State of Cal., Dept. of Educ. v. Bennett
| Decision Date | 02 December 1987 |
| Docket Number | Nos. 86-7273,86-7707,s. 86-7273 |
| Citation | 833 F.2d 827 |
| Parties | 42 Ed. Law Rep. 1095 STATE OF CALIFORNIA, DEPARTMENT OF EDUCATION, Petitioner, v. William J. BENNETT, Secretary of Education, United States Department of Education, Respondents. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Joseph R. Symkowick, Chief Counsel, Michael E. Hersher, Staff Counsel, Cal. Dept. of Educ., Sacramento, Cal., for petitioner.
Wendell L. Willkie, Gen. Counsel, John R. Mason, Office of the Gen. Counsel of the U.S. Dept. of Educ., Washington, D.C., for respondents.
Petition to Review a Final Decision of the United States Secretary of Education.
Before CHOY, ALARCON and O'SCANNLAIN, Circuit Judges.
The State of California Department of Education ("California") petitions for review of two final decisions of the United States Secretary of Education ("Secretary") ordering California to refund a total of $250,279.94 in federal funds extended under Title I of the Elementary and Secondary Education Act that were found to have been misspent during the fiscal years 1978-1980. California contends that the Secretary improperly interpreted regulations governing the allowability of conference costs under Title I. We disagree and deny the petition.
Under Title I of the Elementary and Secondary Education Act of 1965, Pub.L. No. 89-10, 79 Stat. 27 (), 1 the federal government provided funds to local educational agencies ("LEAs") 2 to meet the needs of educationally deprived children residing in school attendance areas with high concentrations of children from low income families. 20 U.S.C. Sec. 2701. Title I funds were channeled from the federal government to the LEAs through state educational agencies ("SEAs") 3 such as California's.
Respecting the deeply rooted tradition of state and local control over education, Congress entrusted most of the responsibility for managing Title I programs to the SEAs. Basically, Title I contemplated that each LEA would file an application with the appropriate SEA describing the programs and projects to be conducted. 20 U.S.C. Sec. 2731. After verifying the application's accuracy and ensuring that all proposals conform with current Title I guidelines, the SEA would distribute Title I funds to the LEA. 20 U.S.C. Sec. 2811. The SEA in turn would receive grants from the federal government upon providing assurances to the Secretary that the LEA would spend the funds only on programs that satisfy the requirements of Title I. 20 U.S.C. Sec. 2802(b).
In 1983, federal auditors found that during fiscal years 1978-1980 California inappropriately charged at least $743,248 to Title I for conferences and State Board of Education meetings. The United States Assistant Secretary for Elementary and Secondary Education ("Assistant Secretary") reviewed the audit report and issued a final determination letter partially sustaining the audit findings. The Assistant Secretary ruled that $335,038 in expenses associated with 16 conferences and meetings were prohibited and ordered California to refund that sum to the United States Department of Education ("Department"). 4
California filed an application for review of this final determination with the Education Appeal Board ("EAB"). On December 17, 1985, the EAB issued its initial decision, which required California to refund $91,624.44 attributable to certain conferences that "were not particularly relevant or primarily related to Title I programs." 5
On March 21, 1986, in response to comments and recommendations filed by California and the Assistant Secretary, the Secretary affirmed the EAB's conclusion that $91,624.44 in expenses attributable to certain conferences were improperly charged to Title I programs. However, the Secretary found that the EAB had "applied an incorrect legal standard for determining whether the expenses related to a conference are chargeable as Title I expenses." As a result, the Secretary remanded the audit to the EAB to determine if the correct legal standard affected its decision with respect to the three conferences involving $158,655.60 that the EAB had found allowable. 6
On remand from the Secretary, the EAB reversed its earlier decision and ordered California to refund an additional $158,655.50 to the Department. The Secretary declined to review the EAB's order, which thereby became final. See 20 U.S.C. Sec. 1234a(d).
California timely petitioned for review of the Secretary's final decisions ordering California to refund $91,624.44 and $158,655.50 in Title I funds. 7
This court will not disturb the Secretary's determination that California misapplied Title I funds if the Secretary's decision reflects an application of the proper legal standards and is supported by substantial evidence. Bennett v. Kentucky Department of Education, 470 U.S. 656, 666, 105 S.Ct. 1544, 1550, 84 L.Ed.2d 590 (1985); Hawaii Department of Education v. Bell, 770 F.2d 1409, 1413-14 (9th Cir.1985).
California's principal contention is that the Secretary applied an improper legal standard in determining whether conference costs are chargeable as expenses under Title I. Title I statutes do not expressly address conference costs but do authorize federal funds to train 1) the parents of disadvantaged children serving on the parent advisory councils; 8 2) teachers with Title I participants in their classrooms, 20 U.S.C. Sec. 2734(a) (1982); and 3) education aides and volunteers performing specific services related to approved Title I programs, 20 U.S.C. Sec. 2734(l ) (1982).
Under federal regulations in effect during fiscal years 1978-1980, "[p]ayment of Title I funds may be authorized for ... training ... [if such training is] directly related to ... [t]he services which such persons will perform ... in connection with an approved program or project under Title I ... [and] ... the development of competencies required if the program or project is to be effective...." 45 C.F.R. Sec. 116.36 (1976) (emphasis added). In addition, "[c]osts [of a meeting] are allowable when the primary purpose of the meeting is the dissemination of technical information relating to the grant program...." 45 C.F.R. pts. 100-100d, app. B, pt. II, Sec. B.19.c. (1976) (emphasis added). 9
The Secretary has interpreted these regulations to require a conference as a whole to be "directly related" to Title I issues and to have as its "primary purpose" the dissemination of technical information regarding Title I in order to qualify as a Title I expenditure. California does not challenge the validity of the federal regulations but claims that the Secretary's interpretation of the regulations imposes an improper legal standard.
An agency's interpretation of regulations it administers is entitled to substantial deference. Natural Resources Defense Counsel, Inc. v. Hodel, 819 F.2d 927, 929 (9th Cir.1987); Hawaii Department of Education, 770 F.2d at 1413. Judicial review is limited to insuring that the agency's interpretation is not "plainly erroneous or inconsistent with the regulation[s]." Udall v. Tallman, 380 U.S. 1, 16-17, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965) (quoting Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700 (1945)); Marathon Oil Co. v. United States, 807 F.2d 759, 765 (9th Cir.1986), cert. denied, --- U.S. ----, 107 S.Ct. 1593, 94 L.Ed.2d 782 (1987). However, as the judiciary is the final authority on issues of statutory and regulatory construction, we will not defer to an agency's interpretation that clearly contravenes congressional intent. Morrison-Knudsen Co., Inc. v. CHG International Inc., 811 F.2d 1209, 1215 (9th Cir.1987); see Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 843 n. 9, 104 S.Ct. 2778, 2781 n. 9, 81 L.Ed.2d 694 (1984).
California initially argues that because the Secretary's interpretation of the regulations has an impact on state and local programs, it is necessarily "[f]ederal control over local decision-making." This allegedly contradicts the express intent of Congress to preserve the deeply rooted tradition of state and local control over education.
This contention is meritless. Congress clearly left the development of innovative compensatory programs to state and local authorities. 10 However, there is an important distinction between the "proper interpretation of congressional action which presumptively should accord state governmental units the broadest measure of respect" and "the broad power of Congress to control certain actions of state governmental units." Bennett v. New Jersey, 470 U.S. 632, 654-55 n. 16, 105 S.Ct. 1555, 1568 n. 16, 84 L.Ed.2d 572 (1985) (Stevens, J., dissenting) (emphasis deleted). In the present case, Congress clearly "intended to achieve a particular purpose and shaped [Title I] to insure that federal funds would be used in a manner consistent with that purpose." Alexander v. Califano, 432 F.Supp. 1182, 1189-90 (N.D.Cal.1977). 11 To that effect, Congress expressly authorized the Secretary to adopt such rules and regulations as he deemed appropriate. See 20 U.S.C. Sec. 242(b). Under such circumstances, the fact that the Secretary's interpretation of the regulations has an impact on state and local programs is not, by itself, a ground for rejecting that interpretation.
California also contends that the Secretary's focus on an entire conference in determining the allowability of conference expenditures is an arbitrary method for determining whether particular training received at that conference fulfills a Title I need. According to California, skills necessary to implement Title I programs are typical organizational and teaching skills that are the subject of conferences not specifically devoted to Title I. However, as previously noted, federal regulations allow costs of a meeting only when the meeting's "primary purpose"...
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