Argument Preview: Zuni Public Sch. Dist. No. 89 v. U.S. Dept. of Educ. on 1/10

The following argument preview is by Adam Lawton, a student at Harvard Law School.

The Court will begin the next chapter in its Chevron jurisprudence on Wednesday in No. 05-1508, Zuni Public School District No. 89 v. United States Department of Education, in which it will decide whether to uphold a set of Department of Education regulations relating to the federal Impact Aid program. Ronald VanAmberg of VanAmberg, Rogers, Yepa & Abeita in Santa Fe will argue the case for the school districts. Leigh Manasevit of Brustein & Manasevit in Washington will argue for respondent New Mexico Public Education Department, and Assistant to the Solicitor General Sri Srinivasan will argue for respondent U.S. Department of Education.

Zuni arises under the Impact Aid provisions of title VIII of the Improving America’s School Act of 1994, 20 U.S.C. §§ 7701–7714. When the federal government owns a substantial amount of tax-exempt land within a school district, the school district is entitled to funds from the federal government to compensate for the lost property tax revenue. The state may not take these federal payments into consideration when determining the amount of state aid to provide to the district unless the Secretary of Education determines that the state’s aid program “equalizes expenditures for free public education” among the state’s public school districts.

Pursuant to § 7709(b), a state’s aid program is said to be equalized if the largest disparity in per-pupil revenues or expenditures among the state’s school districts is no more than 25%, calculated after disregarding the school districts whose per-pupil expenditures or revenues are above the 95th percentile or below the 5th percentile of expenditures or revenues within the state. That is, the equalization determination is made after disregarding both the top and bottom 5% of school districts.

The U.S. Department of Education (DOE) regulations implementing the Impact Aid program specify a method to be used to determine the 95th-percentile and 5th-percentile cutoffs. According to the regulations, the top and bottom 5% that must be ignored for purposes of determining equalization refer to 5% of the number of students who attend public schools throughout the state.

The petitioners, the Zuni Public School District and the Gallup-McKinley County School District, are school districts in New Mexico that receive Impact Aid payments, and the Secretary of Education certified that New Mexico’s state aid program equalized expenditures. The school districts contested the certification, arguing that § 7709(b)’s references to the 95th-percentile and 5th-percentile cutoffs should be determined based on the number of school districts within the state, rather than the number of students who are educated in those districts as the regulations provide. The certification was sustained by an administrative law judge and subsequently affirmed by a panel of the Tenth Circuit. On rehearing en banc, the panel opinion was affirmed by an equally divided court.

The school districts argue that they are entitled to additional state aid because New Mexico is not equalized under a proper reading of § 7709. In their view, the statutory and regulatory formulas for calculating the 5th and 95th percentile cutoffs are irreconcilably different, according to both their plain text and the legislative history of the 1994 act. Before the 1994 act, the Impact Aid program was run entirely by the DOE, with no statutory guidance, and the DOE calculated equalization using its attendance-based formula. The 1994 act, however, did not adopt the attendance-based formula and should therefore be read as rejecting it. Accordingly, the regulation fails Chevron’s step one and therefore cannot be a permissible administrative interpretation of the statute.

The respondents — the New Mexico State Department of Education and the U.S. DOE — argue that the Secretary of Education validly exercised the authority that was delegated to him by Congress and filled a statutory ambiguity with a regulation that merits deference under Chevron. They view the petitioners’ proposed reading, according to which the number of students in each school district is irrelevant to the determination of equalization, as contrary to the goals of the Impact Aid program — namely, to benefit students, not to benefit school districts. In addition, they view the DOE’s method of calculation as consistent with the structure of the Impact Aid scheme when read as a whole. Finally, they argue that the language of § 7709 specifically responds to a request from the DOE and should therefore be interpreted as codifying the regulatory formula that the DOE desired to implement at the time, which was the attendance-based formula. In light of these ambiguities, they argue, the DOE’s method for determining the 95th-percentile and 5th-percentile cutoffs is based on a textually plausible construction of the statute and is therefore entitled to Chevron deference.