Pennhurst, Chevron, and the Spending Power

Under Pennhurst, a court may conclude that Congress has imposed a condition on the grant of federal funds to a state recipient only if Congress unambiguously expressed its intent to do so; under Chevron, the existence of statutory ambiguity with respect to a particular issue requires the reviewing court to defer to a reasonable agency interpretation of the ambiguous statutory language. What, then, should a court do when the terms of a federal-state grant program's condition are not fully elaborated in the statute and when the agency charged with enforcing the statute has issued regulations that purport to define the terms of the condition? Such controversies arise at the crossroads of administrative law and federalism principles. They raise the question whether Chevron deference, which is appropriate only when a statute is ambiguous, ever is warranted when the statutory provision at issue attaches a condition to a state's receipt of funds - a provision that must, in order to be effective under Pennhurst, attach the condition unambiguously. This Essay considers whether the usual principles of Chevron deference govern the interpretation of ambiguous statutory provisions in federal-state grant programs. Resolution of this question depends principally on how one characterizes Pennhurst's clear-statement rule. The first approach, which I call the "accountability model," treats Pennhurst's rule as a structural mechanism to ensure congressional accountability when Congress imposes burdens on the states. Under this framework, Congress (which, at least theoretically, represents the interests of the states), in contradistinction to administrative agencies (which do not), must unambiguously decide whether to impose a particular burden on the states. The second approach, which I call the "state choice model," views Pennhurst's rule as a means to ensure notice - and thus fairness - to the states when a federal grant program imposes a burden on the state recipients. Under this account, the question of which federal actor (that is, Congress or the agency) has imposed a condition on the state is not determinative; the inquiry focuses instead on whether, in light of the information available when the state accepted federal funds, the state can fairly be said to have understood the nature of the bargain, and thus had the opportunity "freely" to "choose" whether to accept the funds. This Essay argues that the accountability model upsets the delicate balance that Pennhurst achieved between federal and state interests and undermines the important values advanced by the Court's decision in Chevron. By requiring an unrealistic standard of congressional precision, the accountability model effectively converts Pennhurst's rule from an interpretive tool to a substantive limitation on Congress's power to regulate through the spending power. The state choice model, on the other hand, accommodates the values advanced by Chevron and limits Pennhurst's application to those cases that involve obvious unfairness to the states. An agency regulation provides a state with notice of its federal obligations just as effectively as a statute does, and states accordingly should be bound if the administering agency has issued an interpretation of the statutory grant condition before the state accepts funds.