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LOUISVILLE, Ky. (WDRB) -- A Kentucky judge will soon determine whether newly created education opportunity accounts can help families pay for tuition to private schools.

Franklin Circuit Judge Phillip Shepherd heard arguments during a hearing Thursday in a lawsuit filed in June by the Council for Better Education challenging the constitutionality of that aspect of House Bill 563, which the Kentucky General Assembly passed into law this year.

HB 563 creates tax credits worth up to $25 million annually for five years for donors, who can recoup up to $1 million per year, to organizations that award education opportunity accounts. 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 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.

Eric Harrington, an attorney representing the Council for Better Education, argued that that provision of the new law is unconstitutional.

“The foundation of the Rose decision was that firm belief that the Constitution requires the General Assembly, the highest duty, to provide education to all Kentucky students and to provide it regardless of their circumstance," Harrington said, referencing the landmark Kentucky Supreme Court decision that ushered in sweeping education reforms in 1990.

"And so that is the animating principle of the Rose decision, and HB 563 is in direct conflict with that."

The Council for Better Education was also involved in that litigation.

But lawyers with Attorney General Daniel Cameron’s office and the Institute for Justice, which is representing parents who have intervened in the case, argued that the tax credit program does not represent state expenditures for private education. They also cited recent cases that upheld similar programs in other states.

“This case can just end there,” said Joshua House, attorney for the Institute for Justice. “Tax credits are not spending. There's no government expenditure ... The plaintiffs don't provide a defining line for why if HB 563 is unconstitutional do the other educational tax credits not also violate the Kentucky constitution.”

Shepherd expressed reservations that the program may create a “two-tiered education system in Kentucky” that does not benefit all students in the state.

“I think what Rose said is that the legislature has an obligation to provide an efficient system of common schools that provides an adequate and an equitable education, and here we have a program that allocates $25 million a year for five years to give the students who are lucky enough to be able to participate in that program additional assistance,” Shepherd said.

“It does raise a question in my mind under the Rose case and under the Constitution, the question of whether we can have an educational program in Kentucky that is by definition limited to a small minority of students that gives them additional advantages in the educational endeavor that are not available to the rest of the school students in Kentucky."

Christopher Thacker, representing Cameron’s office, said the new law does not alter the state’s school funding statute.

Shepherd said he would issue a ruling on motions for summary judgment in the lawsuit after considering briefs from both sides, likely before Oct. 11.

Bethany Rice, an attorney for the Kentucky Department of Revenue, indicated the state would not approve tax credit requests under HB 563 before that date.

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