from Getting Generally Available FEMA Funds: Cathy Young comments on these.

I should say that under a plausible reading of current Establishment Clause doctrine (see the Mitchell v. Helms case from 2000, and Justice O'Connor's controlling concurrence there), the government indeed must discriminatorily exclude religious institutions from FEMA benefits programs, including programs aimed at repairing damage incurred when the institution was trying to help disaster victims: The theory would be that in such "direct aid" (as opposed to private-choice voucher) programs, no government money — even money that's distributed evenhandedly to all property owners damaged in a disaster — may flow to religious institutions unless there are up-front controls instituted to make sure that the money couldn't be used for religious purposes. I suspect there are no such controls on FEMA money, given that FEMA programs weren't designed with this in mind.

But that, it seems to me, just shows how wrong current Establishment Clause doctrine is on this score — and how much better current Establishment Clause doctrine is when it comes to private-choice vouchers, where the law now recognizes that equal treatment is not establishment. For more on this, see my Equal Treatment Is Not Establishment piece (which was written before Mitchell v. Helms and Locke v. Davey, but which is in a sense a prospective criticism of those decisions, as well as a prospective defense of Zelman v. Simmons-Harris, the private-choice voucher case).

Finally, just to make clear the current legal rule (to the extent that one can make it clear), here's a summary from my Religion Clauses textbook:

1. Evenhanded "private choice" funding programs — in which funds are routed by private individuals to institutions of their choice — are generally permissible even when these funds end up being used for religious purposes. See Zelman v. Simmons-Harris (2002).
2. Evenhanded "direct aid" programs — in which benefits are given directly to religious institutions — are
   1. Permissible if and only if there's some assurance that the funds will not be used for religious purposes.
      • Thus, a program that funds new buildings in all universities, and then lets the universities use those buildings for religious purposes, is forbidden. Tilton v. Richardson, 403 U.S. 672 (1971).
      • The program in Mitchell v. Helms (2000), or a program that gives schools secular equipment, such as secular books, Board of Ed. v. Allen, 392 U.S. 236 (1968), is permitted.
      • This is the result of Mitchell, in which the two swing Justices (O'Connor and Breyer) took this view. Four other Justices (Rehnquist, Scalia, Kennedy, and Thomas) take the view that there is no Establishment Clause problem with religious institutions participating in any evenhanded benefit programs, so long as the benefits are not themselves religious (i.e., so long as the benefits are money or secular books or supplies).
      • This is also pretty much the rule for direct-aid "charitable choice" programs, in which the government subsidizes a range of public service programs (for instance, alcohol and drug abuse rehabilitation programs), some of which are run by religious organizations. See Bowen v. Kendrick, 487 U.S. 589 (1988).
   2. Justice O'Connor also voted to uphold the program in Rosenberger, even though it was not a "private choice" program — religious newspapers were directly subsidized, rather than getting funds through the private choices of individual students — and even though the funds were certain to be used for religious purposes. Query how this can be reconciled with her position in Mitchell.

UPDATE: I originally wrote "per-capita voucher" where I meant to say "private-choice voucher"; silly mental crossed wires on my part — "private-choice voucher" is the Establishment Clause term of art. Thanks to Marty Lederman for correcting me on this.