Stanley Carlson-Thies, April 4, 2016

The Obama administration has issued new regulations for federally funded government partnerships with faith-based organizations. The new rules modify somewhat the Equal Treatment regulations of the George W. Bush administration, and represent continuity over three administrations, starting with Charitable Choice rules signed into law by President Bill Clinton.

The basic principles remain the same: faith-based organizations are no less eligible than secular organizations to deliver federally funded services. Religious organizations receiving federal funds retain their religious identity, may continue to offer voluntary religious activities, and generally retain the freedom to consider religion when hiring. Beneficiaries are served without regard to religion and cannot be compelled to participate in religious activities. New in these regulations: written notice of beneficiaries’ religious rights, a new definition of religious activities that cannot be funded by government grants or contracts, and a universal right of beneficiaries to ask for a different provider if they have a religious objection to a faith-based provider.

The new regulations, which were first announced on March 31, 2016, apply to the following federal departments: Agriculture (USDA), Education (ED), Health and Human Services (HHS), Homeland Security (DHS), Housing and Urban Development (HUD), Justice (DOJ), Labor (DOL), Veterans Affairs (VA), and the Agency for International Development (USAID). They are slightly modified from the draft regulations announced last summer in the form of separate NPRMs from these same departments. The finalized regulations were issued in a single final rule that first discusses common elements and modifications and then details variations department by department. One goal of the final rule was to promote as much commonality of these regulations as possible across the departments.

These regulations follow federal funding for social services, and apply whether the funds are awarded to private organizations by federal agencies or by state or local governments (much state and local social service spending is funded by the federal government).

The Most Significant Changes

“Explicitly” religious activities. The Charitable Choice and Equal Treatment regulations required that “inherently” religious activities not be funded by “direct” federal funding (i.e., grants and contracts paid to a private organization to provide services, in distinction from voucher or scholarship funding that goes to a person who then chooses a service provider) and that such activities be kept separate in time or location from the program that is supported by direct federal funding.

Considering this terminology to be insufficiently clear, the final rule uses the phrase “explicitly religious activities” and notes as examples “activities that involve overt religious content such as worship, religious instruction, or proselytization.” Future training and explanatory materials from the agencies will offer further examples.

No religious discrimination against beneficiaries. The regulations already specified that faith-based (and secular) recipients of federal funds may not discriminate against a beneficiary or potential beneficiary on the basis of religion or lack of religion. This prohibition has been reworded to require that grantees must not “discriminate against a program beneficiary or prospective program beneficiary on the basis of religion, a religious belief, a refusal to hold a religious belief, or a refusal to attend or participate in a religious practice.” Note that, in directly funded programs, it was already a requirement that inherently religious activities be offered separately from the federally funded program and that such activities be voluntary for the beneficiary. The new requirement, which is applied as well to indirectly funded programs, creates tensions in those programs—see the discussion below.

Referral to an alternative. The Charitable Choice rules adopted for several federal programs by Congress during the Clinton administration provided (in most programs) that a beneficiary who objected on religious grounds to a faith-based provider had to be offered an alternative provider of services that was religiously not objectionable (which could be a secular provider or a different religious provider). In directly funded programs, there was already the requirement that religious activities be separate from the federally funded program and be voluntary; however, the protection of an alternative was provided as an extra religious freedom protection for a beneficiary who might object, for example, to religious surroundings. (When the funding is indirect, as in a voucher or scholarship program, the beneficiary already has a choice of a secular or a religious provider.)

This referral option has now been extended to all social service programs that are directly funded under the revised regulations, except for those provided overseas (where alternatives might not be possible). The final rule includes considerable discussion of comments that were received, including suggestions that government agencies should assume the responsibility of referrals (as they are more likely to know the range of federally supported alternatives), that the regulations should specify in which ways an alternative has to be accessible and equivalent, and so forth.

In the final regulations, the obligation to locate an alternative and to make the referral is given to the faith-based organization, but the organization can ask for assistance from the granting agency (or from an intermediary, if the faith-based organization is a sub-grantee). And while the organization must make a serious effort to find an alternative, the regulations acknowledge that there might not be one available.

Notably, the final rule acknowledges that in the SAMHSA program—federally funded drug abuse treatment and prevention—which has had Charitable Choice language and a referral requirement since 2000, there are no documented instances of a beneficiary requesting an alternative because of a religious concern about the initial faith-based provider.

Written notice of religious rights. Charitable Choice and the Equal Treatment regulations required grantees to respect the various religious rights of beneficiaries; there is a new requirement that grantees provide notice to beneficiaries and potential beneficiaries of those rights (no discrimination, no forced participation in religious activities, and, in directly funded programs, the right of referral). The requirement of written notice does not apply to overseas programs and is applied flexibly: for example, in a food bank program supported by direct federal dollars, only a sign about the rights needs to be posted without individual notices being given to each beneficiary.

No religious or political bias for or against an FBO. Charitable Choice and the Equal Treatment rules required a level playing field for faith-based applicants for funding, and specifically disavowed a bias for religious providers. That requirement of fair treatment, without religious or political bias, is reinforced in the revised regulations.

Other Notable Matters

Religious staffing. Under the 1964 Civil Rights Act, religious organizations have the right to consider religion when hiring and firing. This right is not abrogated simply because a faith-based organization receives federal dollars to provide services, although some federal programs ban religious hiring. Charitable Choice restated the right and the Charitable Choice regulations provided that, in the SAMHSA program, where there was a ban on religious staffing in the case of some funding, a religious organization could appeal to the Religious Freedom Restoration Act (RFRA) for the freedom to staff on a religious basis despite the ban.

Some commentators had asked that the final regulations totally ban religious hiring; others asked that the regulations describe the RFRA process for programs with a religious hiring ban. The final rule declines to make either change, simply pointing out that religious staffing is not a topic of either President Bush’s or President Obama’s executive orders.

Note, though, that the Obama administration, like the Bush administration, has documented how religious organizations can turn to RFRA if they encounter a ban on religious hiring in a federal program.

Indirect or voucher funding. The final rule stresses, as did the Charitable Choice and Equal Treatment regulations, the important “church-state” distinction between services funded “directly” with federal funds and those funded “indirectly.” With direct funding, it is government officials who select the provider, and to avoid “establishing” religion, the provider is required not to use the direct funding to pay for religion. With indirect funding, the government gives a voucher or scholarship to the beneficiary, who then chooses a service provider from an array of providers that include secular as well as religious choices. In this circumstance, as the US Supreme Court has ruled (the Zelman decision of 2002), religious activities can be woven into the federally supported service: it is the beneficiary, exercising his or her freedom of religion, who has chosen a provider.

The regulations also make special provision for instances when chaplaincy and similar services are not only constitutionally permissible but even required, even if the funding is “direct.” When a beneficiary is confined and unable freely to access religious activities separate from government assistance, for example, by being imprisoned or in the military, then in order to facilitate the beneficiary’s free exercise rights, the government can and should fund worship and other appropriate religious activities for the beneficiary.

Training and web-based information. The final rule notes that training on the revised regulations, both for government officials and for potential grantees, will be developed. And department websites are to feature the revised regulations and explanatory material.

While the Obama administration has maintained the principles of the Bush Equal Treatment and Charitable Choice regulations, as is reflected in these revised regulations, one significant chance over the past years has been a significant and unfortunate decline in publicity for the principles and in the provision of information and training about them, including via the webpages of the faith-based centers in the various departments. The arrival, after a long delay, of the final rule should result in new and much needed information and training.

A difficulty in the new regulations. The new, more detailed, religious nondiscrimination requirement is now specifically applied whether the religious grantee receives the federal support directly or indirectly. Recall that expanded requirement: grantees must not “discriminate against a program beneficiary or prospective program beneficiary on the basis of religion, a religious belief, a refusal to hold a religious belief, or a refusal to attend or participate in a religious practice.” While well-intentioned, the application of this expanded rule to indirectly funded programs introduces an unfortunate problem into those programs.

When the funding is indirect, then religious activities can be woven into the federally funded program of service. Indeed, religious activities can be integral elements of the service. For example, in a voucher-funded job training program, one of the providers might well offer job training that includes among the elements of the program not only resume writing and the development of job-search skills but also several hours of discussion about self image, personal responsibility, and the qualities of a good employee—all framed and taught from a specifically religious perspective (“you are made in God’s image . . .”).

According to the new regulations, a beneficiary must be allowed to opt out of those several hours of discussion—even though the discussion is an integral and essential—not optional–part of the job training service that the faith-based organization offers!

The final rule attempts to address the problem by adding this new element to the regulations: an indirectly funded provider is not required to modify its program to accommodate beneficiaries who chose the provider but object to the religious activities and decline to participate in them. As an example, the final rule says, “[A] substance abuse recover program, like a 12-step program, that includes religious content that is integral to the program would not be required to alter its program to accommodate an objector who pays for the program with indirect aid.”

That’s an important protection for the faith-based provider—but it does not resolve the programmatic issue nor provide meaningful help for the beneficiary. The religious element is integral to a 12-step program! In the previous example, the hours of discussion about self-image and the like are integral to a successful job search and job experience! The problem with allowing a beneficiary to opt out is that the beneficiary then misses a crucial part of the federally funded service, a crucial element included in the program so that the program will be successful for the beneficiary.

Much wiser would be to require beneficiaries to participate in every designed-in element of an indirectly funded program, including religious elements, just as beneficiaries are expected to participate in every designed-in activity of a directly funded program. All of the elements are there for the sake of successfully assisting the beneficiary. The vital religious rights of the beneficiary, in the voucher or scholarship setting, are fully respected by giving the beneficiary the choice of a provider, including of a nonreligious provider—indeed, in indirect funding the rights are stronger than in direct funding, because a beneficiary can choose either services that include religious activities or those that do not.

Background to the Revised Regulations

These regulations on federal funding of faith-based organizations have their origin in the Charitable Choice language that was enacted as part of the 1996 welfare reform signed into law by President Bill Clinton. Through the 1980s, US Supreme Court decisions that reflected an extreme separationist interpretation of the First Amendment had cast some doubt on the legitimacy of government partnerships with distinctly religious organizations, but Court rulings had started to shift in the direction of a “neutrality” or “equal treatment” interpretation: the government should not be biased against religious organizations as long as they did not use government funds to pay for religion instead of services. The new interpretation became the “Charitable Choice” legislative language put into the welfare law and into several other federal laws during the Clinton administration.

After becoming president in 2001, George W. Bush created a White House faith-based offices and faith-based centers in an increasing number of major federal departments. In 2002, he issued an executive order essentially adopting the Charitable Choice principles as his guidance for how the federal government, across its departments, should relate to faith-based organizations. In 2004, through the regulatory process, Charitable Choice regulations were adopted for the Clinton-era laws and similar “Equal Treatment” principles were adopted for the major federal departments whose funds are used to procure social, educational, and health services from private organizations.

President Barack Obama has maintained the White House faith-based office and the departmental faith-based centers. He organized a new Advisory Council on Faith-Based and Neighborhood Partnerships, which in 2010 advised some modifications to the Equal Treatment regulations. On the basis of these recommendations, President Obama in 2010 issued an executive order amending the Bush 2002 executive order. The Obama faith-based regulations just published today in the Federal Register make the modifications directed by the Obama executive order.

Although there have been complaints about the Charitable Choice and Equal Treatment rules by some advocacy groups and also some court challenges, the court challenges have confirmed the underlying principles and the complaints have largely died away after President Obama took office (except for continual criticism because he has not changed the basic rules about religious hiring).

Through the 1990s, the principles that should guide federal funding of religious organizations were highly controversial, leading to continual court cases, including US Supreme Court cases. However, in Charitable Choice and the Equal Treatment regulations the federal government has created consensus rules that have now been strongly upheld through three federal administrations, both Democratic and Republican.