IN THE MATTER OF LAPWAI SCHOOL DISTRICT #341, IDAHO,
Docket No. 95-3-I
Impact Aid Proceeding
Appearances: Alexander J. Pires, Jr., Esq., Conlon, Frantz, Phelan, Knapp & Pires,
for the Petitioner.
Miriam H. Whitney, Esq.., Office of the General Counsel, U.S. Department of Education,
Washington, D.C., for the Assistant Secretary for Elementary and Secondary Education.
Before: Thomas W. Reilly, Administrative Law Judge
In letters dated August 24 and September 6, 1994, the Superintendent of Schools for Lapwai School District #341, Lapwai, Idaho (school district or Petitioner), timely appealed the determination of Charles Hansen, Director of the Impact Aid Program, U.S. Department of Education (ED or Department), Office of Secondary and Elementary Education, disallowing 63 students from the school's count of 391 claimed to be eligible for calculation of the district's Impact Aid amount under Section 3 of P.L. 81-874 (Impact Aid Law, 20 U.S.C. §238), for the school district's fiscal year 1994 (FY 1994). This proceeding is governed by 34 C.F.R. Part 218 and is conducted pursuant to Section 5(g) of P.L. 81-874 (20 U.S.C. §240(g)).
Under the Impact Aid program, ED is authorized to grant Federal financial assistance to local
educational agencies (LEAs or school districts) which provide a free public education to children
who either reside on "Federal property" or whose parents are employed on "Federal
(or are on active duty in the uniformed services), or both. (20 U.S.C. §238(a) & (b).)
Aid program staff found that the disputed 63 children lived on property designated as "lndian
Fee-Owned Tax Exempt Land," which was not eligible as "Federal property"
under 20 U.S.C.
§244(1), and therefore could not serve as the basis for impact aid calculation under
Petitioner does not seriously contest ED's factual finding that the 63 students living on "lndian
fee-owned tax-exempt land" are not eligible to be counted by the school district as part of
Impact Aid calculation predicated on "federal property" status.See footnote 1 1 However, it argues that
a Federal agency making such determination has no right to withhold funds before a notice and
hearing have been held. It asserts, in essence, that the Federal agency must continue to make
payments even after ineligibility has been found until a notice and hearing has taken place, and
even though ultimately clear ineligibility is determined for that portion of the school district's
To place the controversy in the words of Petitioner's counsel:
That Respondent [ED] has chosen to myopically focus on this largely undisputed
issue [ineligibility] does not make it the 'primary issue' in this case. Rather, as
asserted in Petitioner's Motion for Summary Judgment, the primary issue in this
case is whether or not Petitioner is entitled to notice and a fair hearing on its eligibility
for impact aid funding prior to the termination of such funding.
(Petitioner's Reply Brief, at 1, parentheses added.)
Petitioner also argues that:
(A) person who has no adequate defense on the merits is not precluded from com-
plaining that the deprivation of his property occurred without the hearing essential
under the due process guaranty merely because in his particular case due process
of law would lead to the same result. (Citing Coe v. Armour Fertilizer Works, 237
U.S. 413, 424 .) (Petitioner's Opening Brief, at 8, emphasis added.)
Similarly, at page 5 of Petitioner's Brief:
The fact that Petitioner, or any given recipient of impact aid funding, ultimately may
not have a defense on the merits to the charge of ineligibility, is irrelevant to whether
its due process rights have been violated. (Citing Coe, supra.)
It should be noted that Petitioner declined the opportunity for a full evidentiary hearing, opting instead to submit the matter on the briefs and documentary exhibits.See footnote 2 2 Both sides have sub- mitted opening and closing briefs, with closing briefs containing opposing Motions for Summary Judgment.
Correspondence between ED and the school district illustrates the confusion following the
Department's field investigation which resulted in disallowance of a group of students in the
district's population, which group had been accepted as eligible in prior years in calculating
impact aid. It is clear that the school district anticipated and relied upon receiving the same
level of funding as in prior years, and, in fact, had already budgeted and "spent" (in
expected impact aid funds. However, it is not clear that the school district had no advance
warning that eligibility was about to be examined more closely, and that this field review
could result in loss of eligibility for some students who had been accepted by ED as being
in prior years, when ED had simply relied on the Impact Aid Student Count submitted by the
school district.See footnote 3 3 It is also not clear that ED's Director of the Impact Aid Program or his staff
could have acted any more promptly than they did in notifying the school district of the field
investigation of eligibility, and the eventual denial of eligibility to 63 out of 391 students. The
Impact Aid Program staff also promptly assisted the school district in independently re-checking
eligibility status through the Bureau of Indian Affairs (BIA).
It should be noted that Impact Aid funding was not completely denied for the year in question; only 63 out of 391students were disallowed from the "eligible" list. The school district received Impact Aid payments totalling $610,000 for FY 1994. (See Stipulated Facts, at 54, and Exhibits JE-7, JE-10, JE-11.) But as a result of the denial of a portion of the student count, a portion of its impact aid was lost. Thus, on August 4, 1994, the Lapwai School District found an Impact Aid deposit of $49,810 in its bank account when it had expected that final payment to be $150,000 (Petitioner's Opening Brief, at 2), or a shortfall of about $100,000 in expected revenue for the 1993-1994 school year. (On July 26, 1994, the school district's bank account had received the final Impact Aid payment for school year '93-'94 by FedWire deposit.) Due to school budget timing and the letting of school district contracts, in a sense the school district had "already spent" anticipated Federal Impact Aid funds at the "old" level, relying on the prior year's figures. On August 9, 1994, the school district received the formal allocation notice from ED.See footnote 4 4
Whether petitioner's Fifth Amendment Due Process claim relating to a reduction in Federal Impact Aid provides a bar to a Federal agency's reducing the amount of such funds prior to a hearing where, on the merits, the petitioner concedes ineligibility to qualify for those additional funds, but argues "hardship," reliance on the expectation of receiving the "same funds as last year," and argues that the district has "already spent" those funds as part of that year's school budget?
The school district argues that ED has deprived it of "property" without due process of law in violation of the Fifth Amendment, U.S. Constitution. Petitioner's Due Process argument is not persuasive. Federal Impact Aid does not constitute a cognizable property interest under the due process clause of the Fifth Amendment, nor does it constitute the school district's "property", nor does a prior year's award create a property right for a succeeding year, nor does anticipation of Federal aid create a right to Federal aid. First of all, each year's award is separately subject to qualification and eligibility, in accordance with rules laid down by Congress, and even when all students remain fully eligible, the amount of available aid, and thus the amount to be allocated to any individual school district, varies from year to year. Secondly, focussing on the Petitioner's Fifth Amendment Due Process argument, the school district does not constitute a "person" within the meaning of the Due Process clause, and thus does not have "standing" to raise such a claim. The Due Process claim, therefore, that the petitioner is being denied a property right prior to a hearing, within the meaning of the U.S. Constitution, is without merit.
The school district does have a right, under the statute and regulations, to contest the ineligibility
finding at a hearing once payments are made at less than expected rates, and that is the source
and reason for this hearing. (Section 5(g) of P.L. 81-874, 20 U.S.C. §240(g), and 34
218.2.) But neither the applicable statutes nor the regulations require a hearing prior to the
cut-off or recalculation of Impact Aid, where the cut-off is based upon ineligibility of a school
district, a school, or part of its student population.
Coe v. Armour Fertilizer Works, 237 U.S. 413 (1915), cited by Petitioner, is inapposite. That case is distinguished from the instant matter because it involved the seizure of an individual stockholder's property to satisfy a debt without providing notice of a subsequent forcible seizure, thus clearly involving an individual person's property right.See footnote 5 5 The present matter does not involve personal property nor forcible seizure, rather it concerns an "anticipated Federal benefit" or an expectation of a Federal grant, and not something which the school district had a vested "right" to, or had already earned or qualified for, or was eligible for. Furthermore, the assertion that the Petitioner may bring a Due Process claim despite having no defense on the merits (restated in Petitioner's reply brief, at 5) is invalid where the Petitioner concedes that 63 of its students were ("technically") ineligible all along. Additionally, assuming arguendo that Petitioner had a Due Process argument, the documents in the record make it clear that Petitioner had more than just casual notice, in advance, that ED might restrict or reduce Impact Aid in the future after investigating the eligibility status of all (391) of the district's students, not just the 63 eventually determined to have been ineligible. The Petitioner is also deemed to have been already on notice that it did have a right to a hearingSee footnote 6 6 if it disagreed with the Impact Aid amount actually received, as this fact is published in the pertinent and available regulations (see 34 C.F.R. Part 222), as well as being so informed in correspondence from the Impact Aid Program Director, and as evidenced by the school district's prompt and timely appeal.
The Petitioner is in no better position by asserting that in prior years it had collected
Federal funds for those ineligible students, and had "relied" on receiving those same
again. (Receiving improper Federal funds does not create a "right" to continue to receive
improperly calculated Federal funds.) As the ED documents indicate, even where ALL students
claimed were eligible, the actual amount to be disbursed was solely dependent upon exactly how
much Congress would actually appropriate in any given year, and in several years only a pro rata
amount could be granted per school district and per student, to fairly and equally "spread
the only available funds. It is obvious that any "charitable" impulse to allow
such Federal funds to a school district for its ineligible students would unfairly (and illegally)
diminish the amount of funds going to school districts with solely eligible students.
Beyond this, a Federal agency has absolutely no authority to disburse funds outside the express terms articulated by Congress in the controlling legislation. There is no room here for "equitable discretion" or sympathetic largesse to knowingly disburse restricted funds to ineligible parties, not even on the premise that the Federal agency might be able to recoup such funds at some time in the future. Grants under Section 3 of the Impact Aid Law are "formula grants" for which school districts must annually qualify (20 U.S.C. §238(c)), annually reapply for on a timely basis (20 U.S.C. §240(a)), and for which Congress annually appropriates funds (see, e.g., Ex. JE-5, FY 1994 appropriations act). Applicants cannot reasonably rely from year-to-year on any specific level of funding even if the total national appropriation remains exactly the same as in a prior year, because the amount any applicant receives is subject to fluctuation depending on the type, category and validity of the specific children and property basis claimed, the number of other eligible Section 3 applicants elsewhere, and the amount of their shares of available funds, and the extent of pro rata cut-backs or increases in distributive shares to qualifying school districts.
Exploring further the Constitutional Due Process argument, see Walters v. National Association
of Radiation Survivors, 473 U.S. 305 (1985), citing Mathews v. Eldridge, 424 U.S. 319 (1976).
There the Court promulgated a three-part Due Process determination upon the premise that
"marginal gains from affording an additional procedural safeguard often may be
the societal cost of providing such a safeguard." (Mathews, at 348.) The three part test
is: (1) What private interest is affected by the official action? (2) What is the risk of an erroneous
deprivation of such interest through the procedures used? (3) What is the government's interest
in adhering to the existing system?
The Petitioner's argument in the present action appears to fail on each of the three grounds. First, there is no private interest concerned where a state, municipality or governmental sub-unit (school district) is involved. (See ED's brief, at 2, citing City of Sault Ste. Marie, Michigan v. Andrus, 532 F. Supp. 157, 167-168 [D.D.C. 1980].) Second, the Petitioner here was ineligible for the disputed funds ab initio and, therefore, there is simply no chance that a limitation of funds now could constitute an "erroneous deprivation" of a property interest through the procedures used. (The present matter, thus, is clearly distinguished from the cited case of Goldberg v. Kelly, 397 U.S. 254 .)See footnote 7 7 Third, the government's interest in adhering to existing systems ensures that ED stays within the disbursement boundaries prescribed by Congress, and, as importantly, ensures that eligible impact aid applicants receive fair, prompt and proper funding not diminished by funds being illegally dispensed to ineligible recipients. (See ED's brief, at 14.)
In order not to lengthen this decision unnecessarily (and thereby frustrate the expedition Petitioner has urged from the outset), at this point I will incorporate by reference the legal discussion contained in Section I of ED's Reply Memorandum (at 2-16), particularly the Federal cases cited therein. Included therein are the established principles that a school district has no standing to raise a Fifth Amendment Due Process claim because it is not a "person" within the meaning of the Fifth Amendment,See footnote 8 8 that even with standing a claimant must have a "property interest in a benefit ... (and) a legitimate claim of entitlement to it" (versus being ineligible for it),See footnote 9 9 that interests or "rights" that are not legally protected do not constitute "property" for purposes of the Fifth Amendment,See footnote 10 10 that the Due Process clause creates no affirmative right to government aid,See footnote 11 11 that there is no Fifth Amendment property right involved in the continued receipt of Federal funding where the future receipt of such funding is merely a "unilateral expectation,"See footnote 12 12 and that a Federal grant received on a year-to-year basis creates merely a "unilateral expectation" of continued funding.See footnote 13 13 The courts have consistently denied due process relief to applicants for Federal grants.See footnote 14 14
Conclusion of Law
After due consideration of the entire record, including the Briefs and Memoranda of both sides, the Joint Statement of Stipulated Facts, and the attached documentation, l conclude that the Assistant Secretary for Elementary and Secondary Education should be granted summary judgment based upon the school district's failure to present a triable issue of material fact. (Cf., Rule 56, FRCP.) Accordingly, the Petitioner's appeal is hereby DENIED.
IT IS SO ORDERED.
Thomas W. Reilly
Administrative Law Judge
Issued: July 7, 1995.
On July 7, 1995, a copy of the attached document was sent by U.S. Post Office, CERTIFIED MAIL, RETURN RECEIPT REQUESTED, to the following parties:
Alexander J. Pires, Jr., Esq.
Conlon, Frantz, Phelan, Knapp & Pires
Suite 200 --1818 N Street, N.W.
Washington. D.C. 20036.
Miriam Haverstock Whitney, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110.