Maryland and Virginia could be forced to pay back millions of dollars in federal aid for poor schoolchildren if the U.S. Supreme Court upholds efforts by the Reagan administration to reclaim federal money it says the states misspent.
The U.S. Department of Education, arguing before the Supreme Court last month, is trying to force Pennsylvania and New Jersey to repay a total of $1.4 million that was funneled to the states in the 1970's under Title I--the largest federal grant program for elementary and secondary schoolchildren.
The court's ruling on the Pennsylvania and New Jersey cases, expected later this spring, has serious financial implications for Maryland and Virginia, which are among 25 states cited by the agency for failing to comply with Title I spending requirements prior to 1978.
If the court decides in favor of the federal government, Maryland could be forced to pay back as much as $11 million, one of the highest sums in the nation.
Federal auditors say Maryland spent its funds between 1974 and 1978 on children who were not eligible for Title I and for programs that were not allowed under Title 1 regulations. Virginia, cited for similar irregularities between 1977 and 1979, could have to pay the government as much as $3.3 million.
Lawyers for the federal government say the Department of Education is simply trying to collect money that was misspent by the states as a way of ensuring that future funds are directed to the poor children for whom the money was originally intended.
"It's not like we want to spend the money on an MX missile," said a government attorney. "The fact is the states misused the money and we want to reapply the funds to the states for children it was designed to assist."
The attorney said about 75 percent of the money collected from states would be recycled back to them, but not necessarily in the same amounts, if the court rules in favor of the government.
Maryland Attorney General Stephen H. Sachs and the state's top education officials have argued that Maryland spent its funds properly and that confusion arose only because complex new Title I regulations that came out in the mid-1970s were vague and unclear.
"All the money at issue was spent for poor kids and none of it was spent fraudulently," says Gus Crenson, a spokesman for the Maryland Board of Education. "We are proud of the way we have used Title I money. Everybody agrees that the money was spent for poor schoolchildren."
The Title I program began in 1965 as one of the reform programs of the Great Society and was specifically designed to help children from poor and educationally deprived backgrounds. In its earliest years, program abuses were common and, as a result, Congress imposed strict regulations that defined more specifically how states could use Title I money.
Ironically, in its attempt to recoup the funds, the federal department is arguing that states violated regulations that the Reagan administration tried to weaken or abolish after the president took office in 1981. Congress did not agree to the extensive overhaul that Reagan proposed for Title I as part of his promise to reduce the federal role in education, but it made some dramatic changes and renamed the program Chapter 1.
Democrats and liberals have charged that the administration and the Republican-controlled Congress weakened key provisions and added loopholes that now make it more difficult to ensure that funds are targeted for the poor and disadvantaged.
"Many of the things they say are improper spending by the states would not even be subject to an audit under current law," said a Democratic congressional aide. "It's a real irony."
"It's very interesting that they do not enforce anything--not any civil rights violations--but when it comes to money it's a different story," said Margaret Lorber of the Children's Defense Fund.
Twenty-two states, led by Maryland, have filed a brief in the Supreme Court challenging the government's claims that the education secretary has the right to reclaim money spent prior to 1978.
Funds misspent after 1978 are not at issue because in that year Congress gave the secretary of education authority to reclaim federal money that states used incorrectly, although the method for recouping funds was restricted again somewhat in 1981.
The Maryland brief says the government is trying to give the secretary "a far broader and more intrusive" set of powers than he is entitled to. This argument hits at the heart of Reagan's philosophy of federalism, which included a pledge to abolish the Department of Education and to return education issues to state and local control.
Fiscally strapped states also are worried that they may be forced to raise taxes or eliminate services to repay the money if the government wins its case.
Government lawyers told the Supreme Court that the states' failure to spend the money properly amounts to "a breach of contract" and entitles the Department of Education to repayment.
The federal government says that Maryland misspent $7.5 million and Virginia $1.8 million under a regulation known as "comparability," which means there must be comparable services and salaries at all schools, whether or not they are receiving Title I funds.
The government's audit also said that Maryland violated Title I regulations by spending $3.4 million on the general school population, instead of only on disadvantaged children, and for extra programs that are not supposed to be offered under Title 1. Virginia spent $1.6 million on students not entitled to Title 1 funds, according to the government audit.
Under the present Chapter 1, the federal government allocates funds to state education agencies which, in turn, distribute the money to local school districts. Federal officials say the government spends $3 billion annually on the program and about 90 percent of the nation's school districts receive some Chapter 1 funds.
Maryland received $47 million under the program in 1981. More than half of the state's Chapter 1 students live in Baltimore City.