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NATIONAL ASSN. OF CTYS. v. BAKER

July 28, 1987

National Association of Counties, et al., Plaintiffs,
v.
James A. Baker, III, Secretary of the Treasury, Defendant


Joyce Hens Green, United States District Judge.


The opinion of the court was delivered by: GREEN

JOYCE HENS GREEN United States District Judge.

 Plaintiffs National Association of Counties, National League of Cities, United States Conference of Mayors, and ten individual cities and counties, seek declaratory and injunctive relief to compel defendant to release to 39,000 local governmental units approximately $ 180 million appropriated for fiscal year 1986 by Congress under the State and Local Government Fiscal Assistance Act of 1972 ("Revenue Sharing Act") to the State and Local Government Federal Assistance Trust Fund ("Trust Fund") but sequestered under the Balanced Budget and Emergency Deficit Control Act of 1985 ("Gramm-Rudman"). The matter comes before the Court on the parties' cross-motions for summary judgment. *fn1" For the reasons set forth below, plaintiffs' motion is granted.

 I. Factual Background

 Under the Revenue Sharing Act, 31 U.S.C. § 6701, Congress provides non-categorical financial assistance to local governmental units, including cities and counties, in the form of annual entitlement grants. Payments under the Act are made through the Trust Fund, of which the Secretary of the Treasury is personally the Trustee. Id. § 6703.

 In November 1985, Congress appropriated a total of $ 4,566,700,000 to the Trust Fund for the "entitlement period" beginning October 1, 1985 and ending September 30, 1986 (coinciding with fiscal year 1986), but reduced payments from the Trust Fund by $ 381,700,000 to $ 4,185,000,000 through a reduction in the final quarterly payment. Pub. L. 99-160, 99 Stat. 909, 924 (Nov. 25, 1985). See 31 U.S.C. § 6703(b)(2).

 In December 1985, Congress passed and the President signed into law the Gramm-Rudman legislation, Pub. L. 99-177, 99 Stat. 1037 (Dec. 12, 1985), which required an across-the-board sequestration of fiscal year 1986 funding for each "program, project or activity" by a certain percentage determined by the Comptroller General. See §§ 251-252.

 On February 1, 1986, the President issued an order pursuant to Gramm-Rudman sequestering, among other budget items, $ 179,955,000 (or 4.3%) of the Trust Fund monies. In late February, the Office of Revenue Sharing ("ORS") of the Department of Treasury implemented the order and directed that the approximately $ 180 million of the Trust Fund be sequestered and set aside in a special account. Affidavit of Kent A. Peterson, Deputy Director and Acting Director for the ORS ("Peterson Affidavit"), para. 7 (attaching memorandum of former ORS Director Michael F. Hill). *fn2"

 On April 7, 1986, about two months after the Gramm-Rudman sequestration order, the President signed the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), which terminated and provided for the winding down of the general revenue sharing program with the close of the 1986 entitlement period. Pub. L. 99-272, 100 Stat. 327, § 14001 (1986).

 In July 1986, the Supreme Court invalidated the President's February sequestration order, Bowsher v. Synar, 478 U.S. 714, 106 S. Ct. 3181, 92 L. Ed. 2d 583 (1986), but Congress subsequently passed and the President signed legislation which affirmed and ratified the President's earlier action. P.L. 99-366 (July 31, 1986). The $ 180 million reduction in payments to the local governmental units was effected in the third and fourth quarterly payments for the 1986 entitlement period, issued July 7 and September 30, 1986, respectively. Peterson Affidavit, para. 8.

 On January 14, 1987, plaintiff National League of Cities requested the Secretary of the Treasury to release the $ 180 million sequestered under Gramm-Rudman. Pls. Exh. A. The Secretary, through Deputy Assistant Secretary Robert W. Rafuse, Jr., informed the National League of Cities on January 30, 1987, that the funds would not be released and would instead be returned to the General Fund of the Treasury. Pls. Exh. B. On February 6, 1987, plaintiff National Association of Counties also requested the Secretary to release the funds. Pls. Exh. C. Rafuse replied on February 18, 1987, that the sequestered funds had already been returned to the General Fund of the Treasury. Pls. Exh. D. Plaintiffs filed this action for declaratory and injunctive relief the next day. The Court has expedited review of this action in light of the congressional restriction that local governmental units must use, obligate, or appropriate all Trust Fund monies by October 1, 1987. COBRA, § 14001(a)(5).

 II. Analysis

 The question before the Court is a relatively narrow one of statutory interpretation: was the Secretary of the Treasury acting within his statutory authority in refusing to disburse and instead returning to the General Fund the $ 180 million in Trust Funds of the 1986 entitlement payments to local governments under the revenue sharing program that was sequestered under Gramm-Rudman? The parties agree that the relevant facts are undisputed and that the case is appropriate for summary judgment. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, 477 U.S. 242, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).

 The problem in statutory interpretation posed by this case results in part from Congress' failure to explicate fully the relationship between certain provisions of the three major federal statutes affecting the current status of the general revenue sharing program: the Revenue Sharing Act, Gramm-Rudman, and COBRA. Plaintiffs urge that the plain language of the statutes and congressional intent clearly lead to the conclusion that the sequestered funds survived the 1986 fiscal year and should now be paid to local governments. Looking at the same statutes, defendant argues to the contrary that the funds "lapsed" at the conclusion of the 1986 entitlement period, and therefore that he has no authority to make any further payments and is obligated to return the funds to the general treasury. There is no dispute, at least, that the plain language of the relevant statutes is the proper starting point for ...


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