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. e du/thir dc ir c uit_1996/86UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 95-5454

C. K., ON HER OWN BEHALF AND AS GUARDIAN AD LIT EM FOR HER BABY S.B. AND HER DAUGHTER J.M.; L. W., ON HER OWN BEHALF

AND AS GUARDIAN AD LITEM FOR HER BABY E.W. AND H ER SON J.W.; E. P., ON HER OWN BEHALF AND AS GUARDIAN AD LIT EM FOR HER BABY I.P. AND HER SON R.P.; E. M., ON HER OWN BE HALF AND AS

GUARDIAN AD LITEM FOR HER BABY BOY B.M. AND HE R DAUGHTER C.G.; H. K., ON HER OWN BEHALF AND AS GUARDIAN A D LITEM FOR HER BABIES T.H., D.H. AND D.H. AND OTHER SONS S. H. AND J.H.; E. S. AND G. S., ON THEIR OWN BEHALF AND AS GUARD IAN AD LITEM FOR THEIR BABY BOY B.S., SON C.S. AND THEIR DAU GHTER C.S.; M. M., ON HER OWN BEHALF AND AS GUARDIAN FOR HE R DAUGHTER A.P. AND HER SON A.R., ON BEHALF OF THEMSELVE S AND ALL OTHERS SIMILARLY SITUATED,

Appellants

v.

NEW JERSEY DEPARTMENT OF HEALTH AND HUMAN SE RVICES; WILLIAM WALDMAN, COMMISSIONER, NEW JERSEY DEPT . OF HUMAN SERVICES IN HIS OFFICIAL CAPACITY; DONNA SHALALA , SECRETARY,

UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SE RVICES; and

THE UNITED STATES DEPARTMENT OF HEALTH AND HUMA N SERVICES.

On Appeal from the United States District C ourt for the District of New Jersey (D.C. Civil Action No. 93-cv-05354)

Argued June 10, 1996

BEFORE: STAPLETON, GREENBERG, and ALDISERT, Cir cuit Judges

(Filed: August 9, 1996)

Lawrence S. Lustber g Jonathan Romberg Lenora M. Lapidus

On behalf of the AC LU-NJ Crummy, Del Deo, Do lan, Griffinger & Vecchi one One Riverfront Plaz a Newark, NJ 07102-5 497Martha F. Davis (ar gued)

Deborah A. Ellis NOW Legal Defense & Education

Fund
99 Hudson Street - 12th Floor New York, NY 10013

Melville D. Miller, Jr.,
President
David G. Sciarra Legal Services of N ew Jersey,

Inc. 101 Metroplex Drive

P.O. Box 1357 Edison, NJ 08818-1 357

Attorneys for Appel lants

Joseph L. Yannotti Assistant Attorney General

Of Counsel Dennis J. Conklin ( argued) Senior Deputy Attor ney General
Michael J. Haas Senior Deputy Attor ney General Todd A. Wigder Deputy Attorney Gen eral

Deborah T. Poritz Attorney General of New Jersey Richard J. Hughes J ustice Complex
CN 112 Trenton, NJ 08625

Attorneys for Appel lees

New Jersey Department of Human Services and William Waldman,
Commissioner

John F. Daly (argue d)

Mark B. Stern Attorneys, Civil Di vision Department of Justi ce Faith S. Hochberg
United States Attor ney Frank W. Hunger Assistant Attorney General Civil Division, Roo m 7124 Department of Justi ce Washington, DC 205 30

Attorneys for Appel leesUnited States

Department of Health and Hum an Services and Donna Shalala, Secretary

Shirley Brandman
Kathleen Sullivan

The Jerome N. Frank Legal Services Organizati on Yale Law School
127 Wall Street New Haven, CT 0652 0

Lucy Williams
Northeastern Univer sity

School of Law 400 Huntington Aven ue Boston, MA

Attorneys for Amici -Curiae Puerto Rican Legal Defense and Education Fund, Soc iety of
American Law Teache rs, and Wider Opportunities for W omen

David A. Price Daniel J. Popeo Washington Legal Fo undation
2009 Massachusetts Ave., N.W. Washington, D.C. 2 0036

Attorneys for Amicu s-Curiae Washington Legal Fo undation

Rand E. Rosenblatt Rutgers University School of Law
Fifth & Penn Street s Camden, NJ 08102

Attorney for Amici- Curiae

Members & Staff of the National
Commission for the Protection of Human Subjects of B iomedical and
Behavioral Research and The
President's Commiss ion for the Study of Ethical Pr oblems in
Medicine and Biomed ical and
Behavioral Research

Nadine Taub Women's Rights Liti gation Clinic 15 Washington Stree t Newark, NJ 07102

Judith L. LichtmanJoan Entmacher

Susannah Baruch Women's Legal Defen se Fund
1875 Connecticut Av e., N.W.
Suite 710 Washington, D.C. 2 0009

Attorneys for Amici -Curiae Women's Legal Defen se Fund;

Advocates for Youth ; American
Association of Univ ersity Women;
Catholics for a Fre e Choice; Center for Reproduc tive Law & Policy; Feminist Ma jority Foundation; Nationa l Abortion & Reproductive Rights Action League; National Co uncil of Jewish Women, Inc.; National Council of Negro Wo men, Inc.; National Family Pla nning & Reproductive Health Association;
National Women's La w Center;
ProChoice Resource Center, Inc.; Religious Coalition for Reproductive Choice ; Right to

Choose of New Jerse y; and Union of Needletrades, In dustrial and Textile Employees, AFL-CIO

William H. Mellor, III
Clint Bolick
Dana Berliner
Institute for Justi ce 1001 Pennsylvania A ve., N.W.
Suite 200 South Washington, DC 200 04-2505

Attorneys for Amici -Curiae The American Legislativ e Exchange Council; The Empowe rment Network Foundation; The Ind ependent Women's Forum; Beth sai Townsend; Tomikka Simmons; an d Nicole

Green

Evan A. Davis
Marcia L. Narine
Yves P. Denize Cleary, Gottlieb, S teen &
Hamilton One Liberty Plaza New York, NY 10006

Attorneys for Amici -CuriaeAssociation for Chi ldren of New

Jersey; The Nationa l Organization for Wo men (NOW-NJ);
American Friends Se rvice Committee; The Luth eran Office
of Governmental Min istry in New Jersey; The Nationa l Association of Social Workers, Inc.; The
Child Care Law Cent er; The Child Welfare League of America; The

Food Research and A ction Center;
and The National As sociation of
Child Advocates

William H. Hurd Deputy Attorney Gen eral
David E. Anderson Chief Deputy Attorn ey General Craig M. Burshem Assistant Attorney General
Siran S. Faulders
Senior Assistant At torney
General James S. Gilmore, I II Attorney General of the
Commonwealth of Vir ginia
900 E. Main Street Richmond, VA 23219

Attorneys for Amici -Curiae The
Commonwealth of Vir ginia and The States of Alabama, Arizona, California, New Yor k, South Carolina, and Wisco nsin

OPINION OF THE COURT

GREENBERG, Circuit Judge. Appellants, residents of New Jersey who cu rrently receive welfare funding through the Aid to Families with Dependent Children ("AFDC") program, challenge the exercise by the Secretary of Health and Human Services ("HHS") of her authority pursuant to section 1115 of the Social Se curity Act, 42 U.S.C. § 1315(a) ("section 1315(a)"), which permits her to waive requirements for state plans under the Act to enabl e individual states to test reforms to their AFDC programs throu gh "demonstration projects." Specifically, appellants challenge the Secretary's grant of waivers to the State of New Je rsey in July 1992 to allow implementation of the state's Family DevelopmentProgram ("FDP") which, inter alia, contains the so- called "Family

Cap" provision, an amendment to existing state law that eliminates the standard increase provided by AFDC f or any child born to a woman currently receiving AFDC. Appellants claim that the Secretary's waiv er was invalid and improper, that the FDP violates a numbe r of federal statutes and regulations, and that it violates thei r constitutional rights to due process and equal prot ection. Both the appellants and the state and federal appellees moved for summary judgment in the district court on all legal issues. The court granted summary judgment for appellees on all counts and dismissed the complaint with prejudice. C.K. v. Sh alala, 883 F. Supp. 991 (D.N.J. 1995). This appeal followed. The district court had jurisdiction over t his case pursuant to 28 U.S.C. §§ 1331 and 1343(3). We have jurisdiction
under 28 U.S.C. § 1291. Our review of the matter i s plenary. Helen L. v. DiDario, 46 F.3d 325, 329 (3d Cir. 1995 ); Mellon Bank, N.A. v. Metro Communications, Inc., 945 F.2d 635, 642 (3d Cir. 1991).

I. FACTUAL BACKGROUND

A. STATUTORY BACKGROUND AFDC is a joint federal and state program established under Title IV-A of the Social Security Act, 42 U.S .C. § 601 et seq., to "enabl[e] each State to furnish financial assistance and rehabilitation and other services, as far as practi cable under the conditions in such State, to needy dependent ch ildren and the parents or relatives with whom they are living . . . ." 42 U.S.C. § 601. Under the program, if a state submit s an AFDC plan that meets the requirements of 42 U.S.C. § 602, the federal government will reimburse it for a portion of the b enefits it provides to aid recipients. In other words, the st ate will receive federal matching funds if it implements an AFDC plan that comports fully with the Social Security Act. AFDC is a "scheme of cooperative federalis m" in which states are given "considerable latitude" in the adm inistration of their own programs. King v. Smith, 392 U.S. 309, 3 16-19, 88 S.Ct. 2128, 2133-34 (1968). Within the statute its elf, Congress
authorized financial aid: [f]or the purpose of encouraging the care of dependent children in their own homes or i n the homes of relatives by enabling each St ate
to furnish financial assistance and rehabilitation and other services, as far as practicable under the conditions in such State, to needy dependent children and the parents or relatives with whom they are living to help maintain and strengthen fam ily life and to help such parents or relatives to attain or retain capability for the maximu m self-support and personal independence
consistent with the maintenance of continu ing parental care and protection . . . .
42 U.S.C. § 601.In 1962, Congress added section 1115 of th e Social

Security Act, now 42 U.S.C. § 1315, in the Public W elfare Amendments of 1962, Pub. L. No. 87-543, 76 Stat. 19 2 (1962). Section 1315 provides, in relevant part: In the case of any experimental, pilo t, or demonstration project which, in the judgment of the Secretary, is likely to assist in promoting the objectives of subchapter I, X, XIV, XVI, or XIX of this chapter, or Part A or D of subchapter IV o f this chapter, in a State or States--

(1) the Secretary may waive compliance with any of the requirements of section 302, 602, 654, 1202, 1352, 1382, or 1396a of this title, as the case may be, to the extent and for the period he finds necessary to enable such State or States to carry out such project . . . . 42 U.S.C. § 1315(a). New Jersey's AFDC program is administered by the state's Department of Human Services ("DHS"). On J uly 1, 1992, the New Jersey legislature enacted the Family Devel opment Program, now known as the Family Development Act, N .J. Stat. Ann. § 44:10-19 to -33, N.J. Stat. Ann. § 44:10-3.3 to - 3.8 (West 1993). The FDP aims to reduce welfare dependency b y, inter alia, developing educational and vocational skills. To a dvance these goals, one aspect of the FDP mandates that implemen ting state and county agencies provide individual recipients with contracts tailored to the individuals' needs, providing the r ecipients with
such services as: job development and placement in full-time permanent jobs . . . counseling and vocational assessment; intensive remedial education, including instruction in Englis h- as-a-second language; financial and other assistance for higher education . . .; job search assistance; community work experien ce; employment skills training focused on a specific job; and on-the-job training in a n employment setting. N.J. Stat. Ann. § 44:10-25(b). The job training an d education programs created by the FDP for New Jersey's AFDC r ecipients ("FDP-JOBS") are intended to serve as New Jersey's education, employment and job training programs under 42 U.S.C . § 681. SeeN.J. Stat.
Ann. § 44:10-19 note. To assist recipients in pursuing their edu cational and vocational goals, the FDP provides specific benefit s, such as financial assistance for higher education (N.J. Sta t. Ann. § 44:10-25(f)), day care services (N.J. Stat. Ann. § 44:10- 25(g)(1)), transportation services (N.J. Stat. Ann. § 44:10- 25(g)(2)), and the extension of Medicaid benefits f or up to twoyears for persons who "graduate" from the AFDC prog ram as a

result of increased earned income (N.J. Stat. Ann. § 44:10- 25(g)(3)). The provision challenged in this action is section 3.5 of the chapter, an amendment to then-existing state law that eliminates the standard AFDC grant increase (e.g., $102 for a second child and $64 for a third child) for any chi ld conceived by and born to an AFDC recipient. In legislative f indings and declarations accompanying the enactment of section 3.5, the New Jersey legislature declared that: [t]he welfare system in this State should be designed to promote family stability among AFDC recipients by eliminating the incenti ve to break up families created by AFDC progr am regulations, which undermines the ability of
AFDC-enrolled mothers to achieve economic self-sufficiency and thereby perpetuates their dependence, and that of their childr en, on welfare. N.J. Stat. Ann. § 44:10-3.7(c). Briefly stated, after an initial ten-month grace period to provide notice to affected recipients, the FDP d enies additional benefits to families receiving AFDC upon the birth of an additional child conceived while the family was receiving AFDC, N.J. Admin. Code tit. 10, § 82-1.11 (1996). A family affected by the provision is entitled to retain a l arger amount of earned income, permitting the family not only to offset the
denial of additional benefits but to realize an ove rall increase in financial benefits through earnings. See N.J. S tat. Ann. §
44:10-3.5 and -3.6. Section 3.5 directly conflicts with existi ng federal law. Even though the FDP was enacted as a permanen t, statewide change to New Jersey's AFDC program, its implementa tion could not occur without the state losing its federal matching funds, absent a waiver from the Secretary of HHS. Consequently, following the bills' passage, the New Jersey Commissioner of Huma n Services applied to HHS pursuant to 42 U.S.C. § 1315(a) for waivers of the conflicting provisions of the federal act.

B. THE ADMINISTRATIVE RECORD The administrative record submitted by the federal appellees is important for resolution of the legal issues involved in the case. Therefore, we will present t he contents of the record in some detail, as did the district cour t. In mid-May 1992, HHS Assistant Secretary f or Children
and Families Jo Anne B. Barnhart met with a coaliti on of welfare advocacy groups to receive their commentary on and objections to New Jersey's proposed waiver application. App. at 41, 43. Following this meeting, on May 19, 1992, Melville D . Miller, President of Legal Services of New Jersey, Inc., su bmitted on behalf of his organization and 12 other advocacy gr oups a memorandum to Assistant Secretary Barnhart that det ailed certain preliminary objections to New Jersey's AFDC waiver request. App.
at 43-68.On June 5, 1992, DHS submitted its formal application

to HHS for a waiver under section 1315(a) that woul d authorize, inter alia, the state's implementation of section 3 .5 as well as the FDP-JOBS program as a five-year experimental pr oject. App. at 174. The application included a proposal by the agency that described counterproductive results of current welf are policies and described how New Jersey's FDP would address th ese deficiencies with the goal of ultimately breaking t he "cycle of poverty." App. at 175-288. While DHS conceded tha t depriving children of AFDC benefits might seem "harsh," it ne vertheless justified section 3.5 by stating that its purpose w as to encourage parents to be responsible in their decisi on to have additional children while receiving welfare. App. at 183-85. Indeed, DHS explicitly described the choice to have a child while receiving public support as "irresponsible [and] no t socially desirable." App. at 183. DHS stated that it would offer financial incentives to encourage AFDC parents with children born
after section 3.5 became effective to offset the be nefits they otherwise would have received through priority for employment and training services in FDP-JOBS and through the incre ase in the earned income disregard. App. at 184-85. On July 2, 1992, Assistant Secretary Barnh art submitted a memorandum to then-Secretary Louis Sullivan that formally recommended approval of New Jersey's waiver request . App. at 40. Shortly thereafter, on July 9, 1992, the aforementi oned advocacy groups sent a letter to Assistant Secretary Barnhar t to supplement their earlier submission, predicated upo n their "review of the final application submitted by the S tate, together with [their] review of the implementing regulations for the FDP as published in the New Jersey Register . . . ." A pp. at 36. In a reply letter dated August 7, 1992, Assistant Secr etary Barnhart informed Legal Services of New Jersey that HHS had considered their supplemental objections but that the waiver s till was granted, in part because the New Jersey program "re presented a new and innovative approach aimed at promoting self -sufficiency and reducing long-term welfare dependency." App. a t 17. On July 20, 1992, Secretary Sullivan appro ved the waiver to allow the entire FDP to be implemented as a five-year project under section 1315(a). App. at 18-35. The waiver allowed DHS to implement section 3.5 statewide comm encing on October 1, 1992. App. at 20-21. Included among th e terms and conditions of the waiver was the requirement that N ew Jersey conduct a demonstration project whereby families su bject to the provisions of the FDP would be "randomly assigned t o either a treatment group whose eligibility will be determine d based on FDP provisions, or to a nontreatment (or control) group for whom eligibility will be determined based on existing pr ogram provisions." App. at 21. DHS was permitted to pha se in FDPJOBS, first in Essex, Hudson, and Camden counties, and then in the remaining 18 counties of the state according to a DHSsponsored schedule, but "by no later than June 1995 ." App. at 22. DHS adopted regulations to implement the FDP o n September 21, 1992. 24 N.J. Reg. 3352 (Sept. 21, 1992). The regulations became operative on October 1, 1992, and provide th at every childborn after August 1, 1993, to a parent receiving AF DC for any

month within the ten months preceding the birth of the child "shall be excluded from the eligible unit" and the parent "shall not be entitled to incrementally increased AFDC ben efits as a result of the birth of a child(ren)." N.J. Admin. Code tit. 10, § 82-1.11(a). The only exception to section 3.5's mandate is for the children of new AFDC applicants that are born w ithin ten months of their families' application for benefits. N.J. Admin. Code tit. 10, § 82-1.11(a)(2).

II. VALIDITY OF THE HHS WAIVER UNDER THE APA Appellants first challenge the district co urt's decision to uphold the Secretary's grant of the wai ver to New Jersey under 42 U.S.C. § 1315(a). Appellants claim that the Secretary's decision to grant the waiver violated t he Administrative Procedure Act ("APA") in two ways. First, they claim that the Secretary failed to articulate or ex plain in the record how her decision complied with the statutory requirements of 42 U.S.C. § 1315(a) and how it addressed the oth er statutory and constitutional issues raised during the adminis trative process. Second, the appellants claim that the Sec retary exceeded her authority under section 1315(a) by gra nting a waiver that is not likely to assist in promoting the objec tives of AFDC, is imposed beyond the extent necessary to carry out the project, and is not a valid experimental project. We note at the outset that a court, in rev iewing informal agency action, "is not empowered to substi tute its judgment for that of the agency." Citizens to Pres erve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 81 4, 824 (1971). Nor will we presume even to comment upon the wisdom of New Jersey's effort at welfare reform. Although our in quiry into the propriety of the Secretary's waiver here "is to be searching and careful, the ultimate standard of review is a narro w one." Id.
Because we believe that this narrow standard of rev iew forbids us to disturb the Secretary's decision, we will explai n the standard
of review in some detail. The Supreme Court in Overton Park explaine d the contours of judicial review of informal agency acti on under the APA. At issue in that case was the Secretary of Tr ansportation's approval of plans to construct a federally-funded i nterstate highway through a city park located near the center of Memphis, Tennessee. Two statutes prohibited the Secretary f rom authorizing the use of federal funds to finance the construction of highways through public parks absent findings th at no "feasible and prudent" alternative route existed an d that there has been "all possible planning to minimize harm" t o the park. 401 U.S. at 405, 91 S.Ct. at 818 (quoting the Depar tment of Transportation Act of 1966, as amended, 49 U.S.C. § 1653(f), and the Federal-Aid Highway Act of 1968, 23 U.S.C. § 13 8). The Court noted that these statutory provisions were "clear a nd specific directives" to the Secretary, operating as "plain a nd explicit bar[s] to the use of federal funds for construction of highways through parks--only the most unusual situations are exempted." Id. at 411, 91 S.Ct. at 821. "Despite the clarity of thestatutory language," id., the Secretary announced h is approval of

the highway project without providing any statement of factual findings: "He did not indicate why he believed the re were no feasible and prudent alternative routes or why desi gn changes could not be made to reduce the harm to the park." Id. at 408,
91 S.Ct. at 819. The Court held that such formal findings w ere not required. "Undoubtedly, review of the Secretary's action is hampered by his failure to make such findings, but the absence of formal findings does not necessarily require that t he case be remanded to the Secretary." Id. at 417, 91 S.Ct. a t 824. The Court noted that "the Secretary's decision is entit led to a presumption of regularity," but cautioned that the APA nonetheless "require[s] the reviewing court to enga ge in a substantial inquiry." Overton Park, 401 U.S. at 41 5, 91 S.Ct. at
823. The parties do not challenge the district court's determination that here, as in Overton Park, this " substantial inquiry" is pursuant to APA "arbitrary or capriciou s" review: "[A]gency action must be set aside if the action wa s 'arbitrary, capricious, an abuse of discretion, or otherwise no t in accordance with law' . . . ." Id. at 414, 91 S.Ct. at 822 (quoting 5 U.S.C. § 706(2)(A)). The APA thus requi res a finding that the actual choice made was neither arbitrary n or capricious. To make this finding, the court must confine its re view to "the
full administrative record that was before the Secr etary at the time he made his decision," and "consider whether t he decision
was based on a consideration of the relevant factor s and whether there has been a clear error of judgment." Id. at 420, 416, 91 S.Ct. at 825, 824. The Supreme Court, subsequent to Overton P ark, has made it clear that we must remand to the agency "[i]f th e record before the agency does not support the agency actio n, if the agency has not considered all relevant factors, or if the reviewing court simply cannot evaluate the challeng ed agency
action on the basis of the record before it." Flor ida Power & Light Co. v. Lorion, 470 U.S. 729, 744, 105 S.Ct. 1 598, 1607 (1985); see also Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 654, 110 S.Ct. 2668, 2680 (1990). "We wi ll, however, uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct . 2856, 2867 (1983) (internal quotation marks omitted). The Court's jurisprudence in this area ind icates that the terms of the enabling statute frame judicial re view of informal agency action by (1) establishing the scop e of the agency's authority, and (2) indicating what relevan t factors the agency must consider in making its decision. In th is case, the Secretary is authorized to waive compliance with ce rtain provisions of the Social Security Act "to the exten t and for the period he [or she] finds necessary" to enable a sta te to carry out an AFDC demonstration project if, "in the judgm ent of the Secretary, [the project] is likely to assist in pro moting the objectives" of the AFDC program. 42 U.S.C. § 1315( a).Although here, as in Overton Park, there i s "law to

apply," 401 U.S. at 413, 91 S.Ct. at 822, these sta tutory requirements demand of the administrator far less t han those at
issue in Overton Park. Whereas the administrator i n Overton Parkwas prohibited from authorizing the construction of the highway through the park without first finding that no "fea sible and prudent" alternative route existed and that there h ad been "all possible planning to minimize harm" to the park, id . at 405, 91 S.Ct. at 818, the Secretary here was authorized to grant a waiver of compliance if she judged that the experiment was "likely to assist in promoting the objectives" of the AFDC pro gram. 42 U.S.C. § 1315(a). As Chief Judge Friendly observed , writing for a panel of the Court of Appeals for the Second Circ uit in a case involving challenges to a section 1315(a) waiver: [C]onsideration of these claims, like thos e in [Overton Park], takes us into a type of judicial review considerably more difficul t
to define and exercise than traditional
review of administrative action. We have here no adversary hearing, no record, no statement of the grounds for the Secretary 's action, except as these may be inferred fr om the papers on which he acted . . . . Whil e we shall follow the guidelines helpfully stated in Overton, so far as applicable, w e find . . . merit . . . in the defendants' position that, purely legal issues apart, it is legitimate for an administrator to set a lower threshold for persuasion when he is asked to approve a program that is avowedl y experimental and has a fixed termination d ate than a proposal, like that in Overton Park
, which is irreversible. Moreover, Overton
Park dealt with a situation where an administrator was required to make two hig hly specific determinations on the basis of explicit, legislatively prescribed considerations, rather than reach an over- all `judgment'. In saying this we are not insensitive to the impact these projects m ay have on the lives of thousands of people, many of whom are in `brutal need[.]'

Aguayo v. Richardson, 473 F.2d 1090, 1103 (2d Cir. 1973) (citations and footnotes omitted), cert. denied, 41 4 U.S. 1146, 94 S.Ct. 900 (1974). The court in Aguayo stated that "the only limitation imposed on the Secretary was that he must judge the project to be 'likely to assist in promoting the objectives'" of AFDC, and so the central question before the court was "whether the Secretary had a rational basis" for making that determination . Id. at 1105 (quoting 42 U.S.C. § 1315(a)). Rejecting the conte ntion that the administrative record was inadequate concerning man y details of the challenged program, the court found that:the material furnished by the State in

justifying the programs and applying for approval adequately covered the policy, budgetary and logistical essentials, and t he statute--speaking in terms of an otherwise unfettered `judgment'--does not require th at, before the Secretary approves an experimen t, every i must be dotted and every t crossed

.

Id. at 1107. The court concluded: "We are satisfi ed that the materials before the Secretary sufficed for 'a cons ideration of the relevant factors' by him and that there was no 'clear error of judgment' on his part." Id. at 1106 (quoting Ov erton Park, 401 U.S. at 416, 91 S.Ct. at 824). We find Aguayo persuasive, and agree gener ally with that court's statement of the proper standard of re view of section 1315(a) waivers under the APA. To resolve the appellants' APA challenges, the central question be fore us is whether the record disclosed that the Secretary rat ionally could have determined that (1) New Jersey's program was " likely to assist in promoting the objectives" of AFDC, and (2 ) it was necessary to waive compliance to the extent and for the period she did to enable New Jersey to carry out its exper iment. See 42 U.S.C. § 1315(a). If our review of the record sati sfies us "that the materials before the Secretary sufficed for a c onsideration of the relevant factors by [her] and that there was no clear error of judgment on [her] part," then we may not d isturb the Secretary's decision. Aguayo, 473 F.2d at 1106 (in ternal quotation marks omitted). Turning to the appellants' specific APA ch allenges here, the first contention is that the Secretary fa iled to articulate or explain her reasoning in granting the waiver over the objections of representatives of the appellants during the administrative process. As explained above, howeve r, the mere absence of formal findings is not a sufficient basi s for reversal because the Secretary was not required under the AP A or section 1315(a) to make findings or to explain her decision to grant New Jersey's waiver request. See Overton Park, 401 U.S . at 409, 417, 91 S.Ct. at 820, 824; see also Pension Benefit Guar . Corp. v. LTV Corp., 496 U.S. at 654, 110 S.Ct. 2680 (suggesting that the APA, by directing a court to ensure that agency action i s not arbitrary or capricious, functionally requires an a gency to "take whatever steps it needs" to create a record suffici ent to "enable the court to evaluate the agency's rationale at the time of decision"). Our review is limited to considering w hether the Secretary's decision to grant the waiver was arbitr ary or capricious, and we will reverse only "[i]f the reco rd before the agency does not support the agency action, if the a gency has not considered all relevant factors, or if [we] simply cannot evaluate the challenged agency action on the basis of the record before [us]." Florida Power & Light Co., 470 U.S. at 744, 105
S.Ct. at 1607.
We will consider next whether the Secretar y rationally could have determined that the FDP was "likely to a ssist inpromoting the objectives" of AFDC. As the district court

correctly noted, Title IV of the Social Security Ac t expressly provides that the purpose of the AFDC program is to "furnish financial assistance . . . to needy dependent child ren and [their] parents or relatives . . . to help maintain and strengthen family life . . . ." 42 U.S.C. § 601. The statute identifies other objectives of the program to inclu de the encouragement of "self-support and personal indepen dence," and the promotion of "continuing parental care and prot ection" for underprivileged children. Id. The waiver request submitted by New Jersey delineates three primary goals of the FDP: (1) breaking the cy cle of poverty; (2) enhancing the role of individual respo nsibility; and (3) strengthening and reuniting families. App. at 179. As the district court found, these aspirations, on their f ace, conform to the purposes of AFDC. C.K. v. Shalala, 883 F. S upp. at 1005. The district court relied upon the following materi al from the New Jersey waiver request to support its decision t hat section 3.5, in particular, is consistent with the objectiv es of AFDC: `[o]ne important way the FDP will encourag e decision making is to offer parents a choi ce when they have another child while receivi ng welfare. A parent will not receive an AFD C
benefit increase to take into account an
additional child.

. . .

However, [the FDP] will offer a financial incentive for these parents to work which potentially will more than offset the bene fit they would have otherwise received. This incentive will equal the current federal disregards plus the difference between the disregards and 50 percent of the monthly payment standard for financial assistance. These cases will also receive priority for employment and training services.

This may appear harsh, but it is based on the same principle that applies to everyone el se in our society. If a person is working an d has a baby, that person's salary is not automatically increased. Yet, that is essentially what we are required to do und er [current] federal AFDC regulations. We believe that if a person is given a choice
, that person will do what is best for the family which, in this case, is work. We c an best help others by empowering them to hel p themselves. The children will continue to be eligible for Medicaid and increased food stamps.' Id.; see also app. at 184-85.The district court found that the above st atement

regarding the benefits ceiling imposed upon AFDC re cipients, along with the provision for the maintenance of Med icaid and food stamps benefits for the children, "clearly evince t hat the state's goals are congruous with § 601's stated pur pose of enabling `parents [or] relatives to attain or retai n capability for the maximum self-support and personal independe nce consistent with the maintenance of continuing parental care an d protection.'" C.K. v. Shalala, 883 F. Supp. at 100 5 (quoting 42 U.S.C. § 601). The court further stated that it wa s patent from its examination of the documents generated by HHS t hat the Secretary had reviewed the state's submission regar ding section 3.5 and had judged it likely to promote at the very least the AFDC objective of parental self-sufficiency and aut onomy. Id. The court noted specifically that the terms and con ditions appended to the Secretary's waiver included provisi ons for
evaluation of the FDP to measure if and to what ext ent section 3.5 aids AFDC recipients in "slaying their own pers onal welfare dragon." Id. at 1005-06. The court held that "the Secretary's judgment that the state's FDP is consistent with th e objectives of AFDC was predicated on a consideration of the re levant factors and was not arbitrary or capricious." Id. at 1006. We agree with the district court's decisio n. It seems to us that the stated purposes of the New Jersey pr ogram are likely to pursue the goals, in the aggregate, of AF DC. The appellants, however, claim that the record as it pr esently exists
does not enable us to determine whether the Secreta ry considered the broad range of issues surrounding the project. We agree with the district court, however, that the record is sat isfactory insofar as it would allow the Secretary to ascertai n whether the program pursues the goals of AFDC. In reaching this decision, we agree with t he district court's analysis of prior cases on this issue. App ellants attack the Secretary's decision for failing to address the specific objections raised by welfare advocacy groups during the administrative review process. They argue that we should remand the action to the Secretary for additional consider ation of those objections in light of Beno v. Shalala, 30 F.3d 105 7 (9th Cir. 1994), which found remand appropriate after determi ning that the record contained essentially no evidence to indicat e that the Secretary ever took note of the plaintiffs' opposit ion, but for one "conclusory" letter to their counsel. Id. at 1 074. However, we, like the district court, decline to find in Ben o v. Shalala a
rule that in all cases an administrative record is deficient and must be supplemented where it does not contain a sp ecific recitation and refutation of objections submitted i n opposition to a proposed section 1315(a) waiver. See C.K. v. Shalala, 883 F. Supp. at 1006. Here, the record reflects that H HS officials had at least one meeting with the welfare advocacy groups to address their concerns about the waiver request. A pp. at 43. The record also contains lengthy objections by the groups in opposition to the proposed waiver, in addition to m any letters submitted by the general public, mostly in oppositi on to New Jersey's reform proposal.We agree with the district court that, giv en the fact

that prior to making her decision to grant the waiv er the Secretary had before her extensive materials as to the purported harms the FDP might cause, precedent allows us to g ive the Secretary the benefit of the doubt and conclude tha t she did consider those objections in approving the waiver. C.K. v. Shalala, 883 F. Supp. at 1007-08. In this case, as in Aguayo, the Secretary had sufficient data, including inform ation and arguments addressing all the pertinent issues, to c onsider the factors relevant to her decision. Aguayo, 473 F.2d at 1106. We will not assume that the Secretary ignored the mate rials presented in contravention of the state's position simply because, in the end, she was not persuaded by them. Thus, we
believe that the record as it stands is satisfactor y insofar as it would allow the Secretary to ascertain whether t he program pursues the goals of the AFDC, and that the Secreta ry did not exceed her authority under section 1315(a) in this regard. However, the appellants also claim that th e Secretary exceeded her authority under section 1315(a) by gra nting a waiver that was broader than necessary to carry out the pr oject, and that is not a valid experimental project. We will address these two claims in turn. With respect to the first, the district court decided that approval of that portion of the FDP that permitted statewide application of section 3.5 whil e allowing a three-year phase-in for the enhanced JOBS program w as within the Secretary's discretion. Further, the court decided that it was not an abuse of discretion for the Secretary to all ow New Jersey to execute the provision aimed at encouraging emplo yment and treating AFDC families throughout the state equally with the working poor. C.K. v. Shalala, 883 F. Supp. at 100 8. The court therefore found that the Secretary's approval of wa ivers for New Jersey's FDP was not arbitrary and capricious and t hat there had
been no violation of the APA. Id. In support of their claim that the scope o f the waiver was unreasonably broad, appellants argue first that the Secretary's waiver authorized DHS to impose section 3.5 on every AFDC family across the state, except for 3,000 fami lies randomly selected for a control group. The waiver directed DHS to gather data to study section 3.5's effects on these 3,000 families and the 6,000 families placed into an experimental grou p. Thus, appellants argue, HHS allowed the imposition of sec tion 3.5 on virtually the entire statewide AFDC population of 1 43,000 families, even though it did not require any resear ch data from 134,000 of them -- a waiver they claim was beyond t he extent necessary to carry out the project. Next, appellants argue that HHS failed to limit section 3.5's applicability to the extent necessary for its implementation by approving it without any exceptio ns. They note that the section makes no exceptions for those who become pregnant through rape, incest or failed contracepti on, or for those who decide against abortion for religious, et hical, or medical reasons. Further, in their argument for te rming section 3.5 a "Child Exclusion," appellants claim that the section completely bars eligible children from receipt of A FDC:[U]nder a family maximum, when the oldest

child in a large family becomes too old to receive AFDC, the family continues to rece ive
the same level of benefits because the younger children's grants have not been totally rescinded. Under the Child Exclusion, however, when the oldest child becomes too old to receive AFDC, those benefits disappear; the excluded children
never receive benefits because their eligibility has been completely eliminated

. Similarly, under the family maximum, if a child in a large family is sent to live wi th a relative, the child can receive AFDC benefits because the child's eligibility w as never rescinded. Dandridge [v. Williams], 397 U.S. 471, 480, 90 S.Ct. 1153, 1159 (1970). Under the Child Exclusion an
excluded child cannot receive benefits no
matter where he or she lives.
Br. at 34.

The federal appellees argue that the broad language of section 1315(a) allows both the states and the Secr etary wide discretion to conduct a variety of experiments and demonstration projects. Br. at 24. Thus, they claim that: Although the Secretary certainly has the authority to place limits on a proposed waiver project, and could conceivably abus e her discretion by approving a project of truly excessive scope or duration, plainti ffs lose sight of the proposition that neither the states nor the Secretary may be held t o `standards of scientific precision' in the design and scope of such projects. Br. at 24 (citation omitted). With regard to secti on 3.5's applicability state-wide, the federal appellees cla im that "the Secretary's broad § 1315 waiver authority by no mea ns excludes the possibility of a `demonstration' conducted on a state-wide basis." Id. at 25. Regarding the appellants' clai m that the waiver was excessively broad "simply because the Se cretary did not impose exceptions to the plan's provisions that the State itself had not called for," br. at 26, the federal appellees

state that: This argument loses sight of the basic fac t that this was a demonstration project, gea red to assessing the efficacy of new approache s to welfare issues. While it may be that s ome exceptions of the sort plaintiffs suggest might eventually prove to be useful refinements of the approach tested here, t he Secretary acted well within her discretion under § 1315 in approving this pilot progr am, as an initial test of these approaches,without such exceptions.

Id. at 26. We are well aware of our proper deference to the Secretary with regard to the issuance of section 13 15 waivers. However, that deference is not absolute. We also h ave a duty to examine her actions to determine whether they were arbitrary or capricious within the meaning of the APA, 5 U.S.C. § 706(2)(A),
and to examine whether: the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanat ion
for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of age ncy expertise. Motor Vehicle Mfrs. Ass'n, 463 U.S. at 43, 103 S.Ct . at 2867. An amicus group has brought it to our atte ntion that, in reviewing subsequent waiver requests for provisi ons similar to New Jersey's section 3.5, HHS has required that sta tes include exceptions that are absent from New Jersey's law. See br. of Puerto Rican Legal Defense and Education Fund, et a l. at 30-31 n.25. The amici claim that on October 12, 1995, Ho ward Rolston, Director of the Office of Planning, Research and Ev aluation of HHS, wrote in response to Connecticut's waiver requ est: Further, exceptions to the application of the benefit cap have been required: when the
additional child was conceived as a result of incest or sexual assault; for a child who does not reside with his or her parent; an d
for a child that was conceived in a month the family was not receiving AFDC or during so me limited set period following receipt.

Id. Thus, it seems that the Secretary has requ ired exceptions to provisions similar to New Jersey's se ction 3.5 in subsequent waivers under section 1315. We, however , recognize that the Secretary, in her discretion, is allowed t o change her mind over time regarding the wisdom of certain prog rams. Indeed, experiments are supposed to demonstrate the failing s or success of such programs. Our conviction that the Secretar y truly considered the objections presented to her by the a ppellants' representatives in the summer of 1992 thus remains unshaken. Accordingly, we agree with the position of the appe llees that it is within the Secretary's discretion to determine t he wisdom of welfare reform programs in a piecemeal fashion. Sh e need not have included the exceptions to the workings of New Jersey's provision that she later required of Connecticut's program and she legally is allowed to change her mind. Our inq uiry is limited to whether the Secretary's actions in defin ing the scope of New Jersey's waiver were arbitrary or capricious . Since we cannot so conclude, we will affirm the decision of the district
court that the waivers did not violate the APA.The appellants' final APA-based argument i s that

section 3.5 is not a valid experimental project bec ause it is not likely to yield useful information, and that the Se cretary therefore acted arbitrarily or capriciously in auth orizing it. Br. at 27. The appellants rely on Beno v. Shalala for the proposition that "the Secretary must make some judg ment that the project has a research or a demonstration value" -- that is, "she must determine that the project is likely to yield useful information or demonstrate a novel approach to prog ram administration." 30 F.3d at 1069 (noting that "[a] simple benefits cut, which might save money, . . . would n ot satisfy this requirement"). Noting that the record include s no express finding on this point (which, as we have explained, does not necessarily require reversal), the appellants furth er assert that the Secretary reasonably could not have made the re quisite determination with respect to section 3.5. The app ellants rely on studies, cited in the record, indicating no stat istically significant relationship between AFDC grant size an d family size, and fault the Secretary for granting the waiver in the absence of "any evidence demonstrating a likelihood that a com parison of [section 3.5's] treatment and control groups would provided useful information showing a correlation between AF DC benefit levels and family size." Br. at 27-28. We note first that, by its plain terms, se ction 1315(a) only requires the Secretary to determine that the p roposed demonstration project is "likely to promote the obj ectives" of the AFDC. Even assuming that the Secretary was req uired to make the more specific determination that section 3.5 wa s likely to yield useful information, however, we believe the r ecord in this case would support such a determination. Contrary to the appellants' assertions, the stated purpose of secti on 3.5 was not merely to lower fertility rates, but also: to encourage families who have additional children while on AFDC to take advantage o f the additional earned income disregard by seeking employment to help cover the child 's financial needs. It attempts to break the cycle of welfare dependency as the only me ans of acquiring financial resources. App. at 221. The Secretary found that the goals of FDP included "break[ing] the cycle of poverty, [and] enhanc[ing] the role of individual responsibility." App. at 40. In her Au gust 7, 1992 letter to a representative of the appellants during review of the waiver proposal, Assistant Secretary Barnhart expla ined that: the Department approved New Jersey's waive r application . . . because it represented a new and innovative approach aimed at promoting self-sufficiency and reducing lo ng- term welfare dependency. We will be able to determine whether the project meets its go als through the rigorous evaluation that is required as part of the application's approval. App. at 17. The "rigorous evaluation" mandated by the Secretaryrequires New Jersey to evaluate the effects of the FDP not only

on family structure -- including birth rates -- but also to evaluate whether "the FDP help[s] AFDC recipients t o achieve self-sufficiency" and how "the FDP impact[s] AFDC, Food Stamp, and Medicaid participation and costs." App. at 27 (listing specific outcome measures). Thus, it is clear that the Secretary expec ted the FDP, including section 3.5, to yield useful information to enable her "to determine whether the project meets its goals." App. at 17. We cannot say that this expectation, based on the r ecord before the Secretary at the time of her decision, was unre asonable. Accordingly, even assuming that, prior to granting a section 1315(a) waiver, the Secretary must "determine that the project is likely to yield useful information or demonstrate a novel approach to program administration," Beno, 30 F.3d at 1069, we cannot conclude that her decision to grant New Jers ey's waiver request was either arbitrary or capricious.

III. STATUTORY ARGUMENTS
A. THE HUMAN SUBJECTS PROTECTIONS OF 42 U.S.C. § 3515b 42 U.S.C. § 3515b contains safeguards for human subjects involved in research projects or experimen ts conducted with funds appropriated to HHS. The statute provid es in relevant part that no HHS appropriated funds: shall be used to pay for any research prog ram or project or any program, project, or cou rse which is of an experimental nature, or any other activity involving human participant s, which is determined by the Secretary or a court of competent jurisdiction to present a danger to the physical, mental, or emotion al well-being of a participant or subject of such program, project, or course, without the written, informed consent of each particip ant or subject, or a participant's parents or legal guardian, if such participant or subject is under eighteen years of age. T he Secretary shall adopt appropriate regulati ons respecting this section. 42 U.S.C. § 3515b. The appellants contend, as they did in the district court, that section 3.5 presents a real an d immediate danger to themselves and their dependent children b ecause of the ceiling that it places on the AFDC funds that they receive. They argue that the Secretary approved section 3.5 witho ut first determining whether it presented a danger to the re cipients and their dependents and, consequently, whether the pro gram first required the informed consent of each recipient. As the district court noted, the Secretary 's position is that HHS's present human subject regulations gen erally exempt welfare experiments from review by an Institutional Review Board ("IRB"). C.K. v. Shalala, 883 F. Supp. at 1009. T hese regulations, located at 45 C.F.R. Part 46, require that HHS research on human subjects must include (1) prior r eview of the project by an IRB, 45 C.F.R. §§ 46.107-.115 (1995), and (2)informed consent, 45 C.F.R. §§ 46.116-.124. Sectio n

46.101(b)(5)(i) specifically excludes from these sa feguards research and demonstration projects designed for "p ublic benefit or service programs," "procedures for obtaining ben efits or services under those programs," and "possible chang es in methods or levels of payment for benefits or services under those programs." 45 C.F.R. § 46.101(b)(5)(i). Thus, the regulations provide that, as a general rule, a project that cha nges or alters the amount of benefits received will not present a danger such that the informed consent requirement is triggered, but they do not foreclose a finding of danger in a specific sit uation. The Secretary argues that a waiver under 4 2 U.S.C. § 1315 by its terms contemplates an estimation in adv ance of the danger(s) posed by a particular experimental projec t. Comments published with HHS regulations promulgated in 1983 justify the general exemption for social welfare research as un dertakings "fundamentally different" from the experiments othe rwise within the ambit of the statute. 48 Fed. Reg. 9266 (1983) . Moreover, the Secretary asserts that the comments express the notion that benefits programs already are subjected to substant ial state and federal review such that requiring an "additional l ayer of review for such projects [would be] duplicative and needle ssly burdensome in light of the substantial review proce ss to which they are already subjected by state and federal off icials." Id.at 9266. It is clear to us that the Secretary's jud gment that AFDC demonstration projects involving changes in be nefit levels need no additional review represents a reasonable c onstruction of a regulatory statute adopted by the agency charged with enforcement of that statute. New Jersey's change i n how it allocates AFDC benefits is exactly the kind of "cha nges in . . . levels of payment" addressed by the general exempti on from IRB review under 45 C.F.R. § 46.101(b)(5)(i). However, we disagree with the district court's particular reasoning for holding that the Secretary complied with the human subjects rese arch statute. That court found that "it is clear that [section 3. 5] falls within that category of social programs insulated f rom additional review such that the Secretary's failure to comport with the
dictates of § 3515b is not actionable." C.K. v. Sh alala, 883 F. Supp. at 1009. We do not agree with the district c ourt that the Secretary need not comport with the dictates of sec tion 3515b. In contrast, we believe that the "additional layer of review" from which HHS exempted public benefits experiments was the regulatory requirement of IRB review, not the statu tory requirement of review for danger. We do believe, h owever, that in the case of waivers under section 1315, the Secr etary intended that her review for danger be subsumed within her m ore general review of the programs at issue. As we are satisfi ed that the issue was presented to the Secretary by the appella nts' representatives in their objections to New Jersey's plan, and are satisfied that the Secretary considered the issue i n her review of the waiver, we will affirm the judgment of the d istrict court on this point. Appellants also have argued that section 3 .5 constitutes experimentation involving pregnant wome n and fetusesin contravention of HHS regulations that set forth additional

protections for research, development, and other ac tivities involving pregnant women, fetuses, or in vitro fert ilization. 45 C.F.R. § 46.201 et seq. The district court, howeve r, decided
that section 3.5 "has no effect on the level of ben efits received by a pregnant woman; moreover, the data to be garne red from the program and evaluated by HHS/DHS does not at all im plicate issues and/or concerns regarding pregnant women and/or fet uses." C.K. v. Shalala, 883 F. Supp. at 1012. The court theref ore decided that section 3.5 is not directed toward, "nor will it measure," the effects on the pregnant or the unborn. Id. Appellants argue that section 3.5 "involve s" pregnant women, which would trigger IRB review and the other protections required by Part 46. They claim that the regulatio ns indicate that pregnant women need not be the exclusive subje cts of the experiment, but that experiments simply must "invol ve" pregnant women in order to trigger application of the regula tions. Moreover, appellants are correct in noting that the 1983 regulations adopted to exempt human experimentation that involves public benefits programs from the requirements of P art 46 specifically do not apply to experimentation involv ing pregnant women, fetuses, or in vitro fertilization. 45 C.F. R. § 46.101(i), n.1. Thus, the exemption from IRB revie w discussed above does not apply to New Jersey's program if tha t program is decided to "involve" pregnant women or fetuses. The question for us, then, is whether sect ion 3.5 involves pregnant women or fetuses within the meani ng of 45 C.F.R. Part 46. More specifically, we must determi ne whether the Secretary considered the possible application of th e regulations to New Jersey's program as part of her general revi ew under section 1315 and ruled out their applicability, or whether she failed to consider the regulations' effects at all. This question, of course, is distinct from whether statu tory requirements can be waived, as it instead focuses o n whether the alleged requirement is applicable in the first plac e. Welfare advocacy groups did raise the poss ible applicability of the more general regulations apply ing to experimentation involving human research subjects i n their objections to New Jersey's waiver application, alth ough there is no specific reference in the administrative record to the possibility that the regulations aimed at experimen tation involving pregnant women and fetuses might apply to New Jersey's program. However, both the general regulations rel ating to experimentation with human research subjects and th e specific regulations pertaining to pregnant women and fetuse s appear in 45 C.F.R. Part 46, the citation provided by the welfar e advocacy groups in their objections to the waiver. App. at 60. Again, our standard of review requires tha t we give the Secretary the benefit of the doubt and that we assu me she was familiar with the structure of the regulations issu ed by her own agency, particularly in light of the fact that welf are advocacy groups provided the citation for the more general r egulations to her. Thus, we find that the Secretary's considerat ion of the regulations pertaining specifically to experimentat ion involvingpregnant women and fetuses was subsumed within her review under

section 1315. Furthermore, we defer to her implici t judgment that section 3.5 does not involve pregnant women or fetuses. We determine, too, that we also would conclude in a re view of the matter without deference to the Secretary that sect ion 3.5 does not involve pregnant women or fetuses within the me aning of 45 C.F.R. Part 46. Therefore, we will affirm the judg ment of the district court on this point.

B. THE SOCIAL SECURITY ACT Appellants also challenge section 3.5's va lidity based upon its asserted incompatibility with the Social S ecurity Act. 1. Assistance to all Eligible Individua ls
Section 402 of Title IV of the Social Secu rity Act requires that a state AFDC plan must: provide that all individuals wishing to ma ke application for aid to families with dependent children shall have [the] opportunity to do so, and that aid to families with dependent children shall . .

. be furnished with reasonable promptness to all eligible individuals . . . . 42 U.S.C. § 602(a)(10)(A). The appellants claim th at since
section 3.5 is a state law that denies AFDC benefit s to individual children who are eligible for AFDC under federal standards, it violates section 602(a)(10)(A). The district court rejected the appellants ' claim, stating that they had disregarded "one of the centr al tenets of the AFDC program, namely that `eligibility under th e AFDC program has historically been premised upon the household a s the basic unit of assistance.'" C.K. v. Shalala, 883 F. Supp . at 1010 (citations omitted). The court stated that where a household is receiving AFDC, all of the individuals within that household are receiving it, and that payments to one individual i n a family generally are viewed as beneficial to the entire fa mily. Id. The court thereafter concluded that while appellant s had referred to section 3.5 as the "Child Exclusion" throughout their papers, that appellation is inaccurate: Under New Jersey's program, no child is excluded from benefits; rather, the additional child born to the AFDC recipien t household simply partakes of the assistanc e already received by that household at the same monetary level. Thus, the Family Cap here is analogous to the maximum family payment upheld . . . by the Supreme Court in Dandridge v. Williams, 397 U.S. 471, 90 S. Ct. 1153 (1970). Id. The court analogized the New Jersey provision at issue in this case to that involved in Dandridge, stating th at, like the maximum benefits payment in that case, section 3.5 imposes a benefits ceiling on the AFDC household. Any additi onal child born while that AFDC family is receiving payments s imply will be
included in the assistance unit and share in the be nefitsaccorded the rest of the household. Thus, as in Da ndridge, while

the level of cash assistance flowing to the househo ld will not increase with the birth of the additional child, th e court found
that it cannot be said that the additional child is denied benefits in toto. Id. Consequently, the district court held that there was no violation of section 602(a)(10)(A ). Id. at
1010-11. Appellants argue that, unlike a family max imum, section 3.5 completely bars particular eligible children fr om receipt of AFDC. They claim that under a family maximum, such as the program involved in Dandridge, when the oldest chil d in a large family becomes too old to receive AFDC, the family continues to receive the same level of benefits because the youn ger children's grants have not been rescinded totally. Under sect ion 3.5, however, appellants argue that when the oldest chil d becomes too old to receive AFDC, those benefits disappear; the excluded children never receive benefits because their eligi bility has been eliminated completely. Further, under the fam ily maximum, appellants note, if a child in a large family is se nt to live with a relative, the child can receive AFDC benefit s because the child's eligibility never was rescinded. Under sec tion 3.5, however, they note that an "excluded child" cannot receive
benefits no matter where he or she lives. Br. at 3 4. Earlier in this opinion, we noted that the Secretary has required of section 1315 waivers occurring subs equent to New Jersey's request that certain exceptions be made in provisions similar to section 3.5. Of particular note here is the Secretary's requirement of an exception in the case of "a child who does not reside with his or her parent." See b r. of Puerto Rican Legal Defense and Education Fund, et al. at 3 0-31 n.25; discussion supra. As we held there, we note again that it is within the Secretary's discretion to determine the wisdom of welfare reform programs in a piecemeal fashion. Sh e need not have required the exceptions to New Jersey's progra m that she required of later programs. Thus, we agree with th e district
court that the AFDC benefits unit should be viewed as the household, and that, in general, much like the fami ly maximum at issue in Dandridge, New Jersey's provision therefor e does not deprive otherwise eligible individuals of benefits in violation of section 602(a)(10)(A). There is, however, undeniable tension betw een the Court's conclusion in Dandridge (that, "[s]o long a s some aid is provided to all eligible families and all eligible children, the statute itself is not violated," 397 U.S. at 481, 9 0 S.Ct. at 1159), and the potential operation of section 3.5 t o deprive an otherwise eligible family with dependent children o f any AFDC benefits -- rather than merely forcing the family t o share a constant amount of benefits among more family membe rs as in Dandridge. If, for example, a caregiver does not q ualify for additional AFDC benefits himself, and only the affe cted child lives with the caregiver, the otherwise "eligible" family of two would receive no AFDC money at all in apparent viol ation of section 602(a)(10)(A). Despite this tension with the Court's lang uage inDandridge, the FDP does not violate section 602(a)( 10) because

the Secretary expressly waived compliance with sect ion 602(a) generally in order to allow New Jersey to implement the FDP's method for determining the proper amount of assista nce, which necessarily includes the possibility mentioned abov e that an eligible family will receive zero benefits. In relevant part, the waiver provisions of the Social Security Act explicitly provide that "the Secretary may waive compliance with any of the requirements of section . . . 602 . . . of this title . . . to the extent . . . he [or sh e] finds necessary to enable [the State] . . . to carry out [its] project." 42 U.S.C. § 1315(a)(1). Thus, complianc e with section 602(a)(10) is waivable. Moreover, in granting New Jersey's waiver request, the Secretary explicitly waived com pliance with section 602(a) to allow for "Differential Payments -- To allow the State to implement different methods for determ ining the
amount of assistance for families in the FDP treatm ent group and the control group." App. at 34. An eligible famil y in the "control group" would be paid according to the stan dard AFDC program, and thus always would receive some benefit s. An otherwise eligible family subject to the FDP, by co ntrast, always
will receive the standard amount less the increment al amount due for the affected child -- which may work out to be zero if the family unit includes no other eligible children, pa rent or caregiver. Such "differential payments" are precis ely what the Secretary permitted in her general waiver of the co ntrary portions of section 602(a). The general section 602(a) waiver indicate s the Secretary's intent to allow New Jersey to provide z ero additional money for an affected child, even if that means tha t some family units may receive no AFDC money at all. The appell ants argue that the Secretary can waive compliance with sectio n 602(a)(10), if at all, only by explicitly referencing subsectio n (10) because payment of benefits to eligible families is at the "heart" of AFDC. But the differential payments are at the "he art" of section 3.5. Although the Secretary could have cit ed each relevant subsection of section 602(a) specifically in the waiver authority document, such specificity was not necess ary: the waiver provisions clearly indicate the Secretary's intent to waive compliance with subsection 602(a)(10) insofar as that provision is inconsistent with the zero-additional- benefits provisions of the FDP. See Aguayo, 473 F.2d at 110 8 (concluding, where it was clear that the Secretary intended to w aive compliance with a particular section, that "[i]t wo uld elevate form over substance to issue a temporary injunction against the operation of these projects until the Secretary wen t through the formality of adding [the section] to the list of se ctions compliance with which was being waived"). In sum, we hold that the Secretary waived compliance with section 602(a)(10) insofar as to allow New Jer sey to implement the FDP, and accordingly the program does not violate
that section. We will affirm this decision of the district

court. 2. Equitable Treatment RegulationsThe appellants next assert that section 3. 5 violates

the principle that a state must treat eligible indi viduals and groups of residents on an equitable basis. HHS reg ulations provide that "eligibility conditions" in a state pl an "must not exclude individuals or groups on an arbitrary or un reasonable basis, and must not result in inequitable treatment of individuals or groups in [ ] light of the provision s and purposes of the public assistance titles of the Social Secur ity Act." 45 C.F.R. § 233.10(a)(1). Appellants claim that addit ional children born to AFDC recipients are denied benefits under s ection 3.5 based solely on what the state has deemed the "irre sponsible" behavior of their parents. The district court, how ever, held that the section "does not operate to deny any chil d benefits, but instead simply requires that child to share in the cash payments allotted to his or her particular AFDC hou sehold." C.K. v. Shalala, 883 F. Supp. at 1011. Appellants also claim that while states ar e free to set their own standard of need, their "determination of need and amount of assistance for all applicants and recipie nts [must] be made on an objective and equitable basis." 45 C.F. R. § 233.20(a)(1). They argue that section 3.5 violates this regulation because it affords different levels of c ash assistance to families of identical size and need based upon a parent's decision to have a child while in receipt of AFDC. Br. at 35. The district court found no violation of this regul ation, holding that "[t]he cap applies equally to all AFDC recipie nts who decide to conceive and give birth to another child since i t went into effect," C.K. v. Shalala, 883 F. Supp. at 1011, and that "[t]he fact that there may be different levels of assistan ce given to families of equal size is potentially offset by the additional earned income disregards available to the affected families."

Id. We agree with the judgment of the district court that section 3.5 does not violate the HHS regulations re garding equitable treatment of aid recipients. Therefore, we will affirm the decision of that court with regard to this argu ment. 3. Work-Related Programs Pursuant to 42 U.S.C. §§ 681-87, states pa rticipating in the AFDC program must establish and operate a "j ob opportunities and basic skills program," or JOBS. 42 U.S.C. §
682. The services and activities of JOBS include e ducational activities, job skills training, job readiness acti vities to help prepare participants for work, job development and job placement, job searches, on-the-job training, work supplementa tion programs, and community work experience. 42 U.S.C. § 682(d)( 1)(A). In addition, a state also may offer post-secondary edu cation in appropriate cases as well as such other education, training and employment as it may deem necessary. 42 U.S.C. § 6 82(d)(1)(B). The statute provides that, when assigning AFDC reci pients to a JOBS program activity, a state must assure that "th e conditions of participation are reasonable, taking into accoun t in each case the proficiency of the participant and the child ca re and other supportive services needs of the participant." 42 U.S.C. § 684(a)(4). This requirement applies to "any work-r elatedprograms and activities under this part, and under any other

work-related programs and activities authorized . . . under section 1315 of this title." 42 U.S.C. § 684(e). Appellants claim that New Jersey here failed to assure the rea sonableness of conditions of participation in FDP-JOBS by parents of children subject to section 3.5. Their argument is that: all parents of excluded children must participate in FDP-JOBS whether or not the conditions are `reasonable;' such parents must participate whether or not they have the capacity to work, are disabled, can find work, have the ability and proficiency to participate in FDP-JOBS, have a need for child care and other supportive services i n order to work or participate in FDP-JOBS, or have a need to remain home and care for a
newborn child.
Br. at 37. With respect to this claim of the appellan ts, we agree
with the district court that section 684 establishe s that the provision is intended to regulate job placement pro grams, but not changes in benefit levels or work incentives based upon the
relaxation of earned income limits. As the court s tated, "[a] benefit cut, no matter what its purpose, is not a ` program' or `activity' offered by the State to assure that need y families obtain education, training and employment." C.K. v . Shalala, 883 F. Supp. at 1012 (quoting Beno v. Shalala, 853 F. S upp. 1195, 1215 (E.D. Cal. 1993)). We agree with the district court's
assessment of this issue and find no need to alter this part of its opinion. 4. Family Planning Services Appellants claim that section 3.5 is a "fa mily planning service" subject to section 402(a)(15) of the Socia l Security Act, 42 U.S.C. § 602(a)(15), which requires state A FDC programs to offer voluntary plans "for preventing or reducin g the
incidence of births out of wedlock and otherwise st rengthening family life." Section 3.5, they argue, is a compul sory family planning service since it seeks to deter pregnancy in all women who receive AFDC. Thus, they argue that the sectio n does not afford AFDC recipients the information and opportun ity to make informed, voluntary family planning choices, but im poses a coercive family planning regime in violation of sec tion 602(a)(15). Br. at 38. The district court did not agree with the appellants' claims. The court noted that section 602(a)(15), b y its terms, is directed at requiring a state to provide birth c ontrol services to those AFDC recipients who seek them. I t stated that section 3.5, however, addresses the problem of "bir ths out of wedlock" by adjusting benefit levels. Thus, while some AFDC recipients may avail themselves of family planning services provided under section 602(a)(15) given the imposit ion of the cap, the court found that the cap itself cannot be construed as one of those services. While not commenting on the district court's assessment of section 3.5 as addressing "bi rths out ofwedlock," we agree with the court's decision that N ew Jersey's

provision is not a family planning service within t he meaning of section 602(a)(15). Thus, we will affirm this hold ing of that

court.

IV. CONSTITUTIONAL ARGUMENTS Finally, appellants argue that section 3.5 impermissibly interferes with their rights to due p rocess and equal protection of the laws. They argue that the cap is irrational and illegitimate because it penalizes ch ildren for the behavior of their parents. In addition, they asser t that the section should be subjected to, and fails, strict s crutiny review, since the state's "overriding" purpose in e nacting the section (deterring childbirth by welfare recipients ) is an illegitimate goal sought to be realized by broad an d overly
intrusive means. The district court decided that N ew Jersey's welfare cap is rationally related to a legitimate g overnmental purpose, in that the state's interests in giving AF DC recipients the same structure of incentives as working people, promoting individual responsibility, and strengthening and st abilizing the family unit are clearly legitimate. C.K. v. Shalal a, 883 F. Supp. at 1013. Further, the court decided that the case does not present a situation where New Jersey unduly has bur dened the procreative choice of the plaintiff class, since se ction 3.5 "in no way conditions receipt of benefits upon plaintif fs' reproductive choices." Id. at 1014. Accordingly, the court found that section 3.5 does not infringe appellants ' procreative rights. We have nothing to add to the district cou rt's opinion on this point except to observe that it would be re markable to hold that a state's failure to subsidize a reproduc tive choice burdens that choice. In short, there are no consti tutional implications when the state does not pay a benefit to parents who have a child that it would not pay to parents who d id not have a child. Rather than burdening the procreative choic e of the plaintiff class, section 3.5 is neutral with respec t to that
choice. Lastly, the court found that New Jersey's welfare reform efforts are rationally related to the legiti mate state interests of "altering the cycle of welfare depende ncy that it has determined AFDC engenders in its recipients as well as promoting individual responsibility and family stab ility." Id.at 1015. We see no reason to disturb these holdings of the district court, and will therefore affirm its decis ion as
described herein.

V. CONCLUSION For all the foregoing reasons, we will aff irm the judgment of the district court.