Court Opinion

ID: 9011792
Source: CourtListenerOpinion
Date Created: 2022-11-27 14:00:59.570391+00
Date Added: 2024-06-11T17:11:24.121503
License: Public Domain

BECKER, Circuit Judge,
dissenting.
Section 203(a) of the Intergovernmental Cooperation Act of 1963, 31 U.S.C. § 6503(a) (1988) [hereinafter “ICA”], accords the Commonwealth of Pennsylvania (“Commonwealth”) the right to retain “interest earned on grant money pending its disbursement for program purposes.” Id. In my view, the import of this language is clear, and neither the majority nor the Department of Health and Human Services (“HHS”) has offered a compelling argument that the federal funds in question do not meet the “pending disbursement” or “program purposes” requirements of the ICA. Because I believe the statute’s interest repayment exemption applies to the facts of this case, I would hold that the Commonwealth is entitled to retain the interest earned on the federal grant money used in its self-insurance reserves.1
I.
Stated in full, § 203(a) of the ICA provides:
Consistent with program purposes and regulations of the Secretary of the Treasury, the head of an executive agency carrying out a grant program shall schedule the transfer of grant money to minimize the time elapsing between transfer of the money from the Treasury and the disbursement by a State, whether disbursement occurs before or after the transfer.

A State is not accountable for interest earned on grant money pending its disbursement for program purposes.

31 U.S.C. § 6503(a) (1988) (amended in 1990) (emphasis added). In the instant case, there was, admittedly, a particularly .long time between the point at which the Commonwealth “drew down” the money from the federal government to place in its self-insurance reserves and the point at which the Commonwealth disbursed the money to cover insurance claims. That, however, does not change the fact that the federal funds, while they were within the Commonwealth’s self-insurance reserve accounts prior to their use to satisfy insurance claims, were “pending ... disbursement for program purposes.” I agree with the district court that the disbursement of the money occurred when the Commonwealth applied it for its ultimate purpose, the reimbursement of insurance claims. The period before this act occurred was therefore “pending ... disbursement.”
The majority acknowledges that this interpretation of § 203(a) is plausible, but concludes that this provision is ambiguous because the Commonwealth has asserted an alternative interpretation which the Majority deems equally plausible. See Majority at 1510. Specifically, the Commonwealth submits that under § 203(a) the federal funds were disbursed at the point at which the Commonwealth received them from the federal government, not (as the district court concluded) at the time when the Commonwealth used the federal funds to satisfy insurance claims. According to the Commonwealth, therefore, once the relevant funds were deposited within its self-insurance reserve accounts, the federal government lost *1514all claims on the funds, as they were then entirely the property of the Commonwealth. Based on this logic, the Commonwealth then claims entitlement to any interest earned, as it was interest earned on its own money.
Accepting the majority’s contention that both the Commonwealth’s and the district court’s views are plausible — though as just discussed I adhere to the view of the district court — the conclusion the majority reaches is counterintuitive. While crediting the interpretations of the Commonwealth and the district court, both of which result in the conclusion that the Commonwealth is entitled to retain the interest, the majority nonetheless determines that the federal government retains the interest. The majority reaches this surprising result because, having identified a conflict between the interpretations of the district court and the Commonwealth over an arguably ambiguous clause within § 203(a), it then turns to the legislative history, not so much to aid its interpretation of the clause in question, but to supplant the terms of § 203(a) in its entirety, including language that is clear and unambiguous.
Even if the ambiguous meaning of “pending ... disbursement” may justify the majority’s decision to look to the legislative history to interpret that phrase (despite the fact that both approaches giving rise to the ambiguity lead to the same result in favor of the Commonwealth), it does not license the majority to use the legislative history to reconstrue the statute as a whole. Even though there may be two equally plausible interpretations of “pending ... disbursement” as applied to this case, the majority ignores what the statute does make clear: a state does not have to refund the interest on federal funds under either the district court’s or the Commonwealth’s interpretations.
Moreover, in my view, the Commonwealth has easily met the second requirement of § 203(a), that the federal funds be used for “program purposes.” It is undisputed that HHS has approved Pennsylvania’s use of federal money for self-insurance reserves,2 a practice which saved money for both the Commonwealth and the federal government. Although HHS has correctly pointed out that the interest on the federal funds, when it was diverted into the Commonwealth’s general revenue accounts, was not put to use for program purposes, this fact is irrelevant under § 203(a). Section 203(a) requires that the federal grant money, not the interest it generates, must be used toward the goals of the federal-state cooperative program.3
II.
In order to avoid the application of the plain language of § 203(a), the majority, as I have noted, resorts to the legislative history of the ICA, which it then uses to effectively re-write the statute. It is well-established that, ordinarily, legislative history does “not trump the facial meaning of [a] statute,” because if “the language of the statute is clear, only the most extraordinary showing of contrary intentions justifies] altering the plain meaning of a statute.” American Lung Ass’n of N.J. v. Kean, 871 F.2d 319, 325 (3d Cir.1989) (citations and internal quotations omitted); accord Garcia v. United States, 469 U.S. 70, 75, 105 S.Ct. 479, 482, 83 L.Ed.2d 472 (1984), TVA v. Hill, 437 U.S. 153, 187 n. 33, 98 S.Ct. 2279, 2298 n. 33, 57 L.Ed.2d 117 (1978); Malloy v. Eichler, 860 F.2d 1179, 1183 (3d Cir.1988). I do not believe that the majority has made the “extraordinary showing” of contrary legislative intent necessary to warrant its disregard of § 203(a)’s explicit language.
The majority correctly points out, see Majority Typescript at 8, that the general, background purpose of the ICA as a whole was to “improve the administration of grants-in-aid to the States” in order to alleviate the management problems created by the vast increase in number and size of federal grants to the states. H.R.Conf.Rep. No. 1934, 90th Cong., 2d Sess. 1 (1968), reprinted in 1968 *1515U.S.C.C.A.N. 4248. In addition, as the majority explains, § 203(a)’s drafters believed that the period of time between a state’s receipt of federal funds and its disbursal of those funds should be minimized. See Majority at 1510 (citing S.Rep. No. 1456, 90th Cong., 2d Sess. 15 (1968)). Apparently based on the assumption that there would be a short lag time between a state’s draw-down of the funds and their disbursal, the drafters of § 203(a) exempted the states from the burden of accounting for and repaying the federal government for interest earned on federal funds, thereby relieving them of a previous administrative and fiscal burden. See S.Rep. No. 1456, 90th Cong., 2d Sess. 15 (1968). Although allowing the Commonwealth to retain the interest in this case may call into question the wisdom of the drafters’ apparent assumption that there would be a minimal period between federal and state disbursal, that assumption, by itself, cannot override the explicit provisions the drafters included in the ICA itself.
Indeed, it seems clear to me that despite this assumption, the drafters of § 203(a) were willing to place the burden of minimizing the pre-disbursal time period on the relevant federal agency, not on the states. Congress, in enacting § 203(a), changed the preexisting rule that state-grantees were accountable for the interest on federal funds. See 42 Comp.Gen. 289 (1962). The drafters of § 203(a) could have either retained the pre-existing rule or at least retained it in those situations in which states would receive federal funds for a considerable period before their disbursement. However, Congress chose not to do so.
The legislative history makes clear that Congress’ decision to free the states from the burden of accounting for interest earned on federal grants was not inadvertent, but deliberate and well-considered. Both the Comptroller General, see H.R.Rep. No. 1845, 90th Cong., 2d Sess. 29 (1968), reprinted in 1968 U.S.C.C.A.N. at 4247, and the Secretary of the Department of Housing, Education and Welfare, see id. at 18; 1968 U.S.C.C.A.N. 4238, informed Congress of their objections to § 203(a)’s elimination of the states’ duty to account for interest on federal grants. The House of Representatives deleted the provision, while the Senate retained it. At the joint House-Senate conference, the current version of § 203(a) was adopted, exempting states from accountability for interest. The legislative history reveals, therefore, that Congress quite deliberately relieved the states from their liability for interest, while imposing on federal agencies the duty of minimizing the time during which the states would retain federal money before using it.4
III.
Rather than follow Congress’ decision to relieve the states from refunding the interest on undisbursed federal funds, the majority relies on the rule which existed prior to the enactment of the ICA, that all federal grantees must refund any interest earned on federal grants prior to their disbursal, absent specific authorization to the contrary. To do *1516so, the majority invokes the “presumption favoring the retention of long-established and familiar principles.” United States v. Texas — U.S.- ,-, 113 S.Ct. 1631, 1634, 123 L.Ed.2d 245 (1993) (citing Isbrandtsen Co. v. Johnson, 343 U.S. 779, 783, 72 S.Ct. 1011, 1014, 96 L.Ed. 1294 (1952)). Yet this presumption in favor of the retention of a preexisting common law rule does not apply when Congress has legislated on the issue, “ ‘speak[ing] directly’ to the question addressed by the common law.” Id. In the situation at hand, Congress was aware of the old rule that grantees were responsible for the interest on federal money and, through § 203(a), specifically acted to eliminate that rule. Simply put, Congress has directly spoken to the common law rule, having abrogated it with respect to state grantees. For this reason, adherence to the pre-existing common law rule rather than the statutory rule which replaced it is, in my view, improper.
IV.
In sum, I would follow the language of § 203(a) of the ICA, which I consider clear. I do not believe the legislative history so clearly evinces a contrary intention as to justify a failure to follow the statute’s plain language. At best, the legislative history reveals an assumption by the drafters as to the length of time during which states would retain federal funds. The fact that this assumption has not always proven correct, however, cannot overcome the plain language of § 203(a). Applying § 203(a)’s terms to the facts at hand, I would hold that the federal funds were pending disbursement after being deposited in the Commonwealth’s self-insurance reserves and prior to being used to satisfy insurance claims. In addition, the Commonwealth, by using the federal funds to supplement its self-insurance reserves, was using the federal money for a program purpose. I therefore would hold that the Commonwealth is entitled to retain the interest earned on the federal funds, hence I respectfully dissent.

. Like the majority, I do not reach the interesting question raised by the parties — whether we owe deference, under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), to HHS’s interpretation of the ICA when Congress did not delegate the authority to implement this statute directly to HHS, but rather to the Treasury Department. Through an executive order, see Exec.Order No. 12,372, 47 Fed.Reg. 30,959 (1982), the President has delegated the authority to implement and administer the ICA to the Office of Management and Budget (“OMB”), which, in turn, has delegated authority to HHS for "developing and issuing the instructions for use by grantees in preparation of cost allocation plans,” OMB A-87, Fed.Reg. 9548, 9551 (Jan. 28, 1981) [hereinafter “OMB A-87”]. I need not address this Chevron question because, in my view, the language of the ICA is clear and on-point, and it is well-established that courts must follow the language of the statute itself rather than a contrary agency interpretation when the statute speaks directly and unambiguously on an issue. See Chevron, 467 U.S. at 842-43, 104 S.Ct. at 2781-82; see also Immigration & Naturalization Serv. v. Cardoza-Fonseca, 480 U.S. 421, 453-54, 107 S.Ct. 1207, 1224-25, 94 L.Ed.2d 434 (1987) (Scalia, J., concurring).

. OMB A-87 also contemplates the use of federal funds for self-insurance reserves. See 46 Fed. Reg. at 9554 ("Contributions to a reserve for a self-insurance program approved by the Federal grantor agency are allowable.”).

. In addition, as the Commonwealth points out, HHS did not raise the argument that the federal funds did not comply with the program purposes requirement of § 203(a) before the district court. It is therefore waived.

. I reach my conclusion as to the meaning of § 203(a) without resort to Congress' recent amendment of the ICA because of the "difficulties inherent in relying upon subsequent legislative history.” Sullivan v. Finkelstem, 496 U.S. 617, 628 n. 8, 110 S.Ct. 2658, 2665 n. 8, 110 L.Ed.2d 563 (1990) (citing United States v. United Mine Workers of Am., 330 U.S. 258, 281-82, 67 S.Ct. 677, 690, 91 L.Ed. 884 (1947)). However, I note that the subsequent legislative developments support my interpretation. Specifically, in 1990 Congress amended the ICA to authorize regulations imposing upon the states the duty of refunding the interest earned on federal grants prior to their disbursal. See P.L. No. 101-453, 104 Stat. 1058 (1990) (codified at 31 U.S.C.A. § 6503(c)(1) et seq. (West Supp.1993)). The House report accompanying the amendments to the ICA commented:
Currently, the Intergovernmental Cooperation Act permits a State to retain for its own purposes any interest earned on Federal grant funds transferred to the States 'pending its disbursement for program purposes.’ Thus, where a State draws down Federal funds in advance of payment to program beneficiaries, the State may invest the funds to earn income for the use of the State.
H.R.Rep. No. 101-696, 101st Cong., 2d Sess. 5 (1990), reprinted in 1990 U.S.C.C.A.N. 1691, 1693. This interpretation of the unamended version of the ICA as well Congress' decision to amend the ICA in order to reach the result the majority reaches — requiring states to return pre-disbursal interest — comports with my conclusion that the ICA, before its 1990 amendments, allowed states to retain such interest.