On appeal from Final Decision of the Acting Director, Division of Public Welfare.
Michels and Petrella. The opinion of the court was delivered by Petrella, J.A.D.
[196 NJSuper Page 406] After this court voided certain regulations of the Division of Public Welfare in the unreported decision of Melendez v. New Jersey Department of Human Services, A-628-81, decided November 12, 1982, the petitioner Sieglinde Eherenstorfer sought to have her eligibility recalculated. When the agency refused to do so, a fair hearing was conducted before an Administrative Law Judge (ALJ) who concluded that petitioner was entitled to a recalculation. Although the Acting Director
of the Division of Public Welfare in her final decision adopted the ALJ's determination, recalculation was denied for any period of assistance preceding the date of petitioner's request for a fair hearing. Petitioner appeals contending that she was entitled to have her eligibility recalculated from the payment period immediately after this court's decision. We agree and reverse and remand.
The facts are not complicated. On June 13, 1983, after becoming aware of the Melendez case (which had not been submitted for publication) Eherenstorfer wrote to the Bergen County Welfare Board (County Board) requesting that it recalculate her income and adjust her assistance payments from the Aid to Families with Dependent Children (AFDC) program. Relying on our decision in Melendez, she challenged the manner in which the County Board calculated and treated her income from the rental of rooms in her home as unearned income.
Petitioner's request for recalculation was denied on the basis that her income had been determined in accordance with the prevailing regulations, N.J.A.C. 10:82-4.10 and -4.12, notwithstanding the fact they were the very regulations previously invalidated by this court in Melendez. Petitioner requested a fair hearing on June 21, 1983.
A hearing was conducted by an ALJ on August 9, 1983 to determine the correctness of the action of the County Board in budgeting rental income from real property as unearned income. There was no testimony taken and only legal arguments were presented. The ALJ concluded in an August 24, 1983 initial decision that "the agency action in budgeting the petitioner's rental income as unearned income, without the modifications required by the holding in Melendez, was incorrect." He pointed out that in Melendez N.J.A.C. 10:82-4.10 and 10:82-4.12(a)(1) were considered violative of the federal statutes and regulations insofar as the New Jersey provisions treated rental income as unearned income and set the monthly cost figure for the operation and maintenance of a rental unit. The ALJ
ordered that the petitioner's assistance budget be recomputed so as to comply with the standards set forth in Melendez.
The County Board filed an exception*fn1 to the ALJ's initial decision and argued that it could not comply because the regulations which were found void in Melendez were still in effect and that its actions were governed by these regulations and the directives of the Division of Public Welfare (Division).
The Acting Director of the Division concluded in her September 26, 1983 final decision that Melendez, although in her view not dispositive, was persuasive and that steps were being taken*fn2 to amend the regulations to conform with the holding in Melendez. Accordingly, she directed the County Board "to recompute the amount of grant entitlement to which the eligible unit is entitled. . . . Entitlement to a corrective payment will be retroactive to July 1, 1983, the payment period following the filing of the request for a fair hearing." In response to the petitioner's objection to this directive and the argument that recalculation should be made to the date of the Melendez decision, or at the very latest the date that petitioner requested her grant be recalculated, the Acting Director said in an October
19, 1983 letter that she did not find the holding in Melendez "dispositive of the matter at ...