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GLASGOLD v. SECRETARY OF HHS

January 7, 1982

MINNIE GLASGOLD, Plaintiff,
v.
SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendants; LOUIS GREENBAUM, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; SYLVIA KAUFMAN, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; ANNETTE COOMBES, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; ESTHER FLEETER, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; ANNE MEYER, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; FRANCES HUNT, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; MINNIE ISRAEL, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; IDA DORFMAN, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; CELIA ROTHMAN, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; MAE THOMPSON, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; ANN LEONE, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; ANNA COPPOLA et al., Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; VENERA GALLUZZO et al., Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; CATHERINE TRACEY, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; LENA TUMBARELLO, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; LOUIS LINDSTROM et al., Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; ALMA WARANTZ et al., Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; ANNA RILEY, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; MINNIE GUIGNO, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; MINNIE GUIGNO, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant; MARGARET FETTER, Plaintiff, v. SECRETARY OF HEALTH AND HUMAN SERVICES et al., Defendant



The opinion of the court was delivered by: PRATT

I. INTRODUCTION

 By commencing a series of individual actions over a period of several years, plaintiffs have launched a wholesale attack on the federal, state and county governments' calculation of benefits under the Supplemental Security Income Program. Plaintiffs advance federal and New York State constitutional and statutory challenges to the program, and further contend that the program is not administered in accordance with the statutory framework.

 At the heart of plaintiffs' case is the effect of "in-kind" income on the amount of their benefits. Plaintiffs contend that the concept of "in-kind" income has no place in the calculation of Supplemental Security Income Program benefits; defendants respond that the controlling statutes warrant, and in fact compel, a reduction in benefits to take into account "in-kind" income. Each side contends that the controlling statutory criteria and the legislative history support its interpretation of the same subject matter.

 In addition to their substantive contentions, plaintiffs move for varied procedural relief, with a resulting interaction among procedural and substantive issues. The federal, state and county defendants and proposed defendants oppose plaintiffs' motions and cross-move to dismiss or for summary judgment.

 After a preliminary discussion of the statutory framework attacked by plaintiffs, the court will address the particular motions now pending.

 II. SSI PROGRAM

 A. Federal Program

 Plaintiffs are recipients under the Supplemental Security Income (SSI) program, a federal program designed to provide financial assistance to the aged, blind and disabled whose income and resources are below the statutory minimums. 42 USC § 1381 et seq. SSI went into effect on January 1, 1974 and replaced a myriad of partially funded federal programs previously administered by the participating states. See, e.g., former Title 6 of New York State Social Services Law, amended by 1974 NY Laws ch. 1080 § 28 (amended effective January 1, 1974 to coincide with new federal program.)

 Pursuant to Congress' objective of standardizing treatment of SSI recipients nationwide, H.R. Rep. No. 92-231, 92d Cong., 2d Sess. (1972), reprinted in [1972] US Code Cong. & Ad. News 4989, federal criteria govern eligibility for the program. 42 USC § 1382-1382f. The SSI program does not consider individual circumstances or needs; rather, SSI is a "flat grant" program designed to provide for all eligible recipients a national level of minimum income.

 Different categories for eligibility and grant level are established depending upon whether a recipient lives alone, lives with an eligible spouse, 42 USC § 1382, or lives in the household of another, § 1382a(a)(2). *fn1" Once an individual is found to be eligible for SSI, his or her flat grant maximum amount is subject to a reduction, in the amount of any available income not otherwise excludable under the SSI rules, § 1382(b). "Income" for SSI purposes (hereinafter, countable income) is defined expansively, as including both earned income, § 1382a(a)(1), and unearned income, § 1382a(a)(2). Unearned income is defined as including "support and maintenance furnished in cash or kind". § 1382a(a)(2)(A).

 If a recipient is "living in another person's household and receiving support and maintenance in kind from such person", his or her grant is automatically reduced by one-third "in lieu of including such support and maintenance in the unearned income of such individual". § 1382a(a)(2)(A). This so-called automatic one-third reduction rule applies only if several factors are present; *fn2" otherwise a "presumed value" rule applies. After the countable income is calculated, either actually or by the one-third reduction rule, the recipient's grant is reduced accordingly.

 B. State Programs

 In addition to the federal portion of the SSI payment, the statute allows the states to supplement the federal grant. In fact, the federal statute encourages state supplementation by providing that the Secretary of Health & Human Services will administer the state supplement in conjunction with the federal grant. § 1382e(b). The New York State legislature has authorized the state department of social services to contract with the federal secretary for administration of the New York supplementation programs. New York Social Services Law § 211 (McKinney Cum. Supp. 1980-1981), and the federal and state authorities have entered into such an agreement. See agreement between secretary and state annexed to Bushart aff.

 The federal statutory scheme contemplates two distinct state supplementation programs, optional and mandatory. The optional state supplementation (OSS), provided for in 42 USC § 1382e and enacted by New York in § 209 of the Social Services Law, increases a recipient's income level to the New York State minimum level, which is higher than the federal level. The federal and state defendants interpret the governing statutes to mean that the same eligibility and grant level criteria are used for OSS as apply to the federal SSI payment. *fn3" A recipient's federal countable income (FCI), including unearned in-kind income, is considered to be income available to the OSS recipient. New York Social Services Law § 208(6), (8); § 209(1)(a), (b). The result is a reduction in a New York recipient's total federal SSI/OSS grant in an amount equal to the FCI.

 In addition to OSS, any "grandfathered" SSI recipient, i.e. one who formerly was a recipient under a pre-SSI state-run program, is entitled to a mandatory state supplement (MSS) so that the total grant a "grandfathered" recipient receives is at least equal to the amount to which the recipient would have been entitled under the state programs in effect prior to the effective date of SSI, January 1, 1974. Renegotiation Amendments of 1973, Pub. L. No. 93-66, § 212(a)(3)(A), 87 Stat. 152 (1973). Thus, a "grandfathered" recipient is entitled to the greater of MSS or OSS.

 A significant difference between SSI and the former New York State public assistance programs is in their handling of the concept of countable income, which, as discussed above, reduces the SSI grant by the amount of any earned or unearned income. In-kind income, including food or shelter, that a recipient receives from non-SSI sources must be included in FCI, even though such income was not included as countable income under the rules governing the former state programs (state countable income, or SCI). Because New York's 1973 public assistance grants were not lowered to take into account in-kind income, New York must pay a "grandfathered" SSI recipient the amount attributable to any in-kind income that results in a lesser grant than the recipient received in 1973. New York's MSS provision so provides, § 210, as does the secretary's implementing regulation, 20 CFR § 416.2050 (1981).

 In summary, the SSI program as it operates in New York provides for three types of grants:

 
1. The federal SSI payment, calculated by deducting a recipient's FCI (including federal in-kind income rules) from the federal minimum income level;
 
2. OSS, calculated by deducting a recipient's federal minimum income level from his or her New York State's minimum income level; and
 
3. MSS, applicable only to grandfathered SSI recipients, and calculated as the difference between a recipient's federal SSI payment (using FCI standards) and the amount to which the individual would have been entitled under the state program as of December, 1973 (using SCI standards).

 III. CONTENTIONS OF THE PARTIES

 Plaintiffs attack numerous features of the SSI program. They contend that the federal statute is unconstitutional, either as written or as applied; that the regulations do not accurately implement the statute and thus produce unintended and unconstitutional results; that New York State's optional supplementation program violates the federal and state constitutions as written or as applied; and that plaintiffs' rights to privacy are violated by certain policies instituted by defendants in policing the SSI program.

 Plaintiffs, in effect, ask the court to review the entire structure of the SSI program, at least as administered in New York, and to either invalidate or reinterpret numerous key components of the federal and state statutes and regulations.

 Plaintiffs' advance substantive arguments in support of the procedural relief they are seeking. They move to consolidate all of the pending cases; to serve and file an amended consolidated complaint; to add additional federal, state, and county defendants; to allow additional individuals to intervene as party plaintiffs; and to certify a class composed of all aged, blind and disabled persons who have resided in New York at any time after January 1, 1974. The procedural relief is sought by plaintiffs to enable them to advance their common arguments in one lawsuit, thereby conserving the court's and the parties' resources and, in general, furthering policies of judicial economy.

 The individual suits themselves present procedural problems, in that some plaintiffs have not exhausted their administrative remedies. Defendants have moved to remand some of the individual suits because of admitted errors in the calculations of benefits and to remand others based on the lack of exhaustion. Plaintiffs resist remand because each of the suits involves some statutory or constitutional challenge to the SSI program, which is arguably beyond the domain of the administrative process and is a proper subject for consideration by this court.

 Before proceeding to the merits of these actions, the court has satisfied itself that jurisdiction properly lies over all of the defendants in at least those actions where plaintiffs have exhausted their administrative remedies. 42 USC § 405(g); Weinberger v. Salfi, 422 U.S. 749, 45 L. Ed. 2d 522, 95 S. Ct. 2457 (1975); Ellis v. Blum, 643 F2d 68 (CA2 1981). Whether other statutes confer jurisdiction in those cases where not all rungs in the administrative process have been climbed is a question that need not be answered at present, since the identical arguments are made by all plaintiffs in all cases and are thus before the court in any event. *fn4"

 Although plaintiffs are thus far seeking only procedural relief, the basic facts are not in dispute, and much of plaintiffs' argument boils down to a contention that the undisputed facts entitle them to judgment in their favor. All defendants and proposed defendants oppose the procedural relief sought by plaintiffs, mainly because defendants oppose the substantive arguments advanced. In addition, defendants have moved to dismiss or for summary judgment. Because the parties support their motions with affidavits, they will be treated as motions for summary judgment. FRCP 12(b).

 The procedural motions become relevant only if plaintiffs survive the motions for summary judgment; accordingly, the court will first consider the substantive issues raised by defendants' motions.

 IV. STATUTORY CHALLENGES TO OSS CALCULATION

 Plaintiffs contend that the current method of computing the New York State supplements to the federal SSI payment does not comport with the federal and state statutes and regulations. As discussed earlier, SSI Program, section II, supra, there are two methods used to compute the two types of state supplements, OSS and MSS. Plaintiffs' diverse arguments all have a common goal: to convince the court that the countable income rules in effect under New York's pre-SSI programs (SCI) should govern calculation of OSS as well as MSS.

 A. Definition of Unearned Income

 Plaintiffs first argue that the federal definition of unearned income, incorporated by New York State in the federal/state agreement and in § 208 of New York's Social Services Law, does not include all items of in-kind income. However, plaintiffs are faced with an apparently insurmountable obstacle: the apparently clear federal statutory provisions requiring that a recipient's grant be reduced by the amount of any in-kind income. The relevant provisions require that a recipient's benefits be decreased by the amount of the recipient's "income", which is defined as including both "earned" and "unearned" income, § 1382a. Unearned income is thereafter defined as encompassing "support and maintenance furnished in cash or kind", § 1382a(a)(2)(A).

 Plaintiffs' assertion that unearned income does not include all support and maintenance is based on the language of the entire statutory provision:

 
(2) unearned income means all other income, including -- (A) support and maintenance furnished in cash or kind; except that in the case of any individual (and his eligible spouse, if any) living in another person's household and receiving support and maintenance in kind from such person, the dollar amounts otherwise applicable to such individual (and spouse) as specified in subsections (a) and (b) of section 1382 of this title shall be reduced by 33 1/3 percent in lieu of including such support and maintenance in the unearned income of such individual (and spouse) as otherwise required by this subparagraph. 42 USC § 1382a(a)(2)(A) (emphasis added).

 As provided in the statute, for an "individual living in the household of another", a reduction of one-third applies regardless of the actual value of the support and maintenance. However, the implementing regulation specifically provides that the one-third rule applies only when the recipient "lives in another person's household", 20 CFR § 416.1131(a)(1) (1981), and receives both food and shelter from the person in whose household the recipient is living. § 416.1131(a)(2). An individual is not considered to be living in "another person's household" if the individual is paying at least a "pro rata share toward monthly household operating expenses." § 416.1132(a). Thus, under the regulation for the automatic one-third rule to apply, an individual must (1) live in the household of another; (2) receive both food and shelter from that person; and (3) pay less than a pro rata share of the household expenses. The parties agree that the criteria set forth in 20 CFR §§ 416.1131 & 416.1132, in relation to the automatic one-third reduction rule accurately implement Congress' intention in enacting § 1382a(a)(2).

 Plaintiffs point out that § 1382a(a)(2)(A) uses the phrase "support and maintenance" three times. They argue that because the second and third times the phrase appears, it is interpreted by the regulations to mean that a recipient must receive both food and shelter for the one-third rule to apply, it follows that the first time the phrase "support and maintenance" appears it should also be interpreted to define "unearned income" as including only the situation where an individual receives both support and maintenance in cash or kind. However, the secretary's regulations define unearned income expansively, and take into account any food, clothing or shelter received from any source.

 In the situation described above (household of another), the automatic one-third reduction rule applies, § 416.1131-.1133; in all other in-kind income situations, a "presumed value" of one-third applies, but it may be rebutted by showing a lesser actual value of the in-kind income received, § 416.1140 -.1141. Combined the regulations mean that receipt of in-kind income of any type, in any amount, from any source, should result in a reduced SSI grant. *fn5"

 Plaintiffs' interpretation of § 1382a(a)(2)(A) warps its relatively clear language. On its face the statute defines unearned income as "including support and maintenance"; if Congress meant to limit the scope of the statutory term unearned income to include only those situations where both food and shelter were furnished to a recipient, surely more precise language would have been chosen. Moreover, if the statute were read as plaintiffs suggest, the other subsections of § 1382a(a)(2) defining items included in unearned income would have to be construed similarly. For example, subsection (c), defining unearned income as including "prizes and awards", would mean only a recipient receiving both prizes and awards would have either of those items included in the individual's unearned income. Such an interpretation would be ludicrous.

 The legislative history of SSI also militates in favor of a broad definition of income. One of the congressional committees indicated:

 
Your committee believes that the new program, financed as it would be from general revenues and with the benefits based on need, should pay people only to the extent that their needs are not met from other sources * * *. (emphasis supplied). HR Rep. No. 92-231, supra, [1972] U.S. Code Cong. & Ad. news at 5135-36.

 To fulfill this goal, the statute sets forth a broad list of items which will result in a recipient's grant being lowered to the extent these outside sources are actually available to the recipient. Thus, "income" is defined expansively, to include "all" earned and unearned income, whether furnished "in cash or in kind".

 The court concludes that the secretary's regulation defining unearned income as including food, clothing or shelter from any source, 20 CFR § 416.1130(b), accurately implements the definition of unearned income set forth in 42 USC § 1382a(a)(2). The next issue to be addressed is whether the federal definition of unearned income applies fully to the state OSS and MSS.

 B. OSS Calculation

 OSS is computed as the difference between the state's minimum income level and the total of the recipient's federal countable income (FCI) and the recipient's actual federal SSI grant. This calculation is the target of many of plaintiffs' arguments, all designed to convince the court that state countable income (SCI), not FCI, should be used to calculate OSS. *fn6" Plaintiffs urge that the statutory language itself requires that SCI be used in computing OSS, or alternatively, that there are constitutional impediments that preclude FCI from governing calculation of OSS. This latter contention is discussed along with plaintiffs' other constitutional arguments in section V., infra.

 After taking an exhaustive look at the challenged statutes, the court concludes that neither logic, legislative history, nor a plain reading of the relevant statutes and regulations supports plaintiffs' construction of the statutory language.

 OSS is provided for in 42 USC § 1382e, and is enacted by New York in Social Services Law § 209. The federal statute places few restrictions on the type of optional program that a state may adopt; § 1382e provides that an individual eligible for SSI is also eligible for OSS, § 1382e(b)(1), and allows the secretary and the state to agree upon

 
such other rules with respect to eligibility for or amount of the supplementary payments, and such procedural or other general administrative provisions, as the secretary finds necessary * * * to achieve efficient and effective administration of both the program which he conducts under this subchapter and the optional state supplement. 42 USC § 1382e(b)(2).

 The statute further provides that:

 
Any State (or political subdivision), in determining the eligibility of any individual for supplementary payments * * * may disregard amounts of earned and unearned income in addition to other amounts which it is required or permitted to disregard under this section in determining such eligibility, and shall include a ...

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