Colorado Ass'n of Public Employees v. Board of Regents

Burns, COLORADO ASSOCIATION OF PUB BENNETT, N. Jose Lois Gerald EMPLOYEES; Peterson; LIC C.W. Crockett, Cordova, George The Estate Shelley Ostrem; Jerry Aragon; D. Den Cyphers, Denning, of Vincent Francis Deutsch; Schuler; Joyce Shirley nis D. Glassman, Egeness, David Norma Blackmon; Robben; Ruth C. Marianne Keller, Kettel, Dave Ro Louise John Frank, Galensky; I. M. and Jennifer sales, Taylor, Trowbridge, Leslie Joann Plaintiffs-Appellants, Ward, Bradley Maurice William Welt Sloat, ner, Ayer Kenneth and Robert The BOARD OF OF REGENTS the UNI Petitioners, COLORADO, VERSITY OF and each capaci its members their official ties, Arnold; Kathleen Richard Ber OF FOR the BOARD TRUSTEES nick; Caldwell; Dietze; Robert Peter OF NORTHERN COLO UNIVERSITY Lynn Ellins; Harvey Phelps; Norwood Karowski, Truillo, RADO, Betsy Jose Robb; Shore; Winn, Roy and David Stokes, Biffle, Beverly Robert Defendants-Appellees. Thomas Ohanian, Sweeney, Arthur Shoett Gail No. 89SA476. Dickeson, Respondents. ler and Robert Colorado, Supreme Court En Banc. No. 89SC362. Dec. 1990. Colorado, Supreme Court Rehearing Denied Jan. En Banc.

Oct. Rehearing DENIED. Petition VOLLACK, JJ., did not LOHR n participate. Gorrell,

Teryl Jr., R. Luce, Charles F. Giles, O’Keefe, Moye, Gorrell, Vermeire & Denver, Gen., Sp. Attys. Asst. and Ben A. Rich, Staver, Allen W. University of Colo- Center, Denver, rado Health Sciences defendants-appellees.

Justice MULLARKEY delivered the opinion of the Court. appeal1

This is an from the Denver Dis- judgment trict upholding Court’s the con- stitutionality 1143, of House Bill No. Ch. secs. 1 193, 14, 1989 Colo.Sess.Laws 995-1006, reorgani- which for the zation of the of Colorado Uni- versity Hospital private, nonprofit cor- poration. act mostly This codified in -410, (1990 sections 23-21-401 to 9 C.R.S. Supp.). plaintiffs challenged the con- stitutionality statute on two first, grounds: XII, that it violates Article 13, Constitution, Section Colorado Amendment, Service State Civil second, XI, that it violates Article Section Constitution, of the Colorado the consti- prohibition against public tutional indebted- rejected court argu- ness. The trial both ments. reverse. We

I. plaintiffs, the Colorado Association Employees Public of Uni-

versity Hospital, complaint filed a challeng- constitutionality of the statute un- der the Colorado Constitution on alterna- They grounds. tive claimed that if the private corporation, statute created then V, the statute violated Article Section prohibits appropriations pri- which XI, corporations, vate and Article Section prohibits which transfer of state assets to alternative, corporations. if they claimed that the statute created Hobbs, Larry F. public corporation, Hornbein MacDonald then the statute violated P.C., Hall, Hobbs G. Fattor Vonda Article the State Section Civil Ser- Amendment, Employees, Ass’n of Public Den- vice and Article Section indebtedness.2 ver, plaintiffs-appellants. prohibits appeal They this case from the 1. Because involves an also claimed the statute violated I, judgment of a district court in which the 10 of and final the Fourteenth Constitution, constitutionality question, of a statute is in Amendment to United States 13-4-102(l)(b), II, jurisdiction. has 6A court See 42 U.S.C. and Article Sections 11 and guaran- the Colorado Constitution which injunctive plaintiffs requested profit nonprofit” and declara- oper- to administer the tory relief. hospital adequately ation of the and effi- 23-21-102(3)(a). ciently, §

By stipulation, parties submitted solely constitutionality briefs on the facial Although granted the former statute of the statute. The trial court ruled that Regents great degree flexibility re- plaintiffs prove the failed to that the stat- garding type entity they the of could estab- Specifically, ute was unconstitutional. the operate hospital, Regents’ lish the the (1) reorganized the trial court held: power provide any entity for was limited hospital private, nonprofit corpora- awas 23-21-102(3)(c) stated, in section “No XV, tion Article Sec- which did violate provision adversely such shall affect the 2, (2) prohibiting special legislation, tion benefits, rights, privileges and of exist- the not violate Article statute does personnel system employees of Amend- Section the Civil Service university deprive the of Colorado nor ment, employees reorga- the because the of person- them of their status under the state hospital employees of the nized will not be Furthermore, system.” Regents nel the state, (3) that, by reasoning, the similar required appoint were all of XI, statute does not violate Article Section hospital, “pursuant provisions of reorganized because the debts of the section 13 of article XII of the state consti- (4) state, hospital will not be debts of the tution” which is Civil Service Amend- XI, does not that the statute violate ment, 23-21-102(1). Under section 23- § pri- prohibiting extending Section debt to 21-106.5, Regents controlled the fees corporations the statute vate because charged professional services and the public purpose exception, comes within the fees, collected, way in which such when (5) that, by stipulating and to resolve spent operations hospi- were constitutionality an facial of the statute for provision tal. This last was not substan- trial, plaintiffs accelerated abandoned tially changed by the new statute. See under the Fourteenth Amend- their claims 23-21-410, (1990 Supp.). 9 C.R.S. § ment to the United and States Constitution n as well as under Article U.S.C. us, consisting primari- The statute before V, and Article Section of -410, ly of sections 23-21-401 to was enact- the Colorado Constitution. reorganization ed in 1989 to enable the of statute, University Hospital. In the 23-21- Prior to enactment of sections explains its rationale for this -410, organization 401 to of the Univer- measure: sity Hospital in sections 23- was addressed (1988).3 -113, hospi- 21-101 to 9 C.R.S. The (1) general assembly hereby The finds the health science edu- tal was utilized for and declares that: ... provided by University programs cation (c) present hospital, known as the 23-21-104. section of Colorado. Under § university university hospi- of Colorado 23-21-102(1), hospital control of the was tal, is to become and remain eco- unable (the Regents Re- vested the Board of nomically viable because it is Colorado, University of mem- gents) of the government policy kinds various and pursu- elected to office bers of which were regulation. IB C.R.S. ant to section (d) can and Unless become manage, Regents empowered “to were viable, economically remain it will be- control, govern hospitals” such under dependent upon state 23-21-102(1), come ever more regulations prescribed, § subsidies, quality of medical ser- operation provide and to for the inevitably any entity, public private, vice and education will decline. hospitals “by Regents process provision of law. These claims are not authorizes the Board of tee due "establish, maintain, any part us. before all or conduct the schools of medicine” in Denver and al- University Hospital 3. The lows it to discontinue the medical center. Re- was established the Board of Colorado VIII, gents pursuant Section 5. This to Article (e) The needs of the citizens day-to-day explicit have university state of to issue bonds money or borrow on Colorado health sciences will schools best behalf corporation. be served if the 23-21-404(l)(d). However, they may not operate corpora- nonprofit borrow ten more than million dollars at charged operat- with the mission time. Id. ing teaching hospital benefit of The statute allows Regents and the the health sciences and providing schools Directors to money borrow and to issue medically indigent. care for the bonds. do so on behalf 23-21-401. Because the were of the corporation for any of its lawful already prior authorized under the statute purposes. 23-21-403(l)(e). Any bonds to private, the establish non- by Regents issued the comply must with profit entity, Regents’ the authority to requirements applicable the to counties and steps necessary all pri- to create a “[t]ake municipalities. Id. The Directors are au- nonprofit-nonstock vate corporation” grant- up thorized to borrow to ten million dollars 23-21-403(l)(a) grants ed in section no new on corporation behalf the without the authority Regents. the to Regents’ approval. 23-21-404(l)(d). § provisions the Several of new do result in aggregate The indebtedness incurred changes organization hospital. the Regents both the and the Directors is thir- provisions, Under the new Regents ty year million dollars in the first fiscal and transferred the assets and liabili- sixty million dollars in the second fiscal corporation 1, 1989, ties to the on October year. 23-21-404(l)(i). § except for the land which was leased to the The reorganization affected status of corporation for a term exceed ninety- not to 2,000 approximately employees classified years. 23-21-403(l)(b). nine corpo- The § Hospital. the University According to the ration required is to statute award 23-21-406(1) (2), terms of and subsections exclusively privileges to the any hospital employee who is classified as providers “health faculty care are who an employee under personnel sys- the state members of health sciences schools of tem may to become employee elect an university Colorado.” corporation, leaving new thereby 23-21-404(l)(e). specifically The statute § personnel system, may stay on states, corporation “The not be shall an corporation this new as state em- agency government, depart- of state nor a ployee up years. under contract for two political ment or subdivision4 thereof.” employee Once the join elects to the new 21—403(l)(a).Accordingly, this new § 23— corporation, employee eligible is not corporation “shall not be return personnel system to the state and provisions affecting only govern- of law ceases to an active be member Public public mental or entities.” Id. Should the Employees Retirement Association dissolve, corporation assets the cor- (PERA). 23-21-406(2), -407(1). §§ poration less amounts owed creditors Regents. will revert governs Section 23-21-407 how the 23-21-404(l)(g). § rights of the former state retirement are affected the re- governed by benefits a Board (the organization. Although Directors) provisions dif- composed of Directors years depending fer on credit at appointed by nine who are service members transfer, general confirmed time of the con- Senate. cept receive, 23-21-404(l)(b). upon is that members “shall re- § retirement, equal move the Directors at time. Id. The a benefit at least responsible operating they Directors are benefit have from would received entity distinctly pensation Authority. 4. Here the established is differ- Insurance See political 29-4-704, (1990 ent Supp.) from those entities established 12A C.R.S. subdivisions, specifically, Housing Colorado (1990 Supp.). 3B Authority Colorado Finance Com- People PERA stitution itself. they Livesay if continued to earn ex rel. PERA (1881); Wright, People retirement or such earli- 6 Colo. ex rel. service credit until Rucker, legisla an upon they supra. cease to be Tucker v. er date on the employee contrary based ture cannot enact a law to those the transfer plan PERA in effect on constitutional restraints. v. Peo benefit Mauff 23-21-407(2)-(3). ple, date.” 52 Colo. 123 P. 101 We §§ consistently recognized every have though reorganized hospital is Even presumed statute be constitutional affecting by provisions of law governed presumption can overcome be entities, only government only by showing that the enactment is 23-21-403(l)(a), the General beyond unconstitutional a reasonable reorganized continuing role in the has a Eg., Auto & Truck doubt. under the articles of hospital’s activities Department Association Wreckers in the mission incorporation. Any change (Colo.1980); Revenue, 618 P.2d 646 Mr. hospital or in certain Dolan, Lucky’s, Inc. v. approved must incorporation articles of (1979).... P.2d 1021 Where the lan Assembly. 23-21- by the General §§ guage plain of the Constitution is and its -404(1)(/). reorga- 401(l)(g), Should clear, meaning language must be corpora- hospital nized wish to transfer Id.; declared and enforced as written. except “any person entity or tion to v. People ex rel. Park Reservoir Co. sixty regents” to exceed the million dol- or Hinderlider, 98 Colo. 57 P.2d 894 years, limit after two lar indebtedness approval of the only do so with the can 23-21-404(l)(f), (i). Assembly. General §§ Thus, plaintiffs have the burden further involved General to -410 establish that sections 23-21-401 corporation to the operation in the of the beyond a are unconstitutional reasonable Legislative that the Audit Commit- extent mind, principle in With this we now doubt. appointed by four other members tee and plaintiffs. address the issues raised compose the Board of Visi- the Governor The trial court’s determination that tors, every years the reviews two which to -410 are constitution sections 23-21-401 state funds for the corporation’s use of reorga upon finding its that the al rested It then medically indigent. 23-21-405. private corporation nized is a findings Assem- reports its to the General XV, Section of the formed under Governor, Regents, and the bly, the such, it Constitution. As would Colorado Id. Directors. public entity to which Article XII not be a find, apply. or Article XI would We how II. remains, ever, University Hospital under which standard of review substance, entity. Accordingly, we a state against the Colorado a statute is tested plan legislative that the embodied find expressed by this court in was Constitution -410, violates Article sections 23-21-401 Employ Public Association Section (Colo. Lamm, ees 1984): nonprofit corporations are Private by private individuals plenary legis- corporations formed Assembly has

The General which, part purpose5 in “no people public in for a conferred powers, lative profit or of which is distributa People rel. Tuck- the income ex their Constitution. officers, members, directors or Rucker, (1880). These to its ble er v. 5 Colo. 7-20-102(10), 3A C.R.S. however, express ....” Section are powers, corpora- (1986).6 control of the Ultimate reflected in the Con- implied restraints (1986), at the time the provides was in effect 6. This section C.R.S. 3A since been formed. It has was public purposes with some list of nonexhaustive (1990 7-20-102(10), C.R.S. 3A amended. See exceptions are not relevant here. Supp.). in the members or di- or appoint is vested elect own its officers and di- through their rectors. rectors vote. See 7-23-106(3), (1990 3A In Supp.). Thus, whether Hospital may be contrast, public corporations are created as private depends upon considered whether expedient as an

subdivisions state 1) private it is founded and maintained carry govern- device to out the functions of private 2) individuals People Rogers Letford, ment. ex rel. the state is involved in the management or 284, 295, (1938), property control of its opera- or internal corporations we stated: “Public are all tions. specially public purposes those created us, reorga- Under facts before agencies as instruments or increase hospital clearly nized cannot be character- efficiency government, supply public ized hospital. respect With wants, promote welfare.” factor, Regents, the first who are elect- officials, ed hospital pursu- established the not This court has addressed the authority granted VIII, ant to in Article dichotomy public/private specifically in the 5 of section the Colorado Constitution context, jurisdic but several other 23-21-403(l)(a). Thus, section tions done so. In have Woodard v. Porter officials, was founded Inc., 419, 422, Hosp., 125 Vt. 217 A.2d individuals. (1966), Supreme the Vermont Court analysis Our of the second issue focuses hospi following made the distinction Regents’ continuing on the role in control- tal context: operation ling reorganized hospi- public hospital instrumentality an [A] 23-21-404(l)(b), tal. Under section Re- state, founded and owned in the gents appoint the Board of Directors interest, public by supported public may remove the members of at the board funds, governed by deriving those their govern the Although time. Directors authority A private from the state. hos- corporation hospital operates the that the pital pri- by is founded and maintained day day, power corpora- from to the of the corporation, persons or or vate a a state collection, arrange the billing, tion “to for municipality having no voice in the professional and disbursement for servic- management property or control of its or Regents. es” rests the govern- the formation of rules for its 23-21-410(1). fees the collected for § ment. (in essence, professional gross services the hospital) income of the are for See also Green v. Board Directors to be used of of Center, support pro- “the remuneration and of the Lutheran Medical fessional, research, (Colo.Ct.App.1987); 874 Even v. and educational activi- Longmont Ass’n, the Hosp. faculty 1102 ties of members the United 629 (Colo.Ct.App.1981); dentistry schools of medicine and and shall Edson v. Griffin 55, 57-58, used for Hosp., Conn.Supp. 21 144 A.2d also be the administrative costs activities, (1958); such Hosp. 343 Levin Sinai accordance with rules 174, 178, City, adopted A.2d to regents.” Baltimore 186 Md. (1946); 23-21-410(2) added). (emphasis This sec- Valley Ohio Gen- State v. Ass’n., 229, 233, Regents W.Va. 140 tion indicates control Hosp. eral budget spending hospital. In S.E.2d Shulman v. Center, Hosp. F.Supp. Washington are Both Directors (D.C.Cir.1963), explained: the court up thirty to to million authorized borrow operated year sixty that a in the first million hospital The fact dollars year. second public the benefit dollars 21—404(l)(i). years following, profit, does not from In the detract its charac- § 23— institution, limit if ter a if it is estab- raise the General except by private corpo- Id. All funds borrowed lished and maintained chooses. authority within the Directors’ or individual with the ten million dollars ration Regents’ approv- III. must meet discretion dollars, million when bor- al. Even ten XII, Section 13 establishes the rowed, Regents’ implicitly must meet the personnel system Appoint- of the state. a relation since the bear approval promotions according ments and are “made is, effect, that to the Directors which fitness, merit and to be ascertained Thus, employee. an employer an competitive competence tests of without re- per- Regents explicitly sixty-seven control race, creed, color, gard political eighty-three percent potential of the cent to XII, 13(1). person- affiliation.” Art. and control indebtedness system appointive politi- nel consists of all hospital income of the will be how the employees cal officers and of the state with remain- spent. Implicitly, they control the XII, exceptions. Art. specified certain thirty-three per- percent seventeen 13(2). exception per- such from the One potential indebtedness of cent system employees who are sonnel is for opera- day-to-day as the corporation as well employed by political subdivisions of the power tions of the virtue of However, political subdivision state. the Directors. to remove may contract with the state for Regents’ creation of view if to do so law. Id. authorized continuing and their con- corporate hospital reorganization statute deals operations of the re- trol over the internal personnel system in section with the state organized hospital, it is evident 23-21-406, which states: sufficiently divested Regents have not (1) Any hospital employee who is a clas- over the themselves personnel employee of the state sified operate inde- the new enable system on the transfer date shall have Thus, corporation. pendently employee of the option to become an reorganized hospital is still find that the we employee an corporation or to remain entity.7 next consider whether We and a member of the state public entity is University Hospital as a system. personnel limitations con- subject to the constitutional (2) Any hospital employee who elects to 13 and Article in Article Section tained personnel the state remain a member of 3.8 pro- partial hospital the constitutional finding with the statute violated is in accordance 7. This against special relating private laws to Virginia hibition Queen v. West conclusions in court’s hospital (W.Va.1988), corporations. found that the The court Hosp., a case Univ. 365 S.E.2d 375 required private it was to fulfill was not because rely, although Regents strongly upon which the primary object government and its functions definitively classified the status that court never "personal of its stock- was not the emolument reorganized hospital. at 381. holders.” Id. reorganization hospital Queen the involved the Colorado statute was statute after which corporation hold that the estab 8. Because we Virginia though the West stat- modeled. Even -410, to is not a lished under sections 23-21-401 designate nonprofit-nonstock ute did not private corporation, wheth we need not address "private," indicated corporation the court V, 34, as violates Article er the statute corporation possible was that this that it was making appropri prohibits which the state from general corporation laws of the under formed corporations private whether the ations normally create considered to state which are special of Article is a law in violation statute analysis corporations. In its XV, Id. at 380. Similarly, not address Section 2. we need provi- hospital statute violated a Regents’ power whether the holding of that the the trial court's forbidding the constitution money sion in the state issue bonds on behalf to borrow becoming extending to or lia- credit corporation state from in section 23-21- as of 403(1)(e) any corporation, the court of ble for the debts Section 1 does not violate Constitution, reasoned that since a different tack. It because these chose 2 of the and Section nonprofit, generally apply propriety outside of was it fell when the provisions coverage private corporations court at government the constitution. The aid to is of of 445, City, framers were "ex- v. Canon 716 P.2d that the constitutional issue. See Witcher found Lakewood, (Colo.1986); corporations City 636 clusively Gude concerned” of 691, (Colo.1981); City enterprises. Id. McNichols profit-making P.2d which were 251-252, Denver, however, indicated, hospi- County Colo. that The court (1955). analysis 1099-1100 public of whether the in its tal was period system may remain so for a of not of the law in possible the future some but years, more than two shall not be Assembly. hostile General eligible personnel to return to the state Id. years 1919,9 at 872. In the since this system employee once he court has recognized that this amendment has elected to become em- disposition embodies strong peo- ployee. ple of protect Colorado to the state civil plaintiffs reorganization claim that system service from “destruction or emas- University Hospital legisla- amounts to culation of the law in the future some effort tive to free the from com- possible general assembly.” hostile Id. plying requirements with the of the state See Colorado Employees State Civil Serv. system expressly personnel applied which Love, 436, 446, Ass’n v. hospital organization under the former Because we find that the statute. undisputed It is transfer of Uni- public entity, still a we is must examine versity Hospital nonprofit-nonstock whether, such, subject as it is to the re- private corporation was intended to remove personnel system quirements of the state the hospital scope from the of the state forth in Article Section 13. set personnel However, system. adopted This amendment was in 1918 and argue legislation, that the result provisions detailing the contained structure 2,000 elimination approximately civil ser- civil service. In this court jobs, vice “hostile” was not and that this interpreted the amendment for the first highest regard statute evidences “the People Clay v. Bradley, time ex rel. greatest protecting rights care in (1919), judi- 179 P. 871 and took certified remain part history legisla- notice of the of former cial personnel system.”10 This court involving the civil service. We stated: “hostility” part need not find actual on the judicial In addition we take notice of legislature. simple fact that the history concerning legislation legislative large measure terminates a the civil service. Before the act of years of jobs enough number within two Legislatures occasionally were hostile to expressed to invoke the concerns system, appropria- the merit and refused court in Bradley. support commission. The tion[s] above, As not all discussed entities compel appro- of 1912 act was initiated personnel are amendment. remedy defects, other priations reorga- order to consider whether the 1915, however, By did so. the act public entity nized is a laws, repealed Leg- all former personnel outside the of the state islature, coverage standpoint of from the those system, we must examine the especially system, devoted to merit hospital day following effect, closely. the the destroyed much of its beneficial On transfer, was, hospital the new under its and constitutional amendment was initi- very purpose incorporation, operated by articles of accordingly ated for the consisting avoiding the destruction emasculation Board of Directors of nine mem- XII, 8-45-101(9), positions. Compare the Article Section constitution was 3B C.R.S. 9. repealed (1990 (when with amendments in Supp.) reenacted created the These resulted in the amendments estab- Compensation Authority, Insurance separate department personnel of a lishment employees already employed with the division director, personnel respon- a state headed compensation permitted of state insurance were Also, system. administering for sible personnel system choose to remain in Commission was re- three-member Civil Service 18-11C-4(d) indefinitely) and W.Va.Code personnel state placed a five-member board (1988) (the hospital reorganiza Virginia West primarily policy-making has a role. In that addition, statute, after which the Colorado statute changes designed there were other modeled, pre-reorganization was allows the em improve personnel sys- state modernize and ployees per the state to choose to remain with tem. system). sonnel "grandfa- The statute us does not now before employees who hold incumbent classified ther” Milliken, appointed by Regents, confirmed bers Colo. at 223 P. at 40. Cf. Senate, serving at the discretion Employees Colorado Ass’n Public Lamm, (Colo.1984) Di- Regents. Regents of the The and the (statute required the “up construction of empowered rectors were to issue bonds position” ward allocation of and the “move was em- money. hospital The new borrow ment of the employee incumbent with his joint powered participate in ventures position” something pro as other than a private corporations, partic- with other motion coverage to fall outside the of Arti ipate hospital purchasing pools, in XII, 13; rejected proposed cle court sys- personnel hire outside the “euphemistic”). distinction as tem. larger The case before us involves on a hospital, operations of the none- scale the situation where old offices are theless, day remained the same. theOn Here, and new ones are created. abolished transfer, following hospital still employees may keep jobs the old their but operated by appointees served at was who only they give if up protection of the Regents. employ- discretion rights guarantees secured the State nonprofit-nonstock corpora- ees of the new System. Personnel We have held that a jobs tion returned to the same at the same change in mere the nomenclature of an they pre- hospital at which had worked employee’sjob title from “officer” to “com day. still limited staff vious change missioner” does not the essence of privileges exclusively faculty employee’s position purposes school and a clinical envi- medical employee’s status civil service. exclusively for the Colorado ronment State, 202, 207, Campbell v. 176 Colo. of Medicine. The contin- School 1385, 1388(1971). By analogy, a mere hospital just they ued to control the new change in the nomenclature of the Thus, the old. we find that did change employ does not the essence of the changes University Hospital were position purposes ee’s of civil service. form, substance, changes of not that did Thus, we do not find the nature of the new jobs not affect the nature of the held hospital changed such that it falls outside employees. the civil service scope constitutional amendment. prior is consistent with Our conclusion Accordingly, we hold that section 23-21- relating of this court to the cover- decisions because it violates unconstitutional age personnel system. This case protects Section which closely People the situation in ex personnel legislative resembles from measures de Milliken, Kelly 223 P. signed rel. to circumvent the constitutional (1924), in- jobs in which the of license amendment. spectors were abolished and then re-cre- years substantially ated two later with IV. duties, job with a different

identical but our conclusion that the reor inspectors held that the Given title. This court public entity, remains a we ganized jobs rehired when the were entitled analyze operation of the statu need explanation, re-created. we stated: were tory provisions which allow of office secured to Since their tenure and the Directors to incur debt on behalf of Constitution, by the the so-called them Indeed, reorganized hospital. the Re the (article 12, 13), civil service amendment attempted to defend the gents have not legislature deprive has no the debt-financing applied pub to a scheme indeed, has, body That the them of it. entity, though plaintiffs lic even at office, power to abolish but on the that such tacked the statute basis abolishing not avoid Constitution debt would be unconstitutional. creating a new one with the office and same, ability public entity engage substantially the to which of a duties XI, financing is constrained Article appointed. debt new officers are However, Section 3 of the Colorado Constitution. we find no evidence legislative caselaw, however, XI, our Article Under intent reorganized to enable the hospital to complete not a fi Section 3 is bar. The money borrow if it public entity. remains a nancing upheld devices that we have under Accordingly, attempt did not provision generally this constitutional fall to structure the financing provided debt (1) categories: special into three fund cases comply act so that it would with Article repaid funds borrowed are out XI, Section 3 and the relevant caselaw re- generated by improve of the revenue garding public note, entities. We for ex- ment, Perl-Mack Civic Ass’n v. Board ample, that the act provision contains no Metro, Directors Baker and Sanitation repayment of funds borrowed Dist., 371, 374, 685, 140 Colo. 344 P.2d 687 Directors. (1959); (2) borrowing cases in which the view, In our financing provi debt entity public entity independent is a from sions of the statute inextricably are inter state, Interrogatories In re legislative twined with the purpose to cre Senate, 298, 305, Colorado State reorganized ate the private, as a 350, (1977); (3) 566 P.2d cases in nonprofit corporation. Since that effort government which the enters into a has failed and we have found that lease/purchase agreement building for a reorganized hospital public entity, is a improvement independent other with an financing provisions debt of the statute body parties and in which the are not dependent which are on the existence of bound renew the lease at the end of each reorganized hospital private, as a non year, Heights, Glennon Inc. v. Central profit entity 2-4-204, also must fail. See § Trust, 872, (Colo. P.2d Bank & 878-879 (1980); 1B Gallegos Phipps, 1983). 856, (Colo.1989). apparent Here it is from a review of the recognize We that the statute contains a legislative history statute and its that the severability clause. 9 C.R.S. legislature’s authorization for debt financ- (1990 However, Supp.). we find that the assumption was based on its that the financing provisions debt are not severable reorganized hospital private, would be a portions from the of the statute which we nonprofit corporation. Throughout leg- part have found unconstitutional in III of discussions, reorganized hospi- islative opinion. City Lakewood v. Colfax “private” “quasi- tal was referred to as Ass’n, Inc., 52, Unlimited Wells, private.” prime Senator Senate (Colo.1981); Singer, 2 N. Statutes and bill, sponsor explained that the bill 44.04, (C. Statutory Construction .08 “privatize” would and would 1986). Hence, 4th rev. ed. Sands we invali- quasi private allow it to issue bonds “as a entirety. date the act in its institution will be able to do.” His testimo- ny indicates his that the belief as a Conclusion part of the state could not issue bonds. p. Transcript Legislative plaintiffs challenged

Vol. 6 at the constitu- History of Bill tionality House 1143. Our review of of House Bill secs. 1 Ch. 995-1006, legislative history great legis- discloses 1989 Colo.Sess.Laws on XII, propriety grounds lative concern with the of trans- it violates Article XI, ferring state assets to the hos- 3 of the Section 13 Article See, pital private entity. e.g., vol. 2 at Because we find Colorado Constitution. Legislative p. Transcript History that the statute violates Article Sec- Paulson). (remarks Rep. beyond House Bill 1143 and is unconstitutional XI, doubt, §§1, 2. See also Colo. Const. Art. reasonable we reverse. revenue, provides

11. Section 3 in relevant casual deficiencies of erect state, part: buildings suppress for the use of the insurrection, state, or, Section Public debt of the state—limita- defend the in time of war, any defending tions. The state shall not contract by debt assist in the United States.... form, any except provide loan in 148

KIRSHBAUM, J., specially gal Corp., (E.D. concurs. F.Supp. Serv. 433 278 Wash.1977). ROVIRA, C.J., ERICKSON, J., must, inquiry majority indi dissent. cates, degree govern focus on the specially Justice KIRSHBAUM mental in sources fact exercise actual con concurring. trol over particular essential functions of a agree I Although with the conclusion case, entity. In I do not find the part majority opinion reached in II of the presumed authority regents of the to re hospital by that the created sections 23-21- hospital’s move of the members board of -410, (the (1990 Supp.) Act), 401 9 C.R.S. a directors to be critical In factor. consid public institution, is a rather private than a statute, ering challenge a facial to a our grounds I do than so on more narrow those is to responsibility ascertain whether a con by majority. join part articulated I III stitutionally valid construction reason opinion, concluding, majority for the in practical purpose able and view of therein, reasons forth set section 23- and context the statute. See Mr. 21-406, (1990 Supp.), pro- 9 violates Dolan, Lucky’s visions article section (1979). 23-21-404(1)(b) states establishing per- Constitution pertinent in part as follows: system public sonnel for this state’s enti- (b) Nothing in this paragraph shall be ties. limit construed to of the re- Act, adopting the General Assem gents to remove director at time. bly clearly private, a intended to create not (1990 23-21-404(l)(b), Supp.). 9 C.R.S. § public, corporation. 23-21-401(1)(e), §§ face, grants On its this sentence neither -402(3), -403(1)(a), (1990 9 C.R.S. Supp.). authority regents unlimited to re- In the context of the facial constitutional move directors of the nor indicates challenge plaintiffs asserted in this However, authority. extent of such action, question initial is whether the 23-21-403(l)(a), (1990 section 9 C.R.S. adopted goal. Act as achieves that The Supp.), the General has factors relevant for a determination of that, unless otherwise established entity whether such an as the Act, have all “shall public entity fact a or a include the rights powers private nonprofit of a purposes source and for the establishment corporation organized under the laws of institution the source ultimate Construing provisions this state.” these authority and control over institution’s together, legislative in light of the admitted policies, operations provision fiscal private corporation, intent to create I Queen Virginia services. See v. West conclude board of directors (W.Va.1987); Hosp., Univ. 365 S.E.2d 375 authority shall have the same Inc., Hosp., v. Porter Vt. Woodard remove its members as do all other boards (1966). 217 A.2d 37 hospitals respec- of directors of their under incorporation bylaws. tive articles suggest majority does not that an 10-16-106(1), See 4A C.R.S. § institution “founded and maintained itself Since the Act does not authorize the private corpora- individuals or a regents adopt any regulation rule or “private” tion” can never be deemed a enti- defining the circumstances in which this case, ty. (at 143). If that were the such exercised, authority may removal be governmentally created institutions as the regents’ authority may, to remove directors America, Future Farmers of 36 U.S.C. view, my be defined valid rules or (1988), Boy and the of Amer- Scouts regulations adopted by hospital’s board ica, (1988),might 36 U.S.C. deemed sup- would directors. Such construction private nonprofit than corpo- rather give port legislative intent and harmo- Legal Corporation, rations. Services problematical nious to an content otherwise (1988), subject great U.S.C. sentence. control, Congressional direct has been indicated, that, agree proper- I private, public, corpora- not a As do not found to be construed, ly the final sentence of section Spokane County Legal tion. Serv. v. Le-

149 23-21-404(l)(b) part opinion II any impermissible confers clusion of its that the entity by hospital’s essentially pub- created the Act is by regents over the control the lic in nature. agree I operations. Nor do that policies or of section provisions the dissenting: Chief Justice ROVIRA (1990 authorizing of Supp.), review C.R.S. by sepa- funds hospital’s use of state the In October the Board of visitors, any mea- (“the establishes Regents”) rate board the of Colorado degree by regents the or corpo- of control private nonprofit, surable created a nonstock hospital’s opera- (“the Hospital Corporation”) oper- institutions over the ration state University Hospital functions reporting review and ate the of the Universi- tions. Such Colorado, pursuant ty of to the Act to legislative concerns are consistent Reorganize University Hospital as a Pri- accounting expenditures proper over (“the Act”), Nonprofit Corporation vate and, view, my do not amount funds 995-1008, (codified at 1989 Colo.Sess.Laws authority impermissible government -22-111, (Supp. 23-21-401 C.R.S. §§ daily operations. over 1990)). Notwithstanding legislative the However, agree majority I with the pronouncements declaring any corpo- 23-21-401(l)(g), 9 provisions of section pri- the Act ration created under would be (the (1990 Supp.) General C.R.S. notwithstanding statutory vate and hospital’s approve any change must limiting the in the provisions state’s role mission), 23-21-404(l)(f), 9 C.R.S. section operation any corporation formed under (1990 (the Assembly must Supp.) General Act, majority Hospi- holds that the approve the transfer Corporation public corporation tal is a sub- regents), section any entity other than ject state-per- to article section 23-21-404(l)(i) (the Assembly may General system provision, of the Colorado sonnel aggregate limit the indebtedness majority proceeds then Constitution. 23-21-404(l)(/) (the hospital), and section to find that the Act violates ability Assembly may limit the General agree I do not that the Hos- Constitution. incor- to amend its articles of pital Corporation public corporation, is a governmen- poration), substantial establish that the Act violates the state constitution. authority over essential features of tal respectfully I Accordingly, dissent. significantly, hospital’s More activities. “ corporations those cre- ‘Public are all 23-21-410(1), provisions of section specially public purposes as instru- ated (1990 Supp.), and section 23-21- agencies efficiency increase the ments or (1990 410(2), Supp.), require the 9 C.R.S. wants, public government, supply hospital’s board of di- regents, not corpo- Public promote the welfare. rectors, regula- to determine rules or municipal, quasi- rations are classified ” charges for all services tions the basis for municipal, public-quasi corporations.’ and the allocation rendered Letford, 102 Colo. People Rogers ex rel. hospital from income received of all (1938) 284, 297, (quoting P.2d lodging provision of such services. The 11, at Municipal Corporations 43 C.J. hospital’s ultimate control over the of this (1927)); People, 200 Bailey v. 72-73 accord and functions outside policies fundamental 549, 552-53, hospital’s authority of the board “public corporation” has been The term authority wholly within the directors and re- consistently in contexts to used various beyond a rea- public regents establishes as subdivisions of the fer to entities created opera- that the direction carry governmental sonable doubt out functions. state to foreign- determined example, will be in the context of tions of For zones, defined No rules of has private, personnel. trade public, corporation” as: plain "public can alter the statutory construction Colorado, statutory provisions. meaning any political of these sub- state of [T]he county effect, irreparably division, city unfortunately, municipality, thereof, public agency I of the state legislative intent. the stated undermine subdivision, Colorado, mu- any political majority’s con- concur with therefore city county thereof, or nicipality, and or instrumentality, political or subdivision of corporate any municipal instrumentality pursuant law,” the state organized shall or of be liability injury). the state Colorado the state of immune from More- over, Regents may Colorado and one or more other under the Act the only states. “'private nonprofit-nonstock corpo- create a 7-49.5-108(6), (1986); see 3A C.R.S. § ration” under the Nonprofit Cor- 29-1-202(2), (1986) (“political 12A C.R.S. § poration Act, Hospital Corporation and the “public corporation subdivision” includes “shall agency govern- not be an of state organized pursuant in intergovern to law” ment, department political nor a or subdivi- statute); see also Pau mental-relationships sion thereofQ nor shall any it] Valley lu v. Lower Arkansas Council of provisions only govern- law affecting Gov’ts, (Colo.App.), public mental or entities.” cert. (1982) (equating “public denied corpo 21—403(l)(a); see 23-21-401(l)(e) § § 23— municipal ration” quasi-municipal with or (legislative declaration that Hos- corporation wage statute). in context of pital will operate private nonprofit as “a legislature As the this court and have Const, cf, e.g., corporation”); art. “public corporation,” defined I do not be- XIV, 17(l)(a) (4)(a) (“general and assem- § Corporation, Hospital lieve the that as cre- bly provide by orga- shall statute for the Act, by Regents pursuant ated the to the structure, nization, functions, services, fa- public corporation. constitutes The Act cilities, powers and of service authorities” Hospital Corpora- the role of narrows the and such service authorities be a “shall beyond what can be considered a mu- body corporate political and a subdivision nicipal quasi-municipal entity. or Under state”). Act, Hospital the Corporation must “as- Notwithstanding foregoing statutory responsibility defend, sume for and shall provisions, majority reasons indemnify, and hold harmless” Hospital Corporation public entity is a be- to: Regents respect and cause Regents, it was founded who (a) All liabilities and duties of the re- officials, are “state individu- contracts, gents pursuant agreements, als,” “Regents’ and because of the continu- commodities, services, and leases for and ing controlling operation role” supplies hospital, utilized includ- Hospital Corporation. Maj. op. at 143-144. property leases; real I persuaded by am not analysis. Un- (b) employ- All claims to the related majority’s reasoning, der the neither relationship ment transfer after the date legislature nor the create can corporation between private, corporation nonprofit corpo- if the corporation; and the ration pur- is established state officials (c) All claims for of contract breach suant legislative authority, long so and resulting from the action corporation’s they corpora- retain control over the date; to act failure after the transfer Yet, tion. governing nonprofit the law cor- (d) corpora- All claims related -29-107, porations, 7-20-101 to 3A §§ omissions, professional tion’s errors (1986 Supp.1990), specifically & con- including malpractice; medical directors templates nonprofit corporation may that a liability; compen- and officers workers’ legislature, legis- be created sation; liability; premises, automobile enacting lature in the Act intended completed operations, products liabil- Hospital Corporation be created under the ity; corpo- other liabilities See nonprofit-corporations statute. ration. 7-20-102(2)(a) of 23-21-403. Section nonprofit provides 23-21-403(2); 24-10-103(5) corporations statute cf incorporation” that “articles of include: -106, (1988) (“public entity,” 10A C.R.S. special improvement by special district For which includes created district, every agency, pursuant other kind act of general assembly “and Hospital Corporation 1. Because statutes and this court have ade- whether the ais "public quately corporation,” jurisdictions I find it defined to consider how other unnecessary question answering “public corporation.” have defined law, corporation has bilities. The in this case chose general permit to create a accept provisions of said elected to nonprofit corporation carry out the Uni- special charter and 20 to articles versity Hospital Regents’ functions. The by special any thereto made amendments Hospital Corpo- incidental control over the pursuant general assembly or act of the ration, Assembly’s and the General even corporation’s general prior law control, more attenuated is insufficient to accept provisions of said election to Hospital Corporation transform the into a articles. public corporation. Hospital Because the Regents’ limited control over the The public corporation, Corporation is a Corporation, permitted through as Hospital petitioners’ objections under article sec- Act, nonprofit- is consistent with and article section of the 7-21-102 corporations statute. corporation’s Colorado to the Constitution incorporation provides that articles creation must fail. purpose for which the shall include I Accordingly, respectfully dissent. organized “[a]ny provi and corporation is sions, law, with not inconsistent which dissenting: Justice ERICKSON elect to set forth in the arti incorporators upheld The trial the facial court constitu- incorporation regulation for the cles of tionality of sections 23-21-401 to 23-22- [nonprofit] corpo- affairs of the the internal ration_” (1990 Supp.).1 majority, 9 C.R.S. Likewise, section 7-23-102 relying provisions on various sections and provides nonprofit corporation’s that Constitution, of the Colorado has reversed bylaws “may any provisions contain for the the trial court and found that the statute is management of the affairs of regulation or Fact, Findings unconstitutional. The corporation not inconsistent with the law Law, Judgment and of the Conclusions of incorporation.” Nothing or the articles appendix trial court are an to this dissent statute, nonprofit-corporation any in the view, and, my properly address and re- governing the formation and other statute relating University solve the issues operation corporations, prohibits the or Hospital. Hospital ganizational structure of the Cor Hospital University was established contrary, we have held poration. On University of Colorado plena “is invested with Constitution, pursuant Colorado purposes all the of civil ry power for provides: with the state constitution government,” establishment, management, and providing Letford, certain limitations. of the state institutions shall be abolition Letford, at In at state, subject the control of the under challenge to a statute cre considered a we and provisions of the constitution Al ating conservancy district. a water general regulations and as the such laws though we noted that the district was not may provide; except that the assembly “municipal corporation,” the cre traditional Boulder, regents university at Col- did not violate the ation of the district may, whenev- Springs, orado and Denver “ ‘the state Colorado Constitution because of that judgment er in their needs corpo of a legislature may create kind establish, institution demand such action to aid in the administration of ration maintain, any part and conduct all or and endow such and its affairs medicine, dentistry, nurs- the schools of powers such and functions officers with university, ing, pharmacy to- ” necessary.’ at may deem Id. fa- gether hospitals supporting (emphasis supplied). P.2d at 282 health, at programs related cilities view, successfully further, my Denver; ...; nonprofit corporation general private, prior approval created nothing in this shall be assembly, functions of the section carry on the prevent the state institu- lia- construed to hospital’s to assume the Hospital, and statutory judge sections te issue as H.B. 1143. trial identified the 1. The higher tions of education from counsel, hereafter having considered legis- establishing, maintaining, and conducting history lative of Colorado House Bill 1143 centers, or discontinuing centers, medical (“H.B. 1143”), hereby enters findings its or branches of such institutions in fact and conclusions of law as follows: part of the state. VIII, Colo. Const. art. 5.§ GENERAL FINDINGS OF FACT wording VIII, of article section 5 reflects the intent of the framers of the 1. H.B. 1143 duly was enacted provide constitution to regents with the General Assembly April on establish, maintain, operate and 1989. It authorized the to: University Hospital in the manner di- rected and authorized the General As- steps Take all necessary pri- to create a sembly. emergencies Economic confront- nonprofit-nonstock vate corporation un- regents in operation title, der C.R.S., articles 20 to 29 of University Hospital caused the General As- requirements conforms to the sembly to enact the legislation which the section for the purpose op- majority has declared facially to be uncon- erating hospital. The corporation stitutional. I believe the General Assembly shall agency not be an govern- of state had the authority under article ment, department nor be a political

VIII, reorganize section 5 to University subdivision thereof. It shall not be sub- Hospital private corporation. as a ject any provisions affecting of law For the reasons so well set forth only governmental and, entities judge, uphold trial I would the constitution- unless otherwise in part ality question. in statutes shall rights powers have all of a APPENDIX private nonprofit corporation organized COURT, DISTRICT CITY AND COUNTY under the laws of this state. DENVER, OF COLORADO 23-21-403(l)(a). C.R.S. § Case No. 89 CV Courtroom 21 part As of the University of Colora- FACT, FINDINGS OF CONCLUSIONSOF do’s Center, Health Sciences University LAW AND JUDGMENT Hospital has achieved considerable success COLORADO ASSOCIATION OF PUBLIC in care, its four patient research, missions: EMPLOYEES; PETERSON; C.W. SHEL- education and service community, to the OSTREM; ARAGON; LEY JERRY D. especially care medically indigent. DEUTSCH; SCHULER;

DENNIS JOYCE University Hospital among was ranked BLACKMON; SHIRLEY D. RUTH C. top hospitals in ROBBEN; the nation in a 1987 GALENSKY; MARIANNE I. FRANK, and JENNIFER M. peer survey. national Facts University Hospital Reorganization, House Bill Plaintiffs, at submitted as Exhibit 2 to Defen- Regents’ dant in Support Brief of the Con- THE BOARD OF REGENTS OF THE stitutionality of Colorado House Bill 1143. COLORADO, UNIVERSITY OF and each mid-1980s, however, capacities, its members their official it became ARNOLD; KATHLEEN apparent RICHARD BER- that several forces were combin- NICK; CALDWELL; ROBERT PETER ing to threaten Hospital’s status

DIETZE; ELLINS; LYNN HARVEY premiere as the teaching hospital in the PHELPS; ROBB; NORWOOD ROY Rocky Region, Mountain threatening its SHORE; WINN, and DAVID ability accomplish mission, its poten- Defendants. tially threatening very its existence. Sev- eral Court, threatening of these forces were exter- having reviewed the briefs exhibits, having arguments heard the nal: the dramatic competition increase in reorganization, University Hospital

Prior to paid approximately per pool hour for $31 competition patient resulting care and nurses, average pay whereas the rate for employment marketplace for health in the personnel system its nurses under the state greatly increased professionals; care per Many was hour. $14 $15 Univer- capital expenditures provide need for sity Hospital’s nurses reduced the hours technology; and in- state-of-the-art medical they Hospital, worked as creasing by employers gov- reluctance quit Hospital or have entirely, order ernmental insurers to subsidize care for employment nursing pools to obtain medically indigent through traditional cost- they paid higher wage because could be shifting measures. nursing pool. This situation result- 4.University Hospital’s status University Hospital paying ed in mil- $3.8 ability entity severely restricted its nursing pool lion services while respond changes to these in the health care prohibited paying it was from its nurses marketplace. Among significant the more directly wage at a scale commensurate by University Hospital’s limitations caused hospitals community. with other in the entity were: status as a state pool signifi- The use of nurses also created partic- inability 1. The constitutional to training cant additional burdens for the ipate joint in beneficial ventures with Hospital because it is more difficult to private hospitals; required consistency proce- maintain the inability participate 2. The practices heavy dures and treatment with a purchasing pools because dependency upon temporary nurses. regulations; procurement Additionally, University Hospital 7. has inability capital 3. The to build reserves upon by provide been called the state to money or borrow for investment and increasing uncompensated amounts of improvements, equipment (“MI”) medically indigent care. In 1988-89 services; and medical University Hospital’s pro-MI unreimbursed resulting inability 4. The to establish grams approximately million cost was $7.4 programs and at- new therefore to dollars. leading specialists tract and research center; grants to the health sciences 8. The combined forces of increased care, competition patient inability inability pay wages competi- 5. The pay competitive wages to attract and hold sector, private espe- staff, tive with the professional increasing requirements cially nursing care because of uncompensated medically indi- provide per- constraints caused the state gent inability care to borrow mon- wages. system paying sonnel on acquire equipment ey to state-of-the-art graduate necessary to maintain accredited University Hospi- The limitation on 5. programs and to attract medical education competitive ability pay wages tal’s with patients, threatened the private paying propor- sector reached crisis University Hospital to fulfill its ability of 1988, July when 284 nurses sub- tions long- threatened its four-fold mission and resignations dispute their with mitted term existence. compensation. These Hospital over only after resignations were withdrawn The recommendation to transfer action the Gover- emergency executive University Hospital assets and liabilities of Colorado, in the which resulted Hos- nor of private nonprofit was to a in- being pay to offer a pital able 7V2% experience made with the benefit of nursing to its staff. crease centers state academic health at least four nonprof- pay competitive wage, which have 6. Unable to of Ari- required corporations: to contract Universities was Florida, Virgi- zona, Maryland, and West nurs- private nursing pools provide Hospital temporary basis. nia. es to on a

154

12. Plaintiffs have abandoned all claims except claims relating to the facial constitu- 10. H.B. 1143 was the of sub- tionality parties of H.B. 1143. The have legislative scrutiny stantial and debate. stipulated that this case to be submitted legislative history of H.B. con- briefs, on their arguments exhibits and oral sisted days of four committee hearings as to the constitutionality of H.B. 1143. days and three floor argu- debate. Each ment in in opposition favor of and to H.B. BURDEN OF AND PROOF RULES OF airing 1143 pas- received a full before final CONSTRUCTION sage of legislation. presumed “Statutes are to be consti enacting 11. In H.B. 1143 the General tutional, party asserting and a par that a Assembly expressly found that: ticular statute is unconstitutional assumes establishing

a. The the burden mission estab- such assertion by part beyond lished of this 1 article is to facili- doubt.” reasonable Anderson education, research, Personnel, support Dep’t tate and v. State (Colo.1988) added). service activities of the 975 (emphasis health Accord operated Lamm, regents (Colo. sciences schools Urbish v. P.2d 1988); university pro- Dolan, of Colorado and Mr. Inc. Lucky’s, care, patient (1979); including vide care for Colo. Mosko v. medically Dunbar, indigent, specialized (1957); servic- P.2d 581 widely People es not available elsewhere in ex Hosp. rel. Colorado State region. state and Armstrong, 104 Colo. 90 P.2d 522 (1939); People Goddard, ex rel. Thomas v. provide b. In order to for the edu- 432, (1885). 8 Colo. 7 P. 301 training of profes- cation and health care sionals, provide a setting to clinical for proof 14. “The burden of to overcome research, biomedical to ensure the avail- presumption constitutionality of a ability patient of quality including care extremely high statute is where the chal- specialized medical services not other- lenge validity statute, is to the facial of the available, widely provide wise and to potential there is no inhibition of fun- the care medically and treatment of the damental freedoms such as freedom of indigent, necessary it hospital is that the speech.” Beathune Colorado Dealer facility possible be a of the finest quality. 483, Bd., Licensing 198 Colo. 601 P.2d 1386, (1979). 1387-88 hospital, c. present The known as the university university hospi- of Colorado “Among 15. principles the cardinal tal, is become unable to and remain eco- applied construing be when a constitution nomically subject because it viable is are legislature those which tell that a us government policy various kinds of supreme legislative except matters as its regulation. power is limited provi- a constitutional sion, and ambiguities that doubts and are

d. Unless the can become to be resolved in of the viable, favor constitution- economically and remain it will ality of Interrogatories an act.” In re dependent upon become ever more state Senate, the Colorado subsidies, Forty-Sixth State quality and the of medical ser- 558, Assembly, Gen. 168 Colo. 452 P.2d inevitably vice and education will decline. 391, (1969). 393 e. The of the citizens needs of the and of university of Colorado 16. The Court is “not authorized to read part Colorado health sciences schools will be into a statute an on the intention best if served its exceed constitutional operate private nonprofit corpora- powers aas unless used are such words the. charged operat- mission of under no reasonable construction such teaching for the benefit intention can be excluded.” Public Utils. 153, 165, providing Manley, health sciences schools and Comm’n v. Colo. 99 60 913, medically indigent. (1936). good care for P.2d faith ment, department political nor a subdi- thereof. It shall not be vision enacting a statute must be Legislature any provisions affecting only gov- lawof People Morgan, Colo. presumed. and, ernmental or entities unless 504, 507, (1926). not P. 1024 It will 4, part in this shall otherwise Legislature acted unlaw- presumed that rights powers private have all of a Co., 289, People fully. v. Texas nonprofit corporation organized under 296, (1929). 275 P. 896 the laws of this state. well established that this Court 17. It is 23-21-403(1)(a). H.B. C.R.S. 1143 de perspec- H.B. 1143 from the must review “corporation” fines the as “the non Assem- power of the General tive that corporation created for the profit non-stock plenary: bly is Hospital.” purpose operating University constitutions, unlike the federal State 23-21-402(3). legislative his constitution, power grants are not reorga tory also makes clear that government. legislative branch Hospital nized is intended the General plenary have legislatures Because state See, Assembly private corporation. abe purposes govern- civil all History, p. at e.g., Legislative Vol. 6 ment, are limitations state constitutions 11. 3-5. ask, power.... upon that We therefore Thus, expressed intent of the [provisions] are autho- the Act’s if reorganized Hospital legislature is that the rized, they prohibited. are but if corporation formed under the abe Employees Serv. Colorado State Civil nonprofit general relating to Colorado law Love, Ass’n v. corporations. expressed intent of part). (1968) (emphasis added in 628-29 weight by legislature is entitled to reverent County, RE- this Court. Allardice v. Adams AND CONCLUSIONS FINDINGS THE PRIVATE NATURE 173 Colo. GARDING UNIVERSI- THE REORGANIZED OF H.B. General

TY HOSPITAL authority has limited expressly contemplates pri- 18. H.B. 1143 precisely defining the attributes private a reorganized Hospital be that the nonprofit corporation to which the Re- vate Legislative nonprofit corporation. The assets of Universi- gents may transfer the specifically finds: Declaration to H.B. 1143 23-21-403(l)(a) ty Hospital. C.R.S. See § Assembly the citizens of the state and 23-21-404. General The needs of VIII, university authority of under Article Section 5 of and of Colo- has Colorado impose best to health sciences schools will be of the Colorado Constitution rado reorganized Regents. to upon if the See served these restrictions nonprofit corpora- Colorado, private operate University v. Uberoi of operat- (Colo.1984); mission of charged tion with the 785 Associated Students of of teaching hospital for the benefit Regents, a 189 University of providing and 482, (1975). health sciences schools P.2d 59 543 medically indigent. care for the of H.B. 22. At the time of enactment 23-21-401(1)(e). C.R.S. § Hospital’s assets were University 1143 Assembly un- a itself create state assets. General H.B. 1143 does not 19. authority specify to questionably rather autho- has nonprofit corporation, but under these assets Regents to: conditions which rizes the Assembly, pur- The General transferred. a steps necessary to create Take all may also plenary police power, to its suant corporation nonprofit-nonstock private the func- upon and limit impose constraints 7, C.R.S., 20 to 29 of title under articles Queen corporation. v. West Vir- tions of a requirements conforms to Inc., 365 Hosps., S.E.2d ginia Univ. purpose op- for the section XV, 3 of (W.Va.1987). Article corporation hospital. The erating the an in- recognizes Constitution govern- the Colorado agency of state shall not be an buildings and and shall government have entire manage- dependent legislative power of the General ment of the same any exclusive prop- alter, Assembly to upon revoke or annul erty private corpora- a transferred condition, any charter, part corporate a n pursuant part article 21 long just incorporators. so as it is to the title. Platte & Denver Canal Milling Co. v. added). (emphasis Dowell, (1892), 30 P. ap- peal 25. The Court dismissed, finds that U.S. none of the S.Ct. upon restrictions the form of the nonprofit L.Ed. 1079 This is ex- corporation and pressly none of the conditions im- reserved General upon posed property the transfer respect nonprofit corporations un- corporation, deprive der C.R.S. 7-20-107. of its private nonprofit status. 23. provides H.B. 1143 further that the Queen 26. Plaintiffs cite Virgi cannot West be transferred Hosps., Inc., nia any Univ. entity except other S.E.2d 375 Regents, (D.Va.1987) in support their upon corporate dissolution the contention assets reorganized that the Hospital is Regents. revert the state. Queen contrary, On the 23-21-404(l)(f) found (g). In authorizing reorganized West Virginia University to transfer Hos the assets of Uni- pital political was not a versity Hospital to a subdivision of the nonprofit cor- state, a state poration, agency, or a corpora may properly pre- tion. id. at See id. at scribe the 383 n. 5. conditions of the transfer. property private corpora- Transfers of Queen did the reorganized find that tions containing reversionary interest are Virginia Hospital West “public was a exceptional. fact, not C.R.S. body” as defined in Virginia’s West Free- (1)](c) recognizes that assets § 7-26-103[ Act, dom of Information and that the reor- nonprofit corporation held are fre- ganized Virginia West University Hospital quently upon “held requiring condition “public was a process actor” for due pur- return.” poses under the 14th Amendment of the However, United Constitution. manage- The Board of instant Directors and challenges case only ment the facial private nonprofit corporation constitution- ality of H.B. organized does raise to receive the assets and liabili- respect issue with to either the ties of records of Hospital have direct and Hospital alleged responsibility Hospital’s immediate for the process. violation due The issue of day-to-day Subject affairs. to the condi- whether the University Hospi- imposed tions on transfer H.B. tal is a “state process pur- actor” for due general powers has con- poses, is not before this Court. The Court upon nonprofit ferred corporation pursu- contention, rejects however, Plaintiffs’ that 7-22-101, ant to right such as the reorganized Hospital might because be sued, purchase to sue and to or be lease actor” “state for Fourteenth Amendment sell, personal property, convey, real or or process purposes, due it must be deemed assets, pledge property its and to hold in- purposes, being the “state” for all as illogi- corporations, in partnerships terests other contrary Queen. cal and to case law. See ventures, contracts, joint or to make incur liabilities, money severally and con- borrow 28. The Court further finds that H.B. trol its own For example, affairs. H.B. XV, does violate Article Section 2 C.R.S., 1143 amends Constitution, C.R.S. § of the Colorado prohibiting relating psychiatric hospital, pro- to the the creation of corporations spe- expressly: vide XV, legislation. cial 2 pro- Section vides: regents university The board of of

Colorado shall have full and control su- incorporation No charter of shall be pervision the property grounds extended, of all granted, changed and or amended

1 n To this end we have wiping out all dormant and sham law, by special except municipal, for such corporations claiming special and ex- charitable, educational, penal or reforma- privileges. clusive We have denied the tory corporations are or may be under general assembly power to create state; general the control of the but the corporations, or to extend enlarge assembly provide by shall general laws rights by special their chartered legisla- organization corporations for the here- tion, or to rights privi- make such after to be created. irrevocable; leges but in case it be Virginia’s West mir- constitution contains a the exercise such rights found XV, image ror art. Colo.Const. 2:§ proves and privileges injurious to the legislature provide The shall for the or- people, then the General ganization corporations of all hereafter alter, power shall have the revoke or to be created ... but no shall charters, annul such when that can be by special created be law. done injustice incorpo- without XI, Interpreting W.Va.Const. art. 1.§ rators. Virginia’s provision West constitutional in allegations, the face of similar the West People Address to the in contained Pro- Virginia Supreme Appeals Court states: ceedings the Constitutional Conven- Denver, analysis We think that a in detailed Held December cited constitutional sections would not Frame a Constitution the State us, since,

prove particularly helpful Colorado, etc., (1907) (emphasis add- from the records constitutional ed). language emphasized above debates, adopting it is clear that in leaves no doubt that Colorado’s Constitu- precursors to article current section provision, tional Virginia’s, like West X, and article Virgi- section 6 of the West only legislature creating a limitation on the nia Constitution framers were exclu- by special enactment for-profit cor- sively corporations concerned with stock porations having “special and exclusive profit making purposes, formed for privileges.” It was not intended to limit which is not the case here. Assembly’s authority the General to re- Queen, corporate 365 S.E.2d at 380. strict charters. history of the Colorado Constitution- 29. This conclusion is reinforced Ar- al Convention of 1975 shows that Article XV, Constitution, ticle 3 of

XV, the drafters of the Colorado provides: Constitution also were concerned with general assembly shall have the corporations profit stock formed for mak- alter, revoke or annul char- railroads, ing purposes, particularly incorporation existing ter of and re- now only sought prohibit from adoption at the of this vocable constitu- creating corporations special privi- tion, cre- hereafter be leges prerogatives: ated, opinion may whenever their Probably no has come before the state, injurious to the citizens causing anxiety Convention more manner, however, injustice such that no than the concern troublesome vexed corporators. shall be done to the question pertaining corporations. to Milling See also Platte & Denver Canal have, Legislatures other of States Dowell, (1892), 30 P. 68 cases, Co. Colo. unequal most been found dismissed, appeal 154 U.S. 14 S.Ct. preventing protect- task of abuses L.Ed. It is also rein- people grasping from express provisions forced of C.R.S. monopolizing tendencies railroads of to corporations. Experience which reserves the General and other prescribe pro- positive has shown that on such restrictions powers Legislature nonprofit corpo- of the visions and limitations for relation necessary. to these matters are rations as it chooses.

(4)Any classified employee elects who during two-year period transition rejects 30. The Court Plaintiffs’ conten- employee an become of the corporation the nonprofit corporation tion that should shall, under the of employ- terms his new ego considered to be the be alter ment, full receive credit for sick leave Regents, because the and re- conditions leave and annual accrued as a classified placed upon strictions the transfer of as- employee. corpora- sets and liabilities to nonprofit Assembly’s pow- tion are with the General enacted, 32. As H.B. 1143 does not dis- er and because there is no evidence or place any employee classified from the allegation corporation nonprofit is personnel system. state On the other used promote to be an injustice pro- hand, gives H.B. 1143 at employed those City tect a fraud. See Gude v. Lake- Hospital on the date a transfer wood, (Colo.1981). According- 636 P.2d 691 right they would otherwise not have: ly, corporation the Court finds that right for up years to work to two at the authorized H.B. 1143 is a non- private corporation’s Hospital without los- profit corporation. rights ing any they presently enjoy as employees. employee

State If a certified employee elects not become an of the FINDINGS AND RE- CONCLUSIONS corporation years, employee within two THE GARDING OF APPLICABILITY employee remains an re- the State and THE CIVIL SERVICE AMENDMENT rights tains all and privileges of member- 31. H.B. enacted C.R.S. ship in State System. Personnel He provides: 23-21-406 longer no simply may Hospi- work for the (1) Any hospital employee is a clas- who tal corporation. owned employee personnel sified of the state Civil 33. The Service can- Amendment system on the transfer date shall have creating not be read as a constitutional option to become an of the employee right employment to continued at Universi- employee or to remain an ty Hospital reorganization. after state and a member of state purpose legislation of civil is service personnel system. protect employees arbitrary from (2) Any hospital employee elects to who political capricious action and to ensure personnel remain a member of the state during good employment Such behavior. system period remain so for a of not protection applies during ser- authorized years, than two not more but shall however, tenure, vice. service Civil personnel eligible to return to the state guarantee meant duration system hospital employee once he employment any number set elected to em- has become a years any particular over period ployee. time. (3) Any hospital employee elects to who Coopersmith City Den County of personnel remain member of the state ver, (1965) system rights privi- shall retain all added). (emphasis person- leges membership in the state system. any dispute 15(3)(a) nel the case of Amendment, involving employee an pref- who is member Civil Service creating a veterans, personnel system, hospi- lay- contemplates erence for agree accept ing-off tal resolution of all permitted shall classified disciplinary appeals employment or other when is a “lack of there work or curtail- governed by funds.” disputes Similarly, the statutes ment 24-50-124(1), personnel system regarding state or the rules of reduction personnel department according employees Sys- under the state State Personnel tem, procedures contemplates applicable employees to the rules and that certified system. “separated of the due personnel members be from State service

against the state in years, future or that appropriation by legislatures future of mo- work, funds, to lack of zation_” reorgani- lack of or payment nies in obligation of the is nondis- added). (emphasis cretionary.” (citations Id. at 878-879 omit- Further, terms, by express its ted). applies only Civil Service Amendment provision 38. The of H.B. 1143 chal- “appointed public employees officers and lenged by provides Plaintiffs that the Re- State_” 12, 13(2) Colo.Const. art. gents may: (emphasis added). Supreme The Colorado Subject applicable constitutional held: Court has limitations and in the regents’ discre- language used in the Civil Service tion, issue bonds or otherwise borrow clear, plain, meaning Amendment is its money on corporation behalf of the Hence, absurdity and no is involved. it any corporation’s of the purposes, lawful must be declared and enforced as writ- including refunding refinancing ten: all officers the state must be any corporation’s indebtedness, except under civil service for certain ex- repaid the revenues the cor- ceptions from specific which are described in poration. Any bonds or other instru- terms. ments of substantially indebtedness shall Employees Colorado State Civil Serv. comply requirements with the of sections Love, Ass’n v. 448 P.2d 29-3-106, C.R.S., applicable 29-3-105 and (1968) added). (emphasis Having found municipalities. counties and The re- that by authorized H.B. gents may, to marketability facilitate the private nonprofit corporation, 1143 is a corporation, of bonds issued enter applicabili- Civil Service Amendment has no agreements that, providing into subject ty reorganized University Hospital. to the appropriations, regents to available deprive 36. Because H.B. 1143 does not any will make contributions to reserve any employee classified of his status as a required fund to be maintained under the employee, classified and because any terms of any bonds issued to redress reorganized University Hospital will impairment of the reserve fund. The state,” “employees not be H.B. 1143 general assembly specifically finds that does not violate the Civil Service Amend- financial assistance to the ment. provided (e) paragraph pro- would mote a. purpose. substantial AND FINDINGS OF FACT CONCLU- 23-21-403(1)(e), added). (emphasis SIONS OF LAW WITH REGARD XI, TO ARTICLE SECTION 3 plain It is thus on the face of H.B. Regents 1143 that the indebtedness the are 37. Article Section 3 of the Colorado “public authorized to create is not debt.” provides Constitution that state shall “[t]he permits, H.B. 1143 but no means ob- form,” not contract loan in debt ligates, Regents to issue bonds bor- exceptions, certain none of which money corporation. row on behalf of the applicable general prohibition here. The Regents' authority to issue bonds and upon “public the creation of debt” is de money expressly borrow limited insofar signed primarily prevent present legis repaid as the indebtedness must be from irrevocably committing lature from future private corporation, the revenues of the legislatures payment of an obli Furthermore, and not the state. while gation. Heights, Glennon Inc. v. Central permits H.B. Trust, (Colo. to enter into Bank & 1983). agreements to make contributions to a “public Indications of a debt” fund, any agreements bond reserve such constitutional sense are “that the obli into gation pledges years, revenues of future entered must be “sub- requires ject appropriations.” to available Just as use of revenue from a tax general lease/purchase agreement purposes, otherwise available Glennon legally obligation Depart- that it is a Heights State enforceable 160 obligate the state pay any indebtedness ' of corporation. C.R.S. ment of Institutions would use its “best 23-21-403(l)(e). Therefore, H.B. 1143 funding every year efforts” to obtain for does not pledge authorize a of the state’s payments, agreements

rent into which in XI, credit violation of Article 1. Regents are authorized to enter are Moreover, “specifically appropriation tied 43. H.B. plainly of suffi- 1143 serves public Nothing agreement purpose. cient funds.... a legislative declara- legislature.” limits the tion specifically discretion of the states: 658 P.2d at 879. Accord v. City Gude The needs the citizens the state of of of Lakewood, 691, (Colo.1981) 686 P.2d 699 Colorado and the university Colo- (holding discretionary contingent or rado health sciences schools will be best debt). obligations are not constitutional Fi- served if the reorganized nally, authority Regents is ex- operate private nonprofit corpora- pressly “subject applicable constitutional charged tion with the operat- mission of limitations.” ing teaching hospital a for the benefit of the health sciences schools providing Further,

40. to the extent Plaintiffs al- care for medically indigent, lege XI, that H.B. 1148 violates Article because, argue Section 3 Plaintiffs that the added). (emphasis The challenged provi- reorganized University Hospital is the sion of H.B. express legis- 1143 contains an state, this Court has found to the contrary. finding any lative financial assistance Accordingly, this Court holds that H.B. corporation by Regents would XI, 1143 does not violate Article Section 3. “promote purpose.” substantial 23-21-403(l)(e). “Although FINDINGS AND CONCLUSIONS OF expressed intent of the has no LAW WITH RESPECT TO ARTICLE magical quality invalid, which validates the XI, 1 SECTION it weight is entitled to reverent in determin- that, 41. argue Plaintiffs further if the promotes the Act public pur- whether reorganized corporation state, is not the pose.” Allardice v. County, Adams 173 Const, XI, H.B. 1143 violates Colo. art. 1. 133, 982, (1970). 476 P.2d 989 provides: This section Where, here, challenged leg state, any county, city, Neither the nor plainly islation public purpose, serves a town, township or school district shall provision of health care to the citizens of thereof, lend or pledge the credit or faith state, prohibitions of Article XI are directly indirectly, to, in any or manner inapplicable. City, See Witcher v. Canon of, any person, company or aid or (Colo.1986); 716 P.2d 455 City Gude v. corporation, public private, any or Lakewood, (Colo. 636 P.2d 695 n. 2 amount, whatever; any purpose or for or 1981); In re Interrogatories by the Colo debt, responsible become con- Senate, 298, 306-07, rado State 193 Colo. liability any person, tract or company (1977); 566 P.2d City McNichols v. corporation, public private, in or out Denver, County of the state. (1955). In considering a substan Section is not violated where tially challenge similar to a lease transac not, fact, pledge govern- there is between the Arizona Board of general pledge ment’s credit or where a Corporation, Medical Center public purpose. credit is for a Witcher v. Court, Supreme the Arizona after review (Colo.1986). City, Canon P.2d 445 ing the reorganized structure of the Uni held, Witcher, versity Hospital, case, “In 42. As in the instant contractual obli- gation seriously cannot be Hospital solely contended that the private nonprofit nonprofit existence that of the of UMCC as a id., public purpose.” and not the state. 716 P.2d at does not serve a See Kromko no authority Regents, have to uncondi- v. Arizona Ariz. Bd. tionally pledge Regents’ Queen assets or to Accord HIGGS, Petitioner, Jim L. Inc., Virginia Hosps., West Univ. (W.Va.1987) (quoting S.E.2d approval).

Kromko with The Court con- WESTERN LANDSCAPING & SPRIN- analysis curs with the of Kromko that SYSTEMS, INC., KLER The Industrial plainly public purpose H.B. 1143 serves a Appeals Claim Office the State of within the meaning Article XI of the Colorado, Compensation and State In- Constitution, interpreted Authority, Respondents. surance Supreme decisions of the Colorado No. 89SC556. Court.

Supreme Colorado, Court En Banc. ABANDONED CLAIMS 14, 1991. Jan. 45. The finds that Court Plaintiffs have abandoned their claims that H.B. 1143 vio- Const, V, lates Colo. art. 34 or art. 2, that it constitutes an unconstitutional

impairment obligations, of contractual process, violates due and that Plaintiffs

have abandoned their claims under 42

U.S.C. 1983. AND

CONCLUSIONS JUDGMENT 46. General plenary, specifically limited unless constitutionality Constitution. The of H.B. presumed 1143 is unless Plaintiffs demon- unconstitutionality beyond strate a reason- able Plaintiffs have failed doubt. to meet proof. their burden of Accordingly, Court declares constitutional, that H.B. judg- 1143 is ment is entered favor Defendants and

against Plaintiffs. Costs shall be taxed as provided for in the Colorado Rules of Civil

Procedure. October, day

DATED this 31st George Lee, B. /s/ Jr. Lee, B. George Jr. Judge District Court

Case Details

Case Name: Colorado Ass'n of Public Employees v. Board of Regents

Court Name: Supreme Court of Colorado

Date Published: Dec 24, 1990

Citation: 804 P.2d 138

Docket Number: 89SA476

Court Abbreviation: Colo.