US SUPREME COURT DECISIONS

In earlier proceedings in this litigation, this Court, reversing the Court of Appeals' judgment, held that the Federal Government may recover misused funds from States that provided assurances that federal grants would be spent only on eligible programs under Title I of the Elementary and Secondary Education Act of 1965, which provided for grants to support compensatory education for disadvantaged children in low-income areas. Bell v. New Jersey, 461 U. S. 773. However, the Court expressly declined to address the issue whether substantive provisions of the 1978 Amendments to the Act apply retroactively for determining if Title I funds were misused in earlier years. On remand, New Jersey argued that the 1978 Amendments, which relaxed the eligibility requirements for local schools to receive Title I funds, should be applied in determining whether funds were misused during the years 1970-1972. The Court of Appeals agreed, and remanded the case to petitioner Secretary of Education to determine whether the disputed expenditures conformed to the 1978 standards.

Held: The substantive standards of the 1978 Amendments do not apply retroactively for determining if Title I funds were misused under previously made grants. Pp. 470 U. S. 638-646.

(a) The Court of Appeals' reliance -- based on language from Bradley v. Richmond School Board, 416 U. S. 696 -- on a presumption that statutory amendments apply retroactively to pending cases is inappropriate in this context. Both the nature of the obligations that arose under the Title I program and Bradley itself suggest that changes in substantive requirements for federal grants should not be presumed to operate retroactively. Moreover, practical considerations related to the administration of federal grant programs imply that obligations generally should be determined by reference to the law in effect when the grants were made. Retroactive application of changes in the substantive requirements of a federal grant program would deny both federal auditors and grant recipients fixed, predictable standards to determine if expenditures are proper. Pp. 470 U. S. 638-641.

(b) Neither the statutory language nor the legislative history indicates that Congress intended the substantive standards of the 1978 chanrobles.com-red

Page 470 U. S. 633

Amendments to apply retroactively. Both the general purpose of the 1978 Amendments to clarify and simplify provisions concerning implementation of Title I, and specific references in the statute and legislative history, suggest that the new requirements were intended to apply prospectively. Nor do changes in the Act and administrative regulations, made since 1976, support the Court of Appeals' conclusion that earlier regulations were inconsistent with Title I's policies. Pp. 470 U. S. 641-645.

(c) There is no inequity here in requiring repayment of funds that were spent contrary to the assurances provided by the State in obtaining the federal grants. Moreover, the role of a court in reviewing a determination by the Secretary of Education that funds have been misused is to judge whether the findings are supported by substantial evidence and reflect application of the proper legal standards. Where the Secretary has properly concluded that funds were misused under the legal standards in effect when the grants were made, a reviewing court has no independent authority to excuse repayment based on its view of what would be the most equitable outcome. Pp. 470 U. S. 645-646.

724 F.2d 34, reversed and remanded.

O'CONNOR, J., delivered the opinion of the Court, in which BURGER, C.J.,and BRENNAN, WHITE, BLACKMUN, and REHNQUIST, JJ., joined. STEVENS, J., filed a dissenting opinion, in which MARSHALL, J., joined, post, p. 470 U. S. 646. POWELL, J., took no part in the consideration or decision of the case.