AzCLU wrong on school choice
As Ed points out, this is not a violation of the establishment clause of the Constitution (or the Arizona Constitution's prohibition on state funds being used to promote religion) because no state funds are going directly to any religious organization.
I support the Institute for Justice on this issue, and this is a reason I've never given funds to the AzCLU (though I support the ACLU Foundation).
I am a beneficiary of the individual state tax credit--I annually make the maximum qualifying contribution to the Arizona School Choice Trust, which is the single most efficient charity I donate to (100% of donations are distributed as tuition payments for students from low-income families; salaries for employees and administrative overhead are paid by another private organization).
UPDATE (June 7, 2007): Judge Janet Barton granted the Institute for Justice's motion to dismiss this case, back in March.
UPDATE (March 12, 2009): The Institute for Justice won this case again today in the Arizona Court of Appeals.