R.s. Cohen, Muir, Jr. and Kestin. The opinion of the court was delivered by Kestin, J.A.D.
These cases have been consolidated for the purposes of decision. They present a common issue concerning that form of public assistance known as Aid to Families with Dependent Children (AFDC). An AFDC recipient who receives lump sum income from other sources, "such as inheritances and lottery winnings, personal injury and worker compensation awards," excluding funds designated and used for purposes such as payment of medical bills, funeral costs, replacement or repair of resources and the like, is rendered ineligible for AFDC assistance for a period of time. N.J.A.C. 10:82-4.15. The question presented by these cases relates to the standards used to calculate the period of ineligibility.
To reach the number of months of ineligibility, the total lump sum income is divided by a monthly dollar standard. Using a higher monthly standard results in a shorter period of ineligibility. This dispute concerns the monthly dollar standard to be used. In these cases, the allowance standard applicable to the
eligible family, i.e., the monthly AFDC payment, was used. Petitioners contend that it was improper to use the allowance standard, and that the Division of Economic Assistance (Division) was required to use the higher "standard of need" as the determinant of lump sum ineligibility.
In re Petitions for Rulemaking, N.J.A.C. 10:82-1.2 and 10:85-4.1, 117 N.J. 311, 566 A.2d 1154 (1989), required the Division to establish a standard of need as defined by federal law. The standard of need is
the amount of money which has been determined to be essential to maintain an acceptable standard of living.
Accordingly, N.J.A.C. 10:82-1.1A was promulgated as of July 1, 1992, codifying New Jersey's standard of need. At the same time, N.J.A.C. 10:82-4.15(a) was amended to provide that lump sum ineligibility would be determined by "the Standard of Need applicable to the eligible family" instead of the former allowance standard. Both the standard of need and the allowance standard consist of sliding scales depending upon family size. New Jersey has elected to establish its allowance standard at a level no greater than 45% of the standard of need. See N.J.A.C. 10:82-1.2(c)1.
No state is required to meet the standard of need in setting its AFDC payments (the allowance standard). A state may
pare down payments to accommodate budgetary realities by reducing the percent of benefits paid or switching to a percent reduction system . . . .
[ Rosado v. Wyman, 397 U.S. 397, 413, 90 S. Ct. 1207, 1218, 25 L. Ed. 2d 442, 456 (1970).]
In 1991, each of the petitioners received a notice of ineligibility by reason of a lump sum received. This was after the New Jersey Supreme Court had ruled that the Division was required to promulgate a standard of need and also after the Division had quantified that standard in a proposed rule, but before the ...