Tax Analysts Blog

Montana's School Credit Is Unconstitutional, but Not for Obvious Reasons

Posted on Jan 13, 2016

I've been following the brouhaha in Montana over the tax credit program for private school tuition. The Legislature passed a law that provides a new income tax credit of up to $150 for donations to organizations that grant scholarships to students at private schools. That is not unusual; many states have adopted or considered adopting these credits. Note, however, that 62 of Montana's Democratic state lawmakers voted against the bill and that Gov. Steve Bullock, also a Democrat, let it become law without his signature. It was hardly a bipartisan effort.

So why did Republicans -- who I think were unanimous in support -- back the bill? Some were motivated by their dissatisfaction with public schools. Others were motivated philosophically by school choice and limited government. But a couple of lawmakers I know in Helena said that for many, it was about appealing to folks who send their kids to private school. I can't find the exact number, but most (I've heard 90 percent) of the private schools in the state are religiously affiliated. So it's safe to say that most students attending private schools are doing so for religious reasons.

The use of credits like this is controversial. Liberals don't like them because they say they undermine the public school system. Many believe the state should put the money it spends on credits back into the public school system. Conservatives like the credits because they foster school choice and aid families sending their children to private schools.

The Montana Department of Revenue decided the credit could not be used for religious schools. The DOR's rule was based on the belief that the state constitution prohibits aid to sectarian education institutions. That poses two problems. The first is political: If the credit cannot be used for religious schools, and most private schools are religious, who exactly is entitled to it? Most private school students would be ineligible. That could not have been the intent of the Legislature.

The second is legal: At least two lawsuits have been filed against the DOR and its new rule. The legal challenges are on First Amendment and equal protection grounds. The plaintiffs allege that the rules are "hostile to religion, because they single out religious schools and religious individuals for discriminatory treatment." There are several interesting conflicts to resolve. The Montana and federal constitutions both arguably bar appropriations for religious organizations. Yet both also prevent religious discrimination. I'm not personally in favor of giving public money to religious organizations, but I find it odd to say we are giving money to people who run schools -- unless your church is running the school, in which case, don't bother to apply. The other interesting conflict is whether the credit constitutes an appropriation. If it does, the DOR is on solid ground. If it doesn't, the plaintiffs are on solid ground, at least for constitutional purposes.

The law itself is strange. As my colleague Brian Bardwell reported, the Montana Constitution seems to ban this type of assistance altogether. Article 5, section 11 prohibits appropriations for "educational or benevolent purposes to any private individual, private association, or private corporation not under control of the state." That is actually a good government rule. It says no public money for nonpublic actors -- religious or not. Maybe it's the libertarian in me, but why should tax dollars (whether appropriated or stealthily handed out through the tax code) be given to any individual person or organization? It seems obvious that the underlying law is unconstitutional.


Read Comments (1)

Bob KammanJan 13, 2016

Why is it safe to say that most students attending private schools are doing so
for religious reasons? In Arizona, the Catholic schools attract a large number
of non-Catholics because of the quality of education they provide (not to
mention the large number of non-Catholics who are recruited because of their
athletic abilities). Is there a Catholic way to teach algebra, which after all
was an Islamic discovery? If you want to find too much religious instruction,
go to places like Texas where the public schools teach pseudo-scientific

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