Vialpando v. Shea

• Decision Date: 22 March 1973
• Docket Number: 72-1345.,No. 72-1218,72-1218
• Citation: 475 F.2d 731
• Parties: Ascension VIALPANDO for herself and her minor child, Sabrina Vialpando, and both on behalf of all others similarly situated, Plaintiff-Appellee, v. Con F. SHEA, Individually and as Executive Director of the Department of Social Services, State of Colorado, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

475 F.2d 731 (1973)

Ascension VIALPANDO for herself and her minor child, Sabrina Vialpando, and both on behalf of all others similarly situated, Plaintiff-Appellee, v. Con F. SHEA, Individually and as Executive Director of the Department of Social Services, State of Colorado, et al., Defendants-Appellants.

Nos. 72-1218, 72-1345.

United States Court of Appeals, Tenth Circuit.

Argued September 18, 1972.

Decided March 22, 1973.

Charles B. Lennahan, Sp. Asst. Atty. Gen., Denver, Colo. (Duke W. Dunbar, Atty. Gen., John P. Moore, Deputy Atty. Gen., and Douglas D. Doane, Sp. Asst. Atty. Gen., Denver, Colo., with him on the brief), for defendants-appellants, except Melvin Pobanz.

James W. Kin, El Paso County Legal Services Office, Colorado Springs, Colo. (Tom W. Armour, El Paso County Legal Services Office, Colorado Springs, Colo., and Kenneth Neiman, Steven J. Cole, and Henry A. Freedman, N.L.S.P., Center on Social Welfare Policy and Law, New York City, of counsel, with him on the brief), for plaintiff-appellee.

Before LEWIS, Chief Judge, and PICKETT and McWILLIAMS, Circuit Judges.

LEWIS, Chief Judge.

In its present posture, this is a private action brought by appellees, Colorado welfare recipients, against state officials administering the Colorado welfare program. The appeal is from a judgment requiring appellants to implement a modification of the Colorado Division of Public Welfare Manual, § 4313.13 to comply with 42 U.S.C. § 602(a)(7) in determining a family's need under the Aid to Families with Dependent Children (AFDC) program. No party raises any question concerning the nature of the relief granted below.

The AFDC program is financed largely by the federal government on a matching fund basis and is administered by the states. An AFDC grant is computed by comparing a family's income and resources to a standard of need statistically determined by the state. The family income used in this comparison is gross family income less certain exclusions mandated by 42 U.S.C. § 602(a)(7), an employment expense provision, and 42 U.S.C. § 602(a)(8), an income disregard provision. On July 1, 1970 the Colorado Board of Social Services promulgated section 4313.13 of the Colorado Division of Public Welfare Manual. This regulation limits employment expenses under 42 U.S.C. § 602(a)(7) to a standardized $30.00 figure plus mandatory payroll deductions and child care expenses. The $30.00 standardized figure is an average based on a statistical survey and is meant to cover "employment expenses such as transportation, special clothing, union dues, special education or training costs, telephone, additional food or personal needs . . . ." The Colorado method of treating employment expenses embodied in section 4313.13 was approved by the Department of Health, Education and Welfare.

Prior to the effective date of section 4313.13, Colorado excluded from family income all expenses reasonably attributable to the earning of such income. The effect of the new regulation which allows only a standardized exclusion for employment expenses other than mandatory payroll deductions and child care expenses was to reduce appellees' excludible employment expenses to such an extent that their net income after the exclusions was greater than Colorado's standard of need. As a consequence, appellees were ineligible for AFDC grants and they initiated this action seeking damages and declaratory and injunctive relief. The district court held that the standardization of employment expenses in the new Colorado regulation did not comply with 42 U.S.C. § 602(a)(7) and granted the relief sought.

42 U.S.C. § 602(a)(7) requires that a state AFDC plan must "provide that the State agency shall, in determining need, take into consideration any other income and resources of any child or relative claiming aid to families with dependent children . . . as well as any expenses reasonably attributable to the earning of any such income." (Emphasis added.) We interpret the words "any expenses" to mean all actual expenses. Thus 42 U.S.C. § 602(a)(7) requires the states to consider all actual expenses reasonably attributable to the earning of income in determining need. See Amos v. Engelman, D.N.J., 333 F.Supp. 1109, 1119 (three-judge court), modified on other grounds, 404 U.S. 23, 92 S.Ct. 181, 30 L.Ed.2d 143. This interpretation is consistent with the congressional intent that the states should "take these employment expenses fully into account." S.Rep.No. 1589, 87 Cong., 2d Sess., 1962 U.S.Code Cong. & Admin.News, pp. 1943, 1960 (emphasis added). The use of a standardized employment expense exclusion does not take into consideration all actual expenses when a family's expenses exceed the standardized allowance. Cf. Amos v. Engelman, supra. In the instant case the appellees' actual employment expenses consistently exceeded the $30.00 standard exclusion. Consequently, Colorado's application of the standardized allowance in determining the appellees' needs does not comply with 42 U.S.C. § 602(a)(7). Campagnuolo v. White, D.Conn., Civil No. 13968; Adams v. Parham, N.D.Ga., Civil No. 16041.

The appellants maintain that the words "take into consideration" in 42 U.S.C. § 602(a)(7) sanction the use of a standardized employment expense exclusion in determining need in all cases. Their reasoning is that these words do not dictate a specified method for treating employment expenses and that the use of a standardized allowance is one acceptable way of taking into consideration expenses of employment. The phrase "take into consideration" is flexible and by itself does not require a particular treatment of employment expenses. However, when considered in the statutory framework of 42 U.S.C. § 602(a)(7), these words assume a particular meaning. It should be noted that the phrase "take into consideration" modifies both "income" and "expenses". Consequently, Congress intended employment expenses to be treated in the same manner as income.¹ Since consideration of each family's income must necessarily be based on actual rather than average figures, expenses attributable to the earning of such income must be taken into consideration in the same manner.

Appellants also contend that the Supreme Court in Rosado v. Wyman, 397 U.S. 397, 90 S.Ct. 1057, 25 L.Ed.2d 353, approved the principle underlying the use of a standardized employment expense allowance. The Rosado case involved 42 U.S.C. § 602(a)(23) and sanctioned the use of statistical averages in computing a standard of need to be applied in the states' administration of their AFDC programs.² The Supreme Court has continually stressed the states' "undisputed power" to determine this standard of need. King v. Smith, 392 U.S. 309, 334, 88 S.Ct. 2128, 20 L.Ed.2d 1118; Dandridge v. Williams, 397 U.S. 471, 478, 90 S.Ct. 1153, 25 L.Ed.2d 491. Congress itself did not encroach upon this undisputed power until the passage of 42 U.S.C. § 602(a)(23) in 1967.³ Nevertheless, 42 U.S.C. § 602(a)(7) is indicative of congressional reluctance to give the states the same unfettered discretion to determine the needs of a particular family. Thus, Supreme Court approval of the use of statistical averages in determining the standard of need is not a mandate for judicial approval of such averaging in determining the needs of a particular family under 42 U.S.C. § 602(a)(7). But see Amos v. Engelman, D.N.J., 333 F.Supp. 1109, 1119 (three-judge court), modified on other grounds, 404 U.S. 23, 92 S.Ct. 181, 30 L.Ed.2d 143.

Additionally, an understanding of the manner in which a state's standard of need and the computation of a particular family's available income and resources under 42 U.S.C. § 602(a)(7) complement each other illustrates the incongruity of Colorado's standardized employment expenses allowance in the instant case. The standard of need is a dollar amount representing the costs of those items which a state has determined to be necessary to maintain a hypothetical family at a subsistence level. Such an estimate by its nature is susceptible to computation through the use of statistical averages and it was thus fitting for the Supreme Court to approve the use of an averaging system in Rosado. A state must compare its standard of need to the income and resources actually available to the particular family in order to establish financial eligibility and the amount of an AFDC grant. 45 C.F.R. § 233.20(a)(3)(ii)(a) and (c). 42 U.S.C. § 602(a)(7) requires that the computation of income and...