No. 86-566 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1987 

TINA D'EWART, 

Plaintiff and Respondent, 

-vsNANCY NEIBAUER, DIRECTOR OF HILL 

COUNTY WELFARE DEPARTMENT, AND DAVID 

M. LEWIS, DIRECTOR OF THE MONTANA 

DEPARTMENT OF SOCIAL AND REHABILITATION 

SERVICES, 

Defendants and Appellants. 

APPEAL FROM: District Court of the Twelfth Judicial District, 

In and for the County of Hill, 

The Honorable Chan Ettien, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Michael S. Becker, Dept. of SRS, Helena, Montana 

David Rice, Hill County Attorney, Havre, Montana 

For Respondent : 

Steven L. Bunch, Montana Legal Services, Helena, 

Montana 

Submitted on Briefs: May 28, 1987 

Decided: September 15, 1987 

Filed: SEP 15 1981, 

Clerk 
Mr. Justice Fred J. Weber delivered the Opinion of the Court. 

Plaintiff Tina DIEwart filed an action for declaratory 

judgment in the District Court of the Twelfth Judicial District, Hill County. The District Court held that 

5 46.10.512, ARM, was invalid as applied to the plaintiff, 

holding accrued but unpaid child care costs could be claimed 

as deductions from gross income when figuring AFDC payments. 

The Hill County Welfare Department and the Montana Department 

of Social and Rehabilitation Services (SRS) appeal. We 

reverse and remand. 

The issue is: 

Can the AFDC child care deduction found in 5 46.10.512, 

ARM, be applied to child care costs which have accrued but 

not been paid? 

The parties stipulated. to the essential facts in this 

case. Tina DIEwart is a single parent with three young 

children. Ms. DIEwart relies on assistance, in addition to 

wages she earns, from the Aid to Families with Dependent 

Children (AFDC) program to provide shelter and other necessities for herself and her children. AFDC is a federally 

funded welfare program that is administered in Montana by SRS 

and the respective county welfare departments, in this case 

the Hill County Welfare Department. The state and county 

must administer the AFDC program in compliance with and in a 

manner consistent with federal law and regulations. 

A family in which the claimant parent works may receive 

an AFDC payment if income eligible. Income eligibility for 

our purposes requires subtraction from income of items called 

"disregards." The key "disregard" in this case is the payment made for day care of children of the claimant. Benefits 

are calculated by "retrospective budgeting." This means that 
the computations for the month of January are based upon 

income and expenses during the month of November. 

It is the Hill County Welfare Department's policy that 

a child care disregard is allowed for those day care costs 

actually incurred and paid in the budget month as well as 

those charges incurred in the month immediately prior to the 

budget month but paid in the budget month. The disregard of 

day care costs that were incurred but remain unpaid is not 

allowed. 

After a hearing concerning September 1984 AFDC benefits, the hearing officer concluded that unpaid child care 

costs should be disregards in the budget month incurred. Ms. 

D'Ewart then reapplied for benefits. Ms. DIEwart's January 

1985 and February 1985 AFDC benefits were based on her November 1984 and December 1984 income and expenditures due to the 

retrospective budgeting process. Her day care costs for 

November and December were not subtracted from her November 

and December income because they were not actually paid, but 

only incurred. 

The benefit months at issue are January, February, and 

April of 1985. The amounts incurred for day care for those 

three months have not been paid by Ms. D'Ewart. Ms. D'Ewart 

is asking that the incurred, but unpaid day care costs from 

the budget months of November and December 1984 and February 

1985 be included as disregards. If included as disregards, 

the amount of benefits due Ms. DIEwart are: 

BUDGET MONTH BENEFIT MONTH AMOUNT 

November 

December 

February 

January 

February - April 33.00 

TOTAL: $147.00 

Ms. D'Ewart has paid her day care in full every month from 

March 1985 to the present. 
Ms. D'Ewart had a second hearing on March 11, 1986. 

The hearing officer reversed his earlier ruling on the merits, holding day care disregards would only be allowed to the 

extent actually paid. This decision was appealed to the SRS 

appeals board which affirmed the decision. 

Ms. DIEwart then filed a petition for declaratory 

judgment with the District Court. The District Court ruled 

that 5 46.10.512, ARM, was invalid as applied to Ms. D'Ewart 

and ordered back child care costs paid to her. This ruling 

in effect held that day care costs incurred but not paid 

could be disregarded or deducted from a claimant's income. 

SRS and the Hill County Welfare Department appealed. 

Can the AFDC child care deduction found in § 46.10.512, 

ARM, be applied to child care costs which have accrued but 

not been paid? 

Section 46.10.512 (1) , ARM, provides in pertinent part: 

When testing net monthly income and determining 

grant amount, the following disregards are subtracted . . . 

(b) Expenses for the care of each working person's 

dependent child . . . 

(i) The amount actually paid in the budget month 

will be deducted. This amount may include payments 

for charaes incurred in the month immediately prior 

to the bidget month; however, charges incurGed - but 

not paid in the budget month will ---- not be allowed 

under -- thisrule. (Emphasis added. ) 

SRS and the Hill County Welfare Department contend that the 

District Court erred in its declaratory judgment ruling and 

that 5 46.10.512, ARM, is valid and consistent with federal 

law. The applicable federal statute, 42 U.S.C.A. 

S 602 (a) (8) (A) (iii) , provides in pertinent part: 
A State plan for aid and services to needy families 

with children must . . . 

(8) (A) provide that, with respect to any month, in 

making the determination under paragraph (7), the 

State agency . . . 

(iii) shall disregard from the earned income of 

any child, relative, or other individual specified 

in- clause (ii) , an amount equal to expenditures for 

care in such month for a dependent - child . . . (~mphasis added.) 

The lower court framed the issue as follows: 

The court must determine under 42 USCA 602, 

(8) (A) (iii) [sic- should read 42 U.S.C.A. 

602 (a) (8) (A) (iii) ] whether or not unpaid but obligated babysitting services should be considered 

disregardable "expenditures" or whether or not such 

child care costs are an "expenditure" only to the 

extent they are actually paid for. 

After discussing the purpose of the AFDC program and 

accounting principles the District Court held: 

. . . the term "expenditure" was intended by Congress to mean: an outlay, or the creation of a 

liability, or an asset or expense item; that Congress in the instant case meant "expenditure" for 

day care to mean either cash payment, or those 

child care costs which are accrued and obligated 

but not paid. 

The court then concluded that 5 46.10.512, ARM, was inconsistent and more restrictive than 42 U.S.C.A. 

S 602 (a) (8) (A) (iii) and thus was invalid as to Ms. D'Ewart. 

The federal regulation pertaining to this issue, found 

at 45 C.F.R. 233.20 (a) (11) (i) (C) , provides: 
For purposes of eligibility determination, the 

State must disregard from the monthly earned income 

... 

(C) An amount equal to the actual cost, but not to 

exceed$160 . . . (~msasis added.) 

After consideration of the federal and Montana statutes and 

regulations pertaining to the AFDC program, we conclude that 

Montana's administrative rule on AFDC child care disregards, 

§ 46.10.512, ARM, correctly implements federal congressional 

intent. Day care costs which have been incurred, but not 

paid, in the budget month should not be allowed as disregards. Only those child care costs actually paid in the 

budget month should be deducted. 

We reach this conclusion for several reasons. First, 

our reading of 42 U.S.C.A. $ 602(a) (8) (A) (iii) and 45 

C.F.R. 233.20 (a) (11) (i) (C) persuades us that Congress intended 

only those child care costs actually paid to be deducted. 

The federal statute itself speaks of "expenditures." Black's 

Law Dictionary 518 (rev. 5th ed. 1979) , defines an expenditure as " [s] pending or payment of money; the act of expending, disbursing, or laying out of money; payment. " The 

federal regulation is even more explicit in its intention 

when it states, "[aln amount equal to the actual costs." The 

regulation does not mention accrued or incurred costs, but 

actual costs. "Actual" is defined in Black's Law Dictionary 

33 (rev. 5th ed. 1979) as: 

[r] eal; substantial; existing presently in act; 

having a valid objective existence as opposed to 

that which is merely theoretical or possible. 

Opposed to potential, possible, virtual, theoretical, hypothetical, or nominal. Something real; in 

opposition to constructive or speculative; . . . 

In addition, AFDC eligibility determinations are made 

using cash basis accounting principles. When figuring AFDC 
income standards, it is clear the wage or salary must be 

actually received. See 45 C.F.R. 5 233.20 (a) (6) (iii) . Thus, 

it follows that deductions from income must also be actually 

paid. Our reading of the federal statutes and regulations, 

along with the definitions of the key terms, convinces us 

that Congress intended child care costs actually be paid and 

not simply incurred. 

Second, we conclude that S 46.10.512, ARM, correctly 

incorporates the federal law as intended. The construction 

of a statute by the person or agency responsible for its 

execution should be followed unless there are compelling 

indications that the construction is wrong. Red ion Broadcasting Company v. F.C.C. (1969), 395 U.S. 367, 381, 89 S.Ct. 

1794, 1802, 23 L.Ed.2d 371, 384. As this Court stated in 

Department of Revenue v. Puget Sound Power and Light Company 

(1978), 179 Mont. 255, 262, 587 P.2d 1282, 1286: 

When faced with a problem of statutory construction 

great deference must be shown to the interpretation 

given the statute by the officers or agency charged 

with its administration. 

We conclude SRS has correctly interpreted 42 U.S.C.A. 

S 602(a) (8) (A) (iii), and hold that 5 46.10.512, ARM, is 

consistent with and implements congressional intent. We also 

emphasize that the Montana regulation allows child care 

expenses to be paid in the month they are incurred, as well 

as in the subsequent month. The ARM is flexible enough to 

allow a working AFDC mother to increase her working hours, 

but not be required to pay the increased day care costs until 

the following month when she receives her additional income 

from the added hours. 

Third, practical considerations convince us that only 

day care costs actually paid should be allowed as an income 

disregard. The efficient administration by the State of the 
AFDC program requires that the money budgeted by the AFDC 

family for day care expenses is actually spent on the day 

care expenses. While we do not believe Ms. D'Ewart intended 

in any way to perpetrate a fraud on the AFDC program, we can 

see that potential problems could develop if AFDC recipients 

were allowed to accrue day care expenses (perhaps to a relative or friend) with no intention of ever paying those expenses. Also, if the SRS were required to set up a 

bookkeeping procedure to record day care expenses incurred 

months or even years earlier, then the paper work involved 

could materially increase the complexity of operation. 

Ms. D'Ewart argues that the officer's decision concerning the benefit month of September 1984 barred subsequent 

adjudication of this matter. At that administrative hearing 

the position of the SRS and the Hill County Welfare Department was presented not by an attorney but by a social worker 

at the local level. The controversy involved a small amount 

of money, and SRS did not appeal the decision to the next 

administrative level. 

At the time of the first hearing, 5 46.10.512 (1) (b) (i) , 

ARM, provided: 

The amount actually paid in the budget month will 

be deducted. This amount may include payment for 

charges incurred in the month immediately prior to 

the budget month; however, payments in the budget 

month will not be allowed as a deduction under this 

rule. 

The regulation was contradictory. It began by providing that 

the amount actually paid would be deducted, but then stated 

that payments in the budget month would not be deducted. The 

inconsistencies were removed by an amendment effective September 26, 1985, which read: 
The amount actually paid in the budget month will 

be deducted. This amount may include payment for 

charges incurred in the month immediately prior to 

the budget month; however, charges incurred but not 

paid in the budget month will not be allowed under 

this rule. 

Considering these circumstances and especially the inconsistent ARM, we conclude it would be unjust to require the SRS 

to follow the hearing officer's initial determination in all 

subsequent proceedings. 

Accordingly, we reverse the District Court's decision 

and hold that $ 46.10.512, ARM, is valid and applicable as 

applied to Ms. D'Ewart and other AFDC recipients. We also 

hold that S 46.10.512, ARM, is consistent and not more restrictive than 42 U. S.C.A. $ 602 (a) (8) (A) (iii) . We remand 

this case to the District Court for ap proceedings. 

We Concur: 

/f 
Mr. Justice John C. Sheehy, dissenting: 

The majority in this case have established a few 

"disregards" of their own, which in turn ought to be 

disregarded. 

They have disregarded the purpose of AFDC payments, 

which is to benefit children. The concern of the AFDC 

program is for children, for their food, clothing, and 

shelter, to aid their expenses. Any restrictive regulation 

which reduces AFDC payments reduces benefits applicable to 

children. The protection of children is the paramount goal 

of the AFDC program. Rosen v. Hursh (8th Cir. 1972), 464 

F.2d 731. 

The majority disregarded that their interpretation of 

the federal statutes and regulations may result in the 

elimination of any AFDC payments to these children. The 

earnings of the mother may be such that refusal of the 

deduction of incurred costs for day care places the mother in 

an income bracket where she is not eligible to receive AFDC 

payments on behalf of her children. 

Finally the majority have disregarded the work-incentive 

nature of the federal law permitting the deduction of day 

care costs. The majority reduce the value of the 

work-incentive by their decision. 

The AFDC program is designed to provide financial 

assistance to needy dependent children and the 

parents or relatives who live with and care for 

them. A principle purpose of the program, as 

indicated by 43 U.S.C. 601, is to help such parents 

and relatives "to attain or retain capability for 

the maximum self-support and personal independence 

consistent with the maintenance of continuing 

parental care and protection. . ." 
Shea v. Vialpando (1974), 416 U.S. 251, 253, 94 S.Ct. 1746, 

1750, 40 L.Ed.2d 120, 125. 

The principle to which we should adhere in this case is 

that day care expenses reasonably attributable to the earning 

of income by the parent should be disregarded when incurred. 

Simpson v. Miller (D.C. 111. 19821, 535 F-SUPP- 1041. 

The intent of Congress and the federal agencies to limit 

deductions for day care to costs actually paid and not 

incurred costs is not as clear as the majority would make 

out. The departmental regulations allow the deduction of 

" (c) an amount equal to the actual cost, but not to exceed 

$160 . . . for the care of each dependent child . . . I, 45 

C.F.R. 233.20 (a) (11) (i) (c) . The term "actual cost" does not necessarily mean 

"actually paid" costs. It may indeed include incurred costs 

because incurred costs are as actual as those for which 

payment has been made. No federal case that I can find 

applies the majority rule set out here. The United States 

Supreme Court enunciated in Shea v. Vialpando, supra, that 

"we read this language as a congressional directive that no 

limitation, apart from that of reasonableness, may be placed 

upon the recognition of expenses attributable to the earning 

of income . . ." 416 U.S. at 260, 94 S.Ct. at 1753, 40 

L.Ed. 2d at 129. The Supreme Court, in Shea, relied on the 

congressional history set forth in S.Rep. No. 1589, 87th 

Cong. 2d Sess. 17-18 (1962): 

Under present law . . . states are permitted, but 

not required, to - take into consideration the 

expenses an individual has in earning any income 

(this practice is not uniform in the country and in 

a substantial number of states full consideration 

of such expenses is not given.) The committee 

believes that it is only reasonable for the states 

to take these expenses fully into account. Under 

existing - law - if these work expenses - are - not 

considered - in determining need, they -- have the 
effect of providinq a disincentive to working since 

- that poTtion -- of the- family budgetPspent -- for work 

expenses -- has the effect of reducinq the amount 

available for -- food, clothing, and shelter. The 

bill has, therefore, added a provision in all 

assistance titles requiring thg states to give 

consideration to any expenses reasonably 

attributable to the earning of income. (~mphasis 

added in original.) 

416 U.S. 263, 94 S.Ct. 1755, 40 L.Ed.2d 131. 

An incurred cost for day care, though not paid, is an 

expense reasonably attributable to the earning of income in 

the case of a working mother. 

A weak argument by the majority is that to allow 

incurred costs in the month in which the day care costs are 

incurred would result in extra bookkeeping, complex paper 

work, and inefficient administration. This must be true: if 

costs of day care, whether incurred or paid for, are 

disregarded in the month the day care is supplied, the actual 

cost of day care will always be the amount disregarded. No 

additional bookkeeping is required under this procedure. 

There is far more bookkeeping involved in recording monthly 

paid and unpaid costs of day care, and the accounting of day 

care costs paid in subsequent months, then there would be in 

taking "these expenses fully into account" in the month when 

the expenses are incurred. 

Equally weak is the argument that somehow through fraud, 

a working parent may over a three-month period squander $147 

of the children's benefits. It is entirely consonant with 

ordinary experience that payment of bills may sometimes be 

deferred. The legal obligation to pay remains. No fraud is 

involved in the deferral. 

The District Court was correct in its determination, and 

it order ought to be affirmed. 
Justice John C. Harrison concurs in-the foregoing dissent. 

Justice William E. Hunt, Sr., '&rs in the foregoing dissent.