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holding that the University of Colorado University Hospital was not a private hospital because government officials founded it and continued to control its internal affairs
Summary of this case from People of Colorado v. BonviciniOpinion
No. 89SA476
Decided December 24, 1990. Rehearing Denied January 28, 1991.
Appeal from District Court City and County of Denver Honorable George B. Lee, Jr., Judge.
Larry F. Hobbs, Hornbein MacDonald Fattor Hobbs P.C.; Vonda G. Hall, Colorado Association of Public Employees, for Plaintiffs-Appellants.
Teryl R. Gorrell, Charles F. Luce, Jr., Moye, Giles, O'Keefe, Vermeire Gorrell, Special Assistant Attorneys General for Defendants-Appellees and Ben A. Rich, Allen W. Staver, University of Colorado Health Sciences Center, for Defendants-Appellees.
This is an appeal from the Denver District Court's judgment upholding the constitutionality of House Bill No. 1143, Ch. 193, sec. 1 to 14, 1989 Colo. Sess. Laws 995-1006, which provided for the reorganization of the University of Colorado University Hospital as a private, nonprofit corporation. This act is mostly codified in sections 23-21-401 to -410, 9 C.R.S. (1990 Supp.). The plaintiffs challenged the constitutionality of the statute on two grounds: first, that it violates Article XII, Section 13, of the Colorado Constitution, the State Civil Service Amendment, and second, that it violates Article XI, Section 3, of the Colorado Constitution, the constitutional prohibition against public indebtedness. The trial court rejected both arguments. We reverse.
Because this case involves an appeal from the final judgment of a district court in which the constitutionality of a statute is in question, this court has jurisdiction. See § 13-4-102(1)(b), 6A C.R.S. (1987).
I.
The plaintiffs, the Colorado Association of Public Employees and employees of University Hospital, filed a complaint challenging the constitutionality of the statute under the Colorado Constitution on alternative grounds. They claimed that if the statute created a private corporation, then the statute violated Article V, Section 34, which prohibits public appropriations to private corporations, and Article XI, Section 2, which prohibits transfer of state assets to private corporations. In the alternative, they claimed that if the statute created a public corporation, then the statute violated Article XII, Section 13, the State Civil Service Amendment, and Article XI, Section 3, which prohibits state indebtedness. The plaintiffs requested injunctive and declaratory relief.
They also claimed that the statute violated Article I, Section 10 of and the Fourteenth Amendment to the United States Constitution, 42 U.S.C. § 1983, and Article II, Sections 11 and 25 of the Colorado Constitution which guarantee due process of law. These claims are not before us.
By stipulation, the parties submitted briefs solely on the facial constitutionality of the statute. The trial court ruled that the plaintiffs failed to prove that the statute was unconstitutional. Specifically, the trial court held: (1) that the reorganized hospital was a private, nonprofit corporation which did not violate Article XV, Section 2, prohibiting special legislation, (2) that the statute does not violate Article XII, Section 13, the Civil Service Amendment, because the employees of the reorganized hospital will not be employees of the state, (3) that, by similar reasoning, the statute does not violate Article XI, Section 3, because the debts of the reorganized hospital will not be debts of the state, (4) that the statute does not violate Article XI, Section 1, prohibiting extending debt to private corporations because the statute comes within the public purpose exception, and (5) that, by stipulating to resolve the facial constitutionality of the statute for an accelerated trial, the plaintiffs abandoned their claims under the Fourteenth Amendment to the United States Constitution and § 42 U.S.C. § 1983, as well as under Article V, Section 34, and Article XI, Section 2, of the Colorado Constitution.
Prior to the enactment of section 23-21-401 to -410, the organization of the University Hospital was addressed in section 23-21-101 to -113, 9 C.R.S. (1988). The hospital was utilized for the health science education programs provided by the University of Colorado. § 23-21-104. Under section 23-21-102(1), control of the hospital was vested in the Board of Regents (the Regents) of the University of Colorado, members of which were elected to office pursuant to section 1-4-204, 1B C.R.S. (1980). The Regents were empowered "to manage, control, and govern such hospitals" under regulations it prescribed, § 23-21-102(1), and to provide for the operation of the hospitals "by any entity, public or private, profit or nonprofit" to administer the operation of the hospital adequately and efficiently, § 23-21-102(3)(a).
The University Hospital of the University of Colorado was established by the Board of Regents pursuant to Article VIII, Section 5. This provision authorizes the Board of Regents to "establish, maintain, and conduct all or any part of the schools of medicine" in Denver and allows it to discontinue the medical center.
Although the former statute granted the Regents a great degree of flexibility regarding the type of entity they could establish to operate the hospital, the Regents' power to provide for any entity was limited in section 23-21-102(3)(c) which stated, "No such provision shall adversely affect the rights, benefits, and privileges of any existing state personnel system employees of the university of Colorado nor deprive them of their status under the state personnel system." Furthermore, the Regents were required to appoint all employees of the hospital, "pursuant to the provisions of section 13 of article XII of the state constitution" which is the Civil Service Amendment, § 23-21-102(1). Under section 23-21-106.5, the Regents controlled the fees charged for professional services and the way in which such fees, when collected, were spent in the operations of the hospital. This last provision was not substantially changed by the new statute. See § 23-21-410, 9 C.R.S. (1990 Supp.).
The statute before us, consisting primarily of sections 23-21-401 to -410, was enacted in 1989 to enable the reorganization of University Hospital. In the statute, the legislature explains its rationale for this measure:
"(1) The general assembly hereby finds and declares that: . . .
"(c) The present hospital, known as the university of Colorado university hospital, is unable to become and remain economically viable because it is subject to various kinds of government policy and regulation.
"(d) Unless the hospital can become and remain economically viable, it will become ever more dependent upon state subsidies, and the quality of medical service and education will inevitably decline.
"(e) The needs of the citizens of the state of Colorado and the university of Colorado health sciences schools will best be served if the hospital is reorganized to operate as a private nonprofit corporation charged with the mission of operating a teaching hospital for the benefit of the health sciences schools and providing care for the medically indigent."
§ 23-21-401. Because the Regents were already authorized under the prior statute to establish the hospital as a private, nonprofit entity, the Regents' authority to "[t]ake all steps necessary to create a private nonprofit-nonstock corporation" granted in section 23-21-403(1)(a) grants no new authority to the Regents.
Several of the new provisions do result in changes in the organization of the hospital. Under the new provisions, the Regents transferred the hospital assets and liabilities to the corporation on October 1, 1989, except for the land which was leased to the corporation for a term not to exceed ninety-nine years. § 23-21-403(1)(b). The corporation is required by the statute to award hospital privileges exclusively to the "health care providers who are faculty members of the health sciences schools of the university of Colorado." § 23-21-404(1)(e). The statute specifically states, "The corporation shall not be an agency of state government, nor a department or political subdivision thereof." § 23-21-403(1)(a). Accordingly, this new corporation "shall not be subject to any provisions of law affecting only governmental or public entities." Id. Should the corporation dissolve, the assets of the corporation less amounts owed to creditors will revert to the Regents. § 23-21-404(1)(g).
Here the entity established is distinctly different from those entities established as political subdivisions, specifically, the Colorado Housing and Finance Authority and the Colorado Compensation Insurance Authority. See § 29-4-704, 12A C.R.S. (1990 Supp.) and § 8-45-101, 3B C.R.S. (1990 Supp.).
The corporation is governed by a Board of Directors (the Directors) composed of nine members who are appointed by the Regents and confirmed by the Senate. § 23-21-404(1)(b). The Regents may remove the Directors at any time. Id. The Directors are responsible for operating the hospital day-to-day and have the explicit power to issue bonds or borrow money on behalf of the corporation. § 23-21-404(1)(d). However, they may not borrow more than ten million dollars at any time. Id.
The statute allows the Regents and the Directors to borrow money and to issue bonds. The Regents may do so on behalf of the corporation for any of its lawful purposes. § 23-21-403(1)(e). Any bonds issued by the Regents must comply with the requirements applicable to counties and municipalities. Id. The Directors are authorized to borrow up to ten million dollars on behalf of the corporation without the Regents' approval. § 23-21-404(1)(d). The aggregate indebtedness incurred by both the Regents and the Directors is thirty million dollars in the first fiscal year and sixty million dollars in the second fiscal year. § 23-21-404(1)(i).
The reorganization affected the status of approximately 2,000 classified employees of the University Hospital. According to the terms of subsections 23-21-406(1) and (2), any hospital employee who is classified as an employee under the state personnel system may elect to become an employee of the new corporation, thereby leaving the state personnel system, or may stay on with this new corporation as a state employee under contract for up to two years. Once the employee elects to join the new corporation, that employee is not eligible to return to the state personnel system and ceases to be an active member of the Public Employees Retirement Association (PERA). §§ 23-21-406(2), -407(1).
Section 23-21-407 governs how the rights of the former state employees to retirement benefits are affected by the reorganization. Although the provisions differ depending on years of service credit at the time of the transfer, the general concept is that members "shall receive, upon retirement, a benefit at least equal to the benefit they would have received from PERA if they continued to earn PERA service credit until retirement or such earlier date upon which they cease to be an employee of the corporation based on the PERA benefit plan in effect on the transfer date." §§ 23-21-407(2)-(3).
Even though the reorganized hospital is not governed by provisions of law affecting only government or public entities, § 23-21-403(1)(a), the General Assembly has a continuing role in the reorganized hospital's activities under the articles of incorporation. Any change in the mission of the reorganized hospital or in certain articles of incorporation must be approved by the General Assembly. § 23-21-401(1)(g), -404(1)(l). Should the reorganized hospital wish to transfer the corporation to "any person or entity except the regents" or to exceed the sixty million dollar indebtedness limit after two years, it can only do so with the approval of the General Assembly. § 23-21-404(1)(f), (i). The General Assembly is further involved in the operation of the corporation to the extent that the Legislative Audit Committee and four other members appointed by the Governor compose the Board of Visitors, which reviews every two years the corporation's use of state funds for the medically indigent. § 23-21-405. It then reports its findings to the General Assembly, the Governor, the Regents, and the Directors. Id.
II.
The standard of review under which a statute is tested against the Colorado Constitution was expressed by this court in Colorado Association of Public Employees v. Lamm, 677 P.2d 1350, 1353 (Colo. 1984):
"The General Assembly has plenary legislative powers, conferred by the people in their Constitution. People ex rel. Tucker v. Rucker, 5 Colo. 455 (1880). These powers, however, are subject to express or implied restraints reflected in the Constitution itself. People ex rel. Livesay v. Wright, 6 Colo. 92 (1881); People ex rel. Tucker v. Rucker, supra. The legislature cannot enact a law contrary to those constitutional restraints. Mauff v. People, 52 Colo. 562, 123 P. 101 (1912). We have consistently recognized that every statute is presumed to be constitutional and this presumption can be overcome only by showing that the enactment is unconstitutional beyond a reasonable doubt. E.g., Colorado Auto Truck Wreckers Association v. Department of Revenue, 618 P.2d 646 (Colo. 1980); Mr. Lucky's, Inc. v. Dolan, 197 Colo. 195, 591 P.2d 1021 (1979). . . . Where the language of the Constitution is plain and its meaning clear, that language must be declared and enforced as written. Id.; People ex rel. Park Reservoir Co. v. Hinderlider, 98 Colo. 505, 57 P.2d 894 (1936)."
Thus, the plaintiffs have the burden to establish that sections 23-21-401 to -410 are unconstitutional beyond a reasonable doubt. With this principle in mind, we now address the issues raised by the plaintiffs.
The trial court's determination that sections 23-21-401 to -410 are constitutional rested upon its finding that the reorganized hospital is a private corporation formed under Article XV, Section 2, of the Colorado Constitution. As such, it would not be a public entity to which Article XII or Article XI would apply. We find, however, that University Hospital remains, in substance, a state entity. Accordingly, we find that the legislative plan embodied in section 23-21-401 to -410, violates Article XII, Section 13.
Private nonprofit corporations are corporations formed by private individuals for a public purpose in which, "no part of the income or profit of which is distributable to its members, directors or officers, . . . ." Section 7-20-102(10), 3A C.R.S. (1986). Ultimate control of the corporation is vested in the members or the directors through their power to vote. See § 7-23-106(3), 3A C.R.S. (1990 Supp.). In contrast, public corporations are created as subdivisions of the state as an expedient device to carry out the functions of government. In People ex rel. Rogers v. Letford, 102 Colo. 284, 295, 79 P.2d 274, 281 (1938), we stated: "Public corporations are all those created specially for public purposes as instruments or agencies to increase the efficiency of government, supply public wants, and promote the public welfare."
Section 7-20-104, 3A C.R.S. (1986), provides a nonexhaustive list of public purposes with some exceptions which are not relevant here.
This section was in effect at the time the corporation was formed. It has since been amended. See § 7-20-102(10), 3A C.R.S. (1990 Supp.).
This court has not addressed the public/private dichotomy specifically in the hospital context, but several other jurisdictions have done so. In Woodard v. Porter Hosp., Inc., 125 Vt. 419, 422, 217 A.2d 37, 39 (1966), the Vermont Supreme Court made the following distinction in the hospital context:
"[A] public hospital is an instrumentality of the state, founded and owned in the public interest, supported by public funds, governed by those deriving their authority from the state. A private hospital is founded and maintained by private persons or a corporation, a state or municipality having no voice in the management or control of its property or the formation of rules for its government."
See also Green v. Board of Directors of Lutheran Medical Center, 739 P.2d 872, 874 (Colo.Ct.App. 1987); Even v. Longmont United Hosp. Ass'n, 629 P.2d 1100, 1102 (Colo.Ct.App. 1981); Edson v. Griffin Hosp., 21 Conn. Sup. 55, 57-58, 144 A.2d 341, 343 (1958); Levin v. Sinai Hosp. of Baltimore City, 186 Md. 174, 178, 46 A.2d 298, 300 (1946); State v. Ohio Valley General Hosp. Ass'n., 149 W. Va. 229, 233, 140 S.E.2d 457, 460 (1965). In Shulman v. Washington Hosp. Center, 222 F. Supp. 59, 61 (D.C. Cir. 1963), the court explained:
"The fact that a hospital is operated for the benefit of the public and not for profit, does not detract from its character as a private institution, if it is established and maintained by a private corporation or individual with authority to elect or appoint its own officers and directors."
Thus, whether University Hospital may be considered private depends upon whether 1) it is founded and maintained by private individuals or a private corporation and 2) the state is involved in the management or control of its property or internal operations.
Under the facts before us, the reorganized hospital clearly cannot be characterized as a private hospital. With respect to the first factor, the Regents, who are elected officials, established the hospital pursuant to authority granted in Article VIII, section 5 of the Colorado Constitution and section 23-21-403(1)(a). Thus, the hospital was founded by state officials, not private individuals.
Our analysis of the second issue focuses on the Regents' continuing role in controlling the operation of the reorganized hospital. Under section 23-21-404(1)(b), the Regents appoint the Board of Directors and may remove the members of the board at any time. Although the Directors govern the corporation that operates the hospital from day to day, the power of the corporation "to arrange for the billing, collection, and disbursement for professional services" rests with the Regents. § 23-21-410(1). The fees collected for the professional services (in essence, the gross income of the hospital) are to be used for "the remuneration and support of the professional, research, and educational activities of the members of the faculty of the schools of medicine and dentistry and shall also be used for the administrative costs of such activities, in accordance with rules to be adopted by the regents." § 23-21-410(2) (emphasis added). This section indicates that the Regents control the budget and spending of the hospital.
Both the Regents and the Directors are authorized to borrow up to thirty million dollars in the first year and sixty million dollars in the second year. § 23-21-404(1)(i). In the years following, the General Assembly may raise the limit if it chooses. Id. All funds borrowed except the ten million dollars within the Directors' discretion must meet the Regents' approval. Even the ten million dollars, when borrowed, implicitly must meet the Regents' approval since the Regents bear a relation to the Directors which is, in effect, that of an employer to an employee. Thus, the Regents explicitly control sixty-seven percent to eighty-three percent of the potential indebtedness of the corporation and control how the income of the hospital will be spent. Implicitly, they control the remaining seventeen percent to thirty-three percent of the potential indebtedness of the corporation as well as the day-to-day operations of the hospital by virtue of the power to remove the Directors.
In view of the Regents' creation of the corporate hospital and their continuing control over the internal operations of the reorganized hospital, it is evident that the Regents have not sufficiently divested themselves of power over the hospital to enable the new corporation to operate independently as a private corporation. Thus, we find that the reorganized hospital is still a public entity. We next consider whether the University Hospital as a public entity is subject to the constitutional limitations contained in Article XII, Section 13 and Article XI, Section 3.
This finding is in partial accordance with the court's conclusions in Queen v. West Virginia Univ. Hosp., 365 S.E.2d 375 (W.Va. 1988), a case upon which the Regents strongly rely, although that court never definitively classified the status of the reorganized hospital. Queen involved the hospital reorganization statute after which the Colorado statute was modeled. Even though the West Virginia statute did not designate the nonprofit-nonstock corporation as "private," the court indicated that it was possible that this corporation was formed under general corporation laws of the state which are normally considered to create private corporations. Id. at 380. In its analysis of whether the hospital statute violated a provision in the state constitution forbidding the state from extending credit to or becoming liable for the debts of any corporation, the court chose a different tack. It reasoned that since the corporation was nonprofit, it fell outside of the coverage of the constitution. The court found that the constitutional framers were "exclusively concerned" with private corporations which were profit-making enterprises. Id. The court indicated, however, that the hospital was public in its analysis of whether the hospital statute violated the constitutional prohibition against special laws relating to private corporations. The court found that the hospital was not private because it was required to fulfill government functions and its primary object was not the "personal emolument of its stockholders." Id. at 381.
Because we hold that the corporation established under section 23-21-401 to -410, is not a private corporation, we need not address whether the statute violates Article V, Section 34, which prohibits the state from making appropriations to private corporations or whether the statute is a special law in violation of Article XV, Section 2. Similarly, we need not address the trial court's holding that the Regents' power to borrow money and to issue bonds on behalf of the corporation as provided in section 23-21-403(1)(e) does not violate Article XI, Section 1 and Section 2 of the Constitution, because these provisions generally apply when the propriety of government aid to private corporations is at issue. See Witcher v. Canon City, 716 P.2d 445, 455 (Colo. 1986); Gude v. City of Lakewood, 636 P.2d 691, 695 (Colo. 1981); McNichols v. City and County of Denver, 131 Colo. 246, 251-252, 280 P.2d 1096, 1099-1100 (1955).
III.
Article XII, Section 13 establishes the personnel system of the state. Appointments and promotions are "made according to merit and fitness, to be ascertained by competitive tests of competence without regard to race, creed, or color, or political affiliation." Art. XII, § 13(1). The personnel system consists of all appointive political officers and employees of the state with certain specified exceptions. Art. XII, § 13(2). One such exception from the personnel system is for employees who are employed by political subdivisions of the state. However, a political subdivision may contract with the state for employees if authorized to do so by law. Id.
The hospital reorganization statute deals with the state personnel system in section 23-21-406, which states:
"(1) Any hospital employee who is a classified employee of the state personnel system on the transfer date shall have the option to become an employee of the corporation or to remain an employee of the state and a member of the state personnel system.
"(2) Any hospital employee who elects to remain a member of the state personnel system may remain so for a period of not more than two years, but shall not be eligible to return to the state personnel system as a hospital employee once he has elected to become a corporation employee."
The plaintiffs claim that the reorganization of University Hospital amounts to a legislative effort to free the Regents from complying with the requirements of the state personnel system which expressly applied under the former hospital organization statute. Because we find that the hospital is still a public entity, we must examine whether, as such, it is subject to the requirements of the state personnel system set forth in Article XII, Section 13.
This amendment was adopted in 1918 and contained provisions detailing the structure of the civil service. In 1919, this court interpreted the amendment for the first time in People ex rel. Clay v. Bradley, 66 Colo. 186, 179 P. 871 (1919), and took judicial notice of the history of former legislation involving the civil service. We stated:
"In addition we may take judicial notice of the history of the legislation concerning the civil service. Before the act of 1912, Legislatures were occasionally hostile to the merit system, and refused appropriation[s] to support the commission. The act of 1912 was initiated to compel appropriations and to remedy other defects, and did so. By the act of 1915, however, which repealed all former laws, the Legislature, from the standpoint of those especially devoted to the merit system, destroyed much of its beneficial effect, and a constitutional amendment was initiated accordingly for the very purpose of avoiding the destruction or emasculation of the law in the future by some possible hostile General Assembly."
Id. at 872. In the years since 1919, this court has recognized that this amendment embodies the strong disposition of the people of Colorado to protect the state civil service system from "destruction or emasculation of the law in the future by some possible hostile general assembly." Id. See Colorado State Civil Serv. Employees Ass'n v. Love, 167 Colo. 436, 446, 448 P.2d 624, 628 (1968).
Article XII, Section 13 of the constitution was repealed and reenacted with amendments in 1970. These amendments resulted in the establishment of a separate department of personnel headed by a state personnel director, responsible for administering this system. Also, the three-member Civil Service Commission was replaced by a five-member state personnel board that primarily has a policy-making role. In addition, there were other changes designed to modernize and improve the state personnel system.
It is undisputed that the transfer of University Hospital to a nonprofit-nonstock private corporation was intended to remove the hospital from the scope of the state personnel system. However, the Regents argue that the result of the legislation, the elimination of approximately 2,000 civil service jobs, was not "hostile" and that this statute evidences "the highest regard and the greatest care in protecting the rights of certified employees to remain as part of the state personnel system." This court need not find actual "hostility" on the part of the legislature. The simple fact that the legislative measure terminates a large number of jobs within two years is enough to invoke the concerns expressed by this court in Bradley.
The statute now before us does not "grandfather" incumbent employees who hold classified positions. Compare § 8-45-101(9), 3B C.R.S. (1990 Supp.) (when the legislature created the Colorado Compensation Insurance Authority, employees already employed with the division of state compensation insurance were permitted to choose to remain in the personnel system indefinitely) and W. Va. Code § 18-11C-4(d) (1988) (the West Virginia hospital reorganization statute, after which the Colorado statute was modeled, allows the pre-reorganization employees to choose to remain with the state personnel system).
As discussed above, not all public entities are subject to the personnel amendment. In order to consider whether the reorganized hospital is a public entity that is outside the coverage of the state personnel system, we must examine the reorganized hospital closely. On the day following the transfer, the new hospital was, under its articles of incorporation, operated by a Board of Directors consisting of nine members appointed by the Regents, confirmed by the Senate, and serving at the discretion of the Regents. The Regents and the Directors were empowered to issue bonds and borrow money. The new hospital was empowered to participate in joint ventures with other private corporations, to participate in hospital purchasing pools, and to hire employees outside the personnel system.
The operations of the hospital, nonetheless, remained the same. On the day following the transfer, the hospital still was operated by appointees who served at the discretion of the Regents. The employees of the new nonprofit-nonstock corporation returned to the same jobs at the same hospital at which they had worked the previous day. The hospital still limited staff privileges exclusively to the faculty of the medical school and provided a clinical environment exclusively for the Colorado School of Medicine. The Regents continued to control the new hospital just as they did the old. Thus, we find that the changes in University Hospital were changes of form, not substance, that did not affect the nature of the jobs held by the civil service employees.
Our conclusion is consistent with prior decisions of this court relating to the coverage of the personnel system. This case resembles closely the situation in People ex rel. Kelly v. Milliken, 74 Colo. 456, 223 P. 40 (1924), in which the jobs of license inspectors were abolished and then re-created two years later with substantially identical duties, but with a different job title. This court held that the inspectors were entitled to be rehired when the jobs were re-created. In explanation, we stated:
"Since their tenure of office is secured to them by the Constitution, the so-called civil service amendment (article 12, § 13), the legislature has no power to deprive them of it. That body has, indeed, the power to abolish the office, but it may not avoid the Constitution by abolishing the office and creating a new one with duties substantially the same, to which new officers are appointed."
Milliken, 74 Colo. at 457, 223 P. at 40. Cf. Colorado Ass'n of Public Employees v. Lamm, 677 P.2d 1350, 1360 (Colo. 1984) (statute required the construction of "upward allocation of position" and the "movement of the incumbent employee with his position" as something other than a promotion to fall outside the coverage of Article XII, Section 13; court rejected proposed distinction as "euphemistic").
The case before us involves on a larger scale the situation where the old offices are abolished and new ones are created. Here, the old employees may keep their jobs but only if they give up the protection of the rights and guarantees secured in the State Personnel System. We have held that a mere change in the nomenclature of an employee's job title from "officer" to "commissioner" does not change the essence of the employee's position for purposes of the employee's status in the civil service. Campbell v. State, 176 Colo. 202, 207, 491 P.2d 1385, 1388 (1971). By analogy, a mere change in the nomenclature of the hospital does not change the essence of the employee's position for purposes of civil service. Thus, we do not find the nature of the new hospital changed such that it falls outside the scope of the constitutional amendment. Accordingly, we hold that section 24-42-406 is unconstitutional because it violates Article XII, Section 13, which protects state personnel from legislative measures designed to circumvent the constitutional amendment.
IV.
Given our conclusion that the reorganized hospital remains a public entity, we need not analyze the operation of the statutory provisions which allow the Regents and the Directors to incur debt on behalf of the reorganized hospital. Indeed, the Regents have not attempted to defend the debt-financing scheme as applied to a public entity, even though the plaintiffs attacked the statute on the basis that such debt would be unconstitutional.
The ability of a public entity to engage in debt financing is constrained by Article XI, Section 3 of the Colorado Constitution. Under our caselaw, however, Article XI, Section 3 is not a complete bar. The financing devices that we have upheld under this constitutional provision fall generally into three categories: (1) special fund cases in which the funds borrowed are repaid out of the revenue generated by the improvement, Perl-Mack Civic Ass'n v. Board of Directors of Baker Metro. and Sanitation Dist., 140 Colo. 371, 374, 344 P.2d 685, 687 (1959); (2) cases in which the borrowing entity is a public entity independent from the state, In re Interrogatories by the Colorado State Senate, 193 Colo. 298, 305, 566 P.2d 350, 355 (1977); and (3) cases in which the government enters into a lease/purchase agreement for a building or other improvement with an independent body and in which the parties are not bound to renew the lease at the end of each year, Glennon Heights, Inc. v. Central Bank Trust, 658 P.2d 872, 878-879 (Colo. 1983).
Article XI, Section 3 provides in relevant part: "Section 3. Public debt of the state-limitations. The state shall not contract any debt by loan in any form, except to provide for casual deficiencies of revenue, erect public buildings for the use of the state, suppress insurrection, defend the state, or, in time of war, assist in defending the United States . . . ."
Here it is apparent from a review of the statute and its legislative history that the legislature's authorization for debt financing was based on its assumption that the reorganized hospital would be a private, nonprofit corporation. Throughout the legislative discussions, the reorganized hospital was referred to as "private" or "quasi-private." Senator Wells, the prime Senate sponsor of the bill, explained that the bill would "privatize" the hospital and would allow it to issue bonds "as a quasi private institution will be able to do." His testimony indicates his belief that the hospital as a part of the state could not issue bonds. Vol. 6 at p. 446, Transcript of Legislative History of House Bill 1143. Our review of the legislative history discloses great legislative concern with the propriety of transferring state assets to the reorganized hospital as a private entity. See, e.g., vol. 2 at p. 132, Transcript of Legislative History of House Bill 1143 (remarks of Rep. Paulson). See also Colo. Const. Art. XI, §§ 1, 2. However, we find no evidence of legislative intent to enable the reorganized hospital to borrow money if it remains a public entity. Accordingly, the legislature did not attempt to structure the debt financing provided in the act so that it would comply with Article XI, Section 3 and the relevant caselaw regarding public entities. We note, for example, that the act contains no provision for repayment of funds borrowed by the Directors.
In our view, the debt financing provisions of the statute are inextricably intertwined with the legislative purpose to create the reorganized hospital as a private, nonprofit corporation. Since that effort has failed and we have found that the reorganized hospital is a public entity, the debt financing provisions of the statute which are dependent on the existence of the reorganized hospital as a private, nonprofit entity also must fail. See § 2-4-204, 1B C.R.S. (1980); Gallegos v. Phipps, 779 P.2d 856, 863 (Colo. 1989).
We recognize that the statute contains a severability clause. § 23-21-409, 9 C.R.S. (1990 Supp.). However, we find that the debt financing provisions are not severable from the portions of the statute which we have found unconstitutional in part III of this opinion. City of Lakewood v. Colfax Unlimited Ass'n, Inc., 634 P.2d 52, 70 (Colo. 1981); 2 N. Singer, Statutes and Statutory Construction § 44.04, .08 (C. Sands 4th rev. ed. 1986). Hence, we invalidate the act in its entirety.
Conclusion
The plaintiffs challenged the constitutionality of House Bill 1143, Ch. 193, sec. 1 to 14, 1989 Colo. Sess. Laws 995-1006, on the grounds that it violates Article XII, Section 13 and Article XI, Section 3 of the Colorado
Constitution. Because we find that the statute violates Article XII, Section 13, and is unconstitutional beyond a reasonable doubt, we reverse.
JUSTICE KIRSHBAUM specially concurs.
CHIEF JUSTICE ROVIRA dissents.
JUSTICE ERICKSON dissents.