Summary
In Conover v. Hall, 104 Cal.Rptr. 77 (1972), decision vacated pending appeal in California Supreme Court, the court upheld California's $50 standard allowance.
Summary of this case from Shea v. VialpandoOpinion
For Opinion on Hearing, see 114 Cal.Rptr. 647, 52 P.2d 682.
Opinion on pages 676-685 omitted.
HEARING GRANTED
Daniel S. Brunner, San Pedro, Valerie Vanaman, Long Beach, Philip Goar, Los Angeles, Clifford Sweet, F. Hayden Curry, Oakland, Ralph Santiago Abascal, by Daniel Brunner, San Pedro, and Ralph S. Abascal, San Francisco, For plaintiffs-respondents.
Evelle J. Younger, Atty. Gen., by N. Eugene Hill, Deputy Atty. Gen., Sacramento, for defendants-appellants.
REGAN, Associate Justice.
Plaintiffs are recipients of Aid to Families with Dependent Children (hereafter 'AFDC'). On September 22, 1971, plaintiffs commenced a class action in which they sought to have the court declare section 11451.6 of the Welfare and Institutions Code to be in violation of the federal Social Security Act and a denial of equal protection to plaintiffs and members of their class. After various proceedings in the trial court, the court issued a preliminary injunction restraining the defendants [104 Cal.Rptr. 78] from enforcing the provisions of section 11451.6 of the Welfare and Institutions Code. The preliminary injunction issued without a requirement that plaintiffs post a bond or undertaking to secure defendants against damage.
AFDC is funded by the federal and state governments pursuant to the Social Security Act of 1935. (42 U.S.C., § 601 et seq.; see Rosado v. Wyman (1970) 397 U.S. 397, 90 S.Ct. 1207, 25 L.Ed.2d 442, 453-454.) The AFDC program is implemented in California by the Welfare and Institutions Code (§ 11200 et seq.)
In its written opinion, the trial court concluded that the state law and implementing regulations conflict with the federal law and thus are invalid.
Defendants appeal.
FACTS
The State of California participates in the AFDC program. (Welf. & Inst.Code, § 11200 et seq.) The purpose of the program is set forth in the federal law: 'For the purpose of encouraging 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, as far as practicable under the conditions in such State, to needy dependent children and the parents or relatives with whom they are living to help maintain and strengthen family life and to help such parents or relatives to attain or retain capability for the maximum self-support and personal independence consistent with the maintenance of continuing parental care and protection, there is authorized to be appropriated for each fiscal year a sum sufficient to carry out the purposes of this part. The sums made available under this section shall be sued for making payments to States which have submitted, and had approved by the Secretary, State plans for aid and services to needy families with children.' (42 U.S.C., § 601.)
States are not required to participate in the AFDC program. However, once a state chooses to join in and take advantage of the substantial federal funds available, the state must comply with the mandatory requirements established by the Social Security Act as interpreted and implemented by the United States Department of Health, Education and Welfare (hereafter 'HEW'). (King v. Smith (1968) 392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d 1118, 1125-1126; County of Alameda v. Carleson (1971) 5 Cal.3d 730, 738-739, 97 Cal.Rptr. 385, 488 P.2d 953; see 45 C.F.R. 233.20; Handbook of Public Assistance Administration (Dept. HEW).) However, the states have considerable latitude in allocating their AFDC resources, since each state is free to set its own standard of need and to determine the level of benefits by the amount of funds it devotes to the program. (King v. Smith, supra, 392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d at p. 1126; Dandridge v. Williams (1970), 397 U.S. 471, 90 S.Ct. 1153, 25 L.E.2d 491, 498-499.)
As a condition to the continued receipt of federal funds, each of the various states participating in the AFDC program must have a state plan which provides 'that the State agency shall, in determining need, take into consideration . . . any expenses reasonably attributable to the earning of . . . income. . . .' (42 U.S.C., § 602(a)(7).)
A portion of the congressional committee's report reads:
On August 13, 1971, the Welfare Reform Act of 1971 (Stats.1971, ch. 578) became law. Section 28.1 of that act added section 11451.6 to the Welfare and Institutions Code (operative October 1, 1971). It provides as follows:
'Notwithstanding Section 11008 [determination of recipient's income], any exemptions from earned income for workrelated expenses, authorized under other provisions of this chapter shall be limited to a standard allowance of fifty dollars ($50) per month plus reasonable and necessary [104 Cal.Rptr. 79] costs of child car. For purposes of this section, reasonable costs of child care are defined as actual costs, not to exceed the costs of securing child care available in the community which meets the minimum standards of the Federal Inter-agency Day Care Agreement of Section 107 of Public Law 90-222 (Economic Opportunity Act amendments of 1967).'
Regulations were also adopted by the Department of Social Welfare to implement this section.
Prior to October 1, 1971, recipients of AFDC work supplements were allowed the full amount of their work-related expenses subject only to a limitation for personal items such as clothes and lunches. These expenses included such items as transportation costs, federal withholding, income tax, state disability insurance, social security, retirement contributions, union dues, and the $25 standard deduction for food, clothing, and miscellaneous. (See Beilensen and Agran, 'The Welfare Reform Act of 1971,' 3 Pacific L.J. 475, 483-484.) The amount to be deducted depended upon the circumstances of each case.
On October 1, 1971, defendant, Director Carleson, sent the following telegram to Mr. Ruble of HEW in Washington, D. C.:
'We are receiving inquiries as to whether the requirements of 42 U.S.C. § 602(a)(7)(i) and 45 C.F.R. 233.20(a)(3)(iv)(a) and 45 C.F.R. 233.20(a)(7)(i) would permit the State of California to develop a statewide standard allowance for all work-related expenses which would apply a flat sum for all work-related expenses against income in accordance with other requirements of federal law. 'Would you advise me whether there is any provision of federal law which in the opinion of the Department of Health, Education and Welfare would preclude such a standard allowance.'
A telephone transcription of the telegram from the Regional Commissioner received on October 4, 1971, reads as follows:
'REURTEL to Rubel 10-1-71, cited sections Social Security Act and HEW regulations requires state AFDC plan provide that state agency in determining need take into consideration any expenses reasonably attributable to earning income. We interpret act and regulations to permit states, for purposes of simple and efficient administration, to establish justifiable standard allowance for all such expenses, not including child care, to be uniformally applied in all situations with earned income. State must substantiate that amount fixed as standard allowance covers all such personal and nonpersonal expenses reasonably attributable to earning income, for example, through factual study on adequate sample basis or from family living studies conducted by U.S. Bureau of Labor Statistics.'
In their brief, defendants contend:
The federal scheme for determining the financial need for AFDC of a child and working parent, as set forth in the law (42 U.S.C., § 602(a)(8)(A)(ii)), requires that the first $30 plus one-third of the remainder of the gross monthly earnings be considered exempt. In computing AFDC entitlements under section 11451.6 of the Welfare and Institutions Code, by a 'standard allowance' for work-related expenses, the following procedure would be used:
Gross Monthly Earnings (assumed): $ 480.00 Less $30.00 -30.00 -------- $ 450.00 And one-third -150.00 -------- $ 300.00 Less: Child care (assumed) $100.00 Standard allowance 50.00 ------- $150.00 --150.00 -------- Net Income: $ 150.00[104 Cal.Rptr. 80]The figure representing net or non-exempt income is then used for purposes of AFDC grant determination. (In general, see, 3 Pacific L.J., supra, at pp. 483-484.)
At issue in this appeal is that portion of work-related expense calculation employing the $50 standard allowance for work-related expenses, exclusive of child care, as provided for in section 11451.6.
Plaintiffs refer to the limitation as a 'maximum' on work-related expenses while defendants refer to it as a 'standard allowance.' The limitation does operate as a maximum for those recipients who incure work-related expenses in excess of $50. In this respect, counsel for defendants stated in the trial court that all applicants were to be credited with the $50, regardless of what their work-related expenses are.
Plaintiffs filed declarations of AFDC recipients in the trial court to the effect that their work-related expenses exceeded $50 per month and that they would suffer irreparable harm if the standard allowance is applied. Plaintiffs contend the result of the implementation of the standard allowance would be to seriously reduce or terminate AFDC benefits to a substantial number of working parents.
The trial court in its opinion on request for issuance of preliminary injunction stated, in part, as follows:
'It appears to this Court that the Congressional requirement that consideration be given to 'any expense reasonably attributable to the earning of such income' [42 U.S.C., § 602(a)(7)] precludes a fifty dollar ($50.00) maximum absent some provision to permit allowance of expense in excess of the fifty dollars in the individual case where properly substantiated. It therefore appears to the Court that § 28.1 of the Welfare Reform Act of 1971 [Welf. & Inst.Code, § 11451.6] and the implementing regulation (Def. # C) adopted September, 29, 1971 are invalid.'
The court granted the preliminary injunction and this appeal followed.
Conformity with Federal Law.
Defendants contend that section 11451.6 does not contravene the Social Security Act and is a valid method to take work-related expenses into account.
Basically, the position of defendants can be summarized as follows: The pertinent section of the Social Security Act does not require the subtraction of each individual's personal work-related expenses but leaves to the state the method by which a state is to consider them. They argue that the key words of the section are 'take into consideration,' and neither the act nor the implementing regulations prescribe any particular method or procedure. (See 45 C.F.R. 233.20(a)(3)(iv)(a); 45 C.F.R. 233.-20(a)(7)(i).) The California Supreme Court has previously approved a standard deduction for work-related food, clothing, and incidental expenses (County of Alameda v. Carleson, supra, 5 Cal.3d at p. 748, fn. 20, 97 Cal.Rptr. 385, 488 P.2d 953), and the Legislature has chosen to extend the standard to all work-related expenses for case of administration and to reduce costs by elimination individual calculation of each family's expenses.
42 U.S.C., § 602(a)(7), sets forth that portion of the act relating to work-related expenses. It reads:
However, the court in that case also stated (at pp. 747-748, 97 Cal.Rptr. 385, 397, 488 P.2d 953, 965): 'The legislative history underlying the work-related expenses deduction provision indicates that it was the intent of Congress to permit the exclusion of all such expenses, without regard to the amount expended, provided that such expenses were reasonably related to employment.'
In Dandridge v. Williams, supra, 397 U.S. 471, 90 S.Ct. 1153, 25 L.Ed.2d 491, 503, the Court rejected an equal protection attack upon a Maryland regulation placing a ceiling on monthly grants to large families under AFDC:
[104 Cal.Rptr. 81]Secondly, defendants contend that HEW has interpreted the Social Security Act to permit a standard deduction for all work-related expenses except child care. (See Reply of Regional Commission to Carleson, set forth above; see also, 45 C.F.R. 201.3(c).) The interpretation of the agency charged with the administration of the act is entitled to considerable weight. (Rosado v. Wyman (1970) 397 U.S. 397, 90 S.Ct. 1207, 25 L.Ed.2d 442, 452, 457.)
Defendants also argue the history of the HEW Handbook of Public Assistance Administration supports their position. Prior to March 18, 1969, section 3140, part IV, only permitted a standard allowance for work-related food, clothing and personal incidentals. However, on March 18, 1969, portions of the federal handbook were repealed and the provisions were carried into the regulations. The regulations adopted on the repeal of section 3140 of the handbook are silent upon the use of a standard allowance, and where federal regulatory language is neutral, uniform allowances have been approved. (Id. 397 U.S. 418, 90 S.Ct. 1220 at p. 459; see also Amos v. Engelman (D.C.N.J.1970) 333 F.Supp. 1109, affirmed per curiam 404 U.S. 23, 92 S.Ct. 181, 30 L.Ed.2d 143 [but on other grounds].)
Thirdly, defendants contend the trial court erroneously construed section 11451.6 to create a maximum allowance rather than a standard allowance. They concede that one court has found it impermissible to place a ceiling or maximum upon work-related expenses. (Williford v. Laupheimer (E.D.Pa.1969) 311 F.Supp. 720.) The defendants find a distinction between the two techniques and argue as follows: 'When a maximum is imposed, the individualized determination is made, but a fiscal limit is placed upon the absolute amount of expenses any individual may include in the grant determination. A standard allowance consolidates and averages work expenses across the universe of all families. The result will be that some families and individuals will be benefited and others affected adversely as all will receive an average amount.'
In the brief of the United States as amicus curiae in Adams v. Parham (N.D.Ga.1972), the matter is put thusly:
Plaintiffs, on the other hand, contend that section 11451.6 is invalid since it is in direct conflict with section 602(a)(7) of the Social Security Act and implementing federal regulations. (See 42 U.S.C., § 601; 45 C.F.R. 233.20(a)(7).) While states are not required to participate in the AFDC program, they must comply with federal law in the administration of their program if they accept federal funds for this purpose. (King v. Smith, supra; Rosado v. Wyman, supra.)
Plaintiffs rely upon several federal district court cases to support their position. In Williford v. Laupheimer, supra, 311 [104 Cal.Rptr. 82] F.Supp. 720, the court was faced with a state regulation that provided for a maximum of $50 for work-related expenses. The court held that this was impermissible under section 602(a)(7) of the Social Security Act, stating (at p. 722):
This $50 limitation apparently included child care expenses. Williford is cited with approval in County of Alameda v. Carleson, supra, 5 Cal.3d at pp. 748-749, 97 Cal.Rptr. 385, 488 P.2d 953.
'We think it obvious that the fifty dollar limitation on income deductions is inconsistent with the express provisions of the Social Security Act. The imposition of such a maximum deduction violates the clear Congressional directive that the states shall allow deductions for 'any expenses reasonably attributable to the earning of any such income.' The Commonwealth makes no claim that this limitation is inspired by any considerations other than an attempt to preserve and protect is coffers. And although we may sympathize with the state's attempt to alleviate the unquestionably and increasingly heavy burden of programs such as AFDC, the solution of such problems resides in Congress. To date, it has not seen fit to impose any limitation of work-related income deductions; the states are not free to do otherwise.' (Accord, Vialpando v. Shea (D.C.Colo.1972); Adams v. Parham (D.C.Ga.1972); see also Connecticut St. Dept. of Pub. W. v. Dept. of H., E. & W. (2 Cir., 1971) 448 F.2d 209, 216-217; cf. Amos v. Engelman, supra.)
Plaintiffs also rely upon County of Alameda v. Carleson, supra, 5 Cal.3d 730, 97 Cal.Rptr. 385, 488 P.2d 953. It is true that this decision seems to support plaintiffs' position. However, that case did not present the precise issue with which we are here faced. In Alameda, supra, certain counties brought an action against Carleson alleging inter alia, that state welfare regulations authorized more generous deductions for work-related expenses than was allowable under federal law. The court upheld the state regulation, stating that it was the intent of Congress to permit the exclusion of all work-related expenses. (Id. at pp. 747-748, 97 Cal.Rptr. 385, 488 P.2d 953.)
Finally, plaintiffs contend that the Rosada case, which discussed the permissibility of drawing a statistical average with regard to a standard of need (Rosado v. Wyman, supra, 397 U.S. 418, 90 S.Ct. 1220, 25 L.Ed.2d at p. 459), is inapplicable to the instant case since the state provisions there did not involve a direct conflict with the Social Security Act.
The federal statute in question is ambiguous. As we read the statute, there is no mandate by Congress that a participating state must deduct all work-related expenses. We think there is merit in the argument that the California Legislature has imposed a statewide standard rather than an alleged maximum. This standard, of course, will adversely affect some recipients but will benefit others. It would be naive to assume that work-related expenses, exclusive of child care, never exceed the magic number of $50. However, the amount of the standard is not before this court. Rather, the sole issue before us is whether a statewide standard, such as is set forth in section 11451.6, conforms to federal law. In other words, may the states set up a standard for purposes of administrative ease under the Social Security Act?
With due respect for the opinions of the federal courts, we think such decisions are distinguishable. They were concerned with maximum cut-offs which benefited no one. We must also keep in mind the fact that California has excluded child care expense, a not inconsiderable figure. To reiterate, section 602(a)(7) does not require the states to deduct any and all work-related expenses. The recent interpretation of the act by the Regional Commissioner of HEW supports a statewide standard. (Cf. Lewis v. Martin (1970) 397 U.S. 552, 90 S.Ct. 1282, 25 L.Ed. 2d 561, 567.) We think the California statute, insofar as it sets a statewide standard exclusive of child care costs, comports to federal law and thus find no invalidity. (Cf. Jefferson v. Hackney (1972) [104 Cal.Rptr. 83] 406 U.S. 535, 92 S.Ct. 1724, 32 L.Ed.2d 285.)
Having arrived at this conclusion, we do not reach defendants' contentions (1) that the trail court lacked jurisdiction to enjoin them from enforcing section 11451.6 of the Welfare and Institutions Code, (2) that the trial court violated section 529 of the Code of Civil Procedure when it issued a preliminary injunction without requiring an undertaking, and (3) that the trial court lacked jurisdiction to issue its order requiring defendants to comply with the preliminary injunction pending appeal.
The order granting the preliminary injunction is reversed.
RICHARDSON, P. J., and COAKLEY, J., concur.
Retired Associate Justice of the Court of Appeal sitting under assignment by the Chairman of the Judicial Council.
'[I]f these work expenses are not considered in determining need, they have the effect of providing a disincentive to working since that portion of the family budget spent for work expenses has the effect of reducing the amount available for food, clothing, and shelter. The bill has, therefore, added a provision in all assistance titles requiring the States to give consideration to any expenses reasonably attributable to the earning of income.' (1962 U.S.Code Cong. and Admin. News, p. 1960.)
'While the telegram from Philip Schafer stated that the amount of the standard established for work-related expenses must be substantiated as an allowance to cover all such personal and non-personal expenses reasonably attributable to earning income, no issue exists as to validity of the amount of the standard established by the Legislature. The issue framed by respondents' complaint is limited to the right of the Legislature to determine work-related expenses by the use of a standard allowance of any amount. . . . The validity of the amount of the standard allowance is not before any court at this time.'
'(a) A State plan for aid and services to needy families with children must . . . (7) . . . provide that the State agency shall, in determining need, take into consideration . . . any expenses reasonably attributable to the earning of any . . . income . . . .'
'We do not decide today that the Maryland regulation is wise, that it best fulfills the relevant social and economic objectives that Maryland might ideally espouse, or that a more just and humane system could not be devised. Conflicting claims of morality and intelligence are raised by opponents and proponents of almost every measure, certainly including the one before us. But the intractable economic, social, and even philosophical problems presented by public welfare assistance programs are not the business of this Court.'
'HEW does not view the use of maximums as acceptable under 42 U.S.C. 602(a)(7). They do not operate like averages. A maximum adversely affects individuals with higher expenses, but in contrast to an average it does not benefit individuals with lower expenses. Moreover, the use of actual expenses on an individualized basis if below the maximum means that the administrative advantages of using an average are not obtained. A maximum, of course, bears no relationship and does not purport to bear any relationship to the actual expenses incurred. It merely establishes an arbitrary ceiling on the amount of expense which the State will recognize. A standard based on averaging, on the other hand, by definition must bear a reasonable relationship to actual expenses which can reasonable be expected to be incurred.'