The opinion of the court was delivered by: WARD
This action challenges the legality of the method that the State of New York has determined to employ in calculating benefits to be paid to eligible New York families under the federal Aid to Families with Dependent Children ("AFDC") program. The State of New York has determined to treat the amounts mandatorily deducted from the paychecks of employed family members, e.g. amounts withheld for federal and state taxes and Federal Insurance Contributions Act ("FICA") obligations, as "income" to be taken into account in calculating the amount of an eligible family's monthly AFDC grant. Plaintiffs argue that this method of calculation violates certain provisions in the Social Security Act that govern state administration of the AFDC program. In an order dated February 9, 1982, this Court issued a preliminary injunction sought by plaintiffs in this action against defendants Blum and Krauskopf pursuant to Rule 65(a), Fed. R. Civ. P., and certified the action as a class action pursuant to Rule 23(c), Fed. R. Civ. P. RAM v. Blum, 533 F. Supp. 933 (S.D.N.Y. 1982).
For the reasons stated hereinafter, the Court now grants plaintiffs' motion for summary judgment pursuant to Rule 56(a), Fed. R. Civ. P., and issues a permanent injunction against defendants Blum and Krauskopf.
There are two named plaintiffs in this action. The first is RAM, an unincorporated association located in New York which is devoted to advancing the interests of public assistance recipients living in New York. RAM appears on behalf of its members, who include members of New York families presently receiving AFDC benefits, and on behalf of all other individuals similarly situated. The second named plaintiff is Cora Hagler, a mother of three children who currently receives AFDC payments from the State of New York. Hagler appears both individually and on behalf of all others similarly situated. Defendants are Barbara Blum, Commissioner of the New York State Department of Social Services; James Krauskopf, Commissioner of the New York City Department of Social Services; and Margaret M. Heckler,
Secretary of the United States Department of Health and Human Services ("HHS").
The AFDC program is administered pursuant to subchapter IV-A of the Social Security Act (the "Act"), 42 U.S.C. §§ 601-15. Under the program, the states provide assistance to certain needy families, and are in turn reimbursed for a designated portion of their payments by the federal government. The instant litigation has been precipitated by amendments to subchapter IV-A enacted in the Omnibus Budget Reconciliation Act of 1981 ("OBRA") §§ 2301-21, Pub. L. No. 97-35, 95 Stat. 357, 843-60 (1981). Plaintiffs challenge certain changes in the way AFDC benefits are to calculated, proposed by the State of New York in response to the OBRA amendments.
State governments receiving AFDC funds are required to administer their programs pursuant to a "state plan" that is in accord with subchapter IV-A and the regulations promulgated thereunder by HHS. 42 U.S.C. § 602. As required by the statute, the state plan adopted by the State of New York calculated AFDC benefits in a three-step process.
First, the state determines a dollar figure that represents a given family's monthly non-AFDC "income" as that term is used in section 402(a)(7)(A) of the Act, 42 U.S.C. § 602(a)(7)(A). That is the step at issue in the action before this Court. Second, the state reduces this dollar figure through the application of as many as four arithmetical adjustments referred to as "disregards," set forth in section 402(a)(7)(A) of the Act, 42 U.S.C. § 602(a)(8)(A).
Third, the resulting dollar figure, representing "income" minus any "disregards," is subtracted from what the State has determined to be the "standard of need" for a family of the given family's composition. The difference represents the amount of the family's monthly AFDC grant.
The 1981 amendments contained in OBRA altered the second step of this three-step process. Prior to the passage of OBRA, a State plan was required to disregard, inter alia, "any expense reasonably attributable to the earning of [non-AFDC] income," before the net difference was in turn deducted from the family's standard of need. 42 U.S.C. § 602(a)(7) (1976).
Under OBRA, this individualized "work expense disregard" has been replaced by two new disregards, now codified at 42 U.S.C. §§ 602(a)(8)(ii), (iii). See supra note 6. The first of these two new disregards applies to the costs of day-care for young children, and is not at issue in this lawsuit. The other is a flat $75 disregard from the income of any individual employed full time. This flat $75 disregard thus replaces the individualized deduction of work-related expenses other than child care for each recipient family. In enacting this change, Congress cited as potential benefits both the ease of administration and the prevention of misrepresentation.
The central disputed issue before the Court is the treatment to be accorded mandatory payroll deductions under the Act as amended by OBRA. All parties agree that in the nineteen years prior to the passage of OBRA, during which time the individualized work expense disregard was in effect,
neither New York State nor other states included mandatory payroll deductions in the net income subtracted from the "standard of need" figure in calculating AFDC benefits. Defendants contend that, prior to the OBRA amendments, mandatory payroll deductions were disregarded as part of the itemized work expense disregard. Accordingly, defendants argue that gross income is to be used in calculating the income available to a family from non-AFDC sources. Plaintiffs, on the other hand, contend that the term "income" as used in section 403(a)(7)(A) has, since its adoption in 1939, referred to a family's income available for support after mandatory payroll deductions have been withheld.
The issue before the Court is a narrow one of statutory construction: Does the term "income" as used in section 402(a)(7)(A) include mandatory payroll deductions? While the resolution of any problem of statutory construction should begin with an examination of the language of the statute itself, Consumer Product Safety Comm'n v. GTE Sylvania, 447 U.S. 102, 108, 64 L. Ed. 2d 766, 100 S. Ct. 2051 (1980); Mohegan Tribe v. Connecticut, 638 F.2d 612, 618 (2d Cir. 1980), cert. denied, 452 U.S. 968, 69 L. Ed. 2d 981, 101 S. Ct. 3124 (1981), the bare language of section 402(a)(7)(A) provides scant basis for resolving the instant dispute. In pertinent part, section 402(a)(7)(A) provides:
A State plan for aid and services to needy families with children must . . . except as may be otherwise provided in [section 402(a)(8)] . . ., provide that the State agency . . . shall, in determining need, take into consideration any other income and resources of any child or relative claiming aid to families with dependent children, or of any other individual (living in the same home as such child and relative) whose needs the State determines should be considered in determining the need of the child or relative claiming such aid. . . .
42 U.S.C. § 602(a)(7)(A). This language has remained virtually unchanged since its original enactment. Nowhere in the original Act, however, or in the amending acts of 1939, 1962, 1967, or 1981 (OBRA) is the term "income" explicitly defined.
This absence of intrinsic statutory definition has not, however, left the Court bereft of interpretational guidelines. The long history of the language in dispute has provided several bodies of secondary material which serve amply to indicate the intent of Congress as to the treatment to be accorded mandatory payroll deductions. The first such body of material is the collection of legislative and administrative materials which evidence the intention of the 76th Congress when it authored the language in question in 1939. This material is supplemented by administrative interpretations of the disputed language from 1939 to 1981. These pre-1981 materials not only serve to indicate the construction given the term "income" as used in section 402(a)(7)(A) over its more than forty-year history, but also constitute the definitional backdrop that informed the 97th Congress when it amended subchapter IV-A in 1981. The final useful body of material is that produced by the 97th Congress itself in 1981. The drafters of OBRA were explicit as to both their general policies in amending subchapter IV-A and their specific purposes in replacing ...