Tosto v. Pennsylvania Nursing Home Loan Agency

• Decision Date: 27 January 1975
• Parties: Frank M. TOSTO, a Citizen, Resident and Taxpayer of the Commonwealth of Pennsylvania, in his own right and on behalf of all other Residents and Taxpayers of the Commonwealth, Plaintiff, v. PENNSYLVANIA NURSING HOME LOAN AGENCY and Grace M. Sloan, State Treasurer, Defendants.
• Court: Pennsylvania Supreme Court

331 A.2d 198

460 Pa. 1

Frank M. TOSTO, a Citizen, Resident and Taxpayer of the Commonwealth of Pennsylvania, in his own right and on behalf of all other Residents and Taxpayers of the Commonwealth, Plaintiff, v. PENNSYLVANIA NURSING HOME LOAN AGENCY and Grace M. Sloan, State Treasurer, Defendants.

Supreme Court of Pennsylvania.

January 27, 1975.

[Copyrighted Material Omitted]

Gilbert J. Helwig, Robert L. Potter, Reed, Smith, Shaw & McClay, Pittsburgh, Israel Packel, Atty. Gen., Harrisburg for Pa. Nursing Home Loan Agency.

Leonard J. Paletta, McArdle, McLaughlin, Paletta & McVay, Pittsburgh for respondents.

Before JONES, C.J., and O'BRIEN, ROBERTS, POMEROY and MANDERINO, JJ.

OPINION OF THE COURT

ROBERTS Justice.

This is a taxpayer's suit seeking to enjoin the operation of the recently enacted Nursing Home Loan Agency Law, Act of July 22, 1974, P.L. ---, No. 207, Pa.Legis.Serv. 571 (1974) (to be codified as 62 P.S. § 1521.101 et seq.). Plaintiff filed his complaint in the Commonwealth Court alleging a variety of constitutional defects. Defendants petitioned this Court to assume plenary jurisdiction, ^[1] which we did by per curiam order on October 25, 1974. The parties, after stipulating that no issues of fact existed to be tried, have filed motions for judgment on the pleadings. We determine that judgment should be awarded to defendants.

The N.H.L.A.L. stems from legislative concern with the inability of many nursing homes to provide safe and healthy accommodations for their residents. ^[2] Pursuant to article VIII, section 7(a)(3) of the Constitution, P.S., ^[3] the Legislature submitted to the voters the question whether they 'favor the incurring of indebtedness by the Commonwealth of $100,000,000 for use as loans to repair, reconstruct and rehabilitate nursing homes in order to meet standards for health and safety?' ^[4] The program was approved by referendum on May 21, 1974.

Section 201 of the Law creates the Pennsylvania Nursing Home Loan Agency composed of six ex officio members from the executive departments and three gubernatorial appointees. § 202. The agency is authorized in § 203(6) 'to make loans to nursing homes for repair, reconstruction and reheabilitation . . . in order that such nusing homes may meet State and Federal Safety Standards . . ..' Section 301 provides:

'All nursing homes meeting applicable State and Federal regulations, with the exception of Life Safety Code, for the acceptance of Medicaid patients shall be eligible to apply for loans from the Nursing Home Loan Agency under provisions of this act.' ^[5]

Funds for the loans are to be provided by a sale by competitive bidding of general obligation bonds (not exceeding $100,000,000) backed by the credit of the Commonwealth. §§ 401, 402(c). The Law creates a sinking fund for payment of interest and principal. § 408(a). The sources of the sinking fund are funds received in repayment of loans to nursing homes and appropriations by the Legislature. §§ 205, 411.

Plaintiff's first attack on the N.H.L.A.L. is cast in terms of the absence of a public purpose. He invokes the principle, well-settled for over a century, that 'the legislature (does not have) any constitutional right to create a public debt, or to lay a tax, . . . in order to raise funds for a mere Private purpose.' Sharpless v. Mayor of Philadelphia, 21 Pa. 147, 168 (1853) (opinion of Black, C.J.); see Citizens' Savings & Loan Assocation v. Topeka, 87 U.S. (20 Wall.) 655, 22 L.Ed. 455 (1874). He does not contend that the safety of residents of nursing homes is not a proper subject of legislative concern. Rather, he argues that (1) the means chosen by the Legislature are not 'reasonably designed to achieve its stated public purpose'; ^[6] and (2) 'the obvious private gain to proprietors of nursing homes' ^[7] undermines and dissipates the Law's public purpose. Both arguments are without merit.

Plaintiff correctly asserts that the means chosen by the Legislature must be 'reasonably designed' to achieve permissible ends. Basehore v. Hampden Industrial Development Authority, 433 Pa. 40, 50, 248 A.2d 212, 217 (1968); see id. at 65, 248 A.2d at 224 (concurring opinion of this writer). However, the role of the judiciary in scrutinizing the particular approach selected by the Legislature is a limited one. We do not, at the invitation of a disgruntled taxpayer, re-assess the wisdom and expediency of alternative methods of solving public problems. 'It is the province of the legislature, not the judiciary, . . . to determine the means necessary to combat' public problems, for with means as with ends, 'the legislature, which is more responsive to the people and has more adequate facilities for gathering and assembling the requisite data, is in a better position to evaluate and determine' alternative approaches. Basehore,supra, at 49, 248 A.2d at 217; see also Johnson v. Pennsylvania Housing Finance Agency, 453 Pa. 329, 337--338, 309 A.2d 528, 533 (1973). Our inquiry is limited to a determination of whether the means selected are so 'demonstrably irrelevant to the policy the Legislature is free to adopt' ^[8] as to be arbitrary and irrational.

In this case, plaintiff has failed to demonstrate that a program of making 'loans to nursing homes for repair, reconstruction and rehabilitation' ^[9] is not a rational approach to assisting nursing homes to comply with State and Federal safety standards and thus enhancing the safety of their residents. We conclude that the legislative program is reasonably designed to effectuate the Law's public purpose. See Basehore, supra, 433 Pa. at 49--50, 248 A.2d at 217.

Plaintiff's argument that private gain to nursing homes somehow outweighs the public purpose of the Law is equally meritless. We rejected this theory in Basehore, where we sustained the constitutionality of the Industrial Development Authority Law. Speaking through Mr. Justice (now Chief Justice) Jones, we stated:

'The taxpayers' main concern is that the party who is really benefiting from this program is the private manufacturer who acquires an industrial plant at a much lower cost than he would have incurred had he built it himself. It is beyond question that private manufacturers receive a very large benefit from this program; however, this fact alone should not invalidate the program. If the legislative program is reasonably designed to combat a problem within the competence of the legislature and if the public will benefit from the project, then the project is sufficiently public in nature to withstand constitutional challenge.'

433 Pa. at 50, 248 A.2d at 217; see also Sharpless, supra, 21 Pa. at 169; cf. Washington Park, Inc. Appeal, 425 Pa. 349, 353, 229 A.2d 1, 3 (1967); Belovsky v. Redevelopment Authority of Philadelphia, 357 Pa. 329, 341, 54 A.2d 277, 283 (1947). Because the N.H.L.A.L. is reasonably designed to yield benefits to the public, it withstands this constitutional challenge.

Plaintiff next contends that the N.H.L.A.L. involves an unconstitutional delegation of legislative power in violation of article II, section 1 of the Constitution. ^[10] He invokes the so-called nondelegation rule which, as a 'natural corrolary' of article II, section 1, 'requires that the basic policy choices involved in 'legislative power' actually be made by the Legislature as constitutionally mandated.' Chartiers Valley Joint Schools v. Allegheny County Board of School Directors, 418 Pa. 520, 529, 211 A.2d 487, 492 (1965). More specifically, the rule demands that, when the Legislature delegates policymaking discretion to administrative agencies, it must make the 'basic policy choices' which will serve as standards to guide and restrain the exercise of discretion. ^[11] See Commonwealth v. Cherney, 454 Pa. 285, 289--290, 312 A.2d 38, 41 (1973); DePaul v. Kauffman, 441 Pa. 386, 391--392, 272 A.2d 500, 503 (1971); Chartiers Valley Joint Schools, supra; Commonwealth Water & Power Resources Board v. Green Spring Co., 394 Pa. 1, 5, 145 A.2d 178, 183 (1958); O'Hara's Appeal, 389 Pa. 35, 47--48, 131 A.2d 587, 593 (1957).

Plaintiff argues that the Legislature did not provide standards in the N.H.L.A.L. He points to various sections of the law ^[12] which grant the agency policy- making discretion without, he contends, adequate standards. In this he is mistaken. The entire law reveals that the agency's policy decisions must be directed to the effectuation of the Legislature's basic policy of assisting nursing homes that do not comply with the Life Safety Code ^[13] and are unable to achieve compliance through private sources of financing, ^[14] which assistance is to be given with prudence for protection of the loan fund. ^[15] This pervasive general policy is clearly sufficient to satisfy the constitutional requirement that 'basic' policy choices' be made by the Legislature. But the Law goes even further. It provides very specific definitions of pivotal statutory terms ^[16] and detailed guidelines for certain important agency decisions. ^[17] We have no doubt that the standards requirement has been satisfied.

More importantly, the N.H.L.A.L. provides numerous procedural guidelines for protection against administrative arbitrariness and caprice. ^[18] For example, the agency is required to establish criteria for use in determination of priority among applicants ^[19] and eligibility for loan refinancing ^[20] and to develop a standard form for loan applications. ^[21] The use of neutral, generally applicable criteria and forms is an important safeguard against the arbitrariness of ad hoc decision making. In addition, section 203(2) of the Law provides that the promulgation of rules and regulations by the agency must be in accordance with the Commonwealth Documents Law, ^[22] assuring regularity and due notice...