Court Validation of Beneficiary-Choice Contracting

The "indirect" funding of faith-based social-service providers, such as by vouchers or the certificates widely used in federally funded child care, has one vital constitutional benefit: The faith-based providers involved do not need to separate inherently religious elements out from the government-funded service but can, instead, offer government-funded services that incorporate religious elements, such as mentoring that includes religious talk and activities, HIV-AIDS help that includes pastoral counseling, and drug treatment or recovery support services that include a call to spiritual transformation.

Such "indirect" funding via certificates or vouchers is grounded in U.S. Supreme Court decisions, culminating in Zelman v. Zelman-Harris (2002). But most government funding is "direct": government officials select one or a few providers and award grants or contracts to pay for the delivery of services. Converting a government program from grants or contracts to vouchers or certificates requires the redesign of procurement, service delivery, monitoring, and payment systems. Such a redesign has not only the benefit of making it possible for beneficiaries to be able to select a government-supported service that includes religious activities but also empowers the beneficiaries by giving them a choice and can improve the services by introducing competition. Still, converting from "direct" to "indirect" funding is not easy and it is not often done.

Fortunately, the federal courts have validated another form of "indirect" funding:  a specialized form of contracting. In the Faith Works Milwaukee case, the courts decided that contracting is a form of "indirect" funding when it is designed so that beneficiaries have a choice of provider, including a secular option, and the providers are paid only as a result of the independent choice of the beneficiaries.  In such beneficiary-choice contracting, faith-based organizations can provide government-funded help that integrates religious activities into the social services, just as if the payment was via vouchers or certificates. This kind of "indirect" funding can be implemented without the need for a ground-up redesign of how social services are delivered and funded. For details, visit the For Officials section.