As a libertarian, I hold that there SHOULD be a complete separation of church and state, at both the local and national level.
However, that is not what the First Amendment says. The First prevents CONGRESS from establishing religion. It does NOT prevent the states or localities from doing so.
In fact, in the early days of the republic, several states DID establish religions. Interestingly, Massachusetts was among them, designating tax money for establishing churches, until the 1830's.
The reason we no longer allow states and localities to establish religion is a weird, fantastically-broad "interpretation" of the post-Civil-War Fourteenth Amendment.