Bennett v. New Jersey
| Decision Date | 19 March 1985 |
| Docket Number | No. 83-2064,83-2064 |
| Citation | 470 U.S. 632,105 S.Ct. 1555,84 L.Ed.2d 572 |
| Parties | William J. BENNETT, Secretary of Education, Petitioner v. NEW JERSEY |
| Court | U.S. Supreme Court |
In earlier proceedings in this litigation, this Court, reversing the Court of Appeals' judgment, held that the Federal Government may recover misused funds from States that provided assurances that federal grants would be spent only on eligible programs under Title I of the Elementary and Secondary Education Act of 1965, which provided for grants to support compensatory education for disadvantaged children in low-income areas. Bell v. New Jersey, 461 U.S. 773, 103 S.Ct. 2187, 76 L.Ed.2d 312 (1983). However, the Court expressly declined to address the issue whether substantive provisions of the 1978 Amendments to the Act apply retroactively for determining if Title I funds were misused in earlier years. On remand, New Jersey argued that the 1978 Amendments, which relaxed the eligibility requirements for local schools to receive Title I funds, should be applied in determining whether funds were misused during the years 1970-1972. The Court of Appeals agreed and remanded the case to petitioner Secretary of Education to determine whether the disputed expenditures conformed to the 1978 standards.
Held: The substantive standards of the 1978 Amendments do not apply retroactively for determining if Title I funds were misused under previously made grants. Pp. 638-646.
(a) The Court of Appeals' reliance—based on language from Bradley v. Richmond School Board, 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476 (1974)—on a presumption that statutory amendments apply retroactively to pending cases is inappropriate in this context. Both the nature of the obligations that arose under the Title I program and Bradley itself suggest that changes in substantive requirements for federal grants should not be presumed to operate retroactively. Moreover, practical considerations related to the administration of federal grant programs imply that obligations generally should be determined by reference to the law in effect when the grants were made. Retroactive application of changes in the substantive requirements of a federal grant program would deny both federal auditors and grant recipients fixed, predictable standards to determine if expenditures are proper. Pp. 638-641.
(b) Neither the statutory language nor the legislative history indicates that Congress intended the substantive standards of the 1978 Amendments to apply retroactively. Both the general purpose of the 1978 Amendments to clarify and simplify provisions concerning implementation of Title I, and specific references in the statute and legislative history suggest that the new requirements were intended to apply prospectively. Nor do changes in the Act and administrative regulations, made since 1976, support the Court of Appeals' conclusion that earlier regulations were inconsistent with Title I's policies. Pp. 641-645.
(c) There is no inequity here in requiring repayment of funds that were spent contrary to the assurances provided by the State in obtaining the federal grants. Moreover, the role of a court in reviewing a determination by the Secretary of Education that funds have been misused is to judge whether the findings are supported by substantial evidence and reflect application of the proper legal standards. Where the Secretary has properly concluded that funds were misused under the legal standards in effect when the grants were made, a reviewing court has no independent authority to excuse repayment based on its view of what would be the most equitable outcome. Pp. 645-646.
724 F.2d 34, reversed and remanded.
Michael W. McConnell, Washington, D.C., for petitioner.
Mary Ann Burgess, Asst. Atty. Gen., Trenton, N.J., for respondent.
The issue presented is whether substantive provisions of the 1978 Amendments to Title I of the Elementary and Sec- ondary Education Act apply retroactively for determining if Title I funds were misused during the years 1970-1972. This case was previously before the Court, and we then held that the Federal Government may recover misused funds from States that provided assurances that federal grants would be spent only on eligible programs. Bell v. New Jersey, 461 U.S. 773, 103 S.Ct. 2187, 76 L.Ed.2d 312 (1983). We expressly declined, however, to address the retroactive effect of substantive provisions of the 1978 Amendments. Id., at 781, n. 6, 782, and n. 7, 103 S.Ct., at 2192, n. 6, 2193, and n. 7. On remand from our decision, the Court of Appeals for the Third Circuit held that the standards of the 1978 Amendments should apply to determine if funds were improperly expended in previous years. State of New Jersey, Dept. of Ed. v. Hufstedler, 724 F.2d 34 (1983). We granted certiorari, 469 U.S. 815, 105 S.Ct. 79, 83 L.Ed.2d 27 (1984), and we now reverse.
Title I of the Elementary and Secondary Education Act of 1965, Pub.L. 89-10, 79 Stat. 27, as amended, 20 U.S.C. § 241a et seq. (1976 ed.), provided federal grants-in-aid to support compensatory education for disadvantaged children in low-income areas.1 Based on the theory that poverty and low scholastic achievement are closely related, Title I allocated funds to local school districts based on their numbers of impoverished children and the State's average per-pupil expenditures. H.R.Rep. No. 95-1137, pp. 4, 8 (1978), U.S.Code Cong. & Admin.News 1978, p. 4971; S.Rep. No. 95-856, p. 5 (1978); see 20 U.S.C. §§ 241a, 241c(a)(2) (1976 ed.); S.Rep. No. 146, 89th Cong., 1st Sess., 5-6 (1965), U.S.Code Cong. & Admin.News 1965, p. 1446. Within particular school districts, Title I funds were in turn directed to schools that had high concentrations of children from low-income families. § 241e(a)(1)(A). Once Title I funds reached the level of targeted schools, however, all children in those schools who needed compensatory education services were eligible for the program regardless of family income. H.R.Rep. No. 95-1137, at 4; 45 CFR § 116a.21(e) (1977); 45 CFR § 116.17(f) (1972). Respecting the deeply rooted tradition of state and local control over education, Congress left to local officials the development of particular programs to meet the needs of educationally disadvantaged children. Federal restrictions on the use of funds at the local level sought only to assure that Title I moneys were properly used "to provide specific types of children in specific areas with special services above and beyond those normally provided as part of the district's regular educational program." H.R.Rep. No. 95-1137, at 4, U.S.Code Cong. & Admin.News 1978, p. 4974.
The goal of providing assistance for compensatory programs for certain disadvantaged children while respecting the tradition of state and local control over education was implemented by statutory provisions that governed the distribution of Title I funds. Local school districts determined the content of particular programs, and the appropriate state education agency approved the applications for Title I assistance submitted by local education agencies. 20 U.S.C. § 241e(a) (1976 ed.). After determining that the applications complied with the requirements of federal law, the state education agencies distributed Title I funds to the school districts. §§ 241e(a), 241g. The state education agencies in turn received grants from the Department of Education upon providing assurances to the Secretary that the local educational agencies would spend the funds only on programs which satisfied the requirements of Title I.2 Bell v. New Jersey, supra, 461 U.S., at 776, 103 S.Ct., at 2189; 20 U.S.C. § 241f(a)(1) (1976 ed.). As noted supra, we previously held that if Title I funds were expended in violation of the provided assurances, the Federal Government may recover the misused funds from the States.
This case arises from a determination by the Department of Education that respondent New Jersey must repay $1,031,304 in Title I funds that were improperly spent during the years 1970-1972 in Newark, N.J. 461 U.S., at 777, 103 S.Ct., at 2190. There is no contention that the Newark School District received an incorrect allocation of Title I funds or that funds were not used for compensatory education programs. Instead, the Secretary's demand for repayment rests on the finding that Title I funds were not directed to the proper schools within the Newark school district. Regulations in effect when the moneys were expended provided that school attendance areas within a School District could receive Title I funds if either the percentage or number of children from low-income families residing in the area was at least as high as the districtwide average. 45 CFR § 116.17(d) (1972). Alternatively, the entire school district could be designated as eligible for Title I services, but only if there were no wide variances in the concentrations of children from low-income families among school attendance areas in the district. Ibid. A federal audit completed in 1975 determined that the New Jersey Department of Education had incorrectly approved grant applications allowing 13 Newark schools to receive Title I funds in violation of these requirements. App. 9-51.
The auditors found that during the 1971-1972 school year, the percentage of children from low-income families for the 13 schools ranged from 13% to 33.5%, while the district-wide average for Newark was 33.9%. Id., at 23-24. Consequently, for that school year the auditors disallowed Title I expenditures totaling $1,029,630. The auditors also found that funds were misused during the 1970-1971 school year but because of the statute of limitations, only $1,674 remains at issue for that year. App. to Pet. for Cert. 36a-37a. In June 1976, the Department issued a final determination letter to New Jersey demanding repayment of the misused funds. App. 52-58. New Jersey sought further...
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