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Will The Recent Chevron Ruling Have An Impact On Federal Financial Assistance? 

The answer is absolutely but this is not necessarily a bad thing. The “Chevron ruling” refers to the Supreme Court’s decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (1984), which established the principle of Chevron deference. Under Chevron deference, courts defer to federal agencies’ interpretations of ambiguous statutes that the agencies are responsible for administering, as long as those interpretations are reasonable. In June, the Supreme Court overturned this 40-year-old precedent.

Potential Impact of the Chevron Ruling on Federal Financial Assistance: 

1. Agency Discretion

  • Pre-Ruling: Federal agencies had significant discretion in interpreting statutes related to federal grants, which allowed them to implement and adjust grant programs flexibly; think the Treasury’s American Rescue Plan Act (ARPA) – Coronavirus State & Local Fiscal Recovery Funds (SLFRF). 
  • Post-Ruling: If Chevron deference is limited or overturned, agencies might have less flexibility in interpreting statutes. This could lead to more rigid implementation of grant programs, potentially making it harder for agencies to adapt to changing needs or circumstances. However, this could also end the practice of layering burdensome administrative requirements and policy initiatives into these same grant programs. 

2. Legal Challenges

  • Pre-Ruling: Courts generally upheld agency interpretations of grant-related statutes unless they were unreasonable. 
  • Post-Ruling: A reduction in Chevron deference could lead to an increase in legal challenges against agency interpretations of statutes governing federal grants. This could result in more frequent court cases and potentially more inconsistent outcomes as different courts might interpret statutes differently. While you want a level playing field, there are situations where flexibility is required, and the threat of protracted legal action might encourage some federal agencies to have more flexibility. 

3. Consistency and Predictability

  • Pre-Ruling: Chevron deference contributed to a level of consistency and predictability in how federal grant programs were administered because agencies’ interpretations were usually upheld. 
  • Post-Ruling: Without Chevron deference, there could be less consistency in the administration of grant programs, as courts might not always defer to agency expertise. This could create uncertainty for grant recipients who have always looked for “safe harbors” when worried about compliance issues; thus we might see even more consistency amongst federal agencies and their grant programs which will be an improvement. With the Chevron decision and the updated Uniform Guidance it would seem we are moving in that direction. 

4. Policy Implementation

  • Pre-Ruling: Agencies had the ability to implement policies and adjustments to grant programs based on their expertise and understanding of the statutes. 
  • Post-Ruling: Limiting Chevron deference could hinder agencies’ ability to implement new policies or make necessary adjustments to grant programs, potentially slowing down the responsiveness of federal grant systems to emerging needs. While this is yet to be determined I think it will provide for a more open and public process, which has not always been the case. 

5. Congressional Action

  • Pre-Ruling: Agencies often filled in the details of broadly written statutes, allowing for flexibility in the administration of grant programs. 
  • Post-Ruling: There may be increased pressure on Congress to write more detailed, precise legislation regarding federal grants to reduce ambiguity and thus the need for agency interpretation. This could lead to more specific statutory requirements, potentially reducing the flexibility of grant programs. One of the lessons learned from the COVID-19 programs is the confusion created by ambiguity and federal agencies filling in the blanks. While more work is required upfront, it definitely makes for an easier, more consistent process on the back end. 

6. Impact on Stakeholders

  • Pre-Ruling: Grant recipients—including state and local government agencies, non-profits, and other organizations—could rely on agency guidance and interpretations. 
  • Post-Ruling: These stakeholders might face more uncertainty and variability in grant administration, possibly affecting their ability to plan and execute programs funded by federal grants. This will require stakeholders to be more active and engaged in the appropriation process and not wait until many of the key decisions have already been made. 

In summary, the significant change in Chevron deference will have a major impact on all aspects of federal financial assistance. Grant professionals can view this as either a negative or a positive, but the reality is that change is coming. To make the best of this situation, grant professionals need to be more actively engaged in the congressional process and serve as advocates for the programs they manage and support. With the recently updated Uniform Guidance there is a great deal of momentum toward grant simplicity and consistency—and the Chevron decision can help to continue that momentum. 

Author

Matthew-Hanson_5ec4dda68b6bcab72c5edd90255be92b

Matthew Hanson
Managing Director, Grants & Policy

Matthew brings more than 25 years of progressive experience in government program/grant management, finance, and agency operations at the federal, state, and local levels. He is an industry thought leader focusing on the benefits of centralized approaches to grants management and the use of technology as resource multipliers leveraging his experience from the U.S. Department of Justice along with the State of Arizona, Matt has seen first-hand the efficiencies created through centralizing grants management services. As a result of his experiences during the American Recovery and Reinvestment Act of 2009, Matt lead the establishment of one of the nation's first statewide grants management offices along with the deployment of a statewide enterprise grants management solution.

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