_________________________________________________________________
.
CONSOLIDATED APPLICATIONS OF THE PENNSYLVANIA DEPARTMENT OF
EDUCATION,
Applicant.
Docket Nos.93-136-R and 93-44-R
Recovery of Funds Proceeding
ACN:03-23136G and 03-13002G
_________________________________________________________________
DECISION
_________________________________________________________________
Appearances: Michael Brustein, Esq., and Kristin E. Hazlitt,
Esq., of Brustein & Manasevit, for the Pennsylvania
Department of Education.
Lynette A. Charboneau, Esq., Office of the General
Counsel, U.S. Department of Education, for the
Assistant Secretary for Vocational and Adult
Education.
Before: Thomas W. Reilly, Administrative Law Judge
_________________________________________________________________
BACKGROUND
The Pennsylvania Department of Education (Applicant or PDE) has appealed two program determination letters (PDLs) and the resultant preliminary departmental determinations (PDDs) issued by the Assistant Secretary for Vocational and Adult Education, U.S. Department of Education, (Assistant Secretary or ED). As a result of those two PDLs and PDDs (based upon audit results)See footnote 1 1, the Assistant Secretary demanded repayment of $328,799 in Federal funds awarded PDE in fiscal year 1989 (FY'89)(Dkt.93-44-R), and $2,967,774.20 awarded PDE in fiscal year 1991 (FY'91)(Dkt.93-136- R). After reviewing further documentation submitted by PDE (and mediation), the Assistant Secretary ultimately reduced the amounts of both demands to $194,307.75 and $2,887,781.20, respectively, for a new total of $3,082,088.95.
Both of these consolidated proceedings are based upon adverse
"maintenance of effort" (MOE) findings by the Assistant
Secretary, i.e., that PDE had failed to comply with maintenance
of fiscal effort requirements set forth in the Carl D. Perkins
Vocational Education Act, 20 U.S.C. §2301 et seq.(1988)(Perkins
I). Section 503(a) of Perkins I (20 U.S.C. §2463(a)) requires a
State receiving such vocational education Federal funds to
maintain its fiscal effort from State sources for vocational
education on either an aggregate or per-student basis. (See also
§113(b)(1) of Perkins I, 20 U.S.C.§2323(b)(1) (1988); and 34
C.F.R. 401.19(a)(1).)
ISSUE
The basic disagreement between the parties is the method of
calculation of the "maintenance of effort" required by Perkins I.
ED has included the pertinent prior year's Pennsylvania
expenditures for the State's "Customized Job Training program"
(CJT) in the calculation of PDE's fiscal effort requirements for
vocational education. PDE maintains that the CJT amounts should
not be included in such calculation, thereby arriving at a lower
total for each year against which to measure the required State
vocational education expenditure. Viewed more narrowly, the
dispute comes down to whether the definition of "vocational
education" as used in Perkins I is controlling, or whether the
State's own interpretation, intentions, and CJT program
objectives, should be the guide. (§521 (31) of Perkins I, 20
U.S.C. §2471(31) (1988); 34 CFR 400.4(b).) As expressed by PDE
counsel (Reply Brief, at 12): "the sole question in this case is
whether or not Pennsylvania's Customized Job Training program
falls under the definition of vocational education as provided in
Perkins I."
STATUTES AND REGULATIONS
The following are relevant portions of the critical statutes and
regulations affecting this proceeding.
20 U.S.C. §1234a (1988): "Recovery of Funds"
* * * *
(b)(3) In any proceeding before the Office under
this section, the burden shall be upon the
recipient to demonstrate that it should not
be required to return the amount of funds
for which recovery is sought in the
preliminary departmental decision ....
(See also 34 C.F.R. 81.30.)
20 U.S.C. §2463 (1988): "Maintenance of Effort"
(a) No payments shall be made under this chapter
for any fiscal year to a State unless the Sec-
retary determines that the fiscal effort per
student or the aggregate expenditures of such
State for vocational education for the fiscal
year preceding the fiscal year for which the
determination is made, equalled or exceeded
such effort or expenditures for vocational
education for the second preceding fiscal
year.
(See also 34 C.F.R. 401.22(a).)
20 U.S.C. §2471 (1988): "Definitions"
As used in this chapter:
* * * *
(31) The term "vocational education" means
organized educational programs which are
directly related to the preparation of
individuals in paid or unpaid employment
in such fields as ... business occupations,
... technical and emerging occupations,
modern industrial and agriculture arts,
and trades and industrial occupations,
or for additional preparation for a career
in such fields, and in other occupations,
requiring other than a baccalaureate or
advanced degree ....
DISCUSSION
The Applicant (PDE) has the burden of proof in this proceeding.
20 U.S.C. §1234a(b)(3) (1988); 34 C.F.R. 81.30. In totalling the
fiscal effort for vocational education, a State must include all
expenditures from State sources that meet the definition of
"vocational education." (20 U.S.C. §2463(a) (1988); 34 C.F.R.
401.22(a) (1988).) Although PDE argues otherwise, the Federal
definition of "vocational education" does not require that a
program or activity be part of a "coherent sequence of courses"
or include "academic competencies."
Pennsylvania's Customized Job Training Program (CJT) was developed by the State legislature in 1985:
...to meet the training needs of the State's new and expanding business by enhancing the skills of the workers of this Commonwealth ... funding shall be dedicated towards training projects which result in net new full- time employment opportunities, significant wage improve- ments, the retention of otherwise lost jobs or other conditions which would offer substantial economic benefit to this Commonwealth. Recognizing that many regions of the State remain economically distressed, customized job training programs should attempt to meet the special job training needs of these areas.(PDE Initial Brief, at 4, and PDE Ex.3, at R-3-1.)
Although PDE now argues that CJT amounts should not be considered
in calculating the fiscal MOE requirement, PDE admits that it did
include CJT in the MOE calculation for prior years (five
consecutive years). (PDE Initial Brief, at 5; PDE Ex.6; and see
bottom of page 19, PDE Ex.2, at R-2-24, regarding auditor's
findings on this point; also ED Exs. E-1-2,-3 & -4.) However,
PDE argues that doing so was a mistake, that CJT does not really
qualify as "vocational training" within the meaning of Perkins I,
and that this is why the State started to delete CJT funds from
the MOE calculations in subsequent years. PDE argues that
because the focus of the CJT program is economic development and
aid to State businesses, and because the successful completion of
the program was intended to result in a trainee being employed
full-time by the firm at which he was training, that this somehow
pulled the CJT program out of the definition of "vocational
education."
The CJT program appears to fit well within the Federal definition
of "vocational education" as specifically defined in Perkins I
and its implementing regulation. 20 U.S.C.§2471(31) (1988); 34
C.F.R. 400.4(b) (1988). However, PDE argues that the State's own
interpretation and legislative intent should be given deference,
as well as the State's different objectives in preparing and
executing the CJT program. PDE maintains that consideration of
those State objectives and intentions led the State to conclude
that the CJT program is not true "vocational education," and
argues that the State's interpretation should take precedence
over the Federal definition in the Act and regulations. ("The
Department of Education must defer to Pennsylvania's
interpretation of its own statute." PDE Initial Brief, at 10,
citing cases and the Tenth Amendment, U.S. Constitution.) But
the Tenth Amendment does not require giving deference to the
State in a case where a State voluntarily agrees to maintain
fiscal effort, as required by Federal statute and regulations, as
a condition of receiving a Federal grant. "Courts have held
innumerable times that the federal government may impose
conditions on the receipt and use of federal funds." Alabama v.
Lyng, 811 F.2d 567, 568 (11th Cir. 1987), citing Fullilove v.
Klutznick, 448 U.S. 448, 474 (1980).
PDE argues that Pennsylvania's interpretation of the CJT program
is that it is a State labor and business incentive program and
not a vocational education program. The problem with that
argument is that although it might have some weight in the
absence of a Federal definition, in this case we have an existing
and quite clear Federal definition in both the statute itself and
its implementing regulations (supra). I find PDE's cited cases
to be inapposite to the situation we have here. For example, this is not a situation where the
Education Department is
attempting to interfere with issues properly reserved for local
determination, nor is it an attempt by the Federal Government to
exercise control over curriculum, to dictate what courses will be
taught, and how, etc. See 20 U.S.C. §1232a (1990). Nor is this
a case where the Federal Government is attempting to instruct a
State on how it should interpret its own laws. In re Gulf Coast
Trades Center, Dkt. No. 89-16-S, U.S. Dept. of Educ. (Decision of
the Secretary, Oct. 19, 1990), at 3.
PDE also argues that the revised definition contained in
subsequent legislation ("Perkins II," the Carl D. Perkins
Vocational and Applied Technology Education Act, 20 U.S.C. §2301
et seq. (Supp.IV, 1992)) had the effect of "clarifying" the
definition of vocational education in a way that supports the
State's position here, by requiring certain new elements not
specified in Perkins I. There appear to be several flaws in this
approach. First, Perkins II definitions have no applicability
here, as only Perkins I (and its definitions) were in effect at
the time of the pertinent years in issue. Secondly, it appears
that the new definition in Perkins II is not merely a
"clarification," but an intended new definition providing new
direction and emphasis to the program. H.R. Rep.No.41, 101st
Cong., lst Sess., 5-6 & 131 (1989). (See ED Ex.E-6-2, -3, & -5.)
Thirdly, it appears that even if the Perkins II definition of
"vocational education" were applied, the State's CJT program
would still fit that later definition. PDE's alleged
distinctions appear to be "distinctions without a difference."
(See also comments and responses in the NPRM for Perkins II, 57
Fed.Reg. 36720, 36814 (1992); and legislative history, House
Conf.Rep. 101-660, 5 U.S.C.C.A.N. 1288, item 285, ED Ex.E-5-5.)
PDE concedes that Pennsylvania's CJT program expenses must be
included in PDE's "maintenance of effort" calculation if it meets
the regulatory definition of "vocational education," but argues
that it is not an "organized education program" as specified in
the Perkins I definition, that the purpose of CJT is not to
further the education of individuals but is to serve the needs of
industry, that the program does not benefit only individuals who
are entering fields that do not require a baccalaureate or
advanced degree, and that the CJT program is not structured in
such a way that the PDE could have the level of control necessary
to provide the assurances required under Perkins I. (PDE Reply
Brief, at 1-2.) PDE asserts that the Assistant Secretary's
interpretation of the CJT program is thus not consistent with the
interpretation by the State that created and administers the
program, asserting that CJT has a unique definition that varies
from State-to-State and even from business-to-business. On all
the above points, based upon my review of all the exhibits
(including auditors' reports and witness statements), the
legislative history, and the clear, unambiguous definitions of
"vocational education" contained in the Act (Perkins I) and the pertinent regulations,
it appears that the Assistant Secretary
and the auditors' positions are logical and meritorious on these
points and I cannot reasonably conclude that the State's
interpretation must prevail and control the outcome of this
proceeding. It appears that the views of the independent
auditors and State auditor are eminently reasonable. (Nothing in
the Government Auditing Standards casts any doubt upon the
fairness of their work, notwithstanding PDE's disagreement with
their conclusions.)
Certainly, it should not be surprising that a vocational
education program would (also) serve "the needs of industry," and
not benefit "only" individuals entering fields not requiring
baccalaureates or advanced degrees. This would appear to be true
of virtually any vocational education program. I also fail to
see how PDE would lack the "level of control" of the CJT program
demanded by Perkins I or its implementing regulations, as
asserted by PDE.
The comparison with the State's "TOP" program is interesting, but
not dispositive. ("Training for Occupations with Promise") There
can be (and are) many different state vocational education
programs with varying targets and objectives, but still they
could all fit within the wide definition of vocational education
in Perkins I and the ED regulations.
EXHIBITS
All exhibitsSee footnote 2
2 from both sides have been accepted and received
in evidence, with the exception of that portion of PDE Exhibit 19
consisting of Interrogatory 6(a) and its response (at R-19-2), to
which ED counsel filed an objection and motion to strike
(9/27/94), and PDE counsel filed a response (10/3/94,
inadvertently dated "1996"). That material appears to come from
conduct and statements made during mediation of another unrelated
proceeding (Florida Dept. of Education, Dkt.92-115-R, Office of
Admin. Law Judges, U.S. Dept. of Education,), and is therefore
inadmissible under 34 C.F.R. 81.13(f)(1). For the reasons stated
in ED's response explaining the objection (9/27/94) and after
having given due consideration to PDE's opposing argument
(10/23/94), ED's objection is SUSTAINED. That limited portion
of PDE Exhibit 19 is denied admission, and ED's motion to strike
from the record PDE's reference to Interrogatory 6(a) in PDE's
Reply Brief (at 17-18, including footnote 9) is GRANTED. The
fact that the subject information is now "freely obtainable as a
public record pursuant to ... the Freedom of Information Act"
does not cure the defect relating to inadmissibility and
confidentiality of conduct or statements made during mediation.
See 34 C.F.R. 81.13(f)(1)&(2).
Save arguments to relevance or materiality, ED counsel otherwise
had no further objections to PDE's exhibits. PDE had no
opposition to ED Exhibits 1 - 6 and 8 - 9. As to ED Exhibit 7,
PDE objected to its admissibility if the author of the memorandum
was not made available for cross-examination. In view of the
fact that said author is a Pennsylvania state employee, coupled
with the fact that there has been an abundance of time available
to PDE counsel to interview or depose such employee long before
now, that objection is overruled and ED Exhibit 7 is received in
evidence. PDE had no objection to ED Exhibit 10 so long as it is
treated as merely a summary compilation of other documents in
evidence, and that is clearly how it is being viewed.
Accordingly, ED Exhibit 10 is received.
AMOUNT OF REFUND
In assessing the amount of refund required, the Assistant
Secretary for Vocational and Adult Education expressly considered
the harm that PDE's "maintenance of effort" shortfall caused to
the Federal interests related to the Perkins I vocational
education program, and declined to demand the full amount of the
grants that the auditors had questioned.See footnote 3
3 The Assistant
Secretary thus limited the refund demand to just the amount by
which PDE failed to maintain effort in the fiscal years in issue.
(See General Education Provisions Act (GEPA), §453(a), 20 U.S.C.
§1234b (1) & (2); 34 C.F.R. Part 81, Appx.illustra.9.)
PDE submits that it has reduced the harm that these violations
caused to the Federal interest through a supplemental
appropriation to local educational agencies (LEAs) in a later
year (June 1993) to compensate for the shortfalls in FY 1988 and
FY 1990. But I fail to see how a supplemental appropriation in
FY 1994 reduces the harm caused by MOE failures in FY 1989 and FY
1991, which had been calculated based on PDE's vocational
education expenditures in FY 1987 through FY 1990. The MOE
requirement is based upon expenditures made in the two years
prior to the grant year in issue. To accept PDE's logic
would be to change the standards (to which all States are
uniformly held). By using the per-student calculation rather
than aggregate expenditures and not requesting recovery of the
entire grant award for each year in question, the Assistant
Secretary has already minimized the amount of refund demanded for
each year.
REQUEST FOR EVIDENTIARY HEARING
PDE counsel had requested an evidentiary hearing (Initial Brief,
at 2.) However, in view of the completeness of the record (on
both sides) and the briefs, and after fully reviewing all
appropriate submissions, I have determined that an evidentiary
hearing would serve no useful purpose, and that an evidentiary
hearing is not needed to resolve any material factual issue in
dispute. In view of the conceded facts, what we have remaining
is more in the nature of a dispute as to a matter of law, i.e.,
the application of specific Federal statutory and regulatory
definitions in the face of mainly agreed facts. The only factual
issue relevant to this dispute pertains to the nature of the CJT
program and how it fits within the Federal statutory and
regulatory definition of "vocational training." The opinions and
credibility of lay witnesses (e.g., Pennsylvania state employees)
explored on direct or cross-examination as to the State's
intentions and objectives in administering the CJT program would
add nothing material to the limited issues involved in this
proceeding. (See 34 C.F.R. 81.6(b).)
FINDINGS OF FACT
After due consideration of the complete record, I find that the
Pennsylvania Customized Job Training Program (CJT) comes within
the definition of "vocational education" as specifically defined
in both the Perkins Act ("Perkins I", 20 U.S.C. §2471 (31)) and
the implementing Department of Education regulations (34 C.F.R.
400.4(b)). Accordingly, I also find that PDE should have
included CJT expenditures in its calculations to measure
compliance with the maintenance of effort (MOE) requirements of
Perkins I and the Department of Education regulations relating to
vocational education grants for the years in issue. I find that
the Pennsylvania Department of Education has failed to comply
with statutory and regulatory requirements for maintenance of
fiscal efforts from State sources for vocational education, and
that PDE is therefore required to refund to the U.S. Department
of Education $194,307.75 for Fiscal Year 1989 Federal funds and
$2,887,781.20 for Fiscal Year 1991 funds, for a total of
$3,082,088.95.
CONCLUSIONS OF LAW
After due consideration of all the documents of record, including
briefs of counsel, exhibits from both sides, and the applicable
law and regulations, I conclude that Federal law controls which
State activities fall within the Federal definition of
"vocational education" for the purpose of the grant of Federal
education funds and the calculation of "maintenance of effort."
I find and conclude that the Applicant, the Pennsylvania
Department of Education, has failed to sustain its burden of
proving that it should not be required to refund to the U.S.
Department of Education the total of $3,082,088.95 (consisting of
$194,307.75 of FY 1989 funds and $2,887,781.20 of FY 1991 funds)
based upon PDE's failure to maintain its fiscal effort from State
sources for vocational education as required by the Federal
Vocational Education Act ("Perkins I"), §503(a), §113(b)(1), 20
U.S.C. §2463(a)(1988), §2323(b)(1); and its implementing
regulations, 34 C.F.R. 401.22(a), 401.19(a)(1) (1988).
ORDER
The Pennsylvania Department of Education is ordered to refund the
total of $3,082,088.95 to the U.S. Department of Education
(consisting of $194,307.75 of FY 1989 funds, and $2,887,781.20 of
FY 1991 funds).
__________________________
Thomas W. Reilly
Administrative Law Judge
Issued: February 3, 1995.
Washington, D.C.