For affirmance -- Chief Justice Wilentz and Justices Clifford, Handler, O'Hern and Stein and Judges Gaulkin and D'Annunzio. Opposed -- None. The opinion of the Court was delivered by O'Hern, J.
[117 NJ Page 313] This appeal primarily concerns the proper relationship between courts and administrative agencies in the effectuation of programs delegated to the agency by the legislative branch. The issue arises in the context of a judicial order that the New Jersey Department of Human Services (DHS) set forth a standard of need by which to assess the benefit levels of two major public-assistance programs that the agency administers. These programs are Aid to Families With Dependent Children (AFDC), set up under N.J.S.A. 44:10-1 to -8, and the General Public Assistance Law (GA), N.J.S.A. 44:8-107 to -157. The difference in programs (aside from funding sources) is that the AFDC program serves only families with children in need while the GA program is the program of "last resort" for many needy citizens not qualifying for categorical welfare aid, such as Old Age Assistance, Aid to the Blind, Disability Assistance, Aid to Families with Dependent Children, or Aid to Families of the Working Poor. The AFDC program is a joint federal and state program involving 50% federal money and 50% non-federal money, consisting in New Jersey of 35% state money and 15% county money. The GA program is funded entirely through non-federal sources and currently is funded 75% by state money and 25% by municipal money. See Williams v. Department of Human Servs., 116 N.J. 102, 105 n. 1 (1989).
The issues in this case are narrow. The questions are not whether there is a constitutional or a statutory entitlement to a certain level of benefits, but only whether the agency must establish, by a proper administrative process, what level of benefits would be required to maintain the recipients in the measure of dignity that the enabling legislation contemplates. Nor is there a question of constitutional intrusion on the separate powers of the other branches of government. We seek here only to do the Legislature's will. Should we err in our judgment of the Legislature's intent, the matter may be resolved, at least at the state level, by a line in the legislation.
Finally, we recognize the unavoidable circularity in the process. The agency contends that such a process is futile because in the long run the standard of need will provide benefits only on paper; the actual level of benefits will be those that the Legislature establishes in the annual Appropriations Act. Still, we find that there is a sufficient mandate to the agencies in each of the enabling acts that the development of such a standard be not regarded as futile. Hence, we affirm the judgment of the Appellate Division, which directed DHS to conform to the express or implied policy of the enabling acts by requiring development of standards of need.
The procedural history of the case is set forth in DHS' petition for certification. On December 19, 1985, two class petitions for rulemaking were filed with the Department of Human Services pursuant to N.J.S.A. 52:14B-4(f) and N.J.A.C. 1:30-3.6. 18 N.J.R. 1622 (Aug. 4, 1986). These regulations allow any person to petition an agency to promulgate, amend or repeal any rule.
The petitions were filed on behalf of all recipients of welfare benefits from the AFDC program and the GA program. The Commissioner of Human Services perceives the petitions as demanding that he (1) increase the existing federally-mandated
standard in the AFDC program, and (2) create a similar standard in the GA program. Claimants on behalf of AFDC recipients described their petition as seeking "a rule raising welfare benefits and establishing a level of assistance that is required by the New Jersey statutes and Constitution, and is 'compatible with decency and health.'" (Quoting N.J.S.A. 44:10-1(a)(1)). The Public Advocate joined in the petitions. The petitioners presented extensive documentation in support of their claims, primarily consisting of recipients' affidavits of need and monographs questioning the adequacy of existing welfare benefits.
Initially, the Department noted its intention to comply with the petitions and conduct such a rulemaking proceeding, but on July 15, 1986, the Commissioner issued a response denying the relief sought in the petitions. The Commissioner's findings may be summarized as follows: (1) the existing regulations satisfy federal requirements concerning a standard of need in the AFDC program, (2) a standard of need is not required in the non-federal GA program, or (3) an index of need independent of payment schedules that are tied to legislative appropriations would serve no useful purpose to the program, and (4) in any event the amounts reflected in the payment schedules of the welfare programs do not comprise the full range of available benefits and thus should not be "measured in isolation." 18 N.J.R. 1622 (Aug. 4, 1986).
The claimants appealed the denial to the Appellate Division, which reversed the denial of their petitions and remanded to the Commissioner for further proceedings consistent with its finding that "it is the statutory obligation of the Commissioner of Human Services of the State of New Jersey * * * to establish a 'standard of need' based upon the actual cost of basic necessities in New Jersey." In the Matter of Petitions for Rulemaking N.J.A.C. 10:82-1.2 and 10:85-4.1, 223 N.J. Super. 453, 455 (1988). The court held that under this State's welfare statutes, N.J.S.A. 44:8-107 and 44:10-1, the Legislature has mandated a standard of need to advise it of appropriations needed for the welfare programs. 223 N.J. Super. at 460. The DHS petition
for certification asserts that the statutes relied on by the court do not include such a requirement. The court, however, found a mandate for the setting of such standards to be implicit in the legislation. Critical to that finding is the Appellate Division's determination that in the absence of an index set by the Commissioner, the Legislature cannot effectively decide on appropriations for the welfare programs in this state. Ibid. We granted the petition of the Commissioner of Human Services to review that decision. 111 N.J. 638 (1988).
The economic background to the case is perhaps best seen in the collaborative report of the Association for Children of New Jersey and the Junior Leagues of New Jersey and the Governor's Committee on Children's Services Planning. T. Fagan & S. Geismar, Abandoned Dreams: New Jersey's Children in Crisis (undated). We do not intend in any sense to validate these data, inasmuch as that will occur only in the agency process. We assume the source to have sufficient reliability for us to assay the social context.
The report concludes that in New Jersey today, children represent 40% of the poor. Non-white children are four times more likely to live in poverty than are white children. Although children represent only 27% of the total population, they represent close to half -- 277,000 -- of the people living in poverty in New Jersey. Contrary to popular belief, most poor families do not have large numbers of children. In New Jersey, the average family size is 3-1/3 people. The average size of a poor family is 3-1/2 people. Minority families with children in New Jersey are over four times more likely than white families with children to be poor. Almost 30% of all black families and 21% of all Hispanic families with children live in poverty.
A family of four receiving the maximum AFDC grant gets $443 a month. Even with a full food stamp allotment of $183, this family has less than 60% of the minimum cost of living in
New Jersey. While the cost of living in New Jersey increased by over 130% between 1975 and 1985, AFDC payments increased by only 33% during the same period.
We recognize that these data are not entirely current but they represent the background against which the petitioners sought this relief.
The causes for this disparity between needs and benefits are complex. It has been suggested that a national commitment to the primacy of social security has diminished the resources available for needs-based programs. See generally Simon, "Rights and Redistribution in the Welfare System," 38 Stan.L.Rev. 1431 (1986) (arguing that a substantive rights theme has inhibited national redistribution efforts). For example, social security benefits increased by 10% in 1971, by 20% in 1972, and by 7% in 1973, and were indexed, effective 1975, by a formula that "immunized them from the runaway inflation of the late 1970s." Id. at 1465. In contrast, most states allowed their public assistance standards to erode through inflation: "The real value of AFDC payment standards declined by an average of 17% during the 1970s." Ibid. "[The] devastating truth is that few States, if any, define need at, much less above, the poverty level." Tello v. McMahon, 677 F. Supp. 1436, 1445 (E.D.Cal.1988). Under the national administration's 1981 budgets, "[food] stamps would have been cut in half and AFDC by more than a quarter, while social security would have been cut by only 10 percent." Simon, supra, 38 Stan.L.Rev. at 1465. In short, "the protection of social insurance [social security] seems to have come at the expense of public assistance." Id. at 1466. In addition, the "normative priority" given to social security has "contributed to the political isolation of the poor." Ibid. It is not for us to weigh these policy choices, but only to note their effects.
With this as economic background, we turn to the legal issues. To understand the legal issues, it is necessary to
understand the programs. We shall discuss the issues primarily in the context of the AFDC program, since that program has by far the most far-reaching economic and social consequence. In its Appellate Division brief, DHS noted that New Jersey expended $238,197,000 in State funds for the AFDC and GA programs in fiscal year (FY) 1986; of this amount, $184,105,000 was spent for assistance in AFDC (averaging 367,766 recipients per month), and $54,092,000 was spent for assistance in GA (averaging 26,295 recipients per month). In response to the petitions for rulemaking in the instant case, the Department of Human Services, Division of Public Welfare, estimated the cost, in State dollars, of raising the level of benefit in both programs to the federal poverty line. The Division estimated that the cost of such action would be approximately $500,000,000. Hence, we shall focus first on the AFDC issues.
In part IV of this opinion, infra at 324, we explain that our judicial role is limited to determining whether the agency's action or inaction violates express or implied legislative policies. Specifically, the question posed is whether the legislative policies of the State's AFDC program require the agency to develop the "standard of need" by which to measure whether children are receiving the intended benefits of the program.
New Jersey has long elected to participate in the AFDC program. The program appears in our laws of more than fifty years ago. L. 1938, c. 161. Like the counterpart federal program, the purposes of our Act are:
(1) To provide for the care of eligible dependent children in their own homes or in the homes of relatives, under standards and conditions compatible with decency and health,
(2) To help maintain and strengthen family life,
(3) To help such parents or relatives to attain the maximum self-support and personal independence consistent with the maintenance of continuing parental care and protection, * * *. [ N.J.S.A. 44:10-1(a).]
This State mandate to provide care consistent with "standards" of "decency and health" is reinforced by the program of cooperative federalism.
The federal AFDC program is designed to provide financial assistance to needy dependent children and to the parents or relatives who live with and care for them. The principal purpose of the program, as indicated by 42 U.S.C. § 601, is to help such parents and relatives "to attain or retain capability for the maximum self-support and personal independence consistent with the maintenance of continuing parental care and protection * * *." The program "is based on a scheme of cooperative federalism." King v. Smith, 392 U.S. 309, 316, 88 S. Ct. 2128, 2132-33, 20 L. Ed. 2d 1118, 1125 (1968). As noted, it is financed by the federal government on a matching-fund basis. Under the federal Health and Human Services regulations, all State AFDC plans must comply with federal regulations. To understand the difference in what is at stake in this discussion of the "standard of need" as opposed to the "level of benefits," we draw on a recent discussion by the Hawaii Supreme Court.
Need Standard. The federal statute and regulation [establishing AFDC] refer to the state's "standard of need for a family of the same composition." In order to understand the issue raised by the Department's use of a "budgeted standard" in this context, it will be helpful to review certain aspects of the AFDC program.
A state plan for AFDC must specify a statewide standard, expressed in money amounts, to be used in determining the need of applicants and recipients, and the amount of the assistance payment. 45 C.F.R. § 233.20(a)(2)(i). This "standard of need" is the amount of money which has been determined to be essential to maintain an acceptable standard of living. The states, however, are not required to make payments equal to their standards of need; rather, they are permitted to set payment levels at a percentage of the need standard. 45 C.F.R. § 233.20(a)(2)(ii). The purpose of setting a "standard of need" is not, therefore, to ensure that the benefits paid will be sufficient to provide for basic subsistence. Rather, the standard of need serves as a benchmark against which the adequacy of payments may be measured. The Supreme Court explained the function of the standard of need by saying that,
while [the Social Security Act] leaves the States free to effect downward adjustments in the level of benefits paid, it accomplishes within that framework the goal, however modest, of forcing a State to accept the political
consequence of such a cutback and bringing to light the true extent to which actual assistance falls short of the minimum acceptable. [ Burk v. Sunn, 68 Haw. 80, 705 P.2d 17, 22 (Haw.1985) (quoting Rosado v. Wyman, 397 U.S. 397, 413, 90 S. Ct. 1207, 1218, 25 L. Ed. 2d 442, 456 (1970)).]
Moreover, a state cannot obscure what standard of need applies. In Rosado v. Wyman, 397 U.S. 397, 408, 90 S. Ct. 1207, 1215-16, 25 L. Ed. 2d 442, 453 (1970), a case interpreting 42 U.S.C. § 602(a)(23), the provision mandating a one-time adjustment in the standard of need in 1969, the Supreme Court indicated that federal law requires a state to establish a clear "standard of need." The same Court noted that a state may thereafter "pare down payments to accommodate budgetary realities by reducing the percent of benefits paid or switching to a percent reduction system, but it may not obscure the actual standard of need." Rosado v. Wyman, supra, 397 U.S. at 413, 90 S. Ct. at 1218, 25 L. Ed. 2d at 456.
Admittedly, the broad policy of section 602(a)(23) in requiring states to face up to the responsibilities of public assistance has weakened with the passage of time, as Congress has not required additional adjustments to the standard of need. Nevertheless, federal law still requires the state to establish a clear standard, see Mont v. Heintz, 849 F.2d 704 (2d Cir.1988), and doing so has "practical and political consequences." Rosado v. Wyman, supra, 397 U.S. at 413, 90 S. Ct. at 1218, 25 L. Ed. 2d at 456.
The practical consequences are also affected by the fact that the standard of need took on greater significance with the enactment of the Omnibus Budget Reconciliation Act of 1981 (OBRA), Pub.L. No. 97-35, 95 Stat. 357, which in large part became effective October 1, 1981. OBRA declared any household whose gross income exceeded 150% of the state standard of need ineligible for AFDC benefits. OBRA § 2303, 95 Stat. at 845 (codified at 42 U.S.C. § 602(a)(18)). This section was amended to substitute "185%" by the Deficit Reduction Act of 1984, Pub.L. No. 98-369, 98 Stat. 494, 1134 § 2621.
In short, Congress requires the states to set forth the difference between what people need and what they get. And this difference has practical consequences.
In its Appellate Division brief, the Department stressed what it perceived to be the futility of the process of determining what people need apart from what they will get: "[Appellants] [welfare claimants] are in the wrong forum. Their plea for increased public assistance is more properly directed toward the Legislature, which alone has the power to grant that relief."
But when we require compliance with law, it is never an idle gesture. In requiring similar compliance, Justice Harlan noted that although Congress had not mandated a level of appropriations that a state must make, it had mandated that states must nonetheless determine "the magnitude of the public assistance requirement and lay bare the extent to which their programs fall short of fulfilling actual need * * *." Rosado v. Wyman, supra, 397 U.S. at 413, 90 S. Ct. at 1218, 25 L. Ed. 2d at 456. In so doing, Congress
embodied in legislation the cost-of-living exercise which has both practical and political consequences. It has the effect of requiring the States to recognize and accept the responsibility for those additional individuals whose income falls short of the standard of need as computed in light of economic realities * * *. [ Ibid.]*fn1
The practical consequences that Justice Harlan foresaw have been realized:
It is impossible to measure the practical effect of the poverty line, but an interesting argument that need standards had an important progressive effect on public assistance standards is made in Urban Systems Research and Engineering, AFDC Standards of Need, 247-84 (Report to the Social Security Administration, August 1980) (on file with author). The report studies the relation between "need standards" (normative standards of need) and "payment standards" (amounts guaranteed to recipients, which are often some fraction of need standards) in state AFDC programs during the 1970s. Both the standards and the relations between them vary enormously among the 50 states. However, the study found a strong positive correlation between the size of increases in payments and the size of the gap between need and payment standards. In both states with relatively generous benefits and those with relatively ungenerous benefits, benefits tended to increase faster where there was a significant distance between the need and payment standards. The authors speculate that, while need standards are highly manipulable, some states took them seriously, and good faith efforts to estimate need often resulted in standards above program payments. These standards in turn, the authors further speculate, exercised a kind of normative pressure on legislators that prompted benefit increases. [Simon, supra, 38 Stan.L.Rev. at 1489 n. 190.]
Finally, it is a simple fact of human experience needing no empirical demonstration that not until we see the face of poverty do we react to it. The plight of the poor in places such as Appalachia and Ethiopia would have escaped attention were their suffering children not seen.
In short, there is every reason to believe that an informed society will react more humanely than an uninformed. Dickens' fables may represent the reality of human experience. We are not given visions of the future to guide our ...