The proposal, announced on Monday, calls for the establishment of a White House office to distribute federal funds to charities and religious groups during the next 10 years.
But the proposal has left some local leaders with serious reservations regarding the separation of church and state.
The aim of the program is to let such groups compete for taxpayer money to provide services such as after-school programs, prison ministries and drug treatment.
Bush stated in a press release that religious groups must be part of the solution for society's ills.
"A compassionate society is one which recognizes the great power of faith," the statement read. "We in government must not fear faith-based programs. We must welcome faith-based programs."
Bush will meet with leaders of religious and charitable organizations later this week to discuss his next move on the proposal, which is receiving lukewarm reviews from local religious leaders.
Becky Egan, associate campus minister at UNC's Newman Catholic Student Center, said she would support the program as long as it met the needs of the people it served without pushing religion.
"I can see people's issues with (the program) because it could cross the line of church and state."
But other campus religious leaders are not in favor of Bush's proposal. Bob Phillips, a minister with UNC Baptist Campus Ministries, said he opposes the plan because he fears it would be difficult to divide funds among the nation's many religious groups.
"I've heard the stories (about Bush's plan) and have serious reservations about the entire move," Phillips said.
Federal money is sometimes used to fund building projects on campus but funding religious-based organizations might prove difficult, he said.
"(The proposal) seems different and doesn't seem feasible," Phillips said. "As a Baptist, it doesn't appeal to me."
Phillips is not the only one opposed to the move. Rabbi John Friedman with the Judea Reform Congregation said Bush's plan has the potential to seriously weaken religion in America.
Friedman said it gives the government control over what religions get funded, which violates the First Amendment. "I'm deeply concerned about (the proposal)," Friedman said. "It's unwise and signifies an unprecedented action by the government."
Deborah Ross, the local spokeswoman for the American Civil Liberties Union, said religion is not a good way to assess the quality of a program for the purposes of handing out money. "It's always a bad thing to assume that somebody does something better than somebody else based on religious preference."
Religious organizations are exempt from many civil rights laws -- a practice that Ross said allows them to discriminate against certain individuals when they hire staff.
She said she thinks federal funds should not be given to any organization practicing discrimination in its hiring policies. "If the proposal as we understand it goes through, there's going to be an effort to prefer religious charities over nonreligious charities."
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