This arrangement would seem to violate the state’s constitutional restriction on spending state funds to support religious education, but the Arizona Supreme Court declared otherwise (see Kevin Welner’s analysis of this revolutionary decision), and their decision was upheld by the US Supreme Court in 2009 on a 5-4 vote, arguing that the contributor was only redirecting "private" money. Since theoretically the state income tax owed never touched the state's coffers, it never was the state's money. (This is a head-scratcher of an opinion that originated in the Arizona Supreme Court on a 3-2 split vote, and has been critiqued by Kevin Welner in his article, "Taxing the Establishment Clause: — Revolutionary Decision of the Arizona Supreme Court." In 2010, more than 50 STOs received more than $55 Million in donations. More than 31,000 “scholarships” were distributed at an average of $1,650 per student.
The law just signed allows a doubling of the contribution provided that the STO uses the money to award a scholarship to a) a Kindergartener entering a private school, b) a student switching from a public to a private school, or c) a child of a parent on active military duty. Now, a couple can direct $2,000 of their state tax indebtedness to an STO.
A key sponsor of this bill is State Sen. Steve Yarbrough (R-Phoenix), Executive Director of the Arizona Christian School Tuition Organization, second largest in the state. STOs are allowed to keep 10% of all contributions for administrative expenses. Two executives of the largest STOs were recently discovered to have used their administrative fee monies to buy cars (2 Infiniti Luxury sedans for one director), hire relatives and purchase real estate. Two of the 55 STOs account for almost a third of all the $55 Million collected in 2010: Arizona Christian School Tuition Organization and the Arizona Scholarship Fund. The STOs are essentially unregulated since the enabling and subsequent legislation vested no agency with any responsibility or authority to monitor their dealings. A rider on the law just signed exempts religious and private schools from state achievement testing required of all public schools, traditional or charter.
