SC Supreme Court blocks public funding of private schools, disappointing state leaders

Senior South Carolina lawmakers were confident their plan to set aside tax dollars to help parents pay to send students to private schools would survive a legal challenge.

On Wednesday, a divided state Supreme Court said no.

The court ruled that portions of the 2023 Education Scholarship Trust Fund Act violate the state constitution’s prohibition against using public funds for the “direct benefit” of private schools. The ruling was based on the constitution’s Section 4 of Article XI, known as the “no-aid” clause.

The court voted 3-2, with Justices Gary Hill, acting Justices Donald Beatty and James Lockemy voted in the majority. Chief Justice John Kittredge dissented with Justice John Few concurring in the dissent. Hill wrote the majority opinion.

The case was brought by a group of public school parents along with the South Carolina NAACP and the South Carolina Education Association. Defendants included Gov. Henry McMaster, Senate President Thomas Alexander, House Speaker Murrell Smith, Education Superintendent Ellen Weaver and State Treasurer Curtis Loftis.

State leaders expressed disappointment with the court’s decision, pointing to the inconvenience it will cause some parents who’ve already began using the funds this school year to send their children to private schools.

“The late timing of the initial filing and subsequent ruling on this case midway through the first quarter of the new school year wreaks havoc on the participating students and their families,” Weaver said in a statement Wednesday.

The education scholarship law established an education scholarship trust fund that grants $6,000 vouchers to qualified families who pull their children out of local public schools and enroll them in private schools or public schools outside of their zoned districts.

To qualify, a student must have been enrolled in a South Carolina public school during the previous school year, and their family must meet certain income requirements.

In arguing that the law was constitutional, state officials said that while the funds originate as “public,” they become “private” after the monies are transferred by Loftis to a trust fund, where qualified families then own the funds. Those families are governed by rules that limit the use of the money “for direct payment” to educational institutions only, whether private or public.

The court rejected the state’s argument, saying it was skeptical, in the first place, of whether the act included a true trust fund because the law fails to identify a trustee — something required under state law before a trust is considered valid.

“This is not the first time we have encountered an attempt to deploy a trust to avoid constitutional limits on the use of public funds,” the court said. It cited the O’Brien case, where a municipality used public funds placed into a trust to buy stocks and other securities. State law forbids cities from being a company stockholder, and the court ruled the trust fund arrangement in the O’Brien case was unconstitutional because the money in the trust fund was still public.

“We see no daylight between the trust veneer peeled away in O’Brien and the trust here,” the opinion said. “We therefore hold the (Educational Scholarship Trust Fund) funds are ‘public funds.’ “

School choice proponents supported the measure on the grounds it afforded parents the freedom to select an education option that best fits their child’s needs. Detractors argued it would divert money from the traditional public school system to prop up unaccountable private schools that won’t actually accept the neediest students.

Senior legislators were confident the plan would pass legal muster after they considered issues raised in a 2020 Supreme Court ruling, where a plan for McMaster to use $32 million in federal COVID-19 aid to fund tuition grants at private and religious schools was struck down.

To circumvent McMaster’s outcome in the 2020 decision, Republican lawmakers took care to avoid sending money directly to private and religious schools. Rather, the lawmakers decided to givequalifying parents access to a state-funded account for education expenses of their choice. Indirect funding of private schools is not expressly prohibited by the state Constitution.

Nevertheless, the court shot down the law, in-part finding that not only are the funds in question considered public, but also used to directly benefit private schools.

In addition, state officials claimed that any benefit to private schools “is not direct because the path the funds must take is not only winding, but its direction may diverge to public schools based on the scholarship recipient’s choice,” the opinion said.

Regardless, the court said despite the purported trust account and the fact the vouchers may benefit some public schools, private schools still will receive a direct benefit from public funds under the law.

“After we clear away the window dressing, we can see the act funnels public funds to the direct benefit of private schools,” the court said. “This is what our constitution forbids.”

McMaster issued a statement Wednesday saying he plans to ask the court to “expeditiously” reconsider its decision.

“The Supreme Court’s decision may have devastating consequences for thousands of low-income families who relied on these scholarships for their child’s enrollment in school last month,” McMaster said.

Weaver also reacted to the court’s decision, saying the ruling will transform tears of families relying on the funding from “joy” to “devastation.”

“While I respectfully disagree with the holdings of the majority decision, I remain committed to working with the Governor and the General Assembly to find a way forward to support these students and educational freedom for all South Carolina families,” Weaver said.

Because the ESA law was only partially struck down, families are still permitted to use scholarship funds to send their children to another public school outside of their zoned district.