Court Opinion

ID: 8954738
Source: CourtListenerOpinion
Date Created: 2022-11-27 09:08:17.863589+00
Date Added: 2024-06-11T17:10:03.520092
License: Public Domain

WILKINSON, Circuit Judge,
dissenting:
Beginning with the decision in Randall v. Lukhard, 709 F.2d 257 (4th Cir.1983), this circuit has pursued a construction of the availability principle which threatens to leave the states virtually powerless to pursue valid goals in the administration of joint federal-state welfare programs. Even assuming the correctness of Randall, however, this decision is unwarranted. The principal opinion runs counter to the intent of Congress, gives insufficient weight to the position of the federal agency charged with overseeing the AFDC program, and seals with judicial approval a most distressing type of dishonesty. Only those who defraud the welfare system can benefit from this decision, and I respectfully dissent.
I.
I do not believe that Randall v. Lukhard, supra, should be extended to the entire field of welfare administration. In particular, Randall should not be extended to the AFDC program, which has always been administered as a scheme of cooperative federalism. The principal opinion has flouted Supreme Court guidelines for interpreting state AFDC regulations and adopted a more rigid view of the availability principle than Congress ever intended.
The Supreme Court has always recognized that the AFDC program is a “scheme of cooperative federalism.” See King v. Smith, 392 U.S. 309, 316, 88 S.Ct. 2128, 2133, 20 L.Ed.2d 1118 (1968). AFDC is largely financed by the federal government, but it is administered by the states. As has been true throughout the history of the program, “the area of greatest flexibility allowed the States ... is in the determination of eligibility requirements for recipients.” U.S. Advisory Commission Report on Intergovernmental Relations, Statutory and Administrative Controls Associated with Federal Grants for Public Assistance 30 (1964). This state flexibility allows the development of specially tailored solutions to specific problems, and the program as a whole benefits as administrative techniques *1292are tested in fifty separate proving grounds.
Recognizing the value of the state role in AFDC, the Supreme Court in New York State Department of Social Services v. Dublino, 413 U.S. 405, 93 S.Ct. 2507, 37 L.Ed.2d 688 (1973), stated that “[t]he problems confronting our society in [the area of welfare administration] are severe, and state governments, in cooperation with the Federal Government, must be allowed considerable latitude in attempting their resolution.” Id. at 413, 93 S.Ct. at 2513. The Court understands the fact that Congress simply cannot prescribe every detail of a program as complex as AFDC. If it could, state agencies would serve little purpose. The Court has thus been reluctant to imply conflicts between state and federal AFDC provisions that would debilitate state initiatives:
If Congress is authorized to act in a field, it should manifest its intention clearly. It will not be presumed that a federal statute was intended to supersede the exercise of the power of the state unless there is a clear manifestation of intent to do so. The exercise of federal supremacy is not lightly to be presumed.
Id. (quoting Schwartz v. Texas, 344 U.S. 199, 202-03, 73 S.Ct. 232, 235, 97 L.Ed. 231 (1952)).
The principal opinion dismisses Dublino in a footnote, declaring that where a state provision conflicts with federal law, the deferential approach of Dublino does not apply. The opinion never applies Dublino to determine whether a conflict exists in the first place. The correct approach here would have been to ask whether the availability principle represents a “clear manifestation” of congressional intent to forbid state transfer of assets provisions aimed at welfare chiseling. An examination of the history of the availability principle reveals no such congressional intent.
It is obvious that the scope of the availability principle is not to be found in the language of the statute in which it is embodied. See 42 U.S.C.A. § 602(a)(7) (West Supp.1987). As this court has recognized, the availability principle is “derived from judicial and administrative interpretations of the statutory purposes of the ADC program.” Davis v. Lukhard, 788 F.2d 973, 979 (4th Cir.1986). The principle is not therefore a rigid rule of uniform application; it is a judicial limitation on states that is to be applied only where the purposes of the AFDC program demand it. In this case, the purposes of AFDC certainly do not require judicial endorsement of fraud against the needy recipients who must share in the limited resources available for AFDC.
The true scope of the availability principle can be seen in its origins. In the hearings and floor debate over the 1939 amendments to the Social Security Act that added section 602(a)(7), concern was expressed that states not deny benefits to the needy by imputing to them income contributions from relatives that were never actually made. See Hearings Relative to the Social Security Act Amendments of 1939 Before the House Committee on Ways and Means, 76th Cong., 1st Sess. 2254 (1939) (testimony of Arthur Altmeyer, Chairman of the Social Security Board); 84 Cong.Rec. 6851 (1939) (remarks of Rep. Poage), cited in Heckler v. Turner, 470 U.S. 184, 200, 105 S.Ct. 1138, 1147, 84 L.Ed.2d 138 (1985). This is the concern that was later embodied by the Social Security Board in its regulations, and that has remained a part of AFDC regulations ever since, see 45 C.F.R. § 233.-20(a)(3)(ii) (1986).
Sound interpretations of the availability principle have not strayed from this original purpose — preventing states from imputing income from relatives and housemates that is not actually available to the AFDC applicant. See, e.g., Van Lare v. Hurley, 421 U.S. 338, 95 S.Ct. 1741, 44 L.Ed.2d 208 (1975); Lewis v. Martin, 397 U.S. 552, 90 S.Ct. 1282, 25 L.Ed.2d 561 (1970); King v. Smith, 392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968) (each involving attribution to AFDC recipient of income of an able-bodied man living in the household but having no legal obligation to support the AFDC child). As the Supreme Court has stated, the principle has “served *1293primarily to prevent the States from conjuring fictional sources of income and resources by imputing financial support from persons who have no obligation to furnish it or by overvaluing assets in a manner that attributes non-existent resources to recipients.” Heckler v. Turner, 470 U.S. at 200, 105 S.Ct. at 1147.
This original understanding of the availability principle simply had nothing to say about situations in which an applicant who had assets that were clearly available elected fraudulently to give the assets away so as to become eligible for benefits. On the contrary, anti-fraud measures have long been an accepted part of AFDC administration, and certain anti-fraud measures are required by federal regulation. See 45 C.F.R. § 235.110 (1986). Congress’ receptivity to transfer of assets rules themselves is obvious from its endorsement of the rules in the Medicaid and SSI context. See 42 U.S.C. §§ 1382b(c), 1396p(c) (1983). Randall took a huge step when it moved from preventing states from disqualifying applicants based on income they never had to preventing states from disqualifying those who had available assets and transferred them to cheat the system. In my view that step was neither required by the availability principle nor rational as a matter of policy, and it should not be extended. To do so would accord the availability principle an inexorable life of its own, wholly apart from the congressional concerns that gave it birth.
Cases from other courts reveal that the availability principle is not a rigid rule requiring states to ignore any assets that are not actually available. The Supreme Court has held that states may include mandatory tax withholdings in income for purposes of determining AFDC eligibility despite the fact that withholdings are never actually “available” to the family. See Heckler v. Turner, 470 U.S. at 201-202, 105 S.Ct. at 1148. In a case that provides a telling analogy to our facts, the Fifth Circuit held that recoupment of AFDC overpayments did not violate the availability principle despite the fact that the amounts overpaid had been spent, and were no longer actually available for support. See Jacquet v. Westerfield, 569 F.2d 1339 (5th Cir.1978). The recoupment of overpayments was not precluded by Van Lare, Lewis, or King because it did not involve the “assumption of income” that would never reach the recipient. Rather, overpayments, like the assets disposed of here, had been available to the recipient. To ignore that property in determining eligibility would allow a recipient to “acquire fraudulently more than his entitlement at the expense of other families benefiting from the AFDC program.” Id. at 1343.
II.
Two congressional amendments to the AFDC statute provide further reasons for upholding the Virginia transfer of assets rule — reasons that were not present in Randall. The Omnibus Budget Reconciliation Act of 1982 (OBRA) and the Deficit Reduction Act of 1984 (DEFRA), both aimed at reducing federal spending, modified AFDC eligibility determinations. The OBRA and DEFRA amendments reveal that there is no congressional sanction for an availability principle that prevents states from taking even the most modest steps to curtail fraud in the administration of their welfare programs. The principal opinion dismisses OBRA and DEFRA in the same way that it dismisses Dublino. By taking as its starting point the proposition that transfer of assets rules violate the availability principle, the panel requires “specific authorization” from Congress if OBRA and DEFRA are to validate the rules. This misstates the proper significance of the amendments to this case as well as the role of the states in the AFDC program.
OBRA and DEFRA provide strong evidence that the Virginia rule is in harmony with congressional intent. The history of the OBRA provisions reveals that Congress intended that families not be allowed to receive AFDC when they have “resources upon which they could reasonably be expected to draw.” S.Rep. No. 139, 97th Cong., 1st Sess. 503, reprinted in 1981 U.S.Code Cong. & Admin.News 396, 769. This is the precise problem that the trans*1294fer of assets rule attempts to address in a different context by preventing families with resources from making a fictive legal transfer to a relative and then claiming AFDC. Invalidating the transfer of assets rule also frustrates another of Congress’ often-expressed goals — that AFDC benefits be “restricted to those most in need.” Id. see also Davis v. Lukhard, 591 F.Supp. 319, 325 (E.D.Va.1984), vacated as moot, 788 F.2d 973 (4th Cir.1986).
The terms of the DEFRA amendment concerning good faith efforts to dispose of real property also shed light on congressional attitudes toward AFDC. The provision allows families to continue to receive AFDC while they are making “good faith efforts” to dispose of property that would make them ineligible for AFDC. See 42 U.S.C.A. § 602(a)(7)(B)(iii) (West Supp. 1987). Two conclusions follow from this. First, the requirement of “good faith” in the amendment suggests that Congress would not be pleased with the principal opinion’s result of allowing applicants to profit from bad faith transfers. Cf. Deel v. Lukhard, 641 F.Supp. 784, 789 (W.D.Va. 1986) . No one has pointed to a shred of evidence that Congress really intended to allow undeserving applicants to put their assets in the custody of a friend or relative and then reap the limited resources of AFDC. As Judge Mumaghan wrote in his Randall dissent, “Congress neither meant nor wrote to permit such a mischievous practice.” Randall, 729 F.2d at 969.
Second, in the course of claiming to follow congressional intent, the principal opinion undermines Congress' work in passing the DEFRA asset disposal provision. Under the DEFRA amendment, AFDC recipients may, for a limited time, exclude from their resources for purposes of eligibility assets that they are making good faith efforts to dispose of. Once the assets are sold, however, AFDC benefits that would not have been paid had the assets been sold earlier are treated as overpayments. See 42 U.S.C.A. § 602(a)(7)(B)(iii) (West Supp. 1987) . The principal opinion now provides a ready means of circumventing this provision and Congress’ explicit intentions. By means of a fictive transfer, recipients can avoid both the obligation to make a good faith effort to sell the property and the recoupment of benefit amounts that would be deemed overpayments following the sale. This result takes the amorphous availability principle so far that it negates a specific and explicit statute.
III.
I further disagree with the principal opinion’s refusal to defer to the position of the Secretary of HHS in this case. The Secretary has the responsibility for reviewing every state AFDC plan to ensure that it complies with the federal statute, including § 602(a)(7). As the Supreme Court stated with regard to construing AFDC provisions in Dublino, “the construction of a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong.” Dublino, 413 U.S. at 421, 93 S.Ct. at 2516-17. The Secretary has had the opportunity to observe many state transfer of assets rules for years, and has consistently approved them. See U.S. Department of Health and Human Services, Characteristics of State Plans for Aid to Families with Dependent Children (1976); Id. (1983); Id. (1984); Id. (1985). The consistency of the Secretary’s approval of transfer of assets rules strongly argues for deference. See, e.g., Morton v. Ruiz, 415 U.S. 199, 237, 94 S.Ct. 1055, 1075, 39 L.Ed.2d 270 (1974). There is no reason for this court to ignore the settled practice of the agency charged with administering the statute nationwide. This is especially true in light of the fact that it was an administrative statement that gave independent life to the availability principle in the first place. See Heckler v. Turner, 470 U.S. at 200, 105 S.Ct. at 1147. The principal opinion needlessly unsettles the law in this area, opening the door for ad hoc judicial review of the transfer of asset rules of thirty-three states.
IV.
Believing that Virginia may enact a transfer of assets provision in order to thwart welfare fraud, I must add that I can *1295detect no fatal flaw in the specific provisions of the challenged rule. Unlike state transfer of assets rules that have been invalidated by other courts, the rule here does not disqualify AFDC recipients on the sole basis of a property transfer for inadequate consideration. Cf. Udina v. Walsh, 440 F.Supp. 1151 (E.D.Mo.1977); Buckner v. Maher, 424 F.Supp. 366 (D.Conn.1976); Owens v. Roberts, 377 F.Supp. 45 (M.D.Fla.1974). The Virginia rule at issue is aimed at disqualifying applicants who make gratuitous transfers for the purpose of receiving AFDC benefits to which they are not entitled. The validity of the time periods and rebuttable presumption used to carry out this purpose should be obvious from the similarity of the Virginia AFDC rule to those explicitly endorsed by Congress and the Secretary in the Medicaid and SSI context. See 42 U.S.C. §§ 1382b(c), 1396p(c) (1983).
The concurring opinion would strike down the rule because it is not “sufficiently flexible and fair.” Unfortunately, these vague terms provide no clue as to what the specific flaws of the rule might be or as to what type of review the concurring opinion is conducting. If “fair and flexible” is meant to be a euphemism for some species of due process review, then Lavine v. Milne, 424 U.S. 577, 96 S.Ct. 1010, 47 L.Ed.2d 249 (1976), which upheld a similar rebuttable presumption against a due process challenge, leaves no doubt that the Virginia rule should stand.
V.
This foray of the federal judiciary into the field of welfare administration is a distinctly unwelcome development. Congress, the Secretary of Health and Human Services, and the state agencies are all better equipped for this task than we. We must interpret federal statutes, to be sure, but we are not called upon to do so in violation of every maxim of deference to those who bear primary responsibility for administering this sensitive and complex system. This result is pure mischief, and takes the availability principle far beyond anything intended by Congress. I would affirm the judgment of the district court and uphold the Virginia transfer of assets rule.