North Carolina Supreme Court Upholds State-Funded Private School Scholarships For Economically Disadvantaged Students

In Hart v. State,¹ the North Carolina Supreme Court considered whether the Opportunity Scholarship Program (“OSP”),² which provided state-funded scholarships to private schools for students from lower income families, violated the North Carolina Constitution.  In a 4-3 decision, the Court upheld the program, focusing largely on separation of powers concerns.  Because nothing in the state constitution precluded the North Carolina General Assembly from attempting to improve educational outcomes of economically disadvantaged children, the wisdom of the OSP was a legislative, not a judicial, issue.  Thus, the plaintiffs had to seek changes to the program through the political process, not the courts.

Enacted in 2013, the OSP provided a relatively small number of selected students with a scholarship grant up to $4,200 to attend a nonpublic school.³  For fiscal year 2014-15, the General Assembly appropriated $10,800,000 from general revenues to the program.⁴  Under the OSP, nonpublic schools that accept scholarship recipients must adhere to certain minimal requirements, including, among other things, (i) providing the parent or guardian of each participating student with an annual progress report, including standardized test scores; (ii) giving at least one nationally standardized test for each participating student in grades three or higher that measures achievement in English, grammar, reading, spelling, and mathematics; and (iii) submitting graduation rates of scholarship recipients to the State Educational Assistance Authority (the “Authority”).

The Authority, in turn, was required to provide demographic information and program data to the Joint Legislative Oversight Committee (the “Committee”) and to select an independent research group to prepare an annual report relating to “[l]earning gains or losses of students receiving scholarship grants” as well as the “[c]ompetitive effects on public school performance on standardized tests as a result of the scholarship grant program.”⁵  The Committee was then responsible for reviewing the reports and making ongoing recommendations to the General Assembly to improve the administration and accountability for nonpublic schools participating in the OSP.

In December 2013, twenty-five taxpayers filed suit in state superior court alleging that the OSP violated the education provisions in the North Carolina Constitution.  In particular, the plaintiffs asserted five claims: that the OSP (1) violated Article IX, section 6 by appropriating funds for nonpublic schools that must be used exclusively for the public school system; (2) contravened Article IX, section 5 by not requiring the Board of Education to supervise the appropriated funds; (3) created a non-uniform system of schools in violation of Article IX, section 2(1); (4) lacked any accountability or educational requirements that would ensure that students received a sound, basic education as required by Article V and Leandro v. State;⁶ and (5) breached Article V’s public purpose requirement by permitting nonpublic schools receiving scholarship money to discriminate against students based on race, color, religion, or national origin.

The parties filed cross-motions for summary judgment.  On August 28, 2014, the trial court granted the taxpayers’ motion on all claims and permanently enjoined the OSP, thereby precluding the disbursement of public funds to participating nonpublic schools.  The defendants appealed.  Given the importance of the constitutional questions raised, the North Carolina Supreme Court, on its own initiative, certified the appeal for immediate review and bypassed the Court of Appeals.  In reversing the trial court, the majority focused on two central issues: (i) the proper role of the judiciary in reviewing facial challenges to duly enacted legislation and (ii) whether nonpublic schools receiving state scholarship funds were subject to the same substantive educational requirements under the North Carolina Constitution as public schools.

With respect to the separation of powers issue, Chief Justice Martin, writing for the majority, emphasized the circumscribed role of the judiciary.  Like “the legislative and executive branches of government,” the courts are “expected to operate within [their] constitutionally defined spheres.”⁷  But the judiciary’s “constitutionally assigned role is limited to a determination of whether the legislation is plainly and clearly prohibited by the constitution.”⁸  Absent such a prohibition, the nature and scope of educational reforms (such as the OSP) are left to the General Assembly.  Judges “neither participate in this dialogue nor assess the wisdom of legislation.”⁹  As a result, the majority would “presume that a statute is constitutional, and … will not declare it invalid unless its unconstitutionality is demonstrated beyond reasonable doubt.”¹⁰

Turning to the plaintiffs’ specific claims, the majority determined that the plaintiffs did not make the requisite showing.  The plaintiffs’ first claim was that Article IX, section 6 “requires that any and all funds for education be appropriated exclusively for our public school system.”¹¹  Titled “State school fund,” section 6 provides that four specific non-revenue sources of funding “together with so much of the revenue of the State as may be set apart for that purpose, shall be faithfully appropriated and used exclusively for establishing and maintaining a uniform system of free public schools.”¹²  The majority rejected the plaintiffs’ claim, concluding that this section requires only that appropriations from the State’s general revenues that were “set apart” for public education must be used for maintaining a uniform system of free public schools.  Nothing in section 6, though, prevented the General Assembly from appropriating other funds from general revenue—i.e., funds that had not been set apart for the state school fund—to support additional educational initiatives, such as the OSP.

The majority’s resolution of the first claim also answered the plaintiffs’ second and third claims.  The plaintiffs contended that, because the OSP did not require the State Board of Education to supervise the scholarship funds, it violated the express terms of Article IX, section 5, which states that “[t]he State Board of Education shall supervise and administer the free public school system and the educational funds provided for its support.”¹³  Given that the OSP scholarships did not come from revenues set apart for the uniform system of free public schools, the majority denied that those funds were subject to the supervision and administration of the State Board of Education.  For the same reason, the majority rejected the plaintiffs’ claim that the OSP legislation created an alternate system of publicly funded private schools in violation of Article IX, section 2(1), which requires the General Assembly to “provide by taxation and otherwise for a general and uniform system of free public schools.”¹⁴  Rather than create an alternate system of public education, the OSP “provides modest scholarships to lower-income students for use at nonpublic schools of their choice.”¹⁵ Because the uniformity clause applied only to the public school system, the legislature could fund educational initiatives outside of that system without infringing the North Carolina Constitution.

The fundamental disagreement between the majority and the dissent, though, centered on plaintiffs’ fourth and fifth claims, which were predicated on the “public purpose” requirement in Article V, sections 2(1) and 2(7).  Pursuant to Article V, section 2(1), “[t]he power of taxation shall be exercised in a just and equitable manner, for public purposes only, and shall never be surrendered, suspended or contracted away.”¹⁶  Similarly, Article V, section 2(7) states that “[t]he General Assembly may enact laws whereby the State … may contract with and appropriate money to any person, association, or corporation for the accomplishment of public purposes only.”¹⁷  Plaintiffs argued that the OSP did not accomplish a public purpose because the program used public moneys to fund scholarships to private schools without requiring those schools to meet the substantive education standards set forth in Leandro v. State, which held that the public school system must provide students with a sound basic education.¹⁸

The majority once again rejected the plaintiffs’ argument.  According to the majority, when considering challenges to legislative appropriations under the public purpose clauses, the court must consider “whether the legislative purpose behind the appropriation is public or private.”¹⁹  Because even well-intentioned legislation may not always achieve the desired legislative outcome, courts must focus on whether the legislation was directed at a public (as opposed to private) purpose, not on whether the legislation actually “accomplished” that purpose.  Accordingly, if the legislation had a public purpose, then “the wisdom, expediency, or necessity of the appropriation is a legislative decision, not a judicial decision.”²⁰

Although acknowledging that a “‘slide-rule definition to determine public purpose for all time cannot be formulated,’”²¹ the majority applied two “guiding principles” to determine whether the OSP served a public purpose: whether “‘(1) it involves a reasonable connection with the convenience and necessity of the [State]; and (2) the activity benefits the public generally, as opposed to special interests or persons.’”²²

The majority determined that both principles supported the OSP’s having a public purpose.²³  Given that education is critically important to the citizens of North Carolina and that providing education is a central government function, the majority easily concluded that the OSP was reasonably connected to the convenience and necessity of the State: “the provision of monetary assistance to lower-income families so that their children have additional educational opportunities is well within the scope of permissible governmental action and is intimately related to the needs of our state’s citizenry.”²⁴

Similarly, because education “is of paramount public importance to our state,” the majority determined that the OSP benefitted the public generally.²⁵  Although the scholarships helped eligible students as well as certain nonpublic schools, “the ultimate beneficiary of providing these children additional educational opportunities is our collective citizenry.”²⁶  Consequently, the OSP satisfied the public purpose requirements under Article V, sections 2(1) and 2(7).

The dissenters sharply disagreed with the majority’s public purpose analysis.  Given the complete lack of educational standards governing the OSP, Justice Hudson’s dissent, joined by Justices Beasley and Ervin, argued that the OSP violated the North Carolina Constitution in two ways.  First, the OSP violated the public purpose requirements of Article V, sections 2(1) and 2(7) because the public purpose inquiry required the courts to “‘look not only to the ends sought to be attained but also “to the means to be used.” ’ ”²⁷  Under this view, the judiciary must determine whether the OSP appropriations would “accomplish” the intended public purpose, not simply whether education served a public purpose at some abstract level.  Even assuming that a standard less demanding than Leandro’s sound basic education might apply to private schools, the lack of any substantive standards on teachers, administrators, and educational instruction precluded the OSP’s serving a public purpose: “When taxpayer money is used, the total absence of standards cannot be constitutional.”²⁸

According to the dissent, the second constitutional flaw stemmed from the same source—the lack of substantive standards.  Contrary to the majority, the dissent agreed with the trial court that Leandro interpreted Article I, section 15 and Article IX, section 2 as imposing a substantive requirement on the State to provide each child with the opportunity to receive a minimum level of education.²⁹  Because the OSP “allows for taxpayer funds to be spent on private schooling with no required standard to ensure that teachers are competent or that students are learning at all,” the State breached its “duty … to guard and maintain [the] right” to the privilege of education under Article I, section 15.  Thus, because the OSP did not ensure that the scholarships would “prepare our children to participate and thrive in our state’s society,” the dissent would have enjoined the OSP as violative of the North Carolina Constitution.

*Scott W. Gaylord is a professor of constitutional law at Elon University School of Law.

Endnotes

1 2015 WL 4488553 (N.C. 2015).

2 N.C.G.S. §§ 115C-562.1 et seq.

3 Id., § 155C-562.2(b).  The majority noted that in the OSP’s first year only 2,300 students—out of the roughly 1.5 million students attending public and charter schools in North Carolina—were chosen to participate in the program.

4 Hart, 2015 WL 4488553 at *3.

5 N.C.G.S. § 115C-562.7(c) (2014).

6 346 N.C. 336 (1997)

7 Hart, 2015 WL 4488553 at *2.

8 Id.

9 Id.

10 Id. at *5.

11 Hart, 2015 WL 4488553 at *5.

12 N.C. Const. art. IX, § 6.

13 N.C. Const. art. IX, § 5.

14 See N.C. Const. art. IX, § 2(1).

15 Hart, 2015 WL 4488553 at *7.

16 N.C. Const. art. V, § 2(1).

17 N.C. Const. art. V, § 2(7).

18 346 N.C. at 347.  The plaintiffs and the trial court also claimed that the lack of educational standards meant that the OSP violated the requirements of Leandro and Article I, section 15 of the North Carolina Constitution, which states that the State has “the duty … to guard and maintain [the] right” to the privilege of education.  N.C. Const., art. I, § 15.  The majority denied that Article I, section 15 provided an independent basis for relief because (i) Leandro’s sound basic education requirement does not apply outside the public school context and (2) the North Carolina Constitution expressly acknowledged that children may be educated outside the public school system.  See Hart, 2015 WL 4488553 at *11; N.C. Const. art. IX, § 3 (“The General Assembly shall provide that every child of appropriate age and of sufficient mental and physical ability shall attend the public schools, unless educated by other means.”).

19 Hart, 2015 WL 4488553 at *8.

20 Id. (citing Maready v. City of Winston-Salem, 342 N.C. 708, 714 (1996)).

21 Id. at *9 (quoting Mitchell v. N.C. Indus. Dev. Fin. Auth., 273 N.C. 137, 144 (1968)).

22 Id. (quoting Maready, 342 N.C. at 722).

23 The majority dismissed the plaintiffs’ argument—that the OSP permitted nonpublic schools to discriminate on the basis of religion and, therefore, violated the public purpose requirement—as “inapposite to the public purpose analysis.  Id. at *8.  To the extent the OSP breached other constitutional provisions, plaintiffs with standing were required to assert bring claims under those provisions, not he public purpose clauses.

24 Id.  See also State Educ. Assistance Auth. v. Bank of Statesville, 276 N.C. 576, 587 (1970) (“Unquestionably, the education of residents of this State is a recognized object of State government.”); Hughey v. Cloninger, 297 N.C. 86, 95 (1979) (stating in dicta that, where there is statutory authority permitting a Board of Commissioners  to appropriate money to a private school for dyslexic children, such an appropriation “would have presented no ‘public purpose’ difficulties as it is well established that both appropriations and expenditures of public funds for the education of the citizens of North Carolina are for a public purpose.”).

25 Hart, 2015 WL 4488553 at *10.

26 Id.

27 Id. at *14 (Hudson, J., dissenting) (quoting Stanley v. Dept. of Conservation and Devel., 284 N.C. 15, 34 (1973), abrogated in part on other grounds by Madison Cablevision, Inc. v. City of Morganton, 325 N.C. 634, 647-48 (1989)).

28 Id. at *15 (Hudson, J., dissenting).

29 Id. at *19 (Hudson, J., dissenting).