Kentucky School Advocate
November 2022
By Brenna R. Kelly
Staff writer
The Kentucky Supreme Court is poised to make a ruling about whether a scholarship tax credit program to pay for private school tuition violates the state’s constitution.
The court heard arguments on Oct. 12 from attorneys for public school districts and parents opposed to the program and from Attorney General Daniel Cameron and other parents who support the idea.
The scholarship tax credit program, created by the legislature under House Bill 563 in 2021, would allow tax credits for donations to “education opportunity accounts.” The EOA program’s tax credits would be up to 97% of the donation. Families could then use that money to pay for private school tuition in the state’s eight most populous counties and other education expenses in all counties.
After school districts, represented by the Council for Better Education (CBE), and several public school parents sued, a circuit judge ruled that the law violates the Kentucky constitution’s provision on spending public money on private schools.
The case skipped the court of appeals, leading to Oct. 12 arguments before the state Supreme Court.
During the hearing, the justices questioned whether the program amounted to a state appropriation or tax refund and noted that it only applied to certain counties, a practice that has been found unconstitutional.
Justice Lisabeth Hughes questioned the nearly dollar-for-dollar match that donors would receive and noted that donors would essentially be getting a tax refund.
The school districts’ attorney told the justices that the program is a state appropriation, evidenced by the legislature’s $125 million cap on the program.
However, attorney Matthew Kuhn, representing Attorney General Daniel Cameron’s office, disagreed.
“House Bill 563 does not actually spend public dollars. It simply lowers Kentuckians taxes,” he said.
Justice Michelle Keller said though the program might not spend public money, the state would still be losing tax revenue.
“It might divert what might otherwise be public money, because of the tax credits that are given,” she said. “I don’t know of many other tax credits for individual taxpayers that are almost dollar per dollar.”
She also pointed out if someone donated securities, they could end up making money on the transaction.
Byron Leet, an attorney representing CBE, said the goal of the tax credit program the legislature created was designed to spend public money on private schools but crafted in a way to try to circumvent the constitutional prohibition on doing so.
“It was done in such a way so as not to make it an obvious appropriation grant of public money, it was done in a clever, a more clever, way to try to get around that obvious prohibition,” he said. “But the effect is absolutely the same. The effect is that the state of Kentucky is bearing the financial burden of this, not the individual taxpayer when you offer someone dollar for dollar credit.”
In addition to unconstitutionally spending state money on private schools, the circuit judge also ruled the program was illegal because it does not apply equally to all counties.
The law’s provisions for private school tuition only apply to counties with more than 90,000 people as designated by the 2010 U.S. Census. Kuhn told the justices that the problem could be remedied by taking out the reference to the 2010 census – therefore having it apply to any county with more than 90,000 people and not restricted to the eight counties that qualified in the 2010 Census.
“We don’t remove things from legislation, that’s not our role,” said Justice Robert Conley. Keller pointed out that the legislation only passed by a close vote and the number of districts was integral in its passage. The bill passed the House by one vote and representatives overrode Gov. Andy Beshear’s veto by securing exactly the needed 51 votes.
“I think if this court were to just start removing words from the statutes, there would be an uproar and clamor about that, as there should be,” she said.
Ben Field, an attorney from the Institute for Justice, an Arlington-based libertarian think tank, argued that similar tax credit programs have been upheld by courts in many other states.
However, Leet told the justices that those cases don’t matter.
“None of those states have Kentucky’s constitution,” he said. “And none of those states have Kentucky’s court decisions on the significance of public education and the affirmative duty to fund public education in this Commonwealth.”
Chief Justice John Minton did not give a timetable for the court’s ruling.