Morency v. State of Nevada

Litigation: Challenging repeal of the Nevada tax credit scholarship program’s escalator clause, due to the legislature’s failure to secure a two-thirds vote on passage, as required by the Nevada Constitution for all bills that create, generate, or increase any public revenue in any form.

Outcomes: The District Court rejected the Institute for Justice argument on behalf of parents. IJ argued that the escalator clause increased tax credits allowable under the scholarship program and because of repealing that clause, the state would increase public revenue. On appeal to the Nevada Supreme Court, IJ submitted supplemental information after oral argument from a similar case, State of Nevada v. Settelmeyer. In that case, the Nevada Supreme Court recently held that when, but for the passage of a bill, the state would not receive certain revenue, the passage of that bill would constitute an increase in public revenue subject to the state constitution’s two-thirds vote requirement.  On October 7, 2021, the Nevada Supreme Court ruled that tax credits are appropriations, and in a twist of reasoning from Settelmeyer, ruled that the bill eliminating the escalator clause did not require a two-thirds vote and therefore, is constitutional.

Why it Matters: Escalator clauses in tax credit scholarship programs allow scholarship funding to increase if demand for scholarships increase. This is important to parents.

Effects: The number of students receiving scholarships under this program increased from 541 in 2015, the first year of the program, to over 2,300 students in 2019. However, this litigation has had a chilling effect on the program, resulting in a decline in participation to just over 1,055 students in the 2020-2021 school year. A court decision to restore the escalator clause would have allowed scholarship funding to increase, helping hundreds or potentially thousands of children access funding for the educational resources they need to succeed.