CONCORD — The state's new education tax credit program is unconstitutional because it diverts tax payments to religious schools, a superior court ruled Monday. Gov. Maggie Hassan quickly hailed the ruling. Proponents of the law promised an appeal.
Judge John M. Lewis, ruling in Strafford County, held that "New Hampshire students and their parents certainly have the right to choose a religious education. However, the government is under no obligation to fund 'religious' education. Indeed, the government is expressly forbidden from doing so by the very language of the New Hampshire Constitution."
Gov. Hassan called the decision "a victory for public education," while conservatives found it "absurd" and "appalling."
Article 83 of the New Hampshire Constitution states that "no money raised by taxation shall ever be granted or applied for the use of the schools of institutions of any religious sect or denomination."
The law was passed last year by a Republican-led Legislature over the veto of Gov. John Lynch, a Democrat like Hassan. It allows businesses to receive tax credits against business taxes owed equal to 85 percent of amounts they donate to state-designated "scholarship organizations."
The organizations may then award scholarships up to $2,500 to primary and secondary school low-income students to attend non-public schools, as well as public schools outside their home district, or to defray costs of home schooling.
The New Hampshire Civil Liberties Union, the American Civil Liberties Union, and Americans United For Separation of Church and State sued, saying the program diverts money from the state to religious institutions.
The state defended, noting that since the money never comes to the government, it should not be viewed as public funds.
Public or private money?
During an April hearing, Alex Luchenitser, associate legal director of Americans United For Separation of Church and State, argued, "This program uses the tax system to deliver funding for the program. If there was no business profits tax, this program could not exist. The only way we can run this program is if a business owes the tax and chooses to divert some of the tax to this program."
Richard Head of the Attorney General's Office countered that because the tax is retained by the business and never paid to the state, it should not be considered public money.
"What we have in the law before you is a private business making a decision it is going to donate money to a scholarship organization. There is no governmental involvement, except we will give you a tax credit for that decision," Head told the judge.
The civil liberties groups argued the program will primarily benefit private religious schools, which can use the tax funds for religious instruction.
Conservative groups supporting the law said it was carefully crafted to be constitutional.
Hassan said in a statement, "The voucher tax credit would divert millions of dollars in taxpayer money to religious schools with no accountability or oversight. That's the wrong policy for our public education system, and it is clear from today's ruling that it is the wrong policy for our constitutional separation of church and state as well."
Rev. Barry W. Lynn of Americans United for Separation of Church and State, called it "a great victory for public schools and for anyone who doesn't want tax dollars to pay for religious indoctrination and discrimination."
Rep. Bill O'Brien, R-Mont Vernon, championed the bill as House Speaker last year. Also an attorney, he represents seven former and current legislators who sponsored the bill and filed a brief supporting it.
O'Brien said the ruling "does not address why it is permissible for the state to allow tax breaks for religious organizations through college scholarships, but it is not permissible when it's a tax credit of this nature.''
The program allows up to $3.4 million in tax credits to be claimed in its first year and up to $5.1 million in the second. It provides for additional increases in tax credits for subsequent years.
A repeal bill passed the now Democrat-controlled House this session but was tabled by the GOP-led state Senate.
As of Friday, businesses had donated just $164,570 to the program, and there were requests on behalf of students totaling $139,885, well below the cap.
In his ruling, Judge Lewis held, "This court concludes that the program uses 'public funds,' or 'money raised by taxation,' and thus the program implicates Part I, Article 6, and Part II, Article 83. The New Hampshire tax code is the avenue used for producing and directing much money into the program.
"Contrary to the state's assertion that 'the government has not set aside revenue for a specific purpose,' it appears to the court that is indeed exactly what the legislature has done. Money that would otherwise be flowing to the government is diverted for the very specific purpose of providing scholarships to students."
Lewis enjoined the state from paying religious schools with the donations funded by the tax credits.
Parents and students
An attorney for the conservative Alliance Defending Freedom said, "Parents should be able to choose what's best for their own children. New Hampshire's program allows businesses to help make that happen, and nothing about that violates the state constitution, as the state's legal history clearly demonstrates.
"The arguments the ACLU is making against this program do not at all reflect the reality of what the state constitution clearly allows. The people who stand to suffer the most if the ACLU succeeds are New Hampshire's students," Gregory S. Baylor said.
The Alliance, Cornerstone Policy Research, and the Liberty Institute filed a brief defending the law.
Cornerstone Policy Research Executive Director Ashley Pratte was "appalled."
"The education tax credit was carefully established to work within New Hampshire law," she said Monday "In fact, it is run solely on donations from businesses. It is not derived from taxpayer funds and is, in fact, a charitable program working to the benefit of our most vulnerable families in the Granite State.
"While I appreciate the value of public education for all, we must never forget that it is the parent who is responsible for the education of their child," said Pratte.
Charles Arlinghaus of the Josiah Bartlett institute for Public Policy said, "The final decision in this case was always going to come from the Supreme Court, which I'm sure will uphold the law. No education tax credit has ever been struck down by a Supreme Court in any state.
"This ruling is particularly odd," Arlinghaus said. "The entire program is fine unless a parent by their own choice chooses a religious school. By this logic a program is illegal if neutral and only legal if actively hostile to religion. That's absurd and I trust the Supreme Court will find it so."