Federal district court in Washington state grants state’s motion for preliminary injunction barring U.S. Dep’t of ED from implementing interim final rule regarding allocation coronavirus relief funds

State of Washington v. DeVos, No. 20-1119 (W.D. Wash. Aug. 21, 2020)

Abstract: The U.S. District Court for the Western District of Washington has issued a preliminary injunction in favor of the State of Washington prohibiting the U.S. Department of Education (ED) from implementing its Interim Final Rule, which directs states to allocate special funding that allows states to handle the Coronavirus pandemic based on total enrollment in private schools. The court agreed with the state that ED’s rule “misconstrues Congress’s intent and effectively diverts emergency relief funding from economically disadvantaged public schools to less disadvantaged private schools.”

Facts/Issues: The State of Washington filed suit against ED challenging the department’s interim rule regarding the allocation of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) funds to private schools. At issue is: “[W]hether the CARES Act requires States to allocate funding to private schools using a formula based on the percentage of students from low-income families who attend private school (poverty-based formula) as advanced by the State, or whether, as Defendants claim, the CARES Act authorized the Department to issue the Interim Final Rule, which directs States to allocate that funding based on total enrollment in private schools (enrollment-based formula). 

The court stated: 

Critically for purposes of this dispute, Congress outlined how LEAs are to allocate GEER and ESSER funding to non-public, i.e. private, schools. Specifically, Section 18005 provides that an LEA receiving [GEER or ESSER] funds . . . shall provide equitable services in the same manner as provided under section 1117 of the [Elementary and Secondary School Emergency Relief Act of 1965] to students and teachers in non-public schools, as determined in consultation with representatives of non-public schools. 

The district also noted “Title I of the ESEA created a grant program designed to improve the academic achievement of disadvantaged children. Under Title I, public schools are eligible to receive funding for schoolwide programs if 40 percent or more of the children in the LEA attendance area come from low-income families.”

The court pointed out that ED “[c]laiming an ambiguity in the statute, directed LEAs to provide private schools with CARES Act funding according to the proportional share based on the number of children enrolled in each non-public school whose students or teachers participate in the CARES Act programs compared to the number of students enrolled in public schools in the LEA.”

The court said, “In other words, the Guidance adopted a formula for allocating ESF funding to private schools, based on the total number of enrolled students, regardless of their families’ income levels. This is the enrollment-based formula.” It stated: 

Based again on a claimed ambiguity in Section 18005, the Department gave LEAs two options. First, an LEA could choose to use either the enrollment-based or poverty-based formula, but only if it agreed to limit CARES Act funding to schools that are qualified to participate in the ESEA Title I grant program, and actually receive funding under that program. Alternatively, if the LEA elected to use its CARES Act funding for all schools within its attendance area, regardless of Title I participation, the Final Interim Rule required the LEA to use the enrollment-based formula in apportioning funding to private schools. 

The court reiterated the state’s argument that “this choice has the effect of increasing the proportion of CARES Act funding going to its private schools, at the expense of its public schools.” The state contends: Regardless of which option an LEA chooses, in a state like Washington in which not all Title I eligible schools participate in that program, private schools will receive a larger share of CARES Act funding than they would under a straight-forward application of Section 1117’s poverty-based formula.

The state sought injunctive and declaratory relief, including a declaration that the Interim Final Rule is contrary to law and invalid; and preliminary and permanent injunctions prohibiting its implementation, compelling the issuance of the contested CARES funding to the State without the restrictions imposed by the Interim Final Rule, and permitting the State to use the apportionment formula provided by Section 1117 of the ESEA. 

Ruling/Rationale: The district court granted the state’s motion for a preliminary injunction. It pointed out that the state had the burden of establishing: (1) likelihood of success on the merits; (2) likelihood of suffering irreparable harm in the absence of a preliminary relief; (3) that the balance of equities tips in its favor; and (4) that an injunction is in the public interest. 

Beginning with the likelihood of success on the merits, the court addressed the state’s Administrative Procedure Act (APA) claims. The first ADA claim alleges ED’s action is in excess of statutory authority and not in accordance with law. The state contends “Congress did not delegate to the Department the authority to promulgate rules under Section 18005 of the CARES Act.”  It also asserts “that Section 18005 is not ambiguous, and that the Department therefore has no implicit rulemaking authority.”

ED counters “that it had general rulemaking authority to promulgate the Interim Final Rule and that Section 18005 is ambiguous and, therefore, it had implicit authority to interpret the statute by way of the Rule.” It argues “its authority to promulgate the Interim Final Rule is grounded in the Secretary’s general rulemaking authority in 20 U.S.C. § 1221e-3 and 20 U.S.C. § 3474.”

The district court found “nothing in either the text or construction of Section 18005 of the CARES Act evidences an intent to import general rulemaking authority.” As a result, it concluded ED “did not have explicit authority either specific or general to promulgate rules under this section of the CARES Act.”

Regarding the question of whether the statute is ambiguous, It pointed out that the statute “could hardly be less ambiguous,” because “[i]n Section 18005, Congress unequivocally and plainly instructed the Department to allocate GEER and ESSER funding in the same manner as provided under section 1117 of the ESEA of 1965 to students and teachers in non-public schools.” The court added historically speaking, Congress’s reference to Section 1117 of the ESEA cannot be construed as casual or incidental; it is an explicit citation to a formula with which LEAs are well acquainted grounded as it is in one of the nation’s flagship educational programs, providing funding for some of the nation’s neediest students.”

The district court said, “Nothing in the CARES Act suggests Congress intended to differentiate between students based upon the public or non-public nature of their school with respect to eligibility for relief.” It determined that this “argument is unavailing.” It continued, “Distribution of funds under the poverty-based formula will not result in private schools receiving no ESF funding; only in receiving funding in a smaller proportion than they would under the Department-created formula.”

The court emphasized that “[a]s the CARES Act explicitly provides, one of the central uses for the ESSER Fund is to address the unique needs of low-income children or students communities.” It also pointed out “private schools have access to other sources of relief provided by Congress to which public schools do not, such as Payback Protection Program loans and benefits under the Families First Coronavirus Response Act.” It concluded that “[t]here is no tension between the two statutes, and certainly not one that creates ambiguity sufficient to sanction rulemaking.”

In addition, the district court rejected “the Interim Final Rule’s attempt to create ambiguity from the statute’s text.” It disposed of ED ambiguity argument saying, “Section 18005 contains a clear reference to the poverty-based formula found in Section 1117, which ends the Court’s inquiry.” Responding to the statute’s choice of wording, the court said, “The wording choice here simply does not create an ambiguity, or otherwise evidence Congressional intent to open up the funding process to agency rulemaking.” It added, “We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there.”

The district court pointed out that “the Interim Final Rule identifies ambiguity inclusion of consultation and public control of funds provisions in Section 18005 notwithstanding the fact that Section 1117 already contains similar provisions.” It found that this argument failed because “Section 18005’s reference to Section 1117 does not compel, as the Department argues, the importation of all of Section 1117’s requirements into Section 18005.” 

The court opined, “From the use of the word ‘equitable,’ the Department apparently discerns a congressional intent that funding for private schools should be equal or close thereto.” It pointed out “[f]unding can be equitable even if it is not equal, which is certainly the case when Congress chooses to concentrate funding on those in the most need.” 

The court said: “Based on the foregoing, the Court concludes that Congress neither explicitly, nor implicitly by ambiguity, granted the Department the authority to promulgate the Interim Final Rule. The Court finds that the Rule’s promulgation was in excess of statutory authority and not in accordance with law, and that the State, therefore, is likely to succeed on the merits of this claim.”

The district court next analyzed the state’s second ADA claim that ED’s action is arbitrary and capricious. The state claims the “Interim Final Rule runs afoul of two Constitutional principles, (1) Separation of Powers (Count IV) and (2) the Spending Clause.” The court declined to reach this question because ED “lacked authority to promulgate the Rule, the Court declines to reach this question.”

Turning to the irreparable harm requirement, the district court concluded: “But where parties cannot typically recover monetary damages flowing from their injury as is often the case in APA cases economic harm can be considered irreparable. “It agreed with the state’s argument Washington public schools, and in particular the State’s poorest public school students, are irreparably harmed by the Interim Final Rule’s diversion of CARES Act funding to private schools. The Court agrees that this potential harm is great, and irreparable.”

The court stated: “Congress, in its wisdom and without equivocation, determined that funding to schools should be distributed according to the same formula found in Section 1117 of the ESEA; to allow otherwise under the guise of a manufactured ambiguity runs counter to the APA and to Congressional intent.” It added, the school year is rapidly approaching; every day that goes by in which educators are denied access to these funds creates unnecessary risk, to both the health and education of Washington’s students.” 

Lastly, the district court concluded that the balance of the equities and the public interest favored the state’s motion.

[Editor’s Note: In July 2020, Legal Clips summarized an article in Education Week reporting that the NAACP and a number of school districts had filed suit against the COVID-19 rule, which was issued nearly a month ago from U.S. Secretary of Education Betsy DeVos, that provides for federal funding for private schools. The State of Washington has also filed a suit challenging the U.S. Department of Education rule, which provides local school districts two choices about how they distribute that aid—the way the two choices are structured essentially incentivizes districts to set aside a share of federal relief to benefit all local private school students.   

Both legal challenges to the rule, which covers a part of the CARES Act known as equitable services, come on the heels of a July 7 lawsuit originally filed by five states and the District of Columbia. All three suits are seeking a preliminary injunction to immediately halt DeVos’ ability to enforce the rule while the case is considered. The dispute over how much virus aid should go to private school students has underscored years-long divisions in the education community and deepened political ill-will as the K-12 community has tried to address the coronavirus pandemic.]  

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