The Kentucky Supreme Court on Wednesday heard arguments about whether a scholarship tax credit program to pay for private school tuition violates the state’s constitution.
The program, created by the legislature under House Bill 563 in 2021, would allow tax credits for donations to “education opportunity accounts.” Families could then use that money to pay for private school tuition in eight large counties and other education expenses in all counties.
After school districts, represented by the Council for Better Education, and several public school parents sued, a circuit judge ruled this that the law violates the Kentucky constitution's provision on spending public money on private schools.
The case skipped the court of appeals and, on Wednesday, the state Supreme Court heard arguments in Shelbyville as part of the court’s outreach program.
Justices questioned whether the program amounted to a state appropriation or tax refund and noted that it only applied to certain counties, a practice that has been found unconstitutional.
Justice Lisabeth Hughes questioned the nearly dollar for dollar match that donors would receive as a tax refund.
The school districts argued that the program is a state appropriation, evidenced by the legislature’s $125 million cap on the program.
“House Bill 563 does not actually spend public dollars. It simply lowers Kentuckians' taxes,” said Matthew Kuhn, an attorney representing Attorney General Daniel Cameron’s office.
Justice Michelle Keller said though it might not spend public money, the state would still be losing money.
“It might divert what might otherwise be public money, because of the tax credits that are given,” she said. “I don’t know of many other tax credits for individual taxpayers that are almost dollar per dollar.”
She also pointed out if someone donated securities, they could end up making money on the transaction.
Byron Leet, an attorney representing CBE, said the program spends public money on private schools through a program the legislature created to circumvent the constitutional prohibition on doing so.
“It was done in such a way so as not to make it an obvious appropriation grant of public money, it was done in a clever, a more clever way to try to get around that obvious prohibition,” he said. “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.”
Chief Justice John Minton did not give a timetable for the court’s ruling.
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