ANDREW H. BY IRENE H. v. Ambach

• Decision Date: 31 December 1984
• Docket Number: No. 84-CV-131.,84-CV-131.
• Citation: 600 F. Supp. 1271
• Parties: ANDREW H., a minor, by his mother, IRENE H., Denise P., a minor, by her mother, Diane P., Becky D. and Dicky D., minors, by their mother, Jeanne D., Scott W., a minor, by his mother, Janet W., Katrina S., a minor, by her mother, Shirley S., Steven Z., a minor by his father, Leo Z., Erin G., a minor, by her mother, Candice G., on behalf of themselves and all others similarly situated, the Clear View School of the Association for Mentally Ill Children of Westchester, Inc., the Greenshire Residential School for Retarded Children, the Herbert G. Birch School Inc., the Interagency Council of Mental Retardation and Developmental Disabilities Agencies, Inc., the New York State Council of Voluntary Family and Child Care Agencies, Inc., and Organization to Assure Services for Exceptional Students, Inc., Plaintiffs, v. Gordon M. AMBACH, individually and as Commissioner of Education of the State of New York, and Michael Finnerty, individually and as Director of the Budget of the State of New York, Defendants.
• Court: U.S. District Court — Northern District of New York

600 F. Supp. 1271

ANDREW H., a minor, by his mother, IRENE H., Denise P., a minor, by her mother, Diane P., Becky D. and Dicky D., minors, by their mother, Jeanne D., Scott W., a minor, by his mother, Janet W., Katrina S., a minor, by her mother, Shirley S., Steven Z., a minor by his father, Leo Z., Erin G., a minor, by her mother, Candice G., on behalf of themselves and all others similarly situated, the Clear View School of the Association for Mentally Ill Children of Westchester, Inc., the Greenshire Residential School for Retarded Children, the Herbert G. Birch School Inc., the Interagency Council of Mental Retardation and Developmental Disabilities Agencies, Inc., the New York State Council of Voluntary Family and Child Care Agencies, Inc., and Organization to Assure Services for Exceptional Students, Inc., Plaintiffs, v. Gordon M. AMBACH, individually and as Commissioner of Education of the State of New York, and Michael Finnerty, individually and as Director of the Budget of the State of New York, Defendants.

No. 84-CV-131.

United States District Court, N.D. New York.

December 31, 1984.

COPYRIGHT MATERIAL OMITTED

Rebell & Krieger, New York City, for plaintiffs; Michael A. Rebell, Arthur R. Block, New York City, Marion C. Katzive, White Plains, N.Y., of counsel.

Robert Abrams, Atty. Gen. of the State of N.Y., Albany, N.Y., for defendants; Lawrence L. Doolittle, Asst. Atty. Gen., Albany, N.Y., of counsel.

MEMORANDUM-DECISION and ORDER

MINER, District Judge.

I

This action arises out of a challenge to the New York State rate setting procedure for tuition reimbursement of private schools providing services to handicapped children who are unable to be placed in public school programs under the Education of the Handicapped Act ("EHA"), 20 U.S.C. §§ 1401-1461, and Article 89 of the New York State Education Law, N.Y. Educ.Law §§ 4401-4409 (McKinney 1981 & Supp.1983). The action is brought pursuant to 42 U.S.C. § 1983 and is founded upon claims that the revised rate setting procedure deprives plaintiffs of their due process and equal protection rights under the fourteenth amendment to the United States Constitution, and violates statutory protections under the EHA and section 504 of the Rehabilitation Act of 1973 ("Rehabilitation Act"), 29 U.S.C. § 794.¹ Jurisdiction is predicated upon 28 U.S.C. §§ 1331, 1343. Before the Court are the plaintiff children's motion for partial summary judgment on their first, second, fourth and fifth claims, and the plaintiff schools' motion for summary judgment on the ninth claim, and for partial summary judgment on the eighth claim, Fed.R.Civ.P. 56(a). In addition, defendants have moved for summary judgment with respect to those claims raised by the organizational plaintiffs, Fed. R.Civ.P. 56(b).

II

Plaintiffs Andrew H., Denise P., Becky D., Dicky D., Scott W., Katrina S., Steven Z., and Erin G., are handicapped children under the EHA and New York law. See 20 U.S.C. § 1401(1); N.Y.Educ.Law § 4401.1.² Each child either currently attends one of the private schools named as plaintiffs in this action or has not been able to be placed in a proper public or private school due to the extent of his/her handicap. Plaintiffs Clear View School, Greenshire School and Herbert G. Birch School are private schools which have been approved by the New York State Commissioner of Education to provide special educational services for handicapped children.³ Plaintiff Interagency Council of Mental Retardation and Developmental Disabilities Agencies, Inc. ("IAC") is a not-for-profit New York corporation consisting of sixty voluntary, not-for-profit providers of services for the handicapped in New York. Plaintiff New York State Council of Voluntary Family and Child Care Agencies ("Council") is a not-for-profit New York corporation consisting of 119 non-sectarian voluntary family and child care agencies located throughout New York. Plaintiff Organization to Assure Services for Exceptional Students ("OASES") is a not-for-profit New York corporation consisting of thirty-eight private schools approved by the New York State Commissioner of Education to provide educational services to handicapped children. Defendant Gordon M. Ambach is the New York State Commissioner of Education and is charged with overseeing public education in the State, including special education. Defendant Michael Finnerty is the New York State Director of the Budget and is authorized to approve tuition reimbursement rates for private schools providing services for handicapped children after such rates have been set by the Commissioner of Education.

A. Statutory Framework

The EHA "provides federal money to assist state and local agencies in educating handicapped children, and conditions such funding upon a State's compliance with extensive goals and procedures." Board of Education v. Rowley, 458 U.S. 176, 179, 102 S.Ct. 3034, 3037, 73 L.Ed.2d 690 (1982). The Act requires states receiving federal assistance under it to "effect a policy that assures all handicapped children the right to a free appropriate public education." 20 U.S.C. § 1412(1). A participating state must submit for approval to the Commissioner of Education a detailed plan outlining the manner in which such educational opportunities will be provided. Id. § 1413. The "free appropriate public education" includes not only special education, id. §§ 1401(16), 1412, but also related services such as transportation, physical and occupational therapy and psychological services. Id. § 1401(17).

Under the EHA, each local board of education is obligated to locate and evaluate all handicapped children residing within its jurisdiction, id. § 1414, and to provide these children with an educational program "at the earliest practicable time." 34 C.F.R. § 104.33(d).⁴ Each child's educational placement is determined on an individual basis through the development of an "individual educational program" ("IEP") which tailors the specific needs of the child to the specific program. The IEP is developed with the input of the parents, teacher and school board. When an appropriate placement in a public school cannot be located due to the special needs of the child or an unavailability of space, the EHA authorizes local school districts to contract with private institutions, approved as suitable by the Commissioner of Education, for placement of the child. 20 U.S.C. § 1413(a)(4)(B). Children placed in such private programs must be so placed "at no cost to their parents or guardian." Id.

Pursuant to these provisions, Article 89 of the New York State Education Law authorizes local school boards to enter into such contracts with private institutions, provided that the private institution and the specific contract are previously approved by the Commissioner. N.Y. Educ.Law § 4402.2(b)(1). The Commissioner then is charged with the duty to develop reimbursement methodologies "for tuition and maintenance components of approved private schools." Id. § 4405.3(d)(i). These methodologies, developed in consultation with various agencies, are "based upon appropriate educational standards promulgated pursuant to regulations of the commissioner of education," id., and are subject to the approval of the State Director of the Budget. Id. § 4405.3(d)(iii). Once such methodologies are approved, the Commissioner is obligated to apply them to the various approved private schools in order to determine the annual tuition reimbursement rate for each school.

B. The New York Rate Setting Methodologies

Pursuant to a State legislative directive,⁵ the New York State Department of Education ("Department"), prior to the commencement of the 1983-84 school year, adopted a new reimbursement system for private schools. The new reimbursement methodologies attempt to set a school's reimbursement rate by analyzing the school's actual cost history as reflected by a base year. The base year is two years prior to the year for which the current rate is being set. Depending on the individual circumstances of the school, these base year figures may be adjusted upward for inflation or for major program changes required by law, regulation or enrollment. After such figures are established, a school's cost figures in certain cost center categories are subject to various "screens" reflecting statewide or regional averages for such costs. If a given school's cost figures are above the allowable screen, they are disallowed pending an appeal or a possible justification for the higher cost.

At least five cost screens are used by the Department in reviewing actual cost figures: an administrative cost screen, a facility and maintenance cost screen, a teacher salary cost screen, a growth rate cost screen and a total cost screen. The administrative cost screen provides that administrative costs which exceed twenty percent of the total allowable costs are disallowed, pending a possible justification. The facility and maintenance cost screen covers such items as rent, real estate taxes, utilities and interest on debt service and is computed by a formula which considers the average square footage per child in schools statewide, the enrollment of the specific school and the allowable cost per square foot calculated yearly.⁶ The teacher salary cost screen prohibits an increase in teacher salaries in any given fiscal year by more than the allowable increase in personal services. The growth rate cost screen limits a school which has a per care day tuition rate thirty to eighty percent higher than the statewide average to a zero to five and one-half percent increase for the upcoming fiscal year. The total cost screen, which is considered after all other screens, limits a school's per care day rate to a twenty percent increase from the prior year.

Each school's reimbursement rate is calculated initially by Department accountants. Upon receipt of its initial calculation of allowable tuition, a school is given thirty days to appeal the...