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.
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.