New York State
Ethics Commission


Advisory Opinion No. 96-25: Application of the post-employment restrictions of Public Officers Law §73(8) to a former DSS employee who seeks to perform certain services related to his former State responsibilities.

INTRODUCTION

The following advisory opinion is issued in response to a request by [ ], a former Department of Social Services (DSS) employee who developed the agency's federally required Cost Allocation Plan. He asks whether the revolving door statute, Public Officers Law §73(8)(a), would prohibit him from serving as a contractor to the New York State Department of Health (DOH) to assist in its preparation of a Cost Allocation Plan that is necessary for DOH's administration of the federally supported Medicaid Program.

Pursuant to its authority under Executive Law §94(15), the Commission hereby concludes that Public Officers Law §73(8) does not prohibit [the requesting individual] from serving as a contractor to DOH and performing the proposed services, as the plan he would develop for DOH and the plan he developed for DSS are not part of the same transaction.

BACKGROUND

[The requesting individual] was employed at DSS in the office of Financial Management until his retirement from State service on June 14, 1996. Prior to September, 1988, he was responsible for the direction of the agency's [ ] Unit, where he designed and installed Cost Allocation Plans required by the federal government as part of the State's administration of certain public assistance programs.(1) His work included preparing the major share of the Plan for the agency's Title XIX Medicaid Program.

A Cost Allocation Plan, as the name implies, seeks to allocate the cost of engaging in various activities to the benefiting program. When DSS administers a program, there are both inter-departmental and intra-departmental costs which must be allocated. Sometimes an activity or an office or other departmental unit is dedicated to a given program and may be "direct charged" to that program; in other instances, a program unit or an activity may be charged to a cost pool, or several cost pools, which will then be allocated to the federal program. Frequently, an expense will be allocated from one cost pool to another several times before ultimately being charged to the federal program. The single State agency administering the program is usually the principal agency in charge of the Cost Allocation Plan, although other State agencies are included.

DSS officials have advised the Commission that [the requesting individual's] primary duties in developing the agency's Cost Allocation Plan were (1) asserting which activities were necessary to support each federally funded program, (2) determining which activities could be directly charged to each program, and (3) developing an appropriate collection tool to apportion the costs attributed to administrative units which could not be directly charged.

In 1989, DSS' Plan was submitted, in major part, to the federal government's Region II Office of Cost Allocation. After this Plan was submitted, [the requesting individual] changed job duties within DSS in order to concentrate on matters concerning specific funds which had been disallowed by the federal government. He did not thereafter have any responsibility for Cost Allocation Plan matters.

In 1995, the principal federal guidelines governing Cost Allocation Plans, contained in OMB Circular A-87 -- which, with comparatively minor modifications, had been in effect since 1982 -- were substantially amended.

On August 22, 1996, the Personal Responsibility and Work Opportunity Reconciliation Act, commonly known as the federal welfare reform bill, was signed into law as Public Law 104-193. It contained significant changes with respect to eligibility for Medicaid assistance in at least two important respects. Previously, all persons eligible for assistance under the Title IV-A Aid to Families with Dependent Children program were automatically eligible for Medicaid benefits. The welfare reform bill severed this automatic link, leaving to the States the question of whether and how to include AFDC recipients in the Medicaid program. The rules were also changed with regard to legal immigrants. As of January 1, 1997, states will have the option of denying Medicaid coverage to persons who are legal residents but not citizens. DSS officials have advised the Commission that the decisions that will have to be made by the states to implement these changes will substantially affect the Cost Allocation Plan necessary for administration of the Medicaid program.

Changes have also recently taken place on the State level. In June, 1996, Chapter 474 of the Laws of 1996 was enacted transferring responsibility for the federally supported Title XIX Medicaid program from DSS to DOH. However, since other federally supported programs remain the responsibility of DSS, the staff of the Cost Allocation Unit was not transferred. Consequently, DOH finds itself without the necessary administrative resources. It has asked [the requesting individual] to develop and install a Cost Allocation Plan for the Medicaid program that would meet the new Federal standards.

[The requesting individual] is prepared to contract with and assist DOH, but he is concerned about the restrictions of the ethics law. He has, therefore, asked for an advisory opinion as to whether he may enter into a contract with DOH to perform the proposed services.

APPLICABLE LAW

The post-employment activities of former State officers and employees are governed by Public Officers Law §73(8)(a), which bars former employees from utilizing their "insider" knowledge of State agencies and specific projects for their own benefit or for that of a client. This law sets the ground rules for what individuals may do with the knowledge, experience and contacts gained from public service after they terminate their State employment. Subparagraph (ii) of paragraph (a) is the relevant provision to the situation presented by [the requesting individual]. It provides:

No person who has served as a state officer or employee shall after the termination of such service or employment appear, practice, communicate or otherwise render services before any state agency or receive compensation for any such services rendered by such former officer or employee on behalf of any person, firm, corporation or other entity in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and in which he personally participated during the period of his service or employment, or which was under his or her active consideration.

This provision, known as the lifetime bar, prohibits a former employee from rendering services for compensation in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and personally participated during the period of his or her State service or which was under his or her active consideration during that period.(2)

DISCUSSION

The question that the Commission must address is whether [the requesting individual's] development of a Medicaid Cost Allocation Plan pursuant to a contract with DOH would constitute his rendering services in relation to the same transaction on which he worked while in State service. Specifically, the Commission must determine whether the proposed DOH plan would be part of the same transaction as the Cost Allocation Plan developed by [the requesting individual] for DSS in accordance with the then existing federal guidelines to implement various DSS federally supported public assistance programs, including Medicaid.

Under the precedents provided by the Commission's previous opinions, the two plans would each be part of the same transaction if [the requesting individual's] work were to consist of simply adopting the plan he developed at DSS for use by DOH. In Advisory Opinion No. 92-20, the Commission held that similar bills introduced in successive legislative sessions constituted part of the same transaction.

However, the Commission has contrasted this situation to those where there are significant differences between the matters being considered. In Advisory Opinion No. 95-32, it compared successive legislative bills on the same topic to the annual State budget. In holding that the development of each year's budget is a separate transaction, the Commission said:

The development of each year's budget is a lengthy multi-layered process culminating in the passage of legislation. The myriad of variables which must be considered annually -- revenue estimates, fiscal climate, changes in federal aid and revenue-sharing, new mandates -- coupled with an ever-changing number of persons interested in and affected by the budget's outcome render it significantly different from work on any single piece of legislation.

In a different context, the Commission permitted a former State employee who personally participated while in State service in the permitting process for a solid waste management facility to represent a town in connection with an expansion of the facility. It noted, in Advisory Opinion No. 96-12, the differences between the considerations relevant to the original site and the expansion:

The proposed expansion is subject to a new environmental review under DEC's administrative rules, and subject to independent public review under the Uniform Procedures Act and the State Environmental Quality Review Act. A new draft environmental impact statement is required to assess the potential significant adverse environmental impact of the expansion, which statement must consider factors different from those presented by the existing and ongoing landfill operations. In addition, the current application is required to set forth its own distinct engineering and design specifications.

In the case of [the requesting individual], it appears to the Commission that, because of the recent significant changes in the federal requirements for a Cost Allocation Plan, the considerations that underlie the DOH plan would be considerably different from those that were factored into the DSS plan when it was developed. In the 1980s, all persons receiving benefits under the Aid to Families with Dependent Children program, which is, by far, the largest public assistance program, were automatically eligible for Medicaid assistance.(3) These eligible recipients included individuals who were not citizens. As a result, for this group, which constitutes a large percentage of those who are Medicaid eligible,(4) no inquiry had to be made as to their eligibility. Almost the entire administrative effort was geared to consideration of the nature and extent of the medical services they received. Under the new standards, significant amounts of time will have to be spent in reviewing the eligibility of each individual. This will present a fundamental new factor in cost allocation, making the considerations in the DOH plan quite different from those used to develop the DSS plan.

Since [the requesting individual] would be creating a new plan under new federal rules with regard to a Medicaid program that was substantially revised by Public Law 104-193, the Commission concludes that the plan to be developed for DOH is not part of the same transaction as the plan [the requesting individual] developed for DSS. He may, therefore, enter into the proposed contract with DOH.

CONCLUSION

The Commission concludes that [the requesting individual] is not prohibited by Public Officers Law §73(8)(a)(ii), the lifetime bar, from serving as a contractor for DOH and performing the proposed services, as the development of the Cost Allocation Plan for DOH and the Plan he previously developed for DSS are not part of the same transaction.

This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person who requested it and who acted in good faith, unless material facts were omitted or misstated by the person in the request for opinion or related supporting documentation.

All concur:

Angelo A. Costanza
Robert E. Eggenschiller
Donald A. Odell, Members

Dated: October 30, 1996


Endnotes

1. These Cost Allocation Plans are required by federal Office of Management and Budget Circular A-87, Attachment D. See also 45 Federal Code of Regulations, Part 95, Subpart E.

2. There is also a two year bar, contained in Public Officers Law §73(8)(a)(i), which prohibits a former State officer or employee from appearing, practicing or rendering services for compensation in relation to a matter before the individual's former agency. This provision is not of concern here since [the requesting individual's] contract will not be with DSS, his former agency, and DSS has advised the Commission that the plan [the requesting individual] develops will not be reviewed by that agency. It will be submitted by DOH directly to the federal government.

3. Of the 1.5 million individuals receiving public assistance, 1.2 million receive AFDC.

4. Of the 2 million Medicaid eligible individuals, the 1.2 million receiving AFDC are automatically eligible.



URL: http://www.nysl.nysed.gov/edocs/ethics/96-25.htm