The South Carolina Legislature passed the Education Scholarship Trust Fund Act (ESTF) to “provide scholarships to eligible students for qualifying expenses.”[1] The legislature designed the Act to aid low-income students by providing them with up to $6,000 to use for educational expenses.[2] Eligible expenses included tuition at private and religious schools.[3]

In a 3-2 decision, the South Carolina Supreme Court held the ESTF violated the South Carolina Constitution’s prohibition on the use of public funds for the direct benefit of private educational institutions.[4]

Justice D. Garrison Hill’s majority opinion began by describing how the ESTF works in detail.[5] The South Carolina Department of Education manages the ESTF. The Department transfers funds to the ESTF and then to a student’s account only after a parent requests a scholarship for qualifying expenses, and the Department approves the application.[6] After disbursement, the parent may direct the funds to education service providers, public or private, at their election.[7] The Act enumerates qualifying expenses.[8] They range from “fees for advanced placement exams and other supplemental educational services . . . to tuition at full-time, in-person and online private schools.”[9] However, the funds cannot be used if the student is enrolled “in a public school as a full-time student in the school district in which the student is domiciled.”[10]

The court commenced its analysis by noting that state legislatures have plenary authority only limited by the state and federal constitutions.[11] Further, it held that those challenging the law—advocacy organizations and parents—had standing because “standing rules may be relaxed when the case involves a matter of wide public importance and resolution of the case is needed for future guidance affecting the public interest.”[12]

Article XI, Section 4 of the South Carolina Constitution provides that “[n]o money shall be paid from public funds nor shall the credit of the State or any of its political subdivisions be used for the direct benefit of any religious or other private educational institution.”[13] The court conducted its analysis under two main headings: whether the ESTF funds were public and whether those funds were used for the direct benefit of private schools.[14]

The court held the ESTF funds were public. South Carolina argued the funds were not public because they became private once placed in the trust structure of the ESTF.[15] It claimed that once the parents and students become the beneficial owners of the money in trust, the funds “lose their public character.”[16] The court rejected the trust analogy for a few reasons. First, it was doubtful that the ESTF functioned as a “true trust.”[17] Second, even assuming it was a true trust, the court noted that the state, as trustee, still held legal title to the funds while the parents and students held beneficial title.[18] So as long as the state retained legal title, the funds remained public and thus subject to Article XI, Section 4 of the state constitution.[19]

Next, the court held the ESTF funds provided a direct benefit to private or religious educational institutions.[20] South Carolina argued the funds were “not paid to or used for the ‘direct benefit’ of private schools within the meaning of Article XI, Section 4.”[21] The court explained that its analysis of the term “direct benefit” depended on the words’ “ordinary and popular meaning.”[22] It claimed to reject “microscopic literalism” and instead interpreted “words in light of the company they keep—their context.”[23] To construe the ordinary and popular meaning of “direct benefit” in context, the court looked to a dictionary definition for “direct” from 1983—around the time the term was added to the constitution.[24] The court found the Act’s “presumption of constitutionality withers” because “direct” meant “stemming immediately from a source” which rendered the benefit private schools received from the Act a direct benefit.[25]

South Carolina argued that because parents and students could choose to direct the scholarship funds to private or public schools, any benefit to private institutions was “indirect and incidental.”[26] The court explained its precedent barred that view. In Adams v. McMaster, the South Carolina Supreme Court unanimously rejected a funding program that “directly transferred [funds] from the State Treasury to the selected school through the use of a secure online portal.”[27] The court rejected South Carolina’s claim that Adams was distinguishable because the funds in that case could only go to private institutions, whereas here funds could also go to public schools.[28]

Instead, the court said the ESTF nevertheless conferred a direct benefit on private institutions. Like a rising tide lifts all boats, the funds here conferred a direct benefit on public and private schools alike.[29] “But just because the benefit is diffuse does not mean it is not direct; the effect of the tide is the same on all the boats.”[30] The court further reasoned that its precedent foreclosed the argument that the true choice of benefit lay with students. In Hartness v. Patterson,[31] the South Carolina Supreme Court “was unpersuaded by the argument that . . . tuition grants were constitutional because they were made to the student rather than to the institutions and the student chose the school they wished to attend.”[32] The student’s choice of where to direct the funds “does not materially alter the nature of the benefit received by private educational institutions when public money is used for tuition at those institutions.”[33] “After we clear away the window dressing, we can see the Act funnels public funds to the direct benefit of private schools. This is what our constitution forbids.”[34]

Having found that the Act allowed unconstitutional payment of public funds, the court enjoined only Section 59-8-110(13)(a), (e), and (l) of the Act per an express severability clause in the Act.[35]

In response to the dissent’s historical analysis, the court concluded with “the historical lineage of South Carolina’s constitutional past when it comes to education.”[36] In short, the court argued that the constitution’s prohibition on directing public funds to private institutions arose in response to efforts to continue segregation in South Carolina schools. Following Brown v. Board of Education, South Carolina political leaders began an effort to “unwind the State’s constitutional obligation to provide free public schools.”[37] After they amended the constitution to remove this obligation,[38] they passed a school choice law that “provided publicly-funded tuition for any South Carolina school-aged child who wished to attend private school . . . to foil integration.”[39] But as the backlash grew to these attempts to evade integration, voters and the General Assembly passed Article XI, Sections 3 and 4 to prevent public funds from directly benefiting private schools.[40] And so the majority characterized these sections of the constitution as the culmination of school integration efforts in South Carolina.[41]

Chief Justice John W. Kittredge dissented.[42] He first disagreed that the law’s challengers had successfully mounted a facial challenge because there were scenarios in which the law was constitutional under the majority’s analysis—such as when it directed funds to public schools.[43] Substantively, Chief Justice Kittredge disagreed with the majority’s conclusion that the funds were a direct benefit to private educational institutions.[44] He argued they were not. First, he claimed the phrase “direct benefit” was ambiguous because “[i]nterpreting the phrase ‘direct benefit’ will always be a fact-dependent exercise requiring the Court to consider whether a benefit is sufficiently attenuated—or not attenuated enough—to pass constitutional muster.”[45] He argued the court should have looked to history to help resolve the ambiguity.[46] The historical analysis, in his mind, counseled that “the meaning and scope of a ‘direct benefit’ can be properly understood only when considered alongside the framers’ targeted and purposeful removal of the prohibition against an ‘indirect benefit’ from our state constitution.”[47] “[A]ll of the evidence demonstrates that the framers of article XI, section 4 understood the removal of the ban on indirect aid would allow the State to provide [aid] that would indirectly benefit public schools. Indeed, the indisputable purpose . . . was to allow indirect aid to private schools.”[48]

Next, Chief Justice Kittredge argued that the majority misused precedent. He distinguished the law at issue in Adams v. McMaster[49] from the ESTF Act because, in Adams, the funds went directly from the state treasury to the private schools.[50] But here, “the ESTF program puts students and their parents in the driver’s seat, for they alone choose where to spend the allotted funds.”[51] He also argued the majority misused Hartness v. Patterson[52] because that case concerned the now-defunct constitutional ban on indirect aid—not the still-existing ban on direct aid.[53] He addressed other remaining arguments from the law’s challengers before concluding: “The approach taken by the majority opinion today, while presented as the ‘plain meaning’ rule, goes far beyond Adams and defines ‘direct benefit’ so broadly as to prohibit any expenditure of public funds on private schools, no matter how indirect or ‘diffuse.’”[54]

Eidson v. South Carolina Department of Education is a setback for the expanding school choice and voucher movement.[55] But the majority contended its decision was not “policy driven” but instead rooted in its “duty to serve the Constitution, the supreme policy of our land.”[56] It recognized that the ESTF program may be “arguably salutary.”[57] Nevertheless, “[i]f the spending of public funds for the direct benefit of private schools is an idea the people wish to embody in our Constitution, . . . the Constitution provides a ready method to amend its terms.”[58]

 

[1] S.C. Code Ann. § 59-8-120(A) (2023).

[2] Don Byrd, South Carolina Supreme Court Strikes Down School Voucher Program, Baptist Joint Comm’n for Religious Liberty (Sept. 19, 2024), https://bjconline.org/south-carolina-supreme-court-strikes-down-school-voucher-program-091924/.

[3] S.C. Code Ann. § 59-8-110(7) (2023).

[4] Eidson v. S.C. Dep’t of Educ., 906 S.E.2d 345, 348 (S.C. 2024); S.C. Const. art. XI, § 4.

[5] Eidson, 906 S.E.2d at 348–50.

[6] Id. at 348.

[7] Id. at 348–49.

[8] S.C. Code Ann. § 59-8-110(13) (2023).

[9] Eidson, 906 S.E.2d at 349.

[10] Id. at 350.

[11] Id. (“Under our system of government, the legislative power of the General Assembly is limited only by the state and federal constitutions.”).

[12] Id. (noting court guidance is needed particularly when the expenditure of public funds is in question).

[13] S.C. Const. art. XI, § 4.

[14] Eidson, 906 S.E.2d at 351–56.

[15] Id. at 351.

[16] Id.

[17] Id. (“When examining the actual mechanics of the ESTF, it most resembles a government budget allocation tool . . . .”).

[18] Id. at 352 (“[T]he State—the owner of legal title of the funds—only relinquishes its ownership and control upon payment to an education service provider.”).

[19] Id. (“Therefore, even under a true trust structure, the ESTF funds remain public funds until they are disbursed.”).

[20] Id. at 353.

[21] Id. (quoting S.C. Const. art. XI, § 4).

[22] Id.

[23] Id.

[24] Id.

[25] Id.

[26] Id. at 353–54 (quoting Direct, Webster’s Ninth New Collegiate Dictionary (1983)).

[27] 851 S.E.2d 703, 711 (S.C. 2020).

[28] Eidson, 906 S.E.2d at 354.

[29] Id. (“Like the tide, the public funds released by the Act for tuition benefit all education service providers, public and private.”).

[30] Id.

[31] 179 S.E.2d 907 (S.C. 1971).

[32] Eidson, 906 S.E.2d at 354 (citing Hartness v. Patterson, 179 S.E.2d 907, 909 (S.C. 1971)).

[33] Id. at 355; see also id. (“A parent who chooses to use a scholarship to pay their child’s private school tuition is undoubtedly using public funds to provide a direct benefit to the private school . . . .”).

[34] Id. at 355–56.

[35] Id. at 357.

[36] Id.

[37] Id. at 358.

[38] Id. (“The political establishment of the 1950s had seen the handwriting on the wall . . . [and] abolish[ed] its constitutional and statutory obligations to educate its citizens.”).

[39] Id.

[40] Id. at 358–60.

[41] Id. at 360 (“By the early 1970s, integration of South Carolina’s public schools had, for the most part, finally become a reality.”).

[42] Id. at 363–71 (Kittredge, C.J., dissenting).

[43] Id. at 365 (“Accordingly, Petitioners’ facial challenge necessarily—and easily—fails to pass muster . . . .”).

[44] Id. at 370 (“I dissent from the majority opinion’s key holding that the ESTF Act creates a direct benefit to private schools.”).

[45] Id. at 365.

[46] Id. at 366.

[47] Id. at 367.

[48] Id.

[49] Adams, 851 S.E.2d at 703.

[50] Eidson, 906 S.E.2d at 368 (Kittredge, C.J., dissenting).

[51] Id.

[52] Hartness, 179 S.E.2d at 907.

[53] Eidson, 906 S.E.2d at 367 (Kittredge, C.J., dissenting) (“Hartness manifestly involved an indirect benefit, and I respectfully reject the majority opinion’s effort to recast Hartness as a direct-benefit case.”).

[54] Id. at 371.

[55] See Anna Merod, South Carolina Supreme Court Deals Blow to Private School Scholarships, K–12 Dive (Sept. 13, 2024), https://www.k12dive.com/news/south-carolina-ruling-vouchers-esa-program/726954/ (“The decision to halt the state program from providing private school tuition assistance comes as participation in similar programs like education savings accounts or tax credit ESAs grow in popularity nationwide.”).

[56] Eidson, 906 S.E.2d at 362.

[57] Id.

[58] Id. at 356.

Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at [email protected].