March 8 (Bloomberg) -- The Boy Scouts of America lost a U.S. Supreme Court appeal over its exclusion from sharing in the proceeds of a state-run charity campaign because it bans homosexuals.

The court refused to hear the Scouts' argument that Connecticut trampled on free-speech rights in dropping the youth organization from a campaign in which state workers contribute to charities through payroll deductions. The state requires all charities that seek donations in the campaign to have a non- discriminatory membership policy.

A lower court ruling in Connecticut's favor ``licenses state and local governments to punish the Boy Scouts for their views and threatens the First Amendment rights'' of groups including religious organizations, the Scouts' lawyers said in court papers filed in Washington. The Scouts say they have more than 2.5 million youth members and 1 million adult leaders.

The Supreme Court ruled in 2000 that states can't force the Scouts to accept homosexuals as members or youth leaders. The debate over gay rights has since intensified as the high court ruled last year that states can't criminalize homosexual sex acts and President George W. Bush proposed last month to amend the U.S. Constitution to ban homosexual marriage.

Today's action, which let stand a federal appeals court decision in Connecticut's favor, was not a decision on the merits of whether states can exclude the Scouts from charity campaigns.

`Pay a Price'

The Scouts, who also don't accept atheists or agnostics, argued that they can't be required to ``pay a price'' for exercising their right to bar known homosexual members.

The Scouts organization said in a statement it was disappointed the Supreme Court declined to hear the case.

Connecticut's exclusion of the Scouts from the charity campaign ``is a clear violation of Boy Scouts' First Amendment and equal-protection rights'' and amounts to discrimination based on viewpoint, the Scouts' statement said.

If Connecticut can bar the Scouts from the charity campaign, states could set similar conditions on organizations' access to social services, use of public facilities and tax-exempt status, the organization's lawyers said in court papers.

``The state cannot support any organization that engages in discrimination,'' Connecticut Attorney General Richard Blumenthal said in a statement today. He urged the Scouts organization to ``change its policy so the state can once again support its good work.''

``Although a private party may have a right to discriminate, the government does not have to assist'' in such discrimination, C. Joan Parker, lawyer for the Connecticut Commission on Human Rights and Opportunities, said in an interview.

Other Groups Excluded

Connecticut says it excluded 29 other organizations from the charitable campaign because they didn't meet the non- discrimination requirement.

The campaign is run during business hours by state workers who distribute a booklet describing the organizations seeking donations. About 900 charities are listed in the booklet, the Scouts' lawyers said.

The Scouts participated in the campaign for 30 years before state officials dropped the organization from the list in 2000. A state human-rights commission concluded that keeping the Scouts in the campaign would put the state in violation of a law that bars Connecticut from promoting discrimination.

A federal judge ruled for the state, as did the New York- based 2nd U.S. Circuit Court of Appeals. The appeals court rejected the Scouts' argument that the group's exclusion was unfair because the campaign included organizations such as gay- rights groups.

`Open Hostility'

While those organizations may target their services toward specific groups of people, there is no evidence they discriminate in their membership policies, the appeals court said.

In appealing to the Supreme Court, the Scouts said Connecticut showed ``open hostility'' to the Scouts' ``moral view.'' Without the more than $10,000 a year raised through the state charitable campaign, the organization would be forced to cut scouting programs, the Scouts' lawyers said.

Connecticut said it wasn't trying to force the Scout organization to give up its rights. The Supreme Court ruled in 1985 that government charitable campaigns can limit participating organizations as long as the limits aren't based on a group's views, the state said.

Scout Sponsors

Supporting the Scouts in court briefs were the Veterans of Foreign Wars, the American Legion, Campus Crusade for Christ International and three religious groups: the National Catholic Committee on Scouting, the Church of Jesus Christ of Latter-Day Saints and a United Methodist Church men's commission.

Those three groups said they are the largest U.S. sponsors of scouting, together sponsoring more than 1 million scouts.

They said the 2nd Circuit decision was a ``blueprint for using anti-discrimination laws to expel the Boy Scouts from numerous public facilities, lands and programs'' available to other non-profit organizations, the religious groups said.

In 2000, the Supreme Court ruled against an assistant scoutmaster in New Jersey who challenged the Scouts' decision to expel him after he announced he was gay. The court said the Scouts' expressive-association rights under the Constitution's First Amendment trumped a state law that the scoutmaster said required the Scouts to welcome all members.

Today's case is Boy Scouts of America v. Wyman, 03-956.

To contact the reporter on this story: Laurie Asseo in Washington at lasseo1@bloomberg.net.

Last Updated: March 8, 2004 13:49 EST