Court Opinion

ID: 9551401
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:52:44.195546+00
Date Added: 2024-06-11T15:23:42.127446
License: Public Domain

CLARK, J.
While I concur in Justice Burke’s dissent and its “application of common sense,” I feel compelled to further respond to unfortunate statements in the majority’s opinion.
The issue of this case is whether in-kind income—or noncash economic benefits—are to be considered as income which will be applied in computing *880a welfare grant and whether all of the resources furnished to the multigrant household may be considered in determining the family needs from government.1
2In discussing these issues, the majority not only ignores and misinterprets applicable law but also makes several factual errors.
Exemplifying the majority’s misunderstanding of the factual setting, the opinion indicates {ante, p. 861) that at the time of the Welfare Reform Act of 1971, a regulation (44-115.61) was in effect “which expressly declared that ‘partially free or shared living costs do not represent income.’ (Italics added.)” Actually, this regulation was revoked on 1 June 1969, more than two years before welfare reform. A succeeding version of the regulation was revoked on 1 July 1970, and the concept abandoned.2 The majority also states that noncash economic benefits “have never been considered income throughout the entire history of California’s welfare system, and we can find absolutely no indication that the Legislature intended to alter its consistent treatment of such ‘benefits.’ ” {Ante, pp. 859-860.) In fact, in-kind income had long before the enactment of the Welfare Reform Act been recognized as income not only by the Department of Social Welfare,3 but also by the Legislature in section 11009.1 of the Welfare and Institutions Code.4
The Legislature at the time of the enactment of welfare reform was undoubtedly aware of the department’s existing policy of subtracting income *881—in cash or kind—from the standard to obtain payment level. That the Legislature did nothing to attempt to change this ongoing policy of deducting income in cash and kind, but instead wrote it into the flat grant statute (Welf. & Inst. Code, § 11450, subd. (a)) reasonably evidences a legislative intent to retain the policy.
With regard to legislative intent, the majority opinion states (ante, p. 863): “The most obvious indication that the regulation at issue here does not conform to, or implement, the governing welfare statutes appears from the legislative history of the Welfare Reform Act itself.”
The majority then discusses Senate Bill No. 545 (1971 Reg. Sess.) and particularly section 3 2.5 Heavy reliance is placed on the fact that section 32 was not enacted into law. The majority then concludes that because the Legislature rejected section 32, it rejected the noncash economic benefit theory and the principle underlying Regulation 44-115.8.
Sacramento Newspaper Guild v. Sacramento County Bd. of Suprs. (1968) 263 Cal.App.2d 41, 57-58 [69 Cal.Rptr. 480], holds that unpassed bills relating to an act already in effect have little value as evidence of legislative intent. Indeed, it is improper for the majority here to isolate section 32 of Senate Bill No. 545 to glean legislative intent when it is considered that the entire bill failed to meet the legislative approval, and Senate Bill No. 796, which we consider today, was finally enacted into law. (No inference is drawn from this fact, however, and logically so, that welfare reform in general was rejected by the Legislature, yet the same reasoning is applied to section 32.)
The majority emphasizes that section 32 was reconsidered as an amendment to Senate Bill No. 796 at least twice and was discussed and rejected during negotiations on this bill, which thereafter became the Welfare Reform Act of 1971.5
6 This reconsideration, apart from Senate Bill 545, the majority states is an “unambiguous indicant of legislative intent” whereupon it is concluded that the regulation in question, similar in substance to section 32, is inconsistent with legislative intent.7
Failure to adopt section 32 does not necessarily signify rejection of the underlying principle. It is common knowledge that legislative acts are often *882borne out of compromise and necessity. With regard to necessity, it has been pointed out here that the Legislature had knowledge of the department’s pre-welfare reform treatment of in-kind income. The rejection of section 32 could thus be seen as acquiescence in the department’s treatment of in-kind income and the director’s interpretation of pre-welfare reform law authorizing such in-kind income deductions. That the concepts underlying section 32 were already embodied in existing law and practice is a more logical basis for explaining the failure of section 32 to be enacted into law. In any event, the majority emphasis on section 32 is entirely misplaced.
While it is evident the majority misunderstands the history behind in-kind income statutes, it is also evident the opinion suffers from a basic misunderstanding of the present and pre-reform systems in general. The welfare system has always made a sharp distinction between need and income. Prior to the adoption of the Welfare Reform Act, the former Department of Social Welfare utilized a schedule of coded AFDC costs whereby each specific need of every member of the family budget unit had to be identified and aggregated. Total aid payments were limited, however, by a statutory maximum which varied depending on the number of needy children in the home. (Welf. & Inst. Code, § 11450, subd. (a).)
With the enactment of the Welfare Reform Act, the California Legislature changed to a flat grant aid system whereby, rather than aggregating each specific need, a statutory grant schedule was provided which varied depending on the number of eligible needy persons in the family. Recognized income, including currently used resources, would be subtracted from the new grant schedule in determining the actual cash payment. (Welf. & Inst. Code, §§ 11008, 11450, subd. (a).)
When the Legislature averaged out need, it by no means required the department to pay the same amount of grant to all recipients having the same size family. On the contrary, it specifically required the department to continue its existing practice of considering the recipient’s income, in cash or kind, and deducting it from the standard to obtain grant level.
Thus, although need was determined with reference to a flat grant schedule of average needs instead of an aggregation of individual needs, the amount of the welfare grant has consistently reflected income of the recipient.
In the welfare context, then, income, whether in-kind or cash, does not have the effect of reducing need—it reduces the amount of the welfare *883grant. This is evidenced in the language of the flat grant statute which provides in pertinent part: “. . . [T]here shall be paid ... an amount of aid each month which when added to Ms income ... is equal to the sums specified in the following table, . . .” (Welf. & Inst. Code, § 11450, subd. (a); italics added.) The majority therefore is in serious error (ante, p. 859) when it states that “. . . the Legislature took it upon itself to set fixed grant levels to be paid to all recipients without regard to individual need.”
Additional error in the majority opinion is seen in the discussion of the maximum payment standard established by section 11450, subdivision (a), as contrasted to the higher minimum basic standard of adequate care established in section 11452. In melodramatic fashion it is stated: “Thus, since the amount of the uniform payments consciously falls short of the minimum need levels, the Welfare Reform Act does not merely encourage thrift by AFDC recipients, it legislates thrift. Unless a family is able to economize in some areas of need, the statutes contemplate the failure of that family to survive.” (Ante, p. 866.)
This statement overlooks the fact that the difference between maximum aid (§ 11450) and minimum basic standards of adequate care (§ 11452) was in no way meant to coerce families into shared living arrangements. Instead, the Legislature set to establish the difference as the bonus value of food stamps.8 The formula was that grant plus income, plus the bonus value of food stamps, equals minimum basic standard of adequate care. And in order that there would never be any failure of a family to “survive” because of a maximum aid level lower than need, the Legislature provided (Welf. & Inst. Code, § 11453.1) that in the event federal law was amended so as to preclude food stamp benefits to welfare recipients, the bonus value of food stamps would be paid to a recipient family in addition to its maximum aid grant. In other words, the Legislature guaranteed welfare recipients that their full needs would be met either by a combination of grant plus food stamps or, if food stamps were abolished, by increasing the grant by the bonus value of food stamps.
Significantly, recognition of in-kind income is required both by state and federal law. The majority states (ante, p. 867) that ‘“noncash economic benefits’ do not constitute ‘income’ within the meaning of section 11450,” but if they do not, then section 11450 does not conform with the rest of state and federal law. Welfare and Institutions Code section 11009.1 specifically requires the consideration of in-kind income or noncash economic benefits in the form of free board or lodging except when of a temporary *884nature. The court’s unwarranted interpretation of section 11450 would silently overrule the mandate of section 11009.1.
Moreover, misapplication of state law is particularly noticeable in the majority opinion in the edited reliance on section 11006. The majority quotes this section as providing: “ ‘Aid granted shall not be construed as income to any person other than the recipient.’ ” Although the majority’s punctuation would lead one to believe that this is a complete quotation, it is not. The entire sentence in the section reads: “Aid granted shall not be construed as income to any person other than the recipient or, in the case of a recipient group, the recipient group.” (Italics indicate portion of sentence omitted by majority.)
The significance of the omitted portion is of direct relevance because this case deals with a recipient group—specifically a family some of whom are recipients of AFDC and some of whom are recipients of an adult category of aid. Thus, section 11006 not only does not prohibit attributing aid as income to the members of a multi-category recipient group, such as the Cooper family; it contemplates such attribution in specific language.
In addition, section 11008 requires that, in computing the amount of income determined to be available to support a recipient, the value of currently used resources shall be included.
These state statutes comply with federal law (42 U.S.C. § 602(a)(7)) requiring the state, in determining the amount of a welfare recipient’s need, to take into consideration any income or resource of any child or relative claiming AFDC eligibility. The majority’s decision will cast doubt on provisions of the Social Security Act itself and open a Pandora’s box for welfare recipients.
The majority holding that “noncash economic benefits” do not constitute “income” within the meaning of section 11450 would exclude a portion of the recipient’s income that is required to be considered under federal law. Such a result is in total disregard of the requirements of federal law and places the state’s welfare plan in jeopardy.9 Rather than to place the *885state in such predicament, this court should adopt the only logical conclusion—that income in-kind is income in fact, and that both state and federal law require it to be considered as such.10
The majority states (ante, p. 870) that “a recipient’s ‘income’ from shared housing and utilities is calculated by subtracting the recipient’s actual pro rata expenditure from the fixed ‘allowance’ figure devised by the department. Thus, the regulation does not seek to determine the actual value of a recipient’s present housing and utility resources, but instead simply presumes that every recipient’s resources are equal in value to the department’s average allowance figure.”
This criticism would be justified if the department determined the pro rata share by dividing the average or standard of housing and utilities cost by the number of persons in the recipient group. However, by dividing the “total actual cost of housing and utilities” (Reg. 44-115.82; italics added), there is no arbitrary or constructive “presumption” of income of the type alluded to in Lewis v. Martin (1970) 397 U.S. 552 [25 L.Ed.2d 561, 90 S.Ct. 1282] or King v. Smith (1968) 392 U.S. 309 [20 L.Ed.2d 1118, 88 S.Ct. 2128]. The use of actual cost of housing and utilities in the formula provides for an individualized determination of income in each case.* 11
Furthermore, state law provides that the director is the only person authorized to adopt regulations to implement, interpret or make specific the law enacted by the department.12 It must be realized that the defendant not only has the authority, but has the duty to adopt regulations to implement or interpret the laws administered by him. In effect, the defendant is mandated by statute to establish the value of currently used resources. The method of computing the value of this in-kind income is a question for the defendant as the Director of the Department of Social Welfare. Pursuant to the proper exercise of his authority, the director amended Regu*886lation 44-115.8 to implement, interpret, and make specific the application of section 11008 to multi-grant households.
The principle is well-established that courts will not ordinarily overturn the quasi-legislative acts of an administrative agency which are not clearly arbitrary or capricious. (Ralphs Grocery Co. v. Reimel (1968) 69 Cal.2d 172, 179 [70 Cal.Rptr. 407, 444 P.2d 79]; Pitts v. Perluss (1962) 58 Cal.2d 824, 832 [27 Cal.Rptr. 19, 377 P.2d 83].) In view of the longstanding practice of the department, acquiesced in by the Legislature, this court should be hesitant to interfere with the policies of the other branches of government.
The California Constitution makes this court the final authority on matters of state law. (Cal. Const., art. VI, § 1.) Yet, as to matters of administrative policy we should act circumspectly. In the words of the United States Supreme Court: “The Constitution may impose certain procedural safeguards upon systems of welfare administration. [Citation omitted.] But the Constitution does not empower this Court to second-guess state officials charged with the difficult responsibility of allocating limited public welfare funds among the myriad of potential recipients.” (Dandridge v. Williams (1970) 397 U.S. 471, 487 [25 L.Ed.2d 491, 503, 90 S.Ct. 1153].)
I cannot concur with the majority of this court who would preclude the Director of Welfare from utilizing common sense in providing an equitable distribution of California’s limited welfare funds to needy recipients.
On July 19, 1974, the opinion was modified to read as printed above. Respondent’s petition for a rehearing was denied August 7, 1974. McComb, J., Burke, J., and Clark, J., were of the opinion that the petition should be granted.

Regulation 44-115.8, challenged in this case, provides that when one or more recipients of AFDC reside in the same household with one or more recipients of adult aids, if the recipient’s (either adult aid or AFDC) housing and utilities allowance exceeds his share of the actual cost of housing and utilities (including telephone), the excess shall be considered in-kind income and be taken into consideration in computing the grant. Each recipient’s share shall be calculated by dividing the total actual cost of housing and utilities (including telephone) by the number of persons (adults and minors, needy and nonneedy) residing in the household.

For a helpful discussion of the adrpinistrative, legislative, and litigative history of California’s welfare reform program, see Zumbrun, Momboisse and Findley, Welfare Reform: California Meets the Challenge (1973) 4 Pacific L.J. 739, relied on throughout this opinion. The authors are members of the Pacific Legal Foundation, a nonprofit, public interest legal firm recently founded in Sacramento. Pacific Law Journal (University of the Pacific (McGeorge School of Law)) specializes in the analysis of significant California legislation.

Section 44-115 of Manual of Policies and Procedures preserves the treatment of in-kind income. That section can be traced to a regulation in effect in 1963.

Section 11009.1 states: “The value of free board and lodging supplied to a recipient during a temporary absence from his home of not more than one month, shall be considered an inconsequential resource and shall not be deducted from the amount of aid to which the recipient is otherwise entitled. [H] After an absence of one month, free board and lodging shall be considered income to the extent the value exceeds the continuing cost to the recipient of maintaining the home to which he expects to return.”

Section 32 of Senate Bill No. 545 provided for reductions in aid when there is a shared living arrangement between an AFDC recipient and recipients of the former adult aid welfare programs.

Majority opinion, ante, page 864, footnote 11.

Ibid.., page 868, footnote 15.

Zumbrun, Momboisse and Findley, Welfare Reform: California Meets the Challenge (1973) 4 Pacific L.J. 739, 748-749.

Welfare and Institutions Code section 11003 provides: “If the United States Department of Health, Education, and Welfare issues a formal ruling that any section of this code relating to public assistance cannot be given effect without causing this state’s plan to be out of conformity with federal requirements, the section shall become inoperative to the extent that it is not in conformity with federal requirements.”

The pervasiveness of the concept of in-kind income in the welfare system is exemplified in the recent federalization of the adult aid program. Section 1612(a) (2) of the Social Security Act (42 U.S.C. § 1382a(a) (2)) defines unearned income as including “. . . support and maintenance furnished in cash or kind. . . .” and specifies a formula for computing the value to a recipient of a shared living arrangement. The majority should note that this definition of in-kind income is also applied in the context of a flat grant program.

 Justice Burke aptly points out in his dissenting opinion (ante, p. 874, fn. 2) the allowance figure is neither “fictitious” nor “arbitrary.” The values assigned represent the department’s estimates of actual value, based upon actual costs developed with reference to a 1970 survey and prorated on the basis of the total maximum aid payments specified in section 11450, subdivision (a), of the Welfare and Institutions Code.

Welfare and Institutions Code section 10554.