In Lemon v. Kurtzman (1971), the Supreme Court ruled that the state of Pennsylvania could not subsidize religious private schools through its Nonpublic Elementary and Secondary Education Act. Although the funds allocated in the Act were limited to the purpose of reimbursing the schools for textbooks, instructional materials, and the salaries of teachers who did not teach religion, the Court held that since the Act had the result of benefiting primarily Roman Catholic schools, it overextended the government's power on behalf of a religious organization. Later cases have referred to the benchmark three-part test established by Lemon, which states that a U.S. law violates the Establishment Clause of the Constitution if (1) the purpose of the law is not a secular purpose, (2) the law's primary effect is to inhibit or further the practice of religion, or (3) the law creates “excessive entanglement” between government and religious authority.
Other states have also faced questions concerning whether or not a government policy or activity violates the Constitution's prohibition on the establishment of religion. For example, in Pawtucket, Rhode Island, the inclusion of a religious symbol among secular holiday decorations in a display sponsored and maintained by the city, at minimal expense, was declared constitutionally permissible. Although the religious symbol was erected on government property, it was both a longstanding tradition in the town and appeared among other, purely secular, symbols of the holiday season; it had gone unchallenged in the courts for more than 40 years. This, however, did not prevent application of the “Lemon test.” Indeed, as the Supreme Court has interpreted it, the question of establishment of religion is often a matter of perception and context as much as it is of clear divisions. This flexible approach is illustrated by Lynch v. Donnelly (1984), in which the Court demonstrated that differing circumstances could indeed lead to different results of application of the “Lemon test.” Therefore, the Court ruled that, in Pawtucket's context, the appearance of a religious symbol amid various secular ones in a government-sponsored display did not violate the Constitution.