Alabama tax credit scholarships upheld in a case that sounds a lot like Florida’s

Jon East

The Alabama Supreme Court on Monday rejected a constitutional challenge to a scholarship program that bears striking similarity to Florida’s Tax Credit Scholarship for low-income students, which was challenged in August. The Alabama ruling comes six months after the New Hampshire Supreme Court also rejected a challenge to tax credit scholarships in that state.

Not surprisingly, school choice advocates in Alabama were pleased. Said Chad Mathis, chairman of the Alabama Federation for Children: “We are thankful to the justices of the Alabama Supreme Court for seeing this lawsuit for exactly what it was – a veiled attempt by Alabama Education Association (AEA) to keep the status quo in education and prevent parents from making decisions that best suit their children.”

The AEA, Alabama’s teachers union, challenged both the procedure by which the Alabama law was passed in 2013 and the constitutionality of the program. The constitutional issues were based on the union’s argument that the scholarship funds were the equivalent of state appropriations – a claim that closely tracks the Florida case, which was filed by the Florida Education Association and other groups. 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.

By alleging the scholarship funds were in fact government appropriations, the AEA said the program improperly used money from the Alabama Education Trust Fund on nonpublic schools and to support religious schools.

The union’s lawyers wrote that a tax-credited scholarship contribution “channels to charitable organizations monies that otherwise would have gone to the public (and) is the functional equivalent, in all respects, of an appropriation to such charitable institutions that are not under the absolute control of the State.”

The Alabama court disagreed in a 220-page decision, citing case law and Black’s Law Dictionary to distinguish a tax credit from a state appropriation. “Traditional definitions of ‘appropriations’ do not extend to include tax credits,” the court wrote, on Page 88. “Appropriations have been defined as ‘the act by which the legislative department of government designates a particular fund, or sets apart a specified portion of the public revenue or of the money in the public treasury, to be applied to some general object of governmental expenditure, or to some individual purchase or expense.'”

“Based on the foregoing,” the court continued, on Page 101, “we conclude that the circuit court’s construction of the term ‘appropriation’ to include the tax credits provided by (the Alabama Accountability Act) is contrary to the Alabama Constitution, existing case law, and the commonly accepted definition of the term appropriation.”

The court further clarified the distinction on Page 105: “The tax credit … merely allows the taxpayers to retain more of their earned income as an incentive to contributing to scholarship-granting organizations. When the taxpayers contribute to scholarship-granting organizations, they spend their own money and not public revenue actually collected by the state.”

Alabama is the third state Supreme Court to rule in favor of tax credit scholarships – Arizona was the first in 1999 – and none has ruled against them. In 2011, the U.S. Supreme Court also weighed in, rejecting a challenge to the Arizona law by ruling that the tax-credited contributions do not constitute government expenditures.

In Florida, Leon Circuit Judge George Reynolds heard arguments last month on whether the FEA has standing to challenge the scholarship program. He is expected to rule soon.

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