What to watch for as Florida court hears arguments on tax credit scholarships

Travis Pillow

The lawsuit that challenges a scholarship program serving 70,000 low-income children in Florida heads to a Tallahassee courtroom this afternoon.

The issue before Leon Circuit Judge George Reynolds will not be the constitutionality of the Florida Tax Credit Scholarship itself.

Instead, the arguments will center on an important legal point that has stopped challenges to similar programs in other states: The question of whether the groups behind the lawsuit have standing to bring the case.

For that reason, today’s hearing could be pivotal. Judging from the briefs filed by both sides and relevant cases in Florida and elsewhere, the arguments are likely to fall along two lines: Whether the plaintiffs – which includes the statewide teachers union and other groups – can show the program actually harms them, or whether they have standing to challenge the program simply as taxpayers.

Here are some of the key legal threads to keep an eye on.

Is this lawsuit similar to Bush v. Holmes?

Lawyers for the Florida Education Association and the other groups bringing the lawsuit have made clear that this is the terrain on which they want to fight.

Their core argument is that tax credit scholarships are no different from the school voucher program, called Opportunity Scholarships, that the state Supreme Court ruled unconstitutional in 2006. They underscored this point in their most recent legal filing late last month: “As explained in the complaint, the only substantive difference between the two programs is the mechanism through which funds are directed from the public fisc to private schools.”

This goes to the heart of the union’s argument that the program harms public schools. In the 2006 decision, Bush v. Holmes, the justices found Opportunity Scholarships unconstitutional because the vouchers transferred “tax money earmarked for public education to private schools” — money that came “from each school district’s appropriated funds.”

The state’s lawyers argue the tax credit scholarships are different in legally important ways. As they write early in their motion to dismiss the case: “The program relies on private voluntary donations — not public dollars. And the program provides tax credits to donors — not schools or students.”

The union’s lawyers, however, argue the difference between vouchers, funded directly by the state, and tax credit scholarships, which use tax credits to subsidize private donations to private scholarship organizations, is “immaterial” to this case because the state constitution calls for a uniform system of free public schools under the sole control of local school boards. “The legislature,” they cite from a 1938 court case about justices of the peace, “may not do that by indirect action which it is prohibited by the Constitution to do by direct action.” That, they argue, includes creating programs that subsidize private-school tuition.

The state’s counterargument is bolstered by a series of state and federal court decisions that rejected legal challenges to tax credit scholarship programs in other states, and ruled tax credits and vouchers are legally different.

Lawyers for the scholarship parents note the Arizona Supreme Court in 1999 dismissed a challenge of the nation’s first tax credit scholarship program. Tax credits for private donors who contribute to scholarships cannot be considered the same as direct appropriations from the state treasury, the court held, because under “such reasoning all taxpayer income could be viewed as belonging to the state because it is subject to taxation by the legislature.”

In 2009, the Arizona court, in turn, rejected a direct voucher for special needs students. The difference, it wrote, was that vouchers come directly from the state treasury and the tax credit scholarships were “credits against tax liability, not withdrawals from the state treasury … therefore, the credits did not constitute an appropriation.”

Can the plaintiffs show they are “injured” by scholarships?

In December, Judge Reynolds granted 15 scholarship parents full-party status in the case in part because their children stood to lose scholarships and be uprooted from their schools.

Today, the plaintiffs face a similar test: Does the continued operation of these scholarships similarly bring them direct harm?

The plaintiffs argue that the money that shows up in quarterly reports on the program represents money that would have otherwise gone to public schools, meaning the impact “in reducing funding for the public education system – to the detriment and injury of students seeking a high-quality education in the school districts that lose funding – is precisely the same” as the impact of the voucher program in Holmes.

Lawyers for the state, however, argue there is no way to determine how a tax dollar lost to tax credits might have been spent:

Plaintiffs’ diversion theory, presumably, is that absent the tax credits, revenues would increase. With this increased revenue, the Legislature would provide more money to public education. And with more money in education, Plaintiffs’ children and others would be better off. This is speculation stacked on top of speculation.

Meanwhile, lawyers for the parents argue the scholarship has no impact on per-student funding in district schools and, further, that:

Plaintiffs fail to account for the Legislature’s additional appropriations to the public school system and for the cost savings that the Tax Credit Scholarship Program has accomplished. These factors make implausible the allegation that the public system has suffered financial harm as a result of the Scholarship Program.

Is the dismissal of the other lawsuit relevant to this case?

On Dec. 30, Leon Circuit Chief Judge Charles Francis dismissed a separate lawsuit challenging the procedure by which a major school choice bill, SB 850, was passed by the 2014 Legislature. The FEA announced it would not appeal the decision.

Given a second chance to make the case for standing, the FEA tried to argue that expanding the tax credit scholarship program would harm public schools.

Lawyers for scholarship parents felt the win in that case could augur well for them in this case.

In both cases, the plaintiffs argued for standing not just because they could show they were harmed by the laws they challenged, but also under an exception to standing rules that allows taxpayers to challenge unconstitutional use of the Legislature’s taxing and spending powers.

But the earlier ruling is not a binding precedent, and there are some differences between the two lawsuits. For example, the earlier case dealt with an act of the Legislature which the state argued was too broad to be considered a “taxing and spending” measure.

The role that standing has played

Standing is the rock on which previous challenges of tax credit scholarship programs from Arizona to New Hampshire have foundered.

In 2014, on the same day the FEA filed its suit against the Florida scholarship, the New Hampshire Supreme Court rejected a challenge to a tax credit scholarship program there, writing that “the purported injury asserted here — the loss of money to local school districts — is necessarily speculative.” The union’s lawyers argue this case is different because the New Hampshire program was not up and running when the case was decided.

In 2011, the U.S. Supreme Court entered the fray, rejecting a challenge to the Arizona tax credit scholarship because it determined that tax-credited contributions do not amount to government expenditures. “When Arizona taxpayers choose to contribute to (scholarship organizations),” they wrote, “they spend their own money, not money the State has collected from respondents or from other taxpayers.”

But the union argues the Supreme Court’s decision to deny standing in Arizona Christian School Tuition Organization v. Winn “rests on an analysis that is foreign to Florida law.” Florida courts, they write, have generally been more permissive when it comes to giving plaintiffs standing in constitutional cases.

Florida’s tax credit scholarship program is administered by organizations like Step Up For Students, which co-hosts this blog and employs the author of this post.

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