For affirmance -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall and Schettino. For reversal -- None. The opinion of the court was delivered by Jacobs, J.
The plaintiffs instituted a proceeding in the Chancery Division attacking the validity of Section 615A of the Categorical Assistance Budget Manual of the Division of Public Welfare, Department of Institutions and Agencies. The matter was transferred to the Appellate Division and we certified before argument there.
Public Welfare in New Jersey is administered through various avenues including so-called categorical assistance programs which are encouraged and partly financed by the federal government. The best known of these programs is the one for Aid to Families with Dependent Children (AFDC). It was part of the Social Security Act of 1935 and its history is adequately set forth in King v. Smith, 392 U.S. 309, 88 S. Ct. 2728, 20 L. Ed. 2d 1118 (1968); Rosado v. Wyman, 397 U.S. 397, 90 S. Ct. 1207, 25 L. Ed. 2d 442 (1970); Dandridge v. Williams, 397 U.S. 471, 90 S. Ct. 1153, 25 L. Ed. 2d 491 (1970). Though not obliged to participate in the AFDC program, New Jersey elected to do so in L. 1959, c. 86 (N.J.S.A. 44:10-1 et seq.) and adopted a plan which received the approval of the Secretary of Health, Education and Welfare as a prerequisite to the availability of federal funds.
L. 1959, c. 86 did not endeavor to fix the standards of need or the level of benefits but left these matters, along
with most other matters, to administrative regulation. Thus the Commissioner of Institutions and Agencies was authorized and directed, under general policies established by the State Board of Control, to issue "all necessary rules and regulations and administrative orders," and, stressing the legislative goal to obtain maximum federal funding, the Commissioner was authorized and directed to do all things "necessary to secure for the State of New Jersey the maximum Federal financial participation that is available with respect to a program of assistance for dependent children. . . ." L. 1959, c. 86, § 3, pp. 213-14.
So far as the federal legislation was concerned, the State was admittedly free to fix its own standards of need and its own level of benefits, and to determine the amount of funds which it would devote to the program. King v. Smith, supra, 392 U.S. at 318-319, 88 S. Ct. at 2133-2134, 20 L. Ed. 2d at 1126; Rosado v. Wyman, supra, 397 U.S. at 408, 90 S. Ct. at 1215, 25 L. Ed. 2d at 453; Dandridge v. Williams, supra, 397 U.S. at 478, 90 S. Ct. at 1158, 25 L. Ed. 2d at 498. And so far as the State's actual administration of the program was concerned, reference must of course be made to the comprehensive Categorical Assistance Budget Manual which embodies the pertinent administrative procedures, standards and regulations issued by the Commissioner for the governing agency, now known as the Division of Public Welfare, Department of Institutions and Agencies. N.J.S.A. 30:4B-1 et seq. See Bailey v. Engelman, 56 N.J. 54, 56 (1970).
When L. 1959, c. 86 was originally enacted it was geared largely towards dependent children in families in which there was but a single parent. However, in L. 1968, c. 138, the Legislature broadened the categories of eligibility to include families where there were two parents but the dependent child was deprived of parental support by reason of either (1) "the unemployment of his father" or (2) "the insufficient earnings of his parents." With respect to the "unemployment" category, as defined in federal legislation
(42 U.S.C. § 607), there was federal participation. However, with respect to the "insufficient earnings" category there was no federal participation and it was to be borne entirely by State funds. This latter category has come to to be known as the "N" segment and represents the sole New Jersey categorical program in which there is no federal funding.
L. 1968, c. 138 also contained a provision to meet the so-called "income disregard" requirement adopted in 1968 by Congress and designed as an incentive to welfare recipients to seek and retain employment. 42 U.S.C. § 602(a)(8). Under that requirement, approved State plans must provide that in computing need, representing the difference between the family's requirements and its resources, the State shall disregard the first $30 plus one-third of the remainder of the income earned. L. 1968, c. 138 repeated the language in L. 1959, c. 86 that, in determining need and the amount of assistance, all other income and resources of the dependent child and the parents or relatives with whom he is living, shall be taken into consideration, and then added the following: "except that, in making such determination, there shall be disregarded the amounts of income and resources required by Federal law as a condition of Federal financial participation." L. 1968, c. 138, § 2, p. 483; N.J.S.A. 44:10-3(c).
The need of a welfare family is computed by comparing its income with the standard set by the Division as representing the minimum amount which a family of its size would require to sustain itself. If the income received by the family is less than the need, then it is eligible for assistance, but in determining eligibility itself the income disregards are no factor. However, after eligibility is established, budgeting or the fixing of the amount of assistance to be paid occurs and involves a variety of factors including the income disregards. The budget deficit would represent the difference between the income, less the disregards and the other factors, and the amount of need; that difference
would ordinarily constitute the grant of assistance. However, Section 615 in the Budget Manual sets forth ceilings which vary with the number of members of the family unit and which are apparently fixed at a level one-third or more above average requirements. Cf. Bailey v. Engelman, supra, 56 N.J. at 56. The Section further sets forth formulae for calculating "total available adjusted income" and provides that when the applicable ceiling exceeds the available adjusted income the money grant ...