Federal court halts U.S. Department of Education's rule on distributing coronavirus aid relief to private schools

By Marshall W. Grate
Clark Hill

On August 21, a federal court for the Western District of Washington at Seattle granted the State of Washington’s motion for a preliminary injunction to prevent the U.S. Department of Education (the “Department”) from implementing an interim final rule on distributing Coronavirus aid relief to private schools.

The Department’s rule diverted CARES Act emergency relief funding from disadvantaged public schools to less disadvantaged private schools.

On July 1, the Department issued a Rule that gave local education agencies (LEAs) the option to use its CARES Act funding for all schools within its attendance of area, regardless of Title I participation. See CARES Act Programs; Equitable Services to Students and Teachers in Non-Public Schools, 85 Fed. Reg. 39,47934 (codified as C.F.R. § 76.665).

This option required the LEA to allocate funding to private schools based on the total number of enrolled students, regardless of their families’ income. 34 C.F.R. Section 76.665(c). As the Court noted, this is known as the “enrollment-based” formula.

The Court agreed with the State of Washington that the enrollment-based formula option would result in a disproportionate amount of CARES Act funds going to private schools at the expense of public schools.

In reaching its decision, the Court first looked to the text of the CARES Act. Section 18005 of the CARES Act provides that an LEA “receiving funds. . . shall provide equitable services in the same manner as provided under section 1117 of the Elementary and Secondary Education Act of 1965 to students and teachers in non-public schools, as determined in consultation with representatives of non-public schools.” CARES Act, Section 18005(a). Under Section 1117, the amount of funding a private school may receive under Title I is “equal to the proportion of funds allocated to participating school attendance areas based on the number of children from low-income families who attend private schools.” 20 U.S.C. § 6320(a)(4)(A)(i). As the Court observed, it is well-established that this provision is interpreted to mean that LEAs are to share their Title I funding proportionally by the number of students from low-income families that reside in their attendance area but who attend private school – traditionally known as the “poverty-based” formula.

In granting the State of Washington’s motion for a preliminary injunction, the Court rejected all the Department’s legal arguments. The Court found that the CARES Act did not give the Department the authority to create an enrollment-based rule. The CARES Act legislation did not delegate rule-making authority to the Department.

The Court was especially unimpressed by the Department’s argument that an ambiguity existed in Congressional intent over the distribution of the CARES Act fund. The Court found that Section 18005 of the CARES Act plainly and expressly instructed the Department to allocate funding in the same manner as Section 1117 of the Elementary and Secondary Education Act (ESEA) to students and teachers in non-public schools.

The Court found that the Department’s enrollment-based formula caused great and irreparable harm to public schools. 

In a rebuke of the Department, the Court referred to the Department’s claim that the State of Washington only faces economic injury as a result of this Rule as “remarkably callous, and blind to the realities of this extraordinary pandemic and the very purpose of the CARES Act: to provide emergency relief where it is most needed.”

As a result of the Court granting a preliminary injunction in favor of the State of Washington, the United States Department of Education is preliminarily enjoined from enforcing this Rule.  The State of Michigan, along with several other states, filed a similar legal action in the United States District Court for the Northern District of California, which has yet to issue a ruling.  However, the Washington State decision is probably a reliable indicator of the likely outcome of the Michigan case.

In further news, on August 26, the United States District Court for the Northern District of California followed the United States District Court for the Western District of Washington at Seattle and temporarily halted the enforcement of the U.S. Department of Education’s (the Department) interim final rule on distributing Coronavirus aid relief to private schools. As explained more fully in a previous alert, this Rule diverted CARES Act funds from public schools to private schools.

The California Court was highly critical of the Department’s interpretation of the CARES Act. The Court found that the Department's interpretation of Section 18005 went against Congress' intent to distribute funds to private schools.

The Court also discussed the enormous harm that many public schools throughout the nation would face if the rule were to stay in-place.

For example, Michigan’s public schools would lose $16,496,727.63 of federal funding to private schools. While the Court noted the public interest of private schools receiving CARES Act funds, the Department could not legally rewrite the formula for distributing funds.