Fiscal Year 2023 Show Cause filing
Summary
This is a letter titled Fiscal Year 2023 Show Cause filing, dated September 30, 2024, from the Alaska Department of Law, Civil Division to Adam Schott, Principal Deputy Assistant Secretary at the Office of Elementary and Secondary Education (OESE), United States Department of Education. The letter states that the State of Alaska submits it to explain why OESE should not suspend Alaska's authority to obligate fiscal year (FY) 2023 American Rescue Plan ESSER grant funds, and says the State is asking OESE not to suspend authority to obligate $5,556,632. It asserts that a suspension would be unlawful and that OESE did not respond to information requests made by the Alaska Department of Education and Early Development on August 15. The background section describes the maintenance of equity (MOEquity) provision of the American Rescue Plan and the State's criticisms of OESE's guidance.
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“Fiscal Year 2023 Show Cause filing.”
Original at www.ed.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/department-of-education-9-30-2024-alaska-www-ed-gov-6b40c1314d-9a3d21b52e/
, SHA-256 83bf3a0ebe226721d815477ce1138bdca401d1e79b7d2ac76054ca02ce17fb1a.Full text
Department of Law
CIVIL DIVISION
1031 West 4th Avenue, Suite 200
Anchorage, AK 99501
Main: 907.269.5100
Fax: 907.276.3697
September 30, 2024
VIA EMAIL: Alaska.OESE@ed.gov
Adam Schott
Principal Deputy Assistant Secretary
Office of Elementary and Secondary Education
United States Department of Education
400 Maryland Avenue, SW
Washington, D.C. 20202
Re: Fiscal Year 2023 Show Cause filing
Dear Mr. Schott:
The State of Alaska submits this show cause letter to explain why the Office of
Elementary and Secondary Education (“OESE”) should not suspend Alaska’s authority to
obligate fiscal year (FY) 2023 American Rescue Plan (“ARP”) ESSER grant funds. In
our previous filing, regarding FY22, we presented a comprehensive legal and factual
explanation as to why a FY22 suspension would be improper. Unfortunately, OESE
rejected Alaska’s request. Here, we again set forth the legal and factual reasons why a
suspension is not warranted as a matter of fairness and equity and why a suspension
would be unlawful.
As we noted previously, the COVID-19 pandemic disrupted the education of
American children and required all levels of government to respond quickly to novel and
complex challenges. To meet its obligation to the children of Alaska, our State
government moved quickly to direct available federal aid in the most effective and
efficient way possible. This included the acceptance of ARP funds, despite federal
guidance not yet being available.
Now, years later, the State is asking OESE not to suspend Alaska’s authority to
obligate $5,556,632 of ARP ESSER grant funds for FY23. When Congress passed the
ARP, the clear purpose was to assist the states in meeting the urgent needs of the nation’s
school children during a national emergency. Suspending the ability to obligate funds
earmarked for this purpose would be inconsistent with that intent. And, for the reasons
Mr. Adam Schott, OESE September 30, 2024
Re: FY23 Show Cause filing Page 2 of 12
explained below, such a suspension would not be a reasonable response to a good-faith
dispute about how to interpret a first-of-its-kind grant condition.
Additionally, in relation to FY23, we request your consideration of how the Alaska
Department of Education and Early Development (“DEED”) made specific informational
requests to OESE on August 15, including “a full explanation of all calculations used to
arrive at the amount the Department states that Alaska owes to four school districts.”
DEED further requested that OESE confirm that the amounts currently demanded are the
final amounts that OESE believes DEED owes four districts. DEED also set out its
interpretation of ARP § 2004 and provided necessary information on Alaska’s
government appropriations procedures. OESE did not respond to DEED’s requests for
information and, instead, claimed that it had never received the August 15 letter. Even
after the State provided an additional letter pointing out that OESE had, in fact, received
DEED’s correspondence, OESE still did not respond. This course of conduct, if not
corrected, would be arbitrary and capricious on its face. A suspension in these
circumstances would clearly be improper. OESE has an obligation to issue a good-faith
response to Alaska’s requests for information prior to taking any enforcement action,
including suspending DEED’s authority to obligate funds.
I. BACKGROUND
In March 2021, Congress enacted ARP and provided $122 billion in education
funding for the states. The bill included a novel maintenance of equity (“MOEquity”)
provision intended to ensure that if a state cuts education spending, school districts with
higher proportions of low-income students would not receive a disproportionate budget
reduction. OESE issued its first guidance regarding the MOEquity requirements in June
2021, after the funds had already been disbursed. OESE revised that guidance
periodically between late summer 2021 and early 2023. During that time, OESE also
apparently provided unpublished and informal compliance guidance to states. 1
In its guidance, OESE interpreted the MOEquity provision in a way that even if a
state did not make statewide reductions in education spending, the state could still be in
violation of the provision. This analysis came as a surprise to many, including the State of
Alaska. 2 The timing and contents of that guidance also led legal scholars to question
whether it was enforceable. 3 Thus, those scholars opined that where OESE sought to
1
Summary of the Implementation of the Federal “Maintenance of Equity”
Provision, Austin Reed, April 3, 2024, presentation to the Alaska Senate Education
Committee. https://www.akleg.gov/basis/get_documents.asp?session=33&docid=32764.
2
Id.
3
See Kimberly Jenkins Robinson, Strengthening the Federal Approach to
Educational Equity During the Pandemic, 59 Harv. J. on Legis. 35, 71 (2022)
(“Enforcement of the Maintenance of Equity conditions also is unlikely because the
Mr. Adam Schott, OESE September 30, 2024
Re: FY23 Show Cause filing Page 3 of 12
enforce their guidance, it should focus on where the students were hit hardest by the
pandemic, which in Alaska would not be the large urban districts where the students
voluntarily chose to enter into the available and robust correspondence programs. 4
Another surprising outcome of the guidance is that it produced a formula that actively
penalized the most equitable states, while lowering the burden on states with high
inequity. 5 Consequently, Alaska, which has high and widely recognized equity in its
funding, was placed under a microscope for the funding provided to some of its wealthier
urban districts. 6
In sum, OESE’s guidance stated that it would make its own analysis and
calculations regarding state education funding and then determine whether a state had
complied with the provision. This analysis applied even where states continued to fund
education pursuant to their statutory formulas, without change, throughout the pandemic.
Because of this interpretation “it became very difficult, if not impossible, for legislatures
to know during the budget process whether or not they would ultimately be in compliance
with the Maintenance of Equity provision and take appropriate action to ensure
compliance” because “compliance would ultimately become a retrospective assessment
that could only be made after a state funded its education budget. . .” 7
Department's guidance on this issue was issued in June 2021 and the requirement for
Maintenance of Equity applies to the 2021-2022 and 2022-2023 school years.”);
4
See Robinson, supra note 3 at 94 (“The USDOE should be mindful of the
shortcomings in the Maintenance of Equity conditions and tailor enforcement efforts on
states and districts where enforcement would best serve the students hardest hit by the
pandemic.”).
5
See David Gartner, The Federal Role in School Funding Equity, 109 Va. L. Rev.
Online 35, 47 (2023) (The maintenance of equity requirements “lowers the burden on
states with greater inequities.”).
6
Farrie, Danielle Ph.D., Kim, Robert, Sciarra, David G., Making the Grade 2019,
How Fair is School Funding in Your State, Education Law Center (2019)
www.edlawcenter.org, at p. 1 (Last visited April 1, 2024) (assigning Alaska an “A” for
funding level and funding distribution and a “B” for funding effort); see also Baker,
Bruce D., DiCarlo, Matthew, Weber, Mark. The Adequacy and Fairness of State School
Finance Systems, Albert Shanker Institute, University of Miami School of Education and
Human Development, and Rutgers Graduate School of Education (2024),
https://www.schoolfinancedata.org/wp-
content/uploads/2024/02/SFID2024_annualreport.pdf, at p. 20. (Last visited April 1,
2024) (ranking Alaska second in the nation for 2021 state and local K-12 funding, based
on statewide adequacy, fiscal effort, and equal opportunity).
7
Reed, supra note 1 (cleaned up).
Mr. Adam Schott, OESE September 30, 2024
Re: FY23 Show Cause filing Page 4 of 12
As with FY22, the Alaska legislature passed an FY23 budget where the State
continued to fund education by its statutory per-pupil funding formula. This formula is
based on State Constitutional requirements and court decisions. 8 In those decisions,
Alaska courts have applied its Education 9 and Equal Protection Clauses 10 to ensure that
the State’s education funding system is fair in its distribution of state funds. This equity is
extremely important in Alaska due to its widely dispersed rural and remote communities,
which face unique geographical challenges and that are often primarily populated by the
State’s Alaska Native children. 11
Also, like FY22, for FY23 OESE made a series of changing demands for Alaska to
come into compliance. For example, on March 27, 2024, OESE claimed that DEED owed
the Juneau Borough School District (“JBSD”) $204,309; the Anchorage School District
(“ASD”) $1,391,681; the Kenai Peninsula Borough School District (“KPBSD”)
$2,494,871, and the Fairbanks North Star Borough School District (“FNSBSD”)
$3,097,911—with a demand for immediate action from DEED. But, less than a month
later, OESE amended those numbers to $90,148 for JBSD; $215,187 for ASD;
$2,494,871 for KPBSD; and $2,756,426 for FNSBSD. OESE never fully explained how
it calculated these numbers or why the numbers changed.
II. ARGUMENT
a. Suspending Alaska’s FY23 funds would harm the public interest.
If OESE decides to suspend Alaska’s ability to obligate grant funds, that decision
would be contrary to the intent of the ARP relief program and not serve the public
8
AS 14.17.470. The State increased its base student allocation (“BSA”) for per-
pupil spending to districts from $5,930 to $5,960, effective July 1, 2023.
9
Alaska Const., art. VII, Sec. 1.
10
Id. at art. I, Sec. 1.
11
For example, the Alaska Superior Court found that the method of funding school
construction projects violated the State Constitution’s equal protection and education
clauses and Title VI of the Civil Rights Act because it discriminated against rural school
children. Kasayulie v. State 3AN-97-3782 CI, 1999 WL 34793400 (Alaska Superior
Court, September 1, 1999). The Alaska Legislature acted to correct these deficiencies in
funding. The Alaska Supreme Court has stated that the school funding formula
established by the Legislature “is intended to equalize districts by providing them with
needed resources, taking into account differences among districts.” State v. Ketchikan
Gateway Borough, 366 P.3d 86, 88 (Alaska 2016). Notably, the Supreme Court has stated
that state legislatures are entitled to deference over how they raise and distribute state
revenues for local purposes. San Antonio Local School District v. Rodriguez, 411 U.S. 1,
40 (1973).
Mr. Adam Schott, OESE September 30, 2024
Re: FY23 Show Cause filing Page 5 of 12
interest. Congress’s intent in passing the education funding was to assist the states in
meeting the urgent needs of the nation’s school children during a national emergency.
Suspending the ability to obligate funds earmarked for this purpose would be
inconsistent with that intent. No question has been raised that the funds have not and
would not continue to be spent for the purpose intended by Congress. Moreover, it is not
a reasonable action for a federal agency to take in response to a good-faith dispute with a
sovereign state about how to interpret a first-of-its-kind grant condition included in
federal legislation. Alaska has clearly and consistently set forth a reasonable
interpretation of the ARP. The controlling legislation here forbids states from accepting
federal funds and then reducing education funding because of those funds. Because no
one has argued that Alaska has acted in this way, it would be unreasonable for OESE to
suspend Alaska’s authority to obligate funds. On the contrary, Alaska distributed state
funding as it was required to do under state law.
b. Alaska complied with the plain meaning and purpose of the MOEquity
provision.
The controlling statute here, PL 117-2 § 2004(b), is short and simple. 12 For high-
needs LEAs, a state may not reduce per-pupil funding by “an amount that exceeds the
overall per-pupil reduction in State funds. . .” 13 For the highest poverty LEAs, a state
may not reduce per-pupil funding, “below the level of funding (as calculated on a per-
pupil basis) provided to each such local educational agency in fiscal year 2019.” 14 Thus,
where state funding to LEAs on a per-pupil basis remains constant, a state should not fail
this test under a plain reading of the statute. Alaska is one of those states.
When Congress enacted § 2004, it wanted to ensure that states would not
disproportionately decrease per-pupil funding to the districts most in need. This demand
for educational equity has long been enshrined in Alaska law as demonstrated by the fact
that Alaska law does not reduce per-pupil funding to any district from year-to-year. 15
And, in fact, Alaska did not reduce its per-pupil funding amount between FY19 and
FY23. Thus, all school districts—including the ones identified by OESE—received the
same per-pupil funding in FY23 that they received in FYs 19-22.
Under Alaska’s education funding statutes, each LEA receives state funds based
on the number of enrolled students. The amount that an LEA receives per student may
differ from another LEA based on a variety of factors, however, each individual district is
12
Public Law 117-2, § 2004;135 STAT. 24-25.
13
Id.
14
Id.
15
AK LEGIS 15 (2014), 2014 Alaska Laws Ch. 15 at Sec. 28 (H.B. 278).
Mr. Adam Schott, OESE September 30, 2024
Re: FY23 Show Cause filing Page 6 of 12
subject to the same general funding modifiers from year to year. 16 This is especially true
for the districts in question here, considering that these districts are urban by Alaska
standards. Regardless of the specifics, the most important undisputed fact is that each
district receives funding based on a statutory formula that awards those funds on a set
per-pupil basis. This funding structure, by its very nature, would lead a reasonable person
to believe that a state such as Alaska would automatically satisfy Congress’s MOEquity
requirement, so long as the per-pupil funding amount was not decreased (here it remained
constant) and high need/poverty districts did not experience a change in their statutory
funding modifiers (which did not happen here).
Outside of a plain reading on the controlling law, OESE also failed to follow its
own guidance in its determination. As we have previously explained, OESE’s continued
denial of Alaska excluding its hold harmless funding from its calculation is averse to both
the law and solid policy.
During the pandemic students left their traditional schools to attend
correspondence schools. This shift caused the traditional schools to lose large numbers of
students. Even with ARP funds, this shift could have devastated the brick-and-mortar
schools but, fortunately for the LEAs, Alaska school funding law had in place a
mechanism that ensures that mass student migration did not immediately cause school
closures or significant losses in funding.
The hold harmless statute, codified at AS 14.17.410(b)(1)(E), helps alleviate the
burden to districts that lose more than 5 percent of their average daily membership from
one school year to the next. Under that statute, in the first year following a decrease in
student population, that district is still eligible to receive “75 percent of the difference in
the district’s ADM adjusted for school size between the base fiscal year and the first
fiscal year after the base fiscal year.” If the district’s population does not return following
that year, then the district may only receive “50 percent of the difference in the district’s
ADM adjusted for school size between the base fiscal year and the second fiscal year
after the base fiscal year.” The number further decreases to 25 percent for the third year,
and then nothing for any following years. Of course, this statute stops being operational
if, for example, the district’s student population returns due to a global pandemic
ending. 17 But, make no mistake, this is not “per-pupil” funding; this is specialized
funding to help ensure that districts do not experience an abrupt and unexpected change
in funding from one year to the next due to unforeseen factors.
Essentially, Alaska’s hold harmless statute permitted the State to fund imaginary
students for a limited time following a period of mass student migration. This funding
16
By general, we mean modifiers based on size and location. This is different than
modifiers based on factors such as special education modifiers.
17
AS 14.17.410(f).
Mr. Adam Schott, OESE September 30, 2024
Re: FY23 Show Cause filing Page 7 of 12
mechanism was necessary to assist districts in navigating the pandemic. However, it
would be unsustainable and illogical for the State to continue to fund these imaginary
students into perpetuity, thus why the statute has a decreasing amount awarded per year.
It is also why the statute halts hold harmless funding where the students return to school.
OESE rejected DEED’s request to remove hold harmless funding from its
calculations. This stance is not based in the law, or even OESE’s own guidance. Congress
did not state that hold harmless funding must be included in any analysis of state funding
for education. Instead, Congress was pragmatic. Congress wanted to assist the SEAs and
LEAs in navigating through, and emerging from, a global pandemic without injuring
those students who are most at need. 18 Unfortunately, it appears that OESE has lost track
of that guiding principle.
OESE’s guidance reasonably supports the conclusion that DEED should have been
permitted to exclude hold harmless funding from its calculation. OESE’s FAQ 17 states
that “[a]n SEA may determine that some current expenditures, however, are not
appropriate for MOEquity determinations. For example, if, in addition to allocating funds
under a State’s primary funding formula, the State reimburses an LEA for specific
expenses. . . such State funds may, by necessity, vary by LEA annually. . .” The same
answer goes on to say that OESE is looking to “guaranteed” funding to the LEAs, not
special funding, thus “if a State can document a one-time appropriation for a specific
purpose. . . then those funds may be excluded from MOEquity calculations.”
In OESE’s April 11 letter, it stated that Alaska’s hold harmless funding must be
included in its MOEquity equation because “Alaska’s hold harmless funding. . . [does]
not meet this definition of one-time funding because [it] impact[s] LEA across multiple
fiscal years.” But this is simply not true. While hold harmless funding could impact an
LEA for more than one year, that impact is not guaranteed since whether a school
receives this funding, and the amount of the funding, is based on the dynamic variable of
student attendance. Moreover, OESE’s explanation is not only at odds with the reality of
the situation; it is also at odds with OESE’s own guidance. First, in line with OESE’s
guidance DEED, an SEA, is informing OESE that hold harmless funds “are not
appropriate for MOEquity determinations.” When making this assertion, it is not only
OESE’s guidance that makes clear that Alaska is entitled to deference on its
determination of what funds should be included in Alaska’s MOEquity calculation. The
18
See, e.g., H.R. 1319 – American Rescue Plan Act of 2021, Congress.gov
https://www.congress.gov/bill/117th-congress/house-
bill/1319#:~:text=The%20program%20provides%20grants%20to,or%20financial%20har
dship%20are%20eligible (last visited August 14, 2014).
Mr. Adam Schott, OESE September 30, 2024
Re: FY23 Show Cause filing Page 8 of 12
USDOE, relying on Supreme Court precedent, has also found that deference is owed to a
State’s “characterization of funds raised. . . pursuant to the State’s own statutes.” 19
Moreover, OESE has stated that its focus is on guaranteed funding. Hold harmless
funding is far from guaranteed. As noted earlier, if students came back to school
following a global pandemic, hold harmless funding would cease. But if those students
did not come back, a different amount of funding would be allocated to the district in its
second year of decreased ADM to help offset any harm to the district. During and
following the pandemic it was impossible to guarantee whether the grocery store would
have food on the shelves next week (at least in Alaska), much less for any LEA to guess
whether it would receive hold harmless funding for the following year. Despite the
tumultuous nature of that period, OESE so far has claimed that hold harmless funds fall
into the category of “guaranteed” funds. This is factually and legally incorrect, in conflict
with OESE’s own guidance, and in any event is such a close and debatable proposition
that it cannot serve as a reasonable basis to conclude that Alaska failed to reasonably
comply with the MOEquity provision.
In sum, OESE’s guidance is ambiguous in a manner that would create surprise for
any SEA that has already accepted and utilized ARP funds. A plain reading of the statute
and guidance would lead any reader to a clear conclusion: a state that does not decrease
any per-pupil funding will be in compliance with the MOEquity provision and if that
state decides to award special funding to an LEA to help the LEA during that pandemic,
that funding will be excluded from MOEquity requirements. Here, Alaska followed its
statutory per-pupil school funding law and funded all district pursuant to that formula for
FY23. Because the per-pupil funding in these districts did not decrease, Alaska complied
with any reasonable interpretation of the MOEquity provision. 20
c. OESE’s interpretation is unconstitutional.
As noted above, OESE released its first round of guidance three months after ARP
funds were disbursed. In that guidance, OESE recognized that “some States may have
already completed their appropriation process for FY 2022 before MOEquity provisions
19
In the matter of Wyoming Department of Education, IDEA Proceeding, No. 22-38-
O, at 12 (April 17, 2023) https://oha.ed.gov/oha/files/2023/04/2022-38-O.pdf (last visited
August 13, 2024), affirmed by In the matter of Wyoming Department of Education, IDEA
Determination, No. 22-38-O, at 7 (June 23, 2023)
https://oha.ed.gov/oha/files/2023/06/2022-38-O-S.pdf (last visited August 13, 2024).
20
Alaska’s reasonable interpretation of the MOEquity provision and any alternative
interpretation of the law offered by OESE will be considered by the courts in accordance
with the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo. ___
U.S. ___, 144 S. Ct. 2244 (2024), overruling Chevron, U.S.A., Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837 (1984).
Mr. Adam Schott, OESE September 30, 2024
Re: FY23 Show Cause filing Page 9 of 12
were enacted.” 21 Despite that recognition, OESE emphasized that “no State should delay
awarding and allocating ARP ESSER funds to its LEAs until local MOEquity data are
available. . . To the contrary. . . funds should be allocated to LEAs expeditiously as their
availability is essential. . .” 22
Essentially, OESE told the states to spend ARP money despite no state being
aware of what strings may be attached to that money. OESE then proceeded to create a
complex formula of strings that were completely unforeseeable. This course of action has
led legal scholars to question the enforceability of those strings. 23 This is based on the
simple fact that after-the-fact unforeseen grant conditions are unconstitutional.
As DEED has previously pointed out, the federal government may place some
conditions on a state’s acceptance of federal funds. 24 But the Supreme Court has made
clear that this ability “does not include surprising participating States with post-
acceptance or retroactive conditions” and that “if Congress intends to impose a condition
on the grant of federal moneys it must do so unambiguously.” 25 In Pennhurst State
School and Hospital v. Haldernan 26 the Court ruled in favor of Pennsylvania in a suit
regarding a federal grant which was subject to conditions that the state contended were
ambiguous. Similarly, in National Federation of Independent Businesses v. Sebelius 27 the
Supreme Court determined that the Medicaid expansion provisions of the Affordable
Care Act went beyond what the states would have expected when they had agreed to
participate in Medicaid and accept federal funds. Further, in the context of ARP the
Eleventh Circuit ruled last year that a condition placed on states’ receipt of federal grant
money that sought to restrict states’ taxation authority (an offset condition) violated the
Spending Clause because of its ambiguity. 28
Moreover, as noted above, Alaska’s equalized education funding formula has been
set by the Alaska Legislature and is based on two State Constitutional requirements: that
the Legislature “establish and maintain” a system of education 29 and that all Alaskans,
21
MOEquity FAQ at question 8.
22
Id.
23
See Robinson, supra note 3; see also See Gartner, supra note 5.
24
See South Dakota v. Dole, 483 U.S. 203 (1987).
25
Id. at 20; 25.
26
451 U.S. 1 (1981).
27
567 U.S. 519, 132 (2012).
28
West Virginia v. U.S. Department of the Treasury, 59 F.4th 1124 (11th Cir. 2023).
29
Alaska Const. art. VII, § 1.
Mr. Adam Schott, OESE September 30, 2024
Re: FY23 Show Cause filing Page 10 of 12
urban and rural, are entitled to equal protection under Alaska law. 30 Given the fact that
school funding in Alaska is carefully constructed to meet these state conditions and legal
requirements, it is important to recognize that the Supreme Court has warned that
conditions placed on federal grants to states should not be used to effectively coerce a
state into adopting the federal government’s position on how a state program should be
implemented. For example, Chief Justice Roberts warned in Sebelius that:
[r]especting this limitation [on the federal government’s authority under the
Spending Clause] is critical to ensuring that Spending Clause legislation does
not undermine the status of the States as independent sovereigns in our
federal system. . . Otherwise the two-government system established by the
Framers would give way to a system that vests power in one central
government and individual liberty would suffer. 31
The MOEquity provision here was a first-of-its-kind provision not previously
attached to federal education grant funding. If the plain language and intent of the bill is
not applied and instead MOEquity is considered an ambiguous provision, Alaska should
not be penalized by requiring it to expend substantial additional funds in a manner that is
contrary to its established equitable funding system. A requirement otherwise would be
unconstitutional. In particular here, if the State had managed to understand and comply
with the current articulation by OESE of the MOEquity provision, this would have
required the legislature to not distribute money under the statutorily required state
funding formula but rather to have changed the distribution to give more money to four
urban districts—resulting in less money to other school districts. Since there would have
been no way to know Alaska had to change its statutory funding formula, there would
have been no way to avoid being in the position we are now, with OESE demanding
retroactive payments to some districts, while creating inequity with other districts.
When OESE released its guidance, the results were surprising. Section 2004 of the
APR appeared to only apply where the state cuts its education budget. 32 However, OESE
interpreted the statute differently. Thus, “the conditions of compliance were not all clearly
known to legislatures when they agreed to accept these federal funds. . .” 33 Because
OESE’s statutory interpretation would amount to an after-the-fact policy driven
amendment to the plain reading of § 2004, it cannot be applied to Alaska. Moreover, as
noted above, the Supreme Court has made clear that conditions placed on federal grants
30
Id. at art. I, § 1.
31
567 U.S. at 577.
32
Public Law 117-2, § 2004; 135 STAT. 24-25; Reed, supra note 1.
33
Reed, supra note 1.
Mr. Adam Schott, OESE September 30, 2024
Re: FY23 Show Cause filing Page 11 of 12
to states cannot be used to commandeer or effectively coerce a state into adopting the
federal government’s opinion about how a state program should be implemented. 34
d. OESE ignored good-faith questions raised by DEED
When a government agency enforces a statute, its enforcement must not be
arbitrary or capricious. An action may be arbitrary or capricious where the agency
“entirely failed to consider an important aspect of the problem.” 35 That is what happened
here where OESE failed to acknowledge various aspects of the problem that DEED
raised in previous correspondence.
In its August 15 letter, DEED made various informational requests to OESE. First,
DEED asked OESE for “a full explanation of all calculations used to arrive at the amount
the Department states that Alaska owes to four school districts.” Second, DEED
requested that OESE confirm that the amounts currently demanded are the final amounts
that OESE believes DEED to owe the four districts. Third, DEED provided a well-
reasoned argument regarding its interpretation of § 2004. Finally, DEED provided
necessary information on Alaska’s government appropriations procedures.
Despite having received all this information, OESE did not respond and instead
claimed that it had never received the letter. Even when the State provided an additional
letter pointing out that OESE had, in fact, received DEED’s previous correspondence,
OESE did not respond.
OESE’s failure to respond to DEED’s letter and the good-faith issues raised in that
letter is arbitrary and capricious on its face. Thus, OESE has an obligation to issue a
good-faith response, with legal citations and calculations, prior to taking any enforcement
action, including suspending DEED’s authority to obligate funds.
III. CONCLUSION
Alaska’s interpretation of the first-of-its-kind equity provision is reasonable. The
State did not decrease per-pupil funding for any school districts and followed its statutory
formula. In these circumstances, it would not be consistent with the public interest or
Congress’s intent to block funds earmarked for education. Moreover, it would be an
arbitrary and capricious action given the agency’s failure to respond to Alaska’s requests
for an explanation of how OESE came to its conclusions regarding FY23. And such an
action would amount to an unconstitutional effort to leverage a federal agency’s spending
power to enforce its vision of how a core state program should be conducted by a
34
Sebelius, 567 U.S. at 577.
35
Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43, 103 S. Ct. 2856, 2867, 77 L. Ed. 2d 443 (1983).
Mr. Adam Schott, OESE September 30, 2024
Re: FY23 Show Cause filing Page 12 of 12
sovereign state. For these reasons, we urge OESE not to suspend Alaska’s authority to
obligate funds during the pendency of any litigation.
Sincerely,
TREG TAYLOR
ATTORNEY GENERAL
By:
Ryan T. Bravo (1511091)
William E. Milks (0411094)
Assistant Attorneys General
Department of Law
1031 West Fourth Avenue
Anchorage, Alaska 99501
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