Court Opinion

ID: 9797145
Source: CourtListenerOpinion
Date Created: 2023-08-31 04:14:23.319166+00
Date Added: 2024-06-11T08:52:47.922885
License: Public Domain

Opinion
KENNARD, J.
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 helping] 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 XIII, § 24, repealed Gen.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).)
*793Against that backdrop, this court in California Educational Facilities Authority v. Priest (1974) 12 Cal.3d 593 [116 Cal.Rptr. 361, 526 P.2d 513] (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 [37 L.Ed.2d 923, 93 S.Ct. 2868] (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 Constitution’s 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 program’s 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 state’s 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 *794provide a benefit to religion that is merely incidental to the bond program’s 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 and 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 government’s 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.)
*795Under 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 school’s] 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 *796must 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 Authority’s 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 Authority’s 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 Constitution’s First Amendment.
The Authority sought review in this court. It contended that the Court of Appeal’s 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 General’s 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 *797authorizes 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, which 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 school’s 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 Authority’s 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 12th 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 God’s 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 school’s 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 university’s undergraduate students are expected to accept and to live by “biblically based *798Christian 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 school’s 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 University’s 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 Authority’s conduit financing agreements with Oaks Christian School, California Baptist University, and Azusa Pacific University violate our state Constitution’s 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.)
*799Under 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 Constitution’s 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 provision’s 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 Authority’s 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 Educational 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.)
*800Of former article XIII, section 24 (the predecessor of current art. XVI, § 5 of the Cal. Const, 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
*801From 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 Priest's second requirement—that 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. 797, ante.) This satisfies Priest's third requirement. (Priest, supra, 12 Cal.3d at p. 606.)
Because of the utilization of conduit or passthrough 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 Authority’s 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 Priest's fourth requirement, that the program not impose a financial burden on the government. (Priest, supra, 12 Cal.3d at p. 606.)7
*802Having concluded that the second, third, and fourth requirements of Priest are satisfied, we still need to determine whether the bond program meets Priest's first requirement, that the program provide a public benefit and no more than incidentally benefit religion. Priest held that the state’s 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 “ ‘encouraging] 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 793 and 799, our decision in Priest concerned state bond financing to construct or improve facilities at schools that were “religiously affiliated”—schools connected to a religious organization—but not “pervasively sectarian”—schools “ ‘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 state’s 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 Priest's 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 program’s 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 *803more 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 Authority’s 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 case—a 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 state—we 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 program’s 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 *804provide 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 state’s 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 school’s course in a secular subject such as math, chemistry, or Shakespeare’s 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 school’s day-to-day classroom communications. The circumstance that a teacher may, in addition to teaching a course’s religiously neutral content, express an idea or viewpoint that may be characterized as “religious” does not result in a benefit to religion that is *805more than incidental to the state’s 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 § 5 of art. XVI of the Cal. Const.), 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.
As we have pointed out, tax-exempt bond financing is a mechanism by which the government makes available to private investors a tax exemption on income earned on government bonds, thereby encouraging private investment in community development and enabling the recipients of these investments to borrow private funds at a lower interest rate. As the Virginia Supreme Court has observed, in concluding that issuing government bonds to benefit a religious college (the Reverend Pat Robertson’s Regent University, excluding its divinity school) did not violate the establishment clause of the federal Constitution’s First Amendment: “The nature of this aid is properly defined as the granting of tax-exempt status to the bonds which has the incidental result of permitting a qualifying institution to borrow funds at an interest rate lower than conventional private financing.” (Virginia College Bldg. Authority v. Lynn (2000) 260 Va. 608, 638 [538 S.E.2d 682, 698] (Virginia College).)
More recently, in 2002, the federal Court of Appeals for the Sixth Circuit in Steele v. Industrial Development Bd. of Metro. (6th Cir. 2002) 301 F.3d 401 (Steele), rejected an establishment clause challenge to a bond financing program benefiting Lipscomb University, a Tennessee college run by the Churches of Christ. Steele viewed the bond funding program as a form of tax policy, equating the issuance of revenue bonds to tax exemptions benefiting religious organizations that the high court has held do not violate the establishment clause. (See Hernandez v. Commissioner (1989) 490 U.S. 680, 688 [104 L.Ed.2d 766, 109 S.Ct. 2136] [deductions from taxable income for gifts to religious organizations]; Mueller v. Allen (1983) 463 U.S. 388, 396 *806[77 L.Ed.2d 721, 103 S.Ct. 3062] [state tax deductions for amounts paid for school tuition and textbooks even though such deductions substantially benefited religious schools]; Walz v. Tax Commission (1970) 397 U.S. 664, 675 [25 L.Ed.2d 697, 90 S.Ct. 1409] [city tax exemption for real estate owned by religious organizations].) In neither situation, the federal appellate court in Steele stressed, did the government transfer any public funds to the recipient institutions. (Steele, supra, at p. 409.) Steele concluded that the benefit to the recipient school from the issuance of the tax-exempt bonds was analogous “to an indirect financial benefit conferred by a religiously neutral tax or deduction.” (Id. at p. 413.) Steele explained: “The purchaser of a bond has recourse for repayment against Lipscomb University only,” and not against the issuing governmental entity. (Ibid.) Also: “No government funds are involved in the entire transaction. The interest paid to the bond holders by Lipscomb University is not subject to federal, state, or local income taxes. Since the bonds are tax-exempt, Lipscomb University reaps the benefit of a lower interest rate than that paid to a lender paying income taxes on the interest received. Only by the potential loss of tax revenue does the conduit financing involve any impact on public funds.” (Ibid.)10
The trial court here, in denying the Authority’s request to validate its bond funding agreements with the three religious schools, did not consider the substance of the education at those schools. Accordingly, we remand this case to the Court of Appeal, which in turn is to remand the matter to the trial court for that evaluation.
The trial court is to determine whether each religious school benefiting from the state bond program offers a sufficiently broad curriculum in secular subjects—e.g., English literature, history, math, sciences, professional or preprofessional training—that the school’s use of the educational facilities built or improved with the bond funding may be expected to promote the public interest in making secular education more available to California residents in general. The trial court’s inquiry should center on the school’s curriculum as a whole, but it should exclude theological or divinity programs because, under the terms of their agreements, the schools may not use the *807facilities built or improved with the state bond proceeds for those programs. If the school does offer this sort of broad secular curriculum, the trial court should consider whether the academic content of the classes in secular subjects is typical of such classes when taught in nonreligious schools and is thus neutral with respect to religion. In resolving this issue, the court may consider the school’s course descriptions or any other information submitted to establish the content or coursework of the secular classes. The circumstance that a religious viewpoint may also be expressed in these otherwise secular classes does not preclude a determination that providing the proposed tax-exempt bond financing to the school promotes the state’s interest in the intellectual development of its residents and only incidentally benefits religion.11
Having concluded that the proposed state bond funding, as discussed on pages 803 to 805, ante, would not violate our state Constitution if certain conditions are satisfied (a determination to be made by the trial court on remand), we now consider whether the proposed bond funding, on the conditions we have articulated, would pass muster under the establishment clause of the First Amendment to the federal Constitution. We discuss this issue below.
III
The First Amendment to the federal Constitution states that “Congress shall make no law respecting an establishment of religion . . . .” (Italics added.) This provision is incorporated in the due process clause of the Fourteenth Amendment, thus making it applicable not only to Congress but also to the states. (See Everson v. Board of Education (1947) 330 U.S. 1, 8 [91 L.Ed. 711, 67 S.Ct. 504].)
In Lemon v. Kurtzman (1971) 403 U.S. 602 [29 L.Ed.2d 745, 91 S.Ct. 2105] (Lemon), the United States Supreme Court adopted a three-part test to determine when a particular law or government practice would not constitute an establishment of religion: (1) The government program must have “a secular legislative purpose”; (2) the program’s “principal or primary effect must be one that neither advances nor inhibits religion”; and (3) the program “must not foster ‘an excessive government entanglement with religion.’ ” (Id. at pp. 612-613.) Failure to satisfy any one of Lemon’s three requirements *808would render a governmental program unconstitutional. (See id. at pp. 619-620, 622.) In Agostini v. Felton (1997) 521 U.S. 203 [138 L.Ed.2d 391, 117 S.Ct. 1997] (Agostini), the high court refined that three-part test.
Addressing the Lemon test’s third criterion—excessive entanglement between church and state—Agostini rejected the idea that “entanglement” should be treated as a separate inquiry. Rather, Agostini stated, the entanglement inquiry was an aspect of Lemon’s second inquiry, whether the government aid at issue has the impermissible “effect” of advancing religion. (Agostini, supra, 521 U.S. at pp. 232-233.) In determining such effect, Agostini explained, the pertinent inquiry is whether the government aid program “result[s] in governmental indoctrination; define[s] its recipients by reference to religion; or create[s] an excessive entanglement [between church and state].” (Id. at p. 234.) By folding Lemon’s “entanglement inquiry into the primary effect inquiry” (Zelman v. Simmons-Harris (2002) 536 U.S. 639, 668 [153 L.Ed.2d 604, 122 S.Ct. 2460]), the high court in Agostini has collapsed Lemon’s three-part test into just two parts.
The high court has acknowledged that it does not apply the Lemon test in every establishment clause case (see Van Orden v. Perry (2005) 545 U.S. 677, 686 [162 L.Ed.2d 607, 125 S.Ct. 2854, 2861] (plur. opn. of Rehnquist, C. J.) [“[m]any of our recent cases simply have not applied the Lemon test”]; id. at p. 699 [125 S.Ct. at p. 2868] (conc. opn. of Breyer, J.) [“the Court has found no single mechanical formula that can accurately draw the constitutional line in every case”]); and some members of the court have expressed disagreement with that test (e.g., Lamb’s Chapel v. Center Moriches Union Free School Dist. (1993) 508 U.S. 384, 398-400 [124 L.Ed.2d 352, 113 S.Ct. 2141] (conc. opn. of Scalia, J., joined by Thomas, J.)). But the high court has resorted to the Lemon test in dealing with issues involving government aid to sectarian educational institutions. (E.g., Mitchell v. Helms (2000) 530 U.S. 793, 807-808 [147 L.Ed.2d 660, 120 S.Ct. 2530] (plur. opn. of Thomas, J.) (Mitchell); Agostini, supra, 521 U.S. at pp. 222-223, 232-233; Hunt, supra, 413 U.S. 734.) Because Hunt is the case most closely on point here, we summarize it below.
At issue in Hunt was whether South Carolina’s issuance of revenue bonds benefiting the Baptist College of Charleston, a religiously affiliated institution, constituted an impermissible establishment of religion in violation of the First Amendment. Hunt was decided in 1973, just two years after Lemon and 24 years before Agostini (which collapsed Lemon’s three-part test into just two parts). Naturally, therefore, the high court in Hunt applied the original three-part Lemon test. Hunt held that the bond funding satisfied the first Lemon requirement because its purpose was “manifestly a secular one,” providing a funding mechanism for all South Carolina institutions of higher *809education “whether or not having a religious affiliation.” (Hunt, supra, 413 U.S. at p. 741.) And the program produced no “unconstitutional degree of entanglement between the State and the College,” thus satisfying Lemon’s third requirement, even though the agreement between the bond funding agency and the college allowed inspection of “the project to insure that it [was] not being used for religious purposes.” (Hunt, supra, at pp. 745-746.)
Most pertinent here, however, is the high court’s discussion in Hunt of Lemon’s second requirement, that the bond funding not have the primary result of advancing religion. Concluding that the second Lemon requirement was met with respect to the Baptist College of Charleston, the court observed that it had “no religious qualifications for faculty membership or student admission,” and that in its student body Baptists comprised only some 60 percent, “a percentage roughly equivalent to the percentage of Baptists in that area of South Carolina.” (Hunt, supra, 413 U.S. at pp. 743-744.) The court cautioned, however, that a similar bond program might have the impermissible effect of advancing religion if the proceeds “flow[] to an institution in which religion is so pervasive that a substantial portion of its functions are subsumed in the religious mission or when it funds a specifically religious activity in an otherwise substantially secular setting.” (Id. at p. 743.)
The high court in Hunt, supra, 413 U.S. 734, left open whether the state bond program in that case would have violated the establishment clause of the First Amendment if the college had been pervasively sectarian. To this date, the high court has yet to address that issue. (See Revenue Bonds and Religious Education, supra, 100 Mich. L.Rev. 1108.)
Certain observations in the high court’s more recent establishment clause cases suggest that even if state bond funding were to benefit a pervasively sectarian school, the program might still survive scrutiny under the federal Constitution. In Mitchell, supra, 530 U.S. 793, the high court upheld a federal aid program that provided library and media materials, as well as computer software, to private elementary and secondary schools, including religiously affiliated schools. Four of the court’s nine members who comprised the Mitchell plurality unequivocally stated: “[N]othing in the Establishment Clause requires the exclusion of pervasively sectarian schools from otherwise permissible aid programs, and other doctrines of this Court bar it.” (Id. at p. 829 (plur. opn. of Thomas, J., joined by Rehnquist, C. J., Kennedy, J., and Scalia, J.).) Moreover, the two justices who in a separate concurrence became part of the Mitchell majority did not consider whether the recipients of government aid in that case were pervasively sectarian. (Mitchell, supra, at pp. 836-867 (conc. opn. of O’Connor, J., joined by Breyer, J.).)
Furthermore, since 1985 the United States Supreme Court has not invalidated any government aid program on the ground that the recipients were *810pervasively sectarian. (See Mitchell, supra, 530 U.S. at p. 826.) In Agostini, supra, 521 U.S. 203, the high court repudiated the analysis of its two most recent cases that had done so—Aguilar v. Felton (1985) 473 U.S. 402 [87 L.Ed.2d 290, 105 S.Ct. 3232]; and Grand Rapids School District v. Ball (1985) 473 U.S. 373 [87 L.Ed.2d 267, 105 S.Ct. 3216], The Agostini court overruled Aguilar completely and overruled Ball in part. (Agostini, supra, at pp. 218, 225; see Mitchell, supra, at p. 826.) The high court’s overruling of Aguilar has been said to signal its “intent to weaken the Lemon test in favor of a more neutral stance toward sectarian education.” (Note, Educational Vouchers and the Religion-Clauses Under Agostini: Resurrection, Insurrection and a New Direction (1999) 49 Case W. Res. L.Rev. 747, 755.) It has also been observed that “[t]he case law on funding religious institutions has changed dramatically over the last twenty years” (Laycock, Theology Scholarships, the Pledge of Allegiance, and Religious Liberty: Avoiding the Extremes But Missing the Liberty (2004) 118 Harv. L.Rev. 155, 162), that “[f]ederal constitutional restrictions on funding religious institutions have collapsed” (id. at p. 156), and that decisions of the United States Supreme Court restricting government aid to sectarian schools “are confined to a remarkably brief period, from 1971 to 1985” (id. at p. 167).
Here, we need not decide whether extending the benefit of a government bond funding program to a pervasively sectarian school could ever violate the First Amendment’s establishment clause. As ¿xplained in part II, ante, we have concluded that, to avoid violating our state Constitution, a religious school participating in a conduit financing bond program must offer a broad curriculum in secular subjects, comprised of classes whose academic content must be neutral with respect to religion, and it must not use the facilities built or improved with the state bond proceeds for theological or divinity programs or as a place of worship. Accordingly, the issue we address here is whether state bond funding for a religious school, under those conditions, would violate the federal Constitution’s establishment clause.
As we have discussed in greater detail on pages 808 and 809, ante, in 1973 the high court in Hunt, supra, 413 U.S. 734, upheld a South Carolina revenue bond program benefiting a religiously affiliated college. In reaching that decision, Hunt applied the three-part test of Lemon, supra, 403 U.S. 602, which provides courts with a means of determining the constitutionality of government programs that aid religious institutions. We too apply the Lemon test here, but we do so using the test as refined in the high court’s 1997 decision in Agostini, supra, 521 U.S. at pages 232-233, which reduced Lemon's test to just two parts.
The first of these requirements is that the government program have a secular purpose. As we explained on pages 803, 804 and 805, ante, to *811comport with our state Constitution a religious school receiving the bond funding for building or improving its educational facilities must offer a broad curriculum in secular subjects, in which the academic content is typical of that at nonreligious schools and thus is religiously neutral. As we stated, under those conditions, the program serves the primary secular purpose of increasing secular educational opportunities for Californians in general. (See p. 803, ante.)
The second, and final, inquiry under Lemon, as refined by the high court in Agostini, is whether the government program will have the impermissible effect of advancing religion. Pertinent to this inquiry is whether the program will “result in governmental indoctrination; define its recipients by reference to religion; or create an excessive entanglement” between the government and the religiously affiliated beneficiaries of the program. (Agostini, supra, 521 U.S. at p. 234.) We first address governmental indoctrination below.
Government indoctrination of religion occurs when “any use of [the government] aid to indoctrinate religion [can] be attributed to the State.” (Agostini, supra, 521 U.S. at p. 230.) Here, the Authority’s issuance of revenue bonds to finance campus improvements at the three religious schools will not result in governmental indoctrination. As we have explained, a school cannot qualify for the bond funding unless it offers a broad curriculum in secular subjects and the academic content of its classes in secular subjects is similar to that offered in nonreligious schools. (See pp. 803-805, ante.) The mere incidental expression of a religious viewpoint while teaching a secular class does not constitute religious indoctrination. Moreover, the Authority’s financing agreements with the three schools expressly prohibit them from using the bond proceeds to build or improve facilities 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.’ ” (See p. 797, ante.)
We now consider whether the Authority here defines the recipients of its revenue bond funding “by reference to religion.” (Agostini, supra, 521 U.S. at p. 234.) As we have explained on page 794, ante, the Authority is by statute a joint powers authority, which is comprised of some 350 cities, counties and other public entities, and which has since its creation issued tax-exempt bonds to promote economic development within its members’ boundaries, based on principles of neutrality, without taking into account the recipient’s religious affiliation, if any.
Nor will the state bond funding here “create an excessive entanglement” (Agostini, supra, 521 U.S. at p. 234) between the state and the religious schools in question. As mentioned earlier, the Authority’s agreements with the three schools strictly prohibit them from using the bond-funded educational facilities for religious purposes, and we have conditioned *812a school’s participation in the bond program on its offering a broad secular curriculum comprised of classes with academic content similar to or typical of that provided in nonreligious schools. In the absence of contrary evidence, courts presume that recipients of government aid will comply with restrictions imposed. (Agostini, supra, 521 U.S. at pp. 223-224, 226-227; accord, Mitchell, supra, 530 U.S. at p. 847 (conc. opn. of O’Connor, J.).)
In addition, the state bond funding agreements here provide for the appointment of an independent trustee, with the right of access to the three schools to ascertain their compliance with the restrictions imposed. The trustee’s right of access could be exercised by occasional unannounced visits. We note that even when the monitoring visits are by the government entity, rather than as here by a trustee independent of the public entity issuing the bonds, such visits have been held insufficient to create an excessive entanglement between the monitoring agency and the sectarian schools. (See Agostini, supra, 521 U.S. at p. 233; see also Bowen v. Kendrick (1988) 487 U.S. 589, 615-617 [101 L.Ed.2d 520, 108 S.Ct. 2562] [government monitoring of educational materials used by grantee is not excessive entanglement with religion]; Roemer v. Maryland Public Works Bd. (1976) 426 U.S. 736, 764-765 [49 L.Ed.2d 179, 96 S.Ct. 2337] [no excessive entanglement with religion where state conducts annual audits of religious colleges to ensure state aid is not used for “sectarian purposes”].)
For all of these reasons we conclude that the Authority’s issuance of government bonds benefiting religious schools under the conditions we have here set forth (see pp. 803-805, ante) does not violate the establishment clause of the First Amendment to the federal Constitution. Our conclusion finds support in a 2000 decision by the Virginia Supreme Court and in a 2002 decision by the federal court of appeals for the Sixth Circuit, both of which upheld similar bond funding programs benefiting religious schools. (Virginia College, supra, 538 S.E.2d 682; Steele, supra, 301 F.3d 401.)
Disposition
The judgment of the Court of Appeal is reversed, and the matter is remanded to that court with directions to remand the case to the trial court so it can reconsider the Authority’s request for validation of its bond funding agreements with Oaks Christian School, California Baptist University, and Azusa Pacific University in light of our opinion here.
George, C. J., Baxter, J., and Corrigan, J., concurred.

 Further statutory references are to the Government Code, unless otherwise stated.

 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, [j[] (b) Significant reductions in effective user charges levied by a local agency, [f] (c) Employment benefits from undertaking the project in a timely fashion. [10 (d) More efficient delivery of local agency services to residential and commercial development.”

 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.

 At oral argument, the Authority indicated that this function is performed by the trust department of a bank.

 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 UOP’s 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 UOP’s 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 <http://web.pacific.edu/x724.xml> [as of Mar. 5, 2007].)

 Contrary to the dissent (dis. opn., post, at p. 824), Priest’s determination that former article XIII, section 24 (now art. XVI, § 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 Constitution’s 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 court’s recent establishment clause jurisprudence, which as *801stated on page 830, post, has “ ‘changed dramatically’ ” since 1974 when this court decided Priest, that would require such a restriction on a school’s participation in a public entity’s bond funding program.

 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 [176 Cal.Rptr. 300, 632 P.2d 953]. 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 California Constitution, article XVI, section 5, because they “appropriate^] [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 *802treatment 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 helping] to support or sustain any school, college, university, hospital, or other institution controlled by any . . . sectarian denomination whatever . . . .” (Cal. Const., art. XVI, § 5.)

 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 Authority’s evidence describing the three schools at issue here (on which the trial court based its “factual findings”), and the Authority’s characterization of the schools as “pervasively sectarian,” we infer that they come within this definition.

 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 v. American Civil Liberties Union of Ky. (2005) 545 U.S. 844 [162 L.Ed.2d 729, 125 S.Ct. 2722], “The touchstone for 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 oficial religious neutrality, there being no neutrality when the government’s 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 [21 L.Ed.2d 228, 89 S.Ct. 266], that “study of religions and of 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 Amendment’s 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 state’s legitimate purpose—promoting the intellectual development of its residents in secular areas of study—is advanced through the provision of tax-exempt bond financing, these schools must demonstrate that their secular curriculum provides an education that is secular in substance—i.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.

 As illustrated by Steele, supra, 301 F.3d 401, and by Virginia College, supra, 538 S.E.2d 682, the issuance of government bonds to construct or improve facilities at religious schools is a practice not limited to California. The Council for Christian Colleges & Universities (CCCU), which is an international higher education association with a membership consisting of some 100 Christian colleges and universities, including the two colleges here, has filed an amicus curiae brief in support of the Authority. The CCCU mentions that, in addition to California, 22 states have provided conduit financing benefiting CCCU member colleges and universities, thereby providing these states’ private schools with lower interest financing resulting from state and federal tax benefits: Arkansas, Colorado, Georgia, Illinois, Iowa, Kansas, Louisiana, Massachusetts, Michigan, Minnesota, Missouri, New York, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, and Washington.

 Although the trial court made a factual finding that “[r]eligion is integrated into classroom instruction” at the three schools, it is unclear what the trial court meant by that finding or on what evidence it was based. Because the Authority’s declarations provided little information about the form or content of classroom instruction in secular subjects at the three schools, a remand is appropriate to permit the presentation of additional evidence and reconsideration of the issues under the standards we have set forth here.