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Illinois v. Bowen

decided: December 17, 1986.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division, No. 85 C 359, Milton I. Shadur, Judge.

Author: Coffey

Before COFFEY and FLAUM, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

COFFEY, Circuit Judge. The plaintiff-appellant, the State of Illinois ("plaintiff" or "Illinois"), appeals from the district court's decision granting summary judgment in favor of the defendant, Otis R. Bowen,*fn1 Secretary of the United States Department of Health and Human Services ("HHS"), whose department denied the plaintiff reimbursement for monies expended in the plaintiff's special education programs under Title XX of the Social Security Act, 42 U.S.C. §§ 1397-1397(f). We affirm.


The facts of this case are not in dispute. The State of Illinois has, at least since 1963, provided special educational services to eligible handicapped children. Under the direction of the Illinois Office of Education ("IOE"), local school districts are directed to identify those children in need of special education. Although other state agencies may subsequently become involved in the treatment and education of the handicapped students, the IOE has the overall supervisory responsibility for the educational programs offered by any state agency. During the period of time relevant to this action, the Illinois Department of CHildren and Family Services ("DCFS") operated three residential schools for the education of handicapped children.*fn2

The State of Illinois filed claims for participation under Title XX for educational services ($6,311,908) and for room and board ($2,792,804) in connection with the operation of the three residential schools during the period from the Title XX program's inception October 1, 1975 through March 30, 1980. After an audit was performed by the HHS for this time period, an HHS regional administrator initially disallowed all the claimed expenses. After the HHS Grant Appeals Board ("Board")*fn3 affirmed the disallowance on July 29, 1983, the decision became the Secretary's.*fn4 The district court granted the Secretary's motion for summary judgment and dismissed the action with prejudice upon the State's request of judicial review of the Secretary's disallowance. State of Illinois v. Heckler, 616 F. Supp. 620 (N.D. Ill. 1985).

The State of Illinois raises two primary issues on appeal: (1) whether the educational program costs claims for the three residential schools were proper expenditures under Title XX arguing that the programs for the handicapped students were neither "generally available" in the local school districts nor operated by a state educational agency; and (2) whether the room and board expenses were proper claims under Title XX since the education of the handicapped students at the three schools constituted a "new placement" every academic year.*fn5


A motion for summary judgment should be granted only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). An appellate court should reverse a grant of summary judgment upon the showing of a dispute over a material fact, however, the plaintiff must "allude to specific facts which raise a genuine issue for trial." Linhart v. Glatfelter, 771 F.2d 1004, 1008 (7th Cir. 1985). In reviewing a grant of summary judgment, an appellate court must view the record and the inferences drawn therefrom in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655, 8 L. Ed. 2d 176, 82 S. Ct. 993 (1962).

a. The disallowance of educational program costs.

Title XX of the Social Security Act ("Act"), 42 U.S.C. §§ 1397-1397(f), as amended and as pertinent during the audit period, provided for federal payments to the states for certain social services. We believe the district court in analyzing the legislative purpose of the Act gave a proper assessment of Congressional intent:

"When Congress passed Title XX it clearly intended to supplement, rather than to replace, state funding of social services. Act § 1397b required states receiving Title XX funds to continue funding social services at prior levels. Title XX was structured to allow states to extend their services further than before, and Act § 1397a reads like a congressional judgment that its supplemental resources were better spent on services in nonexistent or limited state supply than on services already generally available."

616 F. Supp. at 624.

The parties agree that § 1397a(a)(1) of the Social Security Act, which was applicable during the relevant audit period, would ordinarily provide Title XX funding for the $6,311,908 in expenses in educational costs claimed by the State of Illinois. Section 1397a(a)(1) provided Title XX funding for a variety of services including:

services designed to meet the special needs of children, . . . [and] the physically handicapped.

The then applicable § 1397a(a)(10) compelled the Secretary to disallow reimbursement ...

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