Ward v. Thomas, Civ. No. 3-95-cv-1284 (JBA).

• Citation: 895 F. Supp. 406
• Decision Date: 31 July 1995
• Docket Number: Civ. No. 3-95-cv-1284 (JBA).
• Court: U.S. District Court — District of Connecticut
• Parties: Krasaundra WARD, Akilah Bittle, Denise Miller, Yecenia Rivera and Philomena Collins, individually and on behalf of others similarly situated, v. Joyce THOMAS, Commissioner, Connecticut Department of Social Services, v. Donna SHALALA, Secretary, United States Department of Health and Human Services.

895 F. Supp. 406

Krasaundra WARD, Akilah Bittle, Denise Miller, Yecenia Rivera and Philomena Collins, individually and on behalf of others similarly situated, v. Joyce THOMAS, Commissioner, Connecticut Department of Social Services, v. Donna SHALALA, Secretary, United States Department of Health and Human Services.

Civ. No. 3-95-cv-1284 (JBA).

United States District Court, D. Connecticut.

July 31, 1995.

COPYRIGHT MATERIAL OMITTED

Kathleen Sullivan, the Jerome N. Frank Legal Services Organization, Shelley White, New Haven Legal Assistance, New Haven, CT, and Shirley Bergert, Connecticut Legal Services, Inc., Willimantic, CT, for plaintiffs.

Hugh Barber, Richard Lynch, Peter Brown, Atty. General's Office, Hartford, CT, for Joyce Thomas.

John Hughes, U.S. Attorneys' Office, New Haven, CT, for Donna Shalala.

RULING ON MOTION FOR PRELIMINARY INJUNCTION

ARTERTON, District Judge.

The plaintiff class of more than 50,000 persons who are heads of households of families receiving Aid to Families With Dependent Children ("AFDC") in Connecticut have brought this civil rights action claiming that the defendant Joyce Thomas, Commissioner of the Department of Social Services, has failed to fulfill her federal statutory obligations in connection with her implementation of 1995 Conn.Acts 95-194, as amended by 1995 Conn.Acts 95-351 (to be codified at Conn.Gen.Stat. 17b-104) ("the Act"), which took effect July 1, 1995.

The challenge focuses on the manner in which defendant intends to compute plaintiffs' AFDC benefits by attributing to them a portion of their housing subsidies as unearned income. Specifically, plaintiffs assert that the defendant fails to meet the requirements of the federal law, 42 U.S.C. § 602(a)(7)(C)(ii), that permits states to consider housing subsidies as income and specifies the manner in which such income attribution may be done.

The unchallenged portion of the Act also reduces monthly AFDC benefits immediately to AFDC families by eliminating the $50 monthly "special needs" allowance to AFDC households paying more than 50% of their income on housing and by reducing monthly benefit payment levels across the board to all AFDC families by approximately 7%, to approximately 73% of the established subsistence level for Connecticut.

The plaintiffs filed suit on June 28, 1995 seeking a Temporary Restraining Order on the basis that defendant's notice to them of these impending benefit cutbacks was untimely and inadequate under federal law in its description of the forthcoming impact on them and of their fair hearing rights (under 45 C.F.R. § 205.10(a)(4) (1994)) and the Fourteenth Amendment of the U.S. Constitution. The defendant answered and impleaded the Secretary of Health and Human Services (HHS) as a Third Party defendant seeking declaratory relief to avoid the possibility of being subject to inconsistent directives.

Following a hearing on the Application for a Temporary Restraining Order on June 29, 1995, the court found the defendant's notice deficient and entered an order restraining defendant from reducing benefits to AFDC families without first providing the requisite timely and adequate notice. (Ruling on Plaintiffs' Motion for Temporary Restraining Order, 895 F.Supp. 401, dated June 30, 1995).

The defendant has since issued a ten-page informational packet to all AFDC families concerning the statutory changes (Defendant's Exhibit Y; DSS, Informational Packet), and has sent individual notices with respect to the benefit reductions for August 1995 (e.g., Defendant's Exhibits Z1-Z5). Based on these remedial issuances, the plaintiffs no longer challenge the adequacy and timeliness of defendant's notice related to the welfare cutbacks generally.

At issue here in plaintiffs' Motion for Preliminary Injunction is the challenge of the subclass of AFDC families who reside in government subsidized housing and who are now about to be subjected to the additional reduction in their monthly benefit payment as a result of a portion of their housing subsidy now being imputed to them as income. As these families are considered to have increased income, their benefits payments will be reduced correspondingly. With the across-the-board unchallenged reduction and the housing subsidy reduction, a family of four with no other income will receive $558/month, which is a $288 cutback, and $16 per month less than such a family would have received in 1988 if they had no income. The plaintiff subclass's challenge is three-pronged: (1) the defendant's methodology for computing the value of their housing subsidy for the purpose of imputing countable income to them conflicts with federal law; (2) the defendant's reduction of their AFDC benefits prior to receiving approval by the Secretary of HHS for these AFDC plan amendments violates federal law; and, (3) the defendant's authority to impose benefit payment levels which are below the May 1988 level requires a prior waiver from the Secretary of HHS under 42 U.S.C. § 1396a(c).

Defendant has moved to dismiss the plaintiffs' claim under 42 U.S.C. § 1396a(c) as lacking a right of enforceability under 42 U.S.C. § 1983, inter alia. Both parties agree that the standards of Wilder v. Virginia Hospital Ass'n, 496 U.S. 498, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990) will apply to the analysis in light of the "Suter Amendment," 42 U.S.C. § 1320a-2. Because the court concludes that plaintiffs have not shown a likelihood of success on the merits of this aspect of their claim, a decision on the question of whether § 1396a(c) creates rights enforceable under § 1983 will be reserved until decision on defendant's pending Motion to Dismiss.

A hearing was held on July 19 and 24, 1995 on these issues. The parties submitted a Joint Statement of Uncontested Facts which they agreed would be an adequate factual basis for the court's ruling. Based on the briefing by the parties, oral argument and the uncontested facts, plaintiffs' Motion for Preliminary Injunction will be granted with respect to the defendant's intended valuation of the "housing subsidy" received by public housing residents for the reasons that follow. Plaintiffs' Motion will be denied in all other respects.

BACKGROUND

AFDC is a joint federal and state program established under Title IV-A of the Social Security Act, 42 U.S.C. § 601 et seq., that provides cash assistance to needy families.¹ Under this program, states receive federal matching funds if they have a state AFDC plan that comports fully with the Social Security Act. The statutes which create this "scheme of cooperative federalism" give states "considerable latitude" in the administration of their programs. King v. Smith, 392 U.S. 309, 316-19, 88 S.Ct. 2128, 2133-34, 20 L.Ed.2d 1118 (1968).

An eligible family's benefit is a percentage of a calculation called the "Standard of Need", a minimum amount deemed necessary to maintain a hypothetical family at a level of subsistence. A state is free to determine what percentage of this Standard of Need it will provide as AFDC benefits, however, state Medicaid plans are not federally approvable by the Secretary of Health and Human Services ("HHS") unless AFDC benefits are at levels at least in effect in May 1988 under 42 U.S.C. § 1396a(c) unless the Secretary formally waives such requirement pursuant to 42 U.S.C. § 1315.

The genesis of this challenge by AFDC residents who live in subsidized housing is an apparently infrequently used federal statute which permits state agencies to impute to AFDC recipients as unearned but `countable' income:

... the value of any rent or housing subsidy provided to such family, to the extent such value duplicates the amount for housing included in the maximum amount that would be payable under the State plan to a family of the same composition with no other income.

42 U.S.C.A. § 602(a)(7)(C)(ii) (West Supp. 1995).

The legislative history on 42 U.S.C. § 602(a)(7) does not offer much guidance on how to value the housing subsidies. The Congressional intent expressed was to encourage states to consider the availability of other types of benefits which AFDC recipients may receive and thus "mitigate the effects of pyramiding benefits." S.Rep. 97-139 (1981) reprinted in 1981 U.S.C.C.A.N. 396, 770. Interestingly, it appears that even the Secretary of HHS is uncertain as to how to value certain housing subsidies for AFDC purposes:

There are various HUD programs which provide subsidies to benefit renters and buyers. Our agency is working with HUD to identify which programs are involved, how they operate and some ideas on how subsidies could be valued. We will publish an Action Transmittal in the near future.

47 Fed.Reg. 5648, 5653 (1982).

Neither party, nor the court's independent research, indicates that the Secretary has ever published the promised transmittal to date.

The new state Act attempts to utilize this federal provision as follows:

Effective July 1, 1995, for a family living in subsidized housing, eight per cent of the standard of need, which represents the value of the subsidized housing, shall be counted as income in determining the benefit payment. Such benefit payment shall be reduced by eight per cent of the payment standard.

1995 Conn.Acts 95-194, as amended by 1995 Conn.Acts 95-351, § 2(d).

The defendant Commissioner's policies and procedures which have been developed during the pendency of this litigation appear to be an effort to conform implementation of this Act to federal statutory and regulatory requirements. Under federal law, a state cannot value this subsidized housing in excess of "the value of any rent or housing subsidy provided to such family." 42 U.S.C.A. § 602(a)(7)(C)(ii) (West Supp.1995). Further, a housing subsidy can be counted as income only "to the extent it duplicates" the shelter allocation in the basic monthly benefit payment. Id. In flat grant states like Connecticut, "shelter" is not separately allocated. Defendant has now amended the state's AFDC plan...