Opinion ID: 2172649
Heading Depth: 1
Heading Rank: 4

Heading: Plaintiffs' Federal Law Claim

Text: 1. AFDC Statutory and Regulatory Background Aid to Families With Dependent Children, as Title IV-A of the Social Security Act, was enacted [F]or the purpose of encouraging the care of dependent children in their own homes or in the homes of relatives by enabling each State to furnish financial assistance and rehabilitation and other services, as far as practicable under the conditions of the State, to needy dependent children and the parents or relatives with whom they are living to help maintain and strengthen family life and to help such parents or relatives to attain or retain capability for the maximum self-support and personal independence consistent with the maintenance of continuing parental care and protection.... [42 USC 601.] The AFDC program is based on a scheme of cooperative federalism. King v Smith, 392 US 309, 316; 88 S Ct 2128; 20 L Ed 2d 1118 (1968). Established by Title IV of the Social Security Act of 1935, 49 Stat 627, to provide financial assistance to needy dependent children and the parents or relatives who live with and care for them, Shea v Vialpando, 416 US 251, 253; 94 S Ct 1746; 40 L Ed 2d 120 (1974), the federal program reimburses each State which chooses to participate with a percentage of the funds it expends. § 403, 42 USC § 603. In return, the State must administer its assistance program pursuant to a state plan that conforms to applicable federal statutes and regulations. § 402, 42 USC § 602. [ Heckler v Turner, 470 US 184, 189; 105 S Ct 1138; 84 L Ed 2d 138 (1985).] The State, however, is afforded broad discretion in determining both the standard of need and the level of benefits [citing Shea, supra, 416 US at 253]. The state plan first establishes the statewide standard of need, which is the amount deemed necessary by the State to maintain a hypothetical family at a subsistence level, Shea v Vialpando, 416 US 253; 99 S Ct 1746; 40 L Ed 2d 120, and then determines how much assistance will be given, that is, what `level of benefits' will be paid, Rosado v Wyman, 397 US 397, 408; 90 S Ct 1207; 25 L Ed 2d 442 (1970). Both eligibility and benefit amounts are determined by comparing income with the state standard of need. If a family's income is less than the predetermined statewide standard of need, the applicant is eligible for participation in the program and the amount of assistance payments will be based upon that difference [citing Shea, supra, 416 US at 254]. [ Heckler, supra, p 189, n 3.] Michigan, as a participant in the AFDC program, has developed the required state plan for the administration of the program. MCL 400.1 et seq.; MSA 16.401 et seq. Pursuant to MCL 400.10; MSA 16.410, the Director of the DSS has been given authority to promulgate rules in regard to the AFDC program. Both the statute and the federal regulation have changed several times during the pendency of this action. The AFDC program, established by Title IV-A of the Social Security Act, 42 USC 602 et seq., is administered by the DSS in accordance with the Social Security Act and the federal rules contained in 45 CFR Part 200, and pursuant to MCL 400.10; MSA 16.410, the state administrative rules, and departmental policies found in the Assistance Payments Manual (APM). Prior to October 1, 1981, 42 USC 602(a)(7) provided, in part: (a) A State plan for aid and services to needy families with children must ... (7) ... provide that the State agency (A) shall, in determining need, take into consideration any other income and resources of any child or relative claiming aid to families with dependent children, or of any other individual (living in the same home as such child and relative) whose needs the State determines should be considered in determining the need of the child or relative claiming such aid. Prior to October 1, 1981, this statute contained no specific resource limits. However, resource limits were prescribed by Department of Health, Education, and Welfare regulations pursuant to the secretary's authority under 42 USC 1302. Pursuant to 45 CFR 233.20(a)(3)(i)(A), the secretary prescribed that [i]n addition to the home, personal effects, automobile and income producing property allowed by the agency, the amount of real and personal property, including liquid assets, that can be reserved for each individual recipient shall not be in excess of two thousand dollars. Thus, prior to October of 1981, there were no statutory limits on income for AFDC eligibility; rather, the limitation was set by federal regulation. Effective October 1, 1981, 42 USC 602(a)(7) was amended by the Omnibus Budget Reconciliation Act of 1981 (OBRA), PL 97-35; 95 Stat 859, to provide: (a) A State plan for aid and services to needy families with children must ... (7) except as may be otherwise provided in paragraph (8) or (31) and section 615 of this title, provide that the State agency  (A) shall, in determining need, take into consideration any other income and resources of any child or relative claiming aid to families with dependent children, or of any other individual (living in the same home as such child and relative) whose needs the State determines should be considered in determining the need of the child or relative claiming such aid; (B) shall determine ineligible for aid any family the combined value of whose resources (reduced by any obligations or debts with respect to such resources) exceeds $1,000 or such lower amount as the State may determine, but not including as a resource for purposes of this subparagraph (i) a home owned and occupied by such child, relative, or other individual and so much of the family member's ownership interest in one automobile as does not exceed such amount as the Secretary may prescribe.... Thus, in October of 1981, by the passage of OBRA, Congress established statutory limits to be used in determining AFDC eligibility. As of October 1, 1981, the promulgated federal regulation required that a state plan [s]pecify the amount and types of real and personal property, including liquid assets, that may be reserved, i.e., retained to meet the current and future needs while assistance is received on a continuing basis. 45 CFR 233.20(a)(3)(i). In addition, and more importantly, 45 CFR 233.20(a)(3)(ii)(D) provided: A State Plan for ... AFDC ... must ... (ii) Provide that in determining need and the amount of the assistance payment, after all policies governing the reserves and allowances and disregard or setting aside of income and resources referred to in this section have been uniformly applied: ... (D) Net income available for current use and currently available resources shall be considered; income and resources are considered available both when actually available and when the applicant or recipient has a legal interest in a liquidated sum and has the legal ability to make such sum available for support and maintenance. (E) Income and resources will be reasonably evaluated. Resources will be evaluated according to their equity value. For purposes of this paragraph (a)(3): ... Equity value means fair market value minus encumbrances (legal debts); Fair market value means the price an item of a particular make, model, size, material or condition will sell for on the open market in the geographic area involved ...; Liquid assets are those properties in the form of cash or other financial instruments which are convertible to cash and include savings accounts, checking accounts, stocks, bonds, mutual fund shares, promissory notes, mortgages, loan value of insurance policies, and similar properties; Need standard means the money value assigned by the State to the basic and special needs it recognizes as essential for applicants and recipients.... [Emphasis supplied.] The plaintiffs assert that the issue in the instant case is whether the DSS violated 42 USC 602(a)(7) and 45 CFR 233.20(a)(3)(ii)(D) (1981) when it determined that the houses, owned but not occupied by plaintiffs, were currently available resources within the meaning of the above federal regulation. However, plaintiffs do not quote from the above-cited regulation; rather, they cite the regulation that amended it. The regulation which plaintiffs cite, 45 CFR 233.20(a)(3)(ii)(D) (1982), as published in the Federal Register on February 5, 1982, 47 Fed Reg 5675, provides: Net income, except as provided in paragraph (a)(3)(xii) of this section, and resources available for current use shall be considered; income and resources are considered available both when actually available and when the applicant or recipient has a legal interest in a liquidated sum and has the legal ability to make such sum available for support and maintenance. [Emphasis supplied.] McKee's first hearing decision was issued June 29, 1981, the rehearing decision was issued November 17, 1981, the Policy Hearing Authority decision was issued November 23, 1981, and McKee's second complaint was filed in the circuit court on December 3, 1981. Johndro's hearing decision was issued October 8, 1981, and her complaint, along with that of McKee, was filed in the circuit court on December 3, 1981. Neither party argues the applicability of the law which they cite, and neither party argues that there is any substantive difference between the two regulations. As is apparent, the regulation in existence in 1981 provided that the state must consider net income available for current use and currently available resources ..., whereas the amendment, published in February of 1982, provides that state plans must consider net income ... and resources available for current use. ... Both regulations include the definition that income and resources are considered available both when actually available and when the applicant or recipient has a legal interest in a liquidated sum and has the legal ability to make such sum available for support and maintenance. Prior to the enactment of the OBRA, states were administratively allowed, in their discretion, to provide for grace periods for the disposition of nonliquid assets. While twenty-one states provided for such grace periods, Michigan was not one of those states. After the passage of the OBRA, the Department of Health and Human Services, in November of 1983, changed its policy so as to prohibit the allowance of grace periods. See Schrader v Idaho Dep't of Health & Welfare, 768 F2d 1107, 1110 (CA 9, 1985); Davis v Lukhard, 591 F Supp 319, 321 (ED Va, 1984) ( app pending ). The essential question for resolution is whether the DSS erred by making the determination to terminate plaintiffs' AFDC benefits because plaintiffs owned nonhomestead real property in excess of the AFDC eligibility limit. Plaintiffs claim that the DSS' determination to terminate their benefits is contrary to the plain meaning of 45 CFR 233.20 and, to a lesser extent, to Michigan's analogous administrative rule 1979 AC, R 400.12(7) and (10). Plaintiffs do not contest the fact that the non-homestead real property they owned had an equity value at or in excess of the AFDC eligibility limit. Plaintiffs argue rather that that nonhomestead real property was not an available resource within the meaning of either the federal or state regulations. [10] During the period relevant here, there has always existed an exemption, either by statute or regulation, for homestead real property. Thus, until plaintiffs moved from the marital home (as a result of divorce or separation), their equity interests in their respective homes were exempt and thus were not available assets to be used in determining AFDC eligibility. However, once plaintiffs moved from their marital homes, the exemption did not apply, and their equity interests in their former marital homes became nonhomestead real property, which is subject to the specified limitations in order to retain eligibility for AFDC. 2. Recent Statutory Amendment Initially, I note that, because of a recent statutory enactment, plaintiffs would not make the same argument today. On July 19, 1984, Congress passed Public Law 98-369; 98 Stat 494, known as the Deficit Reduction Act of 1984 (DRA) (effective October 1, 1984). With the passage of that act, Congress amended 42 USC 602(a)(7)(B) to provide: A State plan for aid and services to needy families with dependent children must     (7) except as may be otherwise provided ..., provide that the State agency     (B) shall determine ineligible for aid any family the combined value of whose resources (reduced by any obligations or debts with respect to such resources) exceeds $1,000 or such lower amount as the State may determine, but not including as a resource for purposes of this subparagraph....    (iii) for such period or periods of time as the Secretary may prescribe, real property which the family is making a good-faith effort to dispose of, but any aid payable to the family for any such period shall be conditioned upon such disposal, and any payments of such aid for that period shall (at the time of the disposal) be considered overpayments to the extent that they would not have been made had the disposal occurred at the beginning of the period for which the payments of such aid were made. The secretary then promulgated the current federal regulation which states: A State Plan for ... AFDC ... must    (3)(i)(A) Specify the amount and types of real and personal property, including liquid assets, that may be reserved, i.e., retained to meet the current and future needs while assistance is received on a continuing basis. In addition to the home, personal effects, automobile and income producing property allowed by the agency, the amount of real and personal property, including liquid assets, that can be reserved for each individual recipient shall not be in excess of two thousand dollars.    (B) in AFDC  The amount of real and personal property that can be reserved for each assistance unit shall not be in excess of one thousand dollars equity value (or such lesser amount as the State specifies in its State Plan) excluding only:    (5) Real property for a period of six months (or at the option of the State, nine months) which the family is making a good faith effort (as defined in the State plan) to sell subject to following provisions. The family must sign an agreement to dispose of the property and to repay the amount of aid received during such period that would not have been paid had the property been sold at the beginning of such period, but not to exceed the amount of the net proceeds of the sale. If the property has not been sold within the specified time period, or if eligibility stops for any other reason, the entire amount of aid paid during such period will be treated as an overpayment. ... [45 CFR 233.20(a)(3)(i)(A) and (B)(5) (1985). Emphasis supplied.] Thus, Congress, by the enactment of the DRA of 1984, authorized the promulgation of regulations allowing a grace period of six or nine months in length, at state option, by which real property that a family is attempting in good faith to sell would not be included as an available asset for determining eligibility for AFDC benefits during the grace period. The regulation allows the state to define good faith. Hence, if plaintiffs were attempting to receive AFDC benefits today, as long as they were making a good-faith attempt to sell their non-homestead real property, the value of that property would not be included in determining plaintiffs' eligibility for AFDC benefits during the grace period. The hearing referees, as well as the Policy Hearing Authority in McKee, found that the plaintiffs were making a good-faith attempt to sell the property in question. The DSS does not dispute that fact. However, the DRA of 1984 has not been argued as applicable to the situation in 1981, and we must decide the instant case on the basis of the law in existence at the time these suits were first brought. 3. Application of the Regulation to the Facts I begin, again, with the regulation that was in existence in 1981. That regulation required states to [s]pecify a statewide standard, expressed in money amounts, to be used in determining ... the need of applicants and recipients ..., and, in determining need, to consider all income and resources, excluding reserves and allowances, in relation to the State's need standard.... 45 CFR 233.20(a)(2)(i) and (3)(ii)(A). It also specifically required the state to consider currently available resources: Net income available for current use and currently available resources shall be considered; income and resources are considered available both when actually available and when the applicant or recipient has a legal interest in a liquidated sum and has the legal ability to make such sum available for support and maintenance. [45 CFR 233.20(a)(3)(ii)(D).] At issue, therefore, is whether the defendant erroneously determined, pursuant to 45 CFR 233.20(a)(3), 1979 AC, R 400.12, and the departmental policy Item 211, see n 9, that plaintiffs' interest in real property with a value in excess of the AFDC eligibility limits was a currently available resource or actually available. The departmental policy, as set forth in Item 211, states that in order to receive AFDC, plaintiffs must have combined total countable assets of no more than $2,000. Assets are defined to include real property. Nonhomestead real property is defined as real estate that a person owns that is not part of his homestead. Item 211 also provides that the person's share of nonhomestead property held jointly with a nonspouse or a separated spouse, is calculated by dividing the value by the number of owners, unless otherwise specified in the document of ownership. If the client verifies that the other owners do not agree to the sale of the share, it is not available and none of it is counted toward the asset limit. In the case at bar, all parties agreed to sell the asset. Thus, it appears that defendant found that since all parties agreed to the sale, the nonhomestead real property was considered available and thus countable toward the asset limit. Since it seems obvious that nonhomestead real property is not net income, the question becomes, under the regulation, whether plaintiffs' interest in real property can be considered a currently available resource. The regulation further provides that income and resources are considered available both when actually available and when the applicant or recipient has a legal interest in a liquidated sum and has the legal ability to make such sum available for support and maintenance. Clearly, plaintiffs do not have a legal interest in a liquidated sum. Black's Law Dictionary (4th ed), p 1079, defines liquidated as [a]scertained; determined; fixed; settled; made clear or manifest. At the time of the administrative hearings, plaintiffs' interests in this nonhomestead real property was anything but ascertained, determined, and fixed. Both plaintiffs had reduced the asking price on their real property, and both plaintiffs, it was found, were making good-faith attempts to sell their property. Since the plaintiffs' real estate at issue cannot logically be considered net income or a legal interest in a liquidated sum, the question, pursuant to the regulatory language, becomes whether plaintiffs' interest in nonhomestead real property is a currently available resource or whether that resource is actually available. The Policy Hearing Authority found that the law did not require that the resource be both currently available and liquidated. It also found that the real estate involved here was actually available since all parties were willing to sell the property at the fair market value. I agree with the defendant that the plaintiffs' interest in nonhomestead real property was actually available and was a currently available resource. I reject plaintiffs' invitation to hold that, while an AFDC applicant or recipient is making a good-faith effort to sell such property, the value of that property cannot be considered actually or currently available. In the first instance, I believe that this particular regulation must be viewed in light of the surrounding regulatory provisions. A state plan is required to specify the amount and types of real and personal property, including liquid assets, that may be reserved. 45 CFR 233.20(a)(3)(i). Clearly, liquid assets are but a subset of the types of real and personal property that may be reserved. Thus, real property, without regard to liquidity, is certainly contemplated as being a resource for consideration in determining the applicant's eligibility for AFDC benefits. The question then becomes whether the nonhomestead real property can be considered actually available. The sparse case law on this question does not provide a determinative answer. Several federal district courts have been confronted with this issue, although under varying factual circumstances. Referring to the regulation in question, 45 CFR 233.20(a)(3)(ii)(D), the court, in Kanda v Chang, 475 F Supp 368, 381 (D Hawaii, 1979), stated: When dealing with home property, the wording of this latter regulation is not particularly apt. A resource is considered available when actually available and when the applicant or recipient has a legal interest in a liquidated sum and has the legal ability to make such sum available for support and maintenance. The regulation applies to a variety of income and resources having a wide range of liquidity. Nevertheless, a common sense application of the regulation as applied to home property leads me to the opinion that equity in home property is currently available when there is no legal impediment to the immediate sale of the equity in the open market. [42] [Emphasis supplied.] Plaintiffs point out that a listing for sale and an actual sale are not simultaneous events. A sale may not be consummated for many months. Yet this cannot be a factor in determining current availability. First, by the very nature of the asset, real property would never be currently available if that meant being equivalent to cash in hand. Secondly, a depressed market situation would be reflected in fair market value. Thirdly, the regulation contemplates that home property within the maximum value allowed will not be sold but will be used as a residence by the assistance household. [42] Real property by definition is never a liquidated sum. Kanda, however, is factually distinguishable from the instant case because the plaintiffs in Kanda were not attempting to sell or convert the excess value of their residences into usable resources whereas, as found below, plaintiffs in the instant case were making good-faith attempts to sell their interests in their property. Notwithstanding the fact that the Kanda opinion is of limited utility in the analysis of the instant case, there is merit to the district court's assertion that, by the very nature of the asset, real property would never be currently available if that meant being equivalent to cash in hand. Defendant also relies on the district court decision in Schrader v Idaho Dep't of Health & Welfare, 590 F Supp 554 (D Idaho, 1984). However, Schrader was reversed on appeal to the Ninth Circuit Court of Appeals. 768 F2d 1107 (CA 9, 1985). Schrader involved a challenge to an Idaho regulation adopted in November of 1983 revoking the grace period previously allowed under Idaho law for the disposition of nonliquid resources. The new regulation was adopted at the direction of the United States Department of Health and Human Services, which was a party defendant in the Schrader case. The named plaintiff in this class action contended that Idaho's new regulation conflicted with the Social Security Act. The district court granted summary judgment for the defendants. The district judge noted that whether a resource is currently available is a fundamentally different question from whether income is currently available: The inquiry as to whether a resource is currently available is a more difficult inquiry. It cannot be disputed that some resources are more easily sold and converted to cash than others. To this extent, some types of resources are more currently available than other types of resources. However, it is also generally true that all resources have a price at which they may be liquidated. Even hard-to-liquidate resources may be converted to cash if offered at the right price. In this sense, hard-to-liquidate resources are resources which could be currently available to an applicant. Hard-to-liquidate resources must be distinguished from resources in which the applicant has no legal ability to convert to cash. [590 F Supp 559.] The district court concluded that, if the applicant has the legal ability to dispose of a resource and use the proceeds toward current needs, the resource must be considered currently available. On appeal, the Ninth Circuit reversed the district court's grant of summary judgment for defendants. The Court of Appeals first noted the changes that the enactment of the OBRA and the DRA made in the AFDC program. The court then rejected the HHS secretary's argument that the post-OBRA policy of prohibiting grace periods resulted in administrative efficiency and discouraged potential AFDC families from sheltering resources in hard-to-liquidate assets, holding that this policy did not comport with reality. 768 F2d 1110. Next, the court rejected the secretary's argument that by enacting the OBRA, Congress repealed grace periods sub silentio. The court was not persuaded that HHS' purported 1983 about-face position on grace periods ha[d] sufficient support in the language or legislative history of the 1981 OBRA amendments. 768 F2d 1111. The court then concluded that the revised Idaho regulation which, inter alia, barred grace periods, did not satisfy the availability requirement of the Social Security Act. The Court of Appeals stated that 45 CFR, 233.20(a)(3)(ii)(D) did not change as a result of the OBRA. Holding that [t]he final concomitant of the availability principle is that resources be reasonably evaluated, the court concluded: The combined requirements of 45 CFR, §§ 233.20(a)(3)(ii)(D) and (E) make it difficult to see how a resource can be considered available, and worth more than the $1,000 limit, when the fair market value of the property has never been established by buyers willing to pay a given price for it. [768 F2d 1112-1113.] The court also held that the district court's analysis regarding hard-to-liquidate resources (quoted above) was unsound in two respects: First, it failed to give adequate weight to the requirement of 45 CFR 233.20(a)(3)(ii)(E) that resources be reasonably evaluated; on this point, the Court of Appeals agreed with Schrader's argument that, even if she had received offers of $1,000 or more for the real property, Congress, by enacting the OBRA, never intended to force her to liquidate that property at a fire-sale price. Second, the district court had erred in misreading the regulation as referring to an applicant's legal right to a resource or her legal ability to sell it. The Court of Appeals held that HEW had rejected such an interpretation of availability in 1975 by not adopting a proposed regulation which stated that income and resources are considered available both when actually available and when the applicant or recipient has a legal interest therein and has the legal ability to make them available but does not do so.... 768 F2d 1112, n 5. Finally, the Court of Appeals rejected the secretary's argument that the DRA, by codifying grace periods, showed that Congress' pre-DRA intent must have been to deem nonexcluded real property interests to be currently available despite practical difficulties in disposing of them. Stating that the views of a later Congress regarding the legislative intent of a previous Congress do not deserve much weight, 768 F2d 1114, the court held that the legislative history relied upon by the secretary was too ambiguous to support the secretary's contention that if the law prior to the DRA provided for a grace period, then the enactment of the DRA was a senseless act. The court stated that § 2626 of the DRA would be a sensible enactment if the prior law had permitted unlimited grace periods. 768 F2d 1115. In conclusion, the court reversed the decision of the district court because,  inter alia, it permitted Idaho to deny AFDC benefits to applicants who owned assets whose `book value' exceeded $1,000 and who were attempting in good faith to sell the assets but had not yet been successful. Id. The court noted that, even if it accepted the district court's right price fire-sale analysis, the record did not show that plaintiffs received and rejected offers of more than $1,000. In the absence of such proof, an assumption that the real property currently reduced its owner family's need by more than $1,000 was at least in part unverified, and violated the Social Security Act and its requirement of demonstrable availability set forth in 45 CFR 233.20(a)(3)(ii)(D) and (E). The court therefore reversed and remanded, directing the district court to consider on remand the effect of the DRA amendment on the relief sought by Schrader. Id. I think that the Ninth Circuit's decision in Schrader is factually and legally distinguishable from the instant case. As noted above, pursuant to the pre-November, 1983, administrative policy of HHS permitting states to provide for grace periods, Idaho law had allowed for grace periods for the disposition of nonliquid assets. At issue in Schrader was the revised Idaho regulation, prompted by HHS' 1983 change in policy prohibiting states from providing such grace periods. In contrast, our state, in its discretion, chose not to provide for grace periods. This was administratively allowed by HHS: Although the federal regulations did not specify a grace period for the disposal of non-liquid assets, States, which historically have been permitted to exercise discretion and reasonable flexibility in administering these regulatory requirements, sometimes opted to allow applicants and recipients a grace period for this purpose. In other words, the State could, in its discretion, disregard a non-liquid asset in computing a potential recipient's resources, thus giving that recipient a period of time in which to liquidate the asset. During the interim the asset was not considered an available resource. [ Davis, supra, 591 F Supp 321.] McKee and Johndro were denied AFDC benefits pursuant to the DSS' policy in existence in 1981, which, inter alia, did not provide for grace periods. Since Michigan, unlike Idaho, never adopted regulations allowing grace periods before the OBRA was enacted, I do not believe we need decide the precise issue presented in Schrader: whether HHS' 1983 change in policy prohibiting grace periods, and the revised state regulation adopted in compliance therewith, violated post-OBRA law. Therefore, while there may be language in Schrader supporting plaintiffs' position, I would find that case to be factually and legally inapposite. [11] Decisions from two other state courts provide little guidance on the issue before us. Miller v Stumbo, 661 SW2d 1 (Ky App, 1983); Galster v Woods ( On Rehearing ), 173 Cal App 3d 529; 219 Cal Rptr 500 (1985). Miller is a two-page opinion containing very little helpful analysis. Galster arose after the 1981 OBRA amendments and involved a challenge to an April, 1982, change in policy by the California DSS. The California Court of Appeals examined the federal district court decisions in Schrader and Davis, as well as the Ninth Circuit decision in Schrader. It held that no deference was due the California DSS' interpretation of the relevant regulations, since the DSS' new policy began abruptly in 1982, in response to the OBRA amendments to AFDC, and represents a complete about-face from years of prior administrative practice.... Therefore, Galster, like Schrader, is distinguishable from the case at hand. The Court of Appeals, as well as the defendant, relied on Kilpatrick v DSS, 126 Mich App 559; 337 NW2d 576 (1983). In Kilpatrick, the plaintiff contended that the policy as set forth by the Michigan administrative rules, as well as the APM Item 211, created a presumption, inconsistent with federal and state regulations, that mere ownership of nonhomestead real property makes that property available to the owner for AFDC purposes. The plaintiff claimed that it was impermissible to presume `that a nonsalable or nonmarketable resource is available to meet the needs of an indigent family,' and that the value of the property in question, a saw mill, should have been disregarded for purposes of determining her family's AFDC eligibility since the sawmill was not `actually available' or `available in fact for current use.' Id. at 564-565. The Court of Appeals, relying on the discussion by the court in Kanda, supra, found that there was no conflict between DSS' policies and state and federal requirements of actual availability of resources for current use. The Court stated that there was no legal impediment to the sale of the property in question, and, [a]bsent conflict with federal requirements, the state is free `to insure that limited welfare funds be spent on behalf of those genuinely incapacitated and most in need.' Kilpatrick, supra at 567, quoting Pease v Director, DSS, 105 Mich App 689, 699; 308 NW2d 432 (1981), lv den 412 Mich 940 (1982). The Court of Appeals found that, under the present system, judicial response was precluded and that any response to the plaintiff's situation must be a legislative response. Id. I agree with the defendant that the Policy Hearing Authority's interpretation of the relevant regulations does not require reversal. The state AFDC plan must take into consideration income and resources of any child or relative claiming AFDC benefits. Resources clearly include real property. As noted by the Kanda court, real property would never be actually available or currently available if those terms were construed to mean cash in hand. Here, there is no legal impediment to the sale of the nonhomestead real property, and, as such, the defendant did not err so as to require reversal by including the plaintiff's interests in nonhomestead real property as an available resource in calculating plaintiffs' eligibility for AFDC. My conclusion that the defendant's determination that the nonhomestead real property was an available resource is not error requiring reversal is supported, to some extent, by subsequent statutory enactments. As noted above, in 1984, Congress passed the Deficit Reduction Act of 1984, PL 98-369, § 2626; 98 Stat 1136, which amended 42 USC 602(a)(7). Moreover, as noted above, this amendment authorized a grace period, for the first time, with respect to the AFDC program. The amendment allows the secretary of HHS to exclude, for such period or periods as may be determined, real property of which the family is making a good-faith effort to dispose, as a resource for the purpose of calculating available resources. It is significant, as defendant points out, that prior to the Deficit Reduction Act, the Social Security Act contained no provision authorizing or requiring states to recognize a grace period; however, Title VI of the Social Security Act, which governs the SSI program, has such a statutory grace-period provision. 42 USC 1382b(b). The Conference Committee Report concerning the 1984 amendment to 42 USC 602(a)(7), House Conference Report 98-861, Joint Explanatory Statement of the Committee of Conference, explained that, under the pre-DRA law, real property was considered a resource available to the family both when actually available and when the applicant or recipient had a legal interest in the liquidated sum, and had the legal ability to make the sum available for support and maintenance. The Committee of Conference further stated that the House bill, which was not adopted, would exempt from the AFDC resource limitation, real property which the household was making a good-faith effort to sell at a reasonable price and which had not been sold. The agreement of the Committee of Conference states: The conference agreement follows the House bill with a modification establishing an AFDC policy on real property that is similar to SSI policy. The managers intend that by regulation, real property, which the family is making a good-faith effort to sell would be exempt for six months (with State option for an additional 3 months) but only if the family agrees to use the proceeds from the sale to repay the AFDC paid. Any remaining proceeds would be considered a resource. [H Rep 98-861, 98th Cong 2d Sess 1395-1396 (1984); 1984 US Code Cong & Ad News 2083-2084. Emphasis supplied.] Although we are not called upon to construe the provisions of the Deficit Reduction Act of 1984, I would find it instructive that the modification of 42 USC 602(a)(7) was to establish an AFDC policy on real property similar to that found in SSI policy. This indicates to me, as is asserted by the Attorney General, that Congress, prior to the enactment of the DRA, had no intention of requiring states to provide a grace period during which time property that plaintiffs were making a good-faith effort to sell would not be counted as an available resource in determining AFDC eligibility. Although grace periods were administratively allowed by HHS before November 1, 1983, there is nothing in the statute or regulation to indicate that such grace periods were required. Indeed, the establishment of statutory grace periods in the DRA of 1984 suggests that prior law did not mandate that states, as part of their AFDC program, adopt grace periods for the disposal of nonliquid resources. I conclude therefore that DSS' decision that the real property at issue herein was actually available is not contrary to the plain meaning of 45 CFR 233.20(a)(3)(ii)(D). The plaintiffs agree that the real property in question was legally available to them. I agree with the Court of Appeals that the Policy Hearing Authority did not err so as to require reversal by including nonhomestead real property, which the plaintiffs were making a good-faith effort to sell, as an available asset in determining AFDC eligibility. Neither the statute nor the regulations compel a different conclusion, the sparse case law does not dictate a different conclusion, and, lastly, subsequent legislative history concerning the enactment of the Deficit Reduction Act of 1984 indicates that there was no pre-DRA requirement that participating states provide a grace period. I would decline plaintiffs' invitation to issue our own interpretation and declare that when an applicant or recipient is making a good-faith effort to sell their property, the value of the property is not available to them for purposes of determining AFDC eligibility. The DSS' determination that the plaintiffs' interest in nonhomestead real property was actually available is not error requiring reversal.