Department of Health and Human Services
IN THE MATTER OF THE DISAPPROVAL ) ) OF NEW YORK'S AFDC PLAN
AMENDMENT,) Docket No. 89-143 )
Decision No. 1148 TRANSMITTAL NO. 87-45 )
RECOMMENDED FINDINGS AND PROPOSED DECISION
The New York State Department of Social Services petitioned for
reconsideration of a decision by the Regional Administrator, Region II,
Family Support Administration (FSA). The Regional Administrator
disapproved New York's proposed amendment (submitted as Transmittal No.
87-45) to the New York State Plan for Aid to Families with Dependent
Children (AFDC) under Title IV-A of the Social Security Act (Act). (See
Appendix A for the text of the proposed amendment.) The Administrator
designated me as Presiding Officer for the purpose of providing the
State with a hearing and related procedures pursuant to 45 C.F.R. Part
213. The issues were identified in a Federal Register Notice published
on August 22, 1989 (54 Fed. Reg. 34824). A hearing was held in New York
City, New York, on November 15, 1989, and the parties submitted
post-hearing briefs.
Pursuant to 45 C.F.R. 213.32 and based on the following findings of fact
and on my conclusions regarding the legal issues raised, I propose that
the plan amendment be disapproved.
Below, I first provide a summary of the basis for my proposed decision.
I then provide background information. Finally I discuss each of the
issues raised, explain my legal conclusions related to those issues and
my findings with respect to material, disputed facts. 1/
I. SUMMARY OF THE PROPOSED DECISION
This plan amendment establishes a new category of AFDC special need
known as the Rent Supplement Program (RSP). According to New York, the
purpose of the special need is to secure long-term habitable housing for
homeless AFDC families living in hotels or motels. However, I concur
with FSA that New York is also trying to use Title IV-A funds to
rehabilitate rental housing and to increase the supply of low income
rental housing generally.
The Regional Administrator disapproved the plan amendment on four
grounds. I propose that her disapproval be upheld on all four grounds.
Specifically, I find as follows:
o The plan amendment violates 45 C.F.R. 233.20(a)(1)(i), which
requires that the needs of an AFDC family are to be determined on an
"objective basis," because: (1) the manner in which New York is
permitted to budget and pay this benefit under the amendment is not
related to the family's countable income or the State's monthly need
standard; and (2) the State did not establish that the amount of the RSP
benefit under the amendment is related to the cost of securing long-term
habitable housing for these families.
o The plan amendment violates 45 C.F.R. 233.20(a)(2)(v), which
requires that special need items be considered for all applicants and
recipients requiring them, because the plan amendment does not guarantee
that all families who meet the eligibility criteria will receive the RSP
benefit.
o The plan amendment violates 45 C.F.R. 233.10(a), which requires
that eligibility conditions be applied on a consistent and equitable
basis throughout the State, because local social services districts are
authorized to develop their own prioritization standards for determining
which families receive the RSP benefit.
o The plan amendment is contrary to the intent of Congress as
manifested by section 1119 of the Act in that the amendment seeks to
fund a capital improvements program with Title IV-A money.
Finally, New York argued that the plan amendment should be approved
because the Regional Administrator had acted arbitrarily and
capriciously and that this was an independent ground for approving the
amendment. I find that the Regional Administrator's decision was not
arbitrary or capricious.
II. BACKGROUND
Title IV-A of the Act establishes a program of aid for "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 self-support and personal
independence . . . ." Section 401 of the Act. This program provides
monthly payments to such qualified families and is referred to at the
federal level as "Aid to Families with Dependent Children," or AFDC.
New York has an approved state plan under Title IV-A, but refers to its
program as Aid to Dependent Children, or ADC.
The amount of AFDC to which an assistance unit is entitled is based on
its needs as defined in the state plan. Section 402(a)(7) of the Act;
45 C.F.R. 233.20. In order to measure need, a state must set forth in
its plan a standard of need, expressed in money amounts. 45 C.F.R.
233.20(a)(2). The state does not have to pay assistance units the full
amount of its standard of need but may calculate assistance payments
pursuant to a lower payment standard which is based on the standard of
need. 45 C.F.R. 233.20(a)(2)(ii). Since New York pays its full standard
of need, a New York assistance unit's payment is determined by comparing
the unit's income to its standard of need. Characteristics of State
Plans for Aid to Families with Dependent Children under Title IV-A of
the Social Security Act (hereinafter cited as Characteristics), p. 206,
1989 Edition; 45 C.F.R. 233.20(a)(3)(ii).
A standard of need is composed of basic needs and, if a state chooses,
special needs. 45 C.F.R. 233.20(a)(2). The basic needs component
represents the cost of basic living needs that the state recognizes as
essential for all applicants and recipients. Characteristics, p. 13. In
New York, the basic needs allowance includes food, clothing, shelter,
household supplies, utilities, personal care items, transportation, and
household furnishings. Id., p. 206. Special needs are those needs
which are recognized by a state as essential for some people but not for
all, and are determined on an individual basis. Id., p. 13. Special
needs may be for recurring or nonrecurring needs. For example, New
York's special needs include, but are not limited to, replacement of
furniture and clothing lost in a fire, flood, or other catastrophe;
repairs of essential heating equipment, cooking stoves, and
refrigerators; moving expenses; life insurance premiums; and camp fees.
Id., p. 206.
In March 1988, New York submitted to FSA a proposed amendment to its
AFDC state plan which would create a new category of special need. The
need item, referred to as the Rent Supplement Program or RSP, pays a
special allowance to secure long-term habitable housing on behalf of
certain families. In order to qualify for this special need, a family
must satisfy three eligibility criteria: it must reside in a
municipality having a low income housing rental vacancy rate of less
than three percent, it must not be able to locate housing within the
local shelter maximum, and it must have lived in a hotel or motel at
public expense for more than 24 weeks.
RSP is similar to a prior New York program, known as the Emergency
Assistance Rehousing Program or EARP, for which New York had previously
and unsuccessfully sought IV-A funding. See New York State Dept. of
Social Services, DAB No. 999 (1988). New York operated EARP between
June 1983 and March 1988, when it established RSP. Transcript of
November 15, 1989 hearing (hereinafter cited as "Tr."), p. 13. Both
programs sought to enable public assistance recipients living in hotels
or motels to move into long-term habitable housing; both programs
offered substantial payment bonuses to landlords for making rental units
available to public assistance families; both programs calculated the
bonuses on the basis of the difference between the AFDC shelter
allowance and the hotel/motel rate for the family; both programs
required the private landlord to make the unit available to the family
(or in the case of EARP, to an AFDC family) for 32 months. RSP and EARP
also differ in certain important respects. For example, in EARP there
was no mechanism for budgeting the benefit in the AFDC family's standard
of need while in RSP it is budgeted as a special need over an eight
month period. Further, in EARP, a landlord was entitled to retain the
bonus if a family moved out before expiration of the 32 months while in
RSP the landlord must remit a pro rata share of the bonus. One
important question about which New York and FSA disagree is whether RSP
is, like EARP, a housing rehabilitation program.
On April 19, 1989, the FSA Regional Administrator disapproved the plan
amendment on the following grounds:
(1) the plan amendment violated 45 C.F.R. 233.20(a)(1)(i), which
requires that the needs of an AFDC family are to be determined on an
"objective basis;"
(2) the plan amendment violated 45 C.F.R. 233.20(a)(2)(v), which
requires that special needs payments must be considered for all
applicants and recipients requiring them;
(3) the plan amendment violated 45 C.F.R. 233.10(a), which requires
that applicants and recipients be treated equitably; and
(4) section 1119 of the Act demonstrates that Congress had not intended
for Title IV-A funds to be used to reimburse states for a special needs
allowance of this type and amount.
The following section of the decision contains my findings on each of
these grounds and the supporting analysis.
III. DISCUSSION OF LEGAL ISSUES
A. Whether the proposed state plan amendment violates the
regulatory requirement in 45 C.F.R. 233.20(a)(1)(i) that the needs
of an AFDC family are to be determined on an "objective basis."
In determining the needs and amount of assistance of an AFDC assistance
unit, a state must comply with certain standards. The regulatory
provision at 45 C.F.R. 233.20(a)(1)(i) requires that a state plan must:
Provide that the determination of need and amount of assistance for
all applicants and recipients will be made on an objective and
equitable basis . . . .
FSA argued that New York's plan amendment violated the "objective basis"
requirement. First, it argued that the RSP payment was not related to
the family's countable income or the State's monthly need standard.
Second, it argued that the RSP payment was based on the State's
hotel/motel rate and was unrelated to the type of shelter, i.e.,
residential housing, in which the family was being placed. 2/
As discussed below, I find that the State's practice, which the
amendment permits, of budgeting the RSP supplement over eight months,
but paying over a different number of months, violates the objective
basis requirement of 45 C.F.R. 233.20(a)(1)(i) because the RSP payment
is not related to the family's countable income or the State's monthly
need standard and assumes that the family will be on AFDC for the next
eight months. Second, I find that the proposed amendment violates
section 233.20(a)(1)(i) because the State has failed to demonstrate that
the amount of the RSP payment is objectively related to the actual cost
of securing private housing for these assistance units.
1. Under 45 C.F.R. 233.20(a)(1)(i), a state must determine a
family's need and assistance payment on an objective basis. The
manner in which New York is permitted to budget and pay this
benefit under the amendment violates the objective basis
requirement because the RSP payment is not related to the family's
countable income or the State's monthly need standard and because
the payment speculatively assumes that the family will be on AFDC
for the next eight months.
The regulatory provision at 45 C.F.R. 233.20(a)(1)(i) requires states to
determine a family's need and assistance payment on an objective basis.
New York compares the family's countable income with the applicable need
standard and the difference constitutes the assistance payment. Tr., p.
20; Characteristics, p. 206; 45 C.F.R. 233.20(a)(3)(ii). This process
is done on a monthly basis. Tr., p. 20. FSA objected to the proposed
plan amendment on the grounds that the RSP payment is not related to the
family's monthly needs.
New York argued that the RSP benefit is related to the family's monthly
needs because it is budgeted as a special need over an eight month
period, i.e., the applicable bonus payment is divided by eight and that
amount is added the unit's need standard for the next eight months.
Tr., pp. 20; 23; 40; 45-46. However, New York admitted that the RSP
benefit is not necessarily paid on a corresponding basis. Tr., pp. 40;
45-46. 3/ Neither of the two jurisdictions presently operating RSP
programs correlates the payment of the bonus to the manner in which it
budgets the bonus in the assistance unit's standard of need. Moreover,
both pay the bonus in advance of budgeting it. Tr., pp. 71; 79. 4/
The State concedes that the amendment permits such a practice.
The practice of paying the bonus in advance of the budgeting process
presumes the family will continue to be on aid over the eight month
budget period. This constitutes an assumption of unascertainable future
facts and is not objective since it rests on speculation. 5/
Further, the practice of paying the bonus without regard to how it is
budgeted causes a family's payments to exceed its standard of need for
some months and fall short of it in other months. Consequently, the
family's income, consisting of its actual assistance payment, is not
objectively related to its standard of need. For example, if a four
person family's RSP bonus is $9427, then under New York's budgeting
practice, one-eighth of that amount, or $1178, is added to the family's
standard of need for eight months. In Rockland County, one quarter of
that amount, or $2357, is paid in the first month so the family's actual
payment the first month will exceed their standard need by $1178. An
assistance unit's AFDC payment cannot exceed the standard of need.
Characteristics, p. 14; 45 C.F.R. 233.20(b); Tr., p. 20. Further, in the
remaining months, the payment is less than the standard of need:
Rockland County skips the next two months so those months the family's
payment is $1178 per month less than the standard of need; in months
four through eight the payment is $1414 so the payment is $236 more than
the standard of need. Thus, this practice results in the family being
ineligible for AFDC for some months, or results in the family receiving
less than the budgeted amount in other months. In New York City, this
problem would be exacerbated since only one lump sum payment is made at
the outset. The practice of ignoring the amount of money actually paid
to or on behalf of the family during these eight months cannot be
considered "objective."
New York argued that this practice of bifurcating budgeting and payment
and making lump sum payment is consistent with the federally mandated
procedure for correction of underpayments. Tr., p. 47; Appellant's
Reply Memorandum of February 16, 1990, p. 3. Because 45 C.F.R.
233.20(a)(13)(ii) provides that such a corrective payment should not be
considered "income" in the month it is paid, the corrective payment
is
excluded from the budgeting process. Thus, such a corrective payment is
paid as a lump sum in one month even though it might consist of
underpayments for numerous months and even though it might make the
assistance unit ineligible for AFDC if it was budgeted during the month
it was paid.
New York's argument is not persuasive. The bifurcation of budgeting and
payment in the context of underpayment correction is federally mandated
by section 402(a)(22)(C) of the Act and is an exception to the standard
budgeting rules which require "all types of income to be considered the
same way except where otherwise specifically authorized by Federal
statute . . . ." 45 C.F.R. 233.20(a)(1)(i). Therefore, this
Congressionally mandated practice in the context of overpayments does
not authorize New York to alter budgeting and payment standards in the
AFDC program. 6/
2. The plan amendment violates 45 C.F.R. 233.20(a)(1)(i) because
the State failed to show that the amount of money paid to landlords
under the amendment is related to the cost of opening the housing
market to these families and because the State is trying to do more
with this special need than simply meet individual families'
special needs for access to permanent housing.
The purpose of a special need benefit is to meet a special need;
therefore there must be some objective relationship between the amount
of money the State pays to meet that need and the market cost of that
need.
The RSP special need is access to long-term habitable housing. To
secure that housing, the State pays the difference between the
appropriate shelter allowance and the commercial hotel/motel rate. The
State's methodology results in a substantial sum of money being paid on
behalf of an individual family to secure permanent housing. 7/ The
State justified its use of commercial housing rates to calculate
residential benefits on the grounds that this strategy enabled it to
effectuate a State and federal goal of placing families in permanent
housing and was ultimately cost effective. Appellant's Post-Hearing
Brief, pp. 8-9; Tr., pp. 28-29.
While New York's witness represented that this amount of money was
necessary to enable these families to move into permanent rental housing
(Tr., p. 27), the State did not introduce any evidence beyond these
conclusory statements to substantiate its position. Thus, the State
made no demonstration as to how the RSP benefit amount it selected
related to the market cost of obtaining long-term habitable housing.
When considering the substantial nature of this payment in conjunction
with the history and other provisions of RSP, I find that the program
and payments are designed to do more than simply meet the special
housing need for access to long-term habitable housing for individual
assistance units in hotels or motels. I find that this program and its
payments are, like the EARP program and payments, designed to
rehabilitate and increase the supply of habitable housing available to
public assistance families in general. Consequently, the amount the
State pays landlords on behalf of assistance units would presumably
reflect this larger goal and, as a consequence, would not be objectively
related to the real cost of any individual's special need. I base this
finding on the following factors:
o RSP is a successor program to EARP which was a capital
improvements program designed to rehabilitate previously uninhabitable
housing and make it available to public assistance families. New York
State Dept. of Social Services, supra, p. 2. While New York maintains
that RSP is not a capital improvements program, the similarities between
the two programs remain so strong that I cannot accept the State's
representation as to RSP's limited purpose.
o The RSP bonus payment is calculated on the same basis as the
EARP bonus payment. If the purposes of the programs are different and
RSP is not a capital improvements program, that difference should
ostensibly be reflected in the manner in which the bonus payments are
calculated.
o In RSP, as in EARP, the bonus payment is paid up front rather
than over the life of the tenancy. Again, this EARP-like payment
structure is consistent with the goal of inducing landlords to
rehabilitate property rather than a true rent supplement program.
o In RSP, the local social service district can hold the bonus
payment in escrow until the unit substantially complies with the local
housing code. An escrow mechanism is again consistent with the goal of
rehabilitating housing.
o In RSP, as in EARP, the bonus can be paid to public housing
authorities which presumably have a pre- existing duty to rent to low
income families. This feature supports a finding that the State is
seeking to enable all types of landlords to rehabilitate rental housing.
o RSP is not available for units which have housed an AFDC family
within the last year. This feature supports a finding that the State is
attempting to expand the low income rental market in general, rather
than simply secure housing for a given group of people. This policy is
not consistent with a true rent supplement program and undercuts the
State's professed goal of finding housing for hotel/motel families.
o In its rule publication, New York represented that RSP:
codifies the major provisions of the Emergency Assistance Rehousing
Program. This program has been one of the most successful
approaches to the development of new code-compliant permanent
housing for the homeless. FSA Ex. 2, Regulatory Impact Statement,
Section 3.
It also represented that:
This proposed rulemaking would authorize social services districts
to pay rent supplements to convert or upgrade housing for use by
recipients of public assistance. Id., Waiver of Regulatory
Flexibility Analysis.
These provisions indicate that at least as of March 1988, when it
submitted its plan amendment, New York saw RSP as a capital improvements
program.
Therefore, given the substantial amount of money New York is paying to
landlords and RSP's similarities to the EARP program, I find that the
record supports a finding that these rates are not objectively related
to the goal of simply securing permanent housing for AFDC families in
hotels and motels.
Further, I find that, aside from the question of whether RSP remains a
capital improvement program, the programmatic mechanism the State has
selected to calculate these benefits is not reasonably related to the
cost of access to the private rental market. I base this conclusion on
the following factors:
o The hotel/motel rate is the rate the State pays to house
assistance units temporarily in commercial housing. It is unrelated to
the residential rate which is reflected in the State's basic need
standard.
o The difference between these two rates may reflect what the
State expects to save by diverting this money to residential landlords,
but it bears no necessary relationship to the cost of securing access
for these families to permanent housing.
o Even assuming that the difference between these two rates
presently reflects the cost of securing access to permanent housing,
there is no showing that it will continue to reflect that cost. Either
of these rates could change in relation to one another and thereby make
the RSP bonus payment exceed the cost of access or be insufficient to
secure access.
Therefore, I find that this mechanism for calculating the bonus payment
is not objective since there has been no showing that it is related to
the market cost of the need at issue.
B. Whether the proposed state plan amendment violates the
regulatory requirement in 45 C.F.R. 233.20(a)(2)(v) that special
need items be considered for all applicants and recipients
requiring them.
Special needs are those needs which are recognized by a state as
required by some people but not by all, and are determined on an
individual basis. 8/ While a state is not required to fund any special
need items, certain standards apply to such items if a state does choose
to fund them. Specifically, 45 C.F.R. 233.20(a)(2)(v) requires:
If the State agency includes special need items in its standard,
[its state plan must] (A) describe those that will be recognized
and the circumstances under which they will be included, and (B)
provide that they will be considered for all applicants and
recipients requiring them . . . . [Emphasis added.]
In establishing a special need, a state must define which people
"require" that special need item and then provide them with that item.
Here, New York has described a pool of eligible families who need RSP on
the basis of three statewide criteria: the family must reside in a
municipality having a low income housing rental vacancy rate of less
than three percent, it must not be able to locate housing within the
local shelter maximum, and it must have lived in a hotel or motel at
public expense for more than 24 weeks. Under the amendment, local
social services districts are also entitled to adopt additional criteria
to be used in ranking these families.
The Regional Administrator found that the plan amendment violated 45
C.F.R. 233.20(a)(2)(v) because the RSP special need was available only
to the extent that RSP housing units existed and therefore it would not
be available to all families who "required" it, i.e., who met the
State's eligibility criteria. 9/
In response to this objection by the Regional Administrator, New York
argued that 45 C.F.R. 233.20(a)(2)(v) only requires that a special need
"be considered" for applicants and recipients requiring it. It
maintained that the phrase "be considered" requires it to identify
families who are eligible to participate in RSP, and does not require it
to actually place such families in RSP units and grant them the RSP
benefit. New York also asserted that it was under no obligation to
create sufficient units of RSP housing to ensure that eligible families
received the RSP benefit. Appellant's Post-Hearing Brief, p. 13.
Further, the State did not indicate that there was any guarantee that
such units would ever become available for all eligible families. (See
page 20 of Appellant's Post-Hearing Brief in which it represented that,
though it strives to place all eligible families, the guarantee of
placement was an impossible goal to meet.)
I conclude that this plan amendment violates 45 C.F.R. 233.20(a)(2)(v),
because receipt of RSP is not based solely on whether a family meets the
eligibility requirements for the RSP. I conclude that, when a State
adopts a special need, it must provide the need payment to all people it
defines as requiring the need.
Section 233.20(a)(2)(v) sets up the requirement that a state must: (1)
describe both the special need item and the circumstances under which it
will be included in the statewide standard; and (2) provide that the
need item will be considered for all applicants and recipients requiring
it. The clear meaning of "consider" in the section is that a state
must
evaluate the need item for all applicants or recipients and actually
provide it for those that require it. The obvious purpose of the
requirement is to insure full and uniform implementation of a special
need item in the state's program. A state must rely on the eligibility
criteria that it has identified and may not limit application of the
special need based on factors outside of these criteria; otherwise the
state's implementation of the special need could be arbitrary.
Moreover, the "consideration" process contemplated by this subsection
must be interpreted in the context of the budgeting process as a whole.
The provision at 45 C.F.R. 233.20(a)(2)(v), which compels
"consideration" of a special need benefit for all requiring it, is
a
subsection of a regulation which sets forth the lengthy and complex
budgeting process a state must follow in determining a family's AFDC
eligibility, need, and payment. At the conclusion of this budgeting
process, a family's countable income is compared to the state's basic
need standard plus any special need items for which the assistance unit
is potentially eligible. As a result of this budgeting process, an
assistance unit: (1) might receive the full amount of the special need
at issue; or (2) if it has other income, might only receive a portion of
the special need; or (3) if it has enough income, might receive none of
the special need.
Until the state engages in this budgeting process for each assistance
unit in relation to the basic and special need items for which they are
potentially eligible, there is no way of knowing whether the assistance
unit's countable income will qualify them for actual receipt of the
special need item. Hence, it is understandable that the regulation at
issue requires the state to "consider" the special need item at issue
since it is through this budgeting, or consideration, process that the
state determines whether the family is financially eligible for the
item. In this context, the phrase "be considered" requires that such
a
benefit be budgeted in the family's need standard when it meets the
eligibility criteria for the special need and not at some speculative
point.
Here, New York has defined a set of criteria under which an assistance
unit is deemed to "require" or be eligible for the RSP special need.
However, once the family meets this criteria, there is no assurance in
the plain language of the amendment that the family will ever receive
the need benefit. Only if RSP units exist and only if the assistance
unit is at the head of the line after the "prioritization" process,
will
the RSP benefit be budgeted in the assistance unit's need standard.
Indeed, the plain language of the plan amendment establishes that the
number of families who meet or are expected to meet the RSP eligibility
criteria will exceed the number of RSP units. This is evident from the
following features of the amendment:
o The plan amendment provides: "To the extent that units of
housing are available . . ., social services districts must provide an
[RSP] allowance . . . ." Thus, the districts' duty to supply RSP to
eligible recipients turns not on a family's eligibility, but on whether
there is an RSP unit available.
o The local social services districts are required to develop
prioritization criteria to determine which of the eligible families will
actually receive the RSP benefit. This feature demonstrates that the
State expects the number of families it defines as eligible to exceed
the number of RSP units.
o Local districts, in their requests to the State, must specify
the number of RSP units they will make available. There is no
requirement in the plan amendment that this number be in any way related
to the pool of eligible families.
Further, the State did not allege and the record did not indicate that
even the families in the local districts' highest priority categories
would receive the RSP benefit. The amendment makes no assurances to any
eligible family and apparently subjects eligible families to a
competition process for a limited benefit.
Finally, New York's witnesses admitted that the number of RSP eligible
families exceeded the number of available RSP units. Tr., pp. 30-31;
73. 10/ Therefore, a family could well meet the eligibility criteria
that the State has set forth and never actually receive this special
need.
Thus, under the RSP system, the budgeting, or consideration process, and
the receipt of the benefit is entirely speculative. Eligible families
must "compete" among themselves for limited RSP units. I find that
this
process does not constitute consideration of this special need for
eligible assistance units and violates the requirement in section
233.20(a)(2)(v) that such needs be considered for all requiring them.
C. Whether the proposed plan amendment violates the regulatory
requirement in 45 C.F.R. 233.10(a) of equitable treatment.
The regulatory requirement at 45 C.F.R. 233.10(a)(1)(iv) provides that:
eligibility conditions imposed must not exclude individuals or
groups on an arbitrary or unreasonable basis, and must not result
in inequitable treatment of individuals or groups . . . . Under
this requirement:
* * *
(iv) Eligibility conditions must be applied on a consistent and
equitable basis throughout the State.
FSA argued that there were two aspects of the plan amendment that
violated this requirement. First, it asserted that the local districts'
authority to select prioritization criteria for RSP receipt meant that
families would be treated differently in different districts. It
concluded that this design was a violation of the requirement that the
AFDC program be administered on a consistent and equitable basis
throughout a state. FSA also argued that the three primary eligibility
criteria created an inequitable exclusion of families who were also in
need of the RSP benefit. 11/
I conclude that the degree of discretion given to local districts in
selecting which families will receive RSP benefits and in determining
how many families will be placed does violate the requirement of
statewide consistency. I base this conclusion on the following grounds.
The proposed plan amendment sets forth three uniform eligibility
criteria: rental vacancy rate, no housing located within shelter
maximum, and residence in hotel or motel at public expense for period
exceeding 24 weeks. However, because the numbers of families satisfying
these criteria exceed the number of RSP units (Tr, p. 32), the plan
provides a means of determining which of these eligible families will
actually receive the benefit. It directs the local social service
district to consider additional criteria "such as the length of stay in
a hotel or motel at public expense, the size of the family and the
location of schools . . . ." The local district is entitled to rank
these criteria in the order it deems appropriate. Tr., pp. 32; 77-78.
Further, districts are entitled to adopt additional prioritizing
criteria to these three. Tr., p. 81. Finally, local districts have the
discretion to specify the number of RSP units they will make available.
New York argued that the discretion granted local districts to design a
prioritizing system did not violate the equitable treatment standard
because all district plans had to be submitted to and approved by the
State and the State supervised the ongoing administration of each plan.
Tr., p. 32, Appellant's Post-Hearing Brief, p. 19. It also again tried
to distinguish between the eligibility criteria, which are uniform
throughout the state, and the placement criteria, i.e., the
prioritization criteria, which are not uniform. Id., pp. 18-19.
I find that the criteria which the State has denominated
"prioritization" or "placement" criteria actually determine
which
families will receive the RSP benefit. Since they determine who will
receive an RSP benefit, they are effectively eligibility conditions and
must be consistent throughout the State. The New York State Department
of Social Services' approval of the local districts' criteria plans and
supervision of the local districts' administration of the local plans
does not make the criteria consistent. In fact, the State admitted the
criteria are designed to and do vary from district to district. Tr.,
pp. 32; 77-8. Moreover, the districts have discretion to determine the
number of RSP units they will make available. In order to be equitable
under 45 C.F.R. 233.10(a)(1)(iv), eligibility conditions must be
consistent and must be consistently applied throughout the State. Since
these conditions are not, they violate 233.10(a)(1)(iv).
D. Whether the plan amendment was contrary to Congressional intent
expressed in section 1119 of the Act, which limits federal funding
in public assistance programs for home repairs.
Section 1119 of the Act provides federal funding of home repairs by AFDC
(and other public assistance) recipients under certain circumstances
where the recipients own the home in issue and the costs submitted for
funding do not exceed $500. FSA argued that section 1119 of the Act
demonstrated that Congress had not intended for Title IV- A funds to be
used for housing rehabilitation expenses. As an extension of this
argument, FSA pointed out that Title IV-A federal assistance is
available only for IV-A maintenance payments and administrative costs.
It asserted that RSP payments were designed to address the problems of
the supply of low cost housing and as such did not qualify as
maintenance payments under Title IV-A.
New York responded that RSP was not a housing rehabilitation program and
therefore these objections were irrelevant. Alternatively, New York
argued that section 1119 of the Act applied only to reimbursements to
home owners; and that it was an enhancement of federal funding and not a
limitation on such funding. It pointed out that Congress knew how to
explicitly prohibit capital improvement expenses as it had done in Title
XX and not done in Title IV-A.
As set forth in this decision, I find that RSP continues to be a housing
rehabilitation program. Consequently, I find that section 1119 and the
concept of what constitutes an AFDC maintenance payment are relevant to
this dispute.
New York, supra, dealt with the significance of section 1119 as it
related to EARP, the rental housing rehabilitation program for which New
York sought Title IV-A funding. There the Board held that FSA was
correct in construing section 1119 as an expression of Congressional
intent to limit AFDC funding for capital improvements. The Board wrote:
"Given the limitations on funding available to recipients themselves, it
would hardly be logical to conclude that Congress intended to permit
AFDC funding on a significantly more costly scale, for repairs to
buildings not owned by recipients." New York, supra, p. 6. I find that
Congressional intent here was quite clear, even if Congress did not use
the same language as it did in Title XX.
For this and other reasons identified in New York, supra, I find that
Congress did not intend Title IV-A be used to fund low-income housing
rehabilitation programs such as RSP.
E. Whether the Regional Administrator acted capriciously and
arbitrarily in rejecting the plan amendment, and if so, whether
such conduct is a ground for approving the amendment.
New York asserted that the Regional Administrator had acted capriciously
and arbitrarily in rejecting the plan amendment because she failed to
understand the true nature of RSP. Appellant's Post-Hearing Brief, p.
22. New York argued that this conduct provided an independent basis for
approval of the plan amendment. Id. In support of its position, New
York made the following allegations:
o The disapproval letter for the plan amendment (N.Y. Ex. B) and
the disallowance letters (N.Y. Exs. A and C) for EARP reimbursement set
forth nearly all the same grounds, thereby indicating that FSA failed to
distinguish between the two programs. The State concluded that
disapproval "so grievously disregards the correct nature of the RSP, it
is irreparably flawed and arbitrary per se." Id., p. 23.
o The Regional Office's motive in denying the plan amendment
appeared to be financially based rather than programmatic.
o The failure of the Regional Office to communicate its concerns
about the amendment was completely contrary to the usually open and
active relationship between the two parties. "Indeed, had the dialogue
progressed to agreement, the State would have modified its proposal to
allay federal agency concerns." Id., p. 24.
Since I have concluded that the Regional Administrator's decision
correctly evaluated the nature of RSP and had a sound programmatic
basis, I find that New York's first two objections are not well founded.
I also find that the record here demonstrates that New York has had a
full and sufficient review of its plan amendment by the Regional
Administrator.
New York's representation that it might have been able to modify its
amendment to meet Regional Office concerns is not convincing, and in any
event is not a basis for approving the amendment. The plan amendment
contained significant substantive problems; the differences between the
parties were so great that New York could not have accommodated the
Regional Administrator's objections without changing the nature of its
program. Further, New York had never unequivocally explained how it
would have changed its amendment to satisfy these concerns. While the
Regional Office may have failed to communicate with the State during the
review process concerning reservations that led to disapproval, there is
no evidence that the State sought to consult with the Regional Office
prior to or after submitting the amendment.
Finally, New York has cited no authority for the proposition that any of
the behavior identified by it would be grounds for approval of a plan
amendment even though that amendment does not meet federal requirements.
IV. CERTIFICATION
The time for submission of post-hearing briefs having expired, the
entire record, including the foregoing recommended findings and proposed
decision, is CERTIFIED to the Assistant Secretary for Family Support
Administration, as directed in 45 C.F.R. 213.32(b)(1).
Donald F. Garrett Presiding Officer
April 19, 1990
APPENDIX A
The text of Transmittal No. 87-45 is set out below. The format of the
transmittal has been modified to include multiple paragraphs.
To the extent that units of housing are available and subject to
department approval based upon the housing conditions in the region,
social services districts must provide an allowance to secure or retain
housing to any homeless family
(1) residing in a municipality having a rental vacancy rate for
low income housing less than three percent,
(2) for whom no housing can be located at a rent with in the
shelter maximum under section 352.3 of this Title and
(3) which has resided in a hotel or motel at public expense for a
period exceeding 24 weeks.
In determining priority for placement in housing units for which an
allowance is paid under this subdivision, the district must consider
factors affecting need such as
the length of stay in a hotel or motel at public expense,
the size of the family and
the location of schools in relation to the temporary housing where
the family is residing.
Local social services districts must submit requests to the department
which seek approval of the allowance, indicating
the number of units of housing for which the allowance will be made
available pursuant to this subdivision,
describing the housing to be utilized,
the number of months that the rent supplement will be available
(not to exceed eight months in the case of privately owned units or
four months in the case of publicly owned units),
the procedures for assuring local housing code compliance,
the procedures to identify those families likely to be long-term
residents of hotels and motels and
the criteria to be used in determining priorities for placement.
The allowance consists of a rent supplement up to the difference
between the appropriate shelter allowance and the hotel/motel rate for
the family.
No supplement provided under this subdivision will be paid for housing
which does not comply with or which is not brought into compliance with
the local housing code or which has been occupied by a family receiving
AFDC or Home Relief within one year prior to the payment of supplement
hereunder; provided, however, that such supplement may be held in
escrow by the district pending correction of existing code violations.
Moreover, no supplement will be paid unless the participating landlord
agrees to make a specified apartment available to the selected family
for a period of not less than thirty two months, except as provided
herein.
The landlord must agree that, in the event that a selected family does
not remain for any reason in the specified apartment for the period for
which it is to be available, he/she will return a pro rata portion of
the rent supplement reflecting the balance of the period.
In such event, the district may provide a supplement with respect to a
subsequently selected family for the balance of the period, provided
further that such family meets the eligibility criteria set forth in
this subdivision.
Supplements provided under this subdivision must be paid for a maximum
period specified by the district and approved by the department.
1. I have considered all proposed findings of fact and conclusions of
law submitted by the parties, as well as their supporting arguments. To
the extent those proposed findings, conclusions, and arguments are in
accordance with this decision, I have accepted them; to the extent they
are inconsistent, I have rejected them. I have omitted certain proposed
findings and conclusions as not relevant or as not necessary to a proper
determination of the material issues presented.
2. FSA also argued that the special needs allowance may not meet the
family's shelter needs since it only required the housing to be in
substantial compliance, as opposed to full compliance, with the housing
code. Because FSA did not rely upon any specific requirement in the
AFDC program that shelter payments secure code-compliant housing, I do
not recommend basing a decision on this objection.
3. New York argued that, since the language of the plan does not
compel payment of the bonus in a lump sum, there should be no inquiry as
to whether the payment process differs from the budgeting process.
Given the silence of the plan as to the budgeting and payment processes,
the history of this program, and the admission of the State as to its
practice, I disagree. One of the principal problems with RSP's
predecessor, EARP, was the fact that it did not provide for the
calculation of benefits on a monthly basis and made lump sum payments.
New York, DAB No. 999, pp. 3-4. RSP is the successor program which the
state represented "incorporated the major features of EARP." FSA Ex.
2,
Regulatory Impact Statement, Section 3.
4. Rockland County pays the bonus in six installments: one quarter of
the bonus up front and five subsequent installments beginning two months
after the first payment. Tr., p. 72. New York City makes one payment
after the family moves into the unit. Tr., p. 79.
5. Further, the practice exposes the family to a large potential
overpayment. Should the family go off AFDC within the eight month
budgeting period, it would be assessed a portion of the advanced RSP
payment as an overpayment. Tr., pp. 48-49.
6. New York complained that, had it been informed of FSA's objection
to its payment practices, a compromise could have been reached on this
issue. Tr., pp. 92-94. However, since New York never explained
precisely how it would be willing to alter its budgeting practices, this
representation alone could not provide grounds to absolve New York of
this flaw. Not only does the plan amendment permit the practice, but
also the practice has been consistently followed by the State since the
RSP was initiated.
7. In 1989, the RSP allowance was "approximately $2300" per person.
A
family of four was specifically entitled to an RSP benefit of $9427.
FSA Ex. 10.
8. Recognition of special need items is a matter of state option; 20
states recognize no special need items in their standards of need while
New York recognizes 18. Characteristics, p. 365, 367. The range of
special need items funded by states through the AFDC program is broad
and diverse. For example, nine states fund a pregnancy allowance; nine
fund special clothing or clothing replacement; eight fund expenses
caused by catastrophe or eviction; six fund excess cost of shelter, fuel
or utilities; five fund special dietary needs; three fund funeral
expenses; two fund guide dog costs; one funds check replacement; one
funds infant benefits such as cribs and layettes; one funds child
restraint seats. Characteristics, p. 365-36.
9. In its brief, FSA also argued that the plan amendment violated this
regulation because RSP's three principal eligibility criteria excluded
other categories of homeless applicants and recipients who needed
assistance in obtaining permanent housing. In light of my finding
upholding the ground for disapproval on the basis of its first argument,
I do not find it necessary to rule on FSA's second argument. The three
statewide criteria selected by New York appear on their face to be
reasonably related to the goal of the RSP special need. That goal is to
enable families in tight low income rental markets, who have a
demonstrated inability to obtain permanent housing, to secure permanent
housing.
10. The data in New York Exhibits G, H and I demonstrates that the
number of RSP eligible families in New York City, one of the two social
service districts operating an RSP program, vastly exceeds the number of
units which are available. For example, New York Exhibit I is the June
1988 New York City Report on Temporary Housing Program for Families with
Children. The report includes a breakdown of the family caseload by
length of stay in the City's temporary housing programs. New York Ex.
I, p. 7. In June 1988, some 3,300 families or over 50% of all families
in temporary housing programs were in hotels or motels. Id., p. 3. Of
all families in temporary housing programs, 1247 families (24.20%) had
been in temporary housing six months to a year; 986 families (19.14%)
had been in a year to one and one half years; 576 families (11.18%) had
been in 2 to 3 years; and 334 families (6.48%) had been in more than 3
years. The report states that 587 apartments have been accepted by the
city under its EARP program for FY 87-88 to date. Id., p. 9.
Presumably, since EARP ceased operation in March 1988 (Tr., p. 13) and
New York City officials have demonstrated some confusion about the
program's proper name (Tr., pp. 13-14), the report is actually
identifying RSP units. Comparison of 587 units to the numbers of
families in hotel/motel housing shows the disparate relationship between
the number of RSP slots and the numbers of families who meet the
eligibility criteria.
Further, the report sets out average length of stay of families in
selected larger facilities, including hotels and motels. New York Ex.
I, p. 8. A review of the hotel data demonstrates that families are not
being moved into permanent housing when they pass the six month
residency threshold for RSP eligibility. At Brooklyn Arms, which in
June 1988 was housing 264 families, the average stay was over 10 months;
at Conca D'Oro, which in June 1988 was housing 116 families, the average
stay was over a year; at the Holland Hotel, which in June 1988 was
housing 28 families, the average stay was over 2 years, at Lincoln
Court, which in June 1988 was housing 55 families; the average stay was
approximately 16 months; at the Traveler's Hotel, which in June 1988 was
housing 100 families, the average stay was over 11 months. The State
indicated that the average stay in hotels or motels is 13 months. Tr.,
pp. 35, 66. Again this data demonstrates that the families who are
eligible for RSP dramatically exceed the State's creation of RSP units.
11. In light of my finding upholding this ground for disapproval on
the basis of FSA's first argument, I do not find it necessary to rule on
the second argument. I would note, however, that, since a special need
is something which is necessary for some people, but not all, some
degree of exclusion appears to be inevitable. Here the State is
attempting to deal with the problem of homelessness of public assistance
families in its cities. Through a special need, it is addressing a
portion of that problem: that presented by families living in hotels and
motels. As FSA points out, this solution does not deal with problems
presented by other categories of homeless people: those living in
shelters, those living on the street, those living in hotels or motels
for a shorter time than 24 weeks. Nevertheless, a state may not violate
the equity requirements of 45 C.F.R. 233.10(a) if it acts reasonably
and not arbitrarily in deciding how to address the problem and to define
its eligibility