Lawyers clash over constitutionality of N.H.’s new education tax credit
New Hampshire Gov. John Lynch, alongside his children, from second from left, Julia, Jackie and Hayden, celebrates his re-election at a victory party in Manchester, N.H. Tuesday, November 2, 2010. (AP Photo/Josh Gibney)
A judge heard arguments yesterday about whether New Hampshire’s new education tax credit sends public money to religious schools – and, if it does, whether the whole law should be thrown out or if parts of it should be salvaged.
“It would have made my life easier if they hadn’t involved the government in all of this,” Judge John Lewis said to chuckles toward the end of the three-hour hearing in Strafford County Superior Court in Dover.
Lewis didn’t issue an immediate ruling on the lawsuit filed against the state in January by eight residents, led by former Executive Council candidate Bill Duncan. They’re challenging the tax credit law passed last year by the then-Republican-controlled Legislature, over a veto from then-Gov. John Lynch, a Democrat.
For opponents of the program, the case represents their best chance to overturn it. Just eight days before yesterday’s hearing, the Republican-led Senate blocked a repeal bill that had passed the Democratic-led House. Language repealing the program was also included in the budget that passed the House this month.
The education tax credit law allows a New Hampshire business to reduce its state tax bill by donating money to a nonprofit scholarship organization. That group then provides scholarships to help pay the cost of tuition at out-of-district public schools and private schools, including religious schools, or for home-schooling costs.
Opponents of the program, which got under way this year, argue it will divert money to private and religious schools at the expense of public schools, and uses public funds to support the teaching of religion. Supporters of the law say it gives low-income families the opportunity to afford the best school for their children, and argue it won’t affect public school funding.
There was no disagreement yesterday that money can go to religious schools without any restrictions. One of the central questions, though, is whether that represents a use of public funds and therefore violates the constitutional separation of church and state.
Supporters of the law say it isn’t, since the money never passes through government hands or a government bank account. They cited an April 2011 ruling by the U.S. Supreme Court that determined a similar program in Arizona was constitutional because, the court ruled, a tax credit is not the same as a government appropriation.
Associate Attorney General Richard Head also cited a 1997 ruling by the state Supreme Court, in which it ruled a proposed tax break for industrial properties wouldn’t violate the New Hampshire Constitution’s ban on gifts to corporations.
“The court concluded that the money was, in fact the tax exemption, was not the expenditure of public funds, the exact issue that is before the court today,” Head said.
But Alex Luchenitser, a lawyer for Americans United for Separation of Church and State, said New Hampshire’s Constitution and case law contain stricter standards when it comes to public funds and religious schools.
He pointed to an 1877 amendment to the state Constitution that specifies, “no money raised by taxation shall ever be granted or applied for the use of the schools . . . of any religious sect or denomination.” He said the tax credit program makes use of the tax system to generate money, and said state case law has generally treated tax credits as similar to direct government spending.
“The education tax credit program will take tax funds away from the state treasury, away from the public schools, and deliver them to religious schools in violation of the text, the purpose and the case law of the New Hampshire Constitution,” Luchenitser said.
Another issue discussed yesterday was the concept of severability, whether Lewis could strike down one part of the law (say, scholarships for private and religious schools) but leave the rest in place.
Luchenitser said he doesn’t believe the language is severable, and Lewis would be forced to essentially rewrite the law to keep part of it intact.
But the law itself declares it is severable, and that “if any provision . . . or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications . . . which can be given effect without the invalid provision or application.”
That means, even if Lewis strikes down the scholarships for private schools, he should leave intact the scholarships for out-of-district public schools and the aid for homeschooling, said Dick Komer, an attorney from the Institute for Justice representing the first scholarship organization, the Network for Educational Opportunity.
“Why else would it be there?” Komer said.
Another question is whether Duncan and the seven other plaintiffs even have the legal standing to challenge the law in court. They argue that, as taxpayers, they are affected by the law. But Komer said they haven’t suffered any actual injury or harm as a result of it.
Lewis didn’t indicate when he would issue a ruling in the case. Whatever his decision, it’s likely to be appealed to the state Supreme Court.
(Ben Leubsdorf can be reached at 369-3307 or email@example.com or on Twitter @BenLeubsdorf.)