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Was Yeshiva University Entitled to $230 Million in Public Funds?

For years, Yeshiva University has argued in court that its refusal to recognize an L.G.B.T.Q. student club does not violate New York City’s human rights law because the school is a religious institution.

But the university has also accepted state funding. And on Wednesday, a group of high-ranking state lawmakers said it appeared that the flagship Modern Jewish Orthodox school might have misrepresented itself as a secular institution on at least two occasions in order to qualify for more than $230 million in public funds to build and renovate its facilities and restructure its pre-existing debts.

The suggestion came in the form of a letter from three New York State Senate committee chairs that gave Yeshiva 30 days to provide a full accounting, with supporting documents, of how it spent that money.

“I think this matter is worthy of investigation and a potential criminal inquiry, based on what we know from their own court testimony,” said Senator Brad Hoylman, the chair of the Judiciary Committee and one of the signatories of the letter. “There is the potential that Yeshiva has misrepresented its mission and that could constitute fraud.”

Officials at Yeshiva did not respond to the lawmakers’ letter on Wednesday. But Hanan Eisenman, a university spokesman, said in a statement that “the Supreme Court has three times ruled that the government may not restrict funding to religious schools because of their free exercise” of religion.

“Yeshiva will continue to defend the right of its students to be treated by the state on equal footing with students at every other university,” Mr. Eisenman said in the statement. “They choose for themselves how best to live those values, but the First Amendment guarantees Yeshiva the right to maintain a campus environment consistent with its religious beliefs.”

The letter’s suggestion that the school may have misrepresented itself as a secular institution was a significant escalation in Yeshiva’s legal battle with its L.G.B.T.Q. students, which has brought a nationwide debate over religious freedom and civil rights to one of the country’s most politically liberal cities.

It also may jeopardize the ability of the university, which has more than 6,000 students on four campuses in Manhattan and the Bronx, to receive public funds in the future.

It is not clear what penalty, if any, the school might face, should it fail to provide the requested documents or is found to have misrepresented itself to obtain public funds.

The legal dispute between Yeshiva and its L.G.B.T.Q. students is one front in a yearslong battle over whether religiously affiliated companies and organizations — or even pious individuals — must provide employment or other public accommodations to people with differing views or whose lifestyles they disapprove of.

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That dispute and the concerns raised over Yeshiva’s receipt of public funds are centered around a murky yet timely debate: Should Yeshiva be considered an educational corporation governed by state education law, as its charter says it is, or should it be granted the legal protections of a religious corporation, which it has claimed to be in court testimony?

Federal courts have taken an increasingly broad view of religious liberty in recent years, and religious freedom cases that have made it to the Supreme Court have almost always prevailed since Justice Amy Coney Barrett joined the bench in 2020.

The lawmakers’ letter concerns money that was raised in 2009 and 2011 in two separate bond offerings by the Dormitory Authority of the State of New York, a public finance and construction agency that works with health care and education facilities across the state.

Those bond offerings raised about $140 million in 2009 and $90 million in 2011, said the lawmakers, who include Senator Liz Krueger, the chair of the Finance Committee, and Senator Toby Ann Stavisky, the chair of the Committee on Higher Education. When Yeshiva received the money, it agreed the funds would not be spent on facilities used for “sectarian religious instruction or as a place of religious worship,” they said.

“Y.U.’s discriminatory behavior is wholly inconsistent with the purposes for which state funding is provided, namely, to promote the fullest possible participation by all students in the state’s educational opportunities,” they wrote.

Many Jewish congregations support L.G.B.T.Q. rights, but many Orthodox leaders interpret the Torah as promoting more traditional ideas of gender and sexuality.

As such, Yeshiva’s administrators say recognizing an L.G.B.T.Q. club would be incompatible with the school’s religious values, and being legally forced to do so would violate its First Amendment rights.

The Dormitory Authority acts as a conduit issuer for bonds to raise money on behalf of New York State or its clients, like Yeshiva. The authority has raised vast sums since it was founded in 1944, raising and disbursing more than $29 billion in the last four years alone.

The authority has long worked with religiously affiliated educational institutions that serve the public, including Yeshiva University, as well as Fordham University and Siena College, which are both Catholic schools, said Jeffrey Gordon, an authority spokesman.

But Mr. Gordon said the agency does not work with religious institutions like Catholic seminaries, which are legally permitted to limit enrollment to Catholic men.

Since the L.G.B.T.Q. group sued Yeshiva in 2021, the university has argued it should be considered a religious institution, like a seminary, and not an educational corporation, like Fordham, which is subject to nondiscrimination law but also eligible to receive public funds.

Judges have so far rejected that argument.

In a ruling against the school last June, Justice Lynn R. Kotler of the State Supreme Court in Manhattan said Yeshiva’s own charter clearly stated it to be “an educational corporation under the education law of the State of New York” that was “organized and operated exclusively for educational purposes.”

After that ruling, Yeshiva made an emergency appeal to the U.S. Supreme Court, which rejected the request and told the school to exhaust its appeals at the state level before approaching it again. In the meantime, the court ordered the school to recognize the L.G.B.T.Q. student club, known as the Pride Alliance.

Last month, Yeshiva lost its appeal at the state level. “We find no violation of Yeshiva’s free exercise of religion,” wrote four judges from the New York Appellate Court in the decision.

But Katherine Franke, the founder of the Law, Rights and Religion Project at Columbia University Law School, said the Supreme Court would likely view the case differently.

She expressed doubt that Pride Alliance’s lawsuit would prevail, and said public agencies like the Dormitory Authority may be compelled to continue their financial relationship with Yeshiva.

She compared the situation to a recent Supreme Court case, Fulton vs. City of Philadelphia. The court ruled in 2021 that Philadelphia effectively discriminated against a Catholic social services agency that refused to place foster children with same-sex couples.

“To withdraw public funding after having funded the school for so long lands you in sort of the same place as Catholic social services in the city of Philadelphia,” said Professor Franke. “We are moving in the direction where states are obliged to fund religion because to not do so is to discriminate against religion.”

Yeshiva has been represented in the lawsuit by the Becket Fund for Religious Liberty, a high-profile public-interest legal and education firm based in Washington, D.C.

Eric Baxter, the fund’s vice president and the lead attorney on the Yeshiva case, has called the lower court rulings “obviously mistaken” and argued that no matter what the school’s decades-old charter may say, Yeshiva’s religious character is “plain and obvious.”

In court, Mr. Baxter has shared documents that the school claims show how deeply religion shapes its operations, including a policy that encourages students to undertake intensive religious studies in Israel, with 80 percent doing so, and another requiring that male students study the Torah.

Yeshiva has gone to great lengths to keep from recognizing the Pride Alliance as the school’s appeals work their way through the courts.

After the Supreme Court rejected Yeshiva’s emergency appeal, the university said it would suspend all student clubs rather than recognize one for L.G.B.T.Q. students. That threat was neutralized when the Pride Alliance agreed to remain unrecognized while the case worked its way through the courts.

Yeshiva then said in October that it would form its own “approved traditional Orthodox alternative” to the L.G.B.T.Q. student club in the form of a support group that would operate “within the framework of Halakha,” or Jewish religious law. The Pride Alliance rejected that as a form of top-down oversight that other clubs were not subjected to.

Ms. Stavisky, the chair of the Higher Education Committee, said Yeshiva could not claim to be one thing for the purpose of accessing taxpayer money and then claim to be another thing for the purpose of evading nondiscrimination laws.

“They have to decide which they want to be: an educational institution or a religious institution,” she said.

“I had a cousin who graduated from Fordham and he was Jewish,” added Ms. Stavisky. “And Yeshiva has people who have graduated from it who are not Jewish. And that’s the beauty of education in New York.”

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