Washington Ass'n of Child Care Agencies v. Thompson

• Decision Date: 10 March 1983
• Docket Number: No. 4606-7-II,4606-7-II
• Citation: 660 P.2d 1124,34 Wn.App. 225
• Court: Washington Court of Appeals
• Parties: WASHINGTON ASSOCIATION OF CHILD CARE AGENCIES, et al., and All Other Members of the Class of Child Care Agencies Similarly Situated, Respondents, v. Gerald THOMPSON, Secretary of the Department of Social and Health Services of the State of Washington; and the State of Washington, Appellants.

Page 225

34 Wn.App. 225

660 P.2d 1124

WASHINGTON ASSOCIATION OF CHILD CARE AGENCIES, et al., and All Other Members of the Class of Child Care Agencies Similarly Situated, Respondents, v. Gerald THOMPSON, Secretary of the Department of Social and Health Services of the State of Washington; and the State of Washington, Appellants.

No. 4606-7-II.

Court of Appeals of Washington Division 2.

March 10, 1983.

Review Denied June 3, 1983.

David R. Minikel, Asst. Atty. Gen., Dept. of Social and Health Services, Slade Gorton, Atty. Gen., Olympia, for appellants.

H. Scott Holte, Everett, for respondents.

PETRICH, Chief Judge.

The defendants, State of Washington and Gerald Thompson, former Secretary of the Department of Social and Health Services (DSHS) appeal from a summary judgment which requires DSHS to incorporate into its child care agency rates for fiscal 1979 a 5.5 percent increase over the previous years' rates of each agency as an inflationary increment authorized by the Legislature.

The issue presented is whether DSHS's child care agency rates for fiscal 1979, structured on standards of service which differed from those of prior years, violates the equal protection clause of the fourteenth amendment to the United States Constitution or the privileges and immunities clause of Article 1, section 12 of the Washington State Constitution when a component of the 1979 rate is an allocation of funds designated for inflationary purposes which varies percentage-wise from the prior rates of the respective agencies.

We conclude that the allocation of the appropriated funds by DSHS was not in violation of the constitutional provisions and reverse.

The plaintiffs, several child welfare agencies licensed by the state to provide care for and supervision of abused, neglected, and/or disturbed children, and their trade association, the Washington Association of Child Care Agencies, initiated a lawsuit on behalf of all the named plaintiff agencies and all other similarly situated child care agencies against DSHS. They sought damages because rates paid by DSHS within the appropriate limitation of action period for services rendered on behalf of children placed by DSHS with the agencies (1) were less than reasonable as required by statute, and (2) amounted to a denial of due process and the taking of property without just compensation in violation of the federal and state constitutions. The lawsuit also sought affirmative relief to require the state and DSHS to pay the agencies certain sums allocated for child care services by the legislative appropriation for the 1977-79 biennium and to require the payment of inflationary increases in agency rates equally to all members of the plaintiffs' class, as required by the constitutions of the United States and State of Washington.

This appeal concerns only the claim that inflationary increases for the fiscal year 1979 must be equally allocated among the agencies. ¹

During the period at issue, DSHS paid approximately 78 child care agencies for services to children placed by DSHS with the agencies. Prior to fiscal 1979, the agencies were paid on an individual basis according to expenditures within certain reimbursable cost "centers." The cost center factors included food, clothing, rent, repairs, utilities, maintenance, house parent salaries and social work services. Not all cost centers had ceilings. Under this system, which is referred to as a "cost reimbursement system," monthly per-child payments to individual agencies in fiscal 1977 ranged roughly from $300 to $850.

This cost-reimbursement system for payment was changed as a result of the appropriations act for the 1977-79 biennium. In Laws of 1977, 1st Ex. Sess., ch. 339, § 58, the Legislature appropriated a large lump-sum amount for DSHS's Community Social Services Program, of which the child welfare programs are a part. No specific amount of the overall section 58 appropriation was earmarked for the child care services. Section 58, however, did specifically limit departmental expenditures in two respects by a provision which in relevant part reads as follows:

The appropriations contained in this section shall be subject to the following conditions and limitations:

(1) Not more than $5,564,000 ... shall be expended for an inflationary increase in allowance and vendor rates.

(2) Not more than $1,061,000 ... shall be expended for an increase in the vendor rate for private child caring agencies: PROVIDED, That these funds shall not be expended until the department has developed a revised system for private child caring agencies which include:

* * *

(b) The classification of facilities according to established program standards;

(c) A reimbursement system which compensates facilities for services provided;

* * *

DSHS understood section 58(2) as mandating a payment system based on the type of care being provided by an agency, rather than on the agency's costs, and began working with the agencies to devise a new system. This could not be done immediately, however, so for fiscal 1978, the first year of the biennium, DSHS simply granted each agency a 5.5 percent "inflationary increase" over its previous rate. As a result of this increase, monthly per-child payments to individual agencies during fiscal 1978 ranged from $304 to $919.

In determining how to structure a new payment system for use beginning with fiscal 1979, DSHS looked to the types of services which were being provided, and decided that these services could be classified into three categories, denominated as levels of care 1, 2 and 3. Having done this, DSHS first considered setting a single payment rate for each care level. It then recognized, however, that going immediately to such a single rate per care-level system would result in payment cuts for many agencies, which, it was apparently thought would be inequitable and disruptive. DSHS therefore decided to establish a payment range for care levels 2 and 3: e.g., a minimum of $643 and a maximum of $733 per child per month for agencies providing level 2 care, and a minimum-$804/maximum-$911 for level 3 care agencies. ² This system of ranges was, to some extent at least considered by DSHS as a transitional phase in the implementation of the requirement of section 58(2).

Comparing fiscal 1978 rates to those projected using the minimum/maximum rates for 1979, some agencies had been receiving less than the minimum for their particular care level, some had been paid within the projected range, and a few agencies had received payments over the new maximum.

The problem in this appeal arises from the manner in which DSHS did or did not provide for an "inflationary increase" in rates for fiscal 1979. DSHS explains that it considered that it had $11,389,982 available for payments to child care agencies for that year, computed as the sum of $9,735,191 "base expenditure level," plus the increase of $1,061,000 authorized by section 58(2), plus an inflation component of $593,791 (5.5 percent of $9,735,191 plus $1,061,000). DSHS further explains that the $593,791 inflation component was at least in part included in the computations from which it derived the new minimum/maximum ranges described above.

When it came to determining what rates would be paid to specific agencies for fiscal 1979, in light of the new minimum/maximum ranges, what DSHS actually did can be summarized as follows:

(1) Agencies whose fiscal 1978 payments had been more than 5.5 percent below the 1979 minimums for their care level had their rates of payment increased to the applicable minimum.

(2) All other agencies whose 1978 payments had been below the applicable 1979 maximums had their rates raised by 5.5 percent, but with the maximum in the applicable range as an upper limit.

(3) Agencies whose fiscal 1978 payments had already been above the applicable 1979 maximums had their rates "frozen." They received no increases, but neither were their rates decreased to the stated maximums.

The net result of these decisions was that six agencies received no increase (though they continued to be paid at a rate above maximums), and three others received increases of less than 5.5 percent (but up to allowable maximums). The trial court believed that this disparate treatment of the inflationary increment violated the equal protection clause of the United States Constitution or its counterpart in the state constitution.

In reviewing an order of summary judgment, we engage in the same inquiry as the trial court. The critical determination is whether there is a genuine issue as to any material fact and whether the moving party was entitled to judgment as a matter of law. Sarruf v. Miller, 90 Wash.2d 880, 586 P.2d 466 (1978). We may affirm or reverse the summary judgment of the trial court based on our own resolution of the constitutional issues. Simpson v. State, 26 Wash.App. 687, 615 P.2d 1297 (1980). Although the material facts as to how DSHS arrived at...