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Montana Fights Decision Upholding Tax-Credit Scholarship Program

July 20, 2017

The Montana government is asking the state’s Supreme Court to reverse a ruling that allows religious schools to participate in a tax-credit scholarship program.

Montana established the program through the state’s first-ever education choice law in 2015. The law grants individuals and corporations a 100 percent tax credit for donations to the scholarship program. In implementing it, the Montana Department of Revenue created a rule excluding private, religious schools from serving as qualified providers. The department claimed allowing participation of religious schools violated the state constitution’s Blaine amendment, which prohibits the use of public money to fund sectarian schools.

In December 2015, the Institute for Justice filed a lawsuit against the state on behalf of a group of parents, alleging the revenue department’s rule violated families’ religious liberties. In May 2017, a district court judge ruled in favor of the parents. In June, a Montana Department of Revenue spokesman said the state plans to appeal the case to the Montana Supreme Court.

‘It Is a Big Win’

State Rep. Kris Hansen (R-Havre) says the district court’s ruling was a good sign for parents who want education choice.

“The court ruled that tax credits are not appropriations, and therefore a tax credit that benefits a family that chooses a religious school is not an unconstitutional aid to religion,” Hansen said. “It is a big win. However, the director of the Department of Revenue has stated that the department will appeal.”

Learning from Other States

Montana Family Foundation President Jeff Laszloffy says the education choice bill was a long time in the making. His organization helped draft the legislation, basing it on what’s been successful in other states.

“We wrote the original tax-credit scholarship bill about nine years ago and have introduced it in every legislative session,” Laszloffy said.

The bill passed in 2013 but was vetoed by Gov. Steve Bullock, a Democrat. It passed again in 2015 and became law without the governor’s signature.

“We felt vindicated that the outcome was completely predictable, because this particular case was litigated all the way to the U.S. Supreme Court, and our side won in a similar case in Arizona,” Laszloffy said.

“It’s just clear that these are not appropriations, because the money never transfers from the private sector to the public sector,” Laszloffy said. “I think this [appeal] is both a fool’s errand and a complete waste of taxpayers’ money. There’s a chance they may win at the Montana Supreme Court, but they will lose on the federal side. We have court precedents embedded in this legislation. We doubt the court will go against its own precedents.”

End of Blaine Amendments?

David Herbst, state director of the Montana chapter of Americans for Prosperity, says he’s hopeful the current lawsuit will end the question of whether Blaine amendments can keep inhibiting development of education choice programs.

“We would like to lay this question to rest of whether the Blaine Amendment precludes any amount of school choice whatsoever [in Montana], so we can move on to other choice options like education savings accounts (ESAs),” Herbst said.

ESAs grant parents access to all or a portion of the money allocated for their child’s public school education, to use on approved educational alternatives such as private school tuition, tutoring, learning therapies, and homeschool textbooks.

“I think people are waiting for the oxygen to come back into the room from this current case,” Herbst said. “If the state Supreme Court or federal district court decides in our direction, hopefully what we’ll see is ESAs coming through next. That provides real school choice, correctly incentivizing schools to make every student’s education count.”

Hansen says ESAs would spark education innovation in the state.

“We got an ESA bill to the governor in 2015, but he vetoed it,” Hansen said. “Certainly, a universal ESA or voucher would benefit huge numbers of families and students in the state, and would provide helpful motivation for more and varied private education providers to start up in the state. Those expanded options would go a long way toward giving each child the educational opportunity best suited for him or her.”

‘People Are Excited’

Hansen says she’s glad to have finally gotten education choice going in Montana.

“Our current tax credit program is small, but we are happy to have it, and it appears that it will about double this year over last,” Hansen said. “That is encouraging and proves people are interested and supportive.”

Laszloffy says one advantage to the tax-credit scholarship program is that it distances government from the education system.

“The program is now being used, and people are excited about it,” Laszloffy said. “It’s momentum-building, and the best thing about it is it uses no taxpayer dollars. It’s a private-sector solution to a public-sector problem: the dropout rate. This is one possible solution, and we need as many on the table as possible.”

Teachers Union Power

Laszloffy says the state’s appeal is political.

“I think the reason for the roadblock that’s been put in place by the Department of Revenue and the reason for the appeal is the governor placating his base, the teachers union,” Laszloffy said. “He wants to appear to be fighting to the bitter end, although he’s going to lose.”

Ashley Bateman (bateman.ae@gmail.com) writes from Alexandria, Virginia.

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Ashley Bateman writes from Alexandria, Virginia.
bateman.ae@googlemail.com