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N.J., Pa. Argue Against Return of Title I Funds

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Washington--The states of New Jersey and Pennsylvania argued before the U.S. Supreme Court last week that they should not have to return to the federal government $1.45 million in Title I funds that the Education Department (ed) alleges were misspent prior to 1978.

In two cases heard together by the Court (Bell v. New Jersey and Bell v. Pennsylvania), the states argued that until 1978 ed had no specific statutory authority to recover federal funds and that the law cannot be "retroactively" applied.

Margaret Hunting, deputy attorney general of Pennsylvania, noted that the federal government has the "very effective remedy" of seeking criminal penalties in these cases or of withholding future funds.

The government is arguing, according to a brief filed with the Court, that the federal government has an "inherent right" to recover funds that have been illegally spent unless this right is expressly removed by the Congress.

At issue is the authority of the Ed-ucation Department to recover federal funds distributed to the states that have been determined--through audits--to have been "misapplied" under the terms of Title I of the Elementary and Secondary Education Act of 1965--renamed Chapter 1 by a 1981 law known as the Education Consolidation and Improvement Act.

According to a brief filed by the Justice Department on behalf of the ed, there are 27 similar pending Title I cases, involving audit claims of more than $60 million, the outcome of which could be determined by the decision in this case.

The brief contends that the government stands to lose control of expenditures in over 1,000 grants and contracts administered by federal agencies other than ed

In 1980, the ed asked the two states in the Supreme Court suit to return Title I funds based on earlier audits showing that between 1967 and 1973 the two states had spent their allocations on some schools that did not qualify for Title I aid.

However, the U.S. Court of Appeals for the Third Circuit ruled in 1981 that the states did not have to return the money because the alleged improper expenditures took place before the General Education Provisions Act of 1978 (gepa) established the Education Appeal Board and gave the federal government explicit power to demand the return of improperly spent funds.

The appeals court relied on the "overarching principle" of Pennhurst State School & Hospital v. Halderman, a 1981 decision in which the Supreme Court said "the terms and conditions of a federal grant must be set forth clearly and unambiguously in the statute authorizing the grant."

Soon after that, the U.S. Court of Appeals for the Fourth Circuit reached the opposite conclusion in a case involving West Virginia and ordered the state to return to the federal government $125,000 of a 1975 Title I grant.

The government appealed the Third Circuit's ruling to the Supreme Court. The states of West Virginia and Maryland (which has also been ordered to repay Title I funds) have filed friend-of-the-court briefs.

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