The premise is that, if a given body of people come together for a religious purpose, then it cannot be the recipient of any governmental funds. Ave Maria, FL, would clearly be such a body. It could not function without governmental funds because, as an incorporated municipality within the State of Florida, it would be directly involved with all sorts of state-and-Federally funded things—such as roads and Medicaid, to take just two examples. Its residents would be voting and paying taxes, and higher jurisdictions would find it practically as well as politically impossible to keep the town altogether out of the normal funding loop for incorporated municipalities, such as sales-tax sharing. So unless the court of jurisdiction in this ACLU suit rejects the ACLU's basic premise, the plaintiff should win the case. Thus the dream of Tom Monaghan, founder of Domino's Pizza and bankroller of Ave Maria University, would be quashed. Much to the delight of liberals everywhere, I'm sure.
It's the premise that's gotta go. If it were true, then all government largesse to religious bodies, even when the activity in question is being funded for a purely secular purpose, is unconstitutional. Last I checked, the Supreme Court does not agree. Neither should we.