Kentucky long has lagged in giving families access to education choice. However, that changed dramatically in 2021 when, in the wake of school shutdowns over COVID-19, Kentucky joined a wave of states expanding education opportunities by enacting the Education Opportunity Account program.
Unfortunately, Kentucky children who stood to benefit from access to a greater number of education options no longer will get that chance. Last month, the Kentucky Supreme Court struck down the EOA program for violating a provision of the state Constitution.
Education Opportunity Accounts would have operated similarly to K-12 education savings account programs in several other states that empower families to customize their children’s education. With an EOA, Kentucky families would have been able to pay for a wide variety of education options, including private school tuition, tutoring, textbooks, homeschool curricula, online courses, special-needs therapy, and other related expenses.
Kentucky’s high score for education choice largely was due to its well-designed policy on Education Opportunity Accounts. Not only was Kentucky one of only 10 states with an education savings account policy, the EOA also had a higher percentage of eligible students—in large counties, about 50% of families were income-eligible—than seven of the other nine states with similar policies.
Without the Education Opportunity Accounts, Kentucky would rank No. 38 in the nation for education choice on Heritage’s Education Freedom Report Card, and No. 41 for education freedom overall.
In striking down the program, the Kentucky Supreme Court adopted a line of reasoning that is out of step with the U.S. Supreme Court and nearly every other state supreme court that has addressed a similar question. In its decision, the state’s highest court cited Section 184 of the state Constitution, which states:
No sum shall be raised or collected for education other than in common schools until the question of taxation is submitted to the legal voters, and the majority of the votes cast at said election shall be in favor of such taxation.
However, unlike most other education savings account policies, Education Opportunity Accounts would not have relied on public funds collected by the government via taxation. Instead, Kentucky’s EOA policy was designed to rely on private funds, similar to tax-credit scholarship policies operating in 23 states.
Under the EOA program, Kentucky taxpayers who donated to nonprofit, account-granting organizations would have received tax credits worth 95% of their contributions. The account-granting organizations would then provide the accounts to students from low- and middle-income families to pay for a wide variety of education expenses.
Kentucky Attorney General Daniel Cameron, a Republican, argued that although the state’s constitutional provision prohibits public subsidy of private education without a ballot proposition, it “does not prohibit the General Assembly from decreasing a Kentuckian’s tax burden for having donated to a nonprofit organization that then helps lower-income Kentucky students pursue the education best suited to them.”
Nevertheless, the Kentucky Supreme Court held that the “money at issue cannot be characterized as simply private funds, rather it represents the tax liability that the taxpayer would otherwise owe but will have forgiven entirely or reduced.” In other words, funds that a private citizen gives to a private, nonprofit organization now are considered public funds if the donation reduces the donor’s tax liability.
This line of reasoning—often referred to as “tax expenditure analysis”—was rejected explicitly by the U.S. Supreme Court more than a decade ago.
When considering a challenge to Arizona’s tax-credit scholarship policy, the nation’s highest court ruled that petitioners lacked standing because the policy did not involve public funds.
In ACSTO v. Winn (2011), the Supreme Court concluded that funds belonging to private citizens or corporations do not belong to the government until they have “come into the tax collector’s hands.” The high court observed that the contrary position—now adopted by the Kentucky Supreme Court—absurdly “assumes that all income is government property.” As the court noted: “That premise finds no basis in standing jurisprudence.”
Until now, with the exception of Montana’s supreme court, every other state’s high court to address the question has reached the same conclusion as the U.S. Supreme Court. (Montana’s supreme court later was overturned in 2020 by the U.S. Supreme Court in Espinoza v. Montana Department of Revenue, albeit on other grounds.)
As the Arizona Supreme Court held in 1999, under the dangerous reasoning now adopted by the Kentucky Supreme Court, “all taxpayer income could be viewed as belonging to the state because it is subject to taxation by the legislature.”
“I think Kentuckians would be shocked to learn that their private donations are treated as government money,” said Joshua House, a lawyer with the Institute for Justice, a nonprofit law firm that intervened on behalf of families who stood to benefit from the EOA, “especially when that conclusion will take away educational options from lower-income families across the Commonwealth—options already available to their more affluent neighbors.”
Those hurt most by the flawed court decision are Kentucky’s children, who are in desperate need of educational alternatives. As the Bluegrass Institute noted:
Contrary to the court’s ruling, Kentucky’s Constitution does not prohibit educational alternatives for parents; it simply requires that the commonwealth ‘provide for an efficient system of common schools throughout the State.’ …
Considering per-pupil funding rose by an inflation-adjusted 80% between 1990 and 2019 and yet barely one-third of all Kentucky public school students read proficiently at grade level, from whatever definition you choose, Kentucky has failed in its constitutional responsibility to provide an education system that achieves maximum results with minimum expense.
The Education Opportunity Accounts program is dead. It now appears that expanding education choice in Kentucky will require a constitutional amendment.
Fortunately, with two-thirds of Kentucky adults and 77% of Kentucky parents favoring education savings accounts, there may yet be hope for education opportunity in the Bluegrass State.
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