UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
November 18, 1983
Essie Mae HARRIS, individually and on behalf of all others similarly situated, Plaintiffs,
Margaret M. HECKLER, as Secretary of the United States Department of Health and Human Services, George J. Albanese, individually and in his capacity as Commissioner of New Jersey Department of Human Services, and Audrey M. Harris, individually and in her capacity as Acting Director of the Division of Public Welfare, New Jersey Department of Human Services, Defendants
The opinion of the court was delivered by: LACEY
LACEY, District Judge.
Plaintiffs are former recipients of Aid to Families with Dependent Children ("AFDC") benefits. They challenge the "lump sum rule," under which they were declared ineligible for benefits for a period of time. Defendants administer the AFDC program on the state and federal levels.
The underlying facts are undisputed. Plaintiffs move for a preliminary injunction requiring defendants to pay them AFDC benefits pending the outcome of this suit. (I have already denied their application for a temporary restraining order.) Defendants move for summary judgment. In the meanwhile, plaintiffs have cross-moved for summary judgment and class certification.
I have bypassed the preliminary injunction stage and addressed the summary judgment question directly. Because I could not decide defendant's motion without settling the law of the case, and because the legal issues have been sufficiently aired, this decision disposes of plaintiff's summary judgment motion as well. I will decide the class certification motion upon proper briefing and oral argument.
While on AFDC, each plaintiff came into a sum of money following the death of a relative. Under the lump sum rule, each was declared ineligible for further benefits for a specified period. The period was calculated by dividing the amount of the lump sum by the amount of plaintiffs' monthly grant. The rule thus treats lump sums as the equivalent of future AFDC aid. Each plaintiff, however, has spent the lump sum long before the ineligibility period has run out. Defendants, in accordance with the lump sum rule, denied the application of plaintiff Harris for further aid. It appears likely that plaintiff T.E. will have a similar experience.
Were it not for the rule, plaintiffs would probably qualify for AFDC, as they did in the past. Destitute and in need of assistance, they challenge the lump sum rule on the following grounds:
(1) That it rightfully applies only to AFDC recipients with earned income, and was therefore wrongly applied to them; and
(2) That it creates an unconstitutional irrebuttable presumption of continuing ineligibility.
In essence, they seek to have their reapplications judged by the same needs test applied to all the applications for AFDC.
A. Essie Mae Harris
Essie Mae Harris was collecting AFDC benefits of $372 per month in October 1981. She used that grant, as well as food stamps and Medicaid, to provide for herself and her daughter. After the death of her nephew, she received an insurance check for $11,568.36. On November 1, 1981 defendants terminated her AFDC benefits until April 1985 under the lump sum rule. Her food stamps and Medicaid eligibility were also cancelled.
By March 1983 the insurance money was gone. Harris had, and has, no other income or assets, so she reapplied for AFDC benefits. Defendants again found her ineligible until April 1985. She appealed. The state Administrative Law Judge reviewed her expenditures. He found that she had spent the money on food, shelter and clothing; indeed her basic living expenses amounted to $17,123, about $5400 in excess of the lump sum. The state Division of Public Welfare rejected the ALJ's recommendation that she be reinstated.
Harris and her daughter are now destitute. Harris suffers from high blood pressure, asthma, and arthritis, but cannot afford medical care for herself or her daughter. Her daughter had a part-time job during the summer, but has now returned to high school. She lacks adequate clothing for the coming winter. The family survives on food stamps (restored in June 1983) and the charity of friends, which is rapidly being exhausted.
B. " T.E. "
T.E. received an AFDC grant of $414 per month and a food stamp grant of $154 per month until June 1983. She then received a check for $5329.91 from the estate of her deceased father. She refunded her July AFDC and food stamp payments. Shortly afterward defendants terminated her AFDC benefits until August 1984 under the lump sum rule. She appealed, and the state ALJ recommended reinstatement. Given defendants' adherence to the lump sum rule, reinstatement appears extremely unlikely.
T.E. has spent her small inheritance on family essentials. These included furniture, payments on loans and back tax bills, rent, food, clothing, and medically required air conditioners. She and her husband are unemployed, with no outside sources of income or savings. They have requested assistance from local charities for their food bills. They are now threatened with placement of their two children, aged 12 and 14, with the state Division of Youth and Family Services.
I. Earned Income and the Lump Sum Rule
A. The Issue
Plaintiff challenges the federal regulation setting forth the lump sum rule:
When the AFDC assistance unit's income, after applying applicable disregards, exceeds the State need standard for the family because of receipt of non-recurring lump sum income, the family will be ineligible for aid for the full number of months derived by dividing the sum of the lump sum income and other income by the monthly need standard for a family of that size. Any income remaining from this calculation is income in the first month following the period of ineligibility.
45 C.F.R. § 233.20(a)(3)(ii)(D) (1982). This regulation, and the parallel state regulation,
apply to all AFDC recipients; the regulations refer only to "a recipient," "the family," or "the AFDC assistance unit." Plaintiffs argue that the regulations are invalid because the authorizing statute meant to apply the lump sum rule only to recipients with earned income. Plaintiffs have no earned income, and thus aver that a properly drafted regulation would not apply to them.
The federal statute giving rise to the challenged regulations limits the applicability of the lump sum rule to "a person specified in paragraph 8(A)(i) or 8(A)(ii)." 42 U.S.C. § 602(a)(17) (Supp. V 1981).
Defendants argue that paragraphs 8(A)(i) and (ii) "specify" the entire range of AFDC applicants; plaintiffs argue that those paragraphs specify only recipients with earned income, rendering the regulations fatally overbroad.
The issue, then, is whether paragraphs 8(A)(i) and (ii) specify only those recipients with earned income. Under those paragraphs, a state plan must:
8(A) provide that, with respect to any month, in making the determination [of need] under paragraph (7), the State agency --
(i) shall disregard all of the earned income of each dependent child receiving aid to families with dependent children who is (as determined by the State in accordance with standards prescribed by the Secretary) a full-time student or a part-time student who is not a full-time employee attending a school, college, or university, or a course of vocational or technical training designed to fit him for gainful employment;
(ii) shall disregard from the earned income of any child or relative applying for or receiving aid to families with dependent children, or of any other individual (living in the same house as such relative and child) whose needs are taken into account in making such determination, the first $75 of total of such earned income for such month (or such lesser amount as the Secretary may prescribe in the case of an individual not engaged in full-time employment or not employed throughout the month) . . . .
42 U.S.C. § 602(a)(8)(A) (Supp. V 1981). Thus 8(A)(i) and (ii) provide for "earned income disregards," so called. Certain earned income is excluded from the determination of need, doubtless in order to encourage work by allowing applicants to keep part of what they earn.
Defendants argue that 8(A)(i) and (ii) specify all AFDC recipients. The paragraphs mention, for example, "each dependent child receiving aid," and "any child or relative applying for or receiving" AFDC. Therefore, the argument runs, all applicants are "specified" in the paragraphs, even if they have no earned income to which the disregard provisions could apply. Plaintiffs counter that the paragraphs specify only those persons to whom the "earned income disregard" provisions actually apply.
B. Persons Specified in Paragraph 8(A)(i) or 8(A)(ii)
In construing § 602(a)(8)(A)(i) & (ii), "our starting point must be the language employed by Congress." American Tobacco Co. v. Patterson, 456 U.S. 63, 68, 102 S. Ct. 1534, 1537, 71 L. Ed. 2d 748 (1982), quoting Reiter v. Sonotone Corp., 442 U.S. 330, 337, 99 S. Ct. 2326, 2330, 60 L. Ed. 2d 931 (1979); Mountain Brook Orchards v. Marshall, 640 F.2d 454, 456 (3d Cir.1981). Absent any contrary indication, I must take the words used to have their ordinary meaning. Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S. Ct. 2051, 2056, 64 L. Ed. 2d 766 (1980); Richards v. United States, 369 U.S. 1, 9, 82 S. Ct. 585, 590, 7 L. Ed. 2d 492 (1962).
The only definitional issue is the meaning of the word "specified" in § 602(a)(17). Even a court denying a preliminary injunction on this issue conceded that "in common parlance, the word 'specify' contains some connotation of restriction." Clark v. Harder, 577 F. Supp. 1085, 1087 (D.Kan. 1983). In using the quoted language, Congress may have been restricting its focus from humanity at large to the world of AFDC applicants. On the other hand, the statute by its very existence implies that level of restriction. Plaintiffs argue with some force that the reference to 8(A)(i) and (ii) must have a more restrictive meaning.
The problem seems to be that paragraphs 8(A)(i) and (ii) "specify" persons in two different ways. First, there is the general class of persons to which the guidelines are applied. Second, there is the narrower class -- persons with earned income -- that is uniquely defined by those paragraphs. See Clark, supra, 577 F. Supp. 1085, 1087 (paragraphs "do not specify 'persons' as much as they specify types and amounts of earned income").
If Congress intended the lump sum rule to apply to all applicants, it is difficult to understand the reference to paragraphs 8(A)(i) and (ii), the only sections of the statute that discuss earned income. For example, paragraph (8) is immediately preceded by paragraph (7), which provides general guidelines for determining the need of all applicants. If Congress insisted on inserting a reference back, it could have done as it did in § 602(a)(31), i.e., incorporated paragraph (7) to take in all applicants.
Where Congress meant to make a provision universally applicable, it simply did so.
I note in passing that defendants' own regulations took that simple approach.
The court in Sweeney v. Affleck, 560 F. Supp. 1118, 1124 (D.R.I.1983) found that the language of § 602(a)(17) would be almost meaningless under the construction urged by defendant. Accord, Vermeulen v. Kheder, No. 82-135, slip op. at 24 (W.D.Mich. June 3, 1982). I agree; Congress must have referred to paragraphs 8(A)(i) and (ii) for some reason related to their specific content. It would make no sense to refer to two subparagraphs of paragraph (8), dealing specifically with earned income disregards, to convey the totally unrelated point that the lump sum rule applies to all applicants.
C. Congressional Policy
AFDC is a federal program administered by the states. Its purpose is:
. . . encouraging the care of dependent children in their own homes or in the homes of relatives by enabling each State to furnish financial assistance and rehabilitation and other services as far as practicable under the conditions in such State . . . and to help such parents or relatives to attain or retain capability for the maximum self-support and personal independence consistent with the maintenance of continuing parental care and protection . . . .
42 U.S.C. § 601 (1976).
The lump sum rule legislation was part of the Omnibus Budget Reconciliation Act of 1981 (OBRA), Pub.L. 97-35, § 2301, 95 Stat. 843, 845 (1981). I take judicial notice that OBRA was a budget-cutting measure. The goal of minimizing costs obviously competes with the remedial goals of the statute as a whole.
Defendant's simplest argument is that since OBRA is a budget-cutting measure, Congress must have intended the interpretation that would save the most money. See Callejas, supra, oral op. at 7; Clark, supra, slip op. at 9. I find the argument unconvincing. Both interpretations would save money.
The budgetary policy, taken in isolation, offers no aid in determining where Congress drew the line in balancing competing policies.
Defendant's second policy argument is similarly weighty, but also unhelpful in the balancing process. The lump sum rule, in effect an enforced budgeting scheme, supplanted the treatment of lump sum payments as current income. Congress noted that the old system had "the perverse effect of encouraging the family to spend such income as quickly as possible in order to retain AFDC eligibility." Report of the Committee on the Budget, S.Rep. No. 97-139, 97th Cong., 1st Sess. 505, reprinted in 1981 U.S.Code Cong. & Ad.News 396, 771. Viewed in isolation, that policy would support maximum applicability of the rule.
Balanced against the need to provide for needy children in families without earned income, it does not define any clear boundary. Nor does it explain why Congress worded the rule in terms of paragraphs 8(A)(i) and (ii).
Defendants argue that the construction urged by plaintiff unfairly penalizes recipients with earned income, i.e. the working poor. They argue that we should not attribute such a purpose to Congress. See Faught, supra, 577 F. Supp. 1180, 1187 ("The Court cannot believe Congress would have intended such a result"); Callejas, supra, oral op. at 15-16. See also Clark, supra, slip op. at 8. I find evidence, however, that Congress had its reasons for distinguishing between recipients with earned income and others. Against that evidence, defendant's argument -- which asks the court to speculate -- cannot stand.
The only legislative history that addresses the issue of earned income supports plaintiff's reading of the statute. I find a Congressional purpose to reduce the number of recipients with earned income, and to confine AFDC to those without other sources of income.
Congressman Latta, who sponsored the Gram-Latta amendment including the lump sum provision, argued:
We can restore welfare under an income-support program for those with no other means of support rather than the massive income supplementation program it has become . . . .
127 Cong.Rec. H-3809 (June 26, 1981). Congress seems consciously to have restricted certain benefits to those with no other resources to fall back on. The Sweeney court speculated that a family with earned income has "demonstrated the ability to meet at least part of its basic needs . . . [whereas] families with no other support or income who are terminated for months or even years will inevitably become destitute." 560 F. Supp. at 1125. Whether or not that makes sense, the OBRA amendments do seem to distinguish between recipients with earned income and those without.
For example, § 2305 of OBRA amended 42 U.S.C. § 602(d)(1) to count as income any funds received as a result of the earned income advance. Section 2316 of OBRA terminated all working AFDC recipients with grants of less than $10.00, a measure that falls disproportionately upon working recipients. Section 2301 amended 42 U.S.C. § 602(a)(8) to limit child care deductions and work expenses for working recipients. It also reduced the work incentive income disregard from 12 months to 4 months per year.
Section 2303 of OBRA amended 42 U.S.C. § 602(a)(18) to terminate any person with gross income (i.e. prior to deductions) exceeding 150% of the standard of need. I conclude that we cannot rule out a Congressional intent to pass a measure that impacts more heavily on the working poor. See Sweeney, supra, 560 F. Supp. at 1125. See generally Philadelphia Citizens in Action v. Schweiker, 669 F.2d 877, 879 (3d Cir.1982).
Congress has the responsibility to allocate regrettably scarce resources. Schweiker v. Wilson, 450 U.S. 221, 238, 101 S. Ct. 1074, 1084, 67 L. Ed. 2d 186 (1981). The lump sum rule was in fact intended to provide "a fair allocation of scarce resources among the most needy." 47 Fed. Reg. 5648 (Feb. 5, 1982) (promulgating the rule). The legislature targeted the "truly needy," a phrase in vogue at the time. It took the lack of alternative sources of income as its indicator of destitution. Whether the working poor should be penalized is not a question for this court. I find that 42 U.S.C. § 602(a)(17) (Supp. V 1981) applies only to AFDC recipients with earned income. The rules promulgated by defendants, 45 C.F.R. § 233.20(a)(3)(ii)(D) (1982) and N.J.A.C. 10:82-4.15(a) (adopted 14 N.J.Admin.Reg. § 1459(b) (Dec. 20, 1982)), are invalid as applied to plaintiffs.
In light of the foregoing, plaintiffs' motion for summary judgment is granted; defendants' motion for summary judgment is denied; and plaintiffs' motion for a preliminary injunction need not be decided.