Connecticut lawmakers killed the controversial church finance bill which would have forced the Catholic church to re-structure it's financial system and move the power out of the bishops hands into the hands of church members.
Republicans claimed the bill was unconstitutional and said the government had no right to interfere with church business.
Thousands of Catholics still protested on the Capitol steps after the ruling, saying the bill was a threat to the separation of church and state.
"Religious freedom holds a privileged place in American society," said the Rev. Richard Ryscavage, who runs Fairfield University's Center for Faith and Public Life. "You tamper with that religious freedom at your own political peril."
The state house also held a two-hour meeting to discuss how a bill like this could be introduced in the first place.
Andrew McDonald, a Democratic state senator who backed the proposal, said a lot of misinformation has been spread about the bill.
"We are keeping an open mind to what these parishioners have to say about their church," he said.
The bill was crafted after the former pastor of St. John's Roman Catholic Church in Darien pleaded guilty in September 2007 to stealing more than $1 million from the church. He was sentenced to more than three years in federal prison.
Sources: Reuters, CBN News