Court Opinion

ID: 4967173
Source: CourtListenerOpinion
Date Created: 2021-09-24 16:22:56.435493+00
Date Added: 2024-06-11T08:16:16.194133
License: Public Domain

DISSENTING OPINION

Justice EAKIN.
I respectfully disagree with the majority’s holding that the bulletin at issue contains procedurally invalid legislative regulations; I find the guidelines in the bulletin are a permissible exercise of the Department of Public Welfare’s (DPW) statutory and regulatory authority to review foster care cost data.
DPW’s responsibilities under Title IVE and Article VII of the Public Welfare Code, 62 P.S. §§ 701-709.4, include oversight of foster care services administered by county children and youth agencies, and allocation of federal and state funds for those agencies. See id., § 704.1(a). DPW is required under § 703 of the Welfare Code to “make and enforce all rules and regulations necessary and appropriate to the proper accomplishment of the child welfare duties and functions vested by law in the county institution districts or their successors.” Id., § 703. Thus, the legislature bestowed DPW with both rule-making and regulatory authority under § 703: “[T]he Code reposes a substantial component of the responsibility for financial administration in DPW, which ... must substantially reimburse counties for authorized expenditures.” Majority Op., *318at 304 (citing 62 P.S. §§ 704.1, 709.1) (emphasis added).
Bulletin 09-02 is the product of a change in policy occasioned by a massive federal audit, which resulted in the federal government demanding repayment for services it deemed unjustified, due in part to insufficient documentation. See id., at 304-05. Because the audit underscored the inherent difficulties with its existing practice of reviewing foster care expenses on an ad hoc basis, DPW implemented new procedures designed to avoid future conflicts with the federal government, and to assure Pennsylvania receives maximum allowable reimbursement.
Specifically, DPW abandoned the practice of reviewing expenditures after counties negotiated per diem rates with private service providers and adopted the proactive approach embodied in Bulletin 09-02. This requires more detailed cost-reporting procedures to assist monitoring agencies in differentiating between allowable and unal-lowable expenses. DPW reviews the submitted information to verify compliance with federal and state law, and if discrepancies are found, additional documentation is requested. Once the provider’s allowable costs have been determined, those costs are aggregated, and DPW calculates the maximum level of reimbursement it deems appropriate based upon the information in its possession.
I disagree with the Commonwealth Court’s application of the “binding norm” test1 (classifying Bulletin 09-02 as an invalidly promulgated regulation), and also find its reliance on Eastwood Nursing and Rehabilitation Center v. Department of Public Welfare, 910 A.2d 134 (Pa.Cmwlth.2006), is misplaced. Furthermore, I must differ with the majority’s determination that the cost-reporting regime of the bulletin is not subsumed by current regulations. The three-factor test requires consideration of (1) the plain language of the bulletin, (2) the manner in which DPW has implemented the bulletin, and (3) the amount of administrative discretion allowed by the bulletin. Northwestern Youth Services, Inc. v. Department of Public Welfare, 1 A.3d 988, 993 (Pa.Cmwlth.2010) (citing Cash America Net of Nevada, LLC v. Commonwealth, 978 A.2d 1028, 1033 (Pa.Cmwlth.2009) (en banc), aff'd, 607 Pa. 432, 8 A.3d 282 (2010)). Applying these three factors, I find this bulletin merely offers guidance and interpretation of existing regulations.
First, the test requires a plain language consideration of the bulletin for mandatory language. The plain language of the bulletin, however, should not be read in a vacuum. Portions of the bulletin are merely recitations of validly promulgated regulations, which by their nature are mandatory. For example, two of the four sections of the bulletin cited by the majority simply repeat regulations: the phrase “the maximum level of state and federal reimbursement approved by the Department are binding on the counties” is taken directly *319from 55 Pa.Code § 3170.83,2 and the phrase “expenditures above the level of Departmental participation and those services funded without Departmental approval shall be the fiscal responsibility of the county” is taken from 55 Pa.Code § 3170.103.3 See DPW, Office of Children, Youth, and Families Bulletin, No. 3170-09-02, at 3-4 (August 25, 2009). Since these are recitations of regulations, these portions do not create new mandatory provisions at all.
The other two uses of mandatory language cited by the majority, “[fjailure to submit a complete set of contract documentation forms within the appropriate time frame will result in the county receiving a maximum allowable financial participation that is based on the incomplete information,” and “compliance with detailed instructions for completion of a cost allocation plan with regard to institutional residential facilities ‘is mandatory,’” are mere procedural requirements. Majority Op., at 306-07; Bulletin 09-02, at 13, 80. In fact, upon review of the bulletin, the only mandatory language innate to the bulletin itself is the procedural requirement that information be submitted through specific forms within a specific time frame to be considered for reimbursement. See Bulletin 09-02, at 4-5, 9-12. This, however, is only a procedural requirement regarding submission of a form containing information DPW is already permitted to collect and consider in approving reimbursement.4 Thus, the bulletin’s plain language is not “replete with mandatory, restrictive language” indicative of a regulation, Northwestern Youth Services, at 993, but merely contains guidelines for agencies and providers concerning existing regulations.
Second, concerning DPW’s implementation of the bulletin, note that DPW does not mandate appellees submit the listed forms. Instead, DPW hinges consideration of allowable costs for county services contracted through appellees on data provided through the forms. The county is still at liberty to contract with appellees if they do not submit the forms. See Bulle*320tin 09-02, at 4. Notably, the feared consequence, that the county will not be reimbursed for services if appellees do not prove allowable costs, does not stem from the requirements of the bulletin; rather, it is a result of valid regulations.5 Thus, this nexus between the bulletin and its regulations shows that implementation of Bulletin 09-02 is only an interpretation of existing, valid regulations.
Third, Bulletin 09-02 does not restrict agency discretion. DPW retains its discretion in determining allowable costs and the maximum level of reimbursement on a case-by-case basis when reviewing the submitted data. Accordingly, I find mandating standardized forms does not outweigh the discretion retained by DPW in determining allowable costs and the maximum level of reimbursement on a case-by-case basis. Thus, the three-factor test supports classifying Bulletin 09-02 as a tool providing guidance and interpretation of valid regulations, not as a procedurally invalid regulation.
I disagree with the analogies drawn by the Commonwealth Court between Bulletin 09-02 and the invalidly promulgated regulation in Eastwood Nursing. The Commonwealth Court found Eastwood Nursing instructive in categorizing Bulletin 09-02 as an invalid regulation because both policy statements were “restrictive, directive, [and] substantive,” and thus more like regulations. Northwestern Youth Services, at 994 (citing Eastwood Nursing, at 148). However, in Eastwood Nursing, the policy statement in question initiated an application process involving a new substantive qualification — that nursing homes had to establish a need for additional beds for approval of an application, when this need for beds was not defined or present in any of the applicable statutory or regulatory provisions. Eastwood Nursing, at 147-48 & n. 19. While the Commonwealth Court was correct that both policy statements required a new procedure, it overlooked the distinction that Bulletin 09-02 did not create any new substantive requirements, unlike the policy statement in Eastwood Nursing.
As to the procedural requirement of cost reporting, the Commonwealth Court’s decision in Central Dauphin School District v. Department of Education, 147 Pa.Cmwlth. 426, 608 A.2d 576 (1992), is persuasive. In Central Dauphin, the Commonwealth Court held a requirement that school districts answer a list of questions and submit them at a certain time for purposes of legislatively mandated budget reopening was not an invalidly promulgated regulation. Id. at 582-83. The court noted, “The budget reopening instructions request that school districts present their budget information to the Secretary in a fashion that will facilitate the Secretary’s understanding of the information and ability to report accurately to the Senate and House Education Committees whether a school district has complied with Act 25’s strictures.” Id. at 582. The court determined the manner in which the districts were required to adjust their budgets was *321determined by the relevant Act, and not by the guidance document, which merely provided the districts with a means for determining whether their budgets comported with the Act. Id. Similarly, the manner in which counties and providers here are reimbursed is dictated by the Welfare Code, and not Bulletin 09-02, which merely provides a gauge for determining compliance with the Code.
Further, in Central Dauphin, the court rejected the school districts’ argument that enumerated penalties for failure to submit the information requested in the budget reopening instructions constituted a binding norm. See id. at 582-83. Just as the penalties in Central Dauphin derived from the Public School Code, the penalty for failure to submit the requested information here derives from the Welfare Code.6 The penalty for noncompliance is “merely a restatement of existing mechanisms for enforcing the [Welfare Code] and is not the genesis of a binding norm.” Central Dauphin, at 588. Accordingly, I find Bulletin 09-02 is not a regulation because, while it has prescribed a format and time for submission of information, evaluation of that information relies on valid statutory and regulatory authority and proceeds on a case-by-case basis.
Furthermore, I disagree with the view that Bulletin 09-02' cannot be interpretative because the applicable statute and code sections do not include a cost-reporting requirement. See Majority Op., at 315. DPW is expressly permitted under existing regulations to review a provider’s per diem rates in advance and declare a maximum reimbursement rate. Thus, the reliance on only the final sentence of the record-keeping regulation, which states, “Methods of keeping records is [sic] acceptable as long as it is [sic] complete and accurate,” id: (quoting 55 Pa.Code § 3170.92(b)), is misleading. The relevant regulation, in its entirety, reads:
(b) Records maintenance. County agencies shall maintain sufficient and appropriate records and data to justify payment for expenses by the Department. The local authorities or contractors shall maintain books, records, documents and other evidence and accounting procedures and practices, sufficient to reflect properly all direct and indirect costs of whatever nature claimed to have been incurred and anticipated to be incurred for funds supported by the Department and for which reimbursement is claimed. Records shall be kept for a minimum of 5 years after the close of the fiscal year. Time and attendance and payroll distribution records shall be maintained for each employee. Methods of keeping records is [sic] acceptable as long as it is [sic] complete and accurate.
(c) Financial reporting requirements. The Department has the authority to prescribe the format, instruction, and time at which the county agency shall submit to the Department annual plans, annual estimates of expenditures and revisions, as well as expenditure and income reports.... The Department reserves the right to withhold future payments for non-submission of financial reports.
55 Pa.Code § 3170.92(b)-(c) (emphasis added). Subsection (b) requires the documentation be “sufficient to reflect properly all *322direct and indirect costs.” Id., § 3170.92(b). Clearly, based on the federal audit, there were significant deficiencies in the documentation procedures, and the county agencies failed to “maintain sufficient and appropriate records and data to justify payment for expenses by the Department.” See id. In light of the counties’ failure to comply with such regulations, DPW was justified in upgrading its monitoring policies and practices. Specifically, subsection (c) provides, “The Department has the authority to prescribe the format, instruction, and time at which the county agency shall submit to the Department annual plans[.]” Id., § 3170.92(c).
Therefore, the suggestion these published regulations affirmatively impose a mandatory requirement of cost-reporting to DPW is not too attenuated. But see Majority Op., at 315-16. I find it difficult to accept the proposition that DPW must implement such a program without the ability to ensure it would be properly carried out. Moreover, the provision directing a maximum level of reimbursement to be established by “directive!] or memorandum” can indeed be read as including a cost-reporting regime. See id. at 316 (citing 55 Pa.Code § 3170.84(a)(1)). Therefore, I reject the notion that DPW exceeded its authority by implementing measures to calculate maximum reimbursement rates through the directives published in Bulletin 09-02.
Faced with Office of Inspector General reports indicating the Commonwealth’s Title IV-E program had internal control weaknesses, DPW sought to rectify the problem by implementing new procedures to increase efficiency and prevent future conflicts with federal officials. In doing so, DPW acted within its statutory and regulatory authority in issuing this interpretative guidance document. Based on the foregoing, I would reverse the decision of the Commonwealth Court. I therefore dissent.

. In Pennsylvania Human Relations Commission v. Norristown Area School District, 473 Pa. 334, 374 A.2d 671, 679 (1977), this Court adopted the "binding norm” test for determining when a statement of policy is a regulation. The Commonwealth Court has subsequently elaborated on this test. See R.M. v. Pennsylvania Housing Finance Agency of Commonwealth, 740 A.2d 302, 306-08 (Pa.Cmwlth.1999) (applying three-factor binding norm test and determining statement of policy, not regulation, was at issue); Department of Environmental Resources v. Rushton Mining Company, 139 Pa.Cmwlth. 648, 591 A.2d 1168, 1173 (1991) (explaining "one must look to the extent to which the challenged pronouncement leaves the agency free to exercise discretion to follow or not follow the announced policy in an individual case”).

. Section 3170.83(b) states:
In addition the máximums outlined in § 3170.84 (relating to maximum levels of reimbursement) shall remain binding on the counties regarding the amount of costs in which the Department will participate.
Id. (emphasis added).

. Section 3170.103 states:
Expenditures above the level of Departmental participation and those services funded without Departmental approval shall be the fiscal responsibility of the local authorities. The eligibility requirements included in the regulations refer to maximum level of reimbursement for which the Department will participate. The county may fund programs, services, and facilities at rates they elect. However, the expenditures above the approved levels are the responsibility of the county. In cases where the county funds at a lower level than that listed in policy, the Department will only participate in expenditures based on the lower level established.
Id. (emphasis added).

.Counties establish rates of payment with providers and are instructed to use the policies in §§ 3170.41-3170.49 (relating to personnel expenses); §§ 3170.51-3170.61 (relating to operating expenses); and §§ 3170.71-3170.77 (relating to fixed assets) to develop these rates. 55 Pa.Code § 3170.83(b). Counties and providers are required to keep records “sufficient and appropriate ... to justify payment for expenses by the Department.” Id., § 3170.92(b). The records of counties and providers are subject to review and audit by the Department. Id., § 3170.106(a). Finally, allowable costs are not defined or changed by the bulletin; determination of whether a cost is allowable is proscribed by 55 Pa.Code Chapters 3130, 3140 and 3170; Office of Children, Youth, and Families Bulletin, No. 3140-08-01, at 2-9 (March 4, 2008); The Social Security Act, Title IV, Part E, 42 U.S.C. § 601 el seq.; and The Child Welfare Policy Manual.

. See supra, note 4 (discussing definition of allowable costs). Bulletin 09-02 does discuss a determination of the maximum level of reimbursement, as described in 55 Pa.Code § 3170.84(a); however, the maximum level of reimbursement is dependent upon allowable costs by regulation. 55 Pa.Code § 3170.11(b) (stating "[t]he extent of Departmental participation is dependent upon the level of funding for which a given service qualifies and the allowability of expenditures as they are defined in this chapter”) (emphasis added). Thus, the bulletin does not mandate the maximum level of reimbursement — the regulations do. The bulletin mandates only the format of proof necessary to show allowable costs and thus determine the maximum level of reimbursement, which is done on a case-by-case basis.

. DPW is expressly forbidden from making payments for child welfare services rendered during “any period in which the county institution district or its successor fails to substantially comply with the regulations of the department promulgated pursuant to section 703.” 62 P.S. § 704.1(c). Submitting reimbursement requests for unallowable expenses would constitute a failure to substantially comply with the regulations.