CALIFORNIA STATEWIDE
COMMUNITIES DEVELOPMENT
AUTHORITY v.ALL PERSONS INTERESTED IN THE
MATTER OF THE VALIDITY OF A
PURCHASE AGREEMENT
Filed 3/5/07
IN THE SUPREME COURT OF CALIFORNIA
CALIFORNIA STATEWIDE )
COMMUNITIES DEVELOPMENT )
AUTHORITY, )
)
) S124195
v. )
) Ct.App. 3 C042944, C042947, C042948
ALL PERSONS INTERESTED IN THE )
MATTER OF THE VALIDITY OF A ) Sacramento County
PURCHASE AGREEMENT, ) Super. Ct. Nos. 02AS03351,
__________________________________ )
Recognizing that an educated citizenry and workforce are vital to the preservation of the rights and liberties of the people of this state, California in 1879 included in its new Constitution a provision directing the state Legislature to encourage by all suitable means the promotion of intellectual, scientific, moral, and agricultural improvement. (Cal. Const., art. IX, 1.) Since 1879, our state Constitution has also included a provision prohibiting state and local governments from granting anything in aid of any . . . sectarian purpose, or help[ing] to support or sustain any school, college, university, hospital, or other institution controlled by any . . . sectarian denomination whatever . . . . (Cal. Const., art. XVI, 5; see id., former art. XIII, 24, repealed Gen. Elec. (Nov. 5, 1974).)
Against that backdrop, this court in California Educational Facilities Authority v. Priest (1974) 12 Cal.3d 593 (Priest), upheld a state bond program funding the construction of educational facilities at religiously affiliated colleges, which were expressly prohibited from using the bond proceeds (paid for by private purchasers of the bonds) for specified religious purposes. We concluded that neither the state nor the federal Constitution prohibited this form of indirect assistance to religiously affiliated colleges, a rule that for more than three decades has allowed California public entities to issue revenue bonds to raise private funds for campus improvements at religiously affiliated colleges. We declined in Priest, however, to decide whether that rule would also apply if a college were pervasively sectarian, a term the United States Supreme Court had used in Hunt v. McNair (1973) 413 U.S. 734 (Hunt) to describe a religiously affiliated school that devotes a substantial portion of its functions to its religious mission. (Priest, supra,at p. 602, fn. 8.) Our decision in Priest is pivotal here.
This case involves bond financing agreements between a public entity and three religiously affiliated schools that, for purposes of this litigation, the parties have assumed to be pervasively sectarian. These schools are thus likely to include a religious perspective in their teachings. Each agreement, as in Priest, supra, 12 Cal.3d 593, expressly prohibits use of the bond proceeds for specified religious purposes. And, as in Priest, funds for the projects will not come from any government entity but from private-sector purchasers of the bonds, and no public entity will have any obligation on the bonds in the event of default by the schools.
The trial court invalidated the agreements as violating the state Constitutions article XVI, section 5. The Court of Appeal, in a two-to-one decision, upheld the trial court; the dissent would have validated the agreements.
As explained below, in resolving the state constitutional issue we conclude that the pertinent inquiry should center on the substance of the education provided by these three schools, not on their religious character. Therefore, whether the schools are pervasively sectarian (as the parties have assumed) is not a controlling factor in determining the validity of the bond funding program under our state Constitution. Rather, the programs validity turns on two questions: (1) Does each of the recipient schools offer a broad curriculum in secular subjects? (2) Do the schools secular classes consist of information and coursework that is neutral with respect to religion? This test ensures that the states interest in promoting the intellectual improvement of its residents is advanced through the teaching of secular information and coursework, and that the expression of a religious viewpoint in otherwise secular classes will provide a benefit to religion that is merely incidental to the bond programs primary purpose of promoting secular education.
Finally, we conclude that a public bond program satisfying our state Constitution would not violate the establishment clause of the First Amendment to the federal Constitution.
I
A. The Nature of This Action
Government Code section 6502 provides that two or more public agencies by agreement may jointly exercise any power common to the contracting parties, thus allowing for the creation of so-called joint powers authorities.[1] A joint powers authority can issue tax exempt revenue bonds to finance construction projects that provide a public benefit and are located within the geographical boundaries of its member public agencies. ( 6588 et seq.)
As relevant here, some 350 California cities, counties, and special districts have entered into agreements to create a joint powers authority, known as the California Statewide Communities Development Authority (the Authority), plaintiff in this case. By issuing tax exempt revenue bonds to finance industrial projects, residential units, as well as health care and educational facilities, the Authority promotes economic development for the benefit of its members. The Authority does not fund these projects or otherwise provide any financial subsidy in connection with the issuance of the bonds. It is involved in the financing transaction solely to provide a tax exemption to the private investors who purchase the bonds and thereby fund the private development. Because the government merely provides access to favorable tax treatment and does not itself finance the projects, this form of financing is commonly referred to as pass through or conduit financing; the governments issuance of the bonds provides a conduit for private financing to pass through to the recipient of the bond proceeds. (See Note, Revenue Bonds and Religious Education: The Constitutionality of Conduit Financing Involving Pervasively Sectarian Institutions (2002) 100 Mich. L.Rev. 1108, 1111 (Revenue Bonds and Religious Education).) No public monies are expended in this type of arrangement, as the recipient of the bond proceeds bears responsibility for payments of principal and interest to the private bond purchaser, which has no recourse against the government. (Id. at pp. 1146, 1149-1150; see 91535.) In addition, the recipient also reimburses the public entity for the costs of issuing the bonds. (Revenue Bonds and Religious Education, supra, at p. 1150.)
Under the statutory scheme, the Authority may issue tax exempt bonds whenever there are significant public benefits for taking that action. ( 6586.)[2] In the case of educational institutions, the Authority requires that the beneficiary school be exempt from taxation under section 501(c)(3) of the Internal Revenue Code (26 U.S.C. 501(c)(3)).[3] The tax exempt status of the bonds, however, does not flow from the tax exempt status of the schools. Rather, the income that bondholders derive from bonds that the Authority has issued is exempt from taxation under Government Code section 6575 and section 103 of the Internal Revenue Code (26 U.S.C. 103(a)), which exempt from taxation the income earned on state and local bonds. Thus, the program here is simply a mechanism by which the government extends favorable tax treatment to private individuals to encourage private financial support of development that will provide a public benefit to the community. The program encourages private support of certain activities and programs by way of a tax policy, just as income deductions provided in connection with private donations to tax exempt organizations encourage private support of certain activities and organizations.
In May and July 2002, the Authority adopted resolutions approving agreements to issue revenue bonds to fund campus improvements at three private schools (Oaks Christian School, California Baptist University, and Azusa Pacific University), all operated by tax exempt religious corporations. As to each school, the Authority found that the planned projects would produce one or more of the significant public benefits set out in section 6586. Thereafter, the Authority filed these validation actions, seeking superior court approval of the agreements. For purposes of these lawsuits, and apparently to create test cases, the Authority assumed, without conceding, that each of the three schools was pervasively sectarian, as the United States Supreme Court used that term in Hunt, supra, 413 U.S. at page 743, meaning that a substantial portion of [each schools] functions are subsumed in its religious mission.
Each of the three lawsuits is a validation action, a form of proceeding in rem brought against all persons interested in a specified matter. (Code Civ. Proc., 860, 861.1.) In a validation action, the party seeking court approval must publish notice of the lawsuit in a newspaper of general circulation and set a date for anyone interested to appear and contest the legality or validity of the matter sought to be determined. (Id., 862.) The Authority did so. When no interested party responded, the Authority moved for default judgments in the three actions.
The trial court, on its own initiative, continued the matters to solicit the views of the California Department of Fair Employment and Housing as well as the California Attorney General. The former declined to participate. The latter responded by letter brief, expressing no view on the Authoritys entitlement to the default judgments. Instead, the Attorney General merely pointed out possible state and federal constitutional issues raised by the proposed bond funding agreements. The trial court found the agreements invalid under article XVI, section 5 of the California Constitution and under the establishment clause of the First Amendment to the federal Constitution. But in its order denying the Authoritys request for validation of the agreements with the three schools, the trial court relied exclusively on the state constitutional ground.
The Authority appealed. The Court of Appeal consolidated the three cases, and, in a two-to-one decision, affirmed the trial court. Relying solely on the California Constitution, as the trial court had done in its order denying validation of the bond funding agreements, the Court of Appeal held that issuing revenue bonds to raise capital in the private sector for improvements at pervasively sectarian schools would violate article XVI, section 5. But the dissenting justice concluded to the contrary. And, unlike the majority, the dissent went on to address the federal constitutional issue, concluding the bond funding agreements did not violate the establishment clause of the federal Constitutions First Amendment.
The Authority sought review in this court. It contended that the Court of Appeals decision casts doubt on the eligibility of all sectarian schools to obtain government services and threatens to impede educational opportunities for hundreds of thousands of students in California. We granted review, and thereafter we granted the Attorney Generals motion to intervene as respondent in the case.
B. The Financing Agreements
Each of the three financing agreements provides for the appointment of an independent trustee to receive and handle the bond proceeds.[4] Each school authorizes the trustee to disburse funds to pay for the facilities construction, and the school then pays the principal plus interest on the bonds to the trustee, who in turn pays the private purchasers of the government bonds.
Repaying the private-sector bond purchasers for the bond proceeds falls to the recipient schools and will not constitute a charge against the general credit of [the Authority] or be secured by any public property. The bond purchasers have no recourse for nonpayment against the State of California or any public agency. All costs incurred in the course of the bond issuance are reimbursed by the schools.
Each agreement includes a covenant by the recipient school that no facility, place or building financed or refinanced with a portion of the proceeds of the Bonds will be used for . . . sectarian instruction or as a place for religious worship or in connection with any part of the programs of any school or department of divinity for the useful life of the Project. And each agreement grants the trustee a right of access to ensure each schools compliance with the covenant. The costs of these trustee inspections are to be paid from the trust funds (that is, from the bond proceeds).
In support of the validation actions it had filed in the superior court, the Authority submitted declarations describing each of the three schools, all located in Southern California. The Authoritys materials comprise the only evidence presented to the trial court. A summary follows.
Oaks Christian School, in the City of Westlake Village, provides a private, comprehensive, college preparatory, Christian education for students in the sixth through the twelfth grades. The school intends to use the bond proceeds to build administrative offices, classrooms, and athletic facilities. The school seeks to foster student growth in knowledge and wisdom through Gods grace, and to encourage students to dedicate [themselves] to the pursuit of academic excellence, athletic distinction and Christian values. It admits students without regard to religion, and in the 2001-2002 school year about 35 percent of those enrolled were not Christian. Students and parents must agree, however, to support the schools mission, statement of faith, and biblical goals. Faculty members must adhere to the Christian faith and must sign a statement of faith.
California Baptist University, located in Riverside, is an accredited Christian liberal arts institution that grants undergraduate and graduate degrees in a wide range of disciplines. The bond proceeds will fund the acquisition, construction, and improvement of classrooms, administrative offices, a student center, residence halls, and athletic facilities. The universitys undergraduate students are expected to accept and to live by biblically based Christian principles, and to attend services at a church of their choosing. In the 2000-2001 academic year, the school awarded some 450 student degrees, of which only about 5 percent were to students who had majored in Christian or ministry studies. The university requires its faculty members to adhere to a Christian faith, and it reserves 51 percent of faculty positions for members of the Baptist denomination. Faculty members must agree with the schools theological and philosophical views but need not sign any statement of faith.
Azusa Pacific University, whose main campus is in Azusa, is an accredited Christian liberal arts school offering both undergraduate and graduate degrees. It intends to use the bond proceeds to improve and build campus facilities, including but not limited to a residence facility, a dining facility, [and] a mail center. The declaration of a campus administrator at Azusa Pacific University describes the school as an evangelical Christian community of disciples and scholars who seek to advance the work of God in the world through academic excellence in liberal arts and professional programs of higher education that encourage students to develop a Christian perspective of truth and life. Student applicants are expected to exhibit moral character in harmony with the Universitys purpose. Applicants are chosen for their academic ability as well as their church involvement and participation in school and community activities. Undergraduates must complete 120 hours of student ministry assignments. In the 2001-2002 academic year, less than 7 percent (39 of more than 600) of the undergraduate degrees awarded by Azusa Pacific University went to those who had completed majors in religious studies. All faculty members are Christian.
II
At issue is whether the Authoritys conduit financing agreements with Oaks Christian School, California Baptist University, and Azusa Pacific University violate our state Constitutions article XVI, section 5. That provision states: Neither the Legislature, nor any county, city and county, township, school district, or other municipal corporation, shall ever make an appropriation, or pay from any public fund whatever, or grant anything to or in aid of any religious sect, church, creed, or sectarian purpose, or help to support or sustain any school, college, university, hospital, or other institution controlled by any religious creed, church, or sectarian denomination whatever; nor shall any grant or donation of personal property or real estate ever be made by the State, or any city, city and county, town, or other municipal corporation for any religious creed, church, or sectarian purpose whatever; provided, that nothing in this section shall prevent the Legislature granting aid pursuant to Section 3 of Article XVI [allowing the use of state funds for the construction of hospitals and other charitable institutions when federal funds have been authorized for that purpose]. (Ibid., italics added.)
Under the bond funding agreements, the Authority, which is a municipal corporation, does not provide public money to the three private schools in question. Thus, there is no violation of the prohibition in the state Constitutions article XVI, section 5, against making an appropriation, or pay[ing] from any public fund for the benefit of any school, college, [or] university . . . controlled by any religious creed, church, or sectarian denomination. Nor is there a violation of that provisions prohibition against making any grant or donation of personal property or real estate . . . for any religious creed, church, or sectarian purpose. (Ibid.)
At issue is whether the Authoritys proposed indirect assistance to the three schools, through its issuance of revenue bonds, would be aid of any . . . sectarian purpose or help to support any school . . . controlled by any . . . sectarian denomination, as prohibited by section 5 of article XVI of the state Constitution. On point here is Priest, supra, 12 Cal.3d 593, a unanimous decision authored in 1974 by Justice Stanley Mosk of this court. Priest held that issuing revenue bonds to fund capital improvements at religiously affiliated colleges did not violate former section 24 of article XIII, the identically phrased predecessor of the constitutional provision involved here.
Priest concerned the California Education Facilities Authority Act (hereafter sometimes Act) (Ed. Code, former 30301 et seq.), which is not involved here. That former statutory scheme authorized public entities to issue revenue bonds to assist private colleges in building classrooms and other campus facilities, but it prohibited the use of the monies to construct any facility for sectarian instruction or as a place for religious worship or . . . in connection with any part of the program of a school or department of divinity. (Priest, supra, 12 Cal.3d at p. 596.) In Priest, the school that was the subject of the financing agreement, University of the Pacific (UOP), had no religious affiliation.[5] Nevertheless, this court addressed contentions by the state Treasurer (who was the respondent in the writ of mandate action) that the Act violated the religion clauses of both the state and federal Constitutions; we did so to avoid having a cloud . . . remain over the Act, because several other colleges with denominational ties had sought to participate in the state bond funding program. (Priest, supra, at p. 598, fn. 5.)
Of former article XIII, section 24 (the predecessor of current article XVI, section 5 of the California Constitution at issue here), Priest stated:
This section has been said to constitute the definitive statement of the principle of government impartiality in the field of religion. (37 Ops.Cal.Atty.Gen. 105, 107 (1961).) An examination of the debates of the constitutional convention which drafted the Constitution of 1879 indicates that the provision was intended to insure the separation of church and state and to guarantee that the power, authority, and financial resources of the government shall never be devoted to the advancement or support of religious or sectarian purposes. . . .
The section has never been interpreted, however, to require governmental hostility to religion, nor to prohibit a religious institution from receiving an indirect, remote, and incidental benefit from a statute which has a secular primary purpose. . . .
The Act here challenged clearly provides a benefit in that it enables sectarian institutions to borrow money through the use of a state instrumentality at a cost below that of the marketplace. Thus, the crucial question is not whether the Act provides such a benefit, but whether that benefit is incidental to a primary public purpose. The framers of the [state] Constitution recognized the importance of education in our social fabric, and imposed a constitutional duty on the Legislature to encourage by all suitable means the promotion of intellectual . . . improvement. (Art. IX, 1.) The present law is responsive to that mandate. The Legislature has expressly determined that the Act, in supporting the maintenance and improvement of facilities for higher education, is in the public interest [citations], and that determination is entitled to great deference. [Citations.] The benefits of the Act are granted to sectarian and nonsectarian colleges on an equal basis; in both cases all aid for religious projects is strictly prohibited; and in no event is a financial burden imposed upon the state. In these circumstances the Act does not have a substantial effect of supporting religious activities. Rather, its primary purpose is to advance legitimate public ends, and it therefore does not violate article XIII, section 24. (Priest, supra, 12 Cal.3d at pp. 604-606, italics added, fn. omitted.)[6]
From those statements in Priest we distill the following four-part test for determining whether the issuance of government bonds benefiting a religiously affiliated school violates the state constitutional provision in question: (1) The bond program must serve the public interest and provide no more than an incidental benefit to religion; (2) the program must be available to both secular and sectarian institutions on an equal basis; (3) the program must prohibit use of bond proceeds for religious projects; and (4) the program must not impose any financial burden on the government. (Priest, supra, 12 Cal.3d at pp. 605-606.) Because the last three requirements can be easily disposed of in this case, we address them first.
It is undisputed that the Authority has issued tax exempt bonds to encourage private investment in a wide variety of private institutions, secular as well as sectarian. This satisfies Priests second requirementthat the state bond program not discriminate between secular and sectarian institutions, treating both categories alike. (Priest, supra, 12 Cal.3d at p. 606.)
The bond agreements expressly prohibit each of the three schools from using the bond proceeds to construct or improve any facility for religious projects, that is sectarian instruction or as a place for religious worship or in connection with any part of the programs of any school or department of divinity for the useful life of the Project. (See p. 8, ante.) This satisfies Priests third requirement. (Priest, supra, 12 Cal.3d at p. 606.)
Because of the utilization of conduit or pass through financing, the capital for the construction projects at the three private schools is funded solely by private-sector purchasers of the bonds. The schools repay the advanced capital plus interest to an independent trustee, who then pays the private bondholders, who have no recourse for nonpayment against the Authority. All of the Authoritys costs of issuing the bonds are reimbursed by the schools. Thus, the bond funding places no financial burden on the Authority or any other public entity. This satisfies Priests fourth requirement, that the program not impose a financial burden on the government. (Priest, supra, 12 Cal.3d at p. 606.)[7]
Having concluded that the second, third, and fourth requirements of Priest are satisfied, we still need to determine whether the bond program meets Priests first requirement, that the program provide a public benefit and no more than incidentally benefit religion. Priest held that the states issuance of revenue bonds for purchase by private investors to fund construction or improvements of facilities at religiously affiliated colleges benefited the public at large by encourag[ing] by all suitable means the promotion of intellectual . . . improvement in California, thus furthering the state constitutional mandate of article IX, section 1 (Priest, supra, 12 Cal.3d at p. 605), and that it [did] not have a substantial effect of supporting religious activities (id. at p. 606).
As mentioned earlier at pages 2 and 11, our decision in Priest concerned state bond financing to construct or improve facilities at schools that were religiously affiliatedschools connected to a religious organizationbut not pervasively sectarianschools in which religion is so pervasive that a substantial portion of its functions are subsumed in the religious mission (Priest, supra, 12 Cal.3d at p. 601, quoting Hunt, supra, 413 U.S. at p. 743). Because the schools in Priest were not pervasively sectarian, Priest did not question that the religiously affiliated schools were providing education in secular subjects, thus furthering the states interest in promoting the intellectual improvement of its residents though secular education, and no more than incidentally benefiting religion.
Here, the proposed state bond program would benefit three schools that the Authority throughout this litigation has described as pervasively sectarian. Would that bond program satisfy Priests first requirement, that the program serve the public interest and no more than incidentally benefit religion? To answer that question, we need to examine the bond programs purpose and effects. The program must have a primary purpose . . . to advance legitimate public ends (Priest, supra,12 Cal.3d at p. 606), and its effects may not include a benefit to religious activity that is other than indirect, remote, [or] incidental to the primary secular purpose (id. at p. 605). When a court attempts to determine how, if at all, a bond program would have the effect of supporting religious activity at schools, the characterization of the schools as pervasively sectarian does not provide a reliable or satisfactory answer. A more useful and effective approach, we conclude, is to examine the substance of the education that each of these religious schools offers its students, as explained below.[8]
The goal of the Authoritys proposed issuance of revenue bonds here is to enhance the ability of private schools to improve their facilities through funding provided exclusively by private investors. By providing a tax exemption on interest earned on the bonds, the government makes the bonds more attractive to private investors and thereby enhances the ability of private institutions to expand their educational facilities. We pointed out in Priest: The framers of [our state] Constitution recognized the importance of education in our social fabric, and imposed a constitutional duty on the Legislature to encourage by all suitable means the promotion of intellectual . . . improvement. (Art. IX, 1.) (Priest, supra, 12 Cal.3d at p. 605.) In the circumstances of that casea program available to sectarian and nonsectarian schools on an equal basis, in which all aid for religious projects was prohibited, and no financial burden was imposed upon the statewe concluded that the provision of tax exempt bond financing did not violate article XVI, section 5, because its primary purpose [was] to advance legitimate public ends and it d[id] not have a substantial effect of supporting religious activities. (Priest, supra, at p. 606.) Can the same be said of the proposed bond funding in this case with respect to a school that includes a religious perspective in its curriculum? The answer is yes, if certain requirements are met.
First, the school that is the subject of the revenue bond financing arrangement must provide a broad curriculum in secular subjects. When it does, the bond program assists the religious school in providing educational opportunities to California residents, enhancing their employment prospects and deepening their understanding of critical political, social, scientific, and cultural issues. This broad curriculum requirement excludes from the bond funding program religious schools that offer classes in only a few secular subjects, because to provide bond funding for such schools would not sufficiently advance the programs goal of expanding secular educational opportunities for Californians.
We are mindful of the concern that a school with a religious perspective may use the facilities built or improved with the revenue bond proceeds to substantially further its religious mission. Such use would provide more than an incidental benefit to religion, in violation of the principles we enunciated in Priest, supra, 12 Cal.3d 593. To ensure that the classes in secular subjects promote the states interest in secular education and no more than incidentally benefit religion, the religious school must meet a second requirement: the information and coursework used to teach secular subjects must be neutral with respect to religion. Of course, religion may be an object of study in classes such as history, social studies, and literature, just as in public schools, in a manner that neither promotes nor opposes any particular religion or religion in general. But a class that includes as part of the instruction information or coursework that promotes or opposes a particular religion or religious beliefs may not be taught in facilities financed through tax exempt bond financing.[9] On remand, in determining religious neutrality, the straightforward assessment for the trial court to make is whether the academic content of a religious schools course in a secular subject such as math, chemistry, or Shakespeares writings is typical of that provided in nonreligious schools. When a school establishes, through its course descriptions or otherwise, that the academic content of its secular classes is typical of comparable courses at public or other nonreligious schools, it is not necessary to scrutinize the schools day-to-day classroom communications. The circumstance that a teacher may, in addition to teaching a courses religiously neutral content, express an idea or viewpoint that may be characterized as religious does not result in a benefit to religion that is more than incidental to the states primary purpose of enhancing secular education opportunities for California residents.
As we stated in Priest in addressing former section 24 of article XIII (the identically phrased predecessor of current section 5 of article XVI of the California Constitution), this section has never been interpreted . . . to require governmental hostility to religion, nor to prohibit a religious institution from receiving an indirect, remote, and incidental benefit from a statute which has a secular primary purpose. (Priest, supra,12 Cal.3d at p. 605.) Priest also observed: [M]any expenditures of public money give indirect and incidental benefit to denominational schools and institutions of higher learning. Sidewalks, streets, roads, highways, sewers are furnished for the use of all citizens regardless of religious belief. . . . Police and fire departments give the same protection to denominational institutions that they give to privately owned property and their expenses are paid from public funds. (Ibid.) Here, we have no expenditure of public money, and application of the standards we have set out will ensure that any benefit to religion from the bond funding program is merely incidental.
TO BE CONTINUED AS PART II..
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[1] Further statutory references are to the Government Code, unless otherwise stated.
[2] Section 6586 describes a significant public benefit as any of the following: (a) Demonstrable savings in effective interest rate, bond preparation, bond underwriting, or bond issuance costs. [] (b) Significant reductions in effective user charges levied by a local agency. [] (c) Employment benefits from undertaking the project in a timely fashion. [] (d) More efficient delivery of local agency services to residential and commercial development.
[3] The Authority has imposed other requirements upon educational institutions as well: The bond revenues must be used to finance educational facilities; an objective of the project must be to promote intellectual pursuits that lead toward recognized applications in the community; and the financing must provide a public benefit to the community in which the project is located.
[4] At oral argument, the Authority indicated that this function is performed by the trust department of a bank.
[5] In addressing the original writ of mandate sought by the California Educational Facilities Authority and UOP in Priest, supra, 12 Cal.3d 593, to compel the state Treasurer to sell the bonds authorized under the Act at issue there, it appears this court at first assumed that UOP, the intended beneficiary of the bond funding, was a religiously affiliated college, only to later discover that it was not. The initial assumption would not have been unreasonable in 1974 (when Priest was before this court) because since UOPs founding in 1851 (when it was known as California Wesleyan University), and for more than 100 years thereafter, it was affiliated with the Methodist Church. According to UOPs Web site, the school did not sever its church ties until the late 1960s when federal law about public funding of church-related institutions became an issue. (UOP, General Information
[6] Contrary to the dissent (dis. opn., post, at p. 17), Priests determination that former article XIII, section 24 (now article XVI, section 5) allowed the issuance of government bonds for colleges that were religiously affiliated but not pervasively sectarian did not depend on those colleges giving no admissions preference to adherents of their own faiths. In support of its conclusion that the Act upheld in that case did not violate the establishment clause of the federal Constitutions First Amendment, Priest mentioned that the Act allowed the funding only for schools that did not restrict entry on religious grounds (Priest, supra, 12 Cal.3d at p. 601.) But we discern nothing in the high courts recent establishment clause jurisprudence, which as stated on page 27, post, has changed dramatically since 1974 when this court decided Priest, that would require such a restriction on a schools participation in a public entitys bond funding program.
[7] The circumstance that no public funds are expended on this bond financing program distinguishes it from the government program we invalidated in California Teachers Assn. v. Riles (1981) 29 Cal.3d 794. According to the dissent, Riles controls this case. Not so. In Riles we held that state statutes authorizing direct public aid to parochial schools by providing textbooks at public expense violated article XVI, section 5, because they appropriate[d] [government] money to advance the educational function of the school. (Riles, supra, at p. 811.) By contrast, the issuance of government bonds is merely a mechanism by which the government extends favorable tax treatment to private individuals to encourage private financial support of development benefiting the community. Although tax exemptions to encourage charitable donations or private investment result in a loss of tax revenue, such tax policies have never been viewed as a violation of our state constitutional prohibition on granting anything in aid of any . . . sectarian purpose, or help[ing] to support or sustain any school, college, university, hospital, or other institution controlled by any . . . sectarian denomination whatever . . . . (Cal. Const., art. XVI, 5.)
[8] Here, by religious school we mean a school that not only is affiliated with a religious organization but also is likely to include a religious perspective along with its teaching of secular subjects. Based on the Authoritys evidence describing the three schools at issue here (on which the trial court based its factual findings), and the Authoritys characterization of the schools as pervasively sectarian, we infer that they come within this definition.
[9] The United States Supreme Court developed the concept of religious neutrality in analyzing challenges under the establishment clause of the First Amendment to the federal Constitution. As the high court explained in McCreary County, Ky. v. American Civil Liberties Union (2005) 545 U.S. 844, The touchstone of our analysis is the principle that the First Amendment mandates governmental neutrality between religion and religion, and between religion and nonreligion. [Citations.] When the government acts with the ostensible and predominant purpose of advancing religion, it violates that central Establishment Clause value of official religious neutrality, there being no neutrality when the governments ostensible object is to take sides. [Citation.] (Id. at p. 860 [125 S.Ct. 2722, 2733], italics added.) The high court observed in Epperson v. Arkansas (1968) 393 U.S. 97, that study of religions and the Bible from a literary and historic viewpoint, presented objectively as part of a secular program of education [in a public school], need not collide with the First Amendments prohibition . . . . (Id. at p. 106.)
Of course, the three schools involved in this case are private and need not exclude religion from their programs. Moreover, tax exempt bond financing is in the nature of a tax policy rather than an aid program, and the government is not involved in the provision of the schools education programs. Therefore, the program at issue is quite different from the government actions and policies evaluated in McCreary and Epperson. Nonetheless, the concept of religious neutrality is useful here to the assessment of the academic content of the schools secular classes. To ensure that the states legitimate purposepromoting the intellectual development of its residents in secular areas of studyis advanced through the provision of tax exempt bond financing, these schools must demonstrate that their secular curriculum provides an education that is secular in substancei.e., neutral with respect to religion. The schools inclusion of a religious viewpoint in otherwise secular classes would not impair or diminish the secular education that the students receive.
