The No Child Left Behind Act and "Unfunded Mandates": A Legal Analysis of School District of the City of Pontiac v. Secretary of the United States Department of Education

The No Child Left Behind Act and “Unfunded
Mandates”: A Legal Analysis of School
District of the City of Pontiac v. Secretary
of the United States Department of Education
Jody Feder
Legislative Attorney
American Law Division
Summary
In January 2008, a panel of the Court of Appeals for the Sixth Circuit issued a
decision in School District of the City of Pontiac v. Secretary of the United States
Department of Education. In its decision, the court held that the No Child Left Behind
(NCLB) Act failed to provide the required “clear notice” to states and school districts
regarding the requirements they must fulfill as a condition of receiving federal funding.
However, the full Sixth Circuit recently agreed to reconsider the case. This report
discusses some of the implications of the Sixth Circuit’s actions, including information
regarding the potential practical effect, procedural ramifications, and legal impact of
both the original ruling and the recent decision to rehear the case.
Background
The Pontiac decision arose in response to litigation surrounding § 9527(a) of the
Elementary and Secondary Education Act (ESEA), as amended by the No Child Left
Behind (NCLB) Act of 2001.¹ Section 9527(a) — the so-called “unfunded mandates”
provision — states: “Nothing in this Act shall be construed to authorize an officer or
employee of the Federal Government to ... mandate a State or any subdivision thereof to
spend any funds or incur any costs not paid for under this Act.”
Enacted in 2002, the NCLB Act reauthorized and revised the ESEA, which is the
primary federal law that provides financial assistance to state and local school districts for
pre-collegiate education. Perhaps the most notable feature of NCLB is the wide array of
assessment and accountability measures that seek to improve student achievement and
performance, particularly in troubled schools. For example, the act mandates that states

¹ P.L. 107-110, 115 Stat. 1425. Section 9527 is codified at 20 U.S.C.A. § 7907.

administer annual tests in reading and mathematics for students in grades 3-8, requires
that schools make adequate yearly progress toward improving student performance,
establishes a series of required actions for schools that fail to meet such performance
standards, and adds new requirements regarding teacher qualifications. The bulk of the
new accountability requirements are tied to the Title I, Part A program for disadvantaged
students, which is the largest source of federal funding for elementary and secondary
education.²
Arguing that the costs of complying with some of the new accountability measures
far outweigh what they receive in federal funds, a number of states and school districts
have protested what they perceive as a lack of federal assistance for some of the act’s
more controversial requirements, such as the testing and school choice provisions.³ Other
critics have questioned whether mandating that states pay for the costs associated with
some of the act’s requirements is even lawful, given the language of § 9527(a). Indeed,
in 2005, the National Education Association (NEA), in conjunction with eight school
districts in Michigan, Texas, and Vermont, filed a lawsuit claiming that the Secretary of
Education was violating both the “unfunded mandates” provision and the Spending
Clause of the U.S. Constitution.⁴ The NEA:
sought a declaratory judgment to the effect that states and school districts are not
required to spend non-NCLB funds to comply with the NCLB mandates, and that a
failure to comply with the NCLB mandates for this reason does not provide a basis for
withholding any federal funds to which they are otherwise entitled under the NCLB.
Plaintiffs also sought an injunction prohibiting the Secretary from withholding from
states and school districts any federal funds to which they are entitled under the
NCLB because of a failure to comply with the mandates of the NCLB that is⁵
attributable to a refusal to spend non-NCLB funds to achieve such compliance.
In 2005, the United States District Court for the Eastern District of Michigan
dismissed the NEA’s lawsuit. In its ruling, the district court concluded that § 9527(a)
should be interpreted as a prohibition against the imposition by federal officers and
employees of additional, unfunded requirements beyond those provided for in the statute,
rather than as an exemption from the statute’s requirements when the federal government
fails to fully fund the Title I program. As a result, the court dismissed the lawsuit for

² For more information on NCLB, see CRS Report RL31284, K-12 Education: Highlights of the
No Child Left Behind Act of 2001 (P.L. 107-110), by Wayne C. Riddle et al.
³ For example, “the General Accounting Office estimated that states would have to spend $1.9
billion to $5.3 billion to develop and administer the new tests the law requires. States and federal
officials disagree as to whether Congress has appropriated enough money to help states meet
those costs.” Sam Dillon, States Are Relaxing Education Standards to Avoid Sanctions From
Federal Law, N.Y. Times, May 22, 2003, at A29.
⁴ Sch. Dist. of Pontiac v. Sec’y of the United States Dep’t of Educ., 512 F.3d 252 (6th Cir. 2008).
A similar lawsuit was also filed by the state of Connecticut. A federal court rejected the state’s
claims, although the court did not reach the merits of the “unfunded mandates” claim.
Connecticut v. Spellings, 2008 U.S. Dist. LEXIS 34434 (D. Conn. April 28, 2008); Connecticut
v. Spellings, 453 F. Supp. 2d 459 (D. Conn. 2006).
⁵ Pontiac, 512 F.3d at 257-58.

failing to state a claim upon which relief can be granted.⁶ The plaintiffs appealed the
dismissal to the Sixth Circuit, which reversed the district court’s decision.
The Sixth Circuit’s Decision
In School District of the City of Pontiac v. Secretary of the United States Department
of Education, a three-judge panel of the Sixth Circuit, in a 2-1 vote, held that the
Spending Clause,⁷ which empowers Congress to spend money for the “general Welfare
of the United States,” requires congressionally enacted statutes to provide “clear notice
to the States of their liabilities should they decide to accept federal funding under those
statutes” and that the NCLB Act “fails to provide clear notice as to who bears the
additional costs of compliance.”⁸ Because the court found the statute to be ambiguous in
this regard, it ruled that the plaintiffs had established a claim upon which relief could be
granted and therefore reversed the district court’s decision and remanded the case to the
district court for further proceedings consistent with the Sixth Circuit’s opinion.
In reaching its decision, the two-justice majority emphasized its view that the
Spending Clause requires “clear notice” of a state’s financial obligations. Under the
clause, Congress has frequently promoted its policy goals by conditioning the receipt of
federal funds on state compliance with certain requirements. Indeed, the Supreme Court
“has repeatedly upheld against constitutional challenge the use of this technique to induce
governments and private parties to cooperate voluntarily with federal policy.”⁹ Although
the Court has articulated several standards that purport to limit Congress’s discretion to
place conditions on federal grants under the spending clause, these standards generally
have had little limiting effect:
First, the conditions, like the spending itself, must advance the general welfare, but
the determination of what constitutes the general welfare rests largely if not wholly
with Congress. Second, because a grant is ‘much in the nature of a contract’ offer that
the states may accept or reject, Congress must set out the conditions unambiguously,
so that the states may make an informed decision. Third, the Court continues to state
that the conditions must be related to the federal interest for which the funds are
expended, but it has never found a spending condition deficient under this part of the
test. Fourth, the power to condition funds may not be used to induce the states to
engage in activities that would themselves be unconstitutional. Fifth, the Court has
suggested that in some circumstances the financial inducement offered by Congress
might be so coercive as to pass the point at which ‘pressure turns into compulsion,’
but again the Court has never found a congressional condition to be coercive in this¹⁰

sense.
⁶ Sch. Dist. v. Spellings, 2005 U.S. Dist. LEXIS 29253 (D. Mich. 2005).
⁷ U.S. Const. art. I, § 8, cl. 1.
⁸ Sch. Dist. of Pontiac v. Sec’y of the United States Dep’t of Educ., 512 F.3d 252 (6th Cir. 2008).
⁹ Fullilove v. Klutznick, 448 U.S. 448, 474 (1980).
¹⁰ Congressional Research Service, United States Constitution: Analysis and Interpretation, at
[http://www.crs.gov/products/conan/Article01/topic_S8_C1_3_1_2.html] (citations omitted). See
also, South Dakota v. Dole, 483 U.S. 203 (1987).

Relying on the standard that spending conditions be set forth “unambiguously,” the
Pontiac court cited two Supreme Court precedents: Pennhurst State School & Hospital
v. Halderman and Arlington Central School District Board of Education v. Murphy.¹¹ The
Pennhurst decision involved the Developmentally Disabled Assistance and Bill of Rights
Act of 1975, which contained a “bill of rights” provision stating that mentally disabled
individuals “have a right to appropriate treatment, services, and habilitation for such
disabilities.”¹² Unlike other requirements of the act, the bill of rights provision appeared
to represent a general statement of federal policy and was not conditioned on the receipt
of federal funding. As a result, the Court held that the provision did not create enforceable
obligations on the state, in part because Congress had failed to provide clear notice to
states that accepting federal funds would require compliance with the bill of rights
provision. Meanwhile, the Arlington case involved the Individuals with Disabilities in
Education Act, which authorizes a court to award “reasonable attorneys’ fees” to plaintiffs
who prevail in lawsuits brought under the act. Denying the plaintiffs’ request for
reimbursement of fees paid to a non-attorney expert, the Court held that the statute did not
provide states with clear notice that their acceptance of federal funds obligated them to
compensate prevailing parties for such expert fees.
Applying these precedents, the Pontiac court sought to determine whether the NCLB
Act provided clear notice to the states regarding their funding obligations. According to
the court, because the statute “... explicitly provides that ‘[n]othing in this Act shall be
construed ... to mandate a State or any subdivision thereof to spend any funds or incur any
costs not paid for under this Act,’ a state official would not clearly understand that
obligation to exist.”¹³ Although the Sixth Circuit considered alternative interpretations
under which the statute could be read to require states to comply with all NCLB
requirements regardless of federal funding levels, the court ruled that “... the only relevant
question here is whether the Act provides clear notice to the States of their obligation.”
As a result, the court rejected the alternative interpretations advanced in the case, which
included (1) the district court’s view that the provision prevents officers and employees
of the federal government from imposing additional requirements on the states, and (2)
the Department of Education’s (ED) argument that the provision simply emphasizes that
state participation in NCLB is entirely voluntary. Although the Sixth Circuit
acknowledged that ED’s interpretation of the statute may ultimately be correct, the court
held that neither interpretation was sufficiently evident to provide states with clear notice
of their obligation to spend additional funds to comply with requirements that are not paid
for under the act.
As noted above, the Sixth Circuit’s Pontiac decision was not unanimous. Indeed, one
of the judges vigorously objected to the majority opinion. According to the dissenting
judge’s interpretation, § 9527(a) does not render the NCLB Act ambiguous and therefore
does not violate the Spending Clause. Specifically, the dissent distinguished the cases
cited as precedents and contended that the text, operation, and structure of the act
contradict the majority’s interpretation. Asserting that state and local school officials “had
a crystal clear vision of what Congress was offering them,” the dissent characterized the

¹¹ 451 U.S. 1 (1981); 548 U.S. 291 (U.S. 2006).
¹² Former 42 U.S.C. § 6010.
¹³ Pontiac, 512 F.3d at 265.

majority opinion as “contrary to the way our nation’s education has been operated and
funded for centuries” and concluded that “there is no support in the text or context of the
NCLB for the proposition that Congress intended such a monumental and unprecedented
change in our nation’s education funding.”¹⁴
Ultimately, the decision reached by the three-judge panel may not be the last word
in the case, since a majority of judges on the Sixth Circuit recently agreed to rehear the
Pontiac case.¹⁵
Implications
As noted above, the Sixth Circuit’s actions in the Pontiac case — both the original
ruling and the decision to rehear the case — may have significant practical, procedural,
and legal implications. From a practical perspective, if the decision stands, the case has
the potential to significantly undermine the operation and effect of the Title I program, as
well as other ESEA programs that are subject to the “unfunded mandates” provision in
§ 9527(a). From a broader perspective, the case — if not judicially or legislatively
overturned — could represent a shift in the federal-state relationship across a wide array
of policy areas if the Sixth Circuit’s “clear notice” rule is extended to other statutory
schemes that are perceived to suffer from similar “ambiguities.” As a result, the case
could potentially create a degree of uncertainty across the entire landscape of federal
funding programs by encouraging legal challenges not only to other federal education
programs but also to federal funding programs operated by other federal agencies.
The Pontiac case also has numerous procedural implications. In response to the
ruling, ED sought review of the Pontiac decision by petitioning the Sixth Circuit for a
rehearing en banc.¹⁶ Typically, federal appeals are heard by a panel consisting of three
judges, but the term “en banc,” which translates as “full bench,” refers to a situation in
which a larger number of circuit judges reconsider a decision made by the three-judge
panel. Under the Federal Rules of Appellate Procedure, “[a]n en banc hearing or rehearing
is not favored and ordinarily will not be ordered unless: (1) en banc consideration is
necessary to secure or maintain uniformity of the court’s decisions; or (2) the proceeding
involves a question of exceptional importance.”¹⁷ Although a court of appeals is not
obligated to grant a rehearing, ED’s petition for en banc review was successful. In its
order granting the rehearing, the Sixth Circuit noted that the effect of such an order is to

¹⁴ Id. at 273.
¹⁵ Sch. Dist. of Pontiac v. Sec’y of the United States Dep’t of Educ., 512 F.3d 252 (6th Cir.

2008), reh’g granted, No. 05-2708 (6th Cir. May 1, 2008), at [http://www.edweek.org/media/

ca6_order_gr anting_rehearing_en_banc.pdf].
¹⁶ Petition for Rehearing and Rehearing En Banc, Sch. Dist. of Pontiac v. Sec’y of the United
States Dep’t of Educ., No. 05-2708 (6th Cir. filed February 5, 2008), at [http://www.edweek.org/
media/petitionforrehearing.pdf].
¹⁷ USCS Fed Rules App Proc R 35.

vacate the panel opinion, stay further action, and restore the case as a pending appeal.¹⁸
As a result, the original Sixth Circuit opinion in the Pontiac case is no longer in effect.
Eventually, the Sixth Circuit, sitting en banc, will issue a new ruling in the Pontiac
case. Once that occurs, the losing party may decide to appeal by filing a petition for a writ
of certiorari with the Supreme Court. Because the Supreme Court is not obligated to grant
such requests, however, there is no guarantee that the litigation will continue beyond its
current stage. Nevertheless, given the reality of en banc review and the possibility of
Supreme Court review, the potentially lengthy nature of such proceedings could mean that
the NCLB Act litigation may take years to resolve. As a result, the Sixth Circuit’s original
decision may have little practical effect in the near future, if ever.
In addition to the practical and procedural ramifications, there are several important
legal implications of the Pontiac decision. First, if the decision withstands en banc
review, it will become effective only in states that fall within the jurisdiction of the Sixth
Circuit. Those states are limited to Kentucky, Michigan, Ohio, and Tennessee. Because
school districts and educational agencies in other states would not be affected by the
decision, they may decide to file similar lawsuits in other circuits. Second, Congress has
the authority to override the Pontiac decision statutorily. According to the Sixth Circuit’s
decision, the states’ “obligation to spend additional funds or incur additional costs for ...
compliance is unclear,” and that lack of clear notice violates the Spending Clause.¹⁹ If
Congress disagrees with the Pontiac decision, then Congress is free to amend the NCLB
Act to clarify that states that accept NCLB funds are obligated to comply with all of the
act’s requirements, regardless of whether or not the costs of compliance are fully funded
by the federal government.

¹⁸ Sch. Dist. of Pontiac v. Sec’y of the United States Dep’t of Educ., 512 F.3d 252 (6th Cir.

2008), reh’g granted, No. 05-2708 (6th Cir. May 1, 2008), at [http://www.edweek.org/media/ca6_

order_gr anting_rehearing_en_banc.pdf].
¹⁹ Pontiac, 512 F.3d 252.