Title I of the Elementary and Secondary Education Act of 1965,
as amended, provided for federal grants to States to support
compensatory education programs for disadvantaged children upon the
States' assurances that the grants would be used only for eligible
programs under Title I. At the time of the grants involved in this
case, both the statute and its implementing regulations required
that Title I funds be used to supplement, not to supplant, state
and local expenditures for education. Federal auditors found that
Kentucky had approved Title I programs for fiscal year 1974 --
involving "readiness classes" offered by some local education
agencies for educationally disadvantaged children in place of
regular first- and second-grade classes -- that violated the
prohibitions on supplanting state and local expenditures.
Administrative proceedings ultimately resulted in a determination
by the Secretary of Education (Secretary) that supplanting had
occurred, and the Secretary demanded repayment from the State of
the misused Title I funds. In reviewing the administrative order,
the Court of Appeals acknowledged that the Secretary's
interpretation of the supplanting prohibitions was reasonable, and
would govern subsequent grants, but concluded that it would be
unfair to assess a penalty against Kentucky, since there was no
evidence of bad faith and the disputed programs complied with a
reasonable interpretation of the law.
Held: The Secretary properly determined that Kentucky
violated its assurances of compliance with Title I requirements by
approving the "readiness classes," and thereby misused Title I
funds. Pp.
470 U. S.
662-674.
(a) The Court of Appeals erred in characterizing the issue to be
the fairness of imposing sanctions against the State for its
failure to comply substantially with Title I requirements. Although
recovery of misused funds clearly is intended to promote compliance
with the requirements of the grant program, a demand for repayment
is more in the nature of an effort to collect upon a debt than a
penal sanction. Because of the nature of the obligation to repay
misused funds, "substantial compliance" with applicable legal
requirements does not affect liability. Nor does the absence of bad
faith absolve a State from liability if funds were in fact spent
contrary to the terms of the grant agreement. And recovery of
Page 470 U. S. 657
the misused funds was not barred on the asserted ground that the
State did not accept the grant with "knowing acceptance" of its
terms. Title I clearly provided that States that chose to
participate in the program agreed to abide by Title I's
requirements as a condition for receiving funds.
Pennhurst
State School and Hospital v. Halderman, 451 U. S.
1, distinguished. Pp.
470 U. S.
662-666.
(b) In reviewing a determination by the Secretary that a State
has misused Title I funds, a court should consider whether the
findings are supported by substantial evidence and reflect an
application of the proper legal standards. Although, as asserted by
Kentucky, Title I grant agreements have a contractual aspect, the
program cannot be viewed in the same manner as a bilateral contract
governing a discrete transaction, so as to require that any
ambiguities with respect to the State's obligations invariably be
resolved against the Federal Government as the party who drafted
the grant agreement. Given the structure of the grant program, the
Federal Government simply cannot prospectively resolve every
possible ambiguity concerning particular applications of Title I's
requirements. However, it is unnecessary here to adopt the
Government's suggestion that the Secretary may rely on any
reasonable interpretation of Title I's requirements to determine
that previous expenditures violated the grant conditions. Since the
State agreed to comply with, and its liability is determined by,
the legal requirements in place when the grants were made, the
Secretary's interpretation of the requirements should be informed
by the statutory provisions, regulations, and other administrative
guidelines provided at the time of the grants. Pp.
470 U. S.
666-670.
(c) The "readiness classes" approved by Kentucky clearly
violated existing statutory and regulatory provisions that
prohibited supplanting. Title I funds were used to pay
substantially all the costs for the basic education of students in
the readiness classes, and, absent these classes, the participating
students would have received instruction in regular classes
supported by state and local funds. Although state and local
funding was maintained at the level of particular grades, because
Title I students were placed in separate classes supported by
federal funds, the consequence was to increase per-pupil state and
local expenditures for students who remained in regular first- and
second-grade classes. No plausible reading of the statute or
regulations suggests that such result comported with the
prohibitions on supplanting. Moreover, Kentucky has not shown that
the Secretary's present position is inconsistent with earlier
administrative guidelines. And the possibility that application of
the supplanting provisions might be unclear in other contexts does
not affect resolution of this case. Pp.
470 U. S.
670-673.
717 F.2d 943, reversed and remanded.
Page 470 U. S. 658
O'CONNOR, J., delivered the opinion of the Court, in which
BURGER, C.J., and BRENNAN, MARSHALL, REHNQUIST, and STEVENS, JJ.,
joined, and in Parts I, II, IV, and V of which WHITE and BLACKMUN,
JJ., joined. POWELL, J., took no part in the consideration or
decision of the case.
JUSTICE O'CONNOR delivered the opinion of the Court.
*
This case, like
Bennett v. New Jersey, ante p.
470 U. S. 632,
concerns an effort by the Federal Government to recover Title I
funds that were allegedly misused by a State. There is no
contention here that changes in statutory provisions should apply
to previous grants. Instead, the dispute is whether the Secretary
correctly demanded repayment based on a determination that Kentucky
violated requirements that Title I funds be used to supplement, and
not to supplant, state and local expenditures for education.
Although the Court of Appeals for the Sixth Circuit found that the
Secretary's determination was based on a reasonable
interpretation
Page 470 U. S. 659
of Title I and its implementing regulations, the court
nonetheless excused the State from repayment on the grounds that
there was no evidence of bad faith and the State's programs
complied with a reasonable interpretation of the law.
Kentucky
v. Secretary of Education, 717 F.2d 943, 948 (1983). We
granted certiorari, 469 U.S. 814 (1984), and because we disagree
with the standard adopted by the Court of Appeals, we reverse.
I
As explained more fully in
Bennett v. New Jersey, ante
at
470 U. S.
634-636, Title I of the Elementary and Secondary
Education Act of 1965, Pub.L. 89-10, 79 Stat. 27, as amended, 20
U.S.C. § 2701
et seq., provided federal grants to support
compensatory education programs for disadvantaged children. In
order to assure that federal funds would be used to support
additional services that would not otherwise be available, the
Title I program from the outset prohibited the use of federal
grants merely to replace state and local expenditures. This
prohibition initially was contained in regulations,
see 45
CFR § 116.17(f) (1966); 45 CFR § 116.17(h) (1968), and explained in
a program guide distributed to state education agencies. Office of
Education, Title I Program Guide No. 44, �� 4.1, 7.1 (1968).
Despite the regulations, the Office of Education [
Footnote 1] received public complaints that
Title I funds were being used to replace state and local funds that
otherwise would have been spent for participating children.
See S.Rep. No. 91-634, pp. 9-10 (1970). Congress responded
by amending Title I in 1970 to add a provision that specifically
prohibited supplanting.
Id. at 9-10, 14-15.
Page 470 U. S. 660
That provision, in effect when the grants involved in this case
were made, required that Title I funds be used
"(i) as to supplement and, to the extent practical, increase the
level of funds that would, in the absence of such Federal funds, be
made available from non-Federal sources for the education of pupils
participating in programs and projects assisted under this
subchapter, and (ii) in no case, as to supplant such funds from
non-Federal sources."
20 U.S.C. § 241e(a)(3)(B) (1970 ed.).
Title I regulations elaborated upon the statutory prohibition on
the use of federal funds to supplant state and local funds:
"Each application for a grant . . . shall contain an assurance
that the use of the grant funds will not result in a decrease in
the use for educationally deprived children residing in that
project area of State or local funds, which, in the absence of
funds under Title I of the Act, would be made available for that
project area, and that neither the project area nor the
educationally deprived children residing therein will otherwise be
penalized in the application of State and local funds because of
such a use of funds under Title I of the Act. . . . Federal funds
made available . . . (1) will be used to supplement, and to the
extent practical increase, the level of State and local funds that
would, in the absence of such Federal funds, be made available for
the education of pupils participating in that project; (2) will not
be used to supplant State and local funds available for the
education of such pupils."
45 CFR § 116.17(h) (1974).
In 1976, federal auditors found that Kentucky had approved Title
I programs for fiscal year 1974 that violated the prohibitions on
supplanting. App. 11-21. The disputed programs involved "readiness
classes" offered by 50 local education agencies for educationally
disadvantaged children
Page 470 U. S. 661
in place of regular first- and second-grade classes. App. to
Pet. for Cert. 22a. Participating students received their entire
academic instruction in the readiness classes, and a substantial
number of the students were expected to be promoted to the next
higher grade level the following year. App. 16-17. Title I funds
were used to pay all the instructional salaries and a portion of
the administrative support costs for the readiness classes. App. to
Pet. for Cert. 22a. Students in these classes did receive locally
funded "enrichment services,"
i.e., art, physical
education, music, and library, that were available to students
enrolled in regular classes.
Ibid. It is not disputed,
however, that Title I funds defrayed substantially all the costs of
educating students in the readiness classes. App. 15, 17. The
auditors concluded that supplanting of state and local expenditures
had occurred for children in readiness classes who were promoted to
the next higher regular grade.
Id. at 17, 19; App. to Pet.
for Cert. 30a. Based on this finding, the auditors estimated that
$704,237 in Title I funds had been misused, and the Department
issued a final determination letter demanding repayment. App.
22-23.
Kentucky sought further administrative review. The Education
Appeal Board (Board), after extensive proceedings, issued an
initial decision in 1981 sustaining the auditors' findings. App. to
Pet. for Cert. 17a-32a. The Board rejected the State's argument
that the supplanting provisions were satisfied because state and
local funding was not reduced for the school districts, schools, or
grade levels involved.
Id. at 24a. The statutory and
regulatory provisions, the Board concluded, clearly required that
state and local expenditures be maintained for pupils participating
in programs supported by Title I.
Id. at 24a-25a. On
remand from the Secretary,
id. at 33a-35a, the Board
reaffirmed its initial decision.
Id. at 36a-37a. The
Secretary subsequently affirmed the Board's finding that
supplanting had occurred, but reduced the demanded repayment to
Page 470 U. S. 662
$338,034 to reflect the benefits presumed to result from smaller
pupil-teacher ratios in the readiness classes.
Id. at
38a-42a.
In reviewing the final order demanding repayment, the Court of
Appeals acknowledged that the Secretary's interpretation of the
supplanting prohibition was reasonable, and would govern subsequent
grants. 717 F.2d at 946-947, 948. Nonetheless, the court concluded
that Kentucky was not liable for misusing Title I funds during
fiscal year 1974. The Court of Appeals viewed the issue to be
"the fairness of imposing sanctions upon the Commonwealth of
Kentucky for its 'failure to substantially comply' with the
requirements [of Title I]."
Id. at 947, quoting 20 U.S.C. §§ 1234b(a), 1234c(a).
The statute and regulations concerning supplanting, the court
maintained, were not "unambiguous." 717 F.2d at 948. Moreover,
Congress specifically gave state and local officials discretion to
develop particular programs to be supported by Title I funds.
Ibid. In these circumstances, the Court of Appeals
concluded that it would be unfair to assess a penalty against
Kentucky where there was no evidence of bad faith and the disputed
programs complied with a reasonable interpretation of the law.
Ibid. Relying on
Pennhurst State School and Hospital
v. Halderman, 451 U. S. 1,
451 U. S. 17
(1981), the court further reasoned that the State did not accept
Title I funds with "knowing acceptance" of the condition the
Secretary now seeks to impose, and therefore the Federal Government
was not justified in demanding repayment. 717 F.2d at 950.
II
We note initially that the Court of Appeals erred in
characterizing the issue to be the fairness of imposing sanctions
against the State for its failure to comply substantially with the
requirements of Title I. Although recovery of misused Title I funds
clearly is intended to promote compliance with the requirements of
the grant program, a demand for repayment
Page 470 U. S. 663
is more in the nature of an effort to collect upon a debt than a
penal sanction.
See Bell v. New Jersey, 461 U.
S. 773,
461 U. S. 782
(1983). The State gave certain assurances as a condition for
receiving the federal funds, and if those assurances were not
complied with, the Federal Government is entitled to recover
amounts spent contrary to the terms of the grant agreement.
Id. at
461 U. S. 791.
More specifically, the State gave assurances that Title I funds
would be used only for programs which had been reviewed and
approved by the state education agency and which met applicable
statutory and regulatory requirements. 20 U.S.C. § 241f(a)(1) (1976
ed.). The issue in this case is not the fairness of imposing
punitive measures, but instead whether the Secretary properly
determined that Kentucky failed to fulfill its assurances by
approving programs that violated the requirements of Title I.
Because of the nature of the obligation to repay misused funds,
we also disagree with the suggestion by the court below that
substantial compliance with applicable legal requirements affects
liability. The Court of Appeals relied on provisions which
authorize the Secretary, pursuant to specified procedures, to
withhold funds or to issue cease-and-desist orders if a recipient
fails to comply substantially with the law. 20 U.S.C. §§ 1234b(a),
1234c(a).
Cf. § 2836 (specific authority to withhold Title
I funds). These references to substantial compliance in provisions
governing prospective relief do not, by their own terms, apply to
the recovery of misused funds.
Cf. § 1234a(c) (filing of
application by recipient for review of audit determination does not
affect authority of Secretary to take other adverse actions); 124
Cong.Rec. 20612 (1978) (remarks of Rep. Corrada) (noting that
post-audit recovery and withholding are distinct enforcement
mechanisms). Other provisions that address the Secretary's
authority to demand repayment do not limit liability to instances
where there is failure to comply substantially with grant
obligations.
See §§ 1226a-1, 1234a, 2835(b). This silence
cannot be ascribed to legislative inattention to the
Page 470 U. S. 664
details concerning recovery of misused funds. Congress
specifically limited liability for repayment to expenditures made
in the five years preceding the final written notice of liability,
and also authorized the Secretary, in certain circumstances, to
settle claims involving less than $50,000. §§ 1234a(f), 1234a(g).
Given the detailed provisions concerning audit determinations
contained in § 1234a, we do not believe that Congress intended
impliedly to engraft upon that section the "substantial compliance"
standard expressly stated in §§ 1234b and 1234c for prospective
relief. [
Footnote 2]
Nor do we think that the absence of bad faith absolves a State
from liability if funds were in fact spent contrary to the terms of
the grant agreement. In
Bell v. New Jersey, we explained
that, where a State obtains grants by providing assurances that the
funds will be used on programs that comply with Title I, the State
has no right to retain funds that are in fact misused. 461 U.S. at
787,
461 U. S.
790-791.
See also S.Rep. No. 91-634, at 10, 84
(assurances must be enforced and misused funds recovered). Our
discussion in no way suggested that the "misuse" of Title I funds
depended on any subjective intent attributable to grant recipients.
Instead,
Bell v. New Jersey indicates that funds were
misused if the State did not fulfill its assurances that it
would
Page 470 U. S. 665
abide by the conditions of Title I. 461 U.S. at
461 U. S.
790-791. Provisions of the 1978 Amendments clarifying
the Secretary's right to recover misused funds also do not
condition that right on a recipient's bad faith. Indeed, Congress
expressly placed on the grantees the burden of "demonstrat[ing] the
allowability of [disputed] expenditures" in proceedings before the
Education Appeal Board. 20 U.S.C. § 1234a(b). There is no
indication that grantees may avoid repayment by showing that
improper expenditures were made in good faith. [
Footnote 3]
Finally, we do not agree that
Pennhurst State School and
Hospital v. Halderman, 451 U. S. 1 (1981),
bars recovery of misused Title I funds because the State did not
accept the grant with "knowing acceptance" of its terms. In
Pennhurst, we rejected the argument that acceptance of
federal grants under the Developmentally Disabled Assistance and
Bill of Rights Act, 42 U.S.C. § 6000
et seq., required
States to provide mentally handicapped persons with appropriate
treatment in the least restrictive environment. Such a requirement,
we noted, would have imposed a "massive" and "largely
indeterminate" financial obligation on the States. 451 U.S. at
451 U. S. 24. We
observed:
"Congress must express clearly its intent to impose conditions
on the grant of federal funds so that the States can knowingly
decide whether or
Page 470 U. S. 666
not to accept those funds."
Ibid. The requisite clarity in this case is provided by
Title I; States that chose to participate in the program agreed to
abide by the requirements of Title I as a condition for receiving
funds.
Bell v. New Jersey, 461 U.S. at
461 U. S. 790,
and n. 17. There was no ambiguity with respect to this condition,
and
Pennhurst does not suggest that the Federal Government
may recover misused federal funds only if every improper
expenditure has been specifically identified and proscribed in
advance.
III
In reviewing a determination by the Secretary that a State has
misused Title I funds, a court should consider whether the findings
are supported by substantial evidence and reflect an application of
the proper legal standards.
Bennett v. New Jersey, ante at
470 U. S. 646;
Bell v. New Jersey, supra, at
461 U. S. 792.
The disagreement in this case concerns whether the Secretary
properly determined that the readiness programs approved by
Kentucky violated assurances that Title I funds would be used to
supplement state and local expenditures. The Government argues that
a reviewing court should simply defer to the Secretary's
interpretation of the requirements of Title I so long as it is
reasonable. Without disputing the reasonableness of the
interpretation advanced by the Secretary, Kentucky contends that,
because the grant program was in the nature of a contract, any
ambiguities with respect to the obligations of the State must be
resolved against the party who drafted the agreement,
i.e., the Federal Government. Thus, the parties dispute
the fundamental nature of the obligations assumed under Title I:
the Government suggests that the State guaranteed that the use of
the funds would satisfy whatever interpretation of the program
requirements the Secretary might reasonably adopt; the State argues
that liability for the misuse of funds results only if grants were
spent in violation of an unambiguous requirement.
Page 470 U. S. 667
The contentions of the parties can be properly evaluated only
against the background of the actual operation of Title I. The
grant program provided federal aid for compensatory education for
disadvantaged children, but expressly left the selection and
development of particular projects to local control. State
education agencies approved program applications and monitored
compliance by local school districts, obtained funds from the
Federal Government, and subsequently channeled the money back to
the local level. Thus, the States essentially served as conduits
for what became a massive flow of federal funds. Title I grew from
an annual appropriation of $959 million in 1966 to more than $3
billion by 1981, and assisted compensatory education programs in
every State and in more than 14,000 school districts.
See
2 U.S. Dept. of Education, Fiscal Year 1981 Annual Evaluation
Report 3 (1981); National Institute of Education, Administration of
Compensatory Education xiii (1977) (hereinafter NIE Report). During
the period involved in this case, fiscal year 1974, Kentucky
received more than $32 million in Title I funds. App. 11.
Although Congress in 1965 articulated the general goals of Title
I, the statute and the initial regulations did not precisely
outline the permissible means for implementing those goals.
Uncertainty in this regard was compounded by the fact that, during
the first years following the passage of Title I, the Office of
Education did not vigorously enforce the requirements of the
program.
See L. McDonnell & M. McLaughlin, Education
Policy and the Role of the States 13, 90-91 (1982); Murphy, Title I
of ESEA: The Politics of Implementing Federal Education Reform, 41
Harv.Ed.Rev. 35, 41-45 (1971). In 1970, Congress acknowledged that
funds had been misused because of weaknesses in administration, and
directed the Office of Education to strengthen its monitoring of
the program requirements. S.Rep. No. 91-634, at 8-10. Management of
Title I by the Office of Education improved during the 1970's, but
problems in clarifying the
Page 470 U. S. 668
program requirements remained.
See J. Berke & M.
Kirst, Federal Aid to Education: Who Benefits? Who Governs? 377-378
(1972). Congress in 1974 directed the NIE to conduct a
comprehensive 3-year study of federal compensatory education
programs, including Title I. Pub.L. 93-380, § 821, 88 Stat.
599.
The NIE study was the primary impetus for the Education
Amendments of 1978. In considering those Amendments, Congress noted
evidence that the Office of Education was
"implementing administrative requirements in a manner which is
neither clear nor consistent, and that this inconsistency is
confusing States and local education agencies about their
obligations."
H.R.Rep. No. 95-1137, p. 49, (1978); S.Rep. No. 95-856, p. 27
(1978). This confusion, Congress observed, resulted in part from
the diffuse legal framework for Title I. In addition to the
statutory provisions and the regulations, the Office of Education
sent program guides to state education agencies explaining the
requirements and their application to particular situations.
Id. at 34; H.R.Rep. No. 95-1137, at 55. Office of
Education Program Review teams visited local Title I projects and
provided advice, and the Office also sent interpretative letters in
response to state and local inquiries. NIE Report 18, 27; Office of
Education, Title I Program Guide No. 24 (1968) (compilation of
interpretative letters).
Congress accepted the NIE's conclusion that many of the
questions concerning the requirements of Title I would be resolved
if the various materials prepared by the Office of Education were
"assembled, summarized, and interrelated." S.Rep. No. 95-856, at
34; H.R.Rep. No. 95-1137, at 55. Accordingly, the 1978 Amendments
directed the agency to prepare a policy manual compiling the
applicable statutes, regulations, advisory opinions, and other
materials. 20 U.S.C. § 2837. Congress indicated that such a manual
would help to "ensure that federal officials uniformly interpret,
apply, and enforce Title I requirements throughout
Page 470 U. S. 669
the country." S.Rep. No. 95-856, at 138; H.R.Rep. No. 95-1137,
at 161. The NIE study and the extensive review of Title I's
administration by Congress indicate that the requirements of the
program, while not always clear, evolved and became more specific
over time, and were explained in materials beyond the statute and
its implementing regulations.
Although we agree with the State that Title I grant agreements
had a contractual aspect,
see Bennett v. New Jersey, ante
at
470 U. S. 638,
the program cannot be viewed in the same manner as a bilateral
contract governing a discrete transaction.
Cf. United States v.
Seckinger, 397 U. S. 203,
397 U. S. 210
(1970) ("[A] contract should be construed most strongly against the
drafter, which in this case was the United States"). Unlike normal
contractual undertakings, federal grant programs originate in and
remain governed by statutory provisions expressing the judgment of
Congress concerning desirable public policy.
See R.
Cappalli, Rights and Remedies Under Federal Grants 53-55 (1979).
Title I, for example, involved multiple levels of government in a
cooperative effort to use federal funds to support compensatory
education for disadvantaged children. The Federal Government
established general guidelines for the allocation and use of funds,
and the States agreed to follow those guidelines in approving and
monitoring specific projects developed and operated at the local
level. Given the structure of the grant program, the Federal
Government simply could not prospectively resolve every possible
ambiguity concerning particular applications of the requirements of
Title I.
Cf. Heckler v. Community Health Services of Crawford
County, Inc., 467 U. S. 51,
467 U. S. 64
(1984). Moreover, the fact that Title I was an ongoing, cooperative
program meant that grant recipients had an opportunity to seek
clarification of the program requirements. Accordingly, we do not
believe that ambiguities in the requirements should invariably be
resolved against the Federal Government as the drafter of the grant
agreement.
Page 470 U. S. 670
We find it unnecessary here to adopt the Government's suggestion
that the Secretary may rely on any reasonable interpretation of the
requirements of Title I to determine that previous expenditures
violated the grant conditions. Our review of the operation of Title
I explains how the States assumed an intermediary role in
monitoring compliance with requirements that were not always clear.
In this particular context, we are reluctant to conclude that the
States guaranteed that their performance under the grant agreements
would satisfy whatever interpretation of the terms might later be
adopted by the Secretary, so long as that interpretation is not
"arbitrary, capricious, or manifestly contrary to [Title I]."
Chevron U.S.A. Inc. v.
Natural Resources Defense Council, Inc.,
467 U. S. 837,
467 U. S. 844
(1984). As we noted in
Bennett v. New Jersey, ante at
470 U. S. 639,
470 U. S. 646,
the State agreed to comply with, and its liability is determined
by, the legal requirements in place when the grants were made.
Consequently, in evaluating past expenditures, the Secretary's
interpretation of the requirements of Title I should be informed by
the statutory provisions, regulations, and other guidelines
provided by the Department at that time. As explained
infra we have no occasion in this case to address the
circumstances, if any, in which the Secretary could impose
liability for expenditures made in reliance upon an earlier
interpretation provided by the Department,
cf. Bell v. New
Jersey, 461 U.S. at
461 U. S. 794
(WHITE, J., concurring), or to decide if a State may be held liable
where its interpretation of an ambiguous requirement is more
reasonable than an interpretation advanced by the Secretary after
the grants were made.
IV
We agree with the Secretary that the readiness classes approved
by Kentucky clearly violated existing statutory and regulatory
provisions that prohibited supplanting. It is undisputed that Title
I funds were used to pay substantially all
Page 470 U. S. 671
the costs for the basic education of students in the readiness
classes. Absent these classes funded by Title I, the participating
students would have received instruction in regular classes
supported by state and local funds. Both the statutory provision
and the implementing regulations expressly required that Title I
funds not be used to supplant state and local funds for the pupils
participating in Title I programs. The statute declared that Title
I funds must be used
"to supplement . . . the level of funds that would, in the
absence of such Federal funds, be made available from non-Federal
sources for the education of pupils participating in programs and
projects assisted under this subchapter, and . . . in no case, . .
. to supplant such funds from non-Federal sources."
20 U.S.C. § 241e(a)(3)(B) (1970 ed.). The applicable regulation
similarly provided:
"Federal funds made available . . . will be used to supplement,
and to the extent practical increase, the level of State and local
funds that would . . . be made available for the education of
pupils participating in that project [and] will not be used to
supplant State and local funds available for the education of such
pupils."
45 CFR § 116.17(h) (1974).
Based on the language of the statute and the regulation, we
cannot agree that there was an ambiguity whether the supplanting
prohibition would be satisfied if state and local funding was
maintained at the level of the school district, school, or grade.
Separate statutory provisions required that state and local
spending not be reduced at the level of school districts, 20 U.S.C.
§ 241g(c)(2) (1970 ed.); 45 CFR § 116.45 (1974), or individual
schools. 20 U.S.C. § 241e(a)(3)(C) (1970 ed.); 45 CFR § 116.26
(1974).
See generally NIE Report 9-10 (explaining
relationship of various provisions). Although funding was
maintained at the level of particular grades, because Title I
students were placed in separate classes supported by federal
funds, the consequence was to increase per-pupil state and local
expenditures for
Page 470 U. S. 672
students who remained in regular first- and second-grade
classes. No plausible reading of the statute or regulations
suggests that this result comports with the prohibitions on
supplanting. As noted by the Board, if the State was uncertain on
this point, it could have sought clarification from the Office of
Education. App. to Pet. for Cert. 27a. In fact, the grant
applications approved by the State expressly required the local
school districts to explain:
"How will you organize the program to assure that children
participating in the component activity will receive this Title I
service in addition to services to which they are ordinarily
entitled from state and local school funds?"
Ibid.
Kentucky, moreover, has not shown that the position now taken by
the Secretary is inconsistent with earlier guidelines provided by
the Department. The State notes that Office of Education Program
Review teams visited schools in Kentucky in which the readiness
classes were offered and made no objection to the classes.
Nonetheless, Kentucky does not challenge the finding by the
Education Appeal Board,
see id. at 23a, that there is no
evidence in the record that the teams reviewed the financing of the
readiness classes. [
Footnote 4]
Kentucky further contends that the ambiguity of the supplanting
provisions is demonstrated by the fact that the Secretary
modified
Page 470 U. S. 673
the Board's order to reduce the demanded repayment. This
argument is unpersuasive. The modification reflects the Secretary's
determination that Title I funds provided some additional benefits
to the students in the readiness classes because the classes had
smaller pupil-teacher ratios, but it does not cast any doubt on the
Board's finding that supplanting occurred.
We note, finally, that the possibility that application of the
supplanting provisions might be unclear in other contexts does not
affect our resolution of this case. Congress, in considering the
1978 Amendments, observed that the supplanting regulations had been
applied in an unclear and inconsistent manner.
See
H.R.Rep. No. 95-1137, at 29, 49; S.Rep. No. 95-856, at 15, 27. This
situation resulted in part from debate within the Office of
Education concerning the desirability and practicality of measuring
supplanting at the level of expenditures upon individual students.
See NIE Report 29-38. Difficult questions of
interpretation may well arise in determining if a particular
program violated the supplanting provisions, and we do not suggest
that the prior position of the Department is irrelevant in this
regard. We conclude, however, that the programs approved by
Kentucky for fiscal year 1974 clearly violated then-existing
requirements for Title I, and therefore neither ambiguity in the
application of those requirements to other situations nor the
policy debates that later arose within the Office of Education
avail the State here. [
Footnote
5]
V
We hold that the Secretary properly determined that Kentucky
violated its assurances by approving the readiness
Page 470 U. S. 674
classes, and thereby misused funds received under Title I.
Before the Court of Appeals, Kentucky also challenged the
calculation of the amount to be repaid. The Court of Appeals did
not address this argument, 717 F.2d at 950, and the State may renew
its contentions in this regard on remand. Accordingly, the judgment
below is reversed, and the case is remanded for further proceedings
consistent with this opinion.
It is so ordered.
JUSTICE POWELL took no part in the consideration or decision of
this case.
* JUSTICE WHITE and JUSTICE BLACKMUN join only Parts I, II, IV,
and V of this opinion.
[
Footnote 1]
The Office of Education was the predecessor to the present
Department of Education, and was responsible for the administration
of Title I until 1980.
See Bell v. New Jersey,
461 U. S. 773,
461 U. S. 776,
n. 1 (1983). Unless the distinction is significant, we will refer
to both the Office of Education and the Department of Education as
the Department.
Ibid.
[
Footnote 2]
In
Bell v. New Jersey, we held that provisions in the
1978 Amendments expressly authorizing judicial review of final
decisions by the Secretary or the Board applied retroactively. 461
U.S. at
461 U. S.
777-778, and n. 3. We declined to decide, however,
whether the provisions allowing the Secretary to recover misused
funds were also retroactive,
id. at
461 U. S. 782,
because we held that § 415 of the General Education Provisions Act,
Pub.L. 91-230, 84 Stat. 170, 20 U.S.C. § 1226a-1, created a right
to impose liability on the States. 461 U.S. at
461 U. S. 784,
461 U. S. 791.
Neither the language of § 415 nor
Bell v. New Jersey
suggests that the Secretary's right to recover is affected by a
recipient's substantial compliance with the law. Given our
conclusion that the references to substantial compliance in §§
1234b and 1234c do not limit the right to repayment provided in §
1234a, we need not decide whether the latter section is remedial,
rather than substantive, and thus retroactive.
Cf. Bennett v.
New Jersey, ante at
470 U. S. 637
(substantive standards of 1978 Amendments are not retroactive).
[
Footnote 3]
Although the view of a later Congress does not definitively
establish the meaning of an earlier enactment, it does have some
persuasive value.
Bell v. New Jersey, 461 U.S. at
461 U. S.
784-785. Accordingly, we note that Congress has rejected
a proposal to amend the audit provisions to add a substantial
compliance standard.
See 130 Cong.Rec. H7902-H7903 (July
26, 1984) (§ 808(a) of H.R. 11);
id. at H10756 (Oct. 2,
1984) (deletion of § 808(a) in conference). Similarly, when a
proposal to excuse liability for funds misused before 1978 was
debated and ultimately defeated on a point of order, Members of
Congress noted that the Department had sought repayment
notwithstanding the absence of bad faith or fraud on the part of
recipients.
See 127 Cong.Rec. 10644 (1981) (remarks of
Sen. Thurmond);
id. at 10646 (remarks of Sen. Stennis).
These actions suggest that later Congresses understood that
liability is not conditioned on substantial compliance or bad
faith.
[
Footnote 4]
At oral argument before the Board, the State argued that some
"measure of estoppel" should operate against the Department, and
moved to reopen the record to present additional evidence. The
Board ruled that estoppel would not apply absent affirmative
misconduct by the Government, and, because Kentucky had not alleged
such misconduct, it declined to reopen the record. App. to Pet. for
Cert. 28a. The Court of Appeals did not discuss estoppel arguments,
and Kentucky acknowledged before this Court that it was not making
any estoppel claim. Tr. of Oral Arg. 39, 43. Accordingly, we do not
address the application of the defense of estoppel.
Cf. Heckler
v. Community Health Services of Crawford County, Inc.,
467 U. S. 51,
467 U. S. 60
(1984) (reserving issue of assertion by private party of estoppel
against Government).
[
Footnote 5]
Because the disputed expenditures violated a substantive
requirement concerning the use of Title I funds, we do not address
in this case whether the Secretary could demand repayment for no
more than a technical violation of a grant agreement.
Cf. Bell
v. New Jersey, 461 U.S. at
461 U. S. 794
(WHITE, J., concurring).