14 States Hope Administration Will Cancel Title I Debts

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Washington--Fourteen states that the U.S. Education Department (ED) says owe the government millions of dollars in Title I funds are counting on the Reagan Administration to relieve them of the obligation to pay the money back.

Representatives from the states--which the department's auditors say have not complied with Title I spending regulations--met last month in Burlingame, Calif., to develop a strategy that would convince the Administration that they cannot afford to return the federal money.

State officials who attended the Burlingame meeting would not comment last week on the substance of their discussion.

Audit Results Fought

Some of the payments their states owe have been due since 1976, and several of the states have been been fighting the audits since then through a lengthy process of administrative appeal and litigation.

Title I, the landmark federal initiative to aid disadvantaged students, is the largest of the Education Department's programs. Amendments to tighten regulations governing the program have been added several times since its establishment in 1965, increasing the number of pages of governing legislation to 54 this year--and, state and local officials have often complained--making compliance difficult and expensive.

The program is audited by ed's Office of the Inspector General, and audits are concentrated on states with the highest concentrations of children who meet Title I criteria for eligibility.

The Burlingame meeting was organized by Title I officials from Pennsylvania, which has brought two federal-court challenges to an ed ruling requiring the state to repay $5 million that the department charges was spent inappropriately between 1970 and 1974.

"We're desperate now," said William Dallam, Pennsylvania's Title Idinator. "We're hoping for a settlement to these cases. Anything that would be to our benefit to help bring about the resolution, we want to share [with other states]."

He said he thought federal officials would be willing to reduce or eliminate the contested payment because adjusting to the new Title I procedures mandated by the 1981 Education Consolidation and Improvement Act (ECIA) placed new burdens on state officials.

"Now we're being asked to make the transition from a very prescriptive program to a looser program," he said. "We're being hit with a new bill while we're spending time trying to fight the old bill."

The Education Department has not calculated the total amount it is trying to collect from all of the states because the amounts due, known as "audit exceptions," often are reduced through appeal.

The audit exceptions range from $10,000 to $28 million, according to David Pollen, chairman of the federal agency's Education Appeal Board (EAB). He said the board's decisions, which represent the department's final administrative ruling, can be appealed only in federal court.

The 18-member board sits in three-member panels to rule on appeals to department audit exceptions. The board is authorized to hear disputes within all federal education programs, but because Title I is the largest, it generates the most appeals, Mr. Pollen said. A total of 26 state appeals of Title I audit findings are now pending before the EAB, he said.

Vincent E. Reed, assistant secretary for elementary and secondary education, whose office issues the audit findings, said he was aware that state representatives had met in California.

Mr. Reed said the department was not willing to cancel the states' "debts" outright, but he said that officials were "willing to sit down and talk with any of that group [of state representatives] about how we can settle this. We want to see if there's any information they have about any unique problems in their school systems. Secretary [of Education Terrel H.] Bell is interested in looking at the peculiarities in each case."

One of the problems states face in repaying the funds, Mr. Dallam said, is that most of the audit reports request repayment because of incorrect procedures that occurred on the local level. States have no authority to require local school systems to repay the money, he said. Under Title I law, states are responsible for distributing Title I funds to local school systems and for monitoring school systems' compliance with the program's requirements.

Common Violations

According to Stephen Freid, an attorney with ED's office of general counsel, the three Title I spending requirements most often violated are: "comparability," which requires that the amount of state and local money spent on Title I students is equal to that spent on other students; "supplement, not supplant," which bars states and school systems from replacing some of their own money with federal funds; and "general aid," which forbids the spending of Title I money for anything but compensatory-education programs.

All 26 of the state Title I cases pending before the EAB deal with funds misspent before Title I was amended in 1978, according to Mr. Fried. He said that the 1978 amendments "clarified" the spending requirements of the law, and that states probably have had less difficulty complying with Title I regulations since then.

The ECIA, which Congress passed in July, is said to represent a return to pre-1978 Title I law. The new legislation is significantly shorter than the 1978 version, although it includes the "comparability," and the "supplement, not supplant" provisions of the earlier law. Regulations interpreting those provisions have not yet been issued by the Education Department.

Imogene Trexel, an attorney with Pennsylvania's state education agency, said her state has spent approximately $100,000 on the two court challenges it has initiated.

In one of the two lawsuits, filed in the District of Columbia federal court last year, Pennsylvania alleged that the regulations governing the EAB, which had been vetoed by Congress in 1980, left the board without the authority to rule on the state's case. Because new regulations were subsequently accepted by Congress, the case was declared moot last February, she said.

A second lawsuit, pending before a federal court in Pennsylvania, alleges that the U.S. Office of Education, predecessor to the Education Department, had no statutory authority to collect its debts prior to 1978. (The General Education Provisions Act of 1978 gave the education office specific debt-collection authority.)

An education department official, who asked not to be identified, disputed that claim. "No officer of this government can give away its funds," the official said. "If a government agency catches someone misspending federal money, there's an obligation to recover the funds. If you can't recover the money, why conduct an audit?"

State education agencies in New Jersey and West Virginia have filed similar challenges to the federal education office's pre-1978 authority, Ms. Trexel said.

Legislative Actions

In addition to court action, the states are seeking to be excused from their debts legislatively.

A bill introduced in Congress this year by Representatives William F. Goodling, Republican of Pennsylvania, and Carl D. Perkins, Democrat of Kentucky, would wipe out state Title I debts by dismissing cases pending before the eab

Two staff members on the House Education and Labor Committee said there has been no action on the bill, HR 397, because the legislators, in a conversation with Secretary Bell, have agreed to allow the department to settle the matter itself.

In the Senate, Republican Arlen Specter of Pennsylvania is seeking to have a provision similar to that contained in the House bill amended to the education-appropriations bill for fiscal 1982. There has been no action on Senator Specter's request, although the Appropriations subcommittee was expected to mark up its bill late last week.

Vol. 01, Issue 03, Page 8, 10

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