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LOUISVILLE, Ky. (WDRB) -- A judge ruled Friday that Kentucky’s new school choice law is unconstitutional.

Franklin Circuit Judge Phillip Shepherd found the state’s education opportunity accounts, funded through donations eligible for state tax credits, violated the Kentucky Constitution because the $25 million pool of tax credits cannot be collected for educational purposes “other than in common schools until the question of taxation has been submitted to the legal voters.”

“Accordingly, the tax credit created by this legislation must be approved by ‘the legal voters’ before it can take effect,” Shepherd said in the ruling, which can be appealed.

Shepherd blocked the state from enforcing provisions of House Bill 563, the school choice law, including prohibiting state officials from approving the creation of any account granting organizations, education opportunity accounts and any tax credits for such purposes.

"We knew from the very beginning that it was unconstitutional," said Eddie Campbell, president of the Kentucky Education Association.

"It felt good to see a judge say things that we educators have been saying," said Emilie McKiernan Blanton, a JCPS teacher, parent and JCTA union member.

Attorneys for the Institute for Justice, which represents parents who intervened in the case, criticized Friday's ruling.

"The Kentucky Constitution has no provisions that prevent the Commonwealth from providing tax credits to support giving families alternatives to the public school system," said Institute for Justice attorney Ben Field. "We look forward to vindicating this fact on appeal and ultimately at the Kentucky Supreme Court."

The Council for Better Education challenged the constitutionality of the school choice program in a June lawsuit.

Tom Shelton, the organization's executive secretary, applauded Friday's ruling "as it supports our stated position that this portion of HB563 was unconstitutional," he said in a statement.

Attorney General Daniel Cameron's office, which defended the school choice law in court, said in a message to WDRB News that it was still reviewing Friday's ruling and had no further comment at the time.

Education opportunity accounts were a significant legislative achievement in this year's legislative session for school choice advocates like EdChoice Kentucky, whose president, Andrew Vandiver, said he and the families his group represents were "disappointed" in Shepherd's decision.

"Today’s ruling represents an unnecessary delay with the potential to leave Kentucky’s students in classrooms that just don’t work for them. This is not the end," Vandiver said in a statement. "... We remain confident the Education Opportunity Accounts Act will be upheld on appeal and our next generation will get the financial support necessary to reach for their full potential."

The Kentucky Education Association praised Friday's ruling. KEA President Eddie Campbell said the decision represents "a victory for our public schools, our public school students, and our Commonwealth’s constitution."

"HB 563 violates both the letter and the spirit of the Kentucky Constitution, which makes providing public education the state’s highest duty," Campbell said in a statement. "These plaintiffs stood up for all Kentucky students to ensure that the legislature’s unconstitutional actions did not go unchecked, and the judge has affirmed their concerns."

HB 563, in part, created an pool of tax credits worth $25 million annually for five years. Donors to groups that award education opportunity accounts can recoup up to $1 million in such tax credits under the new law.

The flexible spending accounts, among other permissible uses, can help students in counties with at least 90,000 residents pay tuition for private schools.

The program, if it survives legal scrutiny, is only available to families who earn 175% of the federal limit to qualify for reduced-price school meals, or about $86,000 for a family of four in the current school year.

The Council for Better Education contended that the $25 million in state tax credits amounts to public financial support for private schools while those defending the new law say the tax credit program involves private funds and is separate from direct state appropriations.

"Today’s ruling treats private donations as if they are government money," Institute for Justice attorney Joshua House said in a statement Friday. "It holds that when private individuals donate their own money to education-related causes, and receive tax credits for those donations, it is in effect the government raising and spending money on education. That’s just wrong."

However, Shepherd disagreed and sided with the Council for Better Education in his ruling. The program's entire funding structure depends on the state's ability to levy and collect income taxes, he said.

"There is nothing 'private' or 'charitable' about the funding of the (account granting organizations), and this funding mechanism is not a 'donation' in any meaningful sense of that word that connotes a voluntary contribution of personal or business income," Shepherd said in his ruling.

"These taxpayers are not donating their own money to (account granting organizations); they are taking the money they owe to the state in income taxes, and re-directing it to the (account granting organizations), as authorized by this legislation."

Shepherd further ruled that limiting the private school tuition element of education opportunity accounts to counties with at least 90,000 residents was also unconstitutional and "arbitrarily" excluded less populated counties that have private schools.

"There is simply no rational basis to exclude counties like Franklin County, Nelson County, and many others with a strong existing base of private schools from the tuition assistance program," Shepherd said. "If the legislature had wanted to limit tuition assistance to counties with existing accredited private schools, it would have been simple to do so.

"Instead, the legislature chose an arbitrary and discriminatory geographical classification (tied to population, not existing private school options) that excludes most counties, and families, from the most lucrative benefit of the legislation."

The judge also questioned whether education opportunity accounts would create a two-tiered model of public school funding where one group of students benefit from the flexible spending accounts while the rest of Kentucky children remain "g completely dependent on the funding allocated to the common schools from the legislature and the local school boards."

Such a funding system "raises serious questions about compliance" with the Kentucky Constitution, particularly in light of the Rose v. Council for Better Education case, he wrote.

The landmark Supreme Court ruling in 1989 led to sweeping reforms in Kentucky's education system.

"A system of subsidizing private educational opportunities for a small group of students has the potential to exacerbate inequality in educational funding, and to undermine the required uniformity in educational opportunity that was mandated in Rose," Shepherd said.

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