DECEMBER 19, 1969.

MEMORANDUM FOR THE HONORABLE EDWARD L. MORGAN, DEPUTY COUNSEL TO THE PRESIDENT

Re Presidential Authority To Impound Funds Appropriated for Office of Education Programs

In our memorandum to you of December 1, we considered the authority of the President to impound funds appropriated for assistance to federally impacted schools under P.L. 874, 20 U.S.C. 236 et seq. and P.L. 815, 20 U.S.C. 631 et seq. We concluded that the President has no constitutional authority to refuse to spend funds appropriated for federal programs for assistance to education where the substantive legislation, read together with the provisions of the appropriation legislation, constitutes a direction that such funds be spent. We also considered specifically the terms of P.L. 874 and P.L. 815. We concluded that P.L. 874 constituted a direction to spend but that there was sufficient discretion left in the Executive Branch under P.L. 815 and the appropriations bill to justify at least postponing the obligation of appropriated funds into fiscal 1971. In this memorandum we will consider the President's authority to impound funds for some of the other items covered in the Joelson Amendment to H.R. 13111, the HEW-Labor Appropriations Bill, 1970. With respect to each item the question we will consider is whether the pertinent legislation compels the obligation and expenditure of the full appropriation or leaves sufficient discretion to the Executive Branch to justify a Presidential directive to impound.

A few general comments are in order. As we stated in our previous memorandum, an appropriation is not in itself ordinarily interpreted as a direction to spend. To determine whether or not there is a duty to spend one must examine the substantive legislation. The substantive legislation for some Office of Education programs clearly gives broad discretion to the Commissioner. For example, section 402 of the Elementary and Secondary Education Amendments of 1967. 20 USC 1222, authorizes appropriation of sums "to be available to the Secretary * * * for expenses, including grants, contracts, or other payments for (1) planning for the succeeding year programs or projects *** and (2) evaluation of programs or projects so authorized." We have no doubt that the $9.25 million appropriated1 for this program may be impounded.

On the other hand, substantially all sizeable Office of Education programs do not involve such broad grants of discretion to the agency. They are formula grant programs, in which the statute provides for the allotment or - apportionment of the funds appropriated for the program among the States on the basis of population or some other mathematical criteria. Typically, the substantive legislation provides for submission by State authorities of a plan for the use of the funds. If the Commissioner of Education determines that the plan meets the statutory criteria, he must approve it, and the State becomes entitled to its share of the appropriation. There is usually also provision for judicial review of a disapproval of the plan or of action to withhold or terminate assistance on grounds of noncompliance with the plan.

Examination of the language and legislative history of these State plan-State grant programs indicates little or no attention by Congress to the question of impounding. The principal purpose of formula grants was presumably to assure equitable distribution of the funds available, and it might reasonably be contended that no clear purpose to deny to the Executive the right to make across-the-board reductions in spending was manifested. But neither can it be said that there is evidence of an intent to preserve such a right. Consequently, in each case the question is likely to turn on whether the requisite Executive discretion can be found within the mechanics of the grant distribution scheme rather than whether Congress intended or did not intend to preclude, impounding.

One further point of general application. Section 406 of the Elementary and Secondary Education Amendments of 1967 (“P.L. 90-247”), as amended, 20 U.S.C. 1226, which we cited in our previous memorandum,2 provides:

1 Throughout this memorandum we shall refer to the figures and language contained in H.R. 13111 as it passed the House and assume, for purposes of this discussion, that the bill will be enacted in its present form.

In our previous memorandum we referred to this provision as section 406 of the Vocational Education Amendments of 1968. Actually, section 406 was added to P.L. 90-247 by section 301 (b) of the Vocational Educational Amendments of 1968.

"Notwithstanding any other provision of law, unless expressly in limitation of the provisions of this title, funds appropriated for any fiscal year to carry out any of the programs to which this title is applicable shall remain available for obligation until the end of such fiscal year."

["This title" is Title IV of P.L. 90-247, and it is applicable to all programs of the Office of Education. 20 U.S.C. 1221.]

The purpose of this provision was to deny to the President authority he would otherwise have had under the Revenue and Expenditure Control Act (P.L. 90-364), §§ 202, 203, to reduce obligations and expenditures on Office of Education programs. As we pointed out in footnote 8 of our previous memorandum, the present effect of section 406 may be to prevent such Presidential authority from being inferred from Title IV of P.L. 91-47.

3

It might be argued that section 406 also prevents the impounding for budgetary reasons of any funds appropriated for Office of Education programs, even where the substantive legislation might otherwise permit impounding. However, section 406 does not, in terms, require that appropriations be expended or obligated; it requires that they remain "available for obligation" until the end of the fiscal year. The prohibition is apparently aimed at the Bureau of the Budget, and seems based on the assumption that Congress can prevent the Bureau of the Budget or the President from impounding funds without requiring the agency to which the funds are appropriated to spend them. But if the Commissioner of Education has the discretionary authority to decline to spend the funds, the President undoubtedly has, in our view, the authority to guide the Commissioner's discretion in this matter by virtue of his constitutional authority to "take care that the laws be faithfully executed." 2 Ops. A.G. 482 (1831). Consequently, if section 406 were read as an attempt to interfere with the President's authority to direct the actions of the Commissioner of Education, it would raise constitutional problems. Accordingly, we think the correct interpretation of section 406 is that it denies to the President any statutory authority to impound appropriations for the mandatory programs of the Office of Education, but that it does not interfere with the President's authority to direct the Commissioner to exercise his discretion, where such discretionary authority exists, to avoid the obligation and expenditure of funds.*

We proceed, therefore, to consider the authority to impound funds appropriated to particular Office of Education programs.

TITLE I-A, ELEMENTARY AND SECONDARY EDUCATION ACT

H.R. 13111 appropriates $386,160,700 "for an additional amount for grants under Title I-A of the Elementary and Secondary Education Act of 1965 for the fiscal year 1970." [This sum is additional to appropriations made for this program for fiscal '70 in the Labor-HEW Appropriation Act, 1969, P.L. 90–557, 82 Stat. 969, 975.] It is our conclusion that sums appropriated for this program must be spent in accordance with the terms of the statute and may not be impounded.

Title I of ESEA, 20 U.S.C. 241a et seq., provides for federal financial assistance to local educational agencies for the education of children of low-income families. The statutory formula for computation of payments is fairly complicated, but, basically, local educational agencies are eligible to receive from the Federal Government 50% of the average per pupil expenditure in the State or, if greater, in the United States, multiplied by the number of low-income children in the district. ESEA, § 103(a)(2). In addition, State agencies are eligible to receive direct payments computed on a similar statutory formula for the education of handicapped children, children of migrant laborers, and children in institutions for neglected or delinquent children. ESEA, § 103 (a) (5), (6) and (7).5

Payments under Title I are made by the Commissioner to the States. Local educational agencies eligible for assistance apply to the State educational

Senator Yarborough stated that section 406 "says that if the Appropriations Committee does appropriate the money, it shall remain available. The purpose is to keep the Bureau of the Budget from whacking it to pieces." 114 Cong. Rec. S. 11864.

This conclusion is consistent with the view taken by the General Counsel of HEW at the time the Vocational Education Amendments bill was before Congress. Memorandum of August 15, 1968 from General Counsel Willcox to the Secretary.

5 Part A of Title I provides for "basic grants," Part B for "special incentive grants." However, H.R. 13111 carries no funds for Part B grants.

agency which determines whether the application meets the statutory and administrative criteria. ESEA, § 105 (a). To participate in the program each State must file an application with the Commissioner containing required assurances regarding the State's administration of the program. ESEA, § 106 (a). The Commissioner is required to approve a State application which meets the statutory criteria, § 106 (b), and disapproval of the application is subject to judicial review, § 133. There is no specific provision for judicial review at the instance of a local educational agency.

Title I is similar to P.L. 874 and P.L. 815 in that there is no specific dollar authorization for appropriations. The authorization consists of the aggregate eligibility computed under the statutory formula, and the Commissioner is directed to apply the appropriations for Title I to the satisfaction of such eligibility.

The language of the statute seems clear as to the mandatory nature of the program. Section 102 provides. "The Commissioner shall, in accordance with the provisions of this part, make payments to State educational agencies for grants to local educational agencies***." Section 107(a)(1) provides, "The Commissioner shall ** *pay to each State * ** the amount which it and the local educational agencies of the State are eligible to receive under this part." The State agencies are, in turn, directed to distribute the payments to the local agencies, § 107 (a) (2).

***

Section 108 supplies additional evidence of the mandatory nature of the program. It provides that "if the sums appropriated for any fiscal year are not sufficient to pay in full the total amounts which all local and State educational agencies are eligible to receive under this part for such year," the eligibilities will be paid in accordance with a prescribed formula. Section 108 contemplates no shortfall between the appropriation for making grant payments and sums actually available for that purpose, for if it did the formula would presumably be based on availability and not on appropriations. Furthermore, if funds were to be impounded, the Commissioner would either have to interpret the word "appropriated" in section 108 as if it read "available," cf. P.L. 90-218, § 204, or he would have to depart from the Congressional intent with respect to the allocation of funds in the event of shortfall.

For the reasons set forth above we conclude that Title I of ESEA is a mandatory program, and that funds appropriated to it may not be impounded."

TITLES II AND III, ELEMENTARY AND SECONDARY EDUCATION ACT

H.R. 13111 would appropriate $50 million to carry out Title II of the Elementary and Secondary Education Act of 1965, 20 U.S.C. 821-27, and $164,876,000 to carry out Title III of that Act, 20 U.S.C. 841-45.

Title II provides for nonmatching grants to States for the acquisition of school library resources, textbooks and other instructional materials. The statutory scheme is a fairly typical State plan-State grant arrangement. The Commissioner is directed to allot the sums appropriated to carry out the title among the States on the basis of total elementary and secondary school enrollment. ESEA, § 202. Each State desiring to participate must submit a plan for the Commissioner's approval. The Commissioner must approve a plan which complies with the statutory criteria, § 203 (b), and the State is entitled to obtain judicial review of disapproval of a plan or a determination by the Commissioner that the State has failed to comply with its plan, § 207. Section 204(a) provides, "From the amounts allotted to each State under section 202

This formula, rather complex as set forth in the statute, is further complicated by the provision in H.R. 13111 that the amounts available to each State shall be no less than 92% of the amounts allocated to local agencies in such State in fiscal 1968.

7 This conclusion is subject to minor qualifications. Under section 103 (a)(1), an amount equal to 3% of the amount appropriated for grants to or through the States shall be allotted among Puerto Rico and the Insular Possessions, and for payments with respect to Indian children. The Commissioner probably has sufficient discretion here to withhold some of the funds available for this purpose. There is similar discretionary authority in other formula grant statutes with respect to the allotment of funds to Puerto Rico and the Possessions, see e.g., ESEA, § 302, 20 U.S.C. 842, but in view of the small sums involved and the undesirability of imposing a burden on those jurisdictions not shared by the States, we will omit further consideration of this possibility.

Our conclusion is also based on the assumption that the Title I funds presently carried in H.R. 13111 will not be sufficient to pay the aggregate eligibility in full. These funds, added to last year's advance funding would bring total fiscal '70 appropriations for Title I to about $1.4 billion, whereas HEW's budget justification estimated the total authorization at $2.36 billion.

the Commissioner shall pay to that State an amount equal to the amount expended by the State in carrying out its State plan."

From this sketch of Title II it appears that the Commissioner has little if any discretionary authority to decline to spend funds appropriated to the program. The allotment is carried out by mathematical formula, the State plan must be approved if it complies with the statute, and payments must be made in the amounts expended by the State in carrying out the plan.

There is, however, one point at which discretion may be exercised. Section 202(b) provides, "The amount of any State's allotment *** which the Commissioner determines will not be required for such fiscal year shall be available for reallotment from time to time *** to other States in proportion to the original allotments ***." It is not entirely clear from the language of the title whether such a determination by the Commissioner must be made in the context of a partial disapproval of the State plan, in which case the determinstion would presumably be subject to judicial review, or whether such determination is left entirely to the discretion of the Commissioner. (Since allotments must be made annually, while there is no requirement for annual filing of a plan, it appears that the determination to reallot is not part of the process of approving a plan. Office of Education regulations also indicate that reallotment does not occur at the time plans are approved, but at a later time and on the basis of the States' statements of anticipated need, 45 C.F.R. 117.46.) There is legislative history to the effect that the question of reallotment is within the discretion of the Commissioner. Obviously, to withhold funds for reallotment on the basis of a determination of comparative need is quite different from an across-the-board cut in allotments for budgetary reasons, and it does not follow that because the Commissioner is authorized to do the former, he may also do the latter. Nevertheless, this reallotment provision at least supports the argument that a State with a approved plan does not have a "vested right" to its full allotment. Consequently, while on balance we do not believe that Title II funds may be impounded, we believe that there is a better argument for doing so than with respect to either Title I of ESEA or P.L. 874.

Title III of ESEA provides for a program of grants for supplementary educational centers and services. As enacted in 1965 Title III provided for direct grants from the Office of Education to local educational agencies out of sums apportioned among the States. However, the Elementary and Secondary Education Amendments of 1967 (“P.L. 90-247") revised Title III so that it provides for a State grant-State plan program very similar to that in Title II.

Section 302 (a) provides for an allotment of the appropriation among the States under a formula based partly on school age population and partly on total population. Section 302 (c) provides reallotment authority similar to that in section 202 (b). States are required to file plans annually for the use of the funds. The Commissioner shall approve a plan that meets the statutory criteria, § 305(b), and the State may obtain judicial review if the plan is disapproved, § 305 (e) (3). The States, in turn, receive and act on grant applications from local educational agencies in accordance with standards prescribed in section 304. The local educational agency is entitled to obtain judicial review of the State agency's action with respect to its application, § 305 (f).

Section 307 provides, "From the allotment to each State pursuant to section 302, for any fiscal year, the Commissioner shall pay to each State, which has had a plan approved pursuant to section 305 for that fiscal year, the amount necessary to carry out its State plan as approved."

8 In response to a question from Senator Prouty as to whether the Commissioner would have full authority to decide whether a State needs its full allotment. HEW replied in a memorandum that the language in section 202 (b) was similar to that found in other education legislation. The memorandum stated further:

"The Office of Education has had experience in administering this provision without any difficulty or cutback on State programs. The Commissioner does have authority to decide whether or not a State needs its full allotment. Administratively, this has been carried out by the Commissioner polling each of the States: (1) whether they will need their full allotment and, if not, how much be [sic] available for reallocation: (2) what additional funds could the State prudently use if they have already used their entire original allotment. On this advice of the States, the Commissioner then carries out his reallotment authority." Hearings on the Elementary and Secondary Education Act of 1965 before a Subcommittee of the Senate Committee on Labor and Public Welfare, 89th Cong., 1st Sess.. p. 1190.

9 P.L. 90-247 provided for a gradual transition from direct Federal grants to local agencies to grants through the States. In fiscal '70 the States are eligible to receive their entire allotments less those sums, not in excess of 25%, necessary for direct grants to complete local projects previously initiated. §§ 305(d), 306(c).

On the question of authority to impound, we see no significant difference between Title III and Title II, and our conclusion is, therefore, the same.

Vocational education

H.R. 13111 appropriates $488,716,000 for carrying out the Vocational Education Act of 1963, 20 U.S.C. 1241-1391, and section 402 of P.L. 90-247, 20 U.S.C. 1222,10 of which "not to exceed $356,836,000" shall be for State vocational education programs under Part B of the Act and $40,000,000 shall be for programs under section 102 (b) of the Act.

Parts A and B of the Vocational Education Act provide for formula grants to the States for vocational education programs. The basic grants are provided under Part B, while section 102(b) authorizes a separate appropriation for programs for persons with "academic, socioeconomic, or other handicaps" that prevent them from succeeding in regular vocational education programs. The distinction between the two items is not important, for the same allotment formula and other administrative provisions are applicable to both the appropriation for Part B and that for section 102(b).“

Section 102 (a) of the Act authorizes an appropriation for Part B and C, of which 90% would be available for B, basic grants, and 10% for C, research and training. However, H.R. 13111 carries "not to exceed $357,836,000" for Part B, making no mention of Part C. Whether or not the full sum must be made available to Part B, a question to which we will return, it is evident that it may be used for Part B, without any deduction for Part C.

Section 103 (a) provides that out of sums appropriated pursuant to section 102(a) the Commissioner shall reserve up to $5 million for transfer to the Secretary of Labor to finance certain studies. (This sum, we believe, can be impounded.) The remainder of the sums appropriated under section 102(a) and all sums appropriated under section 102(b) "shall be allotted among the States" under a rather complicated formula based on population in various age groups and per capita income in the States. In other respects the provisions of Parts A and B are similar to those in the Elementary and Secondary Education Act. States must file plans with the Commissioner; the Commissioner shall approve a State plan upon making the prescribed determinations, § 123 (a). The State may seek judicial review from unfavorable action by the Commissioner on the plan, § 123 (c), and a local educational agency dissatisfied with the State's action on its application may likewise obtain judicial review, § 123 (d).

Section 124 (a) provides, "The Commissioner shall pay, from the amount available to the State for grants under this part, to each State an amount equal to 50 per centum of the State and local expenditures in carrying out its State plan ***." As in Titles II and III of ESEA there is provision for reallotment of funds on the basis of the Commissioner's determination that they will not be required. However, the reallotment provision, § 102 (c), is more narrowly drawn than its counterparts in the ESEA. Funds shall be available for reallotment "on the basis of criteria established by regulation, first among programs authorized by other parts of this title within that State and then among other States, ***" (emphasis added). In view of Congress' evident concern that a State should not lose funds through the reallotment process, the argument of no vested right we suggested earlier would have less validity here.

One further point needs to be touched upon. Our analysis thus far indicates that the funds appropriated for Part B must be made available for that program. However, the appropriation reads "not to exceed $357,836,000," which implies that less may be allocated to that part. We have no explanation for this language, which is apparently deliberate. In the absence of any positive evidence that the intended effect of this language is to permit the Commissioner to allot less than the full sum in accordance with the statutory formula, we would still view these funds as not subject to impounding.

10 The reference to section 402 is puzzling since $9.25 million is specifically provided for section 402 earlier in the bill.

11 However, Part B grants are 50% matching grants, while the Commissioner has discretion to waive the matching requirement with respect to section 102(b) funds. § 124(a).

Since Part B is a 50% matching grant program, it may be that Congress anticipates that all the funds will not be used, and wishes to provide that in such event the money will be available for other purposes under the Vocational Education Act.