fbpx

Supreme Court cements Arizona school tax credit

The sun rises behind the Supreme Court on Capitol Hill in Washington, Monday, June 29, 2020.  (AP Photo/Patrick Semansky)
The sun rises behind the Supreme Court on Capitol Hill in Washington, Monday, June 29, 2020. (AP Photo/Patrick Semansky)

A new U.S. Supreme Court ruling allowing state funds to be used for parochial school scholarships in Montana cements in place a system that has existed here for years, all with the blessing of courts.

The nation’s high court in 2011 upheld a virtually identical program in Arizona. And while the reasoning of the justices in that case was different, the result is the same.

In fact, Arizona has a much more direct form of aid to religious schools than the one at issue in the Montana case decided Tuesday. But even that has been found to be legal by state courts here.

At issue in both Arizona and Montana is a system that gives people a dollar-for-dollar credit against their income taxes for money donated to organizations that provide scholarships for students to attend private and parochial schools.

In the Arizona program, individuals can divert up to $593 a year — double that for couples — to the scholarship organizations. There are similar programs for corporations and insurance companies.

All totaled, the state Department of Revenue figures there was about $192 million taken in these credits in the 2018 fiscal year, the most recent figures available.

Challengers to the Arizona law charged that the system is an illegal subsidy of religious schools, pointing out that the organizations that accept the donations and give out the aid can decide where those scholarships can be used. And the largest organizations give scholarships to parents only if they agree to send a child to a religious school.

What makes all this relevant is there is a provision in the Arizona Constitution that bars state aid to religious schools — exactly the same provision that exists in the Montana Constitution and in 36 other states.

It was on the basis of that amendment that the Montana Supreme Court ruled the tax credit unconstitutional. But the U.S. Supreme Court, in Tuesday’s ruling, said applying the amendment that way discriminated against religious schools and the families whose children attend or hope to attend them.

The 2011 Supreme Court ruling upholding Arizona’s tax credits didn’t get into that level of detail.

Instead, Justice Anthony Kennedy, said the people who filed the lawsuit — Arizona taxpayers represented by the American Civil Liberties Union — had no legal right to challenge the law. He said the diversion of tax receipts does not necessarily undermine the goal of providing state funds for public education.

Since that ruling, Arizona has enacted an even more far-reaching program, this one giving actual vouchers of state dollars to parents to send their children to private and parochial schools.

In a challenge to that system, the state Court of Appeals concluded that the program, officially dubbed “empowerment scholarship accounts,” does not run afoul of that constitutional amendment making it illegal to use tax dollars for religious worship or instruction.

The judges also found no violation of a separate constitutional provision that bars public funds from being used to subsidize private and parochial schools. The court said the fact the parents control where the money is spent was sufficient to make the program legal.

A pending initiative drive seeks to limit the number of vouchers the state can issue to no more than 1 percent of the total number of children enrolled in public schools. With about 1.1 million in traditional district and charter schools, that would set the cap at about 11,000.

Tax credit program answers need for affordable housing

Civil engineer and worker discussing issues at the housing construction site (Stock photo/Deposit Photo)
Civil engineer and worker discussing issues at the housing construction site (Stock photo/Deposit Photo)

In the same way as the Covid pandemic has negatively impacted the Arizona economy and many families’ personal finances, the past year has placed even more pressure on the state’s housing market – in particular, the need to build more affordable rental housing.

Even before the pandemic, about 120,000 people were moving to Arizona each year. Such exponential growth means that our state needs to build an estimated 240,000 new rental units this decade. What would have been a major challenge under favorable pre-pandemic economic conditions has now become a behemoth task. With property owners struggling under the various eviction bans enacted to protect renters from losing their homes – and in many cases facing non-payment or reduced payment of rent for the past 10 months – the capital to build new affordable housing rental homes has become more challenging to secure.

If Arizona’s population growth continues at the same furious pace, the law of supply and demand dictates that rents will keep rising. More people and higher rents will create an even greater demand for additional affordable housing, a need the market cannot possibly hope to meet under present circumstances.

Fortunately, there’s a solution for the Catch-22 outlined above – an innovative public-private partnership idea known as the Arizona Low Income Housing Tax Credit Program. Our organization, with help from a bipartisan group of state legislators and stakeholders, nearly got this measure passed in 2020, before the pandemic cut the session short. The legislation is modeled after a federal program that originated with President Ronald Reagan in 1986 and has been expanded by presidents of both parties in the decades since. The federal version of tax credit program has supported the building of nearly 3 million units of affordable housing nationally – including 47,000 in Arizona.

State tax credit programs for low income housing have already passed in Colorado, Utah, New Mexico and 23 other states. These “booster programs” to build affordable housing have created massive momentum wherever they  have been enacted. As just one example, Colorado’s state low income housing program has created about 5,000 new affordable housing units since 2015.

Courtney Gilstrap LeVinus
Courtney Gilstrap LeVinus

We will be back at the state Legislature this year with two identical bills: SB1327 sponsored by Sen. David Gowan and HB2562 sponsored by Rep, Regina Cobb. These bills mirror last year’s legislation, which passed the House with 45 of a possible 60 votes. The Arizona proposal leverages the same stringent regulatory parameters as the federal program, which issues tax credits to state and territorial governments that in turn use a competitive process to distribute the credits to developers. This can be implemented in Arizona without creating a new layer of government, given that the Arizona Department of Housing already manages this process through its Qualified Allocation Plan. Additionally, new state tax credits can be targeted toward the communities that need them most, including urban and rural areas, the homeless, military veterans and schoolteachers.

Under the present pandemic conditions, with renters and property owners feeling enormous financial pressure, and with the need to build more housing and more affordable options, the time for this practical solution is now. Statewide, we need to build about 3,000 new affordable housing units and about 4,500 new workforce housing units each year until 2030. That will not happen without some creative thinking and a motivational tool that helps grow developer interest in building rental housing at all price points and across all demographics. To the extent that developers continue to plan to build amid the pandemic, many property owners face financial challenges, given that land, labor and material costs are the same for building “affordable units” as they are for market-rate apartment homes.

A state level low income housing tax credit program would better level housing supply and demand while freeing the marketplace to do its work. The program has worked for almost 40 years now, through six presidential administrations and innumerable market ebbs and flows. Especially while Arizona finds itself still struggling with the pandemic, the tax credit program will help us help thousands of families put roofs over families’ heads and create jobs to spur our economy.

Our housing market needs solutions right now. Low income housing tax credit program is ready to go, and we know it works. Let’s hope the Legislature and Gov. Ducey agree and vote to get it done. 

Courtney Gilstrap LeVinus, is president and CEO of Arizona Multihousing Association.