Opinion ID: 6938518
Heading Depth: 3
Heading Rank: 3

Heading: Failure to Adjust for Inflation.

Text: Plaintiffs next contend that even if the Secretary properly set the $1500 equity limit in 1982, the figure is no longer reasonable as it fails to account for more than fourteen years of inflation. In support of their position, plaintiffs point out that $1500 in 1979 is the equivalent of $3242 in 1993, and that for the average urban household, the price of a used car more than doubled during that time period. 6 Further, $1,500 in 1992 represented just 9% of the average selling price of a new domestic ear. Cars worth only $1500 are now between ten and fifteen years old and have more than 85,000 miles on them. Compared to newer cars, these cars are unreliable as well as more costly in terms of gas and repairs. 7 Based on these changed economic circumstances, we find that in 1996, there is “ ‘no rational connection between the facts found and the choice made’ ” by the Secretary in 1982. State Farm, 463 U.S. at 43, 103 S.Ct. at 2866 (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207 (1962)). Although many courts have noted that the $1500 automobile equity limit may be now unfair, see, e.g., Dist. Ct. Op. at 12-13, 14, 1993 WL 738386; Falin, 776 F.Supp. at 1101; Champion, 33 F.3d at 968, these courts have upheld the regulation because they found that the decision whether or not to adjust for inflation was within the Secretary’s sole discretion. See, e.g., Falin, 776 F.Supp. at 1102; Champion, 33 F.3d at 967. However, whether the Secretary has properly exercised its discretion in not adjusting the automobile equity limit for inflation, depends on what Congress intended when it granted the Secretary the authority to establish the automobile equity limit. This inquiry is complicated by the existence of two acts of Congress that pertain to the automobile equity limit. The first is the Social Security Act of 1935 which created the AFDC program and authorized the Secretary to administer it. See Pub.L. No. 94-271, 49 Stat. 627 (1935). Congress established AFDC to provide financial assistance 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.... 42 U.S.C. § 601. The second legislation relevant to congressional intent is the Omnibus Budget Reconciliation Act of 1981 (“OBRA”), which directed the Secretary to establish the AFDC automobile equity limit. Pub.L. No. 97-35 § 2302. The purpose of that statute was “to reduce federal spending.” Minnesota v. Heckler, 739 F.2d 370, 375 (8th Cir.1984). Some courts have found it proper for the Secretary to use the purpose behind OBRA as the primary indicator of congressional intent because OBRA was the statute that directed the Secretary to establish the automobile equity limit. See, e.g., Brown, 46 F.3d at 111; Falin, 776 F.Supp. at 1101. These courts hold that on the basis of OBRA alone, the Secretary’s failure to account for inflation is reasonable because as inflation diminishes the value of $1500, fewer people are eligible for AFDC, and thus federal spending is reduced. But this analysis is overly simplistic and not supported by the record. While it is true that the purpose of OBRA was to reduce spending, there is no evidence to suggest that Congress intended to cut spending progressively past 1981. Congress accomplished its goal of cutting costs when it reduced the resource limit from $2000 to $1000. There is also no indication in OBRA or its legislative history that Congress intended to use the automobile equity limit itself as a cost-cutting measure. Therefore, to discern Congress’s intent, we must look beyond OBRA and consider the general purposes of the AFDC program. We must interpret a statute’s provision in a way that is consistent with the policies of other provisions. See United Sav. Ass’n v. Timbers of Inwood Forest Assocs., 484 U.S. 365, 371, 108 S.Ct. 626, 630, 98 L.Ed.2d 740 (1988) (“[statutory construction ... is a holistic endeavor”). The position that we should focus primarily or exclusively on the cost-cutting purpose behind OBRA’s amendments to AFDC and not on the general purpose of the AFDC program to foster “self-suppoit and personal independence” for needy families runs afoul of this canon of statutory interpretation. To the extent that the Secretary can further both purposes-reduee federal spending for the AFDC program in 1981 and also encourage self-sufficiency and independence among AFDC recipients-that is the only course that effectuates Congress’s multiple intentions. We believe that periodically adjusting the automobile equity limit for inflation is the only reasonable way to achieve Congress’s competing goals. Instead of following this course, the Secretary has ignored the general purpose of AFDC program and allowed the automobile equity limit to serve as a cost-cutting measure. Although Congress may have wanted to prevent AFDC recipients from having expensive cars-because before OBRA’s passage there was no limit on automobile equity-Congress did not necessarily want to exclude from the AFDC program needy families that owned safe, functioning cars. We believe that by granting the Secretary the discretion to set the automobile equity limit Congress wanted to ensure that needy families would not be cut from the AFDC program simply because they owned automobiles. In fact, at oral argument, the Secretary conceded that it has never been the Secretary’s position that the $1500 limit was set and not adjusted for inflation to make it more difficult for needy families to qualify for AFDC benefits. Thus, allowing the automobile equity limit to be progressively diminished by inflation has rendered meaningless Congress’s statutory purpose in recognizing the need for an automobile equity exception to the resource limit. Because inflation has lowered the value of the $1500 limit, functioning cars have increasingly cost more than $1500. As a result, more and more families have been disqualified from receiving AFDC benefits. Because the $1500 limit automatically eliminates otherwise eligible families from the AFDC program, the regulation is no longer reasonable and therefore is arbitrary and capricious. Further, by failing to adjust the automobile equity limit for inflation the Secretary also has thwarted the reasoning that HHS itself advanced for the figure when it was established in 1982. The Secretary set the automobile equity limit at an amount that would not eliminate otherwise eligible families from the AFDC program. As the Secretary explained, “the Federal maximum limit should be set within the range of the vast majority of current recipients.” 47 Fed.Reg. at 5657. We should defer to the Secretary’s interpretation of the purpose for the automobile equity limit. See Dioxin/Organochlorine Center v. Clarke, 57 F.3d 1517, 1525 (9th Cir.1995) (“[a] court should accept the ‘reasonable’ interpretation of a statute chosen by an administrative agency except when it is clearly contrary to the intent of Congress”). We believe that the Secretary reasonably interpreted Congress’s purpose in establishing the automobile equity limit to be to preserve eligibility and not to- cut costs. In addition, “an agency’s action must be upheld, if at all, on the basis articulated by the agency itself.” State Farm, 463 U.S. at 50, 103 S.Ct. at 2870. The effect of more than fourteen years of inflation means that the Secretary’s stated purpose no longer supports the $1500 limit and provides a separate basis to vacate the regulation. The fact that there is no mandate in OBRA that the Secretary review the automobile equity limit and adjust it for inflation is not dispositive. We are reluctant to read any meaning into Congress’s silence on the issue of whether periodic review of the effects of inflation on the automobile equity limit is necessary. We have recognized that an agency “is obligated to reevaluate its policies when circumstances affecting its rule-making proceedings change.” See California v. FCC, 905 F.2d 1217, 1230 (9th Cir.1990). Even if that were not so, when, as here, a regulation’s rationality depends on economic conditions, periodic review is essential. The Secretary responds that Congress did revisit the automobile equity limit and decided not to adjust it for inflation. In 1987, Congress considered a proposal for experiments in a few states to explore using the $4500 food stamp automobile equity exemption for AFDC families. But the resulting 1987 OBRA did not contain such a provision. See Pub.L. No. 100-203, 101 Stat. 1330 (1987). Again in 1988, Congress considered the proposal, but made no change to the $1500 limit. Instead, a conference committee directed the Secretary to revise the regulation “if he determines revision would be appropriate.” H.R. Conf. Rep. No. 998, 100th Cong., 2nd Sess. 188-89, reprinted in, 1988 U.S.C.C.A.N. at (102 Stat.) 2776, 2977. The Secretary conducted a review, but did not change the regulation. See Champion, 33 F.3d at 967. Other circuits have interpreted this inaction to mean that inflation adjustments are not necessary under OBRA. See Brown, 46 F.3d at 111-12; Champion, 33 F.3d at 967. We, however, do not. The Supreme Court instructs us that inaction by Congress “lacks persuasive significance.” Brown v. Gardner, — U.S.-,-, 115 S.Ct. 552, 557, 130 L.Ed.2d 462 (1994) (quoting Central Bank of Denver, N.A. v. First Interstate Bank of Denver, — U.S.-,-, 114 S.Ct. 1439, 1453, 128 L.Ed.2d 119 (1994)). Thus, the decision by Congress not to increase the $1500 limit does not change our view that the Secretary’s failure to adjust the $1500 automobile equity limit for inflation has rendered the regulation unreasonable. We also note that the Secretary has allowed various states to waive the $1500 limit and set a higher automobile equity limit. Apparently, California has raised the automobile equity limit to $4500, while Virginia and Colorado, among others, exempt one vehicle entirely regardless of its value. Such waivers are not only a recognition that in many states the $1500 limit is unreasonable but, more importantly, are consistent with this court’s view that the purpose of the automobile equity limit is not to reduce federal spending but to ensure that eligible families are not excluded from the AFDC program simply because they own a reliable car.