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Ky. Supreme Court hears arguments in tax-credit scholarship case

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Proceedings took place at the Shelbyville Conference and Welcome Center, as part of the Kentucky Supreme Court’s effort to facilitate more engagement around the state. Many audience members wore yellow scarves, a symbol of support for private schools.

The Kentucky Supreme Court heard arguments Wednesday in a case that will decide whether a tax-credit program supporting private schools is constitutional.

The initiative, called the Education Opportunity Accounts program, allows donors to contribute to a scholarship fund in lieu of paying state taxes. The initiative’s narrow passage in the state legislature last year was a major victory for advocates of K-12 privatization. Opponents, however, worry the $125 million program will drain needed resources from already underfunded public schools.

A lower-court judge struck down the EOA program last year, ruling that it violates a provision in the Kentucky Constitution that forbids spending public dollars on private schools without first having a referendum.

Advocates appealed to the state’s highest court. Boone County mother Akia McNeary is a plaintiff in the appeal and said she hoped the EOA program would help her keep paying for her children to attend Zion Christian Academy in Florence.

“More wealthier families, they have the choices that low-to-middle-income families don’t have,” McNeary told WFPL News. “So why can’t we just even the playing field and have the same choices as them?”

McNeary said Zion Christian Academy is a better fit for two of her kids, and she likes the school’s faith-based curriculum. She has a third child who attends public school.

The six justices in attendance heard about an hour of arguments for and against the EOA program. Their decision will come down to the question of whether or not the program spends public money on private schools.

Lawyers with the state Attorney General’s office, who are defending the law, say no.

“House Bill 563 [the EOA program] does not actually spend public dollars. It simply lowers Kentuckians’ taxes,” attorney Matthew Kuhn said.

Kuhn and his colleagues argued that the funds come from donors, not the Kentucky State Treasury.

Under the EOA program, individuals and corporations could donate to the fund and receive a tax credit of up to 97% in return. Families could then apply to use the funds on educational expenses. In counties with more than 90,000 people, families could use the funds on private school tuition.

Lines of questioning by several justices suggested a skepticism toward the state’s argument.

“Mr. Kuhn, I agree that in the strictest sense of the word, this doesn't ‘spend’ public money,” Justice Michelle Keller said. “But it seems to me … that it might divert what might otherwise be public money because of the tax credits that are given. I don't know of many other tax credits for individual taxpayers that are almost dollar per dollar.”

Justice Lisabeth Hughes, a former tax attorney, noted that Kentuckians’ taxes are withheld throughout the year, meaning the funds do enter state coffers before donors are reimbursed with the tax credit.

Attorney Ben Field, with the Institute for Justice, a libertarian think tank, rebutted.

“The way the tax refund should be conceptualized is that the government never had a legitimate claim to that money,” Field said. “I simply overpaid it, and I'm being refunded it because it never properly belonged to the government.”

Institute for Justice attorneys have won several major court decisions upholding government support of private schools, including the landmark Espinoza U.S. Supreme Court decision in 2020.

Opponents of the law are represented by attorneys with the public education advocacy group Council for Better Education. The group won its own landmark case in 1989: the Rose decision, in which the Kentucky Supreme Court ruled lawmakers must adequately fund the state’s public education system.

Council for Better Education attorney Byron Leet said, despite the mechanics of the EOA program, the funds are public money.

“It was done in a more clever way to try to get around that obvious [constitutional] prohibition. But the effect is absolutely the same. The effect is that the state of Kentucky is bearing the financial burden of this — not the individual taxpayer when you offer someone a dollar-for-dollar credit,” Leet said.

The justices did not say when they expect to issue a ruling.

Support for this story was provided in part by the Jewish Heritage Fund.

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Jess Clark is LPMs Education and Learning Reporter. Email Jess at jclark@lpm.org.