Kentucky's new school choice program is unconstitutional, a judge ruled Friday.
Franklin Circuit Court Judge Phillip Shepherd's decision delivers a crippling blow to the fledgling education opportunity account program, which narrowly became law earlier this year.
In his decision, Shepherd enjoined state officials from enforcing the parts of House Bill 563 that deal with the school choice program. They will not be allowed to approve the creation of any account granting organizations or education opportunity accounts, nor can they grant any tax credits to fund either.
"This Court does not dispute that many students and their families, both in public and private schools, could greatly benefit from the financial assistance provided for in this legislation," Shepherd wrote.
"Yet, the very fact that so many children need additional educational assistance, beyond what is presently funded and appropriated for the public schools, is an indication that we, as a state, may well be falling short of the constitutional mandate of 'an efficient system of common schools' as defined in the Rose case."
Background: What are education opportunity accounts?
Attorneys for the Institute for Justice, a libertarian-leaning law firm that intervened in Kentucky's suit on behalf of families, said they planned on appealing Shepherd's ruling.
“Today’s ruling treats private donations as if they are government money,” Joshua House, an attorney with IJ, said. “It holds that when private individuals donate their own money to education-related causes, and receive tax credits for those donations, it is in effect the government raising and spending money on education. That’s just wrong.”
Andrew Vandiver, the president of EdChoice KY, which backed the measure, said in a statement the group is "disappointed" in Friday's ruling.
"Today’s ruling represents an unnecessary delay with the potential to leave Kentucky’s students in classrooms that just don’t work for them," he said. "This is not the end."
Shepherd's ruling can be appealed to the Court of Appeals and then to the Kentucky Supreme Court.
Oral arguments in the lawsuit last month focused on the legality of a tax credit meant to prop up the program.
Shepherd sided with the Council for Better Education, ruling the tax credit would have indirectly sent would-be state dollars to private schools.
Attorneys for the Institute for Justice, which won the Espinoza v. Montana Department of Revenue school choice case at the U.S. Supreme Court, argued the funds were merely private donations.
"The 'donor' taxpayers who take advantage of this tax credit are taxpayers who, by definition, are unwilling to make charitable donations to support the laudable goals of this legislation," Shepherd wrote in his ruling.
Taxpayers would take the money they owe in taxes and re-direct it to third-party account granting organizations, Shepherd said.
"There is nothing 'private' or 'charitable' about the funding of the AGOs, and this funding mechanism is not a 'donation' in any meaningful sense of that word that connotes a voluntary contribution of personal or business income," he wrote.
Any funds that go to non-public schools need to ratified by the voters, Shepherd added.
Those who donate to the accounts were to be eligible for hefty tax credits expected to cost the state up to $25 million a year in tax revenue.
School choice advocates said tax credits would attract more donations to the programs, meaning more money to cover education expenses and, in some counties, private school tuition for middle- to low-income families.
Related:After years of contentious policy battles, Kentucky has school choice. What's next?
Shepherd also took issue with how the law allows for EOAs to be used to cover private school tuition in some, but not all, Kentucky counties. He pointed to Franklin and Nelson counties, which have established private schools but would not qualify for EOAs in the same way their more populous neighbors would.
"The singling out of a few counties with populations of over 90,000 for the lucrative benefit of tuition assistance for private schools, to the exclusion of all other counties (even those with robust private school options for students)" violates state law, Shepherd wrote.
"In this case, even if the funding of a private school tuition with tax credits could pass constitutional muster, the blatant geographic discrimination that limits such educational opportunity to children in the eight most populous counties of Kentucky cannot withstand even the most minimal constitutional scrutiny," he continued.
He refused an attempt from Attorney General Daniel Cameron to expand the private school tuition option statewide to fix Shepherd's issue with select counties.
"...the Court cannot re-write the legislation to cure this constitutional defect," he wrote.
Shepherd pointed to the slim margins on which the bill passed, noting repeatedly that it is unlikely that the measure would have passed had private school tuition not been included or had been included for all counties.
A spokeswoman for Cameron said they were in the process of reviewing the decision.
Larger questions around the law's constitutionality remain in question. Shepherd did not definitively say if funding private schools with the tax credits is unconstitutional, nor did he say if the law is consistent with the state's responsibility to fully fund public schools.
More proof could either show the EOA program is a supplement to Kentucky's existing funding for public education, Shepherd said, or it could show it "is simply a stop gap measure to address a systemic inadequacy in the funding and operation of the common schools."
"The Constitution requires a solution that does not exacerbate the inequality and increase the disparity in educational opportunities available to all children," Shepherd wrote.
A separate piece of HB 563 dealing with school districts' open enrollment policies was not part of the lawsuit and remains in place.
The bill's sponsor, House Majority Whip Chad McCoy, R-Bardstown, said “The Education Opportunity Act and scholarship tax credits provide parents with the resources their children need to reach their full potential — regardless of where they live or how much money they make.
"Today’s ruling seems to ignore the very fact that HB 563 would pour more money into education, particularly as children across the state are struggling with the impact of pandemic learning and have fallen further behind.”
Reach Olivia Krauth at [email protected] and on Twitter at @oliviakrauth.
