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The Fifth Circuit heard oral argument this week in a case that could cost Texas more than $33 million in federal money meant to serve students with disabilities.  On January 17, 2017, the United States Department of Education (“Department”) issued a proposed determination that the Texas Education Agency (“TEA”) was ineligible for $33,302,428 of its Individuals with Disabilities in Education Act (“IDEA”) Part B grant in a future year because of its failure to meet the maintenance of State financial support requirement in that amount in state fiscal year (“SFY”) 2012. Texas requested a hearing, and, on May 23, 2018, an agency Administrative Law Judge (“ALJ”) issued a decision affirming the Department’s proposed determination. The ALJ’s decision became the final decision of the Secretary of Education (“Secretary”) and Texas filed a timely petition for review to the Fifth Circuit Court of Appeals.

According to the Department of Education, to establish eligibility for federal funds under Part B of the IDEA, States must meet certain conditions set forth by Congress in the statute. One of those conditions requires States to maintain its level of financial support year over year.  States must not reduce financial support made available for special education and related services below the amount of such support for the preceding fiscal year. The Department of Education claimed that TEA did just that in 2012 by more than $33 million. The ALJ agreed and that is the subject of the pending appeal.

In its petition for review, Texas challenges the Secretary’s decision that the State is ineligible for approximately $33.3 million of its IDEA Part B grant due to the 2012 drop in funding.  According to TEA, the State’s aggregate and per capita spending on special education programs fluctuates from year to year, even though its financial support on a weighted-student basis never wavers. TEA maintains that in 2012, the State experienced a total per capita spending decrease of more than $33 million–because the students in Texas special education programs required fewer cost-intensive services. The Department of Education, thus, concluded that the State must in turn forfeit over $33 million in federal IDEA funding.

TEA also argues that the Department’s interpretation of the statute requiring States to maintain its level of financial support year over year is not reasonable and that the statute is unconstitutionally vague.  According to TEA, it was not on notice that its method of determining spending for special education programs could lead to ineligibility for IDEA funding. Attorneys for TEA and the Department of Education presented oral argument before the Fifth Circuit Court of Appeals on Wednesday October 3rd and a decision is expected later this year.

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