6th Cir.: States off hook for NCLB costs

The Sixth Circuit held 2:1 that the prohibition on unfunded mandates in the No Child Left Behind Act (NCLB) excuses states from making any expenditures that are not covered by federal funds. Pontiac School District v. Secretary of the U.S. Dept. of Education, 512 F.3d 252 (6th Cir. 2008) (No. 05-2708).

Because the NCLB text specifies that the law does not require unfunded mandates, the court found that the state did not have clear, unambiguous notice that it was required to expend its own funds to comply with the requirements of NCLB, a Spending Clause statute. 

 

                Numerous school districts and education associations sued for a declaratory judgment that States do not have to pay out of their own coffers the difference between the cost of complying with NCLB’s requirements and the level of federal funding provided under NCLB. The plaintiffs based their suit on 20 U.S.C. § 7907(a) in NCLB, which states:

Nothing in this Act shall be construed to authorize an officer or employee of the Federal Government to mandate, direct, or control a State, local educational agency, or school's curriculum, program of instruction, or allocation of State or local resources, or mandate a State or any subdivision thereof to spend any funds or incur any costs not paid for under this Act.

They argued that 1) NCLB does not require expenditures beyond federal funding to comply with its provisions, or alternatively  2) the Act is ambiguous as to who bears the additional cost of compliance to such an extent that it violates the Spending Clause of the Constitution. Although the dissent notes that the first argument was the primary focus of the parties, the court based its decision entirely on the second argument.

 

                The majority relied heavily on Pennhurst State School & Hosp. v. Halderman, 451 U.S. 1 (1981), and Arlington Cent. Sch. Dist. v. Murphy, 126 S.Ct. 2455 (2006), which set out requirements for “clear notice” of states’ duties under federal spending legislation. Pennhurst concerned whether a “bill of rights” for mentally disabled persons, attached to federal spending for services for the mentally disabled, created mandatory requirements for states. The Supreme Court held that the legislation was not sufficiently “unambiguous” in showing that states accepting funds were bound by this “bill of rights.” Arlington extended this “clear notice” rule to a discrete question of statutory interpretation under the Individuals with Disabilities in Education Act (IDEA), holding that while the legislative history indicated that Congress intended “costs” recoverable under that statute to include attorney’s fees, the text of the statute did not give sufficiently clear notice to states deciding to participate in the federal program.

 

                The Secretary (contrary to her predecessor in the Bush administration who took the opposite view) argued that the unfunded mandate provision did not excuse states from expending their own funds to comply with NCLB.  She advanced two explanations of § 7907(a): First, that it merely prohibits federal officials from imposing additional or more specific unfunded requirements for states (the view accepted by the district court); and second, that it clarifies the conditional nature of NCLB’s requirements, making clear that they are not “mandates” because participation in the NCLB scheme is voluntary.

 

The panel majority stated that the Secretary’s interpretations were not unreasonable, and might even be correct.  However, in reading the text, the majority found that the Secretary’s interpretations were not obvious from the language of the statute.   As a result, even if the Secretary was correct in divining the true congressional intent, the court found that the states would not necessarily have understood such a meaning for the statute from reading the text.  The court stated that “a state official deciding to participate in NCLB could reasonably read § 7907(a) to mean that her State need not comply with requirements that are ‘not paid for under the Act’ through federal funds.”

 

                In dissent, Judge McKeague argued that “any reasonable State official, reading the NCLB with a clear eye, would understand that there was no guarantee that federal funds would match all of the costs controlled and incurred by States and local school districts.” The dissent found no ambiguity, pointing to states’ traditional role as the primary funders of education; the absence of any mention of the cost of compliance in NCLB; the presence of requirements in NCLB that clearly apply to school districts receiving no federal funds at all; and the well-known unpredictable nature of federal appropriations. Plaintiffs’ view of § 7907(a), the dissent contended, would work a fundamental change in education nationally by shifting the primary financial responsibility to the federal government and “eviscerating with a single provision the entire comprehensive scheme of accountability requirements and financial disbursements set forth in hundreds of pages of statutory text.”

 

                Both majority and dissent purported to rely only on the text of § 7907(a) – the dissent because it found no ambiguity, and the majority because, under Arlington, even a clear manifestation of legislative history could be trumped by a less-than-clear statutory text. Nevertheless, both opinions contain detailed discussions of the legislative history, with each contending that it supports their interpretation of § 7907(a). The majority emphasized that a version of § 7907(a) existed in NCLB’s predecessor legislation, and the clause, “or mandate a State …to spend any funds or incur any costs not paid for under this Act,” was added by the Senate to the original house version – indicating, the court said, that this clause was independent of the federal-officer language. The court acknowledged that the legislative history was far from unambiguous, but emphasized that the plaintiffs’ interpretation was “entirely supportable.” The dissent criticized the court’s reliance on the legislative history of an earlier law rather than NCLB itself, and cited statements by legislators both supporting and opposing NCLB that appeared inconsistent with the plaintiffs’ interpretation.

 

                This case demonstrates that “no-mandate” language is likely to be expansively construed by federal courts and has the potential to undermine all requirements of a Spending Clause statute.