Mont v. Heintz

• Decision Date: 01 June 1988
• Docket Number: D,No. 975,975
• Parties: Cynthia MONT, on her own behalf and on behalf of all others similarly situated, and Judy-Ann Church, Plaintiffs-Appellants, v. Stephen HEINTZ, Commissioner, Connecticut Department of Income Maintenance, in his official capacity, Defendant-Appellee. ocket 88-7016.
• Court: U.S. Court of Appeals — Second Circuit

Page 704

849 F.2d 704

Cynthia MONT, on her own behalf and on behalf of all others similarly situated, and Judy-Ann Church Plaintiffs-Appellants, v. Stephen HEINTZ, Commissioner, Connecticut Department of Income Maintenance, in his official capacity Defendant-Appellee.

No. 975, Docket 88-7016.

United States Court of Appeals Second Circuit.

Argued April 18, 1988.

Decided June 1, 1988.

Joanne Gibau, New Haven, Conn. (New Haven Legal Assistance Ass'n, Inc., Shelley White, of counsel), for plaintiffs-appellants.

Hugh Barber, Hartford, Conn., Asst. Atty. Gen. for the State of Conn. (Joseph I. Lieberman, Atty. Gen. for the State of Conn., of counsel), for defendant-appellee.

Before FEINBERG, Chief Judge, MESKILL and PIERCE, Circuit Judges.

FEINBERG, Chief Judge:

This is an appeal from a judgment of the United States District Court for the District of Connecticut, Ellen Bree Burns, J., dismissing for lack of subject matter jurisdiction appellants' claim under 42 U.S.C. Sec. 1983 against the Commissioner, Connecticut Department of Income Maintenance. Appellants claim that the Commissioner has violated federal law, specifically, 42 U.S.C. Sec. 602(a)(17), by failing to use the state's true standard of need in calculating the period of ineligibility for Aid to Families with Dependent Children (AFDC) applicants and recipients who receive lump sum payments. The district court ruled that appellants' claim is barred by the eleventh amendment under the holding of Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984) ("Pennhurst II"). We disagree, and, for the reasons given below, reverse the judgment of the district court and remand the case for further proceedings.

I. Statutory Framework

As we have previously noted, the tangle of federal and state statutes and regulations in the welfare area now rivals the tax area as a marvel of complexity. McGraw v. Berger, 537 F.2d 719, 720 (2d Cir.1976), cert. denied, 429 U.S. 1095, 97 S.Ct. 1110, 51 L.Ed.2d 542 (1977). Therefore, before turning to the facts of this case, it is useful to summarize the statutory framework governing AFDC benefits.

Title IV-A of the Social Security Act, 42 U.S.C. Sec. 601 et seq., establishes the AFDC program, which is designed to encourage "the care of dependent children in their own homes or in the homes of relatives by enabling each State to furnish financial assistance and rehabilitation and other services ... to needy dependent children and the parents or relatives with whom they are living...." 42 U.S.C. Sec. 601. 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). States are not required to participate in the AFDC program, but those that do must administer their plans in conformity with applicable federal law, Rosado v. Wyman, 397 U.S. 397, 408, 90 S.Ct. 1207, 1215, 25 L.Ed.2d 442 (1970), and must submit an AFDC plan meeting the requirements of 42 U.S.C. Sec. 602 for the approval of the Secretary of Health and Human Services (HHS). A state's expenditures under an approved plan are partially reimbursed according to the formula set forth in 42 U.S.C. Sec. 603.

Two basic factors enter into the determination of what AFDC benefits will be paid, and both are established by a state: the standard of need and the level of benefits. 45 C.F.R. Sec. 233.20(a)(2). "On both scores Congress has always left to the States a great deal of discretion." Rosado, 397 U.S. at 408, 90 S.Ct. at 1215. The standard of need measures who is eligible for public assistance. It is "a dollar figure set by each State reflecting the amount deemed necessary to provide for essential needs, such as food, clothing, and shelter." Quern v. Mandley, 436 U.S. 725, 737, 98 S.Ct. 2068, 2075, 56 L.Ed.2d 658 (1978). See also Shea v. Vialpando, 416 U.S. 251, 253, 94 S.Ct. 1746, 1750, 40 L.Ed.2d 120 (1974) (the standard of need "is the amount deemed necessary by the State to maintain a hypothetical family at a subsistence level"). With the exception of the requirement adopted in 1968 that the standard of need be adjusted as of July 1, 1969 to reflect changes in the cost of living as of that date, see 42 U.S.C. Sec. 602(a)(23), each state is free to set the standard of need at essentially any level it deems fit. Mandley, 436 U.S. at 738, 98 S.Ct. at 2076. There is a "conspicuous lack of guidance from Congress" as to how the standard of need should be formulated. Largo v Sunn, 835 F.2d 205, 208 (9th Cir.1987). However, federal regulations do provide that the state's AFDC plan must set forth its standard of need figures and an explanation of the method used by the state in determining need, 45 C.F.R. Secs. 233.20(a)(2)(i) and (iv), that the standard must be uniformly applied throughout the state, 45 C.F.R. Sec. 233.20(a)(2)(iii), and that the state can include special-needs items in its standard, 45 C.F.R. Sec. 233.20(a)(2)(v).

The level of benefits establishes how much assistance will actually be provided, and "is not necessarily a function of the standard of need." Mandley, 436 U.S. at 737, 98 S.Ct. at 2075. As the Court observed in Rosado, noting the potential discrepancy between a state's standard of need and the level of benefits actually paid:

[federal law] leaves the States free to effect downward adjustments in the level of benefits paid ... accomplish[ing] within that framework the goal, however modest, of forcing a State to accept the political consequence of such a cutback and bringing to light the true extent to which actual assistance falls short of the minimum acceptable.

397 U.S. at 413, 90 S.Ct. at 1218. Thus, in the early 1970's Connecticut proposed to become a "ratable reduction" state (i.e., to pay less than its standard of need), but in response to litigation it agreed to continue the level of benefits at 100 percent of need. See Johnson v. White, 528 F.2d 1228, 1231 n. 2 (2d Cir.1975). See also Rosado, 397 U.S. at 408-09, 90 S.Ct. at 1215-16 (discussing various methods employed by states in setting the level of benefits).

The standard of need does place an upward limit, however, on the level of benefits a state may provide. A state must consider a family's "income and resources" in determining whether it is needy, 42 U.S.C. Sec. 602(a)(7)(A), and is prohibited from providing AFDC benefits for any month in which the family's income (with some adjustments) exceeds 185 percent of the standard of need, 42 U.S.C. Sec. 602(a)(18), or its resources exceed state-prescribed limits (subject to a federal ceiling), 42 U.S.C. Sec. 602(a)(7)(B). See generally Lukhard v. Reed, --- U.S. ----, 107 S.Ct. 1807, 1810, 95 L.Ed.2d 328 (1987) (plurality opinion).

The requirement at issue in this case is known as the "lump sum rule" and was enacted as part of the Omnibus Budget Reconciliation Act of 1981, 95 Stat. 845, as amended, 42 U.S.C. Sec. 602(a)(17). LaMadrid v. Hegstrom, 830 F.2d 1524, 1526 (9th Cir.1987). Under this rule, "AFDC recipients who receive an amount of income that exceeds the State's standard of need are rendered ineligible for as many months as that income would last if the recipients spent an amount equal to the State's standard of need each month." Reed, 107 S.Ct. at 1810. Thus, as explained in LaMadrid, 830 F.2d at 1527, if a state's standard of need is $200 per month, a $10,000 lump sum payment to a recipient would render the recipient ineligible for AFDC benefits for 50 months. See also 45 C.F.R. Sec. 233.20(a)(3)(ii)(F).

II. Background

Cynthia Mont commenced this action in January 1986 seeking declaratory and injunctive relief on behalf of herself and similarly situated applicants and recipients of benefits under the Connecticut AFDC program. Judy-Ann Church was subsequently added as an additional plaintiff. In the complaint, appellants allege that the Commissioner improperly calculates the period of ineligibility under 42 U.S.C. Sec. 602(a)(17) and 45 C.F.R. Sec. 233.20(a)(3)(ii)(F) by dividing lump sum payments by the state's payment level, rather than by the state's higher standard of need, causing unduly long periods of ineligibility. Appellants allege that under Connecticut law the standard of need is the figure computed annually by the Commissioner pursuant to Conn. Gen.Stat. Sec. 17-2(a), and that the Commissioner has failed to use that figure in this context. The complaint also set forth related claims which were later voluntarily dismissed.

The district judge referred appellants' motion for class certification and the Commissioner's motion to dismiss to a magistrate, who issued a memorandum and recommended ruling in August 1986. The magistrate agreed that if the Commissioner was using a level of payment figure as opposed to a standard of need figure to compute the period of ineligibility under 42 U.S.C. Sec. 602(a)(17), he would be in violation of federal law. She concluded, however, that Conn. Gen. Stat. Sec. 17-2(a) only requires the Commissioner to compute and report annually to the legislature the effects of inflation on the components of the standard of need (as opposed to actually setting a new standard of need), and that under Pennhurst II, the court could not consider whether the Commissioner had complied with the requirements of Sec. 17-2(a). She also concluded that even if appellants' claim was based on Conn. Gen. Stat. Sec. 17-2(b)--a provision she construed as requiring the legislature to increase the standard of need by a given percentage in specified years--it would be barred by the eleventh amendment, apparently on the theory that federal law does not incorporate the requirements of state law and that Pennhurst II prevents the court from requiring the Commissioner to comply with state law when employing a standard of need. The magistrate therefore recommended approval of appellee's motion to dismiss the claim now before us. The magistrate also recommended approval of appellants' motion for...