Table 2 shows that there are constitutional provisions prohibiting the State and/or its political subdivisions from providing credit to or assuming the liabilities of private individuals or associations in 34 States.

In 26 of these States the limitation extends to both the State and localities. These States are: Arizona, Arkansas, California, Delaware, Georgia, Idaho, Illinois, Indiana, Maryland, Michigan, Missouri, Nevada, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington, and Wyoming. Five States-Iowa, Massachusetts, Minnesota, Nebraska, and West Virginia-place the limitation only on the State. The remaining three States-Kentucky, New Hampshire, and Oklahoma-prohibit only political subdivisions from lending credit to or assuming the liabilities of private individuals or associations.

An unusual contingency is found in the Tennessee constitution which allows that "... the credit of no County, City, or Town shall be given or loaned to or in aid of any person, company, association or corporation, except upon an election to be first held by the qualified voters of such county, city, or town. . . ." Some State constitutions provide for loans or credit to private institutions for services rendered in the repression of insurrection or in defense of the State in time of war.

Prohibitions against the State and/or its political subdivisions becoming stockholders or joint owners in private endeavors are contained in 25 State constitutions. In 15 cases the provision applies to both the State and localities. Those States are: Arizona, California, Delaware, Georgia, Idaho, Indiana, Nevada, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, and Wyoming. In nine States the limitation is placed only on political subdivisions: Arkansas, Kentucky, Missouri, New Hampshire, New Jersey, New York, Oklahoma, Texas, and Washington. The only State which restricts solely the State government from becoming a joint owner or stockholder in a private endeavor is West Virginia.

In a number of State constitutions there are certain exceptions to the broad provision excluding religious societies, sectarian and/or nonpublic schools, and other private individuals or associations from receiving any form of public aid. The Nevada constitution permits the State legislature to provide aid for corporations formed for educational and charitable purposes. Under its constitution, New Hampshire may provide aid for ventures with no motive of profit; the New Mexico constitution allows aid for the care and maintenance of the sick and indigent; and the constitution of New York permits public aid for the education and support of exceptional children and for health and welfare services for all children. Another interesting exception can be found in the constitution of South Dakota, where State aid may be given to associations or corporations with the purpose of "developing the resources and improving the economic facilities of South Dakota."

Tax Exemptions for Nonpublic Schools

It is the general policy of both the Federal and State governments to grant tax-exempt status to educational, religious, charitable, and eleemosynary groups or institutions. However, the legal validity of such exemptions for property owned by religious organizations was only recently tested in the highest court of the land.

In 1970, the U.S. Supreme Court considered a case involving the constitutionality of tax exemptions for church-owned property. The case was Walz v. The Tax Commission [397 U.S. 664, 674 (1970)] and the Court, although conceding that tax exemptions are clearly a form of indirect support for religious organizations, upheld their constitutional validity. The decision was based on the premise that taxation of church property would result in State involvement in the affairs of religious institutions, which would violate the First Amendment. This factor of "excessive entanglement" by the State in the operations of religious institutions set a precedent which has been cited in several Supreme Court decisions during the early 1970's.

Prior to the Walz decision by the Supreme Court, the States dealt with this matter without any Federal guidelines. The following are examples of State legal thinking on the subject of tax exemptions for church-owned real estate.

In the case of Lundberg v. County of Alameda, et al. [298 P. 2d 1 (Calif. 1956)], the tax exemption of property belonging to a church-related nonprofit school was sustained. The court in California held that:

The exemption was enacted to promote the general welfare thus encouraging the education of the young and not to favor religion, since it is not limited to schools maintained by religious groups but applies also to those operated by other charitable organizations. Under the circumstances, any benefit received by religious denominations is merely incidental to the achievement of a public purpose.

In Murry v. Comptroller of the Treasury, State of Maryland, et al. [216 A. 2d 897 (Md. 1966)], the tax exemption was held not to violate the First Amendment on the grounds that religious organizations perform "secular general welfare functions" as well as sectarian endeavors even though they "benefit from the exemption."

Over two-thirds of all the States subscribe to this form of encouragement for religious, charitable, or educational endeavors by providing for the tax exemptions of property used for such purposes.

There are nine States which have a constitutional provision authorizing that private property used for educational or charitable purposes be exempted from taxation and nine Sta.es which make the exemption contingent on nonprofit use of such property (table 3). In addition to property exemptions, the constitution of

1 Text of sections of State constitutional provisions cited are presented in the State-by-State compilation, usually under the heading of "Public Aid for Nonpublic Schools."

2(S) indicates a State restriction; (L) indicates a political subdivision restriction. A three-fourths majority of both houses of the State legislature is required to make appropriations or loan credit to any private endeavor.

4

Public aid may be authorized for private purposes under certain conditions by a two-thirds vote of both houses of the State legislature.

5 The Louisiana legislature is authorized to appropriate funds for the provision of free textbooks and other instructional materials to all school children of the State.

7

The State may make loans to Nebraska residents for educational purposes at any public or private institution within the State.

State aid may be provided for the care of the needy and for the support and education of handicapped persons.

8

Public assistance may be provided for military pensions, aid to dependent children, handicapped persons, scholarships or loans for higher education, and teacher training schools.

The credit of a county, city, or town may be given if ratified by an election hald by qualified voters in such county, city, or town.

Kentucky exempts the income of institutions devoted solely to the cause of education. The constitutions of New Jersey and New York contain a clause forbidding the altering or repeal of exemptions for charitable and educational institutions not operated for profit. The constitution of Alabama of Alabama contains certain clarifying provisions:

The legislature shall not tax the property, real or personal, of... lots in incorporated cities and towns, or within one mile of any city or town to the extent of one acre, nor lots one mile or more distant from such cities or towns to the extent of five acres, with the building thereon, when same are used exclusively for religious worship, or for purposes purely charitable.

In the additional 17 States having constitutional provisions which grant tax exemptions, the legislature is permitted rather than mandated to extend these exemptions to educational or charitable institutions. Of these there are nine States in which the legislature may not authorize exemptions if the property is used for the purpose of profit.

Clarifying provisions are found in the constitutions of three States. In Georgia, educational institutions must be open to the general public. Its constitution exempts from taxation all funds or property held or used as endowments by educational institutions provided that "the same is not invested in real estate." The Ohio constitution requires that the general laws which exempt any property from taxation shall be subject to alteration or repeal, and that the value of all such property shall, "from time to time, be ascertained and published as may be directed by law." The constitution of Texas permits exemptions for endowment funds of nonprofit educational institutions.

Miscellaneous Constitutional Provisions

In this section the State constitutional provisions for the formation and regulation of private corporations, including those formed for educational purposes, are presented to illustrate this regulatory power assigned to the State legislature. These provisions usually require that: corporations are to be created by general laws and not by special acts; the right to amend or repeal such laws at any time is maintained by the State; and the general assembly may limit, restrain, or revoke the charter of any corporation operating within the borders of the State.

The constitutions of six States contain a provision for compulsory school attendance by children within specified age limits (table 4). Some States have general provisions authorizing the legislature to "encourage the diffusion of knowledge and learning," while certain other States have provisions authorizing their legislatures to provide for the establishment of public schools.

In Nebraska a constitutional provision requires that instruction in all schools, including private, denominational, and parochial, must be conducted in the English language. A provision in the North Dakota constitution directs the legislative assembly to take the necessary steps to prevent illiteracy and secure a reasonable degree of uniformity in the schools' course of study. A constitutional provision in Wisconsin permits the legislature to authorize the release of students during regular school hours for the purpose of religious instruction.

An unusual provision found in the New Jersey constitution allows educational institutions to conduct certain "games of chance" when the "entire net proceeds" of such games are devoted to educational

uses.