Turner v. Prod, s. 82-4552
| Citation | 707 F.2d 1109 |
| Decision Date | 11 August 1983 |
| Docket Number | 82-4567 and 82-4599,82-4566,Nos. 82-4552,s. 82-4552 |
| Parties | Sandra TURNER, Debra Scruggs, Jerrylean Baker, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. Jerold PROD, individually and in his official capacity as the Executive Director of the Department of Social Services of the State of California; et al., Defendants-Appellants. DEPARTMENT OF SOCIAL SERVICES OF the STATE OF CALIFORNIA, Defendant and Third- Party Plaintiff/Appellant, v. Margaret HECKLER, Secretary of Health and Human Services, Third-Party Defendant/Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Gwenda Jones Kelley, Dept. of Health & Human Services, Baltimore, Md., for third party defendants-appellants.
John J. Klee, Jr., Deputy Atty. Gen., San Francisco, Cal., for defendants-appellants.
Mark N. Aaronson, Committee for Urban Affairs, John E. Peer, Guy D. Calladine, Long & Levit, San Francisco, Cal., Marilyn Kaplan, Center on Law & Poverty, Los Angeles, Cal., for plaintiffs-appellees.
Appeal from the United States District Court for the Northern District of California.
Before ELY, SKOPIL and FERGUSON, Circuit Judges.
In a case of first impression, 1 the State of California and the federal Department of Health and Human Services (HHS) appeal a grant of partial summary judgment against them and in favor of a state-wide class of workers receiving Aid to Families with Dependent Children (AFDC). The plaintiff class contends that the income used to calculate a welfare family's needs has never, and does not now, include the funds mandatorily deducted from a worker's paycheck for such items as income taxes because that money is never available to such families for the support of their children. The defendant governments reply that, while prior to 1981 the position of the plaintiffs may have been correct, the congressional AFDC amendments enacted in that year mandated this change in departmental procedures. After careful consideration of legislative history, administrative interpretation and congressional purpose, the district court ruled for the plaintiffs in a decision which has the effect of raising AFDC benefits paid in California an average of $83 a month for each of 45,000 recipient families. Looking primarily to congressional purpose, we affirm, 559 F.Supp. 603.
FACTS:
Plaintiffs are the class of all past, present and future Aid to Families with Dependent Children recipients in California who have been or will be affected by a substantive change recently implemented in the AFDC program, purportedly as a result of the enactment of the Omnibus Budget Reconciliation Act of 1981. Pub.L. No. 97-35, Sec. 2302, 95 Stat. 357, 844-45 (1981), 42 U.S.C. Sec. 602(a) (OBRA). The defendants are those California agencies and officials responsible for administering the California AFDC program. The state, in turn, has brought in the Secretary of Health and Human Services as a third-party defendant.
AFDC is a federal-state public assistance program authorized by the Social Security Act. 42 U.S.C. Secs. 601-76. States which participate provide assistance to those needy families that include a dependent child as that term is defined within the Act. 42 U.S.C. Secs. 606-07. A percentage of the funds expended by a state is reimbursed by the federal government. Id. at Sec. 603. In return for the federal funds, the states are required to administer their programs pursuant to a state plan which is in accordance with federal statutory provisions and HHS regulations governing AFDC. Id. at Sec. 602.
An AFDC family's monthly grant is intended to be limited to the amount which the family needs. The statutes and the regulations attempt to accomplish this purpose by requiring that the state first set a dollar figure, known as the "standard of need," which reflects its view of the amount necessary to provide for essentials such as food, shelter, and clothing for hypothetical families of varying sizes. 2 RAM v. Blum, 533 F.Supp. 933, 937 (S.D.N.Y.1982) (hereinafter RAM I). Next, the state determines the "level of benefits" it will pay, which need not be the full "standard of need" amount. 3 Rosado v. Wyman, 397 U.S. 397, 408-09, (1970). The state then assesses an applicant-family's income and resources and compares the sum of money found to be available to it with the appropriate predetermined benefit level. If the family falls below that level, its AFDC grant will be the amount necessary to close the gap.
Congress originally brought AFDC into being as part of the first Social Security Act in 1935. Title IV, Part A, 49 Stat. 62; 42 U.S.C. Secs. 601-76. The statute describes itself as having three purposes: (1) to provide adequate income for needy families with dependent children, (2) to keep such families together, and (3) to encourage adult members of such families to get and keep jobs. 42 U.S.C. Sec. 601; Shea v. Vialpando, 416 U.S. 251, 253 & 264, 94 S.Ct. 1746, 1750, 40 L.Ed.2d 120 (1974). In 1981, when Congress extensively amended AFDC as part of OBRA, 95 Stat. 843-60, this language was left unchanged. The purpose of OBRA was to bring the rapid growth of federal spending under control. "Views of the Committee on the Budget," Senate Report No. 97-139 (June 17, 1981), reprinted in 1981 U.S.Code Cong. & Ad.News 397.
Plaintiffs challenge new regulations promulgated by the state Department of Social Services at the direction of HHS following the passage of OBRA. EAS Secs. 44-113.21; 44-113.212-13. 4 The regulations change the method by which AFDC benefits are calculated; the state now considers mandatory payroll deductions such as income tax withholding to be "work expenses" incurred by AFDC recipients in obtaining income and subjects them to a maximum monthly $75 cut-off amount rather than allowing them to be deducted in their entirety prior to calculation of grant monies due as was the practice in the past. The practical effect of these regulations is to reduce aid payments to approximately 45,000 AFDC families within the state by the amount of the respective mandatory payroll deductions withheld from the wages of working recipients. In California the average amount of such a deduction is $83 a month.
The Social Security Act, as amended, now requires states to perform a three-step calculation in order to determine AFDC benefits. (1) Determine income amount. (2) Subtract $75 for work expenses from that amount. 5 (3) Subtract the adjusted income amount derived from steps 1 and 2 from the dollar figure set in the state's calculation of level of benefits to determine the exact grant payment which will be made to the recipient. RAM I, 533 F.Supp. at 942; Dickenson v. Petit, 536 F.Supp. 1100, 1105-06 (D.Me.1982).
Within this calculation framework, the parties disagree about the meaning of two key terms: "income" and "work expenses." After the 1981 OBRA amendments which, inter alia, instituted the standardized $75 work expenses disregard, 42 U.S.C. Sec. 602(a)(8)(A)(ii), HHS instructed the state agencies that "income" was to be construed as "gross income" and that mandatory payroll deductions for such items as income tax, FICA and disability payments were properly characterized as "work expenses" to be grouped with such expenses as transportation and uniform costs. This entire group of expenses would then be subject only to the standard $75 disregard, regardless of the actual amounts expended or withheld. The State of California has embodied those HHS instructions in the regulations which are at issue in this case. Plaintiffs contend that "income" means net income and thus mandatory payroll deductions are non-income items. Plaintiffs argue that the Social Security Act requires the agencies to deduct both the mandatory tax deductions (at Step 1, determination of income) and the $75 disregard amount (at Step 2, subtract work expenses) in determining the sum necessary to bring the recipient family up to the state's level of benefits.
In 1982, a mother with three children who earned the minimum wage ($3.35 an hour) 40 hours a week, 4.3 weeks a month, would have had $59.52 withheld in California for federal and state income taxes, FICA and state disability insurance. If that amount is offset at Step 1 as plaintiffs urge, her income is determined as follows:
$3.35 x 172 hrs./month = $576.20
- 59.52
--------
At Step 2, she would still have $75 available to cover her work-related expenses for transportation, uniforms, union dues, etc., which would in turn reduce her income actually available for offset against her AFDC grant monies to $442, in whole dollars. Assuming a state benefit level of $601, $442 would be subtracted from that amount, giving her a monthly AFDC grant of $159.
However, if the calculation is made as the governments here urge, her income at Step 1 is $576, and at Step 2 eighty percent of her work-related expenses allowance of $75 is eliminated by withholding. The working recipient will be left with an offset amount of $501 and only $15 to cover the expenses arising from her job. When the $501 is subtracted from the $601 benefit level, she receives $100 in grant monies.
The district court granted partial summary judgment for the plaintiffs, and entered a permanent injunction in their favor, ruling that mandatory payroll deductions were non-income items eliminated at Step 1 of the calculation process and therefore could not logically also be work-related expenses. Turner v. Woods, 559 F.Supp. 603, 610 (N.D.Cal.1982). The court grounded its decision in the longstanding administrative policy of offsetting against grants only money actually available to AFDC families, and in the purposes of the AFDC Act. It ordered the state agency to cease including these deductions within "income," and enjoined HHS from cutting off matching funds to California as a...
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