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Conduit Revenue Bond Financings for Religious Elementary and Pre-Kindergarten

Schools Following the U.S. Supreme Court’s Decision in
Espinoza v. Montana Department of Revenue

by Scott P. Waller – Gilmore & Bell, P.C.
July 2020

Following the U.S. Supreme Court’s June 2020 Bond counsels’ prior reservations about

decision in Espinoza v. Montana Department conduit financings for elementary schools
of Revenue and its 2017 decision in Trinity Lu- stemmed from the Supreme Court’s 1973 de-
theran Church of Columbia, Inc. v. Comer, as cision in Hunt v. McNair. The Court in Hunt

further described below, the weight of the U.S. distinguished its approval of the South Caroli-
Supreme Court religious freedom decisions pro- na Health Facilities Authority’s college fi nanc-
vide greater comfort for bond counsel to provide ing from church-based elementary schools

unqualified opinions for conduit revenue bond that had been discussed in the Court’s prior

financings for church-related and other reli- Establishment Clause cases. Those prior cas-

giously affiliated pre-kindergarten and elemen- es considered whether an elementary school

tary school financings. Public aid (in the form was “pervasively sectarian” for Establishment

of serving as the conduit issuer) that is provided Clause purposes, with the tenet that govern-
to private pre-kindergarten and elementary ed- ment aid to a church-related elementary school
ucational institutions without discriminating on was more likely to result in an Establishment
the basis of religious status, as part of a neutral Clause violation than aid to colleges because in
government program, should now survive Fed- the elementary school setting the religious mis-
eral Constitutional religious freedom challeng- sion was more likely to permeate, and religious

es. The legally permissible exclusions have been indoctrination was more likely a substantial
narrowed to uses that are “essentially religious purpose, than in the college setting. Impor-
endeavors,” such as training for the ministry. tantly for bond counsel, the Hunt decision also
A neutral government program should not ex- included a key footnote positing other grounds
clude participants based on whether a certain for upholding the South Carolina funding on
religious elementary school may be part of a the basis that the Authority was a “mere con-
church (as was the school in Trinity Lutheran) duit” / “governmental service” with minimal
or may have the significant mission of teaching state aid and did not involve the expenditure of

religious values (as did the elementary school in public funds.
Espinoza).
Over the many decades that have passed since
the Hunt case, Establishment Clause analysis

has shifted away from the “pervasively sectar-
ian” inquiry, to an evaluation of whether gov-
ernment programs are “neutral” in providing

their benefits to eligible recipients.
In Trinity Lutheran, the U.S. Supreme Court
held the exclusion of a church’s pre-kindergar-
ten school from receiving a shredded-tire play-
ground grant through a Missouri state program,
on the basis of the school’s religious status,
was unconstitutional under the Free Exercise

Clause of the U.S. Constitution. The Court reit-
erated that denying a generally available benefi t

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