The United States District Court for the Southern District of California held the $50 Rule, used by the Secretary of Education to evaluate applications for Impact Aid by local school districts, to be invalid as inconsistent with the legislative history of the Impact Aid statute. The district court granted summary judgment to cross-appellants and ordered the Secretary to process the applications using another method of evaluation. We reverse and remand.
A. The Impact Aid Program.
The Impact Aid program grew out of the unprecedented mobilization and war production programs necessitated by World War II. This massive federal activity often caused hardship to local school districts in the area of the activity because large amounts of real property were removed from the tax rolls at the same time the population increased dramatically. When the problem did not subside after the war ended, Congress responded in 1950 by creating the Impact Aid program.
Three types of assistance are available under the Impact Aid program. Section 3 Assistance
The statute prescribes the rate of payment, called the local contribution rate (LCR), and gives the Secretary of Education (Secretary) the task of determining which school districts are "generally comparable" to the applicant LEA's district. It also establishes a minimum payment amounting to one-half the average per-pupil expenditure in the applicant's state, or one-half the average per-pupil expenditure in the United States as a whole, whichever is greater.
The regulations provide two methods for determining "generally comparable" school districts: the group rate method and the individually selected comparable district (ISCD) method.
B. The $50 Rule.
For almost 30 years the Secretary has used an unwritten guideline, the $50 Rule, to aid in evaluating claims of general comparability. The $50 Rule compares the "local effort" of the applicant district to the proposed LCR obtained from the districts to which it claims to be generally comparable. "Local effort" is determined by dividing the total revenues for current expenditures obtained solely from local sources by the number of "non-federal" children.
C. The Grid.
In fiscal years (FY) 1978 and 1979, the Secretary also used a "grid" to evaluate an applicant's claim of generally comparable school districts. The "grid" is simply a list of 14 criteria used to compare school districts. The criteria are legal classification, total average daily attendance, cost per pupil paid from local sources and from all sources, grade levels maintained, percent of pupils transported, pupil-teacher ratio, assessed valuation per pupil, ratio of assessed value to true value, tax rate for current expenses and for all school purposes, curricula offered, teacher salary, and economic characteristics. Using the grid, the Secretary determined that school districts were generally comparable to the applicant only when they were comparable in at least 5 of the 14 criteria.
The grid was used in conjunction with the $50 Rule in FY 1978. In FY 1979, for a period of only about 3 months, the grid was used exclusively before it was dropped completely.
D. The Facts.
Initially, the Secretary informed all applicants that the $50 Rule would be used to calculate the LCR's for FY 1979. The LEA's involved in this appeal spent a relatively small amount per pupil in the second fiscal year that preceded 1979.
On April 9, 1979, a memorandum was circulated within the Department of Education (department) concerning the treatment of ISCD applications for FY 1979. The memorandum stated that the grid method was to be used to evaluate general comparability, with a minimum of 5 of the
The LEA's involved in this case filed amended applications following the change in department practice. These amended applications requested substantially higher LCR's than had the original applications. Eight of the applications were initially approved by the department.
The LEA's filed requests for an administrative hearing to challenge the department's refusal to approve the amended applications. The administrative law judge (ALJ) held that the predecessor to 34 C.F.R. § 222.30(b)(2) expressly authorized the Secretary "to make the type of comparison that takes place under the `$50 Rule' in deciding whether to approve an LEA's local contribution rate." The ALJ also found that the $50 Rule was an interpretative rule and therefore not subject to the notice and comment requirements of the Administrative Procedure Act (APA) or the General Education Provisions Act (GEPA). Lastly, the ALJ determined that only four of the LEA's had relied to their detriment on the department's initial approval of their amended applications. The ALJ ordered the department to reinstate its approval of those four applications.
Some of the LEA's requested review of the ALJ's decision by the Secretary. The Secretary declined to review the decision, finding nothing in the record to indicate clear abuse of discretion by the ALJ.
Two suits were filed in the United States District Court for the Southern District of California by the school districts, and the two were later consolidated.
The Secretary appealed the judgment to the United States Court of Appeals for the Ninth Circuit, which reversed the district court on the issue of the validity of the $50 Rule.
The Tucker Act, 28 U.S.C. § 1491 (1982), vests exclusive jurisdiction in the Claims
It is well settled that where the prime effort of the plaintiff is to obtain money from the Government, the exclusive jurisdiction of the Claims Court cannot be avoided by drafting a complaint which appears to seek only injunctive, mandatory, or declaratory relief against the Government.
The plaintiff districts of Poway and Sweetwater sought an additional $462,000 and $167,000 respectively in their amended applications. Both of these claims exceed the $10,000 limit on the district court's jurisdiction and must be dismissed.
As a class, the Chula Vista plaintiffs seek over $12 million. However, aggregation of claims by individual plaintiffs for jurisdictional purposes is permitted only when there is a "single title or right in which they have a common and undivided interest."
III. Validity of the $50 Rule
A. Standard of Review.
In reviewing a grant of summary judgment, the appellate court must determine whether the strict standard set out in Fed.R.Civ.P. 56(c) has been met.
This court will give substantial weight to the interpretation given a statute
B. Consistency of the $50 Rule with the Impact Aid Statute.
It is undisputed that the $50 Rule does not conflict with the express language of the Impact Aid statute because the statute does not define the term "generally comparable." The district court invalidated the $50 Rule believing it to be inconsistent with the legislative history of the act. The court held that it operated as a cap on the amount of aid that could be obtained, and that it limited comparison to a single factor, which the House report explicitly discouraged.
The House committee report referred to by the court discussed the concept of comparable communities.
In invalidating the $50 Rule, the district court stated that
The district court believed that the $50 Rule limited comparison to just one factor. However, it is clear that local effort includes several of the factors which Congress stated should be considered. Among the other factors listed are tax resources, tax effort, and the number and kind of school population. Local effort is calculated by dividing the total revenues for current expenditures from local sources by the number of non-federal children in average daily attendance. Total revenues for current expenditures from local sources is calculated by multiplying the assessed valuation, or tax resources, by the tax rate for current expenses, or tax effort.
The district court apparently believed that no single criterion could be so important that failure to meet it would preclude a finding of comparability. However, even if local contribution is viewed as a single factor, nothing in the legislative history requires such a conclusion. The fact that Congress set out certain factors for consideration does not prohibit the Secretary from concluding that some are more important than others. It was not beyond the Secretary's authority to determine that one factor, local contribution, was so critical that, unless it was met, there could be no finding of comparability.
In addition, the district court seems to have focused on the statement in the report that "it would not be reasonable to consider merely current expenditures met from local revenues of the district in question" in concluding that the $50 Rule was invalid.
The language cited by the district court does not prohibit the comparison made by the $50 Rule. The statement in the report is ambiguous at best. It might mean that a direct comparison of current expenditures from local revenues between districts is never permissible. On the other hand, it might mean that such a comparison is permitted,
The purpose of the Impact Aid program is to "compensate school districts in reasonable amounts for the cost of educating children who, because they reside on tax-exempt Federal property or because their parents are employed on such property, do not in effect pay their own way."
Because the $50 Rule is not inconsistent with the legislative history of the Impact Aid statute and, furthermore, it being a reasonable interpretation of the statute, we hold the $50 Rule to be valid.
IV. Notice and Comment Procedures
The LEA's contend that the district court erred in holding that the $50 Rule was not subject to the notice and comment procedures of the APA. The district court held that because the rule involved a grant or benefit, it was not required to comply with the notice provisions of the APA. There was no error in this conclusion. The APA specifically exempts grants and benefits from those provisions.
The district court also found that the $50 Rule was an interpretative rule, not a substantive one, and thus was not subject to notice and comment procedures. An interpretative rule describes the agency's view of the meaning of a statute. A substantive rule grants rights or imposes obligations on those affected by it.
The LEA's argue that the district court also erred in holding that similar provisions in the GEPA did not apply. The GEPA provides that regulations are to be published and are subject to the APA's notice and comment procedures. The act makes clear that the term regulation is to be broadly construed.
V. Uniform Application of the Rule
The LEA's argue that 20 U.S.C. § 1232(c) (1982), which states that "[a]ll such regulations
The LEA's contend that the use of the grid for the applications of districts in all the other states and the reinstatement of the $50 Rule only with respect to the class members, all of whom are located in California, violated 20 U.S.C. § 1232(c). However, the LEA's did not prove that there was any geographic nonuniformity resulting from the use of the grid and the $50 Rule. First of all, only 20 states use the ISCD method, and the grid was used only in those states. In addition, at least 5 of the 129 LEA's whose applications were approved using the grid were from California.
The $50 Rule was not applied to the LEA's applications in such a way as to violate 20 U.S.C. § 1232(c). The Secretary had a 30-year policy of applying the $50 Rule to evaluate Impact Aid applications. For a short time — merely 3 months — a new method, the grid, was tried, but it was dropped when it became clear that it was not a good evaluation tool. At that point, the Secretary reverted to his old method, the $50 Rule. The Secretary's approval of applications using the grid during the experimental period and subsequent disapproval of some applications using the $50 Rule does not violate 20 U.S.C. § 1232(c).
Ordering the Secretary to use the grid to evaluate the LEA's applications would reduce the likelihood of innovation in the department in the future. If the Secretary feared that the department would be forced to continue to use new methods after it was determined that they were ineffective, he would be much less inclined to experiment with new ideas.
Finally, the LEA's argue that the Government is estopped from applying the $50 Rule to their applications. However, the Supreme Court has never held that estoppel may be applied against the Government,
The school districts have failed to make such a showing here. They have not alleged that they incurred any obligations in reliance upon the Government's approval of their amended applications. It is not enough to assert that they filed amended applications in reliance on the Government's action; they must also show that this left them in a worse position than they
The district court had jurisdiction over the complaints of only six of the class plaintiffs, and the remaining actions should be dismissed by the district court for lack of jurisdiction. We agree with the district court that the Government is not estopped from enforcing the $50 Rule against the LEA's. We also agree that the $50 Rule is not subject to the notice and comment procedures of the APA or the GEPA. However, the $50 Rule is not inconsistent with the legislative history of the Impact Aid statute, and it is a reasonable interpretation of that statute. Therefore, the $50 Rule is a valid rule. Furthermore, the use of the rule to evaluate the LEA's applications does not violate the uniformity provision of 20 U.S.C. § 1232(c). The judgment of the United States District Court for the Southern District of California is reversed, and the case is remanded to the district court with instructions to dismiss the complaint of the 49 claimants who seek more than $10,000.
REVERSED AND REMANDED.
DAVIS, Circuit Judge, concurring in part and dissenting in part.
I join all of the court's opinion except for the portion upholding the validity of the $50 Rule. On that issue my position is that (a) the Rule contravenes the governing statute as properly interpreted in the light of the controlling legislative history, and (b) the Rule has not been consistently followed by the administrative agency.
First, I think that the House committee report (H.R.Rep. No. 2287, 81st Cong., 2d Sess. 14) — quoted in the majority opinion — makes it absolutely clear that the administrators could not adopt an overriding rule basing comparability primarily or generally on the amount of revenue collected and used by the LEA (aside from federal funds). The committee report said expressly that "it would not be reasonable to consider merely current expenditures met from local revenues of the district in question," but that various relevant factors should be considered. As the District Court explained, the $50 Rule operates in the forbidden manner as the overall governing criterion.
Second, the $50 Rule has not been uniformly and consistently applied — the normal standard for deferring to an administrative interpretation. This record shows that the Rule was jettisoned at least in the Spring of 1979 and that some of the appellees had their applications granted in sums that would not have been awarded under the $50 Rule.
I subscribe to the position "that the interrelationship of [the legislative] history with the statutory text follows a continuous spectrum measuring the strength of the language, on the one hand, and the strength of the history, on the other. The more compelling and definitive the words are, the less controlling the legislative history; conversely, the less compelling and definite the language, the more controlling the history to the extent of its strength." Texas State Comm'n for the Blind v. United States, 796 F.2d 400, 415 (Fed.Cir.1986) (separate opinion of Davis, J.). The statutory language at issue is general and indefinite and the administrative practice is inconsistent, while the legislative history is very strong and precise.