Benjamin Riley

Benjamin Riley

Last week the Supreme Court issued its ruling on the constitutionality of the Affordable Care Act, or as I like refer to it, “Federal RomneyCare.” While the majority of coverage and interest in the case centered around the ACA’s “individual mandate,” a somewhat lesser known issue involving Medicaid has interesting implications for federal and state education policy, particularly in California.

Before getting to that, a quick refresher on health care policy. Medicaid is a cooperative federal/state program whereby the federal government sends money to states so that the states may provide health care to certain vulnerable groups – for example, the blind, the elderly, and the disabled. The ACA as drafted required states to expand the Medicaid program to cover all individuals below the age of 65 with incomes below 133% of the federal poverty line, thus extending health-care coverage to 17 million previously uninsured Americans. If a state refused to expand Medicaid in this fashion, the ACA empowered the Secretary of Health and Human Services to withhold all of the state’s Medicaid funding.

Not anymore. The Supreme Court struck down this portion of the ACA on the grounds that it imposes an impermissible condition upon the receipt of federal funds that “coerces” states into expanding Medicaid against their will. In the words of Chief Justice John Roberts, “the financial ‘inducement’ Congress has chosen is much more than ‘relatively mild encouragement’ – it is a gun to the head.” Consequently, states may decline to expand their Medicaid coverage, and Congress cannot change their minds by threatening to take away existing Medicaid funding. “Congress may not simply conscript state agencies in the national bureaucratic army,” Justice Roberts concluded, “and that is what it is attempting to do with the Medicaid expansion.”

The Elementary and Secondary Education Act, aka No Child Left Behind, is a federal/state cooperative program based on the same constitutional authority as is Medicaid (namely, the Spending Clause). As with Medicaid, the federal government sends funds to states to support K-12 education efforts, in return for states agreeing to comply with certain conditions – for example, that states use the bulk of their funds to support schools in low-income areas. Given the parallel structure of Medicaid and ESEA, I believe the invalidation of the Medicaid expansion calls into further question the waivers the Obama administration is currently issuing to states to relieve them from complying with the law.

To see why, let’s begin with a closer reading of Chief Justice Roberts’ opinion. Roberts, relying upon a prior Court decision known as Pennhurst, wrote that while “Congress’ power to legislate under the spending power is broad, it does not include surprising participating States with postacceptance or ‘retroactive conditions.’” And even though the Medicaid statute expressly states that Congress may alter or amend the law, Roberts believes that Congress’s reservation of that right does not include “the power to transform [Medicaid] so dramatically.” Thus, as Justice Ruth Bader Ginsburg adroitly notes in her opinion, “the Chief Justice appears to find in Pennhurst a requirement that, when spending legislation is first passed, or when States first enlist in the federal program, Congress must provide clear notice of conditions it might later impose.”

It is not hard to draw a line from this straight into the heart of ESEA waivers. For if Congress’s authority to attach conditions to federal grants is limited, and clear notice must be provided in advance, then surely the authority of the Executive Branch to impose “postacceptance” conditions on federal funds is equally if not more circumscribed. The fact that the Department of Education is conditioning waivers upon states implementing teacher-evaluation systems – a requirement found nowhere in ESEA itself – is further evidence of waivers’ “retroactivity.” Nor is it a stretch to believe that the waivers “dramatically” transform ESEA, insofar as they essentially gut the core federal academic accountability requirements the law imposes. Given my view that waivers were already of suspect legality, the Court’s invalidation of the Medicaid expansion adds further doubt as to whether they could survive a constitutional challenge.

Yet, while Chief Justice Roberts strengthened the legal ability of states to push back on the demands of the federal government, he also appears to chastise states for rolling over so quickly to federal demands. “The States are separate and independent sovereigns,” Roberts wrote. “Sometimes they have to act like it.” I couldn’t help read that passage and think of California, a state that – when it comes to education policy under Governor Jerry Brown – has certainly acted like an independent sovereign. Indeed, the State Board of Education that Brown appointed and Superintendent Tom Torlakson have essentially ignored the new conditions set by the federal Department of Education to instead develop their own home-grown waiver plan under another section of the NCLB law. Whatever the underlying merits of their proposal (and I have my reservations), the approach California has taken to developing its waiver proposal appears to neatly accord with Justice Roberts’ vision of proper federalism.

Having said that, a few caveats are in order as to the ACA decision’s applicability to waivers and ESEA in general. First, there is a dramatic difference between threatening to withhold billions in Medicaid funding in order to change state policy versus offering conditional relief from a particularly unpopular school accountability measure. Second, while the federal contribution to state budgets for Medicaid is enormous, states are “far less reliant on federal funding for any other program,” as noted in the joint dissent from the Court’s conservative wing. Finally, I’m at a loss to imagine how Congress is supposed to signal in advance what sort of hypothetical changes it might one day propose making to a federal/state program so states won’t be “surprised” – and I suspect federal judges will be equally befuddled. Or, as Justice Ginsburg asks, “when future Spending Clause challenges arrive, as they likely will in the wake of today’s decision, how will litigants and judges assess whether ‘a State has a legitimate choice whether to accept the federal conditions in exchange for federal funds’?”

We don’t know how courts will answer Justice Ginsburg’s question – but it may not be long before we find out.

Benjamin Riley is the Director of Policy and Advocacy at NewSchools Venture Fund, a nonprofit organization that supports education entrepreneurs. Previously, Ben worked as a Deputy Attorney General for the California Department of Justice, where he worked primarily on education-related matters. He currently lives in Washington, D.C. but will one day return to the Golden State.


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