Ep. 206: Legal Updates with Leslie - SC, NC, NV, TN, ME, MD - EdChoice

Ep. 206: Legal Updates with Leslie – SC, NC, NV, TN, ME, MD

September 22, 2020

Join our VP of Legal Affairs Leslie Hiner as she breaks down school choice cases across the country.

Jennifer Wagner: Hello, and welcome to another episode of our EdChoice Chats, legal edition. I’m Jennifer Wagner, our VP of communications, and I am joined today as always on these legal updates by Leslie Hiner, our VP of legal affairs and head of our Legal Defense and Education Center. Welcome, Leslie.

Leslie Hiner: Hello. Very nice to do another legal update. Although, let’s give our listeners a warning. There’s a lot going on.

Jennifer Wagner: A lot of it’s not really great, but I will start off with a slightly out of character update for us. You were quoted recently in Bloomberg on the ongoing issue of the IRS rules and their effect on local and state charitable giving. Do you want to take a moment before we dive into the state litigation and give folks an update on where that stands?

Leslie Hiner: Sure. With the IRS ruling, this involved the deductibility of charitable contributions to scholarship granting organizations. That was changed by rule by the Department of Treasury. It’s been ongoing now for the last couple years. So there have been a lot of the scholarship groups that have been just waiting for the thing to be over and hoping for some kind of relief. Well, it is relatively speaking over, but the results are not great. The Department of Treasury enacted this rule initially because the high tax states, mainly New York, Connecticut, I think everyone knows what the high tax states are. You can make a list.
But many of those, and led first by New York, decided to enact some programs that would give their high dollar folks in those states some relief from the new cap on state and local taxes. It’s capped at $10,000, but some of these folks had state and local tax burdens well over $60,000. So they were trying to enact some schemes to be able to skirt the tax laws, Treasury didn’t like it. But in the process, Treasury enacted a rule that was overly broad. It was not respectful at all of state actions giving people state tax credits for charitable contributions, to scholarship granting organizations, also to rural hospitals.

There were a number of initiatives, public policy initiatives in states that state legislators deem to be a good public policy and gave tax credits. People got their normal charitable deductions on the federal side, but Treasury swooped in and said no. So this was a clear problem that was faced. The result was there was great confusion caused over two years, and there are scholarships for many children in several states that were lost. So it was quite detrimental, not in every state that has a tax-credit scholarship program, but I’d say it’s safe to say that at least every one of those programs was negatively impacted and that’s where it sits. I don’t see anything changing anytime soon.

Jennifer Wagner: Well, from one piece of unfortunate news, I suppose, onto the next. So let’s talk a little bit, a little few more minutes here at the federal level and kind of if you could give folks an update on, and I realize this will segue directly into state litigation and state programs, but obviously we’re in the middle of a pandemic and some states are being more creative than others in how they are handling their response at the K-12 level and what they’re doing with their CARES Act funding to help schools and families and students. So could you talk a little bit about what’s been going on and then where that has sort of intersected with litigation in the courts?

Leslie Hiner: Yes. Well, it gets a little complicated, so I’m going to try to make it as straight a path here as possible. So I think most people know about the CARES Act funding, which was Congress’ response to the pandemic and trying to give some assistance to families. Families, to schools, to the economy, to keep things going essentially. That included some funding for schools. Now, the wording in the CARES Act allowed for funding to go to public schools and particularly it involved some funding for Title 1 funds, for kids with special needs. But the way it was written, it quickly became obvious that private schools were going to be shortchanged in that formula that was adopted. But that was just at first glance.

The Department of Education took a second look at the language of the CARES Act and realized that they could adopt rules that would provide for a more equitable distribution of the funds to schools. Because the bottom line is that this aid was supposed to help kids and families and for kids who are in K-12 education. There was a large portion of kids who are going to be cut out of that aid, that seemed to be not right. So that was the motivation behind the Department of Education enacting a rule for more equitable distribution. However, courts didn’t see it that way. The public schools really hated it because they wanted to keep all the money. It was kind of the bottom line.

So four different lawsuits in four different federal courts were filed. There was a lawsuit filed by several states that was filed in California. That case was called Michigan v. DeVos. The state of Washington also sued, that was Washington v. DeVos. The NAACP sued, that was NAACP v. DeVos in the D.C. circuit courts. Then finally the most recent one is the Council of Parent Attorneys and Advocates filed in Maryland federal courts. Of those four cases, the Department of Education lost three, and in particular, that last case that was out of the D.C. circuit has nationwide impact.

So there is a nationwide injunction against applying the rule. So it’s a nationwide injunction against a more equitable distribution of CARES Act funding to these private schools. That’s really the bottom line. The fourth case has not moved and probably won’t because of these other cases, but we’ll see. So now the Department of Education needs to decide whether they’re going to appeal any or all of these cases. They have a little bit of time on that. So I’d say probably by the time we do another legal update, we may have a more conclusive answer with that.

Jennifer Wagner: But it’s not going in the right direction, at least for the time being and it’s unfortunate because, I mean, we’ve got partners. I think Cato has a list of private schools that are shutting down because of the pandemic and never to open again. So that is a sad story for those schools and those families who really, really need them relief.

Leslie Hiner: That relief you’re right on with that, Jen. That’s the thing that I think people are losing sight of, that the bottom line is that any school right now that is equipped and they know how to educate kids in a safe way during this pandemic, they should get all the help they need. No matter what kind of school it is, no matter what kind of educational resource it is, kids need an opportunity to learn, and there’s just far too many kids who aren’t getting it right now.

Jennifer Wagner: This is the narrative that we run into all the time and this movement of, oh, these private schools are just… Everyone thinks privately schools, they’re all like Sidwell Friends, the highly exclusive school in Washington, D.C. that politicians tend to send their kids to and they overlook the vast majority of these schools that serve low-income kiddos in urban setting, oftentimes scraping by because tuition dollars aren’t enough. But anyway, I’ll get off my soap box and move into the state litigation. I know you said that we have several cases that I know we’ve discussed before that are kind of on hold, and then some that are moving that I’m sure our listeners would love to have an update on.

Leslie Hiner: That’s true. So let’s start first with the South Carolina case, because this also involves federal funding. So under the CARES Act, there were different tranches of money and there was another tranche of money that was given to governors for them to use essentially as they saw fit to help people in their states. Now that tranche of money was called the GEER funds under the CARES Act. Now, in some cases like in South Carolina, the governor decided that for those private schools and parents who were sending their kids to private schools or had perhaps an opportunity to send their child to a private school when their public school was still closed or was not able to provide remote learning or in-person learning, either way, that the state could use some of those federal dollars then to help those parents.

So they provided a program that’s called the Safe Grants. Great name for the program because that’s really the bottom line. Parents want to send their kids back to school, but they want them to be safe, and this was a way for parents, if there’s a private school nearby and it was safe and it’s a good school, then they would have the opportunity to send their kids there. However, no good deed goes unpunished, it seems, and that’s the case in South Carolina. So actually today, on the day that we’re doing this podcast, in fact, the Supreme Court of South Carolina is hearing oral arguments in this case.

The state has been sued and they’re alleging a number of things. Originally, they alleged that this money couldn’t go for religious schools. That’s a nonstarter after the big victory out of the U.S. Supreme Court this summer on the Espinoza case saying that, no, you can’t exclude religious schools just because they’re religious. That is a violation of the First Amendment. But they’ve expanded their complaint now also to include that this was not the intent of Congress to help any kids who were going to private schools. They’re using the Department of Education’s losses in the three federal cases that we just talked about as some kind of evidence. I don’t think there’s a great argument there, but they’ll be making it later today in South Carolina.

Now, this may have some other impact in other states, for example, in Oklahoma, the governor there has done a similar program using the GEER funds for education and a complaint has been filed with the Oklahoma Attorney General, and we’re hearing some rumblings in other states as well, that there seems to be an effort that the GEERS Act funds should only help public schools, and they’re missing the point. No, the CARES Act fund should help parents and kids, help parents to get their kids into whatever safe educational setting that they can find. Parents need this help. So we’re all watching this case very closely.

Jennifer Wagner: We’ll definitely have an update on our next podcast on South Carolina. Yeah, it’s been both disheartening, but incredibly cool to see that you’ve got governors out there who are leading the way and who are taking this money and kind of exploring the disruption in K-12 education in a way that empowers families and gives them that money to spend. Because, I don’t know, I know your kids are grown, Leslie, but mine are not and this has been a really tough time for me as I’ve got a 12-year-old and 8-year-old. They are back in school full-time in person at their private school. But man, e-learning was rough. I look around and see all these other parents who are doing micro schooling or CODs or just struggling day by day to have their kids in front of a laptop like this for seven hours.

It’s a shame to see that these programs that are born off innovation are winding up in litigation. But maybe, fingers crossed, knock on wood, we’ll get some positive rulings. So what else is going on at the state level other than the pandemic? Other than that, Mrs. Lincoln, how was the show? What else is going on out there?

Leslie Hiner: Well, we have an interesting case that’s popped up in the state of North Carolina, and North Carolina has a lovely voucher program. It’s been doing very well parents like. It’s growing like most voucher programs. They start small and then they start to grow and pick up speed over time. Well, shortly after that program was initially enacted many years ago, there was litigation. In fact, I believe it was 2013 when the courts in North Carolina said, “Absolutely, this program is constitutional with no problem. Does not violate the North Carolina constitution in any way.” So they’ve had voucher programs in North Carolina. But now there’s another lawsuit.

We don’t typically find once a Supreme Court in a state is ruled that a school choice program is constitutional, we don’t usually find that somebody’s going to come back around and challenge it again. But they did in North Carolina. What they’re alleging is what’s called an as applied challenge. So they are saying that notwithstanding the fact that the court earlier said that the program was constitutional, the way that it is being applied in practice is unconstitutional. They’re wrong, in my opinion, just for the record. But this case, though, I think will take some time. We’ll probably be talking about this case for quite a while yet. There are a number of issues that have been raised. So you can look forward to hearing more about North Carolina in future legal updates.

Jennifer Wagner: You didn’t even use the words that you said you were going to use, because we have to keep our podcasts here at EdChoice PG-13. So we can’t use any curse words. But I can assure our listeners that Leslie had some stronger language about the North Carolina lawsuit earlier when we were chatting.

Leslie Hiner: That’s true.

Jennifer Wagner: Well, it sounds like you’ve got plenty of fodder to keep you busy. We should probably get you a couple of more team members so that we can build out the LDEC, and you can have an army of lawyers going out and doing battle because it doesn’t sound like anything is going to subside in the near future.

Leslie Hiner: No, no. Yeah, it could definitely use a little help. We have a lot happening. So let me tell you about some of these other cases then. In Nevada, there are two cases that are now moving and there were some actions since the last time we spoke in one of the cases, this was a case that includes language that repeals the yet unfunded ESA in Nevada. I want to remind everyone that the education savings account in Nevada is the best one in the nation, but it remains unfunded. It has never been funded. It’s a great travesty for the thousands of parents in Nevada who have been clamoring for this and begging the legislature to please let them have this opportunity.

But the legislature passed a bill where they included some language to repeal that ESA. It was a bigger bill. There were tax issues in it and so there was an allegation that they should have had, according to the constitution of Nevada, a two-thirds vote to pass the bill. They didn’t. They just had a simple majority and so that was the nature of the suit. Now, in this particular case, there was another issue that arose where the Legislative Counsel Bureau attorneys, and let me explain who these are, these are nonpartisan attorneys who serve all of the legislators. They assist the legislators with a number of different legal issues during the course of session, they were asked by the Democratic leadership to represent only the Democratic leadership in this case. The way this was set up, there were several Republican legislators who sued the leadership of the legislature, which the Democrats are in control in Nevada for passing this bill with less than a two-thirds vote.

Anyhow, this issue of whether these nonpartisan attorneys could represent the Democrats only in this lawsuit, it had to go all the way up to the Nevada Supreme Court to decide, and the Nevada Supreme Court decided that that’s fine. The nonpartisan attorneys could represent only the Democrats and not the Republicans, which as I see, it sounds really partisan. So not the greatest ruling out there in Nevada, but it’s done, and now that case will proceed at the trial court.

The second case involves the tax-credit scholarship program that had an escalator clause, which simply means that as people continue to contribute to a program, that once they get close to hitting the cap, then the cap can go up incrementally in small, small steps. But that also was included in another bill that also had some tax issues in it. Should have been in two-thirds vote. There wasn’t. It was a simple majority. It’s the very same issue. Now in that case, the Institute for Justice represented parents suing in that case. They lost at the trial court level. It’s now on appeal. The supreme court in Nevada is taking its time in moving this case. As near as we can tell, there have been so many issues that had arisen related to COVID and the pandemic that the courts are just backlogged. So this case will also probably take a while before it really starts to move.

Now, let’s see, we also have Tennessee. The Tennessee case, their brand new voucher education savings account program sued and the issue that is currently before the Tennessee Court of Appeals is whether that program violates the home rule provision in their state constitution, which simply means that the legislature can’t target legislation to… The Constitution says a particular county. Now, in this case of their new program, it applies to the counties surrounding Memphis and Nashville. So Memphis and Nashville are suing and saying that violates the home rule provision. Now, it’s not a particular county so that’s just the first fundamental grammar question that the court will have to answer in Tennessee. Does a particular county mean two or just one? But there are other issues of course involved in this, but we’re waiting now for a decision out of the Tennessee Court of Appeals. I’m quite confident that no matter how the court rules, that the losing side will appeal to the Tennessee Supreme Court.

Now, there are other issues that were raised against the voucher program in Tennessee, but those are all on hold now until this home rule provision has been decided. So any day now, as soon as we get some kind of ruling, we’ll let you know. We’re also waiting for a ruling out of the First Circuit Court of Appeals. We’ve discussed this quite at some length. This case is identical to the Espinoza case that was decided by the U.S. Supreme Court this summer. We thought that after the U.S. Supreme Court ruled on the issue of whether religious schools could be prohibited from participating school choice programs, that the First Circuit Court of Appeals would say, “OK, we recognize the ruling of the U.S. Supreme Court, parents in that case win.” But that’s not happening.
The state of Maine has pushed back to try to say that that ruling out of the U.S. Supreme Court on Espinoza just doesn’t apply to the state of Maine. It may apply to all the other states, but it certainly does not apply to Maine. So we’re waiting for a ruling in that case. I think that’s another one of those cases where the losing side will likely appeal to the U.S. Supreme Court. So stay tuned for that one.

In addition, we have a case that’s pending in the state of Maryland, which is Bethel Academy’s case, where they are suing the state of Maryland, because they were excluded from their voucher program and they were excluded based on language regarding same-sex marriage that was found in their handbooks. This is a case that involves the SOGI laws, the discrimination laws related to LGBTQ. So those issues are involved in that case. But that case is currently, though, in what lawyers call discovery, where you’re trying to find evidence and get some answers and information from your opponents in the case. That will be ongoing for at least another month. I’m not really expecting more action in that case until later this year. Finally, that wasn’t enough. Wait, wait, there’s more.

Jennifer Wagner: Yes, there’s more.

Leslie Hiner: So after the ruling in the Espinoza case this summer, it became clear that to make that ruling actually apply in certain states, there would need to be some follow-up litigation, and it should be just perfunctory in states that do not allow religious schools to participate in their school choice programs to go into court and say, “State, the U.S. Supreme Court has said that you are in violation of the First Amendment of the U.S. Constitution, and you need to adjust that to allow religious schools to participate in your school choice programs.” It should be just be a perfunctory action, a little administrative work by lawyers, basically. But it may not be. Cases had been filed by the Institute for Justice who brought and won that Espinoza case in Vermont and New Hampshire.

New Hampshire seems to be much friendlier about handling what should be an administrative duty more than anything, and in Vermont, not so much. So you might want to pay attention to whatever action that comes up in the state of Vermont. We’ll be sure to let you know. OK. I guess the only other thing to let people know is that we need filed amicus briefs in a couple of these cases. We did in South Carolina, we did in Tennessee, and we joined an amicus brief that was filed by the Wisconsin Institute for Law and Liberty, WILL. They actually were able to get 45 to 50 different entities like us to sign on to their brief in support of the Department of Education’s rule, trying to provide more equitable distribution of CARES Act funding. So they’ve been a great partner and we’ll see what happens next.

There’s a lot of action in the legal world over the pandemic and funding for private schools. Plus, the normal activity in states where our opponents are constantly trying to knock down these programs that do nothing more than help parents provide the best education for their children.

Jennifer Wagner: I guess that’s where I kind of want to… Obviously, you’ve got a lot on your plate and we’ve just heard everything that’s on your plate, but kind of framing it up as we leave this podcast of we had a huge, huge win earlier this year, this summer in Espinoza. That in many ways is probably a little bit responsible for getting people even more defensive because the doorway is open to states that want to pass school choice programs and want those to include faith-based educational options. So I guess as we leave this today, and it’s 45 days away from election, I think, 44 days or something. It’s very soon that we’re going to have an election, and in that election, there are 6,000 legislative seats up for grabs at the state level.

So anyone who’s listening, you’re probably paying more attention to the presidential race, or maybe you’re in a state with a senate race. But the reality is, 6,000 out of around 8,000 legislative seats will be up for grabs, and we are a nonpartisan organization here at EdChoice, but depending on the outcome of those races, there may be even more opportunity for states to enact educational choice, which again, by the way was paved by Espinoza and that’s a good thing and that’s something that we have to keep in mind because we’ve sat here and talked through all of the challenges and all of the things that you’re working on, Leslie, but the reality is we have a lot more landscape in front of us, and the pandemic in many ways has opened the parents’ eyes to the possibilities and the opportunities that are out there.

So if you could, I realize you’ve had to go through this litany of not great news, but if you could say something to those lawmakers out there on all sides of the aisle who might be coming in in the next few months and interested in school choice, what would you say to that group of folks?

Leslie Hiner: Oh, I would say what I always say, which is that whenever they’re considering any kind of legislation related to education, the key thing is for those legislators to envision the children that they are duty-bound to serve as legislators. Keep the children and their needs out in front of them all the time. Then for those legislators who do that, when slings and arrows come and public schools say, “Well, we want more money. We want more money. We want more money.” It’s always, we want more money, and of course now that’s a great challenge for every state given the economic downturn from the pandemic, it’s a little easier to talk about education. It’s a little easier to actually find the solutions the parents need so that their children can be properly educated in the way that parents choose. Parents should have this right.

If they’re always keeping the best interests of the children in front of them, it should actually never be about a particular school, should never be about union contracts. Whenever they’re looking at education issues, it should always be, is this going to help the children of the state actually learn? That’s it. The answer for school choice legislation is always, yes, it will help children. By the way, that decision about whether it will help children, that’s a decision that’s made by parents. For those who try to say that, “Oh, it won’t help children and blah, blah, blah,” I’m sorry, but no one but the parent has the right to say whether any educational option is that right option for their children. We should never lose sight of that.

Let me cite one more case: Pierce v. Society of Sisters from 1925. It’s one of the best cases out there. For 95 years, this case from the U.S. Supreme Court has been upheld and it simply says that it’s the parents who have the right to provide education for their children. The state does not have the right to standardize all children and force anyone to send their children to public schools. That is solely within the province of the parents. School choice is just it’s all about that, and we’ve recognized that for parents to continue to have this right, to take care of their own kids and decide which school is the right fit for them, they need some help with funding as appropriate under every state constitution that says we will fund the education of our children, and that should be wherever the parent decides is the right fit for that child to learn and that’s it.

Jennifer Wagner: Good. I wanted to end on a positive note and you’ve given it to our listeners. I will put in one more shameless plug, though, if you are there listening and you do happen to be an elected official or someone who’s about to become an elected official. If you’re thinking about drafting some school choice legislation, give your friends at EdChoice a heads up. We are always happy to take a look at what you’re looking at. We have a great state team full of folks who are working on this issue at the state level. Of course, we have our very own Leslie Hiner here, who is our legal expert, and she would always be happy to take a look because guess what, if you do it right the first time, it doesn’t wind up on her to-do list. So we are ever so grateful.

Leslie Hiner: Thank you, Jen.

Jennifer Wagner: Yeah. We are so grateful to have you, Leslie, as part of our team. On behalf of all of us here at EdChoice, I am Jennifer Wagner signing off for another edition of our EdChoice Chats. Thanks for joining us.

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