Secretary of Education v. Commonwealth of Kentucky Department of Education

    Nos. 83-1798 and 83-2064

In  T he

(Enttrt at
October Term, 1984

^Secretary op E ducation,
United States Department of E ducation,

Petitioner,V.

Commonwealth op Kentucky 
Department op E ducation

T.H. Bell, Secretary op E ducation,
Petitioner,V.

State op New  J ersey

On Certiorari to the United States Courts of Appeals 
for the Third Circuit and for the Sixth Circuit

BRIEF FOR THE LAWYERS’ COMMITTEE FOR 
CIVIL RIGHTS UNDER LAW AS AMICUS CURIAE

Fred N. F ishman 
Robert H. Kapp 

Co-Chairmen 
Norman Redlich 

Trustee
William L. Robinson 
Norman J. Chachkin * 

Lawyers’ Committee for 
Civil Rights Under Law 

1400 ‘Eye’ Street, N.W. 
Suite 400
Washington, D.C. 20005 
(202) 371-1212

Attorneys for Amicus Curiae 
* Counsel of Record

W i l s o n  -  Ep e s  P r i n t i n g  C o . .  In c . - 7 8 9 - 0 0 9 6  - W a s h i n g t o n , D . C .  2 0 0 0 1



TABLE OF CONTENTS
Page

TABLE OF AUTHORITIES...........................    ii

INTEREST OF AMICUS CURIAE.... ..............................  1

STATEMENT ........     4

SUMMARY OF ARGUMENT........ ..................................  8

ARGUMENT......................................      9

Introduction........ ................    9
The Third Circuit’s Retroactivity Holding Is Con­
trary to Established Legal Principles and Is Un­
workable ................         11
The Sixth Circuit Erred by Refusing to Follow the 
Department of Education’s “Reasonable” Interpre -̂ 
tation of the Statute and Regulations and by In­
venting a Wholly Inappropriate Standard for Re- 
pajunent of Misspent Grant Monies........................  17
The Eligibility and Supplanting Restrictions at 
Issue in These Cases are Directly Related and 
Critical to the Purposes of the Title I Program— 
and the States Had Both Ample Notice of their 
Applicability and Adequate Explanation of their 
Requirements................................................................  22

CONCLUSION........ ............................................................  30



11

TABLE OF AUTaOBlTIES
Cases: Page

Alexander v. Califano, 432 F. Supp. 1182 (N.D.
Cal. 1977) ................ ................................ ...2n, 21, 23n

Bell V. New Jersey, —— U.S. ------, 76 L.Ed.2d
312 (1983) — ................    'passim

Bradley v. School Board of Richmond, 416 U.S.
696 (1974)................ ............................................ .... 12,14

Chevron, USA v. Natural Resources Defense Coun­
cil, 52 U.S.L.W. 4845 (U.S. June 25, 1984).......  18n

Federal Election Commission v. Democratic Sen­
atorial Campaign Committee, 454 U.S. 27
(1981)...............................................     I8n

IndioMa Department of Public Instricction v. Bell,
728 F.2d 938 (7th Cir. 1984) .......  18n

Kremer v. Chemical Construction Company, 456
U.S. 461 (1982) ...___        I2n

New Jersey v. Hufstedler, 662 F.2d 208 (3d Cir.
1981), rev’d sub nom. Bell v. New Jersey,------
U .S.------, 76 L.Ed.2d 312 (1983) ____________lOn-lln

Psychiatric I-nstitute of Washington, D.C. v.
Schweiker, 669 F.2d 812 (D.C. Cir. 1981)___ 18n, 20

United States v. Security Industrial Bank, 459
U.S. 70 (1982).........................................................  13n

West Virginia v. Secretary of Education, 667 F.2d
417 (4th Cir. 1981)........ ........................ ................ 18n

Wheeler v. Barrera, 417 U.S. 402 (1974) ............. 5n, 25n
Statutes:

Chapter 1 of the Education Consolidation and Im­
provement Act of 1981, Pub. L. No. 97-35,
§§ 552 et seq., 95 Stat. 464-69 (codified at 20
U.S.C. § 3801 et seq. (1982)) ........................ ........ 2n

Pub. L. No. 97-35, § 552, 95 Stat. 464 (codi­
fied at 20 U.S.C. § 3801 (1982))........... ........ 2n

Pub. L. No. 97-35, §§ 556(b)(1), 558(b), 95 
Stat. 466, 468 (codified at 20 U.S.C.
§§3805(b)(1), 3807(b) (1 9 8 2 )) ................ 2h

Department of Education Organization Act, Pub.
L. No. 96-88, 93 Stat. 668, reprinted in 1979 
U.S. Code Cong. & Ad. News 668 (codified at 
20 U.S.C. §§ 3401 et seq. (1982))......................... 4n



Ill

TABLE OF AUTHORITIES—Continued
Page

Education Amendments of 1978, Pub. L. No. 95- 
561, 92 Stat. 2143, reprinted in 1978 U.S. Code
Cong. & Ad. News 2143 et seq............................- 3n

Pub. L. No. 95-561, § 101(a), 92 Stat. 2143, 
2161-62 (codified at 20 U.S.C. § 2732(a) (1)
(1982)) .................................... ..................... . 6n

Pub. L. No. 95-561, § 1530, 92 Stat. 2143,
2380, reprinted in 1978 U.S. Code Cong. &
Ad. News 2143, 2380 ________ ________ 12n

Elementary, Secondary, and Other Education 
Amendments of 1969, Pub. L. No. 91-230,
§ 109(a), 84 Stat. 121, 124, reprinted in 1970 
U.S. Code Cong. & Ad. News 133, 137 (codified
at 20 U.S.C. § 241e(a) (3) (1970))_________ _ 29n

Title I of the Elementary and Secondary Educa  ̂
tion Act of 1965, Pub. L. No. 89-10, 79 Stat. 27, 
reprinted in 1965 U.S. Code Cong. & Ad. News 
29, as renumbered by Pub. L. No. 89-750, § 116,
80 Stat. 1191, 1198, reprinted in 1966 U.S. Code 
Cong. & Ad. News 1392, 1400____ _________ 4n

Pub. L. No. 89-10, §2, 79 Stat. 27, 30, re­
printed in 1965 U.S. Code Cong. & Ad.
News 29, 33 (codified at 20 U.S.C. § 241e 
(a) (1) (A) (Supp. IV 1968)) (current ver­
sion at 20 U.S.C. § 2734d (1982) ................6n, 27n

Pub. L. No. 89-10, §205 (a) (1) (B), 79 Stat.
27, 30, reprinted in 1965 U.S. Code Cong. &
Ad. News 29, 33 (codified at 20 U.S.C. 
§241e(a) (1) (B) (Supp. IV 1968))....... 24n

20 U.S.C. § 241c (2) (Sup-p. IV 1968) ........ ........... 23n
20 U.S.C. § 241e(a) (1) (A) (1970) ........ ............... 5n
20 U.S.C. § 241e(a) (1) (A) (Supp. IV 1968) ____  23n
20U.S.C. § 241e(a) (3) (B) (1970)................ .......... 7n, 20
20 U.S.C. § 241e(a) (3) (C) (1970)..... ................... 20
20 U.S.C. § 884 (Supp. IV 1974), as added by Pub.

L. No. 93-380, § 106, 88 Stat. 484, 512, reprinted 
in 1974 U.S. Code Cong. & Ad. News 541, 576.... 5n



IV
TABLE OF AUTHORITIE&--Continued

Page
20 U.S.C. § 1234a(g) (1982)....................................... 5n
20U.S.C. § 1234b(a) (1978)......................................  19n
20 U.S.C. § 1234c(a) (1978).................. ..................... 19n
20 U.S.C. § 1234e(a) (2) (1982)....... ........................  lOn
20U.S.C.§ 2711(c) (1982) ....... ................................  23n
20 U.S.C. § 2732 (1982)...........      23n
20 U.S.C. § 3803 (1982)...........      23n
20 U.S.C. § 3805 (b) (1) (A) (1982)........   23n
20 U.S.C. § 3805 (b) (3) (1982)...........- .....    24n

Regulations:
45 C.F.R. § 116.17(b) (1966)..................................... 25n
45 C.F.R.§ 116.17(d) (1968)............. ....................... 25n
45 C.F.R. § 116.17(f) (1966)............................    27n
45 C.F.R. § 116.17(h) (1973).....     21
45 C.F.R. § 116.17(h) (1968) .................- ................ 28n
32 Fed. Reg. 2742 (February 9, 1967).......... ............ 25n

Legislative Materials:
H.R. Rep. No. 805, 93rd Cong., 2d Sess., reprinted

in 1974 U.S. Code Cong. & Ad. News 4093.......  5n
S. Rep. No. 634, 91st Cong., 2d Sess., reprinted in

1970 U.S. Code Cong. & Ad. News 2768 .... ....... 9n, 20n,
29n

H.R. Rep. No. 1814, 89th Cong., 2d Sess., reprinted
in 1966 U.S. Code Cong. & Ad. News 3844.......  24n

Dismissing Certain Cases Pending Before the Edu­
cation Appeal Board: Hearings on H.R. 8145 
Before the Subcommittee on Elementary, Sec­
ondary and Vocational Education of the House 
Comm, on Educ. & Labor, 96th Cong., 2d Sess.
(1980) ................................................ ...................... 14n

Oversight Hearing on Amendments to Title I of 
ESEA and GEPA: Hearings Before the Sub­
committee on Elementary, Secondary and Voca­
tional Education of the Hou.se Comm, on Educ.
& Labor, 96th Cong., 1st Sess. (1979)_______ 15n

Education Amendments of 1977: Hearings on S.
1753 Before the Subcommittee on Education,
Arts and Humanities of the Senate Comm, on 
Human Resources, 95th Cong., 1st Sess. (1977).. 15n



TABLE OF AUTHORITIES^Continued
Page

Elementary and Secondary Education Amend­
ments of 1973: Hearings on H.R. 16, H.R. 69,
H.R. 5163, and H.R. 5823 Before the General 
Subcommittee on Education of the House Comm, 
on Educ. & Labor, 93rd Cong., 1st Sees. (1973),. 15n

129 Cong. Rec. (1984) ....... ..... ................................13n, 14n
127 Cong. Rec. (1981)................................................. 14n
116 Cong. Rec. (1970) ..................................... ...........  20n
111 Cong. Rec. (1965)............................................ . 27n

Other Authorities:
U.S. Office of Education, Title I Program Guide

No. 45A (July 31,1969)____________________  26n
U.S. Office of Education, Title I Program Guide

No. 48 (November 20,1968).... ............................26n, 28n
U.S. Office of Education, Title I Program Guide

No. 44 (March 18,1968)........... ............................25n, 28n
U.S. Office of Education, Title I Program Guide

No. 28 (February 27,1967)._____ _____________ 25n
Washington Research Project, et al.. Title I of

ESEA: Is It Helping Poor Children? (1969).... 29n



In  The

(Eo«rt at î tat̂ a
October Term, 1984

Nos. 83-1798 and 83-2064

Secretary op Education,
United States Department op Education,

Petitioner,V. ’

Commonwealth op Kentucky 
Department op Education

T.H. Bell, Secretary op Education,
 ̂ Petitioner,

State op New J ersey

On Certiorari to the United States Courts of Appeals 
for the Third Circuit and for the Sixth Circuit

BRIEF FOR THE LAWYERS’ COMMITTEE FOR 
CIVIL RIGHTS UNDER LAW AS AMICUS CURIAE

INTEREST OF AMICUS CURIAE i
The Lawyers’ Committee for Civil Rights Under Law 

was organized in 1963 at the request of the President of 
the United States to involve private attorneys in the 
national effort to assure civil rights for all Americans. 
The Committee has, over the past 21 years, enlisted the

1 Letters from counsel for the parties consenting to the filing of 
this brief have been submitted to the Clerk.



services of over a thousand members of the private bar 
in addressing the legal problems of minorities and the 
poor.

The Lawyers’ Committee has had a long-standing in­
terest in Title I of the Elementary and Secondary Edu­
cation Act of 1965^ because of the statutory emphasis 
upon meeting the needs of poor and disadvantaged chil­
dren. The Committee has sought to promote vigorous 
enforcement of the programmatic and fiscal restrictions 
in the statute and implementing regulations.®

2 In 1981 the Title I program was replaced by “Chapter 1” of the 
Education Consolidation and Improvement Act of 1981, Pub. L. 
No. 97-35, §§ 552 et seq., 95 Stat. 464-69 (codified at 20 U.S.C. 
§§3801 et seq. (1982)). Chapter 1 retains the Title I focus upon 
assisting educationally disadvantaged children residing in high 
poverty areas, see Pub. L. No. 97-35, § 552, 95 Stat. 464 (codified 
at 20 U.S.C. §3801 (1982)), as well as the specific targeting and 
non-supplanting provisions of the Title I law, see id., §§ 556(b) (1), 
558(b), 95 Stat. 466, 468 (codified at 20 U.S.C. § 3805(b)(1), 
3807(b) (1982)). Hence, the rulings below have continuing im­
portance for the major federal program of aid to elementary and 
secondary schools.

® In the early 1970’s the Committee began to monitor the adminis­
tration of the Title I program, in order to determine whether states 
and local school districts were using their grants to operate projects 
which carried out its basic purpose. These activities greatly in­
tensified in 1975 with the establishment of the Committee’s Federal 
Education Project. One of the Project’s major goals was to stimu­
late adherence to the categorical restrictions of the Title I statute 
and regulations in order to increase the effectiveness of local com­
pensatory programs. The Project served as an informational re­
source for parents of Title I participants and Title I staff in local 
school districts, and it provided legal representation to parents of 
Title I students in litigation and administrative complaint proceed­
ings, including an important supplanting case, Alexander v. Cali- 
fano, 432 F. Supp. 1182 (N.D. Cal. 1977).

In 1976, pursuant to a contract with the National Institute of 
Education, the Lawyers’ Committee established a separately staffed 
unit, the Legal Standards Project, to investigate and analyze the 
legal framework of Title I. At the request of members of the 
Congressional authorizing committees, this project subsequently 
made extensive recommendations for legislative changes and pre-



Appl*Opriations for Title I and Chapter 1 were not and 
are not unlimited. For this reason, each year thousands 
of educationally deprived students cannot receive com­
pensatory services. Congress was conscious of this fiscal 
reality and wrote into law a set of requirements that 
are central to the functioning of an effective program, 
including (1) accurate targeting of compensatory proj­
ects to serve only eligible schools and attendance areas, 
and (2) continuation of state and local expenditures for 
basic education programs for participating children so 
that federally funded projects provide extra services to 
needy students.

Compliance with these requirements is essential, in our 
judgment, to the educational effectiveness of compensatory 
instruction projects funded by the federal government. 
Our experience indicates that meaningful compliance de­
pends, in significant part, upon the expectation that audit 
and recoupment of misspent funds will follow any failure 
to adhere to the terms and conditions of the program. 
Thus, the Committee is concerned that the holdings below, 
anouncing rules of construction which defeat recovery of 
funds not expended in accordance with grant-in-aid agree­
ments accepted by Kentucky and New Jersey, will have 
a detrimental impact upon educational opportunities for 
poor children by weakening the incentive for adherence 
to statutory and regulatory requirements.

Rather than crediting ingenious arguments that evade 
the Congressional intention expressed in these statutory 
restrictions, as the courts below did, state and local edu­
cation officials should be held to adhere to the fiscal and 
program limitations of federal law, as interpreted by the 
Department of Education, when audit proceedings are 
subjected to judicial review.

pared a draft bill. Many of its suggestions were incorporated in the 
Education Amendments of 1978, Pub. L. No. 95-561, 92 Stat. 2143, 
reprinted in 1978 U.S. Code Cong. & Ad. News 2143 et seg., and the 
Congress’ reliance upon the work of the Legal Standards Project is 
acknowledged in the legislative history of the 1978 amendments.



STATEMENT
In 1965, Congress enacted Title I of the Elementary 

and Secondary Education Act,^ which provided federal 
grants to states and local school districts for programs 
designed to assist educationally deprived children in areas 
with high concentrations of low-income families. In order 
to ensure that Title I grants benefited these children, the 
statute included specific conditions with which state edu­
cation agencies (SEAs) and local education agencies 
(LEAs) were required to comply.® Two conditions are 
particularly relevant to these cases: first, Title I funds 
could be expended only for projects serving eligible at­
tendance areas and schools; second, students participat­
ing in Title I projects had to receive their “fair share” 
of state and local expenditures so that federal funds 
provided truly supplemental services.® State and federal 
audits were authorized to assess local compliance with 
statutory criteria.

New Jersey and Kentucky participated in the Title I 
program each year following its enactment and were 
aware of the various statutory and regulatory require­
ments for participation. However, audits conducted by 
the United States Department of Health, Education and 
Welfare  ̂ resulted in determinations that both States had 
misapplied substantial amounts of federal Title I funds.

<Pub. L. Xo. 89-10, 79 Stat. 27, reprinted in 1965 U.S. Code 
Cong. & Ad. News 29, as renumbered by Pub. L. Xo. 89-750, § 116, 
80 Stat. 1191. 1198. reprinted in 1966 U.S. Code Cong. & Ad. News 
1392. 1400.

® These conditions were repeated and amplified in the administra­
tive regulations and further clarified in numerous Title I Program 
Guides sent to all of the states as earlj- as 1968. Sfe f»/ra notes 48- 
51 i  accompanying text, 55-57 & aocompanyins text,

* The same sorts of restrictions apply to the grant-in-aid prv>- 
gram which replaced Title I. 8cc .s«pr« note 2,

■ The Title I pnigram was administertHl by the Pepsrtnient of 
Health, Education and Welfare prior h> the creation of the De­
partment of Education by Pub. U No. 96-88. 9.3 8tat, 668. reprinted 
in 1979 U.S. Code Cong. .4d. News 668 vovnlified at 20 U.8.C, 
§13401 et se4. (1982)).



New Jersey. Federal auditors found that the SEA in­
correctly approved Title I grant applications for the 1970- 
71 and 1971-72 school years from the Newark LEA, 
which then used the grant funds in school attendance 
areas that were not eligible to participate in the Title I 
program.® New Jersey disputed these findings,® but ex­
cept for reductions required by a “statute of limita­
tions” “  the Education Appeal Board sustained the 
auditors’ claims and the Secretary of Education declined

® See Joint Appendix at 11-34, Bell v. New Jersey,----- U.S.------ ,
76 L. Ed. 2d 312 (1983) (Final Audit Report) [hereinafter cited 
as N.J.J.A.]. The federal statute required that projects be located 
to serve “school attendance areas having’ high concentrations of 
children from low-income families,” 20 U.S.C. § 241e(a) (1) (A) 
(1970). Regulations and Title I Program Guides issued between 
1965 and 1970 by the Department of Health, Education and Wel­
fare, see Wheeler v. Barrera, 417 U.S. 402, 407, 420 n.l4 (1974), 
defined this term to mean attendance areas having higher-than- 
average numbers or percen'tages of children from poor families than 
the school district as a whole. See generally N.J.J.A. at 14-16; 
infra pp. 23-27.

® The dispute as to the 1970-71 school year is whether the Newark 
LEA qualified for an exception to the usual eligibility requirement, 
see supra note 8, because there was “no wide variance,” within the 
meaning of the regulations and Program Guides, in the level of 
poverty among the district’s school attendance areas. The dispute 
as to the 1971-72 school year concerns the correct manner of docu­
menting and comparing levels of poverty among attendance areas in 
determining eligibility.

w> 20 U.S.C. § 884 (Supp. IV 1974), as added by Pub. L. No. 93- 
380, § 106, 88 Stat. 484, 512, reprinted in 1974 U.S. Code Cong. & 
Ad. News 541, 576, provided that:

No state or local educational agency shall be liable to refund 
any payment made to such agency under this Act (including 
Title I of this Act) which was subsequently determined to be 
unauthorized by law, if such payment was made more than 
five years before such agency received final written notice that 
such payment was unauthorized.

See also H.R. Rep. No. 805. 93rd Cong., 2d Sess. 78-79, reprinted in 
1974 U.S. Code Cong. & Ad. News 4093, 4160. The currently ap­
plicable version of this provision is codified at 20 U.S.C. § 1234a (g) 
(1982).



to disturb its decision.^ On review of the Department’s 
action in the Court of A p p e a ls ,a  panel held that 1978 
amendments to Title I which eased the eligibility require­
ments for school attendance areas should be given retro­
spective effect so as to validate the earlier expenditures 
to the extent that they would have been proper under 
the new eligibility criteria.^^ The panel remanded to the 
Secretary of Education to determine precisely which of 
the challenged expenditures would have been permissible 
under the 1978 statutory amendments.^®

See N.J. Pet. at 13a-15a.
12 See id. at 15a n.l2.
13 Pub. L. No. 95-561, § 101(a), 92 Stat. 2143, 2161-62 (codified at 

20 U.S.C. § 2732(a)(1) (1982)).
11 N.J. Pet. at 4a-5a.
1® There are two reasons why the expenditures in question might 

not have been lawful even had they been made after 1978. First, 
as the court below recognized, use of the provision added in 1978 
was conditioned upon a special “maintenance of effort” requirement 
for compensatory programs; since New Jersey had not sought to 
rely upon the 1978 law prior to review in the Court of Appeals, 
the record previously made in the administrative proceedings is not 
adequate to determine whether this condition has been met (see 
N.J. Pet. at 5a). Second, the Title I law and regulations always 
required that projects be of “sufficient size, scope and quality” to 
offer hope of significant achievement gains for participants. See 
Pub. L. No. 89-10, § 2, 79 Stat. 27, 30, reprinted in 1965 U.S. Code 
Cong. & Ad. News 29, 33 (current version at 20 U.S.C. § 2734(d) 
(1982)). This requirement usually resulted in a school district’s 
establishing Title I projects at fewer than all eligible schools, in 
light of limited Congressional appropriations—^vhich never reached 
the authorization level contained in the statute. See infra note 51. 
Because, in this case, the federal auditors determined that the num­
ber of eligible schools was itself improperly inflated, they had no 
occasion to consider whether Newark's Title I program during the 
years in question otherwise met the "size, scope and quality" re­
quirement. Thus, even if the 1978 amendments' 25‘'( -eligibility pro­
vision could be used in Newark, questions about the program's 
ccniormity with other statutory and regulatory requirements would 
remain. Nevertheless, this matter is ripe for review since the deci-



Kentucky. In Fiscal Year 1974, with SEA approval, 
some 50 LEAs throughout the state placed first- and 
second-grade Title I participants in separate classrooms 
with Title I teachers. Except for a few “enrichment 
classes,” these students received their entire academic 
instruction, including the basic state-mandated curricu­
lum, through the federally funded Title I program.^® 
Although gross state and local expenditures at Title I 
schools were not reduced, again with the exception of the 
enrichment classes the students participating in Title I 
did not receive the benefit of any of these expenditures.

Federal auditors concluded that these practices consti­
tuted “supplanting” in violation of the statutory require­
ment that Title I funds

be [so] used (i) as 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 (ii) 
in no case, as to supplant such funds from non- 
Federal sources.̂ "̂

With certain modifications not relevant to the issues be­
fore this Court, the Education Appeal Board and the 
Secretary of Education upheld the auditors’ supplanting 
findings.^® A panel of the Court of Appeals, however.

sion below finally—and erroneously—determines the issue of retro­
activity and will bind the Department of Education in Title I audit 
cases which are now pending and which may in the future arise 
from the States within the Third Circuit. Cf. N.J. Pet. at 16 ($68 
million in Title I audit claims pending).

Ky. Pet. at 22a (findings of Education Appeal Board).
” 20 U.S.C. § 241e(a) (3) (B) (1970) (emphasis added).
18 The Audit Report sought repayment only of those Title I funds 

expended on readiness classes for students who were promoted to 
the next grade level at the end of the school year—apparently to 
avoid any question whether students retained at the same grade 
level would ultimately receive their “fair share” of state and local



8
refused to sustain the repayment demand. While the De­
partment’s interpretation of the statutory anti-supplant­
ing language and implementing regulations was “reason­
able” and would be controlling in future cases, the Court 
of Appeals said:

[T]he statutory and regulatory provisions at issue 
were [not] sufficiently clear to apprise the Common­
wealth of its responsibilities. . . .

[I]t is unfair for the Secretary to assess a penalty 
against the Commonwealth for its purported failure 
to comply substantially with the requirements of law, 
where there is no evidence of bad faith and the 
Commonwealth’s program complies with a reasonable 
interpretation of the law. *̂

SUMMARY OF ARGUMENT

Because the 1978 amendments to Title I explicitly were 
not made effective prior to October 1, 1978; because the 
statutory change upon which New Jersey seeks to rely is 
a substantive, rather than procedural or remedial one; 
because this matter arises from the state’s voluntary ac­
ceptance of pre-1978 statutory terms and conditions under 
a federal grant program; and because the rule of retro­
activity adopted by the Third Circuit is unworkable in

resources when they repeated the same curriculum. See Joint Ap­
pendix in No. 83-1798, at 17 (Final Audit Report). The Depart­
ment of Education adopted this position, despite the misgivings of 
the Education Appeal Board (see Ky. Pet. at 30a), and the case does 
not now turn upon the propriety of this approach. See Ky. Pet. at 
16a. Additionally, the Secretary reduced the demand for repayment 
in light of the fact that the “readiness” classes were smaller than 
most regular classes in the state (see Ky. Pet. at 38a-42a). The 
correctness of this adjustment is also irrelevant at this time: the 
Sixth Circuit’s ruling eliminates any repayment of any funds on 
account of any supplanting.

Ky. Pet. at 9a-10a, 12a.



9

both the legislative and administrative process, its judg­
ment should be reversed.

II

Because the case before the Sixth Circuit originated 
in Kentucky’s petition for judicial review of agency ac­
tion, once the Court of Appeals concluded that the Edu­
cation Department’s interpretation of the Title I statute 
and regulations was a “reasonable” one, it should have 
deferred to the agency. In addition, the view of the 
panel below that the statute and regulations were am­
biguous is unsupportable.

III
Contrary to the arguments of New Jersey and Ken­

tucky and the intimations of the courts below, the grant 
conditions which the auditors found those states to have 
violated were adopted early in the history of the Title I 
program, were repeatedly communicated to the states, 
and were critical to the effectiveness of the compensatory 
projects funded by the federal government.

ARGUMENT

Introduction

In Bell V. New Jersey, U.S. -, 76 L. Ed.
2d 312, 326 (1983), this Court ruled “that the pre-1978 
version of [Title I] requires that recipients be held 
liable for funds that they misuse” '̂  by making repay-

^  See also id., 76 L. Ed. 2d at 322, quoting S. Rep. No. 634, 91st 
Cong., 2d Sess. 84, reprinted in 1970 U.S. Code Cong. & Ad. News 
2768, 2827 (“Even though there may be difficulties arising from 
recovery of improperly used funds, those exceptions must be en­
forced if the Congress is to carry out its responsibility to the tax­
payer”). The states are, of course, accorded substantial opportuni­
ties to demonstrate the propriety of challenged expenditures and 
have a right to judicial review prior to making any repayment. See 
id., 76 L. Ed. 2d at 327-28.



10
ment to the United States.'̂  ̂ The decisions below will 
substantially frustrate the ability of the federal govern­
ment to obtain such repayments. Without any basis in 
the statutory language or legislative history, and con­
trary to longstanding administrative interpretations of 
the law, the courts below extinguished the obligations of 
Kentucky and New Jersey to repay Title I funds ex­
pended in contravention of statutory and regulatory pro­
visions^ in force at the time the states accepted Title I

Up to 75% of the amount recovered may be returned to the 
state to be used, “to the extent possible, for the benefit of the popu­
lation that was affected by the failure to comply or by the mis- 
expenditures which resulted in the audit exception,” 20 U.S.C. 
§ 1234e(a) (2) (1982). See Ky. Pet. at 15 n.l3.

22 For purposes of resolving the legal issues presented to this 
Court, it must be assumed that the states and their constituent 
LEAs failed to comply with relevant federal program requirements. 
See Bell v. New Jersey, 76 L. Ed. 2d at 327.

In the Kentucky case, the Sixth Circuit panel declined to enforce 
the Secretary’s demand for repayment because of its view that the 
Title I regulations were “ambiguous,” the misexpenditures identi­
fied by the auditors therefore did not constitute “substantial non- 
compliance,” and for this reason repayment of the misspent funds 
was an “unfair . . . penalty” {id. at 12a). But the Court of Appeals 
agreed that the expenditures for “readiness” classes were incon­
sistent with the Department of Education’s “reasonable” interpre­
tation of the Title I statute and regulations (Ky. Pet. 8a-9a) and 
the Commonwealth has not challenged that determination.

In the New Jersey case, the state has acknowledged that “ ‘there 
were irregularities in the original grant approval process’ ” (N.J. 
Pet. 46a) resulting from the presence of a “fiaw in the initial 
formula” used to determine eligible school attendance areas in the 
Newark district {id. at 45a). See id. at 40a (Decision of Education 
Appeal Board) (“the New Jersey SEA admits it did not meet the 
Title I requirements for determining the eligibility of school at­
tendance areas for Title I funding when it approved Newark’s 
1971-72 project application with respect to 13 Newark schools”). 
Although New Jersey argued that at least some of these schools 
would have been eligible under a proper formula {see id. at 8a), 
the Third Circuit never decided this question. In 1981 that court 
held that the Secretary of Education had no authority to order 
repayment of misexpended funds, New Jersey v. Hufstedler, 662



11
grants.®

We agree fully with the United States that the rulings 
below are doctrinally unsound, for the reasons outlined 
in the first two arguments below. In addition, we sub­
mit that these rulings may ultimately be traced to the 
lower courts’ erroneous perception that states and local 
school districts were burdened by unfair or unclear pro­
grammatic and fiscal restrictions which interfered with 
the educational efficacy of Title I projects. However, as 
we show in the third argument, the conditions which 
New Jersey and Kentucky violated were very deliberately 
inserted into the statutory scheme by Congress; they are 
central to the success of the compensatory education 
effort; they are comprehensible and capable of straight­
forward application; and they were promulgated and 
clearly explained to state officials by the federal govern­
ment prior to the misexpenditures which are the subject 
of these suits.

The Third Circuit’s Retroactivity Holding Is Contrary to 
Established Legal Principles And Is Unworkable

In the New Jersey case, the Third Circuit erroneously 
applied well-settled rules of statutory construction when 
it held that eligibility criteria enacted in 1978 could be

F.2d 208, rev’d sub nom. Bell v. New Jersey, U.S. 76
L. Ed. 2d 312 (1983). On remand, the Third Circuit applied 1978 
statutory amendments retroactively to validate Newark’s eligibility 
determinations which, it said, “arguably overstated the relative 
size of the class of students from low-income families” (N.J. Pet. 
at 3a). The only question now before this Court, therefore, is 
whether the 1978 amendments should have been applied in this 
retrospective manner to excuse New Jersey from the obligation it 
would otherwise have to repay funds to the Department of 
Education.

See 76 L. Ed. 2d at 326 (“The State chose to participate in 
the Title 1 program and, as a condition of receiving the grant, 
freely gave its assurances that it would abide by the conditions of 
Title I”).



12

applied retrospectively, so as to excuse a Title I grant 
recipient’s noncompliance with different criteria that 
were contained in federal law when the disputed expendi­
tures were made (in 1970-71 and 1971-72). The 1978 
amendments to Title I specifically provided that “the 
provisions of this Act and the amendments and repeals 
made by this Act shall take effect October 1, 1978.̂ ® 
Thus, the panel below erred in concluding that “ [tjhere 
is . . . nothing in the 1978 amendments or the legisla­
tive history [which] indicates that the amendments were 
not intended to be applied retroactively” (N.J. Pet. 4a). 
And, that being the case, the predicate for application of 
the Bradley '̂  principle evaporates.

Moreover, Bradley involved remedial, not substantive, 
changes in the law; ^̂ thus, even in the absence of the 
legislative directive for prospective application contained 
in the 1978 amendments,®* Bradley would be inapplicable. 
Where new legislation alters a substantive provision of

24 New Jersey does not contend, and the Third Circuit did not 
hold, that the 1978 amendments explicitly repealed or explicitly 
amended, retrospectively, the previous eligibility standards which 
the auditors found to have been violated. Repeals by implication of 
course are not favored. E.g., Kremer v. Chemical Construction 
Company, 456 U.S. 461, 468-78 (1982).

2® Pub. L. No. 95-561, § 1530, 92 Stat. 2143, 2380, reprinted in 
1978 U.S. Code Cong. & Ad. News 2143, 2380.

Bradley v. School Board of Richmond, 416 U.S. 696 (1974). 
See N.J. Pet. 4a.

2̂  In Bradley, this Court noted that upon enactment of § 718 of 
the Education Amendments of 1972, authorizing the award of at­
torneys’ fees to prevailing plaintiffs in school desegregation cases, 
“there was no change in the substantive obligation of the parties.” 
416 U.S. at 721. Here there is no question about the substantive 
impact of the 1978 amendments in altering school attendance area 
eligibility criteria. See also Bell v. New Jersey, 76 L. Ed. 2d at 
318 n.3.

28 See supra note 25 and accompanying text.



IS
a statutory scheme, the general rule is that it is to be 
given prospective effect only.®®

2® F.ff., United States v. Security Industrial Bank, 459 U.S. 70, 
79 (1982). Compare N.J. Pet. at 17a-18a (summarizing New 
Jersey’s earlier arguments against retroactive application of 1978 
amendment to Title I delineating audit repayment obligation).

Congress uses explicit language when it wishes a substantive 
statutory amendment to have retrospective effect. For example, in 
1984 the House of Representatives adopted amendments to the 
Gneral Education Provisions Act designed to alter the auditing and 
repayment process. See 129 Cong. Rec. H7891 (introduction of 
final version), H7902-03 (§ 808), H7904 (passage) (daily ed„ 
July 26, 1984). These amendments deliberately avoided the use of 
language which would have given them retrospective application in 
pending audit proceedings. As their primary floor sponsor recog­
nized, retroactivity

would violate the basic principle that grantees should be held 
accountable for the expenditures of funds under the law as it 
was when they received the funds. A current law standard 
would treat differently grantees who received funds at the 
same time. Depending on when they were audited, grantees 
would be held to different program requirements based upon 
the state of the law when they were audited. A grant might be 
made on the basis of one set of standards, an audit conducted 
on a second, an administrative appeal heard on a third, and 
judicial review sought on a fourth.

Id. at H7814 (Rep. Ford) (daily ed., July 25,1984).
However, the measure adopted by the House would have made 

certain provisions of the 1978 Title I  amendments retrospective. 
Section 808(a) (4) of Rep. Ford’s floor amendment, id. at H7903 
(daily ed., July 26, 1984), provided:

In any final audit determination pending before the Secretary 
of Education or the Education Appeals Board on or made 
after the date of enactment of this Act pursuant to section 452 
of the General Education Provisions Act (20 U.S.C. 1234b), the 
provisions of sections 122(a)(1) and 132 of the Elementary 
and Secondary Education Act of 1965 (20 U.S.C. 2732(a) (1), 
2752) shall be considered to apply with respect to expendi­
tures made before October 1, 1978, in the same manner that 
such provisions apply to expenditures made on or after that 
date, without regard to the provisions of subsections (b) (2),



14
There is a further reason why the Bradley principle is 

inapplicable to the dispute between New Jersey and the 
United States. Because it arises out of the state’s volun­
tary acceptance of federal funds in exchange for “its 
assurance that it would abide by the conditions [con­
tained in the statute and r e g u l a t i o n s ] t h e  case is 
governed by principles of contract law. Post-grant leg­
islation is relevant only insofar as it unambiguously rep­
resents a waiver of the contractual conditions.® Absent 
such a waiver, there is no basis for modifying the con-

(e), and (f) of section 131 of such Act (20 U.S.C. 2751) requir­
ing that certain determinations be made in advance.

This portion of the bill would have mooted the New Jersey case by 
authorizing retrospective use of the “25% rule.” It was, however, 
dropped from the legislation prior to its final passage. See 129 
Cong. Rec. S12906 (Sen. Hatch), S12908 (Sen. Kennedy) (“One 
issue that was included in the House legislation but dropped in 
conference was the audit reform provisions”), S12909 (passage of 
conference report) (daily ed., October 3, 1984); id. at H11425 
(Rep. Hawkins), id. (Rep. Jelfords), H11426 (Rep. Ford), H11429 
(Rep. Goodling), H11430 (acceptance of conference report) (daily 
ed., October 4, 1984).

This history indicates that the Congress can and does employ 
explicit retroactivity language when it desires to create an excep­
tion to the general rule that substantive amendments apply only 
prospectively, especially in grant programs.

Bell V.  New Jersey, 76 L. Ed. 2d at 326-27; see also, i d .  at 329 
(White, J., concurring).

Enactment of a bill directing the Secretary of Education not to 
seek to recover misexpenditures identified in audits completed prior 
to a specified date would constitute a waiver. (Such measures were 
considered by the Congress in 1980 and 1981 but never enacted. See 
Dismissing Certain Cases Pending Before the Education Appeal 
Board: Hearings on H.R. 8145 Before the Subcommittee on Ele­
mentary, Secondary and Vocational Education of the House Comm, 
on Educ. & Labor, 96th Cong.. 2d Sess. (1980) (bill never reported 
ou t); 127 Cong. Rec. S5427-30, S5442 (daily ed.. May 21, 1981) 
(floor amendment rejected on point of order).) Similarly, the 
five-year “statute of limitations” on repayment of misexpenditures 
of Title I funds, see supra note 10, is such a waiver under the 
circumstances specified in that provision.



15
tractual understanding between the parties by virtue of 
a subsequent enactment applying to future grants; this 
amounts to rewriting the contract to the detriment of the 
Department of Education, and that of the program’s 
beneficiaries.

Finally, because of its consequences both for the legis­
lative process and for administration of federal assist­
ance programs, the Third Circuit’s ruling is unworkable. 
As this Court is well aware, the statutory framework of 
federal grant programs rarely remains completely un­
changed; rather, successive Congresses often amend and 
re-amend an enactment in the light of experience and 
perceptions. Indeed, State and local grantees are among 
the most fervent supporters of this “fine tuning.” For 
this reason, if the decision below is permitted to stand, 
federal grantees subject to audit exceptions can be ex­
pected to seek repeated statutory changes that would 
make their past non-compliance with program require­
ments conform to the law. The incentive to maintain 
compliance with statutory and regulatory provisions will

*2 See, e.g., Oversight Hearing on Amendments to Title I  of 
ESEA and GEPA: Hearings Before the Subcommittee on Elemen­
tary, Secondary and Vocational Education of the House Comm, on 
Educ. & Labor, 96th Cong., 1st Sess. 26-32 (1979) (testimony of New 
York City Schools Chancellor Macchiarola supporting amendment to 
drop matching funds requirement for schoolwide projects) ; Educa­
tion Amendments of 1977: Hearings on S. 1753 Before the Sub­
committee on Education, Arts and Humanities of the Senate Comm, 
on Human Resources, 95th Cong., 1st Sess. 1554-58 (1977) (state­
ment of Akron Superintendent of Schools Conrad Ott, requesting 
amendment to permit continuing services to students who formerly 
attended Title I-eligible schools that were closed); id. at 1397-99 
(statement of Pennsylvania Secretary of Education Caryl M. Kline, 
proposing modification of supplanting provision) ; Elementary and 
Secondary Education Amendments of 1973: Hearings on H.R. 16, 
H.R. 69, H.R. 5163, and H.R. 5823 Before the General Subcommittee 
on Education of the House Comm, on Educ. & Labor, 93rd Cong., 1st 
Sess. 419 (1973) (testimony of Chicago Assistant Superintendent 
James Moffat, seeking elimination of annual school eligibility 
requirement).



16
be substantially diminished; federal program benefici­
aries—in this case, educationally disadvantaged children 
who most need assistance— ŵill be the losers.

The Third Circuit’s approach imputes to the Congress, 
each time a grant program statute is amended, an inten­
tion to have the new provision apply in all pending ad­
ministrative or judicial proceedings that relate to prior 
grants. Adoption of this standard, so different from 
that which presently prevails;®* will vastly complicate 
the legislative process. Deliberations about the public 
policy benefits of any particular amendment will have 
to be accompanied by the production and analysis of 
large quantities of information about the current status 
of all audit exceptions or claims under the grant pro­
gram, in order to assess the impact of retrospective 
application of the amendment in such proceedings. It 
simply defies experience to expect that the Congress will 
be able to shoulder these additional burdens and engage 
in reasoned lawmaking.

Since audit or claim proceedings often take years to 
resolve, many will be repeatedly affected by statutory 
changes under the Third Circuit’s ruling, largely depriv­
ing the administrative enforcement process of the final­
ity which is necessary if grantees are to know what is 
expected of them. Moreover, while the result is to New 
Jersey’s liking in this instance, there seems to be no com­
pelling reason why statutory changes which tighten, 
rather than relax, program requirements should not also 
be given retrospective application according to the rule 
adopted below. For it is inherently no more unjust to 
recover grant funds from states which fail to anticipate 
changes in the law than it is to deprive participants in 
federally funded grant programs of substantial addi­
tional benefits because of such changes.

See supra note 29 and accompanying text. 
See supra note 21.



17

It is far more realistic, and sensible, to give substan­
tive statutory changes retroactive effect only when Con­
gress explicitly indicates its intention that this result 
should obtain.®' That has long been the preferred ap­
proach; because the Third Circuit panel departed from 
that approach without justification, its judgment can­
not stand.

II
The Sixth Circuit Erred by Refusing to Follow the De­
partment of Education’s “Reasonable” Interpretation of 
the Statute and Regulations and by Inventing a Wholly 
Inappropriate Standard for Repayment of Misspent 
Grant Monies

The Kentucky case reached the Sixth Circuit as a re­
sult of the state’s petition for review of final adminis­
trative action taken by the Department of Education."** 
Accordingly, the task of the court below was a limited 
one: to determine “whether the [factual] findings of 
the Secretary are supported by substantial evidence and 
reflect application of the proper legal standards. § 455, 
20 U.S.C. § 1234d(c); 5 U.S.C. § 706.” Bell v. New 
Jersey, 76 L. Ed 2d at 328.

There was no controversy over the facts. The use of 
substantial amounts of Title I grant funds for “readi­
ness” classes which substituted for participating stu­
dents’ regular, state and locally funded, academic educa­
tion is admitted. The only matter for determination by 
the reviewing court was whether the reading of the 
statutory anti-supplanting language which is embodied 
in Departmental regulations, Program Guides, and the 
Secretary’s interpretations thereof, was proper. As this 
Court has often emphasized, in this situation

the task for the Court of Appeals was not to inter­
pret the statute as it thought best but rather the

See supra note 29.
See Bell v. New Jersey, 76 L. Ed. 2d at 318-20 n.3.



18
narrower inquiry into whether the [agency’s] con­
struction was “sufficiently reasonable” to be accepted 
by a reviewing court. Train v. Natural Resources 
Defense Council, 421 U.S. 60, 75 (1975); Zenith Ra­
dio Corp. V. United States, 437 U.S. 443, 450 (1978). 
To satisfy this standard it is not necessary for a 
court to find that the agency’s construction was the 
only reasonable one or even the reading the court 
would have reached if the question initially had 
arisen in a judicial proceeding. Zenith Radio Corp. 
V. United States, 437 U.S. 443, 450 (1978); Udall 
V. Tallman, 380 U.S. 1, 16 (1965); Unemployment 
Compensation Commission v. Aragon, 329 U.S. 143, 
153 (1946).®'

The Sixth Circuit panel concluded that the Secretary’s 
interpretation of the supplanting prohibition was “rea­
sonable,” Ky. Pet. at 8a & n.6. Indeed, far from finding 
that interpretation to be contrary to law, the Sixth Cir­
cuit agreed that, at least prospectively, it would be con­
trolling. Id. at 12a. Pursuant to the precedent cited 
above, that should have been the end of the matter. In­
stead, the panel below embarked upon a wholly different 
inquiry than that directed by this Court:

Nonetheless, in the instant case we do not feel it is 
our task on appeal to review the reasonableness of 
the Secretary’s interpretation of Title I section 241 
e(a) (3) (B) and regulation section 116.17(h). We 
are not reviewing with reference to the future effect 
of the Secretary’s interpretation of a statute. 
Rather, in this appeal we are concerned with the 
fairness of imposing sanctions upon the Common­
wealth of Kentucky for its “failure to substantially

Federal Election Commission v. Democratic Senatorial Cam­
paign Committee, 454 U.S. 27, 39 (1981) ; accord, e.g.. Chevron, 
U.S.A. V.  Natural Resources Defense Council, 52 U.S.L.W. 4845, 
4847 n .ll (U.S. June 25, 1984) ; Indiana Department of Public 
Instruction v. Bell, 728 F.2d 938, 940 (7th Cir. 1984) ; Psychiatric 
Institute of Washington, D.C. v. Schweiker, 669 F.2d 812, 813-14 
(D.C. Cir. 1981) (per curiam) ; West Virginia v. Secretary of Edu- 
27-29, is a rational one. See Ky. Pet. at 11 n.9.



19

comply” ® with the requirements of section 241e 
(a ) (3 ) (B )  and 45 C.F.R. 116.17(h), as those re*- 
quirements were ultimately interpreted by the 
Secretary.

8 See 20 U.S.C. § 1234b (a) and § 1234c (a) (1978) (where 
the Commissioner is said to act upon the belief that a recipient 
of funds had “failed to comply substantially” with any re­
quirement of law applicable to such funds).

Id. at 9a (footnote omitted).
There simply is no basis in law for this approach. 

Nothing in the Title I statute suggests that there should 
be one standard of deference to the administrative 
agency’s interpretation in a declaratory judgment action 
looking to the future and another in a judicial review 
proceeding following an audit and demand for repay­
ment.®* “ [T]he pre-1978 version [of Title I] contem­
plated that States misusing federal funds would incur 
a debt to the Federal Government for the amount mis­
used . . . .” Bell V. New Jersey, 76 L. Ed 2d at 321. 
If the law were as stated by the court below, then fed­
eral grantees could with impunity ignore the “reason­
able” interpretations of statutory and regulatory lan­
guage by administrative agencies until those interpreta­
tions were first confirmed in court. This would largely 
defeat the purpose of delegating interpretive rulemak­
ing authority to the agencies in the first place. The fact 
that the Court of Appeals viewed the statute and regu­
lations as ambiguous, see Ky. Pet. at 9a-10a, 12a, 15a, 
does not justify the Sixth Circuit’s lack of deference to 
the agency’s reading of the law, for it is Congress’ in-

38 20 U.S.C. §§ 1234b(a) and 1234c(a), cited in footnote 8 of the 
Court of Appeals’ opinion, are inapposite since they deal only with 
cease-and-desist orders and withholding proceedings, rather than 
audits. The difference in standard, which in any event would not 
lead to a difference of result in the Kentucky case, see infra pp. 
27-29, is a rational one. See Ky. Pet. at 11 n.9.



20

tention that the administrative agency should make the 
choice among alternative interpretations. See, e.g., Psy­
chiatric Institute of Washington, D.C. v. Schweiker, 
supra note 37.

Even on its own terms, the decision below is not de­
fensible. Although the Sixth Circuit characterized Ken­
tucky’s position as a “reasonable” one, it supported this 
assertion only with very general statements from the 
legislative history of Title I. See Ky. Pet. at lla-12a. 
The panel simply slid over the precision of the statu­
tory language requiring that federal funds not sup­
plant “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” by Title I, 20 U.S.C. § 241e(a) (3) 
(B) (1970) (emphasis added). See Ky. Pet. at 20a. 
It also ignored Congress’ separate insertion into the 
Title I law in 1970 of a “comparability” requirement, 
20 U.S.C. § 241e(a) (3) (C) (1970), which is addressed 
specifically to equivalence of school-level expenditures, 
rather than to participant entitlements.®®

The Sixth Circuit similarly gave little attention to the 
Title I supplanting regulation in force at the time of 
the expenditures in question, which was equally explicit 
about the need to provide Title I participants with their 
fair share of state and local expenditures:

Each application for a grant under Title I of the Act 
for educationally deprived children residing in a 
project area should contain an assurance that the 
use of the grant funds will not result in a decrease 
in the use for educationally deprived children resid­
ing in that project area of State or local funds

See S. Rep. No. 634, 91st Cong., 2d Sess. 14-15, reprinted in 
1970 U.S. Code Cong. & Ad. News 2768, 2781-82; 116 Cong. Rec. 
10613 (Rep. Quie) (daily ed., April 17, 1970).



21
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 educa­
tionally deprived children residing therein [i.e., Title 
I participants] will otherwise he penalized in the 
application of State and local funds because of such 
a use of funds under Title I of the Act.

45 C.F.R. § 116.17(h) (1973) (emphasis added). The 
real problem which the Court of Appeals had with the 
Kentucky audit exception apparently was not the sup­
posed ambiguity of the statute or regulations, but the 
panel’s lack of sympathy with the policy choice made by 
Congress:

Given a fixed number of dollars awarded to the 
school district, the requirement that average per 
pupil expenditures be transferred to the Title I 
classrooms, in proportion to the number of students 
in attendance there who are expected to advance a 
grade, cannot help but have an adverse impact on 
the funds available for the regular classroom when 
the number of regular classrooms and teachers can­
not be reduced.^

Ky. Pet. at 15a. As we pointed out at the beginning of 
this section, however, the task of a Court of Appeals 
engaged in judicial review of agency action does not 
extend to rewriting the statute to conform to the court’s 
view of the wisest policy. Compare Alexander v. Cali- 
fano, 432 F. Supp. 1182, 1189, 1190 (N.D. Cal. 1977).

In fact, the Secretary of Education had already taken the 
concern expressed by the panel into account in reducing the amount 
of repayment which he requested to reflect the smaller pupil-teacher 
ratios in Title I classes as compared to regular classes. See supra 
note 18.

“One may well differ, as a matter of educational policy, with 
the legislative choice to concentrate rather than spread aid among 
educationally deprived children, but that is not a matter for this 
Court. . . . That the enforcement of the federal requirement is likely 
to have an impact on State and local programs and may require 
changes in State regulations and guidelines is not a ground for



22
The panel of the Court of Appeals in the Kentucky case 
erred in seeking to do this, and its judgment should be 
reversed.

I ll
The Eligibility and Supplanting Restrictions at Issue in 
These Cases are Directly Related and Critical to the 
Purposes of the Title I Program—and the States Had 
Both Ample Notice of their Applicability and Adequate 
Explanation of their Requirements

Throughout the course of these proceedings, both New 
Jersey and Kentucky have attempted to convey the im­
pression that the eligibility and supplanting restrictions 
involved in these audits interfered with the realization 
of the goals of the Title I program in their states’ school 
districts, and also that the Department of Education’s 
interpretations of the statutory and regulatory language 
were never clearly articulated and explained until the 
audits had taken place. These arguments are, to some 
extent, echoed in the opinions of the courts below ^ and 
they may have contributed to the legal errors made by 
the Third and Sixth Circuits. In fact, the substantive 
requirements at issue in these cases—the determination 
of school and attendance area eligibility, and the prohibi­
tion against supplanting state and local resources—are 
of central importance to the integrity and effectiveness 
of federal compensatory education programs, which con­
stitute the largest part of federal aid to elementary and 
secondary education. These requirements have been a

disregarding that requirement. Nor is the wisdom of the policy to 
concentrate compensatorj' education funds on a small number of 
pupils a matter for the Court’s consideration.” (footnote omitted.)

*2 See, e.g., N.J. Pet. at 4a (“Congress enacted these [1978] 
amendments to correct the injustice which the earlier eligibility 
standards worked in areas with high concentrations of low-income 
families) iemphasis supplied); Ky. Pet. at 9a (‘We are con­
cerned -with . . . the requirements of section 241e(a') (3) (B) and 45 
C.F.R. 116.17 h !. as those requirements were ultimately interpreted 
by the Secretary" > emphasis supplied) ; supra p. ‘21. text at note 
40.



23

part of the Title I and Chapter 1 programs since their 
inception in 1965; the states were clearly notified of 
their applicability and scope long before the expendi­
tures questioned in these audits and should not have had 
any difficulty in complying with them.

Eligibility. As we have noted, in order to promote 
the statutory goals, expenditures of grant funds must 
be targeted on discrete populations (“educationally 
deprived children”). While it would be highly desirable 
to assist all students in need of seiwices, limited appro­
priations for the Title I program made this impossible. 
Hence, the statute provided that appropriations were to 
be allocated among States and school districts according 
to the number of children from low-income families,^® 
and that funds were granted only for programs which 
would contribute to meeting the needs of educationally 
deprived children in areas within school districts where 
there are large concentrations of children from such 
families.^^

The project area eligibility standards are linked to 
the additional requirement, which was maintained 
throughout all versions of the statute since Title I was 
first passed in 1965, that programs must be “of suf­
ficient size, scope and quality to give reasonable promise 
of substantial progress toward meeting” those special

43 See 20 U.S.C. § 241c(2) (Supp. IV 1968); 20 U.S.C. § 2711(c) 
(1982); see also 20 U.S.C. § 3803 (1982) [Chapter 1].

44 See 20 U.S.C. § 241e(a) (1) (A) (Supp. IV 1968); 20 U.S.C. 
§ 2732 (1982) ; see also 20 U.S.C. § 3805(b) (1) (A) (1982) [Chap­
ter 1] ; Alexander v. Califano, 432 F. Supp. at 1189 (referring to 
“the legislative choice to concentrate rather than spread aid among 
educationally deprived children”). Once eligible project areas are 
selected, every child determined to be educationally deprived, re­
gardless of economic status, is eligible to receive services. Educa­
tional deprivation is the .sole criterion for deciding which children 
in a project area will participate in these federal programs.



24
needs.̂ ® The purpose of this provision is to avoid dis­
sipation of federal grants by spreading them among too 
many underfunded projects in too many different 
schools. Because local school administrators are almost 
always under intense pressure to serve as many stu­
dents as p o ss ib le , th e  threshold determination of eligi­
ble school attendance areas facilitates compliance with the 
“size, scope and quality” requirement. It is, for this rea­
son, critical to the operation of successful compensatory 
programs.

The importance of the eligibility standard was con­
sistently emphasized by the federal government and was 
well known to the Congress. For example, in 1966 the 
House Committee on Education and Labor reported 
amendments to the statute and commented:

The committee notes that during the first year of 
operation funds have primarily been used in special 
projects in schools with the highest concentrations 
of children from low-income families. This is to be 
encouraged especially since funds are limited and 
therefore must be concentrated on the most pressing 
needs.“‘’

Initial regulations which had allowed areas that did not 
meet the “highest concentrations of children from low- 
income families” requirement to be included in Title I

«  Pub. L. No. 89-10, § 205(a) (1) (B), 79 Stat. 27, 30, reprinted 
in 1965 U.S. Code Cong. & Ad. News 29, 33 (codified at 20 U.S.C. 
§ 241e(a) (1) (B) (Supp. IV 1968)); see 20 U.S.C. § 3805(b) (3) 
(1982) [Chapter 1].

■*®See N.J.J.A. at 176 (New Jersey Department of Education’s 
Application for Review of Final Audit Determination) (“LEA had 
no choice but to assume high concentrations of low-income families 
in all attendance areas and to attempt to spread the benefits of 
Title I as broadly as possible to assure that most educationally 
deprived children would be served”).

H.R. Rep. No. 1814, 89th Cong., 2d Sess. 3, reprinted in 1966 
U.S. Code Cong. & Ad. News 3844, 3846.



25

programs^* were quickly amended in 1967 to remove 
this option,“‘® and the change was specifically brought to 
the attention of state education officials.®® Thereafter, 
communications from the federal level repeatedly di­
rected attention to the eligibility criteria and explained 
in considerable detail how comparisons of poverty con­
centrations should be made.®̂

45 C.F.R. :§ 116.17(b) (1966) provided that attendance areas 
with numbers or percentages of children from low-income families 
which were at least as high as the district-wide average were eligi­
ble to be designated as project areas, and that “ [ojther areas with 
high concentrations of children from low-income families may be 
approved as project areas but only if the State agency determines 
that projects to meet the most pressing needs of educationally de­
prived children in areas of higher than average concentration have 
been approved and adequately funded.”

The language quoted in the preceding footnote was removed by 
32 Fed. Reg. 2742, 2744 (February 9, 1967) and never reappeared. 
See 45 C.F.R. § 116.17(d) (1968).

Title I Program Guide No. 28, see Wheeler v. Barrera, supra 
note 8, issued on February 27, 1967 to Chief State School Officers 
and State Title I Coordinators by U.S. Commissioner of Education 
Harold Howe, II, advised (p. 2) that:

1. The revised Title I regulations differ from the previous 
regulations in two important respects regarding project 
areas:
a. It is no longer permissible to designate as project areas 

attendance areas with less than average concentrations 
of children from low-income families.

2. The purpose of the “attendance area” requirement in Title 
I is to identify the “target population” from which the 
children with special needs are to be selected.

For example. Title I Program Guide No. 44, issued March 18, 
1968 by Commissioner Howe to Chief State School Officers and 
state Title I coordinators, collected in one document the “Revised 
Criteria for the Approval of Title I, ESEA Applications from Local 
Educational Agencies.” Section 1 of that document elaborated 
upon the Title I regulations with practical instructions about how



26
Thus, far from creating a situation of injustice, the 

eligibility restrictions were designed to insure that the

to collect data and make the necessary attendance area comparisons 
to determine eligibility.

On November 20, 1968, Commissioner Howe distributed Program 
Guide No. 48, entitled “Improving the Quality of Local Title I Com­
pensatory Education Programs.” In that directive, the Commis­
sioner emphasized the need to make wise use of the limited funds 
available for effective compensatory programs:

Many Title I programs are based on the selection of individual 
children from many grade levels from all of the attendance 
areas which are technically eligible to be included in the Title 
I program. This approach has usually resulted in programs 
which are not as effective as they might be.. . .
The purpose of this memorandum is to suggest an approach to 
the planning of Title I programs which can result in improved 
program quality. This approach includes the following major 
steps:
1. Focus resources on a number of children in the “target 

population”—those in the most impoverished school attend­
ance areas;

Id. at 1, 2 (emphasis in original). Finally, in the Title I Program 
Guide No. 45A, issued July 31, 1969 by Associate Commissioner 
Leon Lessinger, Chief State School Officers and Title I Coordinators 
were advised:

Your title I, ESEA, offices are now in the process of reviewing 
and approving applications for grants from the fiscal 1970 ap­
propriation (advance funding). A number of State educational 
agencies have already made special efforts to insure high qual­
ity programs that meet all legal requirements. Information 
reaching this office concerning the administration of Title I 
indicates, however, that in some cases further efforts are likely 
to be required if charges of noncompliance with Federal pro­
gram requirements are to be avoided.

In reviewing Title I proposals the SEA should be particularly 
alert to the following indications of violations of basic Title I 
requirements:

1. The applicant proposes to pro\ide Title I services to chil­
dren who do not reside in areas determined to be eligible 
for Title I, ESEA. services.

• • • • [Continued]



27
expenditure of Title I funds actually provided some 
benefits to the students who participated in the com­
pensatory programs, rather than being just “a drop in 
the bucket”—and the importance of these criteria was 
repeatedly brought to the notice of state education 
officials.®̂

Supplanting. Although the Title I statute, in its orig­
inal 1965 formulation, contained no explicit “anti­
supplanting” language, it did limit the use of grant 
funds to projects designed to meet the “special educa­
tional needs of educationally deprived children,” 
which the Congress understood to incorporate the notion 
that Title I expenditures should supplement local pro­
grams.®̂  Accordingly, from the outset the Title I regu­
lations included a prohibition against supplanting.® By 
1968, six years before the Kentucky expenditures at

[Continued]
Each SEA should adopt a plan and schedule visits for moni­
toring local Title I programs. In checking on local program 
operations the SEA should take appropriate action if there is 
any evidence indicating violations, such as the folio-wing:
1. Use of Title I funds in areas not designated as eligible Title 

I areas.

®2It is not -without significance, in this connection, that the 
Newark, New Jersey school system apparently had little difficulty 
in correctly identifying eligible schools in the school year following 
those for which the auditors noted misexpenditures. See N.J.J.A. 
at 26 (Final Audit Report).

®Pub. L. No. 89-10, §2 [adding § 205(a) (1) (A) ], 79 Stat. 
27, 30, reprinted in 1965 U.S. Code Cong. & Ad. News 29, 33 (codi­
fied at 20 U.S.C. § 241e(a) (1) (A) (Supp. IV 1968)).

See, e.g., I l l  Cong. Rec. 7353 (daily ed., April 9, 1965) (Sen. 
Morse, floor manager) (“I wish to clarify [the permitted use of 
Title I funds] as a matter of legislative history. . . . The funds in 
Title I must be used to help the educational needs of educationally 
deprived children, not to remove any State responsibility from any 
State in providing education for its children”) .

®»See45C.F.R.§ 116.17(f) (1966).



28
issue here, the regulatory language referred unmistak­
ably to providing a fair share of state and local resources 
to participating children, as well as project areas.^  ̂ As 
in the case of eligibility criteria, federal authorities ex­
plained the implications of the non-supplanting require­
ment with great specificity and clarity.®^

See 45 C.F.R. § 116.17(h) (1968) :
Each application for a grant under Title I of the Act for edu­
cationally deprived children residing in a project area shall 
contain an assurance that the use of the grant funds will not 
result in a decrease in the use for educationally deprived chil­
dren 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 the project area and that neither the project 
area nor the educationally deprived children residing therein 
will otherwise he penalized in the application of State and 
local funds because of such a use of funds under Title I of the 
Act.

(emphasis supplied.) See also Program Guide No. 44, supra note 
51, § 7.1 (“It is expected that services provided within the district 
with State and local funds will be made available to all attendance 
areas and to all children without discrimination”) (emphasis sup­
plied).

Title I Program Guide No. 48, issued November 20, 1968 by 
Commissioner Howe, explicitly covered the sort of situation which 
developed in the 50 Kentucky school districts in 1974 and indicated 
that a contribution of state or local funds would be required to 
avoid supplanting:

3. Design a comprehensive program that will meet the most 
pressing needs of each child in the priority groups, utilizing all 
available local, State and Federal resources;

As indicated in item 3 above, the entire school program in the 
project for the disadvantaged children involved. State and 
local funds would then he used to pay for that portion of the 
program which would replace the pre-existing regular school 
program and Title I  funds woidd he used to pay for additional 
services above that level.

Id. at 2 (emphasis supplied). Separate Program Guides and memo­
randa were issued by the Commissioner explaining the comparabil­
ity requirement, see supra note 39 & accompanying text.



29

Nevertheless, the occurrence of supplanting was wide­
spread in the early years of the Title I program, a fact 
that was brought to the attention of the Congress by 
both the U.S. Office of Education and outside groups.®® 
As a result, in 1970 specific language prohibiting sup­
planting was added to the statute itself. That language 
referred to the continuation of state and local spending 
“for the education of pupils participating in programs 
and projects assisted under this title.” ®® While we think 
that that language, standing alone, is sufficiently definite 
and precise to have put Kentucky on notice of the im­
propriety of the “readiness class” expenditures, see 
supra p. 20, there simply could be no misunderstand­
ing of its significance in light of the substantial atten­
tion given to the concept throughout the history of the 
Title I program. For the same reason, it is obvious that 
the Secretary’s interpretation of the statutory and regu­
latory non-supplanting language which was applied to 
the Kentucky audit was no post hoc reading, as the 
Court of Appeals seemed to suggest.®"

In both these cases, then, not only is the Secretary’s 
interpretation of the statute and regulations amply sup­
ported by the language and legislative history, but the 
states received repeated and specific notice of that inter­
pretation long before the events that produced the audit 
exceptions.

See S. Rep. No. 634, 91st Cong., 2d Sess. 9, reprinted in 1970 
U.S. Code Cong. & Ad. News 2768, 2776, referring to Washington 
Research Project, et al.. Title I of ESEA: Is It Helping Poor Chil­
dren? (1969).

®« Pub. L. No. 91-230, § 109 (a), 84 Stat. 121, 124, reprinted in 
1970 U.S. Code Cong. & Ad. News 133, 137 (codified at 20 U.S.C. 
§ 241e(a) (3) (1970)). See also supra, text at note 39.

See supra note 42.



30

CONCLUSION

For the foregoing reasons, amicus respectfully sug­
gests that the judgments of the Court of Appeals for 
the Third and Sixth Circuits in these matters should 
be reversed.

Respectfully submitted,

Fred N. F ishman 
Robert H. Kapp 

Co-Chairmen 
Norman Redlich 

Trustee
William L. Robinson 
Norman J. Chachkin * 

Lawyers’ Committee for 
Civil Rights Under Law 

1400 ‘Eye’ Street, N.W. 
Suite 400
Washington, D.C. 20006 
(202) 371-1212

Attorneys for Amicus Curiae 
* Counsel of Record