When rights claims collide, what’s the collateral damage to society?

That’s the painful question this week out of Illinois, site of the latest conflict between gay-rights laws and religious convictions.

When the state’s new civil-unions law took effect June 1, a Catholic diocese in northern Illinois ended its state-funded adoption and foster-care program rather than be required to place children with same-sex couples.

Collectively, Catholic dioceses across the state provide services to some 2,300 children of the 15,000 children in the foster-care system. Although state officials promise that other agencies will fill the gap as needed, many foster families in northern Illinois are upset about losing their relationship with Catholic Charities.

In two other places in which same-sex unions have won legal recognition, the story has been much the same.

Earlier this year, Catholic Charities in Washington, D.C., ended its contract to provide foster-care and adoption services for D.C. residents in the wake of the legalization of same-sex marriage in the city. And in 2006, Catholic Charities of Boston ended state-funded adoption services because placing children with same-sex couples — who can be legally married in Massachusetts — would violate church teachings.

Not surprisingly, emotions run high on both sides of this debate. For some critics of the church’s position, government funding is the key issue. Speaking about the conflict between Catholic Charities and the Washington, D.C., government, Barry Lynn of Americans United for Separation of Church and State put it this way:

“If ‘faith-based’ charities cannot or will not obey civil-rights laws, they ought not benefit from public funds.”

Although I wouldn’t say Catholic Charities “benefits” by using state funds to help children, I do agree that taxpayer dollars should come with nondiscrimination requirements. At the same time, however, I believe there should be room for religious exemptions, especially when claims of conscience are at stake.

I would feel differently if same-sex couples in Illinois, Boston, and D.C. didn’t have readily available alternatives — but they do. In Illinois, some 45 private agencies, most secular, provide state-funded adoption and foster-care services. For years, Catholic Charities in northern Illinois has referred same-sex couples (as well as unmarried straight couples living together) to other agencies — a practice that appears to have worked well.

With recent polls showing a slim majority of Americans now favoring gay marriage (and bigger numbers endorsing civil unions), legalization of same-sex relationships will undoubtedly spread to more parts of the country. But should the advance of gay rights force a retreat of faith-based groups from adoption and foster-care programs? Or can we accommodate religious convictions by carving out exemptions in civil-union and gay-marriage laws?

Ensuring that Catholic Charities (and other faith-based groups) can participate in state-funded programs and continue their work on behalf of children in need not only would serve the common good, it also would reaffirm our commitment to liberty of conscience as a fundamental human right.

Equality and liberty are core American principles, but neither should trump the other.

Let’s uphold both by moving from gay rights versus religious freedom to gay rights and religious freedom.

Charles C. Haynes is the director of the Religious Freedom Education Project at the Newseum.