Justice O'Connor proceeded to reject a rule of unconstitutionality where the character of the aid is merely capable of diversion to religious indoctrination, hence overruling Meek and Wolman.50 As the Court did in Agostini, Justice O'Connor rejected employing presumptions of unconstitutionality and indicated that henceforth she will require proof that the government aid was actually diverted to indoctrination.51 Because the "pervasively sectarian" test is such a presumption, indeed, an irrebutable presumption (i.e., any direct aid to a highly religious organization is deemed to advance sectarian objectives), 52 Justice O'Connor is best understood to have rendered the "pervasively sectarian" test no longer relevant when assessing neutral programs of aid.53

Justice O'Connor requires that no government funds be diverted to "religious indoctrination," thus religious organizations receiving direct funding will have to separate their social service program from their sectarian practices.54 If the federal assistance is utilized for educational functions without attendant sectarian activities, then there is no problem. If the aid flows into the entirety of an educational program and some "religious indoctrination [is] taking place therein," then the indoctrination "would be directly attributable to the government." "55 Hence, if any part

of an FBO's activities involve "religious indoctrination," such activities must be set apart from the government-funded program and, hence, are privately funded.

A welfare-to-work program operated by a church in Philadelphia illustrates how this can be done successfully. Teachers in the program conduct readiness-to-work classes in the church basement weekdays pursuant to a government grant. During a free-time period the pastor of the church holds a voluntary Bible study in her office up on the ground floor. The sectarian instruction is privately funded and separated in both time and location from the welfare to work classes.

In the final part of her opinion, Justice O'Connor explained why safeguards in the federal educational program at issue in Mitchell reassured her that the program, as applied, was not violative of the Establishment Clause. A neutral program of aid need not be failsafe, nor does every program require pervasive monitoring.56 The statute limited aid to "secular, neutral, and nonideological" assistance and expressly prohibited use of the aid for "religious worship or instruction."57 State educational

headed in Virginia by James Madison of a proposed tax. As more precisely explained by Justice Thomas, the legislation defeated in Virginia was a tax ear-marked for the support of clergy. Rosenberger v. Rector and Visitors, 515 U.S. 819, 852 (1995) (Thomas, J., concurring). Opposition to a tax ear-marked for explicitly religious purposes indeed does go to the heart of the adoption of the Establishment Clause. Charitable choice monies, however, come from general tax revenues, are awarded in a manner that is neutral as to religion, and do not fund sectarian practices.

50 120 S. Ct at 2561-68.

51 Justice O'Connor's statement sidelining future reliance on presumptions that employees of highly religious organizations cannot or will not follow legal restraints on the expenditure of government funds is as follows:

I believe that our definitive rejection of [the] presumption [in Agostini] also stood foror at least strongly pointed to the broader proposition that such presumptions of religious indoctrination are normally inappropriate when evaluating neutral school-aid programs under the Establishment Clause.

Id. at 2567.

52 See id. at 2561 (noting that Agostini rejected a presumption drawn from Meek and later Aguilar); id. at 2563-64 (quoting from Meek the "pervasively sectarian" rationale and noting it created an irrebutable presumption which Justice O'Connor later rejects); id. at 2567 (requiring proof of actual diversion, thus rendering "pervasively sectarian" test irrelevant); id. at 2568 (rejecting presumption that teachers employed by religious schools cannot follow statutory requirement that aid be use only for secular purposes); and id. at 2570 (rejecting presumption of bad faith on the part of religious school officials).

53 While Justice O'Connor did not join in the plurality's denunciation of the "pervasively_sectarian" doctrine as bigoted, her opinion made plain that the doctrine has lost relevance. Thus, while not taking issue with the plurality's condemnation of the doctrine as anti-Catholic, she in fact explicitly joined in overruling the specific portions of Meek that set forth the operative core of the "pervasively sectarian" concept. 120 S. Ct. at 2563.

54 Id. at 2568.

55 Id. A lower court recently applied this principle by striking down direct monetary payments, unrestricted as to use, to reimburse schools, including religious schools, to reimburse them for the cost of Internet access. See Freedom From Religion Foundation v. Bugher, 2001 WL 476595 (7th Cir. Apr. 27, 2001). Once received, the money went into general revenues and could later be used for sectarian purposes. On the other hand, the lower trial court decision in the same case upheld a parallel program whereby the state provided a below-cost Internet link to schools, including religious schools. Hence, the aid could not be diverted to sectarian use. 55 F. Supp.2d 962 (W.D. Wis. 1999). While on appeal, the plaintiffs' challenge to this parallel program was dropped when, in the interim, Mitchell v. Helms was handed down.

56 120 S. Ct. at 2569.

57 Id.

authorities required religious schools to sign Assurances of Compliance with the above-quoted spending prohibitions being express terms in the grant agreement.58 The state conducted monitoring visits, albeit infrequently, and did a random review of government-purchased library books for their sectarian content.59 There was also monitoring of religious schools by local public school districts, including a review of project proposals submitted by the religious schools and annual program-review visits to each recipient school.60 The monitoring did catch instances of actual diversion, albeit not a substantial number, and Justice O'Connor was encouraged that when problems were detected they were timely corrected.61

Justice O'Connor said that various diversion-prevention factors such as supplement/not-supplant, aid not reaching religious coffers, and the aid being in-kind rather than monetary are not talismanic. She made a point not to elevate them to the level of constitutional requirements.62 Rather, effectiveness of these diversion-prevention factors, and other devices doing this preventative task, are to be sifted and weighed given the overall context of, and experience with, the government's program.63

Charitable choice is responsive to the Lemon/Agostini test and Justice O'Connor's opinion in Mitchell v. Helms:

1. The legislation gives rise to neutral programs of aid and expressly prohibits diversion of the aid to "sectarian worship, instruction, or proselytization.” Thus, sectarian aspects of an FBO's activities would have to be segmented off and, if continued, privately funded. An amendment recommended by the Department of Justice is set out in the note below.64 Under this proposal, direct monetary funding is allowed where an FBO, by structure and operation, will not permit diversion of government funds to religious indoctrination.65 Some FBOs, of course, will be unable or unwilling to separate their program in the required fashion. Charitable choice is not for such providers. Those FBOs who do not qualify for direct funding should be considered candidates for indirect means of aid.

2. Participation by beneficiaries is voluntary or noncompulsory. A beneficiary assigned to an FBO has a right to demand an alternative provider. Having elected to receive services at an FBO, a beneficiary has the additional right to "refuse to participate in a religious practice." See discussion in Part I, above.

3. Government-source funds are kept in accounts separate from an FBO's private-source funds, and the government may audit, at any time, those accounts that receive government funds.66 Thus, charitable choice does take

58 Id.

59 Id.

60 Id. at 2569-70.

61 Id. at 2571-72.

62Id. at 2572 ("[r]egardless of whether these factors are constitutional requirements. . .").. 63 Monetary payments are just a factor to consider, not controlling. This makes sense given Justice O'Connor's concurring opinion in Bowen v. Kendrick, wherein she joined in approving cash grants to religious organizations, even in the particularly"sensitive" area of teenage sexual behavior, as long as there is no actual "use of public funds to promote religious doctrines." Bowen v. Kendrick, 487 U.S. 589, 623 (1988) (O'Connor, J., concurring). See also supra note 49. 64 The Department of Justice recommends that H.R. 7 be clarified by the following amend

ment:

(i) LIMITATIONS ON USE OF FUNDS; VOLUNTARINESS FOR CERTAIN PURPOSES.-No funds provided through a grant or COOPERATIVE AGREEMENT contract to a religious organization to provide assistance under any program described in subsection (c)(4) shall be expended for sectarian worship, instruction, WORSHIP, or proselytization. IF THE RELIGIOUS ORGANIZATION OFFERS SUCH AN ACTIVITY, IT SHALL BE VOLUNTARY FOR THE INDIVIDUALS RECEIVING SERVICES AND OFFERED SEPARATE FROM THE

PROGRAM FUNDED UNDER THIS SUBPART. A certificate shall be SEPARATELY signed by RELIGIOUS such organizations, and filed with the government agency that disbursed the funds, CERTIFYING that gives assurance the organization IS AWARE OF AND will comply with this subsection. FAILURE TO COMPLY WITH THE TERMS OF THE CERTIFICATION MAY, IN ADDITION TO OTHER SANCTIONS AS PROVIDED BY LAW, RESULT IN THE WITHHOLDING OF THE FUNDS AND THE SUSPENSION OR TERMINATION OF THE AGREEMENT.[NOTE: Italics represent Strike-through text & CAPS represent Highlighted text]

65 Justice O'Connor nowhere defined what she meant by "religious indoctrination." However, elsewhere the Supreme Court has found that prayer, devotional Bible reading, veneration of the Ten Commandments, classes in confessional religion, and the biblical creation story taught as science are all inherently religious. 42 Wm & Mary, supra note 30, at 915 (collecting cases). 66 In the Substance Abuse and Mental Health Services Administration reauthorization the segregation of accounts is required. 42 U.S.C. § 300x-65(g)(2). This improves accountability, espeContinued

special care, because the aid is in the form of monetary grants, in two ways: separate accounts for government funds are established, hence, preventing the diversion of "cash to church coffers;" 67 and direct monetary grants are restricted to program services, hence, must not be diverted to sectarian practices.68

4. For larger grantees, the government requires regular audits by a certified public accountant. The results are to be submitted to the government, along with a plan of correction if any variances that are uncovered.69

Nothing in charitable choice prevents officials from implementing reasonable and prudent procurement regulations, such as requiring providers to sign a Certification of Compliance promising attention to essential statutory duties.70 Additionally, it is not uncommon for program policies to require of providers periodic compliance selfaudits. Any discrepancies uncovered in a self-audit must be promptly reported to the government along with a plan to timely correct any deficiencies.71 The Department of Justice believes it prudent to add these additional provisions to § 1994A of H.R.

7.

CONCLUSION

Charitable choice facially satisfies the constitutional parameters of the Lemon/ Agostini test, including Justice O'Connor's application of that test in Mitchell v. Helms. Adoption of the Department of Justice's recommendations in notes 15, 17, 64, and 71, above, will further clarify and strengthen § 1994A's provisions, as well as ease its scrutiny in the courts. Moreover, for many cooperating FBOs, those willing to properly structure their programs and be diligent with their operating practices, it appears that charitable choice can be applied in accord with the applicable statutory and constitutional parameters.

Mr. CHABOT. Professor Laycock.

STATEMENT OF DOUGLAS LAYCOCK, ASSOCIATE DEAN FOR RESEARCH AND ALICE MCKEAN YOUNG REGENTS CHAIR IN LAW, THE UNIVERSITY OF TEXAS LAW SCHOOL

Mr. LAYCOCK. I need to be clear that I am speaking for myself and not for the University of Texas. I agree with much of what Mr. Nadler said in his opening statement. I was heavily involved in the recent religious liberty legislation over the last several years. I was involved, representing the parents who objected to prayer at Texas high school football games. I think we need to do as much as we can to separate the religious choices of the American people from the power of government. I think this bill or these proposals are a step in that direction.

The trap of government money has already been set and to some extent sprung. Billions of dollars are spent, government money, on social services delivered through religious providers in government contracts and grants. And many of those, all of that money is subject to no particular statutory standards designed to protect reli

cially in helping to avoid diversion to "religious coffers," with little loss of organizational autonomy. The parallel subsection in H.R. 7 is § 1994A(h)(1).

67 See 42 U.S.C. 300x-65(g)(1).

68 See 42 U.S.C. 300x-65(i).

69 All federal programs involving financial assistance to nonprofit institutions require annual audits by a certified public accountant whenever the institution receives more than $300,000 a year in total federal awards. Executive Office of the President of the United States, Office of Management and Budget, Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, 62 Fed. Reg. 35289 to 35302 (June 30, 1997). The independent audit is not just over financial expenditures, but includes a review for program compliance.

70 See notes 15 and 64, supra, for an example of a "Certification of Compliance" requirement drafted into the charitable choice provision.

71 A self-audit subpart for insertion into H.R. 7 at § 1994A(h)(3), would read as follows: "An organization providing services under a program described in this section shall conduct annually a self audit for compliance with its duties under this section and submit a copy of the self audit to the appropriate Federal, State, or local government agency, along with a plan to timely correct variances, if any, identified in the self audit."

gious liberty, and much of it is distributed on condition that the religious provider secularize itself, to abandon or suppress much of the religious part of its mission.

Charitable choice proposals contain three principles designed to protect the religious liberty of both the providers and of the beneficiaries. I think there are some real questions about how we implement those three principles, but plainly these three principles are a step in the right direction.

First, nondiscrimination. The executive branch, when it awards a grant or contract, cannot discriminate against religious organizations in favor of the secular. I think it would be better to also say neither can it discriminate in favor of the religious and against the secular or among different religions. There is no such provision in place today, and we have evidence in prior hearings that some agencies contract regularly with religious providers. Some agencies refuse to contract with religious providers. I would not be at all surprised to learn that there are some agencies that contract with Catholic charities but not Jewish charities, or the other way around. There are simply no visible standards in place. A nondiscrimination rule on charitable choice is the first principal step in the right direction.

Two, deregulation of the religious providers. Charitable choice says when the religious provider takes the government money, it has to deliver full secular value for that money but it does not have to secularize the associated parts of its operation. It can continue to operate as a religious organization, do whatever religious functions it wants on top of or alongside the secular services the government is paying for. The standard is it has to provide full secular value.

And, three, protect beneficiaries. Beneficiaries are entitled under these proposals to an alternate provider, a secular provider if they prefer, simply by asking for it. They are entitled not to be required to participate actively in religious exercises even if they choose the religious providers. Those protections don't exist in current law either. If the Federal agency in your community has contracted with Catholic Charities and they are the only game in town, you get the service from Catholic Charities. You have don't have a current right to an alternate provider. Charitable choice will provide that right.

So three principles, deregulation, nondiscrimination, and protecting beneficiaries are all protective of religious liberty. They are plainly steps in the right direction.

Now, as I have indicated in my written testimony, and don't have a whole lot of time to elaborate here, I don't think those three protections are going to be easy to implement. I am not an expert on the delivery of social services, but I think there is a lot of work to be done by the witnesses, by the administration and by the Congress about how we actually make those three protections work. But today we are not trying to make them work. We don't have them in place. We don't have any rule of nondiscrimination. We don't have any rule of protecting beneficiaries and we certainly don't have any rule of deregulating the religious providers. I think attention to implementation is the right thing.

Let me say just a little bit about this controversy over hiring. It is an essential part of deregulating the religious providers to the extent that very few of them refuse to hire any Member not of their own church, but many of them prefer Members of their own church-grant a preference. It is a serious intrusion into religious liberty to take that away. Title 7 protects that right today. There has been much talk that, well, if you are federally funded, that Title 7 right goes away. Well, certainly nothing in Title 7 says that, and there is no general Federal spending clause statute like there is with respect to race.

With respect to race we say if you take Federal money, you can't discriminate based on race. Period, no exceptions. There is no such statute with respect to religion. We do not have a spending clause statute that says if you take government money you cannot discriminate on the basis of religion. Simply does not exist in any kind of general form.

Think about the case at Yale just a year ago when Yale was discriminating against Orthodox Jews in its dormitories. There was no claim under Federal law because they took Federal money; there were only claims under State law.

So the status quo is religious organizations get to prefer their own Members. That is a sensible status quo, and we should not offer them Federal money on condition that they surrender that essential part of the free exercise of their religion. Thank you, Mr. Chairman.

Mr. CHABOT. Thank you, professor.

[The prepared statement of Mr. Laycock follows:]

PREPARED STATEMENT OF DOUGLAS LAYCOCK

Thank you for the opportunity to testify on the legal issues surrounding charitable choice. This statement is submitted in my personal capacity as a scholar. I hold the Alice McKean Young Regents Chair in Law at The University of Texas at Austin, but of course The University takes no position on any issue before the Committee.

I. SEPARATION OF CHURCH AND STATE.

The debate over charitable choice has been cast as a debate over separation of church and state. I think the usual formulation of the charitable choice debate is misleading, for reasons I will explain. But let me begin by making clear my own starting premises.

I support the separation of church and state. The religious choices and commitments of the American people should be as separated as possible from the influence of government. The religious choices and commitments of believers and of non-believers should be equally protected, and equally insulated from government influ

ence.

Church-state questions arise in three great clusters of issues: government regulation, government speech, and government money. With respect to government regulation, I have often testified to this committee about the need to separate religious practices from government regulation. With respect to government speech, most recently I represented the parents who objected to Texas high schools opening their football games with prayer. Santa Fe Independent School District v. Doe, 530 U.S. 290 (2000). In Texas, that is a more radically separationist position than anyone outside Texas can fully appreciate.

With respect to government money, I long accepted the widespread fallacy that the ultimate goal is to separate religion from government money. But I have gradually come to realize that that is a means, not an end. The goal is to separate private religious choices and commitments from government influence, including the powerfully distorting influence that government can buy with its money. Government should minimize its influence over the religious choices and commitments of both the providers and the beneficiaries of government-funded social services. That goal is difficult to achieve, but charitable choice is a step in the right direction.