Frederick L. v. Department of Public Welfare of the Commonwealth of Pennsylvania

PRECEDENTIAL
UNITED STATES COURT OF
APPEALS FOR THE THIRD CIRCUIT
No. 02-3721
FREDERICK L.; NINA S.; KEVIN C.;
STEVEN F., ON BEHALF OF
THEMSELVES AND ALL PERSONS
SIMILARLY SITUATED,
Appellants
v.
DEPARTMENT OF PUBLIC
WELFARE OF THE
COMMONWEALTH OF
PENNSYLVANIA; FEATHER O.
HOUSTOUN, IN HER OFFICIAL
CAPACITY AS SECRETARY OF
PUBLIC WELFARE FOR THE
COMMONWEALTH OF
PENNSYLVANIA
On Appeal from the United States
District Court for the Eastern District of
Pennsylvania
(D.C. No. 00-cv-04510)
District Judge: Berle M. Schiller
Argued October 15, 2003
Before: SLOVITER, ROTH, and
CHERTOFF, Circuit Judges
(Filed April 13, 2004)
Robert W. Meek
Mark J. Murphy (Argued)
Robin Resnick
Disabilities Law Project
Philadelphia, PA l9l07
Attorneys for Appellants
D. Michael Fisher
Attorney General
Claudia M. Tesoro (Argued)
Senior Deputy Attorney General
Calvin R. Koons
Senior Deputy Attorney General
John G. Knorr, III
Chief Deputy Attorney General
Office of Attorney General of
Pennsylvania
Philadelphia, PA 19107
Attorneys for Appellees
Robert D. Fleischner
Center for Public Representation
Northampton, MA 01060
Attorney for Amici-Appellants
OPINION OF THE COURT
SLOVITER, Circuit Judge.
Appellants represent a class of
mental health patients institutionalized in
the Norristown State Hospital, a large
congregate psychiatric hospital located in
southeast Pennsylvania, who are qualified
for and wish to be placed in a community-

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care setting.1 They seek declaratory and
permanent injunctive relief to remedy what
they claim are violations of their federal
statutory rights to a more accelerated
program of deinstitutionalization. They
appeal from the judgment for the
Commonwealth entered by the District
Court following a bench trial. Appellants
contend that the District Court erroneously
interpreted the applicable legal principles.
The issue raised is significant as it
implicates the extent to which the state
may rely on general cost concerns to avoid
its statutory responsibility to eliminate
disabilities discrimination.
I.
FACTS AND PROCEDURAL
HISTORY
Appellants represent approximately
300 class members with serious and
persistent mental disabilities who are
institutionalized at Norristown State
Hospital (“NSH”). Approximately 32% of
the class members are classified as short-
stay patients (approximately 10 months)
and 68% of the class members are
c l a ss i f ie d a s l o n g -s t a y p a t i en t s
(approximately 12 and a half years).
Appellee Department of Public Welfare of
the Commonwealth of Pennsylvania
(“DPW”) is an ag ency of the
Commonwealth of Pennsylvania (“the
Commonwealth”) that provides publicly
funded mental health care in institutional
and community settings. Also named as a
defendant is Feather O. Houston in her
official capacity as Pennsylvania’s
Secretary of Public Welfare. The Office
of Mental Health and Substance Abuse
Services (“OMHSAS”), is a department of
DPW that has the responsibility to ensure
local access to mental health and substance
abuse treatment. App. at 712. OMHSAS
operates nine psychiatric facilities and one
nursing facility throughout Pennsylvania.
NSH is one such facility. App. at 717.
Amici curiae represent fourteen former
state mental health agency administrators
and have submitted a brief in support of
appellants.
Appellants filed this class action
lawsuit in September 2000, claiming that,
because the class members are qualified
and prepared for community-based
s e r v i c e s , t h e i r c o n t i n u e d
institutionalization violates the anti-
discrimination and integration mandates of
the Americans with Disabilities Act
(“ADA”), 42 U.S.C. §§ 12131-12134 and
1 The class includes all qualified
and willing “persons institutionalized at
Norristown State Hospital at any time
after September 5, 2000 with the
following exceptions: persons who, at
the time of final adjudication, are: 1)
confined in the Regional Forensic Unit
and Juvenile Forensic Unit; 2) are
involuntarily committed . . . ; 3) have
criminal charges pending who have been
found to be incompetent to stand trial; or
4) otherwise are subject to the
jurisdiction of the criminal courts.” App.
at 711 (Jt. Stipulation).

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28 C.F.R. § 35.130(d) (1998), and Section
504 of the Rehabilitation Act (“RA”), 29
U.S.C. § 794 and 28 C.F.R. § 41.51(d)
(1998).2 They claim that DPW has failed
to provide services to them in the most
integrated setting appropriate to their
needs and has developed no plan to assure
that this be done. They also claim that
DPW has failed to require treatment teams
to prepare appropriate individualized
assessments of the service needs of the
class members that are a prerequisite for
community placement. In their answer,
defendants admit some of the detailed
allegations of the amended complaint and
deny others. Essentially, defendants assert
as an affirmative defense the analysis in
Olmstead v. L.C., 527 U.S. 581 (1999),
where a plurality of the Supreme Court
allowed the states to resist modifications
that would effect a fundamental alteration
of the states’ services and programs.
Although Appellants acknowledge that the
statutes would not require additional
community placements if the increase
would require a fundamental alteration of
the Commonwealth’s policy and budget,
Appellants argue that the cost of providing
the additional placements would be
defrayed by cost-savings from bed closures
in NSH. They further argue that cost
concerns alone do not provide the
C o m m o n w e a l t h g r o u n d s f o r a
fundamental-alteration defense to their
claims.
On May 6, 2002, the parties filed
extensive joint stipulations regarding the
facts underlying this case. App. at 710-39.
In pertinent part, they stated that between
1976 and 1998, DPW closed thirteen state-
operated psychiatric facilities, including
two facilities in southeastern Pennsylvania
in 1990 and 1998. App. at 717.
The joint stipulations explain that
one way in which DPW closed hospitals is
by moving qualified patients into
community care programs. In order to
determine when a patient is ready for
community care, NSH county program
officers hold “monthly Hospital/County
Discharge Planning meetings,” at which
staff and county representatives conduct
“independent, ongoing assessments of
each consumer’s discharge readiness and
aftercare needs,” and address “unresolved
impediments to discharge.” App. at 715.
However, NSH does not maintain formal
waiting lists for community services. App.
at 722.
The parties also stipulated that
DPW receives the bulk of its mental health
funding from the Commonwealth through
a budgetary process set out in 71 P.S. §§
229-240. App. at 723. Under Pa. Code §
4215.21, county programs must annually
develop and submit to DWP and
OMHSAS an assessment of needs for
community-based mental health services
2 The language and implementing
regulations of the ADA and the RA are
virtually the same and the parties
acknowledge the congruence of their
integration mandates. Frederick L. v.
Dep’t of Pub. Welfare, 217 F. Supp. 2d
581, 591 (E.D. Pa. 2002).

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and budget estimates. App. at 724.
OMHSAS submits a proposed budget to
DPW, which can modify it, and DPW
submits the budget to the Governor’s
Office of Budget. The Governor then
formulates a comprehensive budget and
submits it to the Legislature, which
ultimately enacts DPW’s budget. App. at
724.
DPW’s primary funding mechanism
for new community care placements has
been the Community Hospital Integration
Projects Program (“CHIPP”) and the
Southeastern Integration Projects Program
(“SIPP”). App. at 15, 725. The number of
community care placements has varied
widely from year to year: 38 in 1996-97;
155 in 1997-98; 82 in 1998-99; 121 in
1999-2000; 43 in 2000-01; and 60
(proposed) in 2001-02. App. at 726-27.
The stipulations describe instances
in which DPW did not request the full
amount of mental health monies requested
by the counties and instances in which
DPW initially requested additional
community placements, but the Governor
informed DPW that no funding would be
available or rejected the request. App. at
725, 729. However, apart from the budget
process, DPW has funded 48 additional
community care slots through savings in
overtime. App. at 730.
Following a three-day bench trial in
May 2002, the District Court issued a
memorandum opinion on September 5,
2002 in favor of DPW. Frederick L. v.
Dep’t of Pub. Welfare, 217 F. Supp. 2d
581 (E.D. Pa. 2002). The District Court
held that Appellants were not entitled to
the requested relief because it would have
required a fundamental alteration of the
Commonwealth’s programming and
budgetary allocations. The District Court
also found that providing additional
community placements would have
negatively affected other state residents
with mental disabilities who received
services in an institutional setting.
Appellants contend that the District
Court erred by stating that the immediate
extra cost coupled with a lack of
immediate cost-savings associated with
their requested relief, without more,
provided DPW with a fundamental-
alteration defense. Appellants further
argue that the District Court erred in
finding that DPW’s pre-budgetary
involvement in the legislative process was
“beyond judicial scrutiny.” Frederick L.,
217 F. Supp. 2d at 593.
II.
DISCUSSION
We may set aside the District
Court’s conclusions of fact only for clear
error, but we subject its conclusions of law
to plenary review. See, e.g., Goldstein v.
Johnson & Johnson, 251 F.3d 433, 441 (3d
Cir. 2001).
A. Statutory Framework
This case arises under Title II of the
ADA and Section 504 of the RA. Title II

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of the ADA provides that “no qualified
individual with a disability shall, by
reasons of such disability, be excluded
from participation in or be denied the
benefit of services, programs, or activities
of a public entity, or be subjected to
discrimination by any such entity.” 42
U.S.C. § 12132. The ADA largely mirrors
Section 504 of the RA, which states as
follows:
No otherwise qualified
individual with a disability .
. . shall, solely by reason of
her or his disability, be
e x c l u d e d f r o m t h e
participation in, be denied
the benefits of, or be
subjected to discrimination
under any program or
activity receiving Federal
financial assistance or under
any program or activity
conducted by any Executive
agency or by the United
States Postal Service.
29 U.S.C. § 794(a). We have construed
the provisions of the RA and the ADA in
light of their close similarity of language
and purpose. See Helen L. v. DiDario, 46
F.3d 325, 330-32 (3d Cir.), cert. denied,
516 U.S. 813 (1995).
The ADA and RA’s anti-
discrimination principles culminate in their
integration mandates, which direct states
to “administer services, programs, and
activities in the most integrated setting
appropriate to the needs of qualified
individuals with disabilities.” 28 C.F.R. §
35.130(d). “[T]he most integrated setting
appropriate to the needs of qualified
individuals with disabilities” is “a setting
that enables individuals with disabilities to
interact with nondisabled persons to the
fullest extent possible.” 28 C.F.R. pt. 35,
App. A, p. 450 (1998). In short, where
appropriate for the patient, both the ADA
and the RA favor integrated, community-
based treatment over institutionalization.
Significantly, none of the parties contests
that proposition.
B. Olmstead v. L.C.
The parties agree that this case is
governed by the Supreme Court’s decision
in Olmstead v. L.C., 527 U.S. 581 (1999).
In Olmstead, two mental health patients
alleged that the State of Georgia violated
the ADA integration mandate by
unnecessarily segregating them in mental
health institutions and failing to place
them in community-based treatment
programs. Id. at 593-94. The Court found
that the ADA reflects the congressional
c o n c l u s i o n t h a t u n j u s t i f i e d
institutionalization perpetuates prejudice
against mental health patients and severely
diminishes their quality of life. Id. at 600-
01. The Olmstead plurality held that,
under certain circumstances, unnecessary
institutionalization and segregation may
constitute discrimination. Id. at 597.
Justice Ginsburg, writing for the

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plurality,3 emphasized that the integration
mandate “is not boundless.” Id. at 603. It
is quali fied by the “reasonable
modifications” and “fundamental-
alteration” clauses, which provide that:
[a] public entity shall make
reasonable modifications in
policies, practices , or
p r o c e d u r e s w h e n t h e
modifications are necessary
to avoid discrimination on
the basis of disability, unless
the public entity can
demonstrate that making the
m o d i f i c a t i o n s w o u l d
fundamentally alter the
nature of the service,
program, or activity.
28 C.F.R. § 35.130(b)(7) (1998). In light
of these qualifications, the plurality held
that unnecessary institutionalization only
violates the ADA when the following
conditions are met:
[1] the State’s treatment
p r o f e s s i o n a l s h a v e
determined that community
placement is appropriate, [2]
t h e t r a n s f e r f r o m
institutional care to a less
restrictive setting is not
opposed by the affected
individual, and [3] the
placement can be reasonably
accommodated, taking into
account [a] the resources
available to the State and [b]
the needs of others with
mental disabilities.
Olmstead, 527 U.S. at 587. The Olmstead
plurality thus made clear that a state may
defend against disability discrimination
claims by establishing that the requested
community services would require a
fundamental alteration of the state’s
mental health system. Id.4
3 Justice Ginsburg’s plurality
opinion was joined by Justices
O’Connor, Souter, and Breyer. Although
Justice Kennedy concurred in the
judgment of the Court, he wrote
separately to explore the question of
whether plaintiffs should have been
required to prove that they had been
treated differently than similarly-situated
persons. See Olmstead, 527 U.S. at 611-
15 (Kennedy, J., concurring). Justice
Kennedy agreed with the plurality that
States have a responsibility to provide
community-based mental health services,
but characterized the responsibility as a
limited one and emphasized that States
are entitled to considerable deference in
allocating their budgets. Id. at 615.
Justice Stevens also joined the judgment
of the plurality, but did not believe the
question was properly before the Court.
See Olmstead, 527 U.S. at 607-08
(Stevens, J., concurring).
4 Under this scheme, the plaintiff first
bears the burden of articulating a
reasonable accommodation. The burden
of proof then shifts to the defendant, who

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Here, the parties do not dispute that
Appellants have satisfied the first two
Olmstead requirements. The District
Court found that one-third of the
Appellants were qualified for community-
based mental health services and an even
larger portion of the class expressed
affirmative interest in being placed in
community-based care. The point of
contention instead arises from the
interpretation of Olmstead’s third prong
regarding reasonable accommodation and
the fundamental-alteration defense.
C. Reasonable Modifications and the
Fundamental-Alteration Defense
The Olmstead plurality explained
the reasonable-modifications clause and
fundamental-alteration defense as follows:
Sensibly construed, the
f u n d a m e n t a l - a l t e r a t i o n
c o m p o n e n t o f t h e
reasonable-modificatio ns
regulation would allow the
State to show that, in the
allocation of available
resources, immediate relief
for the plaintiffs would be
inequitable, given the
responsibility the State has
undertaken for the care and
treatment of a large and
diverse population of
p e r s o n s w i th m e n t a l
disabilities.
Id. at 604. The plurality thus characterized
the state’s available resources and
responsibility to other institutionalized
mental health patients as primary
c o n s i d e ra t i o n s i n e v a lu a t i n g a
fundamental-alteration defense.
Although Olmstead permits courts
to consider a state’s financial burdens in
evaluating the fundamental-alteration
defense, the Olmstead plurality expressly
proscribed two methods of cost-analysis.
First, courts may not simply compare the
cost of providing the plaintiffs with
immediate relief against the entirety of the
state’s mental health budget because the
state’s mental health budget will almost
always dwarf the requested relief. Id. at
603. Second, courts may not merely
compare the cost of institutionalization
against the cost of community-based
health services because such a comparison
would not account for the state’s financial
obligation to continue to operate partially
must establish that the requested relief
would require an unduly burdensome or
fundamental alteration of state policy in
light of its economic resources and its
obligations to other mentally ill persons
in the institutional setting. Although
Appellants argue that the District Court
reversed the burden of proof by requiring
Appellants to demonstrate that their
requested relief did not require a
fundamental alteration, this contention is
belied by the fact that the District Court
expressly acknowledged the appropriate
burdens of proof in its memorandum
opinion. See Frederick L., 217 F. Supp.
2d at 592 n.12.

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full institutions with fixed overhead costs.
Id. at 604 n.15. It is notable for our
purposes that the plurality did not envision
the fundamental-alteration defense to be a
rare one that states would seldom be able
to invoke. See id. at 603 (eschewing
formulation of fundamental-alteration
defense as one permitted “only in the most
limited of circumstances”).
In his concurrence, Justice Kennedy
underscored his opposition to judicial
involvement in political and/or budgetary
decisions outside the province of the law.
He stated that federal courts should accord
deference to state policym akers’
programmatic and political funding
decisions regarding mental health funding:
No State has unlimited
resources, and each must
make hard decisions on how
m u c h t o a ll o c a te to
treatment of diseases and
disabilities. If, for example,
funds for care and treatment
of the mentally ill, including
the severely mentally ill, are
reduced in order to support
programs directed to the
treatment and care of other
disabilities, the decision
may be unfortunate. The
judgment, however, is a
political one and not within
the reach of the statute.
G r a v e c o n s t i t u t i o n a l
concerns are raised when a
federal court is given the
authority to review the
State’s choices in basic
matters such as establishing
or declining to establish new
programs. It is not
reasonable to read the ADA
to permit court intervention
in these decisions.
Id. at 612-13 (Kennedy, J., concurring).5
Justice Kennedy further stated that states
have considerable latitude in analyzing the
“comparative costs of treatment”:
The State is entitled to wide
discretion in adopting its
o w n systems of cost
analysis, and, if it chooses,
to allocate health care
resources based on fixed
and overhead costs for
wh ole institutions and
programs. We must be
cautious when we seek to
infer specific rules limiting
S t a t e s ’ choic es w h e n
Congress has used only
general language in the
controlling statute.
Id. at 615 (Kennedy, J., concurring).
5 Justice Kennedy further opined
that a state without any community
treatment programs in place would not be
required to create such programs under
the ADA. Id. at 613 (Kennedy, J.,
concurring). We express no opinion on
this view.

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D. Needs of Other Mentally Ill Persons
Olmstead explains that the ADA
does not compel states to provide relief
where the requested relief would require
the state to neglect the needs of other
segments of the mentally disabled
population who are not litigants before the
court. Id. at 597 (recognizing “States’
need to maintain a range of facilities for
the care and treatment of persons with
diverse mental disabilities, and the States’
obligation to administer services with an
even hand”).
In addition, the plurality reasoned
that a state may avoid liability by
providing “a comprehensive, effectively
working plan for placing qualified persons
with mental disabilities in less restrictive
settings, and a waiting list that moved at a
reasonable pace [and was] not controlled
by the State's endeavors to keep its
institutions fully populated.” Id. at 605-06.
It is this language that informs our
decision in this case.
III.
APPLICATION TO THIS CASE
Appellants, along with Amici,
argue that the District Court erroneously
construed the fundamental-alteration
defense with respect to three primary
factors: 1) cost constraints and
consideration of institutionalized persons;
2) past progress in deinstitutionalization;
a n d 3 ) l o ng-te r m p l a n n i n g fo r
deinstitutionalization.
A. Budget Constraints and Needs of
Others
As mentioned above, Olmstead
directs courts to evaluate the fundamental-
alteration defense in light of the state’s
resources and its responsibility to continue
providing services to mental health
patients other than those seeking
community care.
The bulk of Appellants’ objections
have focused on the following statement in
the “Conclusions of Law” section of the
District Court’s opinion:
Even if cost savings may
eventua lly be achieved
t h r o u g h
deinstitutionalization, the
immediate extra cost, and
the concomitant lack of
immediate aggregate cost
saving, is sufficient to
e s t a b l i s h t h a t a
“fundamental alteration”
would be required if the
relief sought by plaintiffs –
accelerated c o m m unity
placements – were granted
in this case.
Frederick L., 217 F. Supp. 2d at 593
(internal citations omitted). Appellants
argue that th e C ommonw ealth’s
articulation of additional costs that would
attend deinstitutionalization does not
automatically give rise to a fundamental-
a l t e r a t i o n d e f e n s e . F u r t h e r m o r e ,
Appellants continue, these cost concerns

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do not automatically make a requested
modification unreasonable. In sum,
Appellants urge that the Commonwealth’s
fiscal concerns, without more, cannot
provide the sole basis for a fundamental-
alteration defense. DPW acknowledges
that government agencies frequently must
spend money in order to meet their ADA
and RA obligations, absent a windfall of
cost-savings.
We have not previously considered
the extent to which states may assert a
fundamental-alteration defense based on
fiscal concerns alone, but now hold that if
the District Court’s opinion is read as
focusing only on immediate costs, as
Ap pellants contend, it would be
inconsistent with Olmstead and the
governing statutes. First, Olmstead lists
several factors that are relevant to the
fundamental-alteration defense, including
but not limited to the state’s ability to
continue meeting the needs of other
institutionalized mental health patients for
whom community placement is not
appropriate, whether the state has a
waiting list for community placements,
and whether the state has developed a
comprehensive plan to move eligible
patients into community care settings.
Olmstead, 527 U.S. at 605-06. The Court
noted that Section 504 of the RA specifies
that:
[the fundamental-alteration
and undue hardship] inquiry
requires not simply an
assessment of the cost of the
accommodation in relation
to the recipient’s overall
budget, but a “case-by-case
analysis weighing factors
that include: (1)[t]he overall
size of the recipient's
program with respect to
number of e m ployees,
n u m b e r an d t yp e o f
facilities, and size of
budget; (2)[t]he type of the
r e c i p i e n t ’ s o p e r a t io n ,
including the composition
a n d structure of th e
recipient’s workforce; and
(3)[t]he nature and cost of
t h e a c c o m m o d a t i o n
n e e d e d.” 2 8 C FR §
42.511(c) (1998); see 45
CFR § 84.12(c) (1998)
(same).
Id. at 606 n.16.
Second, at least one court of
appeals and one district court have held
that a singular focus upon a state’s short-
term fiscal constraints will not suffice to
establish a fundamental-alteration defense.
In Fisher v. Oklahoma Health Care
Authority, 335 F.3d 1175 (10th Cir. 2003),
the plaintiffs challenged the state’s
decision to limit the number of
prescriptions provided for outpatients with
disabilities who received Medical
Assistance, irrespective of medical
necessity, while it continued providing
unlimited prescriptions to disabled in-
patients in nursing homes. The Fisher
plaintiffs argued that because the policy
would require low-income disabled

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persons to move to nursing homes in order
to continue receiving full coverage of all
of their prescriptions, the state had violated
the ADA integration mandate. Id. at 1177-
78. Oklahoma countered that granting
plaintiffs’ requested relief would have
required a fundamental alteration in light
of its fiscal crisis. Id. at 1178, 1182. The
district court entered summary judgment
against the plaintiffs because they were not
currently institutionalized nor did they face
a risk of institutionalization. Id. at 1181.
A f t e r h o l d i n g t h a t
institutionalization was not a prerequisite
to plaintiffs’ ADA claim, the Court of
Appeals for the Tenth Circuit rejected the
state’s fundamental-alteration defense,
stating that Oklahoma’s fiscal problems
did not establish a per se fundamental-
alteration defense. Id. at 1182. The court
reviewed the legislative history of the
ADA and concluded that Congress
contemplated that states sometimes would
be required to make short-term financial
outlays, even in the face of mounting fiscal
problems. Id. at 1183. The court thus
decided that such financial obligations did
not automatically relieve the state from
meeting Congress’ integration mandate.
Id. Because the court found that the
plaintiffs may have had a meritorious
claim under the ADA, it reversed the
district court’s grant of summary judgment
and remanded for consideration of whether
the plaintiffs’ requested modifications
would fundamentally alter the program.
Id. at 1186.
Similarly, in Makin v. Hawaii, 114
F. Supp. 2d 1017 (D. Haw. 1999), a class
of mentally retarded persons on a waiting
list for Hawaii’s community-based
program sued the state for violations of the
ADA and the RA, seeking additional
c o m m u n i t y p l a c e m e n t s a n d t h e
development of a program to encourage
movement on the waiting list at a
reasonable pace. Hawaii attempted to
assert a fundamental-alteration defense
based on the theory that increased
community placements would require the
state to ignore state and federal funding
limits and alter its existing programs by
establishing an “unlimited” state fund for
community mental health services. Id. at
1034. The district court rejected the
state’s defense, noting that a potential
funding problem, without more, did not
give rise to a fundamental-alteration
defense. Id. We agree with the Makin
court and with Appellants that states
cannot sustain a fundamental-alteration
defense based solely upon the conclusory
invocation of vaguely-defined fiscal
constraints.
We do not read the District Court’s
opinion in this case as relying solely on the
increased short-term costs that additional
community placements would entail,
notwithstanding the sentence in its opinion
that suggests a lack of cost-savings alone
will sustain Pennsylvania’s fundamental-
alteration defense. Although the court
noted the absence of cost-savings and the
requisite spending that new community
placements would entail, it undertook
more comprehensive analyses that focused
upon DPW’s unsuccessful attempts at fund

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procurement through the Governor’s
budget. App. at 20-21. It recognized that
DPW had submitted evidence that it had
responsibly spent its budgetary allocation,
re-allocated overtime savings to increase
funding for community-based mental
health services, and had a favorable bed
closure rate when compared with western
Massachusetts, which is considered to be
a model region for deinstitutionalization.
App. at 7, 20-21, 30. Moreover, the
D i s t r ic t C o u r t e m p h a s i ze d t h at
OMHSAS’s ability to increase the number
of community care placements was
hampered by community opposition to
further expansion in the neighborhoods
where the community centers were
located, App. at 23, and that increasing the
number of community placements would
eventually lead to a diminution of services
for institutionalized persons under the
Commonwealth’s care. App. at 24.
A p p e l l a n t s c h a l le n g e t h e
Common wealth’s position on cost
constraints, arguing that 1) the relief they
request would require only negligible cost
increases; 2) DPW could increase its
community care budget by simply
requesting additional funds from the
legislature; and 3) DPW could shuffle its
current budget to favor increased
community care programs. We consider
and reject each argument.6
First, Appellants dispute the District
Court’s factual conclusion that moving
currently institutionalized persons into
community settings wo uld req uire
significant capital outlay by the
Commonwealth. Because Appellants
anticipate that the lion’s share of the
community care costs would be offset by
the savings reaped from hospital bed
closures, they estimate that the additional
community placements requested would
have a net cost of $1 million. Appellants’
6 Appellants also argue that, in
undertaking its cost analysis of the
“resources available to the State,” the
District Court focused upon the wrong
budget; that is, that the District Court
erred in concluding that it should
consider DPW’s mental health budget,
rather than the entire budget for DPW.
Frederick L., 217 F. Supp. 2d at 592
(“The resources available to the State
refers to the state's mental health budget
and nothing beyond that budget.”)
(internal quotation and citation omitted).
Although there are a few references to
“resources available to the State,”
DPW’s myriad non-mental health
responsibilities, which include cash
welfare distribution, medical assistance,
food stamps provision, youth centers,
forestry camps, and chaplaincies, have no
nexus to the “care and treatment” of the
mentally ill described in Olmstead. Id. at
587. Upon examination of the language
used in Olmstead, we agree with the
District Court that it is DPW’s mental
health budget, rather than DPW’s more
general budget, that must be considered.
See Olmstead, 527 U.S. at 595, 596, 597,
603 (referring to state’s “mental health
budget” six times).

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cost comparisons, however, are precisely
the sort of reductive cost comparisons
proscribed by the Olmstead plurality, 527
U.S. at 603-04, as well as by Justice
Kennedy. Id. at 612-13 (Kennedy, J.,
concurring). In following Olmstead and
r e j e ct i n g A p p e l l a n ts’ d i s f a v o r e d
methodology, the District Court did not
err.
Second, Appellants argue that the
District Court erred by not considering
DPW’s ability to lobby the legislature for
additional funds during the budgetary
process. Under the budget process in the
Commonwealth, DPW must submit a
report to the Commonwealth requesting an
operating budget for the upcoming year
before DPW receives its budgetary
allocation. The Governor may then accept
or reject DPW’s request. Appellants
contend that DPW does not request the full
amount necessary to fund all of the
community placements requested. The
District Court concluded that the pre-
budgetary process “is beyond judicial
scrutiny.” Frederick L., 217 F. Supp. 2d at
593. We agree. This is not an issue of
legislative immunity, which DPW has not
claimed, but a recognition of the realities
of the budgetary process. DPW explains
that it would not have been able to request
the full amount required to fund all of the
community placements needed because it
must make its budget request pursuant to
the Governor’s Guidelines, which limit the
percent-increase that it may request. That
process is unchallenged here. We cannot
hold, as Appellants would have us do, that
DPW should have requested additional
funding amounts beyond that which is
p e r m i t te d under the Gov ernor’ s
Guidelines.
Finally, Appellants argue that the
District Court erred by concluding that
DPW responsibly used its budgeted
monies because DPW should have shifted
money from other programs to fund
additional com mu nity placem ents .
Assuming a limited pool of budgetary
resources, if DPW had siphoned off
monies appropriated for institutional care
for mental health patients in order to
increase community placements, DPW
would have run afoul of Olmstead
prohibition on favoring those “who
commenced civil actions” at the expense
of institutionalized mental health patients
who are not before the court. Any effort to
institute fund-shifting that would
disadvantage other segments of the
mentally disabled population would thus
fail under Olmstead. 527 U.S. at 604-06.
However, Appellants argue that
DPW should re-allocate its funds to favor
additional community placements to the
detriment of budget items that are not
associated with community care or the care
of institutionalized persons. For example,
the parties’ stipulations explain that DPW
requested additional funding for several
non-community care items, such as
approximately $9.5 million for a general
3.5% salary increase for state psychiatric
services personnel; $2.5 million for
contracted repairs; $186,000 for consultant
fees; $5.7 million for specialized services;
$420,000 for contracted personnel
services; $372,000 for travel; $47,000 for

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out-service training travel; $1.1 million for
motorized and other rentals; $75,000 for
library materials and supplies; $116,000
for other services and supplies; and $60.6
million for information systems. App. at
730-32. The Commonwealth explains that
some of the aforementioned increases are
mandated under the terms of the
employees’ union contract and the other
costs assist in providing “a safe and secure
environment” in which to provide “active
treatment” to institutionalized patients.
Appellees’ Br. at 53-54.
Because the judiciary is not well-
suited to superintend the internal
budgetary decisions of DPW or evaluate
its physical plant needs, we decline to rely
on Appellants’ assertion that the
aforementioned costs are not essential to
the upkeep of DPW’s care-giving
apparatus. Our rejection of Appellants’
challenges to the District Court’s analysis
of the cost issues does not mean that we
similarly adopt the court’s acceptance of
the Commonwealth’s fundamental-
alteration defense.
B. Past Progress and Future Planning
for Deinstitutionalization
In setting forth the circumstances
under which a state might be relieved of its
responsibility to provide ADA relief on the
basis of the fundamental-alteration
defense, the Olmstead plurality provided
the following hypothetical:
If, for example, the State
were to demonstrate that it
had a comprehensive,
effectively working plan for
placing qualified persons
with mental disabilities in
less restrictive settings, and
a waiting list that moved at
a reasonable pace not
controlled by the State’s
endeavors to keep its
institutions fully populated,
t h e
reasonable-modificatio ns
standard would be met.
Olmstead, 527 U.S. at 605-06. Appellants
and Amici argue that DPW did not
main tain a waiting list or have
comprehensive, strategic plans to continue
deinstitutionalization.
The District Court found that DPW
begins discharge planning as soon as a
patient is admitted, with DPW holding
monthly meetings to determine which
patients are ready for discharge. However,
the Court acknowledged that, while the
Southeast Region Mental Health Planning
Task Force, which is composed of
OMHSAS administrators, mental health
care consumers and providers, had
developed a five-year plan for integration
in 1994, the Commonwealth has not
demonstrated that it has a comprehensive
or actionable plan to support increased
integration through community placements
or any other mechanisms. App. at 18.
S o m e c o u r t s h a v e giv e n
considerable weight to the presence of a
planning and/or waiting list referred to by

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15
the Olmstead plurality as examples of
factors to be considered in connection with
the fundamental-alteration defense. The
Makin plaintiffs had alleged that the state
affirmatively “mismanag[ed] the wait list”
for community care and the court found no
evidence of any “comprehensive plan[s] to
keep the waiting list moving.” Makin, 114
F. Supp. 2d at 1035 (internal quotation and
citation omitted). The court thus rejected
the state’s fundamental-alteration defense
in light of the absence of a comprehensive
integration plan, a slow-moving waiting
list, and the state’s vague protest of
general fiscal problems.
In contrast, a Maryland district
court noted that Maryland maintained a
waiting list and a waiting list equity fund
and also prioritized categories of crisis
resolution for services; further, there was
“no indication that the failure to move
people off the waiting list result[ed] from
an endeavor to keep the State’s institutions
fully populated,” as proscribed in
Olmstead. Williams v. Wasserman, 164 F.
Supp. 2d 591, 633 n.37 (D. Md. 2001).
Based in part on these factors, the court
sustained the state’s fundamental-
alteration defense. Id. at 630-38.
Appellants, joined by Amici, urge
that we adopt long-term planning as a new
factor that should be used in determining
whether a state is entitled to an affirmative
defense to an ADA or RA claim. Amici
argue as follows:
The emp hasis on a
c o m p r e h e n s i v e p l a n
indicates that the Supreme
Court intended to shield
States that had focused on
and planned for the need to
place peop le into the
community on a statewide
basis, prior to and apart
from the litigation before
the Court. A comprehensive
plan is more than an annual
inquiry into whether there
are extra funds left over in
the budget to fund creation
of community beds. It is
long-term and central to the
State’s mental health policy,
not an “add-on” or “extra
funding” item subject to
elimination at the first chill
of budget difficulties.
Amici’s Br. at 23. Appellants argue that
the District Court should have rejected the
Commonwealth’s fundamental-alteration
defense based on DPW’s failure to
develop comprehensive plans or a waiting
list. The Commonwealth responds that
Olmstead does not require the existence of
a comprehensive plan nor does it state that
a non-stagnant waiting list is the only way
that a state can avoid liability. Appellees’
Br. at 41 n.27.
Appellants also contend that under
the facts of this case the District Court
erred in crediting DPW’s past progress in
deinstitutionalization. The District Court
initially noted that “[t]he declining state
hospital population is an important aspect
of this changing healthcare environment.

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In the 1950s, Pennsylvania housed
approximately 40,000 people in its state
mental hospitals; at the time of trial [in
2002], fewer than three thousand patients
were housed in the ten remaining
OM HSAS-operated facilities.” Frederick
L., 217 F. Supp. 2d at 583 n.4. At the
close of its opinion, the District Court
concluded that “the record as a whole
convincingly demonstrates that, over time,
DPW has used its mental health budget to
establish more and more community-based
programs, and DPW will continue to do
so, to the extent possible given fiscal
realities.” Id. at 593.
There is no reference in Olmstead
t o a s t a t e ’ s p a s t p r o g r e s s i n
deinstitutionalization as relevant to
analyzing a fun dam ental-a lteration
defense. As Appellants argue, past
progress is not necessarily probative of
f u t u r e p l a n s t o c o n t i n u e
deinstitutionalizing. For example,
although DPW funded more than 200
community placements in the past two
fiscal years, only 33 placements are slated
for next year. As such, Appellants argue
that DPW’s past progress should not
provide grounds for relieving DPW of its
responsibility to continue providing
community care in the future.
It is true that the district court in
Williams, which accepted Maryland’s
fundamental-alteration defense, relied
most upon the state’s “role in the course of
de-institutionalization[, the] development
of community-based treatment programs
for all Maryland citizens with mental and
d e v e l o p m e n t a l d i s a b il i ti e s ,” a n d
M a r y l a n d ’ s l o n g- s t an d i n g p ol i c y
leadership in supporting community-based
mental health treatment. Williams, 164 F.
Supp. 2d at 633. The Williams court noted
that Maryland had “been gradually closing
institutions and expanding the number and
range of community-based treatment
programs it offers for people with severe
disabilities” and Maryland decreased its
mental hospital population from 7,114 in
1970 to 1,200 in 1997. Id. at 634. As
noted above, the District Court in the case
b e f o r e u s a l s o c r e d i t e d t h e
Commonwealth’s past progress. See
Frederick L., 217 F. Supp. 2d at 593.
Although the District Court did not
err in taking in to acc oun t the
Commonwealth’s past progress in
evaluating its fundam ental-alteration
defense, it was unrealistic (or unduly
optimistic) in assuming past progress is a
reliable prediction of future programs. One
of our principal concerns is the absence of
anything that can fairly be considered a
plan for the future. The District Court
made a finding that “Defendants have not
d e m o n s t r a te d that th ey have a
comprehensive effectively working plan
for placing qualified persons with mental
disabilities in less restrictive settings.” Id.
at 587. The court continued, “At trial, one
of Defendants’ witnesses, Gerald Radke,
Deputy Secretary for OMHSAS, admitted
such a plan is not in place.” Id. The
representative of the Commonwealth
arguing before us disagreed with the
District Court’s conclusion that there was
no such plan. She stated that “the district

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17
court recognized several indicia of a plan
at Norristown that we submit show that
there is a plan.” Tr. of Argument at 31.
She conceded, however, that there is no
piece of paper that represents that plan but
her explanation of a plan (policies and
procedures at NSH utilized for ongoing
review of patients from the minute they
come in and for discharge planning for
each patient individually) falls far short of
the type of plan that we believe the Court
referred to in Olmstead.
The issue is not whether there is a
piece of paper that reflects that there will
be ongoing progress toward community
p l a c e m e n t , b u t w h e t h e r t h e
Commonwealth has given assurance that
there will be. In that connection what is
needed at the very least is a plan that is
communicated in some manner. The
D i s t r i c t C o u r t a c c e p t e d t h e
Commonwealth’s reliance on past progress
without requiring a commitment by it to
take all reasonable steps to continue that
progress. Under the circumstances
presented here, our reading of Olmstead
would require no less.
After all, what is at issue is
compliance with two federal statutes
enacted to protect disabled persons. The
courts have held states throughout the
country responsible for finding the manner
to integrate the schools, improve prison
conditions, and equalize funding to
schools within the respective states,
notwithstanding the states’ protestations
about the cost of remedial actions. The
plaintiffs in this case are perhaps the most
vulnerable. It is a gross injustice to keep
these disabled persons in an institution
notwithstanding the agreement of all
relevant parties that they no longer require
institutionalization. We must reflect on
that more than a passing moment. It is not
enough for DPW to give passing
acknowledgment of that fact. It must be
prepared to make a commitment to action
in a manner for which it can be held
accountable by the courts.
IV.
CONCLUSION
In analyzing whether there was
sufficient evidence before the District
Court to justify its acceptance of the
Commonwealth’s fundamental-alteration
defense, we conclude that its factual
findings are fully supported by the
evidence of record. As noted in the
foregoing discussion, many of the court’s
conclusions of law are also consistent with
the governing legal principles. We believe
that the cost constraints make it
inappropriate for us to direct DPW to
develop 60 community residential slots per
year as Appellants request. Unlike
Appellants, we credit the Commonwealth
f o r i t s p a s t p r o g r e s s i n
deinstitutionalization. We depart from the
District Court’s analysis in its assumption
or prediction that past actions auger future
commitments.
Accordingly, we will vacate the
judgment of the District Court and remand
so that it can direct the Commonwealth to

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make a submission that the District Court
can evaluate to determine whether it
complies with this opinion.

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