Opinion
Review Granted Dec. 17, 1987.
Previously published at 194 Cal.App.3d 885
Evelyn R. Frank, Legal Aid Society of Alameda County, Oakland, Dick Rothschild, Western Center on Law and Poverty, Los Angeles, Gail Wetzel, Oakland, for plaintiffs and respondents.
John K. Van De Kamp, Atty. Gen., John J. Klee, Jr., Deputy Atty. Gen., San Francisco, for defendants and appellants.
BENSON, Associate Justice.
In these consolidated cases we consider the dilemma confronting a state administrative agency when the state Legislature enacts a potentially unconstitutional statute which conflicts with article III, section 3.5 of the California Constitution.
Background
This action concerns the joint federal-state program for medical assistance to indigents operated pursuant to Title XIX of the Social Security Act (42 U.S.C. § 1396 et seq.). The program is known nationally as Medicaid and in California as Medi-Cal.
Medi-Cal, like all welfare programs based on need, requires a determination of the individual's "income" in order to calculate the individual's entitlement to benefits. For disabled persons residing in long term care facilities, federal law requires the state to use the same methodology for computing "income" for the Medi-Cal program as the federal government uses to compute "income" for purposes of the federally administered supplemental security income (SSI) program operated pursuant to Title XVI of the Social Security Act (42 U.S.C. § 1381 et seq.).
The federal government, in its operation of the SSI program, does not recognize community property law concepts. Thus, as administered by the federal government, the SSI program treats the earnings and other income received by the husband as "income" of the husband; likewise, the earnings and other income received by the wife is treated as the "income" of the wife. California followed that same practice in computing "income" for Medi-Cal purposes, and the practice was upheld in Granneman v. Myers (1981) 115 Cal.App.3d 846, 171 Cal.Rptr. 583. The consequence of this practice is that if an institutionalized spouse receives most of the couple's income, the institutionalized spouse is required to use most of the income for the cost of his or her medical care and the noninstitutionalized spouse only receives a In an apparent attempt to reverse the result of Granneman, Assembly Bill 1667 was introduced in 1983. The bill was enacted by the Legislature and became chapter 1031 of the 1983 Statutes. In its attempt to engraft California's community property laws into Medi-Cal "income" computations, section 1 of chapter 1031 added section 14005.16 to the Welfare and Institutions Code. Section 14005.16 was in two parts. Subdivision (a) provided that the state, in computing the "income" of the institutionalized spouse, would not count the other spouse's community property interest in any unearned income of the institutionalized spouse. Subdivision (b) brought balance to the formula; i.e., the state would count the institutionalized spouse's share of his or her spouse's unearned income.
As originally enacted Welfare and Institutions Code section 14005.16 provided: "(a) In determining the eligibility of a married individual, pursuant to Section 14005.4 or 14005.7, who resides in a skilled nursing facility or an intermediate care facility, and who is in a Medi-Cal family budget unit separate from that of his or her spouse, the community property interest of the noninstitutionalized spouse in the unearned income of the married individual shall not be considered income available to that individual. [p] (b) In determining the eligibility of a married individual pursuant to Section 14005.4 or 14005.7 who resides in a skilled nursing facility or an intermediate care facility, and who is in a Medi-Cal family budget unit that does not include his or her spouse, the community property interest of the institutionalized individual in the unearned income of the noninstitutionalized spouse shall be considered income available to that individual."
The Legislature recognized the possible invalidity of section 14005.16's attempt to change the federal requirements. Accordingly, to make sure that any increased costs resulting from the implementation of section 14005.16 would qualify for federal matching funds, the Legislature specifically stated in section 2 of Chapter 1031 that section 14005.16 would not be operative to the extent that it "is in conflict with any federal statute or regulation." The Legislature also directed the Department of Health Services (DHS) to request any waivers from the federal government necessary to allow section 14005.16 to be operative.
More specifically, section 2 of chapter 1031 provides in part:
Thereafter, the DHS met with federal officials and was told that section 14005.16 did, in fact, conflict with federal requirements. DHS then requested waivers from the federal government. The federal government responded by stating that "this new State rule conflicts with Federal rules" and refused to grant any waivers to allow its implementation. Accordingly, DHS did not implement either subdivision (a) or subdivision (b) of section 14005.16.
Procedural History
On December 26, 1984, plaintiffs filed a state court class action complaint for injunctive relief, a writ of mandate and a claim for retroactive benefits. The complaint sought to implement subdivision (a) of section 14005.16, but not subdivision (b).
In their memorandum of points and authorities in support of the motion for preliminary DHS filed a cross-complaint against plaintiffs and the federal government seeking declaratory relief as to whether section 14005.16, in its entirety, conflicted with federal law. The cross-complaint also requested the court to enter an injunction against the federal government from taking sanctions against the state in the event that the court entered an injunction ordering DHS to implement section 14005.16, or any part thereof. The federal agency then removed the entire action to federal court pursuant to 28 United States Code section 1441.
Plaintiffs renewed their motion for a preliminary injunction in federal court. In the renewed motion plaintiffs, for the first time, argued that pursuant to article III, section 3.5 of the California Constitution, DHS was precluded from refusing to implement section 14005.16 until an appellate court had made the determination that enforcement of the statute is prohibited by federal law or federal regulations.
The federal court never ruled on plaintiffs' motion for preliminary injunction. Rather, it elected to remand the matter to state court. Once back in state court, plaintiffs renewed their motion for a preliminary injunction.
The superior court granted the motion for preliminary injunction, enjoining the DHS from failing and refusing to implement section 14005.16, subdivision (a). The preliminary injunction is silent as to whether its issuance was based on the determination that section 14005.16, subdivision (a) did not conflict with federal law or because article III, section 3.5 required it to be implemented until an appellate court determined otherwise. Defendants timely appealed from the order granting the preliminary injunction.
While the superior court was preparing the clerk's transcript on appeal in action No. A031937, there was action on the legislative front. In 1985, the Legislature enacted Assembly Bill 987, which became chapter 1221 of the 1985 statutes. Chapter 1221 amended section 14005.16 in several respects. It made section 14005.16 apply to all community property, not just "unearned" income, and it repealed former subdivision (b), which was the portion of section 14005.16 that would operate to the disadvantage of the institutionalized spouse. The most important aspect of chapter 1221 as pertains to this action is that it repealed section 2 of chapter 1031 of the 1983 statutes, which was the provision that directed DHS not to implement section 14005.16 to the extent it was in conflict with federal law.
Although chapter 1221 contained a provision that section 14005.16, as amended, shall be inapplicable to the extent of any conflict with federal law, it specifically provided that "[n]o provision of this act shall be considered to be in conflict with any federal statute or regulation until after a final determination of the Secretary of the United States Department of Health and Human Services, made pursuant to Section 1116(a)(3) of the federal Social Security Act, finding such a conflict."
Because the secretary of the federal agency had not yet rendered any such decision, DHS agreed that it was under a duty to implement section 14005.16, as amended. Accordingly, there was no longer any need for prospective injunctive relief.
More than six months after the trial court granted plaintiffs' motion for summary judgment in this case, the secretary of the federal agency issued its final administrative decision that California law did not comply with federal regulations. The validity of this determination is now pending in the Ninth Circuit Court of Appeal.
The fact that there was no longer a need for injunctive relief does not moot the appeal in action No. A031937, since certain persons received benefits under the preliminary injunction and the propriety of those payments is still at issue.
Plaintiffs then moved for summary judgment. Their brief in support of their motion admitted that the enactment of chapter 1221 eliminated the need for continued injunctive The superior court entered an order granting summary judgment, in which it affirmatively ordered the payment of retroactive benefits. However, the order specifically stated that "[t]he court does not reach the question whether Welfare & Inst. Code § 14005.16(a) is consistent with federal law." The order also required the parties to meet and confer in order to develop a plan for retroactive benefits in accordance with the summary judgment. The appeal from the summary judgment is action No. A035545.
Thereafter, the parties entered into a stipulation regarding the way retroactive benefits would be paid and judgment was so entered. Action No. A036276 is an appeal from this judgment. On October 31, 1986, this court ordered that the appeals be consolidated.
Since the appeal in action No. A035545 is from the trial court's order granting summary judgment, a nonappealable order, we dismiss that appeal and consider the issues raised therein in appeal No. A036276, the appeal from the final judgment. (See Leo F. Piazza Paving Co. v. Foundation Constructors, Inc. (1981) 128 Cal.App.3d 583, 586, fn. 1, 177 Cal.Rptr. 268.)
Discussion
The central issue in the two remaining appeals is whether article III, section 3.5 of our state Constitution required the immediate implementation of section 14005.16 on January 1, 1984.
Article III, section 3.5 provides: "An administrative agency including an administrative agency created by the Constitution or an initiative statute, has no power: (a) To declare a statute unenforceable, or refuse to enforce a statute, on the basis of it being unconstitutional unless an appellate court has made a determination that such statute is unconstitutional; (b) To declare a statute unconstitutional; (c) To declare a statute unenforceable, or to refuse to enforce a statute on the basis that federal law or federal regulations prohibit the enforcement of such statute unless an appellate court has made a determination that the enforcement of such statute is prohibited by federal law or federal regulations."
This constitutional amendment was adopted by California voters on the June 6, 1978 in order to nullify the decision in Southern Pac. Transportation Co. v. Public Utilities Com. (1976) 18 Cal.3d 308, 134 Cal.Rptr. 189, 556 P.2d 289, where our Supreme Court held that the Legislature had conferred upon the Public Utility Commission the power to declare a state statute unconstitutional. (Id. at p. 311, fn. 2, 134 Cal.Rptr. 189, 556 P.2d 289; see Ballot Pamp. Proposed Amends. to Cal. Const. with analysis of Proposition 5 by Legislative Analyst and arguments to voters, Primary Elec. (June 6, 1978) (hereafter "Ballot Pamp.") pp. 24-27; 5 Witkin, Summary of Cal.Law (1984 supp.) Constitutional Law, § 42A, pp. 22-26.) On its face the constitutional amendment "precludes any administrative agency ... from declaring a statute unenforceable or refusing to enforce a statute on grounds of federal prohibition in the absence of a reviewing court's antecedent determination." (Regents of University of California v. Public Employment Relations Bd. (1983) 139 Cal.App.3d 1037, 1042, 189 Cal.Rptr. 298.)
Defendants take the position that article III, section 3.5 was enacted in order to curb the powers of administrative agencies, not the Legislature. They then contend that in enacting section 2 of chapter 1031, the Legislature mandated DHS not to implement section 14005.16 to the extent it conflicted with federal law. They consequently conclude that the Legislature had the power to order DHS to consult with federal authorities and interpret federal law.
Article I section 26 of our state Constitution provides: "The provisions of this Constitution are mandatory and prohibitory, unless by express words they are declared to be otherwise." The Supreme Court has observed that "This rule of construction applies to all provisions of the Constitution Defendants argue that, pursuant to article III, section 3.5, they were without power to make a determination that the Legislature had enacted a law in violation of constitutional mandate. We agree.
It is clear that absent the enactment of section 2 of chapter 1031 of the 1983 statutes, DHS was precluded from refusing to implement section 14005.16 until an appellate court had ruled that the statute conflicted with federal law or regulations. However, the enactment of section 2 of chapter 1031 placed the agency in a position where any choice it made would violate article III, section 3.5 of the Constitution.
If, on the one hand, DHS followed the statutory directive of section 2, chapter 1031, it would not enforce the provisions of 14005.16 without first determining whether those provisions were in conflict with federal law or regulation. Thus, the agency would be placed in the position of violating subdivision (c) of article III, section 3.5, because no appellate court had yet determined whether such conflict existed and the agency is constitutionally required to enforce the provisions until such time as that appellate determination is made.
If, on the other hand, the agency refused to follow the statutory directive contained in section 2, chapter 1031, on the grounds that the Legislature was constitutionally prohibited from ordering the agency not to immediately implement section 14005.16, then the agency would be placed in the position of violating subdivision (a) of article III, section 3.5, in that no appellate court had determined the statute to be unconstitutional.
The Legislature must bear the responsibility for placing DHS in this untenable position. It unanimously supported the constitutional amendment to article III, and thus was completely aware that a public agency such as DHS was constitutionally precluded from refusing to implement a statute such as section 14005.16. As one state senator stated in his ballot argument favoring the constitutional amendment, "Every statute is enacted only after a long and exhaustive process, involving as many as four open legislative committee hearings, where members of the public can express their views. If the agencies question the constitutionality of a measure, they can present testimony at the public hearings during legislative consideration. Committee action is followed by full consideration by both houses of the Legislature." (Ballot Pamp., op. cit. supra, at p. 26.) Nevertheless, the Legislature enacted section 2 of chapter 1031, directing DHS to violate the constitutional prohibition. As previously stated, the Legislature was without authority to direct the administrative agency to disregard the constitutional mandate of article III, section 3.5.
Chapter 1031, section 2, subdivision (d) of the 1983 statutes provides: "If any provision of this act or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the act that can be given effect without the invalid provision or application, and to this end the provisions of this act are severable." Having determined that the Legislature could not order the DHS not to implement those provisions of section 14005.16 for which federal waivers could not be obtained, we must conclude that those portions of chapter 1031, section 2 which impede the immediate implementation of section 14005.16 must be severed from the act.
See chapter 1031, section 2, subdivision (b) in footnote 2, ante.
While a close reading of chapter 1031, section 2, subdivision (a) indicates that the Legislature did not intend to enact section 14005.16 if it conflicted with federal statute or regulation, statutory construction must yield to constitutional mandate The judgments in actions Nos. A031937 and A036276 are affirmed.
KLINE, P.J., and ROUSE, J., concur.
All further statutory references are to the Welfare and Institutions Code unless otherwise indicated.
"(a) Any provision of this act that is in conflict with any federal statute or regulation shall be inapplicable to the extent of such conflict, but the provision and the remainder of the provisions shall be unaffected to the extent no conflict exists.
"(b) The state Department of Health Services shall, within 30 days of the operative date of this act, seek all federal waivers necessary to implement the provisions. The provisions for which appropriate federal waivers cannot be obtained shall not be implemented, but provisions for which waivers are either obtained or found to be unnecessary shall be unaffected by the inability to obtain federal waivers for the other provisions.
"(c) The State Director of Health Services shall, within 30 days of obtaining all necessary federal waivers, adopt regulations implementing the provisions as emergency regulations in accordance with the provisions of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. For the purposes of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the adoption of the regulations shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare."