Court Opinion

ID: 859181
Source: CourtListenerOpinion
Date Created: 2013-04-26 18:39:07.128544+00
Date Added: 2024-06-11T09:06:42.539215
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                               No. 12-1764

SOUTH CAROLINA DEPARTMENT OF EDUCATION; SOUTH                     CAROLINA
STATE SUPERINTENDENT OF EDUCATION MITCHELL ZAIS,

                Petitioners,

           v.

ARNE   DUNCAN,   Secretary      of        Education;     UNITED     STATES
DEPARTMENT OF EDUCATION,

                Respondents.

On Petition for Review       of      an    Order    of   the   Department    of
Education. (EDUC-1)

Argued:   March 22, 2013                           Decided:    April 26, 2013

Before NIEMEYER, AGEE, and THACKER, Circuit Judges.

Petition for review granted and case remanded by published
opinion. Judge Niemeyer wrote the opinion, in which Judge Agee
and Judge Thacker joined.

ARGUED:   Shelly Bezanson Kelly, SOUTH CAROLINA DEPARTMENT OF
EDUCATION, Columbia, South Carolina, for Petitioners.      Alisa
Beth Klein, UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Respondents.    ON BRIEF:   Wendy Bergfeldt Cartledge,
Barbara Drayton, Karla Hawkins, SOUTH CAROLINA DEPARTMENT OF
EDUCATION, Columbia, South Carolina, for Petitioners. Philip H.
Rosenfelt, Deputy General Counsel Delegated to Perform the
Functions and Duties of the General Counsel, Joan DeLise Bardee,
Attorney, Department of Education, Stuart F. Delery, Principal
Deputy Assistant Attorney General, Mark B. Stern, Attorney,
Appellate   Staff,   UNITED   STATES   DEPARTMENT   OF   JUSTICE,
Washington, D.C., for Respondents.

                                2
NIEMEYER, Circuit Judge:

       The      Individuals           with     Disabilities             Education      Act      (“IDEA”)

provides for grants of federal funds to States for the education

of disabled children.                   To meet the eligibility requirements for

the full amount of funds allocated to a State, that State must

not reduce the amount of its own financial support for special

education “below the amount of that support [it provided] for

the preceding fiscal year.”                        20 U.S.C. § 1412(a)(18).                      If the

State fails to meet this “maintenance-of-effort” condition, as

it    is    referred         to,      the    Secretary           of    the   U.S.    Department      of

Education (“USDOE”) must reduce the level of federal funding to

the    State        in    subsequent         years         by    the    amount    of      the    funding

shortfall.            Id.    Alternatively, the Secretary may grant a waiver

of the maintenance-of-effort condition if doing so “would be

equitable           due     to   exceptional           or       uncontrollable         circumstances

such       as   a     natural      disaster        or       a    precipitous        and    unforeseen

decline in the financial resources of the State.”                                   Id.

       South Carolina requested a waiver of its maintenance-of-

effort condition for approximately $67.4 million for its fiscal

year ended 2010.                 The Secretary granted the waiver in part, but

denied      it      to    the     extent      of   $36.2         million.        Accordingly,         he

advised         the      State     that      the   USDOE          was    reducing       the      State’s

allocation for fiscal year 2012 by $36.2 million.                                          When South

Carolina            sought       to     have       a       hearing        on     the      Secretary’s

                                                       3
determination, the Secretary advised the State that the IDEA did

not provide for such a hearing.

     South Carolina filed this petition for review, challenging

the Secretary’s denial of its request for a full waiver and its

request for a hearing.            The Secretary filed a motion to dismiss,

contending    that     this       court       does     not    have     jurisdiction           to

consider the State’s petition.

     We    conclude        that    the        Secretary’s        action      in   partially

denying     South     Carolina’s          request          for     a    waiver         was     a

determination       made    “with    respect          to   the     eligibility         of    the

State” for funding and that therefore we have jurisdiction to

consider    the    State’s    petition          for    review.         See   20   U.S.C.       §

1416(e)(8)(A).       We also conclude that the Secretary’s denial of

the State’s request for a full waiver was a determination that

South Carolina was “not eligible to receive a grant” in the

amount of $36.2 million and that therefore the Secretary was

required to provide the State with notice and an opportunity for

a hearing before he made a final determination with respect to

the waiver request.           Id. § 1412(d)(2).                  Accordingly, we grant

the petition for review and remand to allow the Secretary to

provide    South    Carolina      with        notice    and   an    opportunity         for    a

hearing    before     he     makes        a     final      determination          on    South

Carolina’s waiver request.

                                               4
                                                    I

        The    IDEA       provides       federal          funding       to   States       for     the

education       of    disabled         children.            To     be    eligible        for    this

funding, a State must submit a plan to the Secretary of the

USDOE that “provides assurances to the Secretary that the State

has in effect policies and procedures to ensure that the State

meets each of [25 stated] conditions.”                            20 U.S.C. § 1412(a).             In

addition       to    requiring        that     the       State     provide    an     appropriate

public        education         to    all      children          with    disabilities,            the

conditions       require        that     the       State    “not    reduce     the    amount       of

State       financial         support        for    special        education       and     related

services for children with disabilities . . . below the amount

of    that     support         for     the     preceding          fiscal     year.”         Id.     §

1412(a)(18)(A).               This maintenance-of-effort condition, however,

may     be     waived         under    two     circumstances,            including        if      the

Secretary determines that doing so “would be equitable due to

exceptional or uncontrollable circumstances such as a natural

disaster       or     a       precipitous          and     unforeseen        decline      in      the

financial resources of the State.” 1                             Id. § 1412(a)(18)(C)(i).

Without       such        a    waiver,       the        statute     provides       that        “[t]he

        1
       The Secretary may also waive the maintenance-of-effort
requirement if “the State provides clear and convincing evidence
that all children with disabilities have available to them a
free appropriate public education.” 20 U.S.C. § 1412(a)(17)(C).
South Carolina did not seek a waiver under this standard.

                                                    5
Secretary shall reduce the allocation of funds . . . for any

fiscal year following the fiscal year in which the State fails

to comply with [the maintenance-of-effort condition] by the same

amount by which the State fails to meet the requirement.”                           Id. §

1412(a)(18)(B).

     After experiencing “severe and precipitous” reductions in

state tax        revenues,    South    Carolina      advised       the   USDOE   of    the

reduced revenues and South Carolina’s need to reduce funding for

special education by $67.4 million.                  In a letter to the agency,

dated February 26, 2010, South Carolina requested a waiver of

the maintenance-of-effort condition for fiscal year 2010.                             The

State     also     provided     the    agency        with    supporting      financial

information.

     In an eight-page opinion letter dated June 17, 2011, then-

Assistant    Secretary        for    Special     Education        and    Rehabilitative

Services     Alexa     Posny        found     that    the     submitted       financial

information       indicated    that    “the      State      did    not   treat   special

education    and     related     services       in   an     equitable      manner     when

compared to State agencies as a whole.”                           She noted that the

State   reduced      its     support    for     special      education      by   12.02%,

whereas     its    average     reduction        in   appropriations         across    all

agencies was 7.55%.          For this reason, she denied the request for

a waiver of the full $67.4 million amount.                        After recalculating

the reductions in an “equitable” manner, however, Posny granted

                                            6
the State’s waiver request to the extent of $31.2 million and

denied it to the extent of $36.2 million.                  She stated:

      The State’s submissions to the [USDOE] in support of
      its waiver request establish that it has failed to
      maintain financial support for special education and
      related services for FY 2010 by $36,202,909 . . . .
      Thus, the State has a $36,202,909 shortfall in the
      amount of State financial support for FY 2010.

The   letter   encouraged       the   State     “to      take    action    to   restore

funding for special education and related services for FY 2011.”

On    South    Carolina’s       request       for     reconsideration,           Deputy

Secretary Anthony Miller affirmed the decision.

      Even though the USDOE informed South Carolina that it was

not entitled to a hearing, South Carolina filed an appeal from

Assistant Secretary Posny’s decision on August 1, 2011, with the

Office of Hearings and Appeals, requesting a hearing.                                After

receiving no status reports or information regarding the appeal,

South Carolina filed a motion to expedite.                      When the request for

a hearing was presented to the Secretary, he issued an order

dated   May    22,    2012,    denying    the     request       for   a   hearing      and

explaining     that    while    the   IDEA      provides        for   notice    and    an

opportunity     for    a   hearing       “prior     to     (1)     issuance     of     the

Department’s final agency decision rejecting the eligibility of

a State for IDEA grant funding or (2) a withholding of IDEA

funds,” (emphasis added), the agency’s partial denial of South

Carolina’s request for a waiver was neither a decision rejecting

                                          7
eligibility nor a decision withholding funds.                          Thus, he ruled,

“no   right    to    a     hearing        attached.”        The    Secretary’s     opinion

reasoned that because South Carolina was not challenging the

conclusion      that       it       did   not     meet     the    maintenance-of-effort

condition and because South Carolina was never deemed ineligible

for a grant, this was not a case of an agency decision rejecting

eligibility.         He also stated that the agency decision did not

involve a “withholding” of grant funds under the IDEA because

“[s]uch a withholding action can only occur after [the Office of

Special     Education        and      Rehabilitative         Services]      has    made     a

determination that a State has substantially failed to comply

with an IDEA eligibility condition.”                        But here “[that Office]

never determined the State substantially failed to comply with

the   IDEA’s     [maintenance-of-effort]                 requirement       --    the    State

concedes that it did not.”                      Finally, the Secretary noted that

the   General       Education         Provisions      Act    (“GEPA”),      20    U.S.C.   §

1234d(b)      (requiring        a    hearing      before    the    Secretary      withholds

payment     under     an    education          program),    does    not    provide      South

Carolina with a right to a hearing because the specific terms of

the   IDEA,    which       require        a    reduction    of    funds,   supersede      the

general terms of the GEPA.

      The     South        Carolina           Department    of     Education      and     its

Superintendent, Mitchell Zais, filed this petition for review of

the Secretary’s denial of South Carolina’s request for a waiver

                                                 8
and request for a hearing, naming the Secretary and the USDOE as

respondents.       In its petition, South Carolina also requested an

order that the Secretary restore, during the pendency of the

hearing    procedures,        the     $36.2       million      in    funding        that    the

Secretary     reduced        from   South         Carolina’s         fiscal        year    2012

allocation.     In addition to its petition, South Carolina filed a

motion to stay the reduction of its IDEA funds pending appeal.

      The USDOE filed a motion to dismiss the petition for lack

of jurisdiction, contending that its waiver determination was a

final agency action subject to review only in the district court

under   the   Administrative          Procedure         Act,   not    in     the    court    of

appeals under the IDEA or GEPA.

      By   order     dated    August     13,       2012,    we      denied    the     State’s

motion for a stay pending appeal and deferred ruling on the

USDOE’s motion to dismiss until after oral argument.

      In this appeal, we are thus presented with two procedural

questions:      (1) whether we have jurisdiction to consider South

Carolina’s petition for review, and (2) whether South Carolina

is   entitled   to    an     opportunity          for   a   hearing     on    the     USDOE’s

determinations       that     South    Carolina          had     “failed      to     maintain

financial support for special education and related services for

FY 2010 by $36,202,909” and consequently that South Carolina’s

grant for fiscal year 2012 be reduced by that amount.

                                              9
                                           II

     To justify our jurisdiction over its petition for review,

South      Carolina       relies     principally            on        IDEA’s     provision

authorizing a State to file a petition for review in a court of

appeals when the “State is dissatisfied with the Secretary’s

action    with     respect   to     the    eligibility           of    the     State    under

section     1412    of    this     title.”       20    U.S.C.         §   1416(e)(8)(A).

Alternatively, it relies on the GEPA’s provision for review by

courts of appeals of agency decisions to withhold payments for

failing    to    comply    substantially        with    any       requirement          of   law

applicable to such funds.           Id. § 1234g.

     Although South Carolina contends that both the IDEA and

GEPA provide subject-matter jurisdiction over its petition, we

will look first to the IDEA, the more specific statute and the

statute pursuant to which the underlying action in this case was

taken.     Cf. Morales v. Trans World Airlines, Inc., 504 U.S. 374,

384 (1992) (looking to ERISA instead of the more general Federal

Aviation    Act    saving    clause       because     “it    is       a   commonplace       of

statutory construction that the specific governs the general”).

     Under       the     IDEA,      any    State       “dissatisfied             with       the

Secretary’s action with respect to the eligibility of the State

under section 1412 of this title . . . may . . . file with the

United States court of appeals for the circuit in which such

State is located a petition for review of that action.”                                      20

                                           10
U.S.C. § 1416(e)(8)(A).          Our jurisdiction under this provision

thus turns on whether South Carolina is appealing an “action

with respect to . . . eligibility.”                        Because South Carolina

seeks review of the USDOE’s decision denying a full waiver of

the maintenance-of-effort condition for fiscal year 2010 imposed

by § 1412(a)(18) (as well as the Secretary’s decision not to

grant South Carolina a hearing before making that decision), we

must     evaluate      whether     the       maintenance-of-effort                  waiver

determination was an “action with respect to eligibility.”

       South Carolina’s primary argument on why a maintenance-of-

effort waiver determination is an eligibility determination is

that    “[maintenance-of-effort]           is     one        of     the     twenty-five

eligibility requirements” and therefore “[b]y not waiving [the

maintenance-of-effort         condition]        for    the        2009-10       year,    the

Secretary found that South Carolina did not meet the eligibility

requirements for a grant.”

       The USDOE argues to the contrary, contending that “South

Carolina [had already been] found eligible for grants under IDEA

Part    B    because    its    State’s       plan          provided       the     required

assurances” and, instead, that the cut in funding was due to a

“[f]ailure    to    administer    the    grant        in    compliance      with        grant

                                        11
assurances.”       (Emphasis added). 2            It argues that South Carolina

was not found ineligible for a grant under the IDEA because, had

it been so found, it would not have received any funding.

     The USDOE’s position rests ultimately on the distinction

between    a    finding          of   ineligibility      and   a     finding    of    non-

compliance.       Explaining the difference, it states:

     If South Carolina had not provided one or more of the
     required assurances [contained in § 1412(a)], the
     [USDOE] would have found the State ineligible for a
     grant and would have provided the State with notice
     and opportunity for a hearing in connection with that
     finding.   The State’s failure to comply with any of
     these grant assurances in the administration of its
     federal grant is a basis for finding of noncompliance
     and may cause the Department to take enforcement
     action.      But,   under  the   IDEA’s   direct-review
     provision, only a finding of ineligibility is subject
     to direct review in the court of appeals.

     The distinction that the USDOE makes is indeed meaningful.

A condition of eligibility looks forward such that its failure

leads to ineligibility.                 A finding of non-compliance, on the

other     hand,    is       an     evaluation     that    looks      backward    in     an

assessment of performance.

        Thus,     as    §        1412(a)   sets     forth      the     conditions       to

eligibility, it includes the forward-looking consequence of fund

reductions, albeit not necessarily a complete funding reduction.

     2
        The USDOE also contends that its interpretation is
entitled to deference under Chevron, U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837 (1984). Because
we find the statute to be clear, however, we do not reach the
question of deference.

                                            12
Section 1412(a) provides that the consequence for failing to

satisfy      the        maintenance-of-effort              condition       is       a     directly

related reduction in the future allocation of grant funds.                                       See

20 U.S.C. § 1412(a)(18)(B).                      The requirement thus operates an

ongoing condition as to the State’s eligibility for allocated

grant funds, and as a condition of eligibility, a failure to

satisfy the condition leads to proportionate ineligibility.                                      In

this      manner,       a     failure       to     meet     the    maintenance-of-effort

condition        to     the       extent    of     $1,000     leads    to       a       comparable

reduction        of     future      funds    in     the    amount     of    $1,000.             Non-

compliance, on the other hand, is addressed in § 1416 pursuant

to   an     evaluation        of     past    performance          following         the    State’s

submission of a “performance plan.”                        Id. § 1416(b).           The finding

of a compliance failure under § 1416 can lead to the Secretary’s

provision          of       “assistance,”              “intervention,”              “substantial

intervention,” or even “withholding funds.”                         Id. § 1416(e).

       To   be    sure,       a    State’s       failure    to    appropriate           funds   for

special education as provided in the IDEA might lead either to

the failure of a condition to funding eligibility under § 1412

or to non-compliance enforcement under § 1416.                             Consequently, it

is necessary to determine the precise course that is implicated

by either the State or the USDOE’s actions and to apply the

procedures that Congress prescribed for that course.

                                                  13
       The    course       implicated          in    this      case   is     not    in     question.

There was no assessment of the State’s performance plan, nor was

there        any        finding        that     the           State     needed          assistance,

intervention, or substantial intervention as would occur under §

1416(e)(1)-(3).            Although a determination that a State failed to

comply       with       its   plan      could        lead       to    the        USDOE,    under     §

1416(e)(3),         to    recover       funds,       using      GEPA;       to    withhold        funds

(after a hearing); to refer the case to the USDOE’s Office of

the Inspector General; or to refer the matter for appropriate

enforcement action, no such actions were undertaken and none of

the § 1416(e) remedies were invoked.                              Instead, South Carolina

requested      a     waiver       of   the     maintenance-of-effort                condition        to

eligibility in § 1412(a)(18), and the USDOE acted accordingly.

The    USDOE        addressed      the        request         under    §    1412(a)(18)(C)           to

determine whether the maintenance-of-effort condition should be

waived.

        More specifically, South Carolina requested a waiver of the

maintenance-of-effort condition under § 1412(a)(18)(C)(i), which

allows    for       a    waiver    based       on        “a   precipitous         and     unforeseen

decline in the financial resources of the State.”                                   The Secretary

responded to the request, applying the criteria provided by the

same provision, finding that the State “had failed to maintain

financial support for special education and related services for

FY    2010     by       $36,202,909”          and    reducing         grant       money     for    the

                                                    14
following fiscal year to the same extent.                       Thus, both South

Carolina’s request and the USDOE’s response employed § 1412,

which in its entirety is directed to “State eligibility.”                          The

Secretary’s        waiver     determination      was     accordingly         (1)     a

determination whether to remove an eligibility condition, and

(2) a reduction of the State’s eligibility for future funding.

      Because removing an eligibility condition imposed by § 1412

is an “action with respect to the eligibility of the State under

section 1412,” we readily conclude that we have jurisdiction to

consider    South    Carolina’s    petition     for    review.        20   U.S.C.    §

1416(e)(8)(A) (emphasis added).

      The   USDOE    nonetheless       argues   that    we    lack    jurisdiction

because “South Carolina was not found ineligible for a grant

under IDEA Part B” because, though funding for fiscal year 2012

was reduced, South Carolina continued to receive some funding.

The   USDOE   claims    that    “only    a   finding     of     ineligibility       is

subject to direct review in the court of appeals,” implying that

the statute requires complete ineligibility before implicating

our jurisdiction.           But the text of § 1416(e)(8)(A) forecloses

such a claim.         Under that section, our jurisdiction does not

depend on whether a State was found completely ineligible for

funding.      Rather, it depends on whether an action was taken

“with respect to eligibility.”               (Emphasis added).             A partial

reduction     in    funding    based    on   the      failure    to    satisfy      an

                                        15
eligibility        condition        is   as     much    an    “action         with    respect      to

eligibility”        as    is    a     full    reduction       of     funding.          Here,      the

Secretary      used       §    1412(a)(18)(B)-(C)             to     conclude        that    South

Carolina     was    ineligible           to    receive       $36.2       million      in    federal

funding.

      We     therefore          have     jurisdiction             over     South      Carolina’s

petition for review under § 1416(e)(8)(A) and need not reach

South Carolina’s other jurisdictional arguments.

                                                III

      We    turn    next       to     South    Carolina’s         contention         that    it   is

entitled to notice and an opportunity for a hearing before the

Secretary makes his final determination whether to grant South

Carolina a full waiver of the maintenance-of-effort condition

for   fiscal       year       2010.      South       Carolina       contends         that    it   is

entitled to a hearing under either (1) IDEA § 1412(d)(2) because

the Secretary found that the State was not eligible for the

$36.2 million portion of its allocated grant under the IDEA; or

(2)   IDEA     §    1416(e)(4)(A)             and    GEPA     §    1234d(b)          because      the

Secretary’s reduction of South Carolina’s grant following its

denial of a full waiver was a “withholding.”

      For    the    same       reasons        the   USDOE     gave       in   challenging         our

jurisdiction, it contends that the Secretary’s partial denial of

South      Carolina’s          waiver         request       was      not      an     eligibility

                                                16
determination        and     also    that     the    consequent         reduction    of     its

grant to South Carolina was not a withholding under either the

IDEA or the GEPA so as to trigger notice and an opportunity for

a hearing.

        Paralleling our jurisdictional analysis, we look first to

the language of the IDEA, which is the more specific statute

relevant to this issue.

        The IDEA entitles a State to notice and an opportunity for

a     hearing       in    two   situations,         both    of    which   South     Carolina

claims are relevant.                First, § 1412(d)(2) mandates that “[t]he

Secretary shall not make a final determination that a State is

not   eligible       to    receive     a    grant    under       this   subchapter        until

after providing the State (A) with reasonable notice; and (B)

with an opportunity for a hearing.”                        Similarly, § 1416(e)(4)(A)

mandates notice and an opportunity for a hearing “[p]rior to

withholding         any     funds     under    this        section.”            Because     our

jurisdiction exists on the basis of a decision made with respect

to eligibility, we look first to whether § 1412(d)(2)’s hearing

provision is applicable.

        Both the basis for our jurisdiction and the basis for a

right     to    a    hearing        depend     on     the        Secretary’s      making     a

determination            relating     to    eligibility,          but     the    IDEA     uses

slightly different language for each.                        As addressed in Part II

above, we have jurisdiction over “the Secretary’s action[s] with

                                              17
respect       to    the        eligibility         of     the       State,”       20    U.S.C.       §

1416(e)(8)(A) (emphasis added), but South Carolina is entitled

to     a    hearing       only       when     the       Secretary         “make[s]        a    final

determination that a State is not eligible” for funding, id. §

1412(d)(2).          At       oral    argument,         the   USDOE        treated      these      two

provisions as equivalent, stating that if we found that we had

jurisdiction, we should also conclude that South Carolina was

entitled to an opportunity for a hearing.

       While       the    USDOE      may     be    correct      in     that       position,        the

distinction in statutory language persuades us not to adopt a

blanket rule that if we have jurisdiction under 1416(e)(8), the

State should also be entitled to notice and an opportunity for a

hearing under § 1412(d)(2).                       Nonetheless, we do agree that in

this       case,    the       partial       denial      of    the    maintenance-of-effort

waiver not only provides us with jurisdiction under § 1416(e)(8)

but    also    amounts         to    a   “determination             that    a     State       is   not

eligible” for funding under § 1412(d)(2), albeit only to the

extent of $36.2 million.

       Section       1412(a)(18)(B)           provides        for     a    reduction          in   the

USDOE’s      grant       to    a    State    when       the   State       fails    to     meet     its

maintenance-of-effort condition, while § 1412(a)(18)(C) removes

this consequence and allows the State to become eligible for

funding despite its failure to satisfy the condition.                                     When the

USDOE decided that South Carolina was only entitled to a partial

                                                  18
waiver under § 1412(a)(18)(C) and that its eligibility would

therefore be partially reduced under § 1412(a)(18)(B), it made a

determination        that     the     “State       [was]   not     eligible”     for     the

funding      it     otherwise       would    have        received.        20    U.S.C.     §

1412(d)(2).          Thus,     under     §     1412(d)(2),        South   Carolina       was

entitled to notice and an opportunity to be heard before a final

determination on its waiver request was made.                       Id.

       Because      we     conclude    that        the   Secretary’s      determination

could not have been final until after the USDOE provided the

State with notice and an opportunity for a hearing, we also

conclude     that     South     Carolina       remains      eligible      for   its    full

funding until that final determination is made.                            Only if and

when the USDOE finally denies South Carolina’s waiver request

can it reduce the federal funding grant to South Carolina, and

then    it    can    implement        the    reduction       in    “any    fiscal      year

following [FY 2010].”           20 U.S.C. § 1412(a)(18)(B).

       For the same reason, the Secretary may not, until he makes

a final determination on the waiver request, redistribute to

other   States       the    amount     of    his    proposed      reduction     of    South

Carolina’s grant for fiscal year 2012, as directed by § 1514 of

the Consolidated and Further Continuing Appropriations Act, Pub.

L. No. 113-6, 127 Stat. 198, 425 (2013) (providing that “the

Secretary shall distribute to all other States . . . any amount

by which a State’s allocation under [Part B] . . . is reduced

                                             19
under   [the      maintenance-of-effort    penalty    provision,   §

1412(a)(18)(B)]”).

     Because we conclude that South Carolina is entitled to an

opportunity for a hearing on the waiver determination, it is

premature for us to address its challenge to the Secretary’s

decision to deny a full waiver.       Likewise, we need not address

South Carolina’s argument that denying a hearing was a violation

of due process.

                                      PETITION    FOR    REVIEW    IS
                                      GRANTED   AND   CASE   REMANDED
                                      WITH INSTRUCTIONS.

                                 20