Cooper v. Swoap

524 P.2d 97, 11 Cal. 3d 856, 115 Cal. Rptr. 1

• Court: California Supreme Court
• Decided: July 2, 1974
• Docket: Sac. 7985
• Status: Published

Opinions

Opinion

TOBRINER, J.

In this case, as in the companion case of Waits v. Swoap, post, page 887 [115 Cal.Rptr. 21, 524 P.2d 117], we must determine the validity, under state and federal law, of an administrative welfare regulation promulgated by the State Department of Social Welfare subsequent to the enactment of the Welfare Reform Act of 1971. The regulations at issue in both cases represent variations on a single administrative theme: that “noncash economic benefits” enjoyed by certain recipients of aid to families with dependent children (AFDC) may be treated as “income” of such recipients so as to warrant a reduction of their welfare grants.¹ The regulation challenged in the instant case finds' that such “noncash economic benefits” may arise when AFDC recipients share housing with a recipient of one of the state’s “adult aid” programs; accordingly, in such situations the regulation requires that the AFDC grant be reduced by a designated sum. The principal question presented is whether this particular regulation, and, more generally, the entire “noncash economic benefit” concept, is consistent with the governing statutory scheme.

For the reasons discussed more fully below, we have concluded that the regulation at issue here cannot be squared with the controlling provisions of the Welfare Reform Act of 1971, and is therefore invalid. Initially, we shall point out that at the time the 1971 legislation was enacted a provision identical to the instant regulation was proposed by the administration but was decisively rejected by the Legislature; thus, the legislative history provides perhaps the clearest indication that the present regulation is inconsistent with legislative intent.

Moreover, we shall explain that on a more general level the department’s newly devised “noncash economic benefit” concept is completely at odds with the “flat grant” system of welfare benefits that lies at the heart of the 1971 welfare reform legislation. In establishing a flat grant system, the Legislature consciously abandoned the previous practice under which welfare grants were set on the basis of an administrative determination of need; instead, the Legislature took it upon itself to set fixed grant levels to be paid to all recipients without regard to individual need. The regulation at issue directly contradicts this flat grant approach, reducing certain recipients’ grants on the basis of an administrative judgment that such recipients have less need than other recipients.

Although the department defends its new approach on the ground that “noncash economic benefits” generally, and shared housing in particular, constitute “income” to recipients which may properly be considered in calculating welfare grants, such benefits have never been considered income throughout the entire history of California’s welfare system, and we can find absolutely no indication that the Legislature intended to alter its consistent treatment of such “benefits.” Moreover, with respect to the “adult aid” payments governed by the instant regulation, a specific statute explicitly mandates that such aid “shall not be construed as income” under these circumstances (Welf. & Inst. Code, § 11006). Finally, we shall explain that even if it were permissible to construe “noncash economic benefits” as income, the present regulation would be invalid for it does not measure the actual value of benefits received by an individual recipient but instead assigns an arbitrary, fictitious measure of income, in contravention of the controlling federal and state statutes.

Consequently, we have concluded that the challenged regulation cannot stand.

1. The facts.

Laura Cooper is a recipient of aid to the disabled (ATD); she lives with her five minor children and receives on their behalf aid to families with dependent children (AFDC). Moice Palladino has also been receiving ATD benefits for herself and AFDC benefits on behalf of her minor son. The ATD program covers only the mother’s needs; the AFDC program covers the needs of the children.

Under the payment schedule established by the Legislature in Welfare and Institutions Code section 11450, the Palladino child was entitled at the time this litigation was instituted to a welfare grant of $115 per month (AFDC unit of one), and the Cooper children to a grant of $320 per month (AFDC unit of five). Because both of the families qualified for two welfare programs, however, the State Department of Social Welfare (department) directed that the grants to the children be reduced by application of its newly propounded Regulation 44-115.8,² the regulation at issue in the instant case. Under this new regulation, the Palladino child was to receive $92 per month instead of $115 (a $23 deduction) while the Cooper children would obtain $289 per month instead of $320 (a $31 deduction).³

Mrs. Cooper and Mrs. Palladino, joined by the California Welfare Rights Organization, then instituted the present class action against the department challenging the validity of Regulation 44-115.8. All parties stipulated that no factual disputes existed and after oral argument the superior court granted the department’s motion for summary judgment, concluding that the challenged regulation was valid under state and federal law. Plaintiffs appeal from that judgment.

2. The governing statutory background.

In determining whether or not the regulation before us is consistent with the current California statutory scheme, we must briefly review the historical background of the Welfare Reform Act of 1971. Prior to 1971, the Legislature had delegated to the department the authority to determine individual recipients’ needs, and to pay corresponding benefits, up to a statutory maximum. The department accordingly promulgated detailed regulations specifying allowances for itemized needs. Allowances for non-housing items, such as food and clothing, were calculated on the basis of the age and sex of each family member, the family’s size and county of residence; the housing and utilities allowances reflected actual payments for these commodities up to a specified maximum. Among the regulations previously in effect was former Regulation 44-115.61 which expressly declared that “partially free or shared living costs do not represent income.” (Italics added.)

Determining individual families’ needs on the basis of such diverse factors as family composition and geography, however, proved unacceptably inefficient. The Reform Act of 1971 replaced this cumbersome system with a simple, uniform flat grant. The Legislature abolished the administrative allowances and need figures and took upon itself the task of determining the minimum need level of recipients (Welf. & Inst. Code, § 11452). The Legislature itself then set uniform welfare payments (Welf. & Inst. Code, § 11450) based on a fair averaging of all AFDC grants, a method of welfare benefit computation recently approved by the United States Supreme Court in Rosado v. Wyman (1970) 397 U.S. 397 [25 L.Ed.2d 442, 90 S.Ct. 1207].⁴

The chief purposes of the reform were to streamline the administration of the welfare program⁵ 67and to eliminate welfare paternalism by allowing recipients to allocate grant money according to their own priorities.⁶ The Legislature accomplished these purposes by replacing the complicated administrative allowances with flat grants determined solely by family size, and mandating that the full grants be paid without regard to actual expenditures for particular need items. The amount received by each family is now dictated by a schedule adopted by the Legislature and contained in Welfare and Institutions Code section 11450, subdivision (a); “For each needy family which includes one or more needy children . . . there shall be paid ... an amount of aid each month which when added to his income ... is equal to the sums specified in the following table . . . .”⁷

Thus, whereas under the pre-1971 practice the administrative agency was primarily responsible for establishing the basic amount of a recipient’s grant, the 1971 legislation withdrew the department’s authority in this regard and established a schedule of legislatively mandated “flat grants.”

Subsequent to the enactment of the 1971 act, the department promulgated a series of regulations purporting to implement the reform legislation. In one of the regulations (Reg. 44-115.9), the department adopted a schedule of housing and utility “allowances,” assigning a designated dollar value to housing and utilities assertedly used by different sized AFDC family units.⁸ Regulation 44-115.8, the regulation at issue here, provides that whenever this administrative “allowance” figure exceeds the amount of an AFDC recipient’s actual pro rata expenditure for housing and utilities, the “excess” amount shall be considered “income” to the recipient; by its terms, the regulation confines its operation to situations in which the AFDC recipient resides in the same household with one or more recipients of “adult aid.”⁹ Although the precise rationale of the regulation is not explicitly stated, the regulation appears to be an attempt to measure the “noncash economic benefits” which an AFDC recipient obtains by sharing housing and utilities with an individual who is receiving an independent welfare grant.

As noted above, the central issue in this case is whether Regulation 44-115.8, and more generally the entire “noncash economic benefit” concept, is compatible with the legislative scheme established by the Welfare Reform Act of 1971. As discussed below, we conclude that both the specific regulation at issue and the department’s general “noncash economic benefit” theory are in direct conflict with the governing statutory provisions and cannot stand.

3. The legislative history of the Welfare Reform Act of 1971 demonstrates that Regulation 44-115.8 is incompatible with the governing statutory scheme.

The most obvious indication that the regulation at issue here does not conform to, or implement, the governing welfare statutes appears from the legislative history of the Welfare Reform Act itself. Senate Bill No. 545 (1971 Reg. Sess.) (also known as the Burgener Bill) included a section (§ 32) requiring that part of the benefits of an ATD recipient living with an AFDC family be deemed available to the AFDC family with a consequent reduction in that family’s grant.¹⁰ The avowed purpose of this section of the bill was to eliminate a procedure which was attacked politically as providing for “double payments” to recipients of welfare benefits. Section 32, however, met with decisive defeat both in committee and on the Senate floor as a suggested amendment to the bill which ultimately was enacted, as the Welfare Reform Act. (Sen. Bill No. 796 (1971) (Reg. Sess.).)¹¹

Thus, while drafting the current statutory scheme, the Legislature directly considered a proposal to reduce grants of AFDC recipients sharing housing with an adult aid recipient, and it explicitly rejected such a proposal. Despite this unambiguous indicant of legislative intent, however, the department subsequently adopted the principal elements of the rejected amendment by promulgating the regulation at issue here. Not surprisingly, a legislative subcommittee has since condemned this very regulation as a blatant frustration of legislative will. (See Senate-Assembly Subcommittee on Implementation of Welfare Reform, Report to the Legislature (March 17, 1972) (Reg. Sess.) pp. 20-21.)

It is axiomatic, of course, that administrative regulations promulgated under the aegis of a general statutory scheme are only valid insofar as they are authorized by and consistent with the controlling statutes. “Administrative regulations that alter or amend the statute or enlarge or impair its scope are void and courts not only may, but it is their obligation to strike down such regulations.” (Morris v. Williams (1967) 67 Cal.2d 733, 748 [63 Cal.Rptr. 689, 433 P.2d 697]; Whitcomb Hotel, Inc. v. Cal. Emp. Com. (1944) 24 Cal.2d 753, 757 [151 P.2d 233, 155 A.L.R. 405].) In promulgating the regulation in question here, the department has ignored this fundamental principle of administrative law, and has arrogated to itself the authority to reject explicit legislative determinations, an authority which is completely incompatible with the basic premise on which our democratic system of government rests.¹² Thus, the Legislature’s specific rejection of the substance of the challenged regulation provides the clearest indication that the measure is not consistent with legislative intent.

4. Regulation 44-115.8, and the entire “noncash economic benefit” concept, is in addition totally incompatible with the general principles of the governing “flat grant” system.

Even if the Legislature had not explicitly rejected the substance of the proposed regulation, we would still conclude that Regulation 44-115.8 is invalid because it is directly at odds with the flat grant system established by the 1971 legislation. As noted above, under the flat grant system the basic amount of an AFDC grant is determined on the basis of family size. In calculating the various flat grant figures included in the schedule of section 11450, the Legislature averaged the diverse needs of all AFDC recipients; this averaging took into account the savings accruing to some recipients because of shared housing, as well as the many factors, such as specialized housing or utility needs, which resulted in higher housing costs for other recipients.¹³ Under the flat grant approach, the resulting average figure is to be paid to all AFDC recipients without regard to differing need.

Because the effects of shared housing have already been considered in establishing the basic grant figures, and because the Legislature explicitly directed that reduced need cannot justify a reduced grant, it is obvious that the present regulation’s reduction of AFDC housing is impermissible. Indeed, from this perspective it becomes perfectly clear why the Legislature rejected the “double payment” argument proffered in support of the Burgener Bill provision: because the savings from shared housing had already been considered in setting the flat grant figures, there was no “double payment” to be eliminated. In reality, it is the challenged regulation which would impose an unfair “double deduction” on AFDC recipients who happen to share a household with a recipient of adult aid.

Moreover, when the flat grant figure is viewed in the context of the entire prevailing welfare scheme, the invalidity of the challenged regulation becomes even clearer. The Legislature itself explicitly recognized that the flat grant payments authorized by section 11450 were not adequate to meet recipients’ minimum needs; a separate provision, section 11452, sets forth a schedule of minimum needs, which in every case exceeds the flat grant payment for the corresponding family unit.

Thus, since the amount of the uniform payments consciously falls short of the minimum need levels, the Welfare Reform Act does not merely encourage thrift by AFDC recipients, it legislates thrift. Unless a family is able to economize in some areas of need, the statutes contemplate the failure of that family to survive. By distributing flat sums without restriction as to use, the Legislature has provided some leeway for families to meet this arduous challenge. The legislative scheme contemplates that families will find ways to save in one area of need to help meet less flexible expenses generated by another need item.

The “noncash economic benefit” concept devised by the department to cut welfare costs completely undermines this legislative program. Under the department’s approach, whenever a recipient is successful in saving expenses in one area of need, the department asserts that it can consider such “savings” as “income” and can reduce the recipient’s grant accordingly. Thus, under the instant regulation, an AFDC recipient who saves on housing costs through shared housing is “rewarded” for his thrift by a reduction in his welfare grant. It is not difficult to see that such an approach acts as a direct disincentive to economize; even if he can make do with less, a recipient is encouraged to spend up to the full amount of the agency’s arbitrary “allowance” figure. Moreover, the regulation makes it impossible for a recipient to utilize savings on housing costs to bridge the gap between his flat grant payment and his minimum needs. This consequence is another indication that both the instant regulation and the general “noncash economic benefit” concept are incompatible with the flat grant system.

5. “Noncash economic benefits” do not constitute “income” within the meaning of section 11450.

The department maintains, however, that the instant regulation does not conflict with the flat grant system, because the regulation represents a reasonable measure of a recipient’s “income” which, under section 11450,¹⁴ must be deducted from the flat grant figure. As we shall explain, however, the regulation’s characterization of such “benefits” as “income,” as well as its method of valuing such “income,” is fatally flawed.

a. “Noncash economic benefits,” and particularly “shared housing,” have never been considered income in the history of California welfare programs and there is no indication that the Legislature intended to alter this approach.

The department’s contention that “noncash economic benefits,” such as those involved in the instant case, constitute “income” to a recipient which justifies a reduction of his welfare grant is an entirely novel proposition. Never before in the long history of California’s numerous welfare programs have such “benefits” been so designated. Indeed, with respect to the “shared housing” benefit at issue here, a pre-1971 department regulation explicitly declared that “partially free or shared living costs do not represent income.” (Former Reg. 44-115.61.)

The department, however, purports to derive authority to transmute shared housing and other noncash economic benefits into deductible “income” from the language of Welfare and Institutions Code section 11008, which provides that “[i]n computing the amount of income determined to be available to support a recipient, the value of currently used resources shall be included . . . .” (Italics added.) As its context indicates, section 11008 undertakes to reflect only income available for the recipient’s support; although imprecisely stated, the “value of currently used resources” has always referred to the income derived from such resources. The term “resources” itself has never before referred to anything but real or personal property which a recipient may retain without forfeiting eligibility for welfare benefits.¹⁵

Section 11008 itself was enacted in 1965 and was re-enacted in 1971 without amendment. At no time prior to 1971, however, did the department ever assert that intangible economic benefits such as the savings derived from shared housing constitute a “resource” or “income” under section 11008 or its precursor. If in revising our state’s welfare scheme in 1971, the Legislature meant to convert shared housing into income, such a radical departure from the prior practice would necessarily have been accompanied by a clear expression of legislative intent. Otherwise we must conclude that the Legislature, familiar with the long-standing administrative interpretation of income, manifested its approval by leaving the income provision of section 11008 unchanged. (See California Welfare Rights Organization v. Brian (1974) 11 Cal.3d 237 [113 Cal.Rptr. 154, 520 P.2d 970]; Coca-Cola Co. v. State Bd. of Equalization (1945) 25 Cal.2d 918 [156 P.2d 1].)

This conclusion is confirmed by the report of the Legislative Analyst evaluating the financial consequences of the 1971 welfare reform legislation. As noted earlier (see fn. 5, supra), the Legislative Analyst projected a $5 million savings in administrative costs but no savings at all in substantive grant payments. Had the Legislature intended to convert a large category of previously “non-income” benefits into deductible income, a large savings in grant payments would have been predicted. The analyst’s report necessarily implies that no such transformation was intended.¹⁶

Indeed, if the department’s characterization of such benefits as deductible “income” were accepted, the practical effect would be to afford the department broad discretion to curtail almost all payments to AFDC recipients under the guise of “income” because the noncash economic benefits involved here are logically no different than myriad similar benefits available to all recipients. Housing and utilities represent only two of the “need” items enumerated in Welfare and Institutions Code section 11452. The department could easily assert an allowance figure for recreation and deduct from the flat grant whenever the AFDC children actually only played in a free public park or shared a television set with nonrecipients. So, too, could allowances be resurrected for food and medical supplies with consequent deductions for items shared. Yet the fact is that such sharing has always taken place. The Legislature not only knew of this practice but contemplated that such sharing would help bridge the gap between the amount of the flat grant and the recognized minimum need level. We can find no indication that the Legislature intended to permit the agency to seize upon these “economic benefits” so as to undermine the integrity of the legislatively established flat grant figure.

b. Welfare and Institutions Code section 11006 precludes the department from treating any portion of adult aid benefits as “income" of AFDC recipients.

Moreover, aside from the general impropriety of treating shared housing or similar benefits as “income,” such characterization is clearly impermissible in the instant case by virtue of Welfare and Institutions Code section 11006. Section 11006 explicitly prohibits the imputation of any of an adult aid recipient’s benefits as income to anyone else: “Aid granted shall not be construed as income to any person other than the recipient.” (Italics added.) It seems clear that the Legislature, in establishing this prohibition, intended to protect the full grant mandated for other welfare recipients, such as the AFDC children involved in the instant case. Regulation 44-115.8, by in effect designating some portion of an adult aid recipient’s housing benefits¹⁷ as “income” to AFDC recipients residing in the same household, directly conflicts with this legislative mandate. Accordingly, on this basis alone, the regulation cannot stand.

c. In any event, the regulation is invalid because it does not measure the actual value of a recipient’s benefits but instead assigns a fictional value to this asserted “income.”

Finally, even if the economic benefits of shared housing could properly be considered “income,” the challenged regulation would still be invalid for it does not measure the actual value of a recipient’s benefits but instead assigns a fictional value to such benefits. Numerous cases of the United States Supreme Court have clearly established that under the governing provisions of the federal Social Security Act only a recipient’s actual available income may be deducted from his basic welfare benefit; arbitrary or constructive “presumptions” of income are not permissible (Lewis v. Martin (1970) 397 U.S. 552 [25 L.Ed.2d 561, 90 S.Ct. 1282]; King v. Smith (1968) 392 U.S. 309 [20 L.Ed.2d 118, 88 S.Ct. 2128]. See 42 U.S.C. § 602(a)(7); 45 C.F.R. §§ 233.20(a)(3)(ii)(c) and 233.90; Handbook of Public Assistance Administration, Part IV, § 3120 et seq.)

Under the regulation before us, a recipient’s “income” from shared housing and utilities is calculated by subtracting the recipient’s actual pro rata expenditure from the fixed “allowance” figure devised by the department. Thus, the regulation does not seek to determine the actual value of a recipient’s present housing and utility resources, but instead simply presumes that every recipient’s resources are equal in value to the department’s average allowance figure. The Lewis and King cases cited above demonstrate the invalidity of such an approach. No matter how accurately an allowance figure may reflect the average cost of housing and utilities for welfare recipients throughout the state, it is still an impermissible presumption as to the value of these items received by any one recipient.¹⁸ Only the actual value of housing and utilities benefits received could possibly constitute income to the recipient, and this the regulation does not measure.

Indeed, the present case provides perhaps the clearest illustration of the arbitrary manner in which the department’s fixed allowance operates. At the time this action was instituted, ATD recipients such as Mrs. Cooper and Mrs. Palladino received as a housing allowance, an amount which, at most, equalled the ATD recipient’s pro rata share of actual housing costs. (See former Welf. & Inst. Code, §§ 12151, 12651, 13700.) Because the ATD housing grant was limited to the recipient’s pro rata share, there were never any “excess” benefits which could properly be considered as paying for part of the AFDC recipient’s housing costs. Thus the nature of the ATD grant itself precluded the generation of any “income” of AFDC recipients sharing a household with an ATD recipient. Despite these economic realities, however, the regulation at issue here, by utilizing the department’s fictional “allowance” figure, attributed substantial income to both the Cooper and Palladino children, improperly reducing the already meagre grants on which the children must seek to survive.¹⁹

6. Conclusion.

To reiterate, we have concluded that the regulation at issue is incompatible with the governing statutory provisions and therefore invalid. As we have seen, the Legislature, in drafting the Welfare Reform Act of 1971, explicitly rejected a provision identical in substance to the proposed regulation; we have also explained that such rejection was quite predictable in view of the fact that the “noncash economic benefit” concept on which the instant regulation rests is itself completely at odds with the flat grant system adopted by the 1971 legislation. Although the department defends the regulation as a proper measure of deductible income, we have demonstrated that such a characterization flies in the face of established practice as well as the explicit provisions of Welfare and Institutions Code section 11006. Finally, we have demonstrated that, in any event, the department’s abstract “allowance” figures constitute an impermissible measure of income for they fail to measure the actual value of benefits received by any recipient.

The department’s desire to cut welfare expenses at any cost has led it to disregard the clear guidelines of its legislative mandate and to construct a contrived and tortured concept of “income” in an attempt to camouflage an impermissible administrative reevaluation of AFDC recipient’s needs. An analysis of the complexities of the department’s novel determination of “income” is reminiscent of a journey into the fictional realms visited by Alice through the looking glass. In the fanciful world of Lewis Carroll, the inhabitants could turn fact into fiction and fiction into fact by mere ipse dixit. As Humpty Dumpty scornfully informed Alice, “When I use a word, it means just what I choose it to mean—neither more nor less.”

“The question is,” said Alice, “whether you can make words mean so many different things.”

“The question is,” said Humpty Dumpty, “which is to be master—that’s all.”

Like Humpty Dumpty, the department confronts us with the question “which is to be master”—the department or the Legislature? The department’s position is as precarious and untenable as Humpty’s seat on the wall.

“Through the Looking-Glass” dealt with a fictional child. The tragedy of the instant case is that the department’s regulation, born of a fictional “allowance” construct, has brought all-too-real hardships to very real children. An administration of the welfare program that discards statutory mandate to reduce relief to the indigent young cannot be sustained. A society that sacrifices the health and well-being of its young upon the false altar of economy endangers its own future, and, indeed, its own survival.

We conclude that Regulation 44-115.8 is invalid. The judgment is reversed and the case remanded to the superior court for further proceedings consistent with the views expressed herein.

Wright, C. J., Mosk, J., and Sullivan, J., concurred.

1 In California Welfare Rights Organization v. Brian (1974) ante, page 237 [113 Cal.Rptr. 154, 520 P.2d 970], we recently examined a similar welfare regulation which reduced AFDC grants to expectant mothers on the rationale that the value of a pregnant woman’s body represented deductible “income” to her fetus. In Brian we found the regulation invalid, concluding that the governing statutes could not reasonably be interpreted to authorize such deduction.

2 Regulation 44-115.8 provides that when one or more recipients of AFDC aid reside in the same household with one or more recipients of adult aid, “if the recipient’s housing and utilities allowance exceeds his share of the actual cost of housing and utilities (including telephone) the excess shall be considered in-kind income and taken into consideration in computing the grant. [<]] Each- recipient’s share shall be calculated by dividing the total actual cost of housing and utilities (including telephone) by the number of persons (adults and minors, needy and non-needy) residing in the household.”

3 The deductions are calculated in the following manner. The Palladinos pay $88 per month on housing and utilities. The son’s pro rata share is $44 (one-half of $88). The pro rata share ($44) is then deducted from the administrative “allowance” for housing and utilities for one AFDC child ($67); $67 less $44 yields $23 which is the purported value of the in-kind income to the child from shared housing. The Coopers pay $84 per month on housing and utilities. The children’s pro rata share is $70 (five-sixths of $84). The administrative allowance for housing and utilities for four or more AFDC children is $101; $101 less $70 yields $31 in-kind income purportedly received by the Cooper children.

The figures throughout this opinion refer to the figures in force at the time this action was initiated. Although the figures have since been adjusted in response to cost of living increases, such changes do not affect the substantive analysis of the regulation’s validity.

4 The rationale of the flat grant was aptly described by Judge Weinstein on remand of Rosado: “If a family’s rent also covers some or all of its utilities costs, this is not now considered to reduce or eliminate its utilities need, which is included in the averaged basic amount. Rather, the family has made a good buy in shelter, just as when for the same money it gets an apartment with a washing machine, a plot to grow vegetables or a lower cost of transportation.” (Rosado v. Wyman (E.D.N.Y. 1970) 322 F.Supp. 1173, 1189, affd. (2d Cir. 1970) 437 F.2d 619, affd. sub nom. Wyman v. Rosado (1971) 402 U.S. 991 [29 L.Ed.2d 157, 91 S.Ct. 2169].)

5 The report of the Legislative Analyst projected a $5 million savings in administrative costs and no savings at all in overall grant payments. (See Analysis of the Budget Bill, Report of the Legislative Analyst to the Joint Legislative Budget Committee (1972 Reg. Sess.) p. 724 (Table 2).)

6 The legislation operates in accordance with the “money payment” principle incorporated in the Social Security Act, 42 United States Code section 606(b); H.E.W.’s Handbook of Public Assistance Administration, section 5120; and California Welfare and Institutions Code section 10501. An eligible recipient receives his or her grant money as a matter of right; the payment is not identified with any particular requirement or requirements considered in arriving at the amount of the payment; nor is the grant money designated for any specific items or purposes. The principle guarantees the autonomy of the recipient and encourages his responsibility in budgeting his limited finances.

7 At the time this action was commenced, the. table in section 11450 established, inter alia, a flat grant figure of $115 per month for a home containing one needy eligible person, $190 for two needy persons, and $235 for three needy persons.

Unless otherwise indicated, all section references are to the Welfare and Institutions Code.

8 Thus, for example, the regulation established a combined housing and utility allowance of $67 per month for one child, $87 per month for two children, and $95 per month for three children.

9 At the time this action was commenced, there were three “adult aid” programs in California: Aid to the Totally Disabled (ATD), Aid to the Blind (AB), and Old Age Security (OAS).

10 The administration’s proposed bill would have added a section to the Welfare and Institutions Code which read: “The allowable amount of aid granted pursuant to this chapter to a family which includes a recipient or recipients of [adult aid] . . . shall be determined by reducing the allowable amount of aid determined pursuant to section 11450 by an amount equal to the amount allocated to any item of the minimum basic standard of adequate care considered in determining the need of the recipient or recipients receiving [adult aid] ...”

11 The Burgener Bill died in the Senate Health and Welfare Committee (see Final Calendar of Leg. Business (1971) Sen. Bill No. 545 (1971 Reg. Sess.)). The'next month, section 32 was offered as an amendment to Senate Bill No. 796 and was rejected by the Senate Finance Committee. On July 21, this amendment was offered on the Senate floor and again was rejected (see 3 Sen. J. (July 21, 1971 Reg. Sess.) p. 5245 third set of amend., amend. 12). The same provision was also discussed and rejected during final negotiations on Senate Bill No. 796 which thereafter became the Welfare Reform Act of 1971.

12 In committee hearings conducted by the Legislature after the passage of the Welfare Reform Act, Department of Social Welfare Director Carleson (Swoap’s predecessor) was asked to explain the department’s policy of initiating regulations despite repeated rejections of the specific concept by the Legislature. The testimony follows:

Mr. Carleson: “Mr. Chairman, I say categorically on all of the questions relating to elements that proposed legislation [sic] that were not adopted, we have always said, we have said as clearly as we can before committees that anything we can do administratively we. will do whether or not there is legislation.”

Chairman Beilenson: “Even if the regulations are specifically rejected?”

Mr. Carleson: “. . .1 would say that from the standpoint of any proposed legislation by anyone that if administratively these reforms can be accomplished, we will be doing them administratively and there has been no agreement or commitment to do otherwise.”

This dialogue was reprinted in the “Report to the Legislature” by the Senate-Assembly Subcommittee on Implementation of Welfare Reform, March 17, 1972, accompanied by the criticism: “Director Carleson’s efforts to usurp the Legislature’s policy-making authority has been a disturbing and recurring theme during the implementation of welfare reform.” (Report to the Legislature, pp. 20-21.)

13 Although the department now contends that the average figures of section 11450 were based only upon “independent” living arrangements and did not contemplate shared housing, there is absolutely nothing to support such a contention. On the contrary, it is clear that in devising section 11450’s flat grant figures, the Legislature relied upon the department’s past payment schedule which did not distinguish between independently housed units and AFDC units that shared housing with others. (See former Reg. 44-115.61.)

14 As noted above, section 11450, subdivision (a), provides that: “[f]or each needy family which includes one or more needy children . . . there shall be paid ... an amount of aid each month which when added to his income ... is equal to the [flat grant figures] specified in the following table . . . .” (Italics added.)

15 An AFDC recipient may retain $600 worth of personal property (§ 11257) and an ATD, $1,200 (§ 11154). Real property is governed by sections 11153.7, 11152 and 11255. (See also §§ 11155 (additional exempt resources) and 11158.)

16 In his dissenting opinion, my colleague Justice Burke states: “I have no difficulty characterizing as ‘income’ or ‘resources’ the actual economic benefits obtained by AFDC recipients whose living expenses are paid, in whole or in part, by other persons. . . . (Post, p. 874.) With all respect, I believe this statement demonstrates the numerous flaws in the dissent’s argument.

First, the crucial question in this case is not whether we, as judges, or the administrative agency, can conceivably “characterize” the noncash economic benefits at issue as “income,” but rather whether the Legislature intended such a characterization. Indeed, Justice Burke’s recent opinion for this court in California Welfare Rights Organization v. Brian (1974) 11 Cal.3d 237 [113 Cal.Rptr. 154, 520 P.2d 970] explicitly recognizes this distinction, for while the resources of a pregnant woman’s body at issue there could in some sense be characterized as “in kind income” (food, shelter) to her fetus, our court held that such a characterization was impermissible because the Legislature had not intended it. For the reasons discussed above, it is clear that, just as in Brian, the Legislature did not intend the noncash economic benefits at issue in this case to be considered as deductible income warranting a reduction of a recipient’s flat grant payment.

Second, the passage from the dissent quoted above, and indeed the entire dissenting opinion, erroneously assumes that the challenged regulation measures the value of living expenses of AFDC recipients actually paid for by ATD recipients residing in the same household. As I discuss below {post, pp. 870-871), however, the administrative regulation never accurately measures the value of such benefits because, by the very nature of the ATD grant, the ATD recipient never has any “excess” resources to give to the AFDC recipients. In reality, by relying upon the department’s average allowance figure, the regulation only determines the AFDC recipient’s “reduced need” flowing from shared housing, and, as the dissent concedes, “under the express terms of section 11450, the full AFDC grant must be paid to eligible needy persons without regard to their actual expenditure for particular need items. . . .” (Post, p. 877.)

17 The adult aid benefits at issue are granted only to the individual adult residing in each household, not to a “recipient group.” The suggestion to the contrary in Justice Clark’s dissent is simply fallacious.

18 The very recent United States Supreme Court decision in Shea v. Vialpando (1974) 416 U.S. 251 [40 L.Ed.2d 120, 94 S.Ct. 1746] explains that under the federal Social Security Act a recipient’s income, as well as income-related expenses, must be determined on an individual, rather than an average, basis. The Shea court declared: “[I]t has consistently been the practice to compute the income of an AFDC applicant on an individual basis. [H] From the inception of the Act, Congress has sought to ensure that AFDC assistance is provided only to needy families, and that the amount of assistance actually paid is based on the amount needed in the individual [original italics] case after other income and resources are considered. . . . For example, HEW’s broad definition of ‘earned income’ . . . demonstrate^] its view that the determination of need in such case is to be based upon an amount of the particular individual’s available income and resources. [Italics added.] . . . Thus if income and expenses related to the production of income are to be treated alike . . . both must be considered on an individualized basis.” (Fn. omitted.) (416 U.S. at pp. 260-262 [40 L.Ed.2d at pp. 129-130].) Pursuant to this analysis the Shea court invalidated a state welfare provision which limited a recipient’s “work-related expenses” to an average, standardized figure.

19 Justice Clark’s dissent rests entirely upon the totally erroneous premise that the “noncash economic benefit” concept underlying the challenged regulation is equivalent to “in-kind income.” As we have explained, however, unlike true “in-kind income,” the department’s “economic benefit” concept does not reflect actual income (commodities or cash) received by a recipient, but instead attributes “constructive” income to a recipient who, through such economizing conduct as sharing housing, manages to spend less money monthly than the department’s hypothesized average. A recipient who saves on housing costs by sharing a household with others, and who in the department’s eyes thereby realizes “noncash economic benefits,” is a far cry from a recipient who receives free housing (i.e., actual “in-kind income”) or cash from a willing and able donor. (See Waits v. Swoap, supra, post, p. 887, fn. 6.) Accordingly, the dissent’s reliance on federal and state provisions concerning actual “in-kind” income is misplaced. In short, Justice Clark simply fails to comprehend the regulation’s serious distortion of the “in-kind income” concept. Furthermore, the scattered and random allegations of “misstatements” ascribed to the majority opinion by Justice Clark are neither borne out by the record nor worthy of refutation.