Zeien v. Palmer

955 F.2d 506, 1992 WL 8385

• Court: Court of Appeals for the Eighth Circuit
• Decided: January 23, 1992
• Docket: No. 90-2744
• Status: Published

Opinions

HEANEY, Senior Circuit Judge.

Jane Zeien brought this action on behalf of herself and others similarly situated under 42 U.S.C. § 1983 and title IV-A of the Social Security Act, 42 U.S.C. §§ 601-617 (1988). She challenges the Iowa Department of Human Services’ (IDHS) policy of canceling a family’s Aid to Families with Dependent Children (AFDC) benefits based on the receipt in a single month of a child support payment that exceeds the state’s standard of need for AFDC. Zeien claims that the Social Security Act and federal AFDC regulations require IDHS to make a best estimate of the likelihood that child support payments will continue before terminating AFDC benefits. The district court found that IDHS need not estimate the likelihood of child support continuing before terminating AFDC benefits, but that it must make a corrective payment in the first month of AFDC ineligibility if anticipated child support is not received. Zeien appeals from that portion of the district court’s order which concludes that the IDHS termination policy comports with the Social Security Act and regulations. We affirm.

BACKGROUND

Zeien, the divorced mother of four minor children, began receiving AFDC benefits of $490 per month in June 1987. Court orders entered on August 3 and December 1, 1987 required Zeien’s ex-husband to pay her child support of $320 per month, increasing to $600 per month in March 1988. As required by the Social Security Act and regulations for AFDC eligibility, Zeien assigned her right to child support to the State of Iowa. See 42 U.S.C. § 602(a)(26)(A) (1988); 45 C.F.R. § 232.-11(a)(1) (1990).

Zeien’s ex-husband made the following child support payments to the Collection Services Center (CSC), a branch of IDHS:

Amount Date

August 1987

September 1987

October 1987 750

November 1987 600

December 1987 390

January 1988 80

February 1988

March 1988

April 1988 1040

May-November 1988 0

Zeien s AFDC benefits were canceled for September 1987.¹ She reapplied and again received AFDC benefits for the months of January through May 1988. Based on the child support payment of $1,040 in April 1988, IDHS canceled Zeien’s AFDC benefits effective June 1, 1988.²

Zeien’s ex-husband failed to. make child support payments in May and June 1988. Zeien reapplied for AFDC on June 9, 1988, and again began receiving benefits on July 1, 1988. She received no child support, AFDC grant, or corrective payment for June 1988, and therefore had no income with which to support her family during that month.

Zeien brought this action against Charles M. Palmer, director of IDHS, alleging that the cancellation of AFDC benefits based on a presumption that child support payments will continue following a single payment violates the Social Security Act and federal AFDC regulations.- Zeien sought declaratory and injunctive relief, class certification, and an order requiring IDHS to notify class members of the possibility of monetary relief through state administrative channels. Palmer brought a third-party complaint against Louis W. Sullivan, Secretary of Health and Human Services (HHS), claiming that IDHS' policy resulted from its compliance with regulations promulgated by HHS. Palmer sought an order requiring HHS to provide federal financial participation in any AFDC paid pursuant to a judgment for Zeien, and enjoining HHS from penalizing IDHS for noncompliance with the Social Security Act for any AFDC paid pursuant to such a judgment.

The district court held that HHS regulations require cancellation of AFDC in the second month after receipt of a support payment exceeding the AFDC need standard without a best estimate of the likelihood of support payments continuing. The court found that the regulations were reasonable and were the product of a permissible construction of the Social Security Act by HHS. The court also held, however, that 42 U.S.C. § 602(a)(22) requires IDHS to make corrective payments for months of AFDC ineligibility when anticipated child support payments are not received. The court entered a declaratory judgment to this effect and enjoined IDHS from continuing its policy of refusing to make corrective payments. The court certified a class of all Iowa residents whose AFDC benefits were terminated after January 13, 1987 due to a child support payment, or whose AFDC benefits will be terminated in the future due to such payments. The court ordered IDHS to notify class members of their right to corrective payments for months of AFDC ineligibility in which anticipated support payments did not materialize.

DISCUSSION

Zeien claims on appeal that the district court erred in concluding that the Social Security Act and HHS regulations do not require IDHS to make a best estimate of the likelihood of child support payments continuing before terminating AFDC benefits. The district court adopted the interpretation of the statute and regulations advanced by HHS as a third-party defendant. Zeien’s argument therefore impliedly suggests either that HHS has misinterpreted its own regulations or that it has promulgated regulations inconsistent with-the Social Security Act.

The Supreme Court articulated the standard by which we review an agency’s interpretation of the statute the agency administers in Chevron, U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984):

First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.... If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, ... as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute ....

Id. at 842-43, 104 S.Ct. at 2781-82 (footnotes omitted). If Congress authorizes an agency to promulgate regulations to fill statutory gaps, such regulations “are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.” Id. at 843-44, 104 S.Ct. at 2782.

Congress created the AFDC program “to provide financial assistance to needy dependent children and the parents or relatives who live with and care for them.” Shea v. Vialpando, 416 U.S. 251, 253, 94 S.Ct. 1746, 1750, 40 L.Ed.2d 120 (1974). The Social Security Act restricts eligibility for AFDC to only the neediest families, excluding any family whose combined assets exceed $1,000 in value. See 42 U.S.C. § 602(a)(7)(B) (1988).³ States choosing to participate in the program receive reimbursement from the federal government for a percentage of the funds they expend. See 42 U.S.C. § 603 (1988); Heckler v. Turner, 470 U.S. 184, 189, 105 S.Ct. 1138, 1141, 84 L.Ed.2d 138 (1985). Participating states, in return, must administer their AFDC programs according to state plans that conform to applicable federal statutes and regulations. See 42 U.S.C. § 602 (1988); Turner, 470 U.S. at 189, 105 S.Ct. at 1141.

The Social Security Act requires each state participant in the AFDC program to implement a plan designed to maximize the collection of child support payments from absent parents. See 42 U.S.C. § 602(a)(27) (1988); see also 42 U.S.C. §§ 651-669 (1988) (Child Support Enforcement Act). One purpose of this requirement is to reduce welfare costs by increasing child support collections. See S.Rep. No. 1356, 93d Cong., 2d Sess. 13-14, reprinted in 1974 U.S.Code Cong. & Admin.News 8133, 8145-46 (“The problem of welfare in the United States is, to a considerable extent, a problem of the non-support of children by their absent parents.”). To this end, each state AFDC plan must require AFDC recipients to assign to the state their rights to child support as a condition of eligibility for aid. See 42 U.S.C. § 602(a)(26)(A) (1988). Child support payments ordinarily' are made directly to the state child support collection agency, which distributes them according to a formula set forth in the statute and regulations. See 42 U.S.C. § 657 (1988); 45 C.F.R. § 302.51(b)(1990).

The Social Security Act also requires the state AFDC agency to consider all income and resources of all members of a recipient family in determining the need for aid. See 42 U.S.C. § 602(a)(7) (1988). The Act authorizes a monthly income reporting and retrospective budgeting system to determine eligibility and need for aid. See 42 U.S.C. § 602(a)(13)(A)(i) (1988) (the state agency will determine eligibility for aid for a month based on the family’s income, composition, resources, and other similar relevant circumstances during that month); 42 U.S.C. § 602(a)(13)(A)(ii) (1988) (the state agency will determine the amount of aid based on the family’s income and other relevant circumstances in the first or second month preceding the month in which the aid is to be paid).

HHS has promulgated additional regulations governing the determination of eligibility and need for AFDC, and prescribing the method by which state AFDC agencies must consider child support payments in making those determinations. The state agency must determine AFDC eligibility prospectively for each payment month based on the agency’s “best estimate of income and circumstances which will exist in the month for which the payment is made.” 45 C.F.R. § 233.33(a) (1990). The estimate must be based on the agency’s “reasonable expectation and knowledge of current, past or future circumstances.” 45 C.F.R. § 233.31(b)(1) (1990). Once an individual has been found eligible for AFDC benefits, the state agency must reconsider or redetermine eligibility promptly whenever “a report is obtained which indicates changes in the individual’s circumstances that may affect the amount of assistance to which he is entitled or may make him ineligible[.]” 45 C.F.R. § 206.10(a)(9)(ii) (1990).

The regulations provide an exception to the best estimate rule for child support collections. When the state child support collection agency reports a collection to the state AFDC agency, the AFDC agency must treat the amount of the collection as a change in circumstances requiring a review of eligibility under 45 C.F.R. § 206.-10(a)(9)(ii). The agency must consider only that portion of a support collection which represents the support obligation for the current month. If that amount, when treated as if it were income, exceeds the state’s standard of need, the AFDC agency must find the family ineligible for aid. See 45 C.F.R. §§ 232.20(b)(1), 302.51 (1990). Because eligibility is determined prospectively, a finding of ineligibility because of a sufficient child support payment will take effect either one or two months after the support collection is reported to the state AFDC agency. If the support collection is insufficient to render the family ineligible for aid, the amount of the collection will have no effect on the amount of the family’s AFDC grant. 45 C.F.R. § 232.20(b)(1) (1990).

Zeien argues on appeal that IDHS violates 45 C.F.R. § 233.33(a) by failing to make a best estimate of the likelihood of child support payments continuing before finding a family ineligible for aid. As noted above, however, the regulations provide an exception to the best estimate rule for child support collections, requiring a rede-termination of eligibility every time the child support collection agency reports a collection to the AFDC agency. See 45 C.F.R. §§ 233.33(b), 232.20(b), 302.32(b) (1990).

While we may disagree with HHS’ decision to treat child support payments differently from other components of an AFDC recipient’s income, we may not invalidate that decision unless it is arbitrary, capricious, or manifestly contrary to the Social Security Act. See Chevron, 467 U.S. at 844, 104 S.Ct. at 2782. Congress has authorized HHS to promulgate regulations governing AFDC and child support enforcement by state agencies. 42 U.S.C. §§ 602(a)(5), 652(a)(1) (1988). Nothing in the Social Security Act prohibits HHS from drawing a distinction between child support payments and other forms of income used to calculate a family’s eligibility for AFDC. Similarly, the Act does not preclude HHS from exempting child support from the best estimate rule, which was itself created by regulation rather than by statute. We therefore cannot conclude that the regulation exempting child support from the best estimate rule is manifestly contrary to the Social Security Act.

We are also unable to conclude that the regulations distinguishing child support from other income are arbitrary or capricious. Congress itself drew such a distinction by requiring that AFDC recipients’ rights to child support be assigned directly to the state, rather than merely reported to the state as are other forms of income. See 42 U.S.C. § 602(a)(26) (1988). One purpose of giving states the responsibility of enforcing child support obligations was to ensure that child support payments replace AFDC benefits as promptly as possible. See S.Rep. No. 1356, 93d Cong., 2d Sess. 13, 20, reprinted in 1974 U.S.Code Cong. & Admin.News 8145, 8152. While the requirement that AFDC eligibility be redetermined based on each current support payment may not be the means this court would have adopted to effectuate congressional intent, it is sufficiently rational to preclude us from substituting our judgment for that of HHS. See Department of Social Servs. v. Bowen, 804 F.2d 1035, 1038 (8th Cir.1986).⁴

Moreover, we note that the hardship Zeien experienced when her anticipated child support failed to materialize is a direct result of the method Congress has required the state child support collection agency to use in distributing support collections which render a family ineligible for AFDC. Before October 1982, the Social Security Act required state child support collection agencies to pay directly to the family the full amount of the child support which was collected and used to determine the family’s ineligibility for AFDC. This amount was paid to the family in the first month the family was ineligible for an AFDC payment. In addition, the family received any current support paid during the first month of ineligibility. Elimination of Double Support Payments, final rule amending 45 C.F.R. § 302.32 (background), 49 Fed.Reg. 22,287 (1984); see S.Rep. No. 494, 97th Cong., 2d Sess. 55, reprinted in 1982 U.S.Code Cong. & Admin.News 781, 831. If support payments continued, the family would receive two payments in its first month of ineligibility: the current payment for that month and the payment on which its ineligibility had been determined one or two months earlier. If support payments did not continue, the family received at least the one support payment on which its ineligibility had been determined, and again became eligible for an AFDC grant the following month, with no gap in income. Whether or not support payments continued, the family effectively received two payments for the month in which it was determined ineligible; one in the form of AFDC for that month paid before the support was collected, and one in the form of the support on which it was found to be ineligible and which it eventually received in its first month of ineligibility.

In 1982, Congress amended the Social Security Act to require the state child support collection agency to use the payment that rendered the family ineligible to reimburse the state for AFDC paid in the month for which the support payment was collected. Tax Equity & Fiscal Responsibility Act of 1982, Pub.L. No. 97-248, § 173(a), 96 Stat. 403 (1982) (codified at 42 U.S.C. § 654(5) (1988)) [hereinafter TEFRA]. Congress intended to eliminate double payment to an AFDC family for any single month, and to ensure reimbursement to the state and federal government for AFDC already paid in the month before the support was collected and known to make the family ineligible. S.Rep. No. 494, 97th Cong., 2d Sess. 55, reprinted in 1982 U.S.Code Cong. & Admin.News 781, 831. The Senate Finance Committee estimated that the amendment would save $11 million over the next three fiscal years. Id., reprinted in 1982 U.S.Code Cong. & Admin.News 831.

Recognizing that the amendment would cause hardship to families whose child support payments did not continue in the first month of AFDC ineligibility, HHS adopted a policy of issuing corrective payments to such families for the month of ineligibility and reinstating their AFDC grants the following month without reapplication. Memorandum from HHS Associate Commissioner for Family Assistance to HHS Regional Administrator, Region VIII (Oct. 19, 1983); see also 42 U.S.C. § 602(a)(22) (1988) (requiring state AFDC agencies to promptly correct any underpayment of aid); 45 C.F.R. § 233.20(a)(13)(ii) (1990) (requiring “prompt correction of any underpayments to current recipients and those who would be a current recipient if the error causing the underpayment had not occurred”). The district court found IDHS to be in violation of this policy because it did not issue corrective payments and required a family to reapply for AFDC before reinstating its aid.⁵

The lack of income in June 1988 that prompted Zeien to commence this action thus was the product of the TEFRA amendment prohibiting direct payment to the family of a child support collection sufficient to render the family ineligible for AFDC. See supra note 2 (describing distribution of Zeien’s April 1988 child support payment pursuant to 42 U.S.C. § 654(5) and 45 C.F.R. § 302.51). Even if HHS regulations permitted IDHS to make a best estimate of the likelihood of continued child support before terminating AFDC benefits, distribution of child support collections as required under TEFRA would produce a similar lack of income whenever the agency wrongly predicted that child support would continue.

We recognize that automatic reinstatement and corrective AFDC payments do not eliminate hardship to AFDC families whose child support payments do not continue in their first month of ineligibility, because such families are likely to receive corrective payments no earlier than the first week of the following month. Because families must be virtually without assets to qualify for AFDC in the first place, failure to receive either AFDC or child support in a given month can leave a family with no means to pay for food, clothing, or shelter. The Supreme Court has noted:

Such suffering is frequently the tragic byproduct of a decision to reduce or to modify benefits to a class of needy recipients. Under our structure of Government, however, it is the function of Congress — not the courts — to determine whether the savings realized, and presumably used for other critical governmental functions, are significant enough to justify the costs to the individuals affected by such reductions.

Bowen v. Gilliard, 483 U.S. 587, 596, 107 S.Ct. 3008, 3014-15, 97 L.Ed.2d 485 (1987). We question the wisdom of Congress’ determination that a potential annual savings of less than $4 million justifies the possible hardship to AFDC families who no longer are guaranteed receipt of at least one child support payment in their first month of ineligibility. Our task, however, is not to pass judgment on the wisdom of congressional policy choices. Unless those choices “run afoul of some constitutional edict, any inequities created by such decisions must be remedied by the democratic processes.” Id. at 597, 107 S.Ct. at 3015.⁶ Because the AFDC regulations at issue comport with the Social Security Act and are neither arbitrary nor capricious, we must uphold them.

CONCLUSION

We affirm the order of the district court.

1 . The record does not indicate the reason for, and Zeien does not challenge, the AFDC cancellation in September 1987.

2 . Pursuant to 45 C.F.R. § 302.51, the CSC distributed the $1,040 child support payment made in April 1988 as follows:

Distribution Explanation

$50 to Zeien 45 C.F.R. § 302.51(b)(1) requires that the family receive the first $50 of any amount collected representing the required support obligation for that month.

$490 to IDHS 45 C.F.R. § 302.51(b)(2) requires the state to reimburse itself for the AFDC already paid for the month in which the support was collected.

$60 to Zeien 45 C.F.R. § 302.51(b)(3) requires that any excess remaining be paid to the family up to the difference between the AFDC payment for the month and the court-ordered amount for the month ($600 — $490 = $110, less $50 already distributed under § 302.51(b)(1) =

$440 to IDHS 45 C.F.R. § 302.51(b)(4) requires the state to retain any excess remaining after the first three distributions as reimbursement for any AFDC benefits paid in past months for which the state has not yet been reimbursed.

3 . The eligibility ceiling excludes from the $1,000 valuation the family home, one automobile, and one burial plot for each family member. 42 U.S.C. § 602(a)(7)(B) (1988).

4 . The dissent concludes that it is irrational to base AFDC ineligibility on receipt of a single child support payment and a presumption that such payments will continue, because "child support payments, even if they were to continue, would not go to the custodial parent but to the government to pay for prior assistance.” This speculation ignores the regulations. Section 302.51(e) provides:

[WJhenever a family ceases to receive assistance under the [state AFDC] plan, the [state child support collection] agency must:

(1) Continue to provide all appropriate [child support collection] services for a period not to exceed three months from the month following the month in which the family ceased to receive assistance under the [state AFDC] plan. The State may not charge fees or recover costs from support collections and must pay all amounts collected which represent monthly support payments to the family[.]

45 C.F.R. § 302.51(e)(1) (1990) (emphasis added).

5 . Under the district court’s order, Zeien has since received a corrective AFDC payment for June 1988.

6 . The dissent emphatically reminds us that we are reviewing HHS regulations rather than an act of Congress. The HHS regulations that directly prevented Zeien from receiving any income in the month of June 1988 are 45 C.F.R. §§ 302.32(b) and 302.51(b)(2). HHS amended these regulations to conform with 42 U.S.C. § 654(5), the TEFRA amendment to the Social Security Act designed to eliminate the possibility of AFDC families receiving both child support and the AFDC payments for the same month. The intent behind these HHS regulations thus is that of Congress, not the HHS. Congress made the policy decision that the possibility of double payments to AFDC recipients for a single month was an evil greater than the possibility of no payments at all. HHS simply implemented that policy decision, as 42 U.S.C. § 654(5) required it to do.