Metropolitan News-Enterprise


Tuesday, March 6, 2007


Page 1


S.C. Upholds Bond Financing for Construction of Some Religious Schools




A private school that is “pervasively sectarian” may, under some circumstances, obtain tax-exempt construction bond financing, the California Supreme Court ruled yesterday.

The state high court, in a 4-3 decision, overturned a Third District Court of Appeal ruling that “conduit financing” agreements between the California Statewide Communities Development Authority and Oaks Christian School in Westlake Village, California Baptist University in Riverside, and Azusa Pacific University violated the state Constitution.

On remand, the high court said, the agreements must be judged under a less stringent test.

If the schools “offer a broad curriculum in secular subjects,” including secular classes that “consist of information and coursework that is neutral with respect to religion,” the Constitution does not bar them from participating in tax-exempt funding, Justice Joyce L. Kennard wrote for the court.

Validation Action

Chief Justice Ronald M. George and Justices Marvin Baxter and Carol Corrigan concurred. Justice Ming Chin, in a dissent joined by Justices Kathryn M. Werdegar and Carlos Moreno, argued that the Constitution “simply does not permit a public entity to act as a fundraiser for schools of this nature.”

The ruling came in a validation action by the California Statewide Communities Development Authority, a joint powers authority created by more than 350 local governments to assist in the construction of schools, health care facilities, housing, and industrial facilities through the issuance of tax-exempt revenue bonds.

The recipients of the funds, not the taxpayers, are responsible for payment on the bonds, which are sold in the private markets. State and federal tax exemptions benefit the schools and other institutions by reducing the amount of interest they have to pay on the bonds.

The authority requires a showing that any project it finances will benefit the surrounding community and requires beneficiaries to sign a statement that no facility financed by it will be used for religious instruction or worship.

Then-Attorney General Bill Lockyer opposed validation, based on Art. XVI, Sec. 5 of the Constitution, which, among other things, prohibits the state and local governments from giving “anything to or in aid of any religious sect, church, creed, or sectarian purpose, or help[ing] to support or sustain any school, college, university, hospital, or other institution controlled by any religious creed, church, or sectarian denomination whatever.”

Lockyer noted that all three schools conceded that they are “pervasively sectarian” and that a predecessor attorney general’s opinion had questioned whether such a school could qualify for conduit financing by another state agency. The ACLU opposed the agreements on state and federal constitutional grounds, while a number of religious organizations supported the authority.

A Sacramento Superior Court judge declared the agreements unconstitutional, and a divided Third District agreed.

But Kennard, writing for the high court, emphasized that no public money is used, that bond proceeds cannot be used for buildings that are used for worship or religious instruction, and that the three schools involved grant the vast majority of their degrees in secular subjects.

‘Pervasively Sectarian’ Test

The “pervasively sectarian” test, first applied by the United States Supreme Court in Hunt v. McNair (1973) 413 U.S. 734, which involved a religiously affiliated school that devoted a substantial portion of its functions to its religious mission, is useless in these circumstances, Kennard said.

“When a court attempts to determine how, if at all, a bond program would have the effect of supporting religious activity at schools, the characterization of the schools as ‘pervasively sectarian’ does not provide a reliable or satisfactory answer,” Kennard wrote. “A more useful and effective approach, we conclude, is to examine the substance of the education that each of these religious schools offers its students” within those programs that can be housed in bond-financed facilities, she said.

Chin argued in dissent that the “sweeping terms” of Sec. 5 prohibit the use of conduit financing to benefit schools which discrimination in admissions and hiring on the basis of religion and which integrate religion into “every aspect of student life,” including the curriculum.

The fact that the money used to repay the bonds comes from the school, rather than from a public entity, does not make the exercise more palatable, the dissenting justice insisted. The legal obligation to pay the bondholders still belongs to the authority, without whose participation the interest would not be tax exempt and the cost to the schools considerably higher, Chin wrote.

The case is California Statewide Communities Development Authority v. All Persons Interested in the Matter of the Validity of a Purchase Agreement, 07 S.O.S. 1094.


Copyright 2007, Metropolitan News Company