On Appeal from the United States District Court for the Eastern District of Pennsylvania Civil Action No. 88-5305.
Gibbons, Chief Judge, Becker and Nygaard Circuit Judges.
The City of Philadelphia and its mental retardation officials, Health Commissioner Maurice Clifford and Mental Health/Mental Retardation Administrator Robert Glover, (collectively "Philadelphia"), and the Commonwealth of Pennsylvania, its Secretary of Public Welfare, John F. White, Jr., and his Deputy Secretary for Retardation, Steven Eidelman, (collectively "the Commonwealth") appeal from a district court order enjoining them to maintain services to mentally retarded individuals who live at home at fiscal year 1988 levels. We conclude that the district court erred in holding that the reduction or elimination of services to this group violated the fourteenth amendment on equal protection and substantive due process grounds. Therefore, we will reverse.
The mentally retarded require special and continuing care called "habilitation" to function optimally in society. Habilitation entails "teaching and training the retarded basic life and social skills," App. 833, such as walking, talking, eating, toileting, socializing, using money, traveling, and working. These lessons, however, are not learned permanently by mentally retarded persons: once habilitation ceases, they begin to regress. In Pennsylvania, state-subsidized habilitation of the mentally retarded is performed in a variety of settings ranging from state institutions to the retarded person's home.
Provision of these services is governed by the Mental Health and Mental Retardation Act of 1966, 50 Pa. Stat. Ann. §§ 4101-4704 (Purdon 1969 & Supp. 1988). The Act divides responsibility for providing and purchasing services for the mentally retarded between the state and county governments.*fn1 It delegates to the state the duties "to ensure . . . the availability and equitable provision of adequate . . . mental retardation services for all persons who need them," to promulgate regulations consistent with the Act, and to assist the counties in fulfilling their duties. 50 Pa. Cons. Stat. Ann. § 4201. It delegates to the counties diagnosis, evaluation of needs, and development of a plan to address those needs, including a determination to place the mentally retarded person either in the institution, a group home, or with his family. Id. at §§ 4301-4305; 55 Pa. Code §§ 6201.1-.14. To be eligible for county-level services, individuals must register with, and be accepted by, a base service unit ("BSU"). 50 Pa. Cons. Stat. Ann. § 4301(d)(9) (Purdon 1969) ; 55 Pa. Code § 6201.13(a).
The Act requires the Pennsylvania General Assembly annually to budget funds for mental retardation services within the state. See 50 Pa. Stat. Ann. §§ 4201-4202 (Purdon 1969 & Supp. 1988). It delegates to the Department of Public Welfare disbursement of these funds, supplemented by federal funds, among Pennsylvania's sixty-seven counties. Id. at §§ 4201, 4507, 4509. The counties, however, remain free to provide additional funding. Seeid. at § 4509. The Act also anticipates funding shortfalls, requiring the Department of Public Welfare, in the event of an allocation insufficient to fully fund approved grants,
to distribute State funds among the counties by a formula reasonably designed to achieve the objectives of this act, provided however, that in such event the counties' financial obligations under this act shall be reduced in accordance with the same formula and the counties shall be required to provide only those services for which sufficient funds are available.
Under the statutory scheme, the state must provide total funding for approved local residential programs, which give twenty-four hour care to live-in residents. Id. at §§ 4507, 4509. Programs administering approved nonresidential services must receive ninety percent of their funding from the state and ten percent from the county. Id. at § 4509. Since 1983, Philadelphia's program has run at a deficit; in each year through fiscal year 1987, it covered the deficit with money left over from placement of persons from Pennhurst. App. 636-37. In fiscal year 1988, however, Philadelphia could not find a way to cover the difference. Faced with cutting services, Philadelphia asked for and received supplemental funding from the Commonwealth. The Commonwealth, however, refused Philadelphia's request to annualize this special allocation. The Commonwealth's position set the stage for the instant dispute.
For fiscal year 1989, the Commonwealth once again allocated less funds than Philadelphia needed. The shortfall was estimated at $6.8 million, approximately 10% of Philadelphia's budgeted spending for care and treatment of the mentally retarded. The Commonwealth, as promised, refused to supplement the funding. In response, Philadelphia announced that it planned to reduce services to mentally retarded citizens living at home. The reductions would be made there because Philadelphia believed such a response best would maintain the integrity of the system as a whole.
Hoping to minimize harm to those residing at home, the city decided to cut "soft" services, such as case management, more heavily than "hard" services, such as day and vocational programs. Specifically, Philadelphia planned to compensate for the shortfall by reducing case management by 50%, family support services by 30%, and early intervention programs*fn2 by 10%. These cuts were made equally to each BSU. Thus, regardless of the ratio of nonresidential to residential clients serviced, each BSU lost the same proportionate amount of dollars. App. 214. The plan additionally called for a per person reduction in day and vocational programs, meaning that the ratio of nonresidential to residential clients factored into the reductions. Id. at 214-15. Once instituted, this policy would affect the home-treated mentally retarded as follows: 540 (59%) would lose their vocational services; 550 of 1,800 families would lose support services; and 150 of 1,500 children would lose their early intervention services. App. 829 (Philadelphia Police & Fire Ass'n for Handicapped Children v. City of Philadelphia, 699 F. Supp. 1106, slip op. at 1 (E.D.Pa. 1988) [hereinafter Dist. Ct. Op.]). The decision where to make the cuts was an administrative one.
When Philadelphia announced the planned cuts, the Philadelphia Police and Fire Association for Handicapped Children, Inc.*fn3 and thirty-two mentally retarded individuals, later absorbed into a certified class of mentally retarded plaintiffs comprised of all individuals currently or subsequently registered "as clients with retardation with the City of Philadelphia and its Base Services Units," (collectively, "the class"), sued Philadelphia and the Commonwealth under 42 U.S.C. § 1983. September 15, 1988 Order, App. 170a. They alleged violations of the class members' fourteenth amendment equal protection and substantive due process rights arising from a reduction of mental retardation services provided to mentally retarded persons living at home by the state and the city due to budgetary shortages. They also alleged that Philadelphia's planned actions violated state law.
The class moved for a temporary restraining order and a preliminary injunction. On July 29, 1988, the district court heard oral argument and issued a temporary restraining order enjoining Philadelphia and the Commonwealth "to continue all services, programs and support . . . to all retarded persons who were receiving such services on June 1, 1988 on the same basis and to the same extent as such services were provided as of June 1, 1988," effective 12:01 a.m. August 1, 1988. App. 167a. The court next consolidated the requests for preliminary and permanent injunctions and scheduled a trial for September 26, 1988. All issues concerning mentally retarded Philadelphians on the "waiting list" for services were severed, leaving for resolution at trial only those issues concerning the plaintiffs currently receiving community mental retardation services. The parties, through a series of agreements, consented to continue the temporary restraining order in effect through November 17, 1988.
The trial was held from September 26 through September 29, after which the court ordered the parties to attempt settlement. The negotiations, however, bore no fruit. ...