Department of Education of the State of California v. William J. Bennett, Secretary of Education, United States Department of Education

The California State Department of Education (“California”) petitions for review of a final decision of the United States Secretary of Education (“Secretary”). The Secretary ordered California to refund a total of $1,203,139 to the United States Department of Education (“Department”). The Department had allocated these funds to California under Part B of the Education of the Handicapped Act (“EHA-B”), 20 U.S.C. § 1400 , et seq., §§ 1411-1420. The Secretary found that $1,077,870 of fiscal year 1977 and $125,269 of fiscal year 1978 funds were not obligated during the time frame prescribed by statute and must therefore be returned to the Department. We reverse the Secretary’s decision.

I. STATUTORY SCHEME

The EHA-B establishes an entitlement program providing special education and related services to handicapped children. See 20 U.S.C. § 1400 (c). Congress appropriates funds for this program annually, and the Secretary then allocates them to the states on a per capita basis. See 20 U.S.C. § 1411 (a). The state’s educational agency receives the EHA-B grant on behalf of the state. See 20 U.S.C. § 1401 (7).

The state educational agency must comply with distribution requirements in…