Revenue Bonds and Religious Education: the Constitutionality of Conduit Financing Involving Pervasively Sectarian Institutions

Michigan Law Review Volume 100 Issue 5 2002 Revenue Bonds and Religious Education: The Constitutionality of Conduit Financing Involving Pervasively Sectarian Institutions Trent Collier University of Michigan Law School Follow this and additional works at: https://repository.law.umich.edu/mlr Part of the Constitutional Law Commons, First Amendment Commons, Religion Law Commons, and the Supreme Court of the United States Commons Recommended Citation Trent Collier, Revenue Bonds and Religious Education: The Constitutionality of Conduit Financing Involving Pervasively Sectarian Institutions, 100 MICH. L. REV. 1108 (2002). Available at: https://repository.law.umich.edu/mlr/vol100/iss5/5 This Note is brought to you for free and open access by the Michigan Law Review at University of Michigan Law School Scholarship Repository. It has been accepted for inclusion in Michigan Law Review by an authorized editor of University of Michigan Law School Scholarship Repository. For more information, please contact [email protected]. NOTE Revenue Bonds �nd Religious Education: The Constitutionality of Conduit Financing Involving Pervasively Sectarian Institutions Trent Collier TABLE OF CONTENTS INTRODUCTION ...................................................................................... 1108 I. THE ONGOING EVOLUTION OF THE PERYASIVEL Y SECTARIAN TEST ..... ··································································· 1114 A. Diversion as the Root of the Pervasively Sectarian In- quiry ...................................................................................... 1115 B. Mitchell v. Helms: Th e Need to Revisit Hunt v. McNair ................................................................................. 1121 II. AIDING RELIGIOUS UNIVERSITIES WITHOUT ADVANCING RELIGION .................................................................................... 1129 A. Revenue Bonds as Neutrally Available Government Aid ......................................................................................... 1130 B. Bond Purchasers and Private Choice ................................ 1136 C. Neutral Distribution of Aid and In centive ........................ 1140 Ill. THE LIMITED CHURCH-STATE RELATIONSHIP IN CONDUIT FINANCING ................................................................ 1141 A. Excessive Entanglement: Government Loans Wi thout Public Funds ........................................................................ 1142 B. The Conduit Issuer's Approval Under the Endorsement Analysis ................................................................................ 1152 CONCLUSION .......................................................................................... 1155 INTRODUCTION The Establishment Clause1 - and particularly the issue of gov ernment funding of religious education2 - is one of the murkiest areas 1. U.S. CONST. amend. I ("Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."). 2. See, e.g., ERWIN CHEMERINSKY, CONSTITUTIONAL LAW: PRINCIPLES AND POLICIES § 12.2.6.2, at 1007 (1997) (noting that the Supreme Court's decisions on government aid to religious elementary and secondary schools are often "difficult to reconcile"). 1108 March 2002) Revenue Bonds and Religious Education 1109 of Supreme Court jurisprudence.3 The Supreme Court has acknowl edged as much,4 and the sharp divide in the Court's most recent forays into Establishment Clause territory illustrates the point that the cur rent jurisprudential standards allow for a broad range of interpreta tion. 5 There is some hope that the Supreme Court will provide further clarification of its Establishment Clause standard in the near future.6 For now, however, it appears that the dominant mode of Establish ment Clause analysis is the examination of a government program's 3. See, e.g., F. King Alexander & Klinton W. Alexander, The Reassertion of Church Doctrine in American Higher Education: The Legal and Fiscal Implications of the Ex Corde Ecclesiase for Catholic Colleges and Universities in the United States, 29 J.L. & EDUC. 149, 157 (2000) (arguing that, rather than clarifyingthe "proper boundaries" between church and state, the Supreme Court "has managed to obscure it [sic), thus fueling the flames of contro versy surrounding the issue of separation"); Ronna Greff Schneider, Getting Help with Their Homework: Schools, Lower Courts, and the Supreme Court Justices Look for Answers Under the Establishment Clause, 53 ADMIN. L. REV. 943, 995 (2001) (hypothesizing that a "consis tent and clear Establishment Clause jurisprudence" may not be possible for the current Court). 4. See David H. McClamrock, Note, The First Amendment and Public Funding of Re ligiously Controlled or Affiliated Higher Education, 17 J.C. & U.L. 381, 383 (1991) (stating that "[t)he gloomy refrain, 'we can only dimly perceive the lines of demarcation' echoes through the procession of the Supreme Court cases concerning establishment-clause limits on aid to education" (quoting Lemon v. Kurtzman, 403 U.S. 603, 612 (1971))). 5. There are at least three distinct tests for evaluating government aid to religious insti tutions. See Steele v. Indus. Dev. Bd., 117 F. Supp. 2d 693, 704-06 (M.D. Tenn. 2000) (noting and describing the current Establishment Clause tests). (1) The pervasively sectarian test, see Roemer v. Bd. of Pub. Works, 426 U.S. 736 (1976); Hunt v. McNair, 413 U.S. 734 (1973); Tilton v. Richardson, 403 U.S. 672 (1971); (2) the Agostini/modifiedLemon test, see Mitchell v. Helms, 530 U.S. 793 (2000); Rosenberger v. Rector & Visitors of the Univ. of Va., 515 U.S. 819 (1995); (3) the "endorsement" test, see County of Allegheny v. Am. Civil Liberties Union, 492 U.S. 573, 593 (1989); Lynch v. Donnelly, 465 U.S. 668, 691 (1984) (O'Connor, J., concurring). 6. In September 2001, the Supreme Court granted certiorari to Simmons-Harris v. Zelman, in which the Sixth Circuit Court of Appeals held that Ohio's school voucher pro gram violated the Establishment Clause of the First Amendment. Simmons-Harris v. Zelman, 234 F.3d 945 (6th Cir. 2000), cert. granted, 533 U.S. 976 (2001). The Court consoli-· dated Zelman with Taylor v. Simmons-Harris, 533 U.S. 976 (2001), and Hanna Perkins School v. Simmons-Harris, 533 U.S. 976 (2001). It is unlikely that the Supreme Court's adjudication of the school voucher issue will set tle the conduit-financing issue. School vouchers involve an element of individual, private choice that differs significantly from that in conduit financing. Whereas school vouchers in volve a concrete form of intervening private choice in the decisions of each individual stu dent and his or her family, the private choices of bond purchasers in a revenue bond issuance are more restricted. See infra Il.B; see also Mitchell v. Helms, 530 U.S. 793, 841 (2000) (O'Connor, J., concurring): The plurality bases its holding that actual diversion is permissible on Witters and Zobrest [ ci tation omitted). Those decisions, however, rested on a significant factual premise missing from this case, as well as from the majority of cases thus far considered by the Court involv ing Establishment Clause challenges to school-aid programs. Specifically, we decided Witters and Zobrest on the understanding that the aid was provided directly to the individual student who, in tum, made the choice of where to put that aid to use. (citation omitted}. If the Court determines that school voucher programs are constitutional, therefore, this rul ing would not necessarily mean that programs with more limited forms of private choice are constitutional as well. 1110 Michigan Law Review [Vol. 100:1108 purpose and effect, a test first articulated in 1970 in Lemon v. Kurtzman1 and modified over twenty years later in Agostini v. Felton.8 Generally, in assessing the constitutionality of government aid to religious institutions, the Court looks to the aid's purpose and effect.9 Any form of government aid must have a secular purpose and an ef fect that does not (1) result in indoctrination attributable to the gov ernment, (2) use religious criteria to identify potential recipients, or (3) lead to an excessive entanglement between church and state.10 In addition to this inquiry into a program's purpose and effect, the Court may consider whether the government aid has the purpose or effect of endorsing religion in the eyes of a reasonable observer.11 As might be expected, lower courts have applied these guidelines to reach widely conflicting results. One particular controversy con cerns the eligibility of "pervasively sectarian"12 colleges to receive government loans funded by revenue bonds.13 Revenue bonds are of ten issued by specialized government agencies created and authorized by statute14 to issue municipal bonds in pursuit of a particular goal,15 7. 403 U.S. 602 (1970). 8. 521 U.S. 203 (1997). 9. The Court has emphasized that this analysis cannot be conducted mechanically. See, e.g. , Tilton, 403 U.S. at 677 (plurality opinion) (stating that any Establishment Clause inquiry "must begin with the candid acknowledgment that there is no single constitutional caliper that can be used to measure the precise degree to which these three factors are present or absent"). 10. Mitchell, 530 U.S. at 835 (O'Connor, J., concurring). 11. County of Allegheny v. Am. Civil Liberties Union, 492

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