Drysdale v. Spirito, 82-1218

• Decision Date: 14 September 1982
• Docket Number: No. 82-1218,82-1218
• Citation: 689 F.2d 252
• Parties: Diane DRYSDALE, et al., Plaintiffs, Appellees, v. Thomas SPIRITO, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

Page 252

689 F.2d 252

Diane DRYSDALE, et al., Plaintiffs, Appellees, v. Thomas SPIRITO, Defendant, Appellant.

No. 82-1218.

United States Court of Appeals, First Circuit.

Argued May 7, 1982.

Decided Sept. 14, 1982.

Scott A. Smith, Asst. Atty. Gen., Boston, Mass., with whom Francis X. Bellotti, Atty. Gen., Boston, Mass., was on brief, for appellant.

Mary C. Gallagher, Boston, Mass., with whom T. Richard McIntosh, Hyannis, Mass., was on brief, for appellees.

Before CAMPBELL, BOWNES and BREYER, Circuit Judges.

BREYER, Circuit Judge.

Plaintiffs, appellees in this case, are a class of dependent children who receive welfare payments under the Aid to Families with Dependent Children (AFDC) program. Social Security Act §§ 401-410, 42 U.S.C. §§ 601-610. Each plaintiff has a "caretaker parent" (often, but not always, the plaintiff's mother) who is not herself in need of welfare and who also has some earned income. Because the caretaker parent is not needy, each plaintiff is a victim of what he believes is an anomaly in the way the amount of his AFDC grant is calculated: If his caretaker parent were herself needy, a certain portion of her earned income would be disregarded in calculating the size of the AFDC grant. But, because the plaintiff's caretaker parent is not herself needy, this portion is not disregarded. The effect is to reduce the size of the AFDC grant. Plaintiffs have sued Thomas Spirito, Commissioner of the Massachusetts Department of Welfare-claiming that this anomaly violates the Social Security Act. The district court agreed. We believe, however, that federal law permits the Department not to apply the "earned income disregard" to plaintiffs' caretaker parents. We therefore reverse the district court's decision.

I

At the outset, it is important to understand some of the rudiments of how the AFDC program works in Massachusetts. AFDC is a joint federal-state program. Its purpose is to provide support for needy dependent children (lacking the support of at least one parent) and for certain others living with them. The federal government participates in the program financially according to a complex formula set out in 42 U.S.C. § 603; the state provides both funding and administrative support. If a state chooses to participate in the AFDC program, it must conform to the specific requirements of the Social Security Act, Dandridge v. Williams, 397 U.S. 471, 90 S.Ct. 1153, 25 L.Ed.2d 491 (1970); Rosado v. Wyman, 397 U.S. 397, 90 S.Ct. 1207, 25 L.Ed.2d 442 (1970); King v. Smith, 392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968), in part set out in the thirty-three subsections of 42 U.S.C. § 602.

In principle, the operation of the Massachusetts program is simple. The Department determines whether a group of persons within a household is eligible for assistance by comparing their income (and assets) with a dollar standard of need. If they are "in need," the Department sends them a check equal to the difference between the standard of need and their income. In practice, however, these determinations are complicated, for they are made in accordance with a series of highly detailed statutes and regulations. We consider here several such complexities.

A. Eligibility and income. Insofar as is relevant here, the Department first looks to see whether the dependent children in a household are in need. To do so it looks at their assets and income. Of course, most children have no assets and income of their own; but the federal regulations require the Department to deem the income of the child's parents (if living with the child) to be income available to the child. 45 C.F.R. § 233.30(a)(3)(vi)(b). This fact ordinarily means that if the children qualify for AFDC, the caretaker parent will also qualify. Assume, for example, that there are two dependent children living with their single mother in a Massachusetts home; the children are without income of their own and the mother has a small income. Either the mother's monthly income is below the Massachusetts standard of need for a group of three persons (about $380) or it is not. If it is, Massachusetts sends a check aimed at raising the three-person unit's income to that level; if not, no one receives a check. Thus, ordinarily, as practical matter, it makes little difference whether one considers the check as sent to three individuals As the word "ordinarily" suggests, however, there are many cases that are not ordinary. And, we must here consider two complications that can arise in picking out persons eligible for AFDC assistance. First, there may be another person living in the household whose presence there is helpful to the child and who is needy, but who does not qualify for AFDC assistance directly. Consider, for example, a needy stepfather or the spouse of the "caretaker relative" (there can be only one caretaker), whose presence in the house is highly desirable. These people are called "essential persons," and the Department may take their needs into account when determining total "need" and when writing the assistance check. See 106 C.M.R. § 304.310. If so (even though, technically speaking, the money is being given to the child "for the essential person") the "essential person" in Massachusetts terminology would be considered part of the "assistance unit."

to a three-person "family," or (as Massachusetts calls it) to a three-person "assistance unit."

Second, it is possible, though unusual, for a caretaker relative not to be "needy" (and thus to be outside the "assistance unit") even though the children are "needy" (and thus alone comprise the unit). This can happen if the caretaker relative has income that is not "deemed" part of the children's income for eligibility purposes. At the time this case was brought, there were at least two such circumstances. A single, divorced, or widowed mother might marry a person who became the children's stepfather. The income of her new husband would then be deemed to be her income. But, in light of a series of court cases interpreting the Social Security Act, the Department was not allowed to consider the stepfather's income as the dependent child's income. ¹ See Solman v. Shapiro, 300 F.Supp. 409, 415-16 (D.Conn.) (three-judge court), aff'd, 396 U.S. 5, 90 S.Ct. 25, 24 L.Ed.2d 5 (1969). See also Van Lare v. Hurley, 421 U.S. 338, 95 S.Ct. 1741, 44 L.Ed.2d 208 (1975); Lewis v. Martin, 397 U.S. 552, 90 S.Ct. 1282, 25 L.Ed.2d 561 (1970); King v. Smith, 392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968). Or a mother under eighteen might still be living with her parents. Her parents' income would be considered to be her income, for the parents have a legal obligation to support her. Her parents' income, however, would not be considered to be her children's income, for her parents have no legal obligation to support their grandchildren. In either of these cases, the mother would still be considered to be the "caretaker relative," but, if the income deemed to her is sufficient to provide for her own needs, she would not be considered to be "needy." Only the children would be needy; the "assistance unit" would consist of them, not them plus her; and the check that she continued to receive in her role as the caretaker relative would be solely for use to meet the needs of the children. This case involves such nonneedy caretaker parents.

B. The Earned Income Disregard. We turn now to a second set of relevant complications, arising when the Department calculates the amount of the check that the needy persons are to receive. These complications flow from Congress's recognition that the AFDC system can create a financial incentive not to work-a recognition that led Congress to provide an earned income disregard (EID). The EID, added to the federal statute in 1968, and codified in 42 U.S.C. § 602(a)(8), reflected Congress's awareness that, because increased income reduces the size of the AFDC grant, members of AFDC families may have little financial incentive to work. If, for example, every dollar earned is considered a dollar of income that reduces the AFDC grant, then if a Massachusetts mother with two dependent children earns $380 (the "need level"), her assistance unit would receive no payment. If she stops working (and has no other income), the assistance unit would To counteract this perverse incentive, Congress provided that dependent children who remain in school may keep all of their earned income. When the Department calculates their AFDC grant, it must disregard 100 percent of their earned income. 42 U.S.C. § 602(a)(8)(A)(i) (1968 enactment); 42 U.S.C. § 602(a)(8)(A)(i) (after 1981 amendments). Congress went on to state, in a provision more relevant here, that persons who are "dependent child(ren) not included under (clause (a)(i), referred to directly above), a relative receiving such aid, and any other individual (living in the same home as such relative and child) whose needs are taken into account" in making the determination of need, shall have the first $30 and one-third of the remainder disregarded from their earned income. 42 U.S.C. § 602(a)(8)(A)(ii) (1968 enactment).

still receive about $380, but it would take the form of an AFDC payment instead of a paycheck.

Congress sought to tailor the EID to act solely as an incentive for persons receiving AFDC to earn income and so remove themselves and their families from the AFDC rolls, not as an incentive for people not receiving AFDC to apply for AFDC. It therefore limited the EID by prohibiting the state from applying the EID to "any of such persons specified in clause (ii) of subparagraph (A) if with respect to such month the income of the persons so specified (within the meaning of clause (7)) was in excess of their need as determined by the State agency pursuant to clause (7) (without regard to clause (8)), unless, for any one of the four months preceding such month, the needs of such persons were met by the furnishing of aid under the plan...." 42...