Clark v. Helms

• Decision Date: 09 December 1983
• Docket Number: Civ. No. 83-9-D.
• Citation: 576 F. Supp. 1095
• Parties: Paula CLARK, Sandra Curran, Donna Sargent, on behalf of themselves and all other persons similarly situated v. Edgar J. HELMS, Jr., in his capacity as Commissioner, New Hampshire Department of Health and Welfare, Richard Chevrefils, in his capacity as Director of the New Hampshire Division of Welfare.
• Court: U.S. District Court — District of New Hampshire

576 F. Supp. 1095

Paula CLARK, Sandra Curran, Donna Sargent, on behalf of themselves and all other persons similarly situated v. Edgar J. HELMS, Jr., in his capacity as Commissioner, New Hampshire Department of Health and Welfare, Richard Chevrefils, in his capacity as Director of the New Hampshire Division of Welfare.

Civ. No. 83-9-D.

United States District Court, D. New Hampshire.

December 9, 1983.

Michael A. Fuerst, NH Legal Assistance, Claremont, N.H., Deborah Dickinson, NH Legal Assistance, Concord, N.H., for plaintiff.

Douglas L. Patch, Asst. Atty. Gen., Concord, N.H., for defendant.

OPINION

DEVINE, Chief Judge.

Plaintiff class brings this action and attacks the method used by defendant to calculate Aid to Families with Dependent Children ("AFDC")¹ benefits. Plaintiffs also attack defendants' alleged failure to adequately notify AFDC recipients of cases involving intended actions to terminate or reduce benefits. Plaintiffs seek injunctive and declaratory relief.² Plaintiffs found jurisdiction upon 28 U.S.C. §§ 1331 and 1343(3). Both parties move for summary judgment regarding the calculation of AFDC benefits.³ The motions do not address plaintiffs' complaint of inadequate notice. In light of the exhaustive and instructive treatment given this difficult matter by both parties and other courts,⁴ the Court proceeds forthwith.

Background

The AFDC program is designed to provide financial assistance to needy dependent children and the parents or relatives who live with and care for them. A 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, 2133, 20 L.Ed.2d 1118 (1968). It is financed in large measure by the Federal Government on a matching-fund basis, and participating States must submit AFDC plans in conformity with the Act and the regulations promulgated there under by the Department of Health, Education, and Welfare (HEW). The program is, however, administered by the States, which are given broad discretion in determining both the standard of need and the level of benefits.

Shea v. Vialpando, 416 U.S. 251, 253, 94 S.Ct. 1746, 1750, 40 L.Ed.2d 120 (1974); see Dickenson, supra, 692 F.2d 177; Drysdale v. Spirito, 689 F.2d 252 (1st Cir.1982).⁵

Since the original enactment of the AFDC program in 1935, as Title IV of the Social Security Act, Pub.L. No. 74-271, 49 Stat. 620 (1935), participant states have been required to establish a minimum dollar amount considered necessary to provide for the essential needs of an AFDC recipient family of any given size. Prior to 1939, each recipient family received benefits equal to this entire `standard of need,' regardless of whether or not the family derived income from non-AFDC sources. This failure to consider outside income created the possibility that a recipient family with an employed member could realize an income in excess of its state's standard of need. Congress eliminated this possibility in 1939 by enacting section 402(a)(7) of the Social Security Act, which provided, as it still does, that `the State agency shall, in determining need, take into consideration any non-AFDC income and resources of any child claiming AFDC.' See Social Security Act Amendments of 1939 § 401(b), Pub.L. No. 76-379, 53 Stat. 1360, 1379-80 (1939).

RAM, supra, 564 F.Supp. at 638. The amendment assured that no Little Orphan Annie would receive public assistance if she had a Daddy Warbucks. Drysdale v. Spirito, supra, 689 F.2d at 257; Dickenson, supra, 536 F.Supp. at 1112, n. 10. Courts disagree over the usefulness of the intent of the 76th Congress when it enacted the 1939 amendment. Compare Turner, supra, 707 F.2d at 1114-15; RAM, supra, 564 F.Supp. at 638-40, 645 (useful), with Dickenson, supra, 536 F.Supp. at 1115 (not helpful).

The amount of an AFDC family's monthly grant is intended to be limited to the exact amount which the family needs. The statutes and the regulations attempt to accomplish this purpose by requiring that an applicant-family's eligibility be determined by a careful assessment of the family's income and resources and a comparison of the sum of money thus found to be available to it monthly with a dollar figure (known in AFDC parlance as `the standard of need') that reflects the state's view of the amount necessary to provide for the essential needs such as food, clothing and shelter of a hypothetical family having the same composition as the family in question. If it is found that the family has less than the standard of need, its AFDC grant will be the amount necessary to close the gap.

Turner, supra, 707 F.2d at 1111.

Congress first required in 1962 that AFDC recipients be given full credit for "work expenses". State agencies were instructed to disregard any expenses reasonably attributable to the earning of income in the calculations made for purposes of determining AFDC benefits. In 1967, Congress enacted a so-called "work incentive disregard" by which the first $30 of gross income earned plus the next one-third of gross income earned in each month were disregarded in the calculation of AFDC benefits. P.L. 90-248, 81 Stat. 821, 881 (1968). Turner, supra, 707 F.2d at 1118.

Hypothetically, therefore, if the applicant earned $900, the first calculation to be made would be to subtract from that amount $330 (one-third of $900 plus $30), leaving a balance for further calculation of $570....

The next deduction to be made under the statute ... was a work expense deduction or `disregard.' That deduction (under Shea) would be a total of the personal expenditures incurred by the applicant for lunches, transportation, child care expenses, mandatory payroll deductions, and the like. Income tax withholdings were included in that total, so that, if income tax withholdings amounted to $25 and the other personal expenses, including child care, amounted to $125, a further deduction of $150 ($25 for withheld taxes, plus $60 for child care, plus $65 for transportation, lunches, and so forth) would be subtracted from the $570 previously noted. At that point in the calculation, $420 would remain to be measured against the state's standard of need. Assuming hypothetically that the state's standard of need was $500, the difference of $80 would be paid to the applicant as an AFDC grant.

James, supra, 715 F.2d at 797.

Congress amended AFDC as part of the Omnibus Budget Reconciliation Act of 1981, P.L. No. 97-35, 95 Stat. 357 ("OBRA").

One change made was to permit a standard or uniform deduction for all work-related expenses. Congress ... eliminated the requirement that a state `take into consideration ... any expenses reasonably attributable to the earning of ... income.' ... the statute ... made provision for a $75 work-expense deduction or `disregard' against earned income or a lesser amount as the Secretary might prescribe where the applicant was only a part-time employee.

In addition, for the first time, the statute expressly allowed child care expenses and provided that those expenses ... could be deducted as a separate `disregard' up to a limit of $160. Lastly ... OBRA provided that the work incentive `disregard' was to be applied, not as the first deduction from gross earned income, as it had previously been applied, but rather only after all of the other separate `disregards' had given effect. This ... had the effect of reducing the ultimate AFDC grant to the beneficiary, because applying the one-third plus $30 work incentive `disregard' to a sum which had been reduced by amounts for work expenses and child care obviously would result in a smaller work incentive disregard than would have resulted had the `work incentive disregard' been computed on the basis of gross earned income.

James, supra, 715 F.2d at 797-98. Therefore, if the earlier hypothetical applicant who earned $900 had received an $80 grant, the applicant would now receive only $20 for the first four months, and no grant thereafter.

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. (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 need to determine the exact grant payment which will be made to the recipient....

... 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. § 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 New Hampshire 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 in determining income and the $75 disregard amount in subtracting work expenses in calculating the size of the grant necessary to bring the recipient family up to the state's standard of need.

Turner, supra, 707 F.2d at 1112.

The Law

THE STATUTE:

... As originally passed in 1939, § 602(a)(7) read as follows:

A state plan for aid and

...