January 25, 1978 L'
MEMO KEY WORDS:
RE: Economic Impact Statements/Administrative Rule Making Proceedings
Pursuant to your recent request I have obtained a copy of
the recent opinion from the Division of Administrative Hearings
holding a proposed rule invalid as a result of a defective
economic impact statement. I also took the liberty of
attempting to locate companion opinions in the Administrative
Law Reporter over at the Hillsborough County Law Library.
Only one additional administrative opinion was discovered.
I have attached copies of both decisions. In both cases
Ken Oertel, the Director of the Division of Administrative
Hearings, served as Hearing Officer.
In the case of FLORIDA CEMETERY ASSOCIATION v. STATE BOARD OF
FUNERAL DIRECTORS AND EMBALMERS, DOAH Case No. 77-602R,
Mr. Oertel, pursuant to 120.56, F.S., declared an existing
administrative rule invalid for failure to comply with the
economic impact statement requirements set forth in 120.54, F.S.
The second decision was rendered in the case of ALICE P. &
SUSAN A., et al. v. DEPARTMENT OF HEALTH AND REHABILITATIVE
SERVICES, Case No. 77-1974R. In this case a proposed rule was
declared invalid under 120.54(4), F.S., for failure to prepare
an adequate economic impact statement during the course of the
rule making proceedings.
These decisions serve to illustrate that an attack based upon
an alleged defective economic impact statement can be launched
against either proposed rules or existing rules. (The existing
rule that was attacked in the case involving the State Board of
Funeral Directors and Embalmers was adopted subsequent to the
effective date of the economic impact statement requirements
within Ch. 120, F.S.)
In both decisions, Mr. Oertel relied upon the First District
Court of Appeal decision of DER v. LEON COUNTY, 344 So2d 297
(1st DCA Fla. 1977) for the proposition that failure to prepare
an adequate economic impact statement in adopting an administrative
rule is a fatal defect to the rule's validity.
In both cases the economic impact statements offered by the
respective agencies were demonstrably false. In both cases the
agency was unable to demonstrate that any attempt was made by
the agency to comply with the economic impact requirements within
Memo to LMB
January 25, 1978
The question of what would constitute an "adequate" economic
impact statement remains to be determined.
It is my conclusion that this could be a significantly
troublesome aspect of Southwest Florida Water Management
District rule adoption proceeding. I believe that this is
an area that merits further consideration. Please let me
know whether I may be of further assistance.
14 (~ )T 0 ~ 1d~g'I ~ tl~wim D ~i
rU.k-C C (4, 1. 1. L IIA ( I- Jn ^JJALJU)k3J L^
SJOHN VAN TALK OF TALLAHASSEE
Herald Capital Bureau
Department of- Administration officials
aren't in the market for a new pickup and welfare support costs of children who
truck just yet, but they may be if a court co
ng upholding a determined woman
Challenged state hiring practices Hearing Examiner Kenneth Oertel ruled
-stands. In the abortion case that economic-impact
SThe First District Court of Appeal ruled statements must be prepared by qualified
last week in favor of frustrated job-seeker persons using professionally accepted
Tat Harvey, who contended that 30 ob m, methodology.
i4spdcifications were Invalid because the
agency failed to adopt them as rules. VAN GIESON SHAW OERTEL'S PRECEDENT could require
.- Harvey, 29, applied in 1974 for a job as the Department of Administration to pre-
an administrative assistant and was placed pare 2,900 meticulous economic-impact
,on the register of qualified job applicants, Would be crushed if the stack slipped. statements.
'cianlng she could interview with state What would happen if the Department Administration officials, however, are
SJut the aency notd Harvey a month: of Administration added 2,900 job specifl- loath to adopt the 'specifications as rules.,
after that she was not qualified because nations to an already overwhelming set of Falling to do so, according to the district,
e lacked the to years o staff or admin les court, could result in an ih an equally burt
'.she lacked the two years of staff or admin- d". .. e situatIon where an.. disgruntled
istrative work required by the specifica- "You'd double the size of the Adminls- deosob alicant ound werean exspegrnve
-tlons for administrative assistant. She was trative Code," said William 0. Gibson, as'. administrative haco ing asn expensive
dropped from the register, meaning state. distant to Administration Secretary Wal- v a
agencies could not even consider her. lace Henderson. "We'd need a wheelbhr Harvey's plucky fight against an Indlf-
A NO-LAWYER WHO represent row to take them over to the secretary of ferent bureaucracy has put the department
A ONi ao art .of he wapresev states office, and that's conservative. We. betwe i the proverbial rock and a hard
.herself a good part of the way, Har'ey n track 6 lace. ; -
lenged the department in aa adminis- inlght eed a pickup tru ck. ,
S. Ave hearing. She won a decision thatK. It's difficult to estimate the cost of -Agency official haven't decided what
the job specifications should have been adopting 2,900 new rules, but one given Is to do, but their best hope at thi point ap;
adopted as rules. The state appealed, but' the $1 a line charged by Secretary of State pears to be finding some loophole by
the district court ruled In' Harvey's favor: Bruce Smathers' office for the required which they an appeal the district court's
-. "The irohic thing is for a person of my ub publication of new rules in The Admlnls- ruling to the Florida Supreme Court
,.caliber who was able to go through all of trative Weekly. The latest edition 6t i Th .
-this administrative flasco- t~have them Administrative Weekly had 33 proposed Harvey, meanwhile, is looking forward
4say I was not qualified to be an dminis'. rules averaging about 25 lines. to the dy when she once again applies
trative assistant is ludicrous," Harvey said. -. ., With the Department of Administration
< : '* "' ': for a state Job. She has been working for
er victory s a classic case a lone in- AT 25 LINES AC tstthe ptyear ,a techtnial assib Int ,w &
ual successfully ewheingid The sys- state $72,500, just to publish 2,900- new federally funded job training program in
em despite overwhelming The po- dLeolzand Gadsden counties.. .
tential consequences., however, mind- rules in The Administrative Weekly; The L and d o
=Boggling. secretary of state's office lists the tota An-
Sbogglng.nal cost 6f publishing The Administrative "I think it's neat that! made an Impact
The department has 2,900 job s fica- Weekly at $58,095.52. on state government, but I don't know.
tons covering 87,000 state emp es. If how much of an Impact I made at this
the agency accepts the dlst ct court's But publishing proposed rules in The point" Harvey said. *
order, it would have to adopt 2,900 new Administrative Weekly is only one small % :-
tules at a potentially staggering cost. portion of the cost of' promulgating new .
rules. Agencies must hold public hearings
-PE ADMINISTRATIVE Code, a com.- 'if demanded, and they must submit eco- UN-SIGHTLY STICKER Lt. Gov. Jim,
S lum of every existing state agency nomic impact statements on the effect of Williams is distributing campaign bumper
rule, is a set of six volumes, each about the rules. stickers that are about one-fourth the
4our inches thick. i usual size1
S etatS anenciehc hbeen srbimlthttin '." *
11ibd~k ~IZ -.
would risk a rear-end collision.
Campaign press aide Bill Cox claims'
at the tiny stickers show that Wiliams
a the tost fareilghted' candidates f'-0gov-
When Commissioner Don Reed stacked
-the Administrative Code on'his desk dur-
ing a recent Condtitution Rbvision Comn-
Snmission debate on rule-making by state
Agencies, he could barely see over the top.
I iOtHer commissioners joked .that Reed
diculously inadequate economic-impact
statements in many cases, but that, too, Is
changing. The Department of Health and
Rehabilitative Services failed in an eco-
nomic-Impact statement on Medicaid abor-
tions, for example, to consider the birth
He presumably thinks the ministickers
will help him win election as governor
next year, but it's hard to see how. Wil-
liams main problem is lack of recognition,
but the print on his stickers is so small
that. drivers attempting to read them
STATE OF FLQRIDA
DIVISION OF ADMINISTRATIVE HEARINGS
ALICE P. and SUSAN A., )
Individually and on behalf
of all others similarly situated, )
JEANNETTE R.; )
JACKSONVILLE WOMEN'S HEALTH
ORGANIZATION, INC.; and CENTRAL ) Case No. 77-1974R
FLORIDA WOMEN'S HEALTH ORGANIZATION,
DEPARTMENT OF HEALTH AND
REHABILITATIVE SERVICES, )
APPEARANCES: Terry L. DeMeo, Esq.
Ben Patterson, Esq.
Frank Susman, Esq.
George Waas, Esq.
By this proceeding proposed rules of the Department of Health and
Rehabilitative Services are sought to be declared invalid pursuant to
Section 120.54(4), F.S. The original petition filed on behalf of Alice
P. and Susan A. challenges the validity of proposed amendments to Rules
10C-7.38 and 10C-7.39, Florida Administrative Code, of the Department of
Health and Rehabilitative Services, which deal with payment for Physician
Services under the Medicaid Services Program. The department proposes to
amend the above rules to limit payments for abortions to instances where
"the attending physician certifies the abortion is necessary because the
life of the mother would be endangered if the fetus were carried to term or
if the procedure is necessary to terminate an ectopic pregnancy." a- 51
The petition is this proceeding was later amended to include two
individuals denominated as Jane Doe and Janet Woe and Samual J. Barr, M.D.
In addition the Jacksonville Women's Health Organization, Inc. and Central
Florida Women's Health Organization, Inc. were permitted to intervene.
The Department of Health and Rehabilitative Services objected to having
Petitioners proceed under assumed names. This, the department claimed,
prevented them from being able to pursue discovery as to the adequancy
of the Petitioners' standing. After hearing all the testimony in this
proceeding it is the determination of this Hearing Officer that all women
of childbearing age who are Medicaid recipients are substantially affected
by the proposed rule and have adequate standing to challenge it pursuant
to Chapter 120, F.S. Since that class of women is apparently numbered in
the thousands and the Petitioners who did testify in this proceeding
adequately demonstrated such standing it can be seen the Respondent was
not in any manner prejudice by allowing several parties to proceed under
assumed names to protect their identity.
The Respondent also objected to permitting additional parties to
join this proceeding after fourteen (14) days had elapsed since the
publication of its notice of intention to adopt said rules in the Florida
Administrative Weekly. Although Section 120.54(4)(b), F.S., requires
that requests for determinations under that subsection be filed within
fourteen (14) days after the publication of this notice, it is also clear
that subsection (d) of that section specifically permits other substantially
affected persons to join the proceedings "as parties or intervenors on
appropriate terms which will not substantially delay the proceeding."
It seems clear therefore that an intervenor to this proceeding need not
petition to become party only within the fourteen (14) day time period
after the filing of the original petition. It is also apparent that
doctors who are providers of medical services are substantially affected
by the proposed rules.
This matter went to final hearing on November 29, 1977, at which
time evidence and argument was heard on behalf of all parties After
the hearing was adjourned the parties were given approximately ten (10' '7 52
days to file proposed findings and other argument which they consider to
be relevant to this proceeding.
The Petitioners challenge the proposed rule amendments on the
(a) That the rule attempts to restrict a payment for services
already authorized by the legislature in the current appropriations bill
and therefore is contrary to Florida Statutes;
(b) That the department prepared a faulty Economic Impact
Statement as required by Section 120.54(4), F.S.;
(c) That the rules are arbitrary, vague and impose an impossible
(d) That the rules otherwise do not comply with the requirements
Since these issues are separate and unrelated they will be considered
(a) The Withholding of Federal Funds.
The Department of Health and Rehabilitative Services seeks to
amend the above rules in response to action taken by the federal government.
In the summer of this year the federal government cut off federal funds
which were previously paid to Medicaid recipients for non-therapeutic abortions.
Prior to that the federal government had been sharing expenses with the
state for this Medicaid Program which is administered by the Respondent,
Department of Health and Rehabilitative Servcies. The cutting off of
federal funds precipitated the rule changes which are the subject of this
proceeding. The present rule permits payments by the department for a host
of treatments under the Physician Services account, including non-
The department maintains that is has no choice but to stop
payments on non-therapeutic abortions when the federal government cuts
off its share of such funding. According to the Respondent, the funds
for Physician Services which were approved by the legislature in the
appropriations bill for the Department of Health and Rehabilitative
Services was passed as a joint expenditure with the federal and state 78
government both participating in the payment of all covered expenses.-
Thus, argues the Respondent, when the federal government withholds payments
for a particular service the state is obligated to eliminate such service.
Article 3, Section 12 of the Florida Constitution provides:
"Laws making appropriations for salaries of public
officers and other current expenses of the state
shall contain provisions on no other subject."
This part of Florida's constitution was interpreted in Dickinson v. Stone,
251 So.2d 268 (Fla. 1971), where the Surpeme Court indicated that in
certain situations appropriations may be made on a contingent basis, but
such contingency must be specifically spelled out in the appropriation.
In this proceeding the department maintains that the expenditure of state
funds for the payment of non-therapeutic abortions is contingent upon
the availability of federal funds for this purpose. Apparently, nowhere
in Florida's legislative budgetary enactment is any such contingency
contained or expressed. Therefore, the department's position is actually
a presumption based upon an inference.
However, what is certain is that the legislature appropriated
funds for Medicaid recipients to be used toward all "Physician Services",
of which the performance of abortions is but one of many types of medical
procedures which have been reimbursable. Without an express statement
in the budgetary enactment that such funds are to be disbursed contingent
upon the availability of matching federal funds the department's position
is not consistent with state law. As the Supreme Court stated in
Dickinson v. State, supra,
"It is a violation of an elemental principle in the
administration of public funds for one who is charged
with the trust of their proper expenditure not to
apply those finds to the purposes for which they
If the legislature had intended to make the expenditure of funds
it specifically appropriated contingent upon the availability of matching
federal funds it must specifically express its intention in the budgetary
enactment. No evidence was presented at this hearing that the legislature
had done so with regard to the Physician Services account although express
contingencies appear in other parts of the state budget. Since the legisla-
ture did not do so the Department of Health and Rehabilitative ServiEs miay-.
not impound funds which have been raised and appropriated. '
(b) The Economic Impact Statement.
As a part of its rule adoption proceeding the department prepared
an Economic Impact Statement as is required by Section 120.54(2)(a), F.S. .
The Economic Impact Statement was submitted into the record as Petitioners'.
Exhibit No. 4. The statement prepared by the department concluded that ''
the adoption of the proposed rules would require no additional expenditures
of state funds, would result in a savings of somewhat over $500,000 to the
state and would have no other determinable economic impact.
The Economic Impact Statement was perpared by Michael Morton, a ,'
social and economic services program consultant of the department.
Mr. Morton had no prior training in statistics or economics. He used no
outside references, no sources of information or data, nor did he consult
any other knowledgeable workers in this area. Although the department
of Health and Rehabilitative Services has a statistical section which is
at the same location as Mr. Morton's office he did not consult with anyone
in that section before he prepared the Economic Impact Statement.
Mr. Morton testified that he read Section 120.54(2), F.S., which
deals with the preparation of Economic Impact Statements and although he
believes he understood the requirements of the statute he was generally
unfamiliar with the meaning of several terms used in the law. For example,
he stated he thought he understood what "professionally accepted methodology"
was, but he was unware if there were any standards which could be used
for such a statement as he was required to prepare or what those standards
After reviewing the evidence presented it is evident that the
department's Economic Impact Statement does not comply with any of the
statutory requirements. Not only did the department make no effort to
seek available data which might aid in a projection of the consequences of
its proposed action, but the conclusions reached by the department are
As even William Page, Secretary of the Department of Health and
Rehabilitative Services, testified,the cutting off of funds for abortions
for Medicaid recipients will undoubtably result in an increased birth -ate
among those recipients. That will require the expenditure of funds for
the actual birth itself and will further require additional monthly
assistance payments for those families. No attempt was made by the
department to evaluate the statistical probabilities or consequences which
would attend those.events. It is entirely conceivable, as Secretary Page
testified, that the failure of the state to fund non-therapeutic abortions
to Medicaid recipients would actually result in greater state expenditures
when one considers that the state will reimburse the provider for the birth
of a child and become responsible for monthly maintenance payments.
Although this is recognized by the head of the department, the department's
Economic Impact Statement does not mention this as a possible economic
consequence of its proposed action. Without belaboring the point it is
sufficient to say that the department's Economic Impact Statement is
inaccurate, incomplete and in complete contradiction with the requirements
of Section 120.54(2)(a), F.S.
The First District Court of Appeal has considered the question of
the failure of an agency to comply with the requirements for the prepara-
tion of an Economic Impact Statement in rule adoption proceedings. In
DER v. Leon County, 344 So.2d 297 (Fla 1st DCA 1977) it is concluded that
this requirement is a material aspect of the rule adoption proceeding and
the failure of an agency to comply with the statutory requirements will
render the rule adoption proceedings invalid. For this reason alone the
department's proposed rules must be declared invalid.
The purpose of having an agency prepare an Economic Impact
Statement in conjunction with rule adoption proceedings is to require it
to intelligently understand the consequences of its actions. The law
requires an intelligent and thorough study of the probable long and short
,term consequences. The obvious intention of this design is to prevent
the agency from operating in a vacuum and to avoid unforeseen events
which might occur when the agency acts in partial ignorance of who is
affected by its actions. In this situation the department not only
did not attempt to gather relevant data as required by law but it did not
even inquire as to what data was already available. -78- bb
The Respondent, Department of Health and Rehabilitative Services
has presented a position that unless it can have been shown to have inten-
tionally failed to prepare an adequate statement it has complied with the
statute. But the department's intentions are irrelevant to a determination
of the adequacy or accuracy of the Economic Impact Statement. The department
has failed to comply with an essential requirement for the lawful adoption
of a rule.
For whatever reason, this jeopardizes the validity of the action
it seeks to achieve, regardless of the department's good intentions.
(c) The Vagueness Issue.
The Petitioners also allege that theproposed rule change seeks
to impose a standard that is so vague and arbitrary that it defies
rational or reasonable interpretation and is therefore invalid.
Two witnesses, both medical doctors who specialize in obstetrics
and gynecology, were called by the Petitioners. Both doctors have sub-
stantial experience in performing abortions. The rule in question seeks
to deny Medicaid payments for abortions "except when the attending
physician certifies the abortion as necessary because the life of the
mother would be endangered. ." The witnesses testified that pregnancy
itself to some degree endangers the life of the mother and that in addi-
tion to the inherent dangers of the pregnancy itself there often arise
many intervening situations which further jeopardize the life of the
expectant mother. Thus, according to the witnesses it is impossible to
comply with the proposed rule without resorting to guess work as to
which procedures will eventually be reimbursable and which will be
considered to be excluded under the proposed rule.
After considering the evidence and argument on this issue it
is the decision of the undersigned Hearing Officer that the rules do
not impose an impossible standard. Although it certianly opens the
door to arguments of almost a metaphysical nature, it is the opinion
of the undersigned the rules apply a standard that is capable of
The Florida Supreme Court in Walsingham v. State, 250 So.2d 857
(Fla. 1971) struck down language in the Florida Statutes similar to the
rule in question as being impermissibly vague, but that case dealt with a .
criminal charge of conspiracy to commit abortion. The standard of the
statute which charges a crime is necessarily higher than that for a rule
which only limits reimbursement. Similarly, in State v. Barquet, 262 So.2d
431 (Fla. 1972) a similar result was reached, but also in an appeal from
an order from a criminal court.
The rule in question here does not proscribe conduct. It sets
a standard which determines which medical procedures will be reimbursed
for Medicaid recipients. Unquestionably, the standard will be a difficult
one with which to comply, however, the state has a right to limit assistance
(d) Other AZlegations of Illegality.
The Petitioners have raised numerous other grounds in their
combined objections to the proposed rules. Without considering them
separately in this order it is sufficient to state that these remaining
allegations which include lack of notice, failure to submit the rules
to a review board, conflict with the Social Security Act are either not
supported in the record or are without merit.
In addition, the undersigned Hearing Officer has reviewed all
the proposed findings submitted by the Petitioners and the Respondent.
Those proposed findings which are not resolved in this order have been
found to be either without merit or wholly irrelevant.
For the above reason it is
That the proposed rules 10C-7.38 and 10C-7.39 as amended by the
Department of Health and Rehabilitative Services are invalid.
DONE and ORDERED this c23r- day of December, 1977, in
KENNETH G. OERTEL, Director
Division of Administrative Hearings
Room 530, Carlton Building
Tallahassee, Florida 32304
Terry L. DeMeo, Esq.
7210 Red Road
South Miami, Florida 33143
Jerry Traynham, Esq.
Ben Patterson, Esq.
1215 Thomasville Road
Tallahassee, Florida 32303
Frank Susman, Esq.
7733 Forsyth Boulevard
St. Louis, Missouri 63105
George Waas, Esq.
Dept. of Health and
1323 Winewood Boulevard
Tallahassee, Florida 32301
Carroll Webb, Executive Director
Administrative Procedure Committee
Room 110, Holland Building
Tallahassee, Florida 32304
Ms. Liz Cloud
Department of State
403 E. Gaines Street
Tallahassee, Florida 32304
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