INTRODUCTION

Every approach to the problem of general Federal aid to education assumes as a major objective the assuring of a defensible foundation program in every community in the United States. Federal aid, therefore, presupposes certain types of action in the States. One of these suppositions is that the aid shall be granted to communities in such a way that the poorer communities receive more than the abler. Another is that in sparsely settled areas children shall be transported to school at public expense, A third is that in many States school district reorganization shall go forward. It is therefore desirable that the Federal aid act should be written in such a way as to implement these actions in the States. But in order to accomplish this end it is necessary to have an understanding of the legal problems that have arisen or are likely to arise with reference to them.

In this document, Professor Hamilton reports his studies bearing on the first two of these questions. He deals with the legal status of funds appropriated to the States by the Federal Government for educational purposes with the aim of determining at what point, if at all, between the time Federal funds are appropriated for the support of education and the time they are actually expended for the purposes stated in the act of appropriation they cease to be Federal funds and become those of the State, local district, or other agency designed to benefit therefrom. This question is important because it has a bearing on the degree to which constitutional provisions within States may limit the use of Federal funds in the ways presupposed or set forth in the Federal act. He then examines in detail the constitutionality of equalization aid in the various States and the legal aspects of the problem of transportation of public school pupils by school districts.

PAUL R. MORT.

IX

CHAPTER I

THE LEGAL STATUS OF FEDERAL APPROPRIATIONS TO THE STATES FOR EDUCATIONAL PURPOSES

It is the purpose of this chapter to determine at what point, if at all, between the time Federal funds are appropriated for the support of education and the time they are actually expended for the purposes stated in the act of appropriation they cease to be Federal funds and become those of the State, local district, or other agency designed to benefit therefrom. More specifically it shows how this question is related to the equalization problem and indicates how Federal equalization plans may be affected, actually or ostensibly, by the answer. An attempt is made to show the attitude of the courts and Federal officers in dealing with the question and to present some of the principles which underlie their decisions. The answer to the problem is pertinent to a number of phases of Federal aid, but emphasis here is on equalization, and other phases will be considered only incidentally.

An effort has been made to exhaust court decisions on the status of Federal funds, but no useful purpose would be served by citing all of them here. A sufficient number are quoted from, however, to indicate what the courts have done. in dealing with the problem. In addition, the holdings of a few cases are indicated without any extended discussion, so that the reader may know the authority for certain conclusions.

The question as to when Federal funds appropriated for use by the States for educational or other purposes become State funds has usually arisen in cases where the State has attempted to use the funds for different purposes than those specified in the grant, or in which the legal custodian has refused to pay out money on vouchers drawn against the

funds. Although a grant of Federal funds is not involved, the question of the right of the State to utilize the income from the sale or lease of lands granted to the States by the Morrill Act of 1862 has been a fruitful source of litigation and will be treated at length. It is assumed that Federal grants of lands to the States for specific purposes do not differ in principle from grants of funds, and no effort has been made to treat them as distinct problems.

The Problem as It Affects Equalization

In an equalization program the question as to when Federal funds become State funds is material, since the plan of distribution may be determined by the answer. It is legally conceivable that grants to the States may immediately become State funds and therefore no longer be subject in any sense to the control of the Federal Government. It is equally conceivable that the grants may become a part of and indistinguishable from the common school fund, subject to distribution according to the constitutional and statutory provisions of the State involved. If Federal grants do become part of the common school fund, and if the Federal act contains an apportionment plan in conflict with that set up in the State constitution, a legislative act of acceptance would appear to be unconstitutional. Consequently, equalization through Federal grants would be a constitutional impossibility in any State which has a plan of distribution embodied in its constitution which differs from the Federal plan of distribution. On the other hand, if the funds belong to the Federal Government until they are actually disbursed to the spending agency, it is possible to argue that the State constitutional provisions do not apply to them and that they may be distributed in accordance with any plan set forth in the grant.

Court Decisions

Since there have been no Federal grants to the States specifically for equalization purposes, no decisions directly on the point can be cited. There are a number of cases, however, that deal with the use of the income from the sale

or lease of lands granted to the States, and while they involve points not relevant to an equalization plan they are pertinent to the general question of the "ownership" of the land and the income therefrom.

The Federal land grants.-Among the early cases on the question of ownership is an Indiana case decided in 1854.1 This litigation resulted from an attempt of the legislature to divert the revenue of school lands from the township to the State at large. By an act passed in 1816, the sixteenth section in each township had been "granted by Congress to the inhabitants of such townships respectively, for the use of schools." There had been constitutional acceptance of the grant. The State contended that title to this sixteenth section was vested in the State, and that "it is her right to expend the income of the fund upon such system of common schools as she may deem best adapted to diffuse the blessings of education among all classes." The court overruled this contention and held that the State had no power to divert the fund from the purpose expressed in the grant, and that the acceptance of the grant carried with it the obligation to reserve the proceeds for the use of the townships.

The actual location of the title to the lands was not decided by the court since it considered the question immaterial. However, location of the title, even if it be in the State, as counsel for the State contended, does not settle the question of the appropriate use of the funds. If title were in the State that title would still be burdened with all the conditions and limitations contained in the grant. The State does not acquire such control or ownership as will enable it to use the proceeds as it deems wise; it is in the position of a "trustee" for the inhabitants of the township.

It is not necessary to examine the soundness of the court's conclusion that the State is a trustee. The trustee device is as good as any other as a basis for the decision. It would be an error to argue that the court determined the existence of a technical trust and felt impelled to reach the decision because it was a trust. It is obvious that the court decided

1 The State of Indiana and Others v. Springfield Township, 6 Ind. 83 (1854).