Are Arizona’s private school tax credits illegal?

by David Safier
This is potentially very big news. The U.S. 9th Circuit Court of Appeals decided that portions of Arizona's private school tuition tax credit programs violate the U.S. Constitution.

Before you pop champagne corks or pull out your pitchforks, depending on which side of the controversy you're on, nothing is final so long as people can appeal. Right now, nothing has changed.

I don't completely understand the ramifications here, but let me give you the facts.

In 1999, the AZ Supreme Court decided tax credits were OK, because the court understood that the groups giving out scholarships, the STOs (School Tuition Organizations), would not use religious criteria. But it turns out, many of the STOs have religious affiliations, so their scholarships only go to students attending private schools of specific religious denominations.

On April 21, the 9th Circuit unanimously held that that kind of religious discrimination violates the First Amendment to the U.S. Constitution.

Apparently, any STO that gives out scholarships to schools regardless of religious affiliation won't be affected, so even if the ruling stands, the tax credit program can continue. But some STOs will have to either change their policies or shut their doors.

Here's an interesting wrinkle. Rep. Steve Yarbrough (R-Chandler), one of the biggest tax credit supporters in the legislature, also happens to run the biggest STO in the state. By law, the organization gets to keep up to 10% of the tax credit money it collects for overhead. In 2007, Yarbrough's STO pulled in about $11 million, and my reading of the STO's tax return indicates it took out about $1.1 million in expenses, which included a $96,000 salary for Yarbrough (He may have benefited personally from other STO expenses as well, though I can't say that for certain). Not a bad haul.

The name of Yarbrough's STO? Arizona Christian School Tuition Organization. Something tells me Steve is not a happy camper right now.

0 responses to “Are Arizona’s private school tax credits illegal?

  1. Since this is on the subject of education.

    Cory Booker did an interesting article today on Hpost about education reform. I’ve been a fan of Mr. Booker for a few years.

    http://www.huffingtonpost.com/cory-booker/a-hard-look-at-education_b_201368.html

    He links to a group called the Alternative High School Initiative. http://www.ahsi.org/2009/01/newark-mayor-superintendent-launch-alternative-high-school-partnership/

    So far, what I’ve read about their program is pretty good. I wonder if this is something that would even be possible here in Arizona with the state amendment the way it is.

  2. Jack is right. Ethically a legislator should recuse him or herself from any matter that the legislator or a direct member of his or her family would receive any pecuniary benefit. Rep. Yarborough is not the only legislator who has personally benefitted from legislation they sponsored.

  3. Jack the Griper

    My biggest problem is that Rep. Yarborough can hold his head up while voting and proposing legislation that has made him a millionaire in the last decade. If it isn’t illegal it is certainly immoral and unethical by most any standard.

  4. Establishment clause jurisprudence isn’t cut and dry. I agree that the courts will probably throw it out, but as it travels toward the Supreme Court, which it will do, helping all children without penalizing those children from families of faith — any faith — may be ruled Constitutional.

  5. On a side note it is rather interesting how often ads for Connections Academy and Arizona Virtual Academy appear on this site.

  6. The ruling seems to be pretty cut and dried, that there is strong merit in the plantiff’s case that the law violates the establishment clause because the law clearly targets faith-based private schools. The ruling itself allows the lawsuit continue, but it is pretty clear that if the appeals court gets this case, they will strike the law down.