God or mammon: when religious groups get caught between their principles and their subsidies.

THE SALVATION ARMY, with its bells and kettles, is ubiquitous in the Christmas season. In our contentious times, it is also the center of a controversy over religion, public funding for charities, and discrimination.

In May the New Fork Post reported that the Salvation Army, which has provided social services and Christian ministry to the poor around the world for more than 125 years, could be pulling out of New York City rather than provide health insurance benefits to domestic partners of gay employees, as New York City law may soon require. The legislation, passed in May, would require all businesses and nonprofits that have contracts with the city worth at least $100,000 to provide the benefits.

At this writing, New York Mayor Michael Bloomberg, a moderate and generally pro-gay rights Republican, is suing to block enforcement of the legislation, which is also vehemently opposed by Catholic Charities. (One of Bloomberg's appointees to the city's Human Rights Commission, National Gay and Lesbian Task Force Executive Director Matt Foreman, resigned from the commission over the mayor's position on this issue.)

Regardless of how the skirmish is ultimately resolved, the question of whether religious organizations with secular functions will have to sacrifice their traditional moral beliefs to modern anti-discrimination laws will surely remain at the center of the culture wars.

This is not the first time the Salvation Army, which defines itself as an evangelical Christian church, has faced this issue. In 1998 it chose to forgo $3.5 million a year in public funding in San Francisco after the city passed an ordinance requiring all firms with city contracts to offer benefits to their staffers' domestic partners. In 2001, with similar problems looming in Los Angeles and several other major West Coast cities with legal protections for domestic partnerships, the Salvation Army's leadership approved a policy that would allow employees in its Western region to buy insurance coverage for one "legally domiciled adult"--who could be a same-sex partner or a relative sharing the employee's household. Right-wing religious groups such as Focus on the Family and the American Family Association were quick to cry foul, lamenting that the Salvation Army was trying to "ignore the moral standard for behavior set by God." Faced with the prospect of losing millions in donations from conservative Christians, the national leadership reversed itself and rescinded the policy allowing domestic partner benefits.

A similar conflict has arisen around the issue of insurance coverage for contraception. In California, Catholic Charities sued for an exemption from the state law mandating that employers who provide prescription drug coverage for their workers also cover the cost of contraceptives. The law does contain an exemption for religious employers such as churches. But in May 2004 the California Supreme Court ruled that Catholic Charities was not a religious organization for the purposes of the law: It offers "secular" services such as housing and immigration assistance to people of all faiths, employs Catholics and non-Catholics alike, and does not directly mix its services with Catholic preaching.

The sole dissenter, Justice Janice Rogers Brown, accused the government of "an intentional, purposeful intrusion into a religious organization's expression of its religious tenets and sense of mission." Yet one of the ironies of the case is that Catholic Charities had long downplayed its religious mission--in part to qualify for the government funds that make up two-thirds of its budget.

The partnership between religious charities and the state goes back to the 1960s, when, as part of the War on Poverty, the federal government began to dole out grants for social services to community organizations, including churches and church-based groups. The money came with strings attached: It could not go to programs in which secular social services (food banks, homeless shelters, job training programs) were too closely intertwined with a religious mission, such as Bible studies or proselytizing.

The first breach in this wall of separation was made not by theocrats in the Bush White House but by the Clinton administration. The 1996 welfare reform law created a "charitable choice" provision, allowing religious charities to accept various forms of direct or indirect federal subsidy "on the same basis as any other nongovernmental provider without impairing the religious character of such organizations, and without diminishing the religious freedom of beneficiaries of assistance funded under such programs."

Among other things, these changes meant that government-funded programs could be provided in houses of worship, that religious art could be displayed on the premises of such programs, and that the religious programs getting the money could discriminate against their employees on the basis of religion. (The use of federal funds for proselytizing and explicitly religious missions, however, was still prohibited.) Bush's much-discussed "faith-based initiative" did little more than take Clinton's measure a step further by making a special effort to promote religious charities and expanding the range of activities that could be covered under this provision from assistance to the needy to virtually all government-funded social programs.

As the controversy over domestic partnership laws illustrates, the allocation of federal funds to religious organizations raises some tough issues. Should taxpayer money subsidize groups that discriminate against some citizens? Most Americans do not yet see same-sex marriage as a civil right, so the Salvation Army's refusal to endorse same-sex domestic partner benefits is likely to be seen as a legitimate exercise of religious belief. The same is probably true of Catholic Charities' anti-contraception stance.

But what if , for instance a faith-based social service refused to hire married women, or refused, on scriptural grounds, to put women in leadership positions? Should religious belief excuse an organization from having to follow laws against sex discrimination, particularly in the public sector? And if so, why should that exemption be limited to organizations with an explicitly religious mission? Why not extend it to the deeply religious owner of a secular business who wants to run his enterprise in accordance with the principles of his faith?

If social conservatives tend to brush aside these questions in their conviction that religion is a socially beneficent force, liberals have their own blind spot, overlooking the fact that nonreligious dogmas in the nonprofit sector can be equally problematic. For nearly three decades, for example, federal and state money for domestic violence programs has gone to feminist groups whose missionary zeal fully matches that of any church. These programs not only serve as vehicles for a narrow sectarian ideology; they also habitually discriminate on the basis of gender, both in the provision of services and in employment.

In 1998, Independence House, a battered women's program in Massachusetts that has had longstanding service contracts with the state Department of Public Health and Department of Social Services, appointed a man, Richard Costa, as its new director. The decision caused an outcry from activists who accused the agency of betraying its feminist roots, sparking several resignations from its board. (Costa was dismissed six months later.)

Partnerships in which public funds for social services are allocated to privately run programs are often seen as a semi-libertarian solution to the problem of the welfare state. But in religious or secular guise, such entanglements pose thorny problems. Taxpayers can be forced to subsidize religiously or ideologically driven programs they find objectionable; private groups can be compelled to compromise their beliefs and their mission.

What's more, the government gets to decide which private organizations and which beliefs will receive its imprimatur. Suddenly, the privatization of the welfare state looks more like the bureaucratization of charity.

Editor Cathy Young ([e-mail]) is a columnist for The Boston Globe.