985 F.Supp. 168 (D.D.C. 1998), Civ. 97-2393, City of New York v. Clinton

Docket Nº:CIV. 97-2393(TFH), CIV. 97-2463(TFH).
Citation:985 F.Supp. 168
Party Name:CITY OF NEW YORK, et al., Plaintiff, v. William J. CLINTON, et al., Defendant. SNAKE RIVER POTATO GROWERS, INC., et al., Plaintiff, v. Robert E. RUBIN, et al., Defendant.
Case Date:February 12, 1998
Court:United States District Courts, District of Columbia

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985 F.Supp. 168 (D.D.C. 1998)

CITY OF NEW YORK, et al., Plaintiff,


William J. CLINTON, et al., Defendant.



Robert E. RUBIN, et al., Defendant.

Nos. CIV. 97-2393(TFH), CIV. 97-2463(TFH).

United States District Court, District of Columbia.

Feb. 12, 1998

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Michael Sean Laane, Arnold & Porter, Washington, DC, for City of New York, New York City Health and Hospitals Corp., Greater New York Hospital Association, Jamaica Hospital Medical Center, District Council 37, American Federation of State, County and Municipal Employees, Local 1199 National Health and Human Service Employees Union.

Neil H. Koslowe, U.S. Dept. of Justice, Washington, DC, for William J. Clinton, Donna E. Shalala, Franklin D. Raines.

Michael Davidson, Washington, DC, for Robert C. Byrd, Daniel Patrick Moynihan, Carl Levin.

Thomas Becket Pahl, Gadsby & Hannah, Washington, DC, for Dan Burton.

Morgan John Frankel, Thomas B. Griffith, Legal Counsel, Washington, DC, for U.S. Senate.


THOMAS F. HOGAN, District Judge.

This case requires the Court to adjudge the constitutionality of the Line Item Veto Act. Before reaching the constitutional challenge, however, the Court must first conclude that it has jurisdiction to hear the case, by determining that Plaintiffs in this action have Article III standing. Based on the briefs and exhibits submitted by the parties and amici curiae1, and argument at a hearing conducted on January 14, 1998, the Court finds that these Plaintiffs have demonstrated the requisite injury to have standing; furthermore, it finds that the Line Item Veto Act violates the procedural requirements ordained in Article I of the United States Constitution and impermissibly upsets the balance of powers so carefully prescribed by its Framers. The Line Item Veto Act therefore is unconstitutional.

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I. Background

A. The Line Item Veto Act [2

Unable to control its voracious appetite for "pork," Congress passed, and the President signed into law, the Line Item Veto Act. Pub.L. No. 104-130, 110 Stat. 1200 (1996).3 The Act is designed as an amendment to, and an enhancement of, Title X of the Congressional Budget and Impoundment Control Act of 1974 ("ICA"). 2 U.S.C. §§ 681 et seq. The ICA authorized the President to defer spending of Congressional appropriations during the course of a fiscal year or other period of availability, as long as Congress intended for those appropriations to be permissive rather than mandatory. Id. The President also could propose the total rescission of an appropriation to Congress, but unless Congress approved the rescission, the President was obligated to release the funds. Id. §§ 683(b), 688. Because it generally failed to make the rescissions recommended by the President, Congress found this arrangement to be an unsatisfactory mechanism for controlling deficit spending.4

As large deficits persisted, Congress considered various amendments to the ICA to alleviate its perceived defects. One proposal, called "expedited rescission," would amend the ICA to streamline the process for Congressional approval of rescissions proposed by the President. See, e.g., H.R. 2164, 102d Cong. (1991). Other proposals included amending the Constitution to give the President a line item veto, see, e.g., H.R.J. Res. 6, 104th Cong. (1995); H.R.J. Res. 4, 103d Cong. (1993), or adopting a congressional procedure for presenting each spending provision to the President as a separate bill, for approval or veto. See, e.g., S. 137, 104th Cong. (1995); S. 238, 104th Cong. (1995). Congress settled on an "enhanced rescission" proposal, codified in the Line Item Veto Act, that makes Executive rescissions automatic in defined circumstances, subject to congressional disapproval. By making appropriations "conditional" during the period in which the President has authority to veto provisions, and "by placing the onus on Congress to overturn the President's cancellation of spending and limited tax benefits," H.R. Conf. Rep. No. 104-491, at 16 (1996), the Line Item Veto Act reverses the appropriation presumptions under the ICA.

The Line Item Veto Act gives the President the authority to "cancel in whole," at any time within five days (excluding Sundays) after signing a bill into law, (1) "any dollar amount of discretionary budget authority;" (2) "any item of new direct spending;" and (3) "any limited tax benefit." 2 U.S.C. § 691a (1997).

A "dollar amount of discretionary budget authority" is defined as "the entire dollar amount of budget authority" that is specified in the text of an appropriations law or found in the tables, charts, or explanatory text of statements or committee reports accompanying a bIll. Id. at § 691e(7). An "item of new direct spending" is a specific provision that will result in "an increase in budget authority or outlays" for entitlements, food stamps, or other specified programs. Id. at §§ 691e(8), 691e(5). A "limited tax benefit" is a revenue-losing provision that gives tax relief to 100 or fewer beneficiaries in any fiscal year, or a tax provision that "provides temporary or permanent transitional relief for ten or fewer beneficiaries in any fiscal year."5 Id. at § 691e(9).

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With respect to any dollar amount of discretionary budget authority, the Act defines "cancel" as "to rescind." Id. at § 691e(4)(A). Cancellation of an item of new direct spending or a limited tax benefit prevents it from having "legal force or effect." Id. at § 691e(4)(B). Canceled funds may not be used for any purpose other than deficit reduction. Id. at §§ 691c(a)-(b).

To exercise cancellation authority, the President must submit a "special message" to Congress within five calendar days of signing a bill containing the item being canceled. Id. at § 691a(c)(1). The President's special message must set forth the reasons for the cancellation; the President's estimate of the "fiscal, economic, and budgetary effect" of the cancellation; an estimate of "the ... effect of the cancellation upon the objects, purposes and programs for which the canceled authority was provided;" and the geographic distribution of the canceled spending. Id. at § 691a(b). The President may exercise this authority only after determining that doing so will "(i) reduce the Federal budget deficit; (ii) not impair any essential Government functions; and (iii) not harm the national interest." Id. at § 691(a)(3)(A).

A cancellation takes effect upon Congress' receipt of the President's special message. Id. at § 691b(a). Congress can restore a canceled item by passing a "disapproval bill," which is not subject to the President's Line Item Veto authority, but is subject to the veto provisions detailed in Article I. Id. Disapproval bills must comport with the requirements prescribed in Article I, section 7, although the Line Item Veto Act provides for expedited consideration of these bills. Id. at §§ 691e(6), 692(c). If a disapproval bill is enacted into law, the President's cancellation is nullified and the canceled items become effective. Id. at § 691b(a).

In terms of judicial review, the Line Item Veto Act provides that "[a]ny member of Congress or any individual adversely affected ... may bring an action in the United States District Court for the District of Columbia, for declaratory judgment and injunctive relief on the ground that any provision of [the Act] violates the Constitution." Id. at § 692(a)(1). The Act provides for direct appeal to the Supreme Court and directs both Courts "to expedite to the greatest possible extent the disposition of any matter brought under [this provision.]" Id. at 692(b)-(c).

B. Factual Background in New York City v. Clinton

The City of New York plaintiffs consist of the City itself, two hospital associations (Greater New York Hospital Association, or GNYHA, and New York City Health and Hospitals Corporation, or NYCHHC), one hospital (the Jamaica Hospital Medical Center), and two unions that represent health care employees (District Council 37, American Federation of State, County and Municipal Employees and Local 1199, National Health and Human Service Employees).

The City of New York plaintiffs' claims arise out of a dispute over Federal Medicaid payments to the State of New York. The Health Care Financing Administration of the Department of Health and Human Services ("HCFA") provides federal financial participation ("FFP") to match certain state Medicaid expenditures. (See Brown Decl., Defs.' Ex. 1 at ¶ 3.) The FFP provided by the federal Medicaid program to match state expenditures is reduced by the revenue that the state receives from health care related taxes. Id. at ¶ 4. The FFP is not reduced, however, by tax revenue that meets specified criteria, including that the taxes are "broad-based" (i.e., applied to all health care providers within the same class) and "uniform" (i.e., applied equally to all taxed providers). Id.

New York State taxes its health care providers and uses this tax revenue to pay for health care for the poor. (See Wang Decl., Pls.' Ex. 2 at ¶ 4.) The State exempts certain revenues (e.g., those derived from particular charities) of some health care providers (e.g., the plaintiff health care providers) from the health care provider tax. (See van Leer Decl., Pls.' Ex. 3 at ¶ 3.) That is, New York exempts plaintiff health care providers from taxes that other health care providers must pay.

On December 19, 1994, HCFA notified New York State that 19 of its tax programs violated HCFA's requirements. (See Dear

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State Medicaid Director Letter, Pls.' Ex. 2D.) Since then, New York has submitted over 60 waiver applications to HCFA, which to date have neither been approved nor denied. (...

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