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.
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.
470 U. S.
638-646.
(a) The Court of Appeals' reliance -- based on language from
Bradley v. Richmond School Board, 416 U.
S. 696 -- 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.
470 U. S.
638-641.
(b) Neither the statutory language nor the legislative history
indicates that Congress intended the substantive standards of the
1978
Page 470 U. S. 633
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.
470 U. S.
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.
470 U. S.
645-646.
724 F.2d 34, reversed and remanded.
O'CONNOR, J., delivered the opinion of the Court, in which
BURGER, C.J., and BRENNAN, WHITE, BLACKMUN, and REHNQUIST, JJ.,
joined. STEVENS, J., filed a dissenting opinion, in which MARSHALL,
J., joined,
post, p.
470 U. S. 646.
POWELL, J., took no part in the consideration or decision of the
case.
JUSTICE O'CONNOR delivered the opinion of the Court.
The issue presented is whether substantive provisions of the
1978 Amendments to Title I of the Elementary and Secondary
Page 470 U. S. 634
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 (1983). We expressly declined, however, to
address the retroactive effect of substantive provisions of the
1978 Amendments.
Id. at
461 U. S. 781,
n. 6,
461 U. S. 782,
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 (1984), and
we now reverse.
I
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. [
Footnote 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);
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). Within particular school districts, Title I funds were in
turn directed to schools that had high concentrations
Page 470 U. S. 635
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.
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/ [
Footnote
2]
Bell v. New
Page 470 U. S. 636
Jersey, supra, at
461 U. S. 776;
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
461 U. S. 777.
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 district-wide 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,
Page 470 U. S. 637
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 administrative review, and hearings were held
before the Education Appeal Board (Board). In those proceedings,
New Jersey argued that the Department was not authorized to compel
repayment, that the auditors had miscalculated the percentages of
children from low-income families, and that the entire Newark
School District qualified as a Title I project area under the
regulations. App. to Pet. for Cert. 35a-58a. The Board rejected
each of these arguments,
id. at 37a-58a, and ordered
repayment. The Secretary declined to review the Board's order,
which thereby became final.
Id. at 59a.
New Jersey then sought judicial review, and the Court of Appeals
for the Third Circuit held that the Department did not have
authority to issue the order demanding repayment.
State of New
Jersey, Dept. of Ed. v. Hufstedler, 662 F.2d 208 (1981).
Accordingly, the Court of Appeals did not address arguments made by
New Jersey challenging the Department's determination that funds
were misused.
Id. at 209. After remand from our decision
in
Bell v. New Jersey, the State argued for the first time
that the 1978 Amendments to Title I, Pub.L. 95-561, 92 Stat. 2143,
20 U.S.C. § 2701
et seq., should determine whether the
funds were misused during the years 1970-1972. 724 F.2d at 36, n.
1. The Court of Appeals agreed, and remanded the case to the
Secretary to determine whether the disputed expenditures conformed
to the 1978 standards.
Id. at 37. We hold that the
substantive standards of the 1978 Amendments do not affect
obligations under previously made grants, and we reverse. Our
holding does not address whether the Secretary correctly determined
that Title I funds were misused under the law in effect during the
years 1970-1972, and New Jersey may renew its contentions in this
regard on remand.
Page 470 U. S. 638
II
The Court of Appeals based its holding on a presumption that
statutory amendments apply retroactively to pending cases. Relying
on language from
Bradley v. Richmond School Board,
416 U. S. 696
(1974), the Court of Appeals observed that
"[a] federal court or administrative agency must"
"apply the law in effect at the time it renders its decision,
unless doing so would result in manifest injustice or there is
statutory direction or legislative history to the contrary."
724 F.2d at 36, quoting 416 U.S. at
416 U. S. 711.
We conclude, however, that reliance on such a presumption in this
context is inappropriate. 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. [
Footnote 3]
As we explained in our first decision in this case,
"the pre-1978 version [of Title I] contemplated that States
misusing federal funds would incur a debt to the Federal Government
for the amount misused."
461 U.S. at
461 U. S. 782.
Although our conclusion was based on the statutory provisions,
id. at
461 U. S.
782-790, we also acknowledged that Title I, like many
other federal grant programs, was "much in the nature of a
contract."
Pennhurst State School and Hospital v.
Halderman, 451 U. S. 1,
451 U. S. 17
(1981).
"The State chose to participate in the Title I program and, as a
condition of receiving the
Page 470 U. S. 639
grant, freely gave its assurances that it would abide by the
conditions of Title I."
461 U.S. at
461 U. S. 790.
A State that failed to fulfill its assurances has no right to
retain the federal funds, and the Federal Government is entitled to
recover amounts spent contrary to terms of the grant agreement.
Id. at
461 U. S. 791;
see id. at
461 U. S. 794
(WHITE, J., concurring). In order to obtain the Title I funds
involved here, New Jersey gave assurances that the money would be
distributed to local education agencies for programs that qualified
under the existing statute and regulations.
See 20 U.S.C.
§ 241f(a) (1976 ed.); 45 CFR § 116.31(c) (1972). Assuming that
these assurances were not met for the years 1970-1972,
see
461 U.S. at
461 U. S. 791,
the State became liable for the improper expenditures; as a
correlative, the Federal Government had, before the 1978
Amendments, a preexisting right of recovery.
Id. at
461 U. S. 782,
and n. 7.
The fact that the Government's right to recover any misused
funds preceded the 1978 Amendments indicates that the presumption
announced in
Bradley does not apply here.
Bradley
held that a statutory provision for attorney's fees applied
retroactively to a fee request that was pending when the statute
was enacted. This holding rested on the general principle that a
court must apply the law in effect at the time of its decision,
See United States v. Schooner
Peggy, 1 Cranch 103 (1801), which
Bradley
concluded holds true even if the intervening law does not expressly
state that it applies to pending cases. 416 U.S. at
416 U. S. 715.
Bradley, however, expressly acknowledged limits to this
principle.
"The Court has refused to apply an intervening change to a
pending action where it has concluded that to do so would infringe
upon or deprive a person of a right that had matured or become
unconditional."
Id. at
416 U. S. 720.
This limitation comports with another venerable rule of statutory
interpretation,
i.e., that statutes affecting substantive
rights and liabilities are presumed to have only prospective
effect.
See, e.g., United States v. Security Industrial
Bank, 459 U. S. 70,
459 U. S. 79
Page 470 U. S. 640
(1982);
Greene v. United States, 376 U.
S. 149,
376 U. S. 160
(1964).
Cf. Bradley, supra, at
416 U. S. 721
(noting that statutory change did not affect substantive
obligations).
Practical considerations related to the enforcement of the
requirements of grant-in-aid programs also suggest that
expenditures must presumptively be evaluated by the law in effect
when the grants were made. The federal auditors who completed their
review of the disputed expenditures in 1975 could scarcely base
their findings on the substantive standards adopted in the 1978
Amendments. [
Footnote 4]
Similarly, New Jersey, when it applied for and received Title I
funds for the years 1970-1972, had no basis to believe that the
propriety of the expenditures would be judged by any standards
other than the ones in effect at the time.
Cf. Pennhurst State
School and Hospital, supra, at
451 U. S. 17,
451 U. S. 24-25.
Retroactive application of changes in the substantive requirements
of a federal grant program would deny both federal auditors and
grant recipients fixed, predictable standards for determining if
expenditures are proper.
Requiring audits to be redetermined in response to every
statutory change that occurs while review is pending would be
unworkable, and would unfairly make obligations depend on the
fortuitous timing of completion of the review process. Moreover,
the practical difficulties associated with retroactive application
of substantive provisions in the 1978 Amendments would be
particularly objectionable, because Congress
Page 470 U. S. 641
expressly intended those Amendments to strengthen the auditing
process by clarifying the Department's responsibilities and
specifying the procedures to be followed.
See Bell v. New
Jersey, 461 U.S. at
461 U. S. 789;
S.Rep. No. 95-856, at 37, 131; H.R.Rep. No. 95-1137, at 53, 161. We
conclude that, absent a clear indication to the contrary in the
relevant statutes or legislative history, changes in the
substantive standards governing federal grant programs do not alter
obligations and liabilities arising under earlier grants.
III
Neither the statutory language nor the legislative history
indicates that Congress intended the substantive standards of the
1978 Amendments to apply retroactively. Congress adopted the
amendments as part of a general reauthorization of Title I that did
not depart from the program's basic philosophy, but instead sought
to clarify and simplify provisions concerning implementation.
H.R.Rep. No. 95-1137, at 2, 8; S.Rep. No. 95-586, at 2, 8, 130. The
substantive provisions of the 1978 Amendments to Title I were
expressly made applicable for grants between October 1, 1978, and
September 30, 1983. 20 U.S.C. § 2702.
See also Pub.L.
95-561, § 1530, 92 Stat. 2380 (provisions shall take effect on
October 1, 1978, "[e]xcept as otherwise specifically provided in
this Act"). The House Report similarly stated that the changed
requirements were intended to clarify "the manner in which school
districts
are to distribute Title I funds among eligible
schools and children." H.R.Rep. No. 95-1137, at 21 (emphasis
added). Thus, both the general purpose of the 1978 Amendments and
the more specific references in the statute and legislative history
suggest that the new requirements were intended to apply
prospectively.
The Court of Appeals did not rely on evidence from the
legislative history to conclude that the 1978 Amendments in general
have retroactive effect. Instead, the court below observed that the
amendments to the school attendance area
Page 470 U. S. 642
eligibility requirements "were designed to correct regulations
that frustrated the basic objectives of the Title I program." 724
F.2d at 36-37. This observation mischaracterizes both the
regulations in effect prior to 1976 and the provisions adopted by
Congress in 1978. Regulations adopted in 1967,
see 32
Fed.Reg. 2742, and in effect for nearly 10 years, generally
restricted Title I assistance to school attendance areas having a
percentage of low-income children at least as high as the
district-wide average.
Supra at
470 U. S. 636;
see also Office of Education, Title I Program Guide No.
44, 1.1 (1968) (explaining eligibility requirements). This
requirement deliberately channeled funds to the poorest areas
within any particular school district. One consequence of this
comparative approach, however, was that a school located in a
disadvantaged district might be ineligible for assistance even
though it would have qualified if it were located in a wealthier
district. [
Footnote 5] Although
later changes in the eligibility standards attempted to mitigate
this incidental effect,
Page 470 U. S. 643
they do not indicate that the earlier regulations conflicted
with the policies of Title I.
During consideration of 1974 Amendments to Title I, a House
Committee observed that inflexible application of the existing
regulations might make schools with high proportions of low-income
children ineligible. H.R.Rep. No. 93805, p. 17 (1974) ("[I]t was
never intended by the Act to render any school with a 30%
concentration ineligible"). Although the 1974 Amendments made
changes in the school eligibility requirements, they did not
specifically address this situation. [
Footnote 6] Apparently prompted by the concerns of
Congress, the Department modified its regulations in 1976 to permit
a school attendance area to qualify for funds if more than 30% of
its children were from low-income families, even though the
district-wide average might exceed 30%.
See 42 Fed.Reg.
42914, 42917 (1976), codified in 45 CFR § 116 A. 20 (b)(2) (1977);
National Institute of Education, Title I Funds Allocation: The
Current Formula 57, 109 (1977). The 1978 Amendments refined this
alternative by lowering the percentage to 25% and requiring the
school district to guarantee that state and federal funding for
compensatory education would not be reduced for any other school
attendance area that received Title I funds in the preceding year.
20 U.S.C. § 2732(a)(1).
The evolution of the school eligibility requirements no doubt
reflects a reassessment of the proper means to implement
Page 470 U. S. 644
the goals of Title I. Nonetheless, the changes made since 1976
simply do not support the conclusion of the Court of Appeals and
the contention of New Jersey that the earlier regulations were
inconsistent with Title I's policies. The regulations in place from
1967 to 1976 targeted assistance to the neediest areas within each
school district in conformance with the statutory directive that
funds should go to school attendance areas having high
concentrations of children from low-income families.
See
20 U.S.C. § 241e(a) (1976 ed.). Moreover, available funds never
were sufficient to provide services to all eligible students,
H.R.Rep. No. 95-1137, at 7, and Title I required funds to be
concentrated on particular projects rather than diffused among all
eligible school attendance areas.
See 20 U.S.C. §
241e(a)(1)(B) (1976 ed.); 45 CFR § 116.17(c) (1972). Thus, the
school eligibility requirements helped to assure that funds would
not be spread so thinly as to impair the effectiveness of
particular Title I projects.
Cf. H.R.Rep. No. 1814, 89th
Cong., 2d Sess., 3 (1966) (suggesting that limited funds should be
directed to schools with highest concentrations of children from
low-income families); S.Rep. No. 95-856, at 7 ("[T]itle I is
successful in directing substantial federal aid to those areas
which have the highest proportions of children from low-income
families").
Congress did not abandon the concerns underlying the earlier
regulations when it enacted the 1978 Amendments. Legislative
Reports spoke approvingly of the longstanding policy to direct
funds to school attendance areas "having the highest concentrations
of low-income families."
Id. at 11; H.R.Rep. No. 95-1137,
at 21. Although the 1978 Amendments relaxed the eligibility
requirements for school attendance areas, the intent was
"to give districts more flexibility without watering down the
targeting features intended to give the programs a focus when funds
are limited."
Ibid. The 25% eligibility standard was itself the
product of a compromise at Conference. The House bill,
see
id. at 22, 211, but not the Senate amendment, provided that
any school
Page 470 U. S. 645
attendance area having a 20% concentration of poor children must
be designated as eligible for Title I. H.R.Conf.Rep. No. 95-1753,
p. 255 (1978). The Conference agreed to an amendment that made the
designation of these areas optional, increased the required
percentage to 25%, and provided that other areas must retain the
same amount of funds they received the preceding year.
Ibid. Although it is fair to infer that Congress
determined that the targeting features of Title I would not be
unduly compromised by adoption of the 25% standard, the background
to the 1978 Amendments does not suggest the earlier regulations
frustrated the program, or that Congress intended the Amendments to
apply to prior grants.
IV
New Jersey urges that we affirm the holding below on the ground
that the Court of Appeals reached an equitable result. The
determination by the Secretary does not question the good faith of
New Jersey or the Newark School District with respect to the
disputed expenditures, which we acknowledge might be permissible
under standards enacted in 1978 or currently in effect. [
Footnote 7] Nonetheless, we find no
inequity in requiring repayment of funds that were spent contrary
to the assurances provided by the State in obtaining the grants.
Particular cases might appear to present exceptions to this rule,
but given the statutory and administrative framework for assuring
compliance with the requirements of Title I, we do not think
recognizing such
Page 470 U. S. 646
exceptions is within the province of the courts. Congress has
already accommodated equitable concerns in the statutory provisions
governing recovery of misused funds. Those provisions limit
liability for repayment to funds received during the five years
preceding the final written notice of liability, 20 U.S.C. § 884
(1976 ed.), repealed and replaced by 20 U.S.C. § 1234a(g), and
authorize the Secretary, under certain conditions, to return to the
State up to 75% of any amount recovered. § 1234e(a). Of course, if
Congress believes that the equities so warrant, it may relax the
requirements applicable to prior grants or forgive liability
entirely. The role of a court in reviewing a determination by the
Secretary that funds have been misused is to judge whether the
findings are supported by substantial evidence and reflect
application of the proper legal standards.
Bell v. New
Jersey, 461 U.S. at
461 U. S. 792.
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.
Cf. Bennett v. Kentucky Dept. of Education, post at
470 U. S.
662-663.
Because the Court of Appeals has not yet addressed New Jersey's
arguments that the demanded repayment does not reflect proper
application of the standards in effect during 1970-1972, the State
may renew these contentions on remand. Accordingly, the decision of
the Court of Appeals is reversed, and the case is remanded for
further proceedings consistent with this opinion.
It s so ordered.
JUSTICE POWELL took no part in the consideration or decision of
this case.
[
Footnote 1]
The Education Amendments of 1978, Pub.L. 95-561, 92 Stat. 2143,
20 U.S.C. § 2701
et seq., reauthorized the Title I program
and generally amended the Elementary and Secondary Education Act.
The Title I program was subsequently succeeded by Chapter 1 of the
Education Consolidation and Improvement Act of 1981, Pub.L. 97-35,
95 Stat. 464, 20 U.S.C. § 3801
et seq. Chapter 1 retains
Title I's focus upon assisting educationally deprived children who
live in low-income areas.
[
Footnote 2]
In 1980, the Department of Education replaced the former Office
of Education as the federal agency responsible for administering
Title I.
See Bell v. New Jersey, 461 U.
S. 773,
461 U. S. 776,
n. 1 (1983). For simplicity, unless the distinction is significant,
we will refer to both the Office of Education and the Department of
Education as the Department, and to both the former Commissioner of
Education and the Secretary of Education as the Secretary.
See
ibid.
[
Footnote 3]
In determining compliance with federal grant programs, other
Courts of Appeals have consistently applied the legal requirements
in effect when the grants were made.
See, e.g., Indiana v.
Bell, 728 F.2d 938, 941, n. 6 (CA7 1984);
North Carolina
Comm'n of Indian Affairs v. Department of Labor, 725 F.2d 238,
239 (CA4 1984);
Woods v. United States, 724 F.2d 1444,
1446 (CA9 1984);
West Virginia v. Secretary of Education,
667 F.2d 417, 420 (CA4 1981).
[
Footnote 4]
The eligibility requirements for school attendance areas have
been altered many times since the years 1970-1972. Changes were
made by 1974 Amendments to Title I, and the requirements were
modified by regulation in 1976 and again amended in 1978.
Infra at
470 U. S. 643,
and n. 6. The Department issued regulations in 1981 clarifying the
requirements of the 1978 Amendments. 34 CFR § 201.51(d)(ii) (1981).
Later in 1981, the enactment of Chapter 1,
see n 1,
supra, superseded the
provisions of Title I. Chapter 1 has its own provisions governing
eligibility for attendance areas within school districts,
see 20 U.S.C. § 3805(b), and these provisions were amended
in 1983.
See Pub.L. 98-211, § 3, 97 Stat. 1413, 20 U.S.C.
§ 3805(d) (1982 ed., Supp. 1).
[
Footnote 5]
Of course, relatively poor school districts would receive a
greater district-wide allocation of Title I funds, because this
amount was determined by the number of poor children within the
district. This fact is illustrated by the present case: for the
period from September 1, 1970, to August 31, 1973, Newark was
allocated more than $28 million in Title I funds, or 18.4% of New
Jersey's total allocation. App. 14.
Moreover, from the outset of the Title I program, the
regulations provided that, in certain circumstances, an entire
school district could qualify as a Title I project. 45 CFR §
116.17(b) (1966). This alternative responded to indications by
Congress that district-wide eligibility might be appropriate for
particularly impoverished areas.
See S.Rep. No. 146, 89th
Cong., 1st Sess., 9 (1965) ("There may be circumstances where a
whole school system is basically a low-income area, and the best
approach in meeting the needs of educationally deprived children
would be to upgrade the regular program"); H.R.Rep. No. 1814, 89th
Cong., 2d Sess., 3 (1966) ("[W]hen 30 or 40 percent of the children
in the school district are from low-income families, all of the
children in the district could be considered disadvantaged, and the
whole school system could be upgraded").
We do not address whether the Secretary correctly determined
that Newark did not qualify for district-wide eligibility under the
legal provisions in effect during the years 1970-1972.
See
supra at
470 U. S.
637.
[
Footnote 6]
The 1974 Amendments liberalized the eligibility standards by
providing that an otherwise ineligible school attendance area would
be deemed eligible if it had qualified and received Title I funds
in either of the two preceding fiscal years. Pub.L. 93380, §
101(a)(5)(D), 88 Stat. 500, 20 U.S.C. § 241e(a)(13) (1976 ed.).
Furthermore, the 1974 Amendments allowed a local education agency
to deem a school attendance area eligible for Title I assistance
based on the actual attendance, rather than the residency, of
children from low-income families. § 101(a)(5)(B), 88 Stat. 500, 20
U.S.C. § 241e(a)(1)(A) (1976 ed.).
See S.Rep. No. 93-763,
p. 30 (1974); H.R.Rep. No. 93-805, pp. 16-17 (1974); S.Conf.Rep.
No. 93-1026, p. 144 (1974).
[
Footnote 7]
New Jersey contends that 10 of the disputed attendance areas had
concentrations of low-income children exceeding 25%, and, under the
1978 standards, the State is liable for a minimum of $249,607. As
the Court of Appeals noted, 724 F.2d at 37, the 1978 standards
would not be satisfied if compensatory funding was not maintained
at prior-year levels in other schools receiving Title I aid.
Ibid. The present record leaves unclear whether this
requirement was satisfied,
ibid., and the possibility that
the necessary information is no longer available merely underscores
the practical problems resulting from retroactive application of
changes in the eligibility requirements. Brief for Petitioner 46,
and n. 37.
JUSTICE STEVENS, with whom JUSTICE MARSHALL joins,
dissenting.
The Elementary and Secondary Education Act of 1965, 79 Stat. 27,
was a part of the broader program that President
Page 470 U. S. 647
Johnson characterized as the "war on poverty." [
Footnote 2/1] Title I of the Act authorized the
expenditure of large sums of federal money to improve the education
of children in low-income areas. The statute, however, did not
contain a specific definition of the schools that would qualify for
assistance under the program. It merely stated that
"payments under this subchapter will be used for programs and
projects . . . (A) which are designed to meet the special
educational needs of educationally deprived children in school
attendance areas having high concentrations of children from
low-income families. . . ."
20 U.S.C. § 241e(a)(1) (1976 ed.).
As the case comes to us, the underlying issue is whether 10 of
the public schools in Newark, New Jersey, [
Footnote 2/2] that received federal assistance in the
1971-1972 school year were located "in school attendance areas
having high concentrations of children from low-income families"
within the meaning of the Act as it was enacted and as it was
clarified by subsequent amendments. If funds were incorrectly
allocated to those schools, the total federal grant was not
increased; instead, the consequence was a lower distribution to
other Newark schools that admittedly qualified for federal aid.
[
Footnote 2/3] There is
Page 470 U. S. 648
no dispute about the fact that the money that was allocated to
these schools -- like that allotted to over 60 other schools in
Newark -- was used in programs and projects properly designed to
meet the special educational needs of educationally deprived
children. [
Footnote 2/4] The only
"misuse" of federal funds that is at issue is the suggestion that
the money should have been spent in different school attendance
areas. The remedy for this misuse is not a redistribution to the
more needy areas, but is a recapture of the funds by the Federal
Government. The Court agrees that the areas in dispute would have
qualified for federal assistance under the statute as amended in
1978, and under the Secretary's regulations that are now in effect.
Ante at
470 U. S. 645.
I think the Court would also agree that the Secretary had authority
under the original Act to issue the regulations that are in effect
today; indeed, in 1976, the Secretary did issue regulations that
would have qualified seven of the attendance areas that are now in
dispute. [
Footnote 2/5] As the case
comes to us, it is also clear that we must assume that none of the
disputed areas qualified under the Secretary's regulations that
were in effect in 1971-1972. [
Footnote
2/6] Thus, the
Page 470 U. S. 649
question for decision is whether the legal standard that should
govern the disposition of this controversy is to be derived from
the Secretary's regulations in effect during the 1971-1972 school
year -- which admittedly were violated -- or from the statutory
language, which plainly was broad enough to authorize these
expenditures when the statute was first enacted in 1965, as well as
after its amendment in 1978.
The Court holds that the now-repudiated regulations must be
strictly enforced. I agree with the Court's view that the fact that
its holding produces an inequitable outcome does not authorize a
reviewing court to depart from the controlling legal standard,
[
Footnote 2/7] but I am convinced
that the Court has seriously misread the intent of Congress.
I
In order to understand the impact of the regulations that must
be strictly enforced under the Court's holding -- and which I
submit Congress later repudiated -- it is useful to set forth the
relevant facts concerning one of the school attendance areas where
federal money was allegedly "misused." The federal auditors
disallowed expenditures of $104,842 for special programs at
Newark's South 17th Street Elementary School. The disallowance was
based on a determination that only 33.5% of the 1,549 children in
the school were from low-income families. [
Footnote 2/8] Because the average percentage of children
from low-income families in the entire
Page 470 U. S. 650
Newark School District was slightly higher -- 33.9% -- the South
17th Street Elementary School did not satisfy one of the
eligibility criteria in the Secretary's regulations. [
Footnote 2/9] Under those regulations,
unless the entire Newark School District qualified for assistance,
only those school attendance areas in which the percentage exceeded
the district-wide average could qualify. Thus, even though South
17th Street's percentage of 33.5 would have qualified for federal
aid in any other school district in New Jersey and, indeed, in
almost any school district in the entire United States, [
Footnote 2/10] it did not meet the
Secretary's rigid standard.
Page 470 U. S. 651
When the anomalous consequences of this regulation came to the
attention of Congress during its consideration of amendments to the
Act in 1974, the House Committee on Labor and Education issued a
Report that expressed the opinion that "it was never intended by
the Act to render any school with a 30% concentration ineligible."
[
Footnote 2/11] Presumably it was
that Report that prompted the Secretary to modify the regulations
in 1976 to permit school attendance areas with more than 30% of the
children from low-income families to qualify even though the
district-wide percentage was even higher. [
Footnote 2/12] Regardless of whether that is a correct
explanation
Page 470 U. S. 652
of the regulatory change in 1976, it is significant that the
Secretary then interpreted the 1965 Act as allowing a school in a
30% area to qualify even though its attendance area had a lower
percentage than the district-wide average.
In its consideration of the 1978 Amendments, Congress plainly
expressed its disapproval of the kind of interpretation of the 1965
Act that is reflected in the regulations involved in this case. One
example, described in the hearings before the Subcommittee on
Elementary, Secondary and Vocational Education, provides a precise
analogue to this case:
"In Baltimore City, any school district which has less than
30.3% Title I children was not eligible to receive Title I funds.
This minimum is higher than the maximum incidence in schools
receiving Title I funds in 11 other counties. This means there are
schools in relatively affluent counties receiving Title I
assistance with no more than 5% Title I children, while schools in
Baltimore City with 25-30% Title I children are excluded from the
program. [
Footnote 2/13]"
In response to testimony of that kind, Congress amended the
statute to make it clear that a local school district could
designate any attendance area with a 25% incidence of poverty as
eligible for Title I funds. The House Report explained the purpose
of the change (which originally proposed a reduction to 20%):
"[C]urrent OE regulations [45 CFR § 1 16a-20(b)(2)] provide that
any school attendance area with 30 percent
Page 470 U. S. 653
or more children from low-income families (based on eligibility
for free lunch) may be designated a target area. . . . The
Committee bill reduces this minimum to 20 percent out of a concern
that inflexible targeting requirement could force some school
districts with very high incidences of poverty to declare school[s]
with 20 percent low-income enrollment ineligible, while schools
with only 10 percent low-income enrollment or less might be
eligible in wealthier neighboring districts. [
Footnote 2/14]"
When Congress amended the Act in 1978 to provide that any school
attendance area would be eligible for federal assistance if at
least 25% of its children were from low-income families, it did not
change the basic eligibility standard that had been adopted in
1965. Thus, the statute as amended in 1978, like the statute prior
to those Amendments, provides that a
"local educational agency shall use funds received under this
subchapter in school attendance areas having high concentrations of
children from low-income families (hereinafter referred to as
'eligible school attendance areas')."
92 Stat. 2161, 20 U.S.C. § 2732(a)(1). In adding the specific
provision that a local educational agency may designate any school
attendance area in which at least 25% of the children are from
low-income families, Congress did not broaden that standard, but
merely ensured that the Secretary would not improperly narrow it.
Thus, the only practical effect of the 1978 Amendments was to deny
the Secretary the legal authority to promulgate the kind of rigid
regulation that is being strictly enforced today.
II
In my opinion, this is plainly a case for application of the
normal rule that a reviewing court must apply the law in effect at
the time of its decision. As JUSTICE WHITE correctly noted when
this litigation was before the Court two Terms ago:
Page 470 U. S. 654
"A federal court or administrative agency must"
"apply the law in effect at the time it renders its decision,
unless doing so would result in manifest injustice or there is
statutory direction or legislative history to the contrary."
Bradley v. Richmond School Board, 416 U.
S. 696,
416 U. S. 711
(1974).
Accord, Gulf Offshore Co. v. Mobil Oil Corp.,
453 U. S. 473,
453 U. S. 486,
n. 16 (1981). Here, nothing in the 1978 Amendments or the
legislative history suggests that the Amendments were not intended
to be applied retroactively, and their application to this case
would not result in manifest injustice.
Bell v. New Jersey, 461 U. S. 773,
461 U. S.
793-794 (1983). In my view, it is the Court's holding,
rather than an application of the 1978 Amendments to this case,
that results in manifest injustice.
Ever since the statute was enacted in 1965, Congress has
expressed a strong preference for allowing broad discretion to
local governmental units in the administration of these federally
funded programs. [
Footnote 2/15]
We should therefore adopt a strong presumption supportive of a
local school board's decision concerning the proper allocation of
money among different school attendance areas subject to its
jurisdiction. [
Footnote 2/16]
Finally, it is appropriate to note that, just as the 1978
Amendments
Page 470 U. S. 655
themselves protected local school districts from overly
prescriptive federal regulations, Congress in 1981 again identified
the same interest in further amendatory legislation. Thus, the
Education Consolidation and Improvement Act in 1981 directed that
federal assistance be provided
"in a manner which will eliminate burdensome, unnecessary and
unproductive paperwork and free the schools of unnecessary federal
supervision, direction and control,"
95 Stat. 464, and specifically indicated that federal assistance
of the kind involved in this case would be most effective
"if educational officials, principals, teachers, and supporting
personnel are freed from overly prescriptive regulations and
administrative burdens which are not necessary for fiscal
accountability and make no contribution to the instructional
program."
Ibid. [
Footnote
2/17]
conclusion that its disposition of this case accords with the
intent of Congress.
Accordingly, I respectfully dissent.
[
Footnote 2/1]
Cf. S.Rep. No. 146, 89th Cong., 1st Sess., 4 (1965)
("
Poverty will no longer be a bar to learning, and learning
shall offer an escape from poverty. We will neither dissipate the
skills of our people, nor deny them the fullness of a life informed
by knowledge. And we will liberate each young mind -- in every part
of this land -- to reach the furthest limits of thought and
imagination'") (statement of President Johnson).
[
Footnote 2/2]
The original dispute between the parties involved 10 elementary
schools and 3 high schools. If the Court of Appeals' disposition
were accepted, the determination of ineligibility for two
elementary schools and for one high school would no longer be at
issue.
See State of New Jersey, Dept. of Education v.
Hufstedler, 724 F.2d 34 (CA3 1983); Brief for Respondent
15-16, n. 12 (acknowledging that, under the Third Circuit's
decision, it would have to repay "to the Secretary a minimum of
$249,607");
id. at 16-17, n. 13.
[
Footnote 2/3]
The Title I funds allotted to the New Jersey State Department of
Education for the 3-year period between September 1, 1970, and
August 31, 1973, aggregated $156,166,574. Of this total,
$28,709,198 was suballotted to the Newark School District. There
was no question about the total amount of money that either New
Jersey or Newark was entitled to receive. The only question at
issue in this case is whether Newark distributed some of that money
to the wrong schools.
Ante at
470 U. S. 636;
Brief for Petitioner 4, n. 1 ("[T]he Newark school district
received its correct allocation of Title I funds"); Brief for
Respondent 5;App. 14.
[
Footnote 2/4]
Brief for Petitioner 9 ("[T]he principal issue in the audit was
the method of calculating eligibility of school attendance areas in
1971-1972").
[
Footnote 2/5]
The "low-income percentage" as determined by the federal
auditors for the 10 disputed school attendance areas ranged from a
low of 27.9% to a high of 33.5%. In seven of these areas, the
figure was in excess of 30%. The auditors also disqualified two
elementary school attendance areas with percentages of 22.9% and
20.6% and one high school attendance area with a percentage of 13%.
App. 23-24. The determinations for those three areas would
apparently no longer be in dispute if the Court of Appeals'
decision were affirmed.
See Brief for Respondent 15-16, n.
12, 16-17, n. 13.
See also 470
U.S. 632fn2/3|>n. 3,
supra.
[
Footnote 2/6]
New Jersey argued that, if the children who were not attending
school and those who were attending special schools in the area
were counted, the correct percentage of the low-income children in
most of the attendance areas would be increased. Thus, for example,
in the attendance area of the South 17th Street Elementary School,
the low-income percentage would be 40.3%.
See App. to Pet.
for Cert. 53a; for purposes of decision, I assume that argument was
correctly rejected by the auditors. However, I note that New Jersey
has represented that the poverty level in the attendance area of
the South 17th Street Elementary School had risen to 73.91% in
1984-1985.
See Brief for Respondent 8, n. 5.
[
Footnote 2/7]
Ante at
470 U. S. 646;
cf. Trans World Airlines, Inc. v. Franklin Mint Corp.,
466 U. S. 243,
466 U. S. 277
(1984) (STEVENS, J., dissenting).
[
Footnote 2/8]
App. 23, 25.
[
Footnote 2/9]
Title 45 CFR § 116.17(d) (1972) then provided:
"A school attendance area for either a public elementary or a
public secondary school may be designated as a project area if the
estimated percentage of children from low-income families residing
in that attendance area is as high as the percentage of such
children residing in the whole of the school district, or if the
estimated number of children from low-income families residing in
that attendance area is as large as the average number of such
children residing in the several school attendance areas in the
school district. In certain cases, the whole of a school district
may be regarded as an area having a high concentration of such
children and be approved as a project area, but only if there are
no wide variances in the concentrations of such children among the
several school attendance areas in the school district."
[
Footnote 2/10]
It is undisputed that Newark's poverty level was one of the
highest in the Nation. New Jersey offers the following
description:
"The Newark School District for the years 1970 through 1973, the
period covered by the federal audit before this Court, could
readily be characterized as the prototypic Title I district. The
application for Title I funds for the year 1971-72 school year, the
primary focus of the audit, showed that 33.9% of the children in
the Newark School District were from low-income families (J.A.
108). The narrative portion of this application clearly
demonstrated that Newark was uniformly disadvantaged in other ways.
Statistics showed a jobless rate in 1970 of 14%; a rate which was
double that needed to qualify under the Economic Development Act.
Another 35,000 residents were earning $3,000 per year or less. In
1971, the Model Cities program in Newark was expanded to include
the entire city. At the time the 1971-72 application was submitted,
Newark had a black population of 54.2%, with another 11% of its
population of hispanic background. The City also had the highest
percentage of slum housing in the nation, the highest incidence of
crime per 10,000 population, the highest population density, a high
rate of maternal mortality and the second highest birth rate. Of
particular significance to the Title I program, and exacerbating
the inherent difficulties of obtaining precise statistics for
Newark's low-income population, was the fact that in 1970-71 Newark
had the highest population turnover in the nation. Indeed, Model
Cities data indicated that mobility rates reached as high as 80%
for schools in the Title I area (J.A. 113 to J. A. 114; J.A.
69)."
Brief for Respondent 3-4 (footnote omitted).
[
Footnote 2/11]
The quoted statement appears in the following paragraph from
H.R.Rep. No. 93-805, p. 17 (1974):
"As originally conceived and as extended, Title I authority is
basically centered in the local educational agency (the school
district). The special needs of the educationally disadvantaged
child and programs to meet those needs must be locally devised.
This is consistent with the Congress' historical concern that local
communities should, not in conflict with constitutional and legal
prescriptions, formulate educational policy. . . . This is not
consistent with strict Federal administration regulations, which so
narrowly define 'target school' that a school in one local
educational agency with 10% of its enrollment of 'educationally
deprived' is an eligible 'target school,' whereas a school in
another local educational agency with 30% or more is not eligible
as a target school. While it is clearly the expressed objective to
serve children in schools with high concentrations, it was never
intended by the Act to render any school with a 30% concentration
ineligible."
[
Footnote 2/12]
See 45 CFR § 116a.20(b)(2) (1977), which stated, in
pertinent part:
"An attendance area may be designated under paragraph (b)(1) on
a percentage basis if the percentage of children from low-income
families in that attendance area is at least as high as the
percentage of such children residing in the whole of the school
district. In addition, upon specific request by the local
educational agency, the State educational agency may approve the
designation of attendance areas in which at least 30 percent of the
children are from low-income families."
[
Footnote 2/13]
Education Amendments of 1977: Hearings on H.R. 15 before the
Subcommittee on Elementary, Secondary and Vocational Education of
the House Committee on Education and Labor, 95th Cong., 1st Sess.,
pt. 12, p. 392 (1978) (testimony of Ruth Mancuso, vice-president of
the National Association of State Boards of Education).
[
Footnote 2/14]
H.R.Rep. No. 95-1137, p. 22 (1978).
[
Footnote 2/15]
See, e.g., S.Rep. No. 146, 89th Cong., 1st Sess., 9
(1965), which stated:
"It is the intention of the proposed legislation not to
prescribe the specific type of programs or projects that will be
required in school districts. Rather such matters are left to the
discretion and judgment of the local public educational agencies. .
. . What may be an acceptable and effective program in a school
district serving a rural area may be entirely inappropriate for a
school district serving an urban area, and vice versa. There may be
circumstances where a school system is basically a low-income area
and the best approach in meeting the needs of educationally
deprived children would be to upgrade the regular program. On the
other hand, in many areas, the needs of educationally deprived
children will not be satisfied by such an approach."
[
Footnote 2/16]
There is, of course, an important distinction between the broad
power of Congress to control certain actions of state governmental
units,
see, e.g., EEOC v. Wyoming, 460 U.
S. 226,
460 U. S.
244-248 (1983) (STEVENS, J., concurring), and the proper
interpretation of congressional action which presumptively should
accord state governmental units the broadest measure of respect.
See, e.g., New York Telephone Co. v. New York Dept. of
Labor, 440 U. S. 519,
539-540, 545-546 (1979) (opinion of STEVENS, J.).
[
Footnote 2/17]
This thought was echoed in a recent study, which noted that one
"Title I administrator compared the current federal Title I role to
the people who hide in the mountains until the war is over, and
then come down to kill the dead.'" L. McDonnell & M.
McLaughlin, Education Policy and the Role of the States 105
(1982).