention confirm that the strict language of our

constitution emerged from the framers’ firm conviction

that the state should be absolutely prohibited from sub-

sidizing any form of sectarian education—a _ conclusion

drawn from the framers’ territorial experience.

€110 In 1864, the territory’s First Legislative Assembly

established a publicly funded common school system. See

chapter XXIII, § 11, The Howell Code (1864). Ironi-

cally, the first school appropriation was an 1866 grant

of $250 to the mission school at San Xavier. Jay J.

WAGONER, ARIZONA TERRITORY, 1863-1912: A POLITI-

CAL History 51 (Tucson 1970). In the following decade,

however, the national battle over public funding for sec-

tarian schools hit Arizona’s emerging public education

59a

system, and Arizona forged a clear path toward separa-

tion by prohibiting state aid to sectarian education.

4111 In light of the large Mexican-American, predomi-

nantly Catholic population of the territory, the possibility

of public funding for Catholic schools would have had a

substantial impact. See Samuel Pressly McCrea, FEstab-

lishment of the Arizona School System, in BIENNIAL

REPORT OF THE SUPERINTENDENT OF PUBLIC INSTRUC-

TION OF THE TERRITORY OF ARIZONA, FOR THE YEARS

ENDING JUNE 30, 1907 AND JuNE 30, 1908, at 95

(1908). Governor A.P.K. Safford, known as the father

of Arizona education, expressed early concern that sec-

tarian, primarily Catholic, schools would attract public

moneys for their support. McCrea, supra, in BIENNIAI

REPORT, at 96. The Legislative Assembly apparently

shared Governor Safford’s concern and in 1871 sought

to prevent such a result by enacting a prohibition against

use of sectarian books or other documents and teachings

of “sectarian or denominational doctrine” in Arizona's

public schools. Any school in which such sectarian or

denominational doctrine had been taught could not re-

ceive public school funds. Act to Establish Public Schools

in the Territory of Arizona § 34 (approved Feb. 18,

1871).

€ 112 Ina report to the Federal Commissioner on Edu-

cation, Governor Safford explained and endorsed the iogic

of such a provision:

To the end that children of every religious faith may

consistently attend these schools, the legislature

wisely prohibited the use of sectarian books and reli-

gious teaching in them. Therein children of parents

of any and every faith can meet in harmony and

upon an equality in all respects. Based upon any

other character of law, the free-school-system would

and should soon be destroyed. Were one religious

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doctrine taught, children of other religious doctrines

would surely be driven from the schools. In this age

of science, learning, and religious and political in-

dependence, it will not do to promote any sect at the

common expense. The funds which maintain the

grand free schools are drawn from people of every

creed, and it is but just that all shall be equally

benefited, without the least attempt to inculcate any

of the many religious beliefs. Religious instruction

peculiarly belongs to the family-circle and church.

The most cruel and bloody wars recorded in the

pages of history show that they were the offspring

of the intolerance of religious sects. Bigotry has

brought untold thousands of innocent men and

women to torture and death. The cloak of religion

has been used to cover dire crimes against mankind:

but happily for poor and rich of all beliefs and con-

ditions, the time for such cruel intolerance has passed

away. Under the benign influences of our free Repub-

lic, every one has and can exercise the inalienable

right, free from threats and oppression, to worship

God in his own way; and our public schools consti-

tute the safe foundation upon which the prosperity

and endurance of our beloved country rest and our

rightful liberties are secured and assured. In the

public-school-room the children of every creed are

gathered, not to despise and hate each other, as in

olden times, under sectarian teaching, but to love

and respect manly and womanly virtues wherever or

in whomsoever found, regardless of the faith one or

the other entertains.

Report of Hon. A.P.K. Safford. in REPORT OF THE

COMMISSIONER OF EDUCATION FOR THE YEAR 1873, at

426-27 (G.P.O. 1874).

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4113 The 1871 act was also the first to provide for a

general or territorial tax to support schools. WAGONER,

supra, at 106. Section 32 stated: “No portion of the

public school funds, whether derived from Territorial,

county or district taxation, shall be used or appropriated

to any other than school purposes.” Yet in a separate

act, the 1871 Legislative Assembly appropriated $300

from the general fund to the Sisters of St. Joseph of

Tucson to reimburse them for school books purchased.”

This appropriation, which was renewed by the 1873 Leg-

islative Assembly, was apparently not paid because the

territorial treasurer believed payment would be illegal.

But in 1875, the Legislative Assembly ordered it paid

from the Territory’s general fund. McCrea, supra, in

BIENNIAL REPORT, at 88.

4114 This 1875 paymeni, coupled with the Catholic

community’s apparent boycott of fundraising efforts on

behalf of the public schools, set off a wave of debate on

the issue of state funding of private religious institutions.

See John C. Bury, Dissertation, The Historical Role of

Arizona’s Superintendent of Public Instruction 114-29

(Northern Arizona University 1974). The cause for pub-

lic support of Catholic schools was championed by Chief

Justice Edmund Dunne of the Arizona Territorial Supreme

Court. He argued before the 1875 Legislative Assembly

that either Catholics whose children attended private, sec-

tarian schools should be exempt from paying taxes to

support public schools or public moneys should be used

to support Catholic schools. /d. at 117-18. He sought to

enforce his vision of state-funded Catholic schools by ask-

ing the Assembly to create corporations that would estab-

lish private schools. These corporations would then re-

12 In 1871, St. Joseph’s Academy, a private girls’ school, was the

only school operating in Tucson. The first public school did not

open until 1872. WAGONER, supra, at 70, 107.

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ceive tax funds based on the number of enrolled students

in their schools. Jd. The measure was ultimately de-

feated,'’ and Chief Justice Dunne was relieved of his

position by the federal government. /d. at 119-20, 124.

€ 115 Governor Safford remained publicly silent on the

issue until after the Legislative Assembly settled it in

favor of nonsectarian instruction. In his 1877 message

to the Legislative Assembly, Governor Safford recounted

the achievements of the nascent Arizona public schools

and strongly argued for continuing nonsectarian instruc-

tion and limiting expenditure of public school funds to

support of public schools:

The school room is peculiarly an American insti-

tution. It is organized and kept free from sectarian

or political influences .... To surrender this |pub-

lic school| system, and yield to a division of the

school fund upon sectarian grounds, could only result

in the destruction of the general plan for the educa-

tion of the masses, and would lead, as it always has

wherever tried, to the education of the few and the

ignorance of the many. This proposition is so self-

evident, and experience has proved it so true, that

it does not require argument.

Journal of the Ninth Legislative Assembly, at 32 (1877)

(emphasis added).

13 According to McCrea, when Arizona decided against pubic sup-

port of private sectarian education it “then and there parted from

New Mexico in educational policy.” McCrea, supra, in BIENNIAL

REPORT, at 96. The contrast with New Mexico is as striking as it

is illuminating. In New Mexico, the Catholic Church dominated

education, and attempts to secularize the schools via the 1889 draft

constitution were in large part responsible for the failure to ratify

that constitution. See Ropert W. Larson, NEW MEXICo’s Quis?

FOR STATEHOOD 1846-1912, at 125, 159-68 (1968).

es Le

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4116 Resolution of the 1875 school controversy was

not, however, the final legislative word on sectarian in-

fluence in the public schools. In 1885, the Legislative

Assembly revised the school laws to provide far more

stringent protections. The first change was to amend the

earlier proscription on sectarian instruction to read:

No books, tracts or papers of a sectarian char-

acter shall be used in, or introduced into any school

established under the provisions of this act, nor shall

any sectarian doctrine be taught therein, nor shall

any school whatever under the control of any reli-

gious denomination, or which has not been taught in

accordance with the provisions of this act, receive

any of the public school funds, and upon satisfactory

evidence of such violation the county school super-

intendent must withhold all apportionments of school

moneys from said school.

Act to Establish a Public School System and to provide

for the maintenance and supervision of Public Schools in

the Territory of Arizona § 84 (approved March 12, 1885)

(emphasis added).

€ 117 While this first amendment did little more than _

strengthen the existing proscription on sectarian influence .

in the public schools, a second legislative measure dis-

tinguished Arizona from the anti-Catholic bigotry pervad-

ing most of the nation on the church/school question.. In

contrast to the Blaine Amendment and constitutional

amendments in states that discriminated against Catholics

and promoted Protestantism through reading the King

James Bible in schools, Arizona legislated against all reli-

gious exercise:

Any teacher who shall use any sectarian or denom-

inational books or teach any sectarian doctrine, or

conduct any religious exercises in his school, or who

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shall fail to comply with any of the provisions men-

itoned in section 89 of this act, shall be deemed

guilty of unprofessional conduct, and it shall be the

duty of the proper authority to revoke his or her

certificate, or diploma.

Id. § 93 (emphasis added). As noted in a United States

Bureau of Education Report on Public School Education

in Arizona:

Every school law since that of 1871 had contained

provisions against the introduction of tracts or papers

of a sectarian character into the public school, also

against the teaching of any sectarian doctrine in

them. For some reason this was not believed to be

drastic enough, and a section was added to the law

which provided for revoking teachers’ certificates for

using in their schools sectarian or denominational

books, for teaching in them any sectarian doctrine,

or for conducting any religious exercise therein. The

lawmakers evidently aimed to relegate all religious

teaching to the home and the church. The prohibit-

ing of “religious exercises” in schools has met with

strong condemnation from many Protestant church

members, but with the variety of religious creeds

represented in the Territory it is doubtful whether

a better policy could have been found.

STEPHEN B. WEEKS, UNITED STATES BUREAU OF EDUCA-

TION, HISTORY OF PUBLIC SCHOOL EDUCATION IN ARI-

ZONA 55 (Bulletin No. 17, 1918) (quoting McCrea,

supra, in BIENNIAL REPORT, at 121-22) (emphasis

added). Thus, by 1885 Arizona had firmly demonstrated

its commitment to the separation of church and state in

education. Moreover, it had radically distinguished itself

from most of the rest of the nation by extending its separa-

tionist commitment to preclude Protestant, Catholic, and

all other religious influence in its public schools.

aaa er ea eee

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{118 Arizona’s continued commitment to church/state

separation in education was next evinced in the 1891

Draft Constitution proposed as part of the statehood move-

ment. Article VIII, § 3 stated:

All common schools, universities and other educa-

tional institutions, for the support of which lands have

been granted to the State, or which are suported by a

public tax, shall remain under the absolute and ex-

clusive control of the State, and no money raised for

the support of the public schools of the State shall be

appropriated or used for the support of any educa-

tional institution, wholly, or in part, under sectarian or

ecclesiastical control. No religious test or qualification

shall ever be required of any person as a condition of

admission into any public educational institution of

the State, either as teacher or student. No sectarian

or religiou

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