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AZ Supreme Court declines case challenging tuition tax credits

UPDATED AT 6:27 P.M., OCT. 30

A state law allowing businesses to reduce their tax liabilities by contributing money to organizations that distribute private school tuition payments will remain on the books – for now. A challenge in federal court is pending.

The Arizona Supreme Court on Oct. 27 declined to review ~Green v. Garriott~, a lawsuit filed by opponents of the tax-credit system who argued unsuccessfully the law amounted to unconstitutional state aid to private schools and religious organizations. The law was approved by the Legislature in 2006

A challenge against the law was rejected by the Arizona Court of Appeals in March when the majority of a three-judge panel ruled the tax credits did not steer cash away from the state unlawfully.

The Supreme Court challenge against the law was led by the American Civil Liberties Union of Arizona and the Arizona School Boards Association. An amicus brief was filed by the Arizona Education Association, the state’s largest union of teachers.

Tim Keller, a supporter of the school-choice measure and a litigant in the case, said he was ecstatic the court declined to pursue additional inquiry into the constitutionality of the tax credit.

“We’ve maintained all along that this lawsuit was frivolous,” said Keller, an attorney with the Institute for Justice. “The Arizona Supreme Court and the U.S. Supreme Court have already spoken that school-choice programs like this are perfectly consistent with both the state and federal constitutions.”

Keller said the Arizona Supreme Court in 1999 upheld a similar credit established for individuals in the precedent-setting case, ~Kotterman v. Killian~.

Chris Thomas, an attorney working for the Arizona School Boards Association, said the Supreme Court’s decision to avoid another hearing in the case is disappointing, although not entirely unexpected given the case precedent established in ~Kotterman~.

However, a federal challenge remains. This month, the 9th Circuit Court of Appeals declined to review an earlier court decision that revived a lawsuit challenging the tax credit.  That case, ~Wynn v. Garriott~, has been remanded to the U.S. District Court in Arizona for review, but Keller said he might appeal the 9th Circuit Court’s recent decision to the U.S. Supreme Court.

The ongoing federal fight over the constitutionality of individual tuition tax credits could spur a revival of claims against corporate tuition tax credits that, Thomas said, could ultimately lead to the downfall of private school tax credit systems in the state. Both laws benefit the same school-tuition organizations, he said.

“The issue over tax credits is not over by any means, either in a legal sense or a policy sense,” he said.

Thomas said loopholes in the state’s individual tax credit system, which has been shown to benefit families who could otherwise afford private schools, will add political difficulty for lawmakers eager to expand school-choice options.

“We believe it is the Legislature’s responsibility under the Arizona Constitution to create an adequate, general, and uniform public school system to make sure they have the necessary programs for kids to achieve academically,” he said. “I think it’s debatable whether they have done that.”

John Wright, president of the Arizona Education Association, said existing state budget deficits will complicate the goals of even the most ardent of school-choice supporters in Arizona’s Legislature.

“I think a majority of citizens and parents are going to be opposed to taking additional money out of the neighborhood schools while we’re subsidizing people to pay tuition to private schools,” he said. “I think sooner or later the public will win out here.”

Alessandra Soler Meetze, director of the ACLU of Arizona, said her organization will continue to litigate against tax credits for private school tuition payments and accused the options as “corrupt, dishonest and not serving its purpose” of helping poor children.

Public school interests hope the court’s refusal to consider the corporate tuition tax credit will not result in a renewed expansion of school-choice measures. But supporters of the options are viewing the court’s action as a signal to proceed.

Matthew Ladner, vice-president of research for the Goldwater Institute, said the court’s decision was a significant victory for the school-choice movement that should be seized upon to expand private school options for students in Arizona.

In March, the Arizona Supreme Court struck down two school voucher programs that were created to benefit foster and developmentally disabled children. Now, state court precedent holds that vouchers created by the Legislature are “off the table,” while tax credit scenarios are legitimate, said Ladner. He urges the adoption of expanded funding limits and an individual tax credit to help poor parents send their children to private schools.

Ladner said expanded school-choice options benefit students and public schools, which would be forced to improve their services to maintain student enrollment.

“One of the important goals should be to maximize a healthy level of competition,” he said.

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