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Portions of HB 563 ruled unconstitutional, nonresident student provisions remain

Franklin Co court hearing

Kentucky School Advocate
November 2021

By Brenna R. Kelly
Staff writer

The portion of House Bill 563 that requires Kentucky public school districts to adopt a policy on accepting nonresident students will remain in effect after a judge clarified his ruling on the constitutionality of the bill.

Franklin Circuit Judge Phillip Shepherd ruled in early October that the portion of HB 563 that allows for tax credits in return for donations to education opportunity accounts and for those accounts to be used to pay for private school tuition in some counties violated the Kentucky constitution.

The decision came after the Council for Better Education, a nonprofit made up of Kentucky school districts, and several public school parents sued to stop the tax credit and opportunity account portion of the law. The suit did not challenge the nonresident student requirements in the law.

After the ruling, the Kentucky Department of Education (KDE) interpreted Shepherd’s decision to mean that the entire bill was unconstitutional and therefore that the nonresident portion was prohibited from taking effect.

Citing KDE’s interpretation, six independent districts – Augusta, Corbin, Paintsville, Pineville, Raceland-Worthington and Bowling Green – filed a motion asking the judge to clarify whether the ruling applied to the nonresident student requirements laid out in sections 1-4 of the bill.

The provisions include requiring school boards to adopt a policy by July 1, 2022 on how they will accept nonresident students, require KDE to submit a report to the legislature about how education funds can follow students and require students who transfer to be ineligible for sports for one year.

During an Oct. 25 hearing, Shepherd said that his ruling finding the tax credit portion of the bill unconstitutional had been “misconstrued” by KDE and that he would issue a written order clarifying that the nonresident student portions of the bill are still in effect.

“Let me reiterate that the court’s ruling does not apply in any way, shape or form to sections 1 through 4 of the bill,” he said.

Bowling Green Ind. Superintendent Gary Fields said the nonresident student provisions in HB 563 will allow the district to have more stable enrollment, offer high-quality programs and have the student population represent the demographics of the community.

“This ruling is a victory for families and for our school district,” he said. “Families in Bowling Green and Warren County will now have more opportunity to choose which school district their children attend, whether that be for proximity to their workplace or childcare, for a particular program, or to continue family tradition as Purples.”

After Shepherd’s clarification, KDE spokeswoman Toni Tatman said the department would move forward with implementing the nonresident student portions of the law. Under the law, KDE must provide a report to the General Assembly by Nov. 1 giving options on “how to ensure the equitable transfer of education funds” from one district to another depending on where a student chooses to attend school.  

In a presentation to the legislature’s School Funding Task Force on Oct. 18, Chay Ritter, director of KDE’s Division of District Support, explained how the funding transfer could work.

Ritter explained that while state education funding could follow students, he noted that KDE has no control over local tax revenue.

KSBA president Davonna Page, a Russellville Independent board member, pointed out that school boards set tax rates for the people who live inside the district and the revenue is used to operate the district’s schools.

“It would be very difficult for me to ask my community to raise the taxes if they thought that money was going to be transferred to a district outside my community,” she said.

Ritter agreed that any attempt to transfer local tax money would face significant legal challenges. Under the state constitution “no tax levied and collected for one purpose shall ever be devoted to another purpose.” In addition, the state’s Supreme Court’s decision in Rose v. Council for Better Education said the responsibility for adequately funding education lies with the General Assembly, Ritter said.

Creating add-ons to the SEEK funds for non-resident students and therefore reducing some district’s SEEK funds could also be legally challenging, he said.

“For each of these considerations, with exception of the status quo, we believe there are some legal questions behind,” Ritter said.

Though the Council for Better Education succeeded in getting the scholarship tax credit portion of the law declared unconstitutional at the circuit court level, proponents of the measures have vowed to appeal Shepherd’s ruling.

If the ruling is overturned, the law would allow the state to give away $25 million a year in tax credits for those who donate to the education opportunity accounts. The accounts in turn could be used to pay for private school tuition in counties with more than 90,000 residents and other educational expenses in the remaining counties.

In Shepherd’s ruling he noted that the law violates the state constitution in several ways including that state funds cannot be spent to support private schools without voter approval.

Shepherd also noted that allowing the EOAs to be used for private school tuition in some counties but not others violates the Rose decision which said the state must provide adequate and equal educational opportunities for all children.

“In this case, even if the funding of a private school tuition with tax credits could pass constitutional muster, the blatant geographic discrimination that limits such educational opportunity to children in the eight most populous counties of Kentucky cannot withstand even the most minimal constitutional scrutiny,” he wrote.

Ben Field, an attorney with the Institute of Justice, a libertarian-leaning law firm, said his group would appeal the case all the way to the state’s Supreme Court.

“The Kentucky Constitution has no provisions that prevent the Commonwealth from providing tax credits to support giving families alternatives to the public school system,” he said in a press release after the ruling.

Tom Shelton, spokesman for the council, said the law is not about school choice, it’s about funding.

“This is providing public money for private purposes,” he said during a discussion on KET’s Kentucky Tonight, “that is strictly prohibited by our constitution.”

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