Gardenia v. Norton

• Decision Date: 05 March 1976
• Docket Number: Civ. No. N-74-225.
• Citation: 425 F. Supp. 922
• Parties: Gloria GARDENIA et al. v. Nicholas NORTON, Individually and as Commissioner of the State Welfare Department.
• Court: U.S. District Court — District of Connecticut

425 F. Supp. 922

Gloria GARDENIA et al. v. Nicholas NORTON, Individually and as Commissioner of the State Welfare Department.

Civ. No. N-74-225.

United States District Court, D. Connecticut.

March 5, 1976.

COPYRIGHT MATERIAL OMITTED

Bruce A. Morrison, New Haven, Conn., Richard McCarthy, Bridgeport, Conn., for plaintiffs.

Paige J. Everin, Asst. Atty. Gen., Hartford, Conn., for defendant.

MEMORANDUM OF DECISION

NEWMAN, District Judge.

This suit challenges on statutory and constitutional grounds the efforts of Connecticut's Welfare Department to deter fraud and lessen the consequences of fraud on the state's treasury. Plaintiffs have launched a broad-based attack on the actions formerly taken by the defendant Commissioner of Welfare following the conviction for welfare fraud of a supervising relative receiving assistance under the Aid to Families with Dependent Children AFDC program. Plaintiffs originally complained that the automatic termination of AFDC benefits — or any reduction in such benefits — to those supervising relatives convicted of welfare fraud creates two classes of dependent children, one that receives full AFDC benefits and one that suffers the loss of the supervising relative's AFDC payments because of a conviction for welfare fraud. This classification was claimed to be invalid under the Equal Protection Clause of the Fourteenth Amendment. There are also claims that certain Connecticut and federal policies toward supervising relatives convicted of welfare fraud violate the enabling legislation of the AFDC program and that these regulations and procedures are therefore void under the Supremacy Clause. These statutory claims can be considered without convening a three-judge court. Hagans v. Lavine, 415 U.S. 528, 543-45, 94 S.Ct. 1372, 39 L.Ed.2d 977 (1973).

The Aid to Families with Dependent Children program (42 U.S.C. § 601 et seq.) is designed to provide needy and dependent children with a minimal income level sufficient to secure the basic necessities of life. The protection of such children is the paramount goal of AFDC. King v. Smith, 392 U.S. 309, 325, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968).

The individual plaintiffs in this case are supervising relatives who have been convicted of welfare fraud under Conn.Gen. Stat. § 17-83i. After conviction, plaintiff Gardenia was notified that her portion of the AFDC benefits would be withheld until the withheld amount equalled the amount of money fraudulently obtained under the program. She was also notified that she would not be able to participate in the Medicaid (42 U.S.C. § 1396 et seq.) and Food Stamp (7 U.S.C. § 2011 et seq.) programs, although her children would remain eligible for those forms of government assistance. Plaintiff Violet underwent an essentially similar experience. Ms. Aster was convicted of welfare fraud and subsequently informed that she would be terminated from the Work Incentive Program (42 U.S.C. § 630), which permits an exemption of certain earned income for purposes of determining eligibility for AFDC benefits. If Aster were terminated from the Work Incentive Program, the entire family's AFDC grant would have been lost because Ms. Aster was earning employment income greater than the AFDC flat grant for her two children.

On October 21, 1974, this Court issued a preliminary injunction ordering that the defendant restore benefits to all members of the class of persons convicted of welfare fraud pending final disposition of this action.^* That order enjoined the defendant from enforcing the state welfare regulation that required a person convicted of welfare fraud to be discontinued under the AFDC program (Welfare Manual, Vol. 1, Chap. III, 385.9(B)). On November 14, 1974, Commissioner Norton submitted a set of Emergency Regulations to the Secretary of the State which significantly altered the Welfare Department's approach to supervising relatives convicted of welfare fraud. Although these regulations expired after 120 days, they have subsequently been reinstituted and are presently in effect. Under the new guidelines recoupment is limited to 8½% of the grant on a monthly basis until the overpayment is recovered, and if such a recovery would cause the recipient undue hardship, the case is to be referred to the office of the Deputy Welfare Commissioner who may reduce the amount of recoupment based on the individual facts in each particular case. (Welfare Manual, Vol. 1, Chap. III, 386(B)(1)(emergency regulation)). Under the emergency regulation an AFDC recipient convicted of fraud remains eligible for medical assistance and the Food Stamp program. Therefore plaintiffs' claims insofar as they relate to disqualification from these programs are moot. See Hall v. Beals, 396 U.S. 45, 90 S.Ct. 200, 24 L.Ed.2d 214 (1969).

Plaintiffs have renewed their claims that the recoupment provision, as revised, conflicts with requirements of federal law. That issue has been submitted as if on cross-motions for summary judgment since no material facts are in dispute.

Plaintiffs argue that the revised regulation, which allows the state to recover 8½% of the flat grant, violates the letter and the intent of 42 U.S.C. § 602(a)(7) and 45 C.F.R. § 233.20(a)(3)(ii). The statute requires the state agency "in determining need" to "take into consideration any other income and resources of any child or relative claiming aid to families with dependent children." The regulation provides that in determining "financial eligibility and the amount of the assistance payment," the state plan can permit consideration of "only such net income as is actually available for current use on a regular basis. . . ." Plaintiffs' contention is that any recoupment deducted from a grant that itself is designed to meet the bare subsistence requirements of a family unit is impermissible unless it can be demonstrated that the family then has additional currently available resources.

When states have relied upon presumptions that uniformly impute income to an AFDC recipient under certain circumstances, with the result that AFDC eligibility is denied or that AFDC grants are reduced, courts have found such presumptions to violate the Social Security Act, 42 U.S.C. § 602(a)(7). King v. Smith, supra; Solman v. Shapiro, 300 F.Supp. 409 (D.Conn.) (three-judge court), aff'd, 396 U.S. 5, 90 S.Ct. 25, 24 L.Ed.2d 5 (1969); see 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); Reyna v. Vowell, 470 F.2d 494 (5th Cir. 1972). The present controversy involves the converse proposition: does a state violate the Act when it reduces AFDC grants without finding or even presuming that income is available to a child?

When Connecticut reduces the amount of assistance given to any family unit under the AFDC program, it does not violate the statute, which requires income and resources to be considered only in determining need. The standard of need and the level of assistance payments differ from each other in that the former is set by the state pursuant to the Act and reflects the state's judgment as to the minimum amount of money necessary to assure economic security. King v. Smith, supra, 392 U.S. at 318 n.14, 88 S.Ct. 2128. The level of benefits that a state determines it will pay to AFDC recipients may be an amount less than the level of need. The 8½% recoupment regulation does not affect the determination of the standard of need at all, but rather furthers a legitimate state fiscal goal by a percentage reduction in the amount of assistance given to an individual AFDC unit. The unit remains eligible for AFDC benefits and receives the bulk of the benefits that a normal AFDC unit would receive. Thus the statute is not violated by the Connecticut emergency regulation because the determination of need is not affected at all by the Connecticut policy.¹ Cf. Cooper v. Laupheimer, 316 F.Supp. 264, 269 (E.D.Pa.1970); see Rosado v. Wyman, 397 U.S. 397, 413, 90 S.Ct. 1207, 25 L.Ed.2d 442 (1970); Johnson v. White, 528 F.2d 1228 (2d Cir. 1975).

The regulation upon which plaintiffs rely, 45 C.F.R. § 233.20(a)(3)(ii), requires that the defendant "consider" only available resources in both determining financial eligibility and the amount of assistance payment. The regulation is not violated when the defendant recoups 8½% of the AFDC award. The regulation only specifies those resources that may be considered in determining the amount of assistance payment. It does not require that the state make its determination as to the amount of assistance payment based solely upon income. For instance, in Johnson v. White, supra, the Court of Appeals for this Circuit approved a Connecticut policy that limited the AFDC rental allowance to an AFDC child residing with a non-needy, non-legally liable relative. Judge Friendly wrote that:

The most reasonable construction of this provision is not that it was an attempt by Connecticut to attribute income which in fact was not available to the dependent children . . ., but rather that it was an effort . . . to make sure that relatives did not profit by charging outrageous rents to children who were in no position to protect themselves. Johnson v. White, supra at 1237.

Thus it is clear that the state may consider legitimate policy objectives in determining the level of assistance payments and is not restricted solely to considering the child's income and resources in that determination.

This reading of 45 C.F.R. § 233.20(a)(3)(ii) is bolstered by reference to 45 C.F.R. § 233.20(a)(12)(i)(A)(2) which states that:

Where . . . overpayments were occasioned or caused by the recipient's willful withholding of information concerning his income, resources or other circumstances which may affect the amount of payment, the State may recoup prior overpayments from current assistance grants irrespective of current income or resources.

The objectives of preserving the fiscal integrity of the...