State of California, Department of Education v. William Bennett, Secretary of Education, U.S. Department of Education, Education Appeals Board

California petitions for review of the Secretary’s determination that it must repay approximately $2.7 million in federal grant monies paid to California to reimburse it for unemployment insurance contributions on behalf of school employees. California argues liability is barred by the statute of limitations on claims for refund of improperly expended education grants, 20 U.S.C. § 1234a(g). We deny the petition.

I

The United States Department of Education reimburses California for its costs in providing certain educational activities. In 1976 the Department realized California was making unemployment insurance contributions at a higher rate for federally-assisted programs than for other education programs. California concedes this discrimination violated the regulations requiring states treat federally-assisted education activities “equitably” and “uniformly” relative to other state education activities.

The Department informed California of the problem, but took no formal action to recover any excess unemployment insurance contributions until 1985. The over-payments resulted in reserves in the unemployment insurance fund for payment of claims from federally-assisted employees…