In Goodwin v. Cross County School District No. 7 (1973), the Court ruled unconstitutional the distribution of Gideon Bibles on public school grounds. Goodwin v. Cross County School District No. 7, 394 F. Supp. 417 (E.D. Ark. 1973) and Meltzer v. Board of Public Instruction of Orange County, Fla, 548 F.2d 559 (5th Cir. 1977), reh. 577 F.2d 311 (5th Cir. 1978), Cert. Denied 439 U.S. 1089 (1979).
http://arkedu.state.ar.us/commemos/static/fy0102/attachments/prayer_in_schools_review_final.docThere have been more recent rulings on the topic in the context of the "equal access to school facilities" concept, again affirming that what happened in your daughter's school is unconstitutional. Here's what the ACLU has to say on the matter (note that this article on the ACLU's site was written in 2002, so that would be what the "earlier this year" is referring to:
II. BIBLE DISTRIBUTION
Earlier this year, the United States Court of Appeals for the Seventh Circuit ruled that an Indiana school district's policy and practice permitting representatives of Gideon International to distribute Bibles in public schools during school hours violated the Establishment Clause of the Constitution. See Berger v. Rensselaer Central School Corp., 982 F.2d 1160 (7th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 2344 (1993).
In Berger, the father of two elementary school children challenged the local school district's longstanding practice of allowing the Gideons to come into the public schools during instructional hours and distribute Bibles to fifth-grade students. Even t hough the teachers did not participate in handing out the Bibles to the students, and even though the Bibles were not used for pedagogical purposes, the Seventh Circuit held that the in-school Bible distribution was "a far more glaring offense to First Am endment principles" than the nonsectarian graduation prayer at issue in Lee. See Berger, 982 F.2d at 1169.
A long line of Supreme Court precedents establish that it is impermissible for school officials to allow the machinery of the state to be used to gather an audience for religious exercises or instruction. See Illinois ex rel. McCollum v. Board of Educ., 333 U.S. 203; Engel, 370 U.S. 421. In McCollum, for example, the Supreme Court struck down a program allowing religious instructors to come into the public schools to teach sectarian classes during school hours, at a time when students would be free to attend the religious classes or remain in their regular classes. The Court stated that:
Here not only are the State's tax-supported public school buildings used for the dissemination of religious doctrines. The State also affords sectarian groups an invaluable aid in that it helps to provide pupils for their religious classes through use of the State's compulsory public school machinery.
333 U.S. at 212.
It violates one of the Establishment Clause's most fundamental principles to turn government power over to religion. As the Supreme Court has recognized, the public school is the forum through which basic norms of citizenship are transmitted to the next generation and is thus a "vital civic institution for the preservation of a democratic system of government." See Abington Township, 374 U.S. at 230 (Brennan, J., concurring). When government permits a religious group to take over part of the school's facilities during instructional time, however briefly, it strongly implies official endorsement of that religion. In the Grand Rapids case, the Supreme Court stressed the importance of avoiding any "symbolic link" between government and religion. The Court held that the second ("effects") prong of the Lemon test will not be satisfied where the government fosters a "close identification of its powers and responsibilities with those of any -- or all -- religious denominations." School District of the City of Grand Rapids v. Ball, 473 U.S. at 385.
A school's participation in or supervision of the Gideons' Bible distribution impermissibly suggests that the Gideons' program is a valid part of a legally required education. The practice also carries the unmistakable message that religion -- in this case, Christian Bible study -- is the norm and the non-adherents are something less than full members of the school community. "When the government puts its imprimatur on a particular religion, it conveys a message of exclusion to all those who do not adhere to the favored beliefs." Lee, 112 S.Ct. at 2665 (Blackmun, J., concurring). See Wallace, 472 U.S. at 69 (O'Connor, J., concurring)(government endorsement of religion violates the Establishment Clause because it "sends a message to nonadherents that they are outsiders, not full members of the political community, and an accompanying message to adherents that the are insiders, favored members of the political community"); see also Lynch v. Donnelly, 465 U.S. 668, 688 (1984)(O'Connor, J., concurring).
As the Seventh Circuit aptly observed in Berger:
the act of accepting a Bible in front of other students, with the option of returning it later privately or choosing not to read it, signals accord with the Gideons' beliefs. Presumably, the fifth graders could make a public show of not accepting the Bible, just as students could walk out of the graduation ceremony in Lee, or leave during the scriptural reading in Abington, but the First Amendment prohibits the government from putting children in this difficult position.
982 F.2d at 1170.
Moreover, the Supreme Court repeatedly has emphasized the impressionability of primary and secondary school children and the pressure they are apt to feel from teachers, administrators and peers to conform. As the Supreme Court recently observed in Lee, "there are heightened concerns with protecting freedom of conscience from subtle coercive pressure in the elementary and secondary public schools" 112 S.Ct. at 2658. See Edwards, 482 U.S. at 584; see also Grand Rapids, 473 U.S. at 390 ("The symbolism of a union between church and state is most likely to influence children of tender years, whose experience is limited and whose beliefs consequently are the function of environment as much as of free and voluntary choice").
The Seventh Circuit also properly rejected the school district's argument that barring the Gideons from distributing Bibles in the public schools would violate the Gideons' First Amendment free speech rights. It is well established that the free speech rights of individuals and religious groups to engage in religious expression must be subordinated to Establishment Clause concerns where those individuals or groups seek to observe their religion in a manner that unduly involves the government. See, e.g. , Engel v. Vitale, 370 U.S. 421 (students and teachers may not recite prayers in school); McCollum, 333 U.S. 203 (teachers may not provide religious instruction on public school property); see also Berger, 982 F.2d at 1168. Religious groups such as the Gideons remain free to promote Bible study and otherwise proselytize in ways that do not carry the imprimatur of state endorsement.
http://www.aclu.org/religion/gen/16037res20020311.html