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Financial assistance The Supreme Court first considered the question of financial assistance to religious organizations in Bradfield v. Roberts (1899). The federal government had funded a hospital operated by a Roman Catholic institution. In that case, the Court ruled that the funding was to a secular organization—the hospital—and was therefore permissible.

In the twentieth century, the Supreme Court more closely scrutinized government activity involving religious institutions. In Everson v. Board of Education (1947), the Supreme Court upheld a New Jersey statute funding student transportation to schools, whether parochial or not. Justice Hugo Black held,

The "establishment of religion" clause of the First Amendment means at least this: Neither a state nor the federal government can set up a church. Neither can pass laws which aid one religion, aid all religions, or prefer one religion over another. Neither can force nor influence a person to go to or to remain away from church against his will or force him to profess a belief or disbelief in any religion. No person can be punished for entertaining or professing religious beliefs or disbeliefs, for church attendance or non-attendance. No tax in any amount, large or small, can be levied to support any religious activities or institutions, whatever they may be called, or whatever form they may adopt to teach or practice religion. Neither a state nor the Federal Government can, openly or secretly, participate in the affairs of any religious organizations or groups and vice versa. In the words of Jefferson, the clause against establishment of religion by law was intended to erect "a wall of separation between church and State."

The New Jersey law was upheld, for it applied "to all its citizens without regard to their religious belief." After Everson lawsuits in several states sought to disentangle public monies from religious teaching, the leading case being the 1951 Dixon School Case out of New Mexico.<ref>Pfeffer, Leo (1967) Church, state, and freedom Beacon Press, Boston, Massachusetts, pages 545-549</ref>

The Jefferson quotation cited in Black's opinion is from a letter Jefferson wrote in 1802 to the Baptists of Danbury, Connecticut, that there should be "a wall of separation between church and state." Critics of Black's reasoning (most notably, former Chief Justice William H. Rehnquist) have argued that the majority of states did have "official" churches at the time of the First Amendment's adoption and that James Madison, not Jefferson, was the principal drafter. However, Madison himself often wrote of "perfect separation between the ecclesiastical and civil matters" (1822 letter to Livingston), which means the authority of the church (that which comes from the church) is decided by church authority, and that which is decided in civil government is decided by civil authorities; neither may decree law or policy in each other's realm. Another description reads: "line of separation between the rights of religion and the civil authority... entire abstinence of the government" (1832 letter Rev. Adams), and "practical distinction between Religion and Civil Government as essential to the purity of both, and as guaranteed by the Constitution of the United States" (1811 letter to Baptist Churches).

In Lemon v. Kurtzman (1971), the Supreme Court ruled that government may not "excessively entangle" with religion. The case involved two Pennsylvania laws: one permitting the state to "purchase" services in secular fields from religious schools, and the other permitting the state to pay a percentage of the salaries of private school teachers, including teachers in religious institutions. The Supreme Court found that the government was "excessively entangled" with religion, and invalidated the statutes in question. The excessive entanglement test, together with the secular purpose and primary effect tests thereafter became known as the Lemon test, which judges have often used to test the constitutionality of a statute on establishment clause grounds.

The Supreme Court decided Committee for Public Education & Religious Liberty v. Nyquist and Sloan v. Lemon in 1973. In both cases, states—New York and Pennsylvania—had enacted laws whereby public tax revenues would be paid to low-income parents so as to permit them to send students to private schools. It was held that in both cases, the state unconstitutionally provided aid to religious organizations. The ruling was partially reversed in Mueller v. Allen (1983). There, the Court upheld a Minnesota statute permitting the use of tax revenues to reimburse parents of students. The Court noted that the Minnesota statute granted such aid to parents of all students, whether they attended public or private schools.

While the Court has prevented states from directly funding parochial schools, it has not stopped them from aiding religious colleges and universities. In Tilton v. Richardson (1971), the Court permitted the use of public funds for the construction of facilities in religious institutions of higher learning. It was found that there was no "excessive entanglement" since the buildings were themselves not religious, unlike teachers in parochial schools, and because the aid came in the form of a one-time grant, rather than continuous assistance. One of the largest recent controversies over the amendment centered on school vouchers—government aid for students to attend private and predominantly religious schools. The Supreme Court, in Zelman v. Simmons-Harris (2002), upheld the constitutionality of private school vouchers, turning away an Establishment Clause challenge.


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