## Facts

- The Federal Impact Aid Program provides federal aid to school districts whose revenue-raising capacity is reduced by federal activity, including districts serving Indian reservation lands.
- A State generally may not reduce its own aid because a district receives Impact Aid, but an exception permits offsets if the Secretary of Education finds the State’s school-funding system “equalizes expenditures” among districts.
- Equalization is measured by comparing per-pupil expenditures in the highest- and lowest-spending districts, after disregarding districts “above the 95th percentile or below the 5th percentile” of per-pupil expenditures; the system qualifies if the remaining highest district does not exceed the remaining lowest district by more than 25%.
- For decades, Department of Education regulations implemented the percentile exclusions using student enrollment: districts were ranked by per-pupil expenditures, and districts were excluded from the top and bottom until the excluded districts together accounted for the top 5% and bottom 5% of the State’s students.
- Applying that method to New Mexico for fiscal year 1998, the Secretary excluded certain high- and low-spending districts, then determined that the disparity among the remaining districts was under 25%, and certified New Mexico as “equalized.”
- The certification allowed New Mexico to reduce state aid to districts receiving Impact Aid, including Zuni Public School District No. 89, which is located largely on reservation lands.
- Zuni challenged the certification administratively, arguing the statute required percentiles to be calculated by counting districts (excluding the top and bottom 5% of districts), not by student population.
- An administrative law judge rejected the challenge; the Secretary affirmed; the Tenth Circuit upheld the agency, and an evenly divided en banc court left the panel decision in place.

## Issues

1. Whether 20 U.S.C. § 7709 unambiguously requires the Secretary to identify the 95th and 5th percentiles by counting districts rather than by cumulative student enrollment.
2. If the statute is ambiguous, whether the Department of Education’s student-population-based percentile methodology is a permissible interpretation entitled to judicial deference.
3. Whether the Secretary lawfully certified New Mexico’s funding system as “equalized,” permitting the State to offset Impact Aid.

## Decision

- The Supreme Court affirmed the judgment upholding the Secretary’s certification of New Mexico as “equalized.”
- The Court held that the statutory percentile language did not clearly prescribe a single calculation method and permitted the agency’s approach.
- The Court sustained the Department’s long-standing regulation using student-weighted percentiles as a reasonable implementation of the equalization test.
- The result allowed New Mexico to reduce state aid in response to districts’ receipt of Impact Aid under the equalization exception.

## Legal Principles

- When a statute leaves ambiguity about a technical implementation detail, courts may uphold a reasonable agency construction, particularly where the agency’s interpretation has been consistently applied over time.
- In determining Impact Aid “equalization” under 20 U.S.C. § 7709, the Secretary may calculate the 95th and 5th percentile exclusions using cumulative student population rather than a simple count of districts.
- Longstanding administrative practice, coupled with congressional amendments or reenactments that do not displace that practice, can support the conclusion that an agency interpretation is permissible.
- The equalization inquiry may be administered in a manner focused on how a State’s funding system functions for the large majority of students, including by reducing the influence of small outlier districts.

## Conclusion

The Court upheld the Department of Education’s student-enrollment-based method for excluding outlier districts in the Impact Aid equalization test, concluding the statute allowed the agency’s approach and that New Mexico could treat qualifying Impact Aid as an offset to state funding under § 7709.


Zuni Pub. Sch. Dist. No. 89 v. Dep’t of Educ., 550 U.S. 81 (2007)