In the 1956 case Pennsylvania et al. v. Board of Directors of City Trusts of the City of Philadelphia, the Supreme Court ruled on a dispute over control and management rights for Girard College, a school established by Stephen Girard's will in 1831 to educate poor white male orphans. The state argued that it should have authority over the institution due to its public nature while trustees maintained they were responsible for managing it according to Girard’s will which specified that only white boys could attend. The court sided with trustees stating that since funds came from private sources rather than public taxes, it was not subject to state regulation despite serving a public function. However, this decision would later be overturned in another case (Pennsylvania v Brown) where racial discrimination at privately funded institutions serving public functions was deemed unconstitutional under equal protection clause.

In the dissenting opinion for Pennsylvania et al. v. Board of Directors of City Trusts of the City of Philadelphia, Justice Frankfurter argued that there was no constitutional violation in allowing a religious organization to maintain and operate a school with public funds because it did not involve any form of coercion or compulsion on matters related to religion. He contended that this case was fundamentally different from those where state action had been used to force individuals into participating in religious activities against their will, which would be an infringement upon personal liberties protected by the First Amendment. Instead, he saw this as an instance where public resources were being utilized for secular purposes within a religious institution - something he believed fell outside the scope of what is prohibited by the Constitution's Establishment Clause.