Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Pennsylvania Department of Public Welfare
DATE: October 31, 1997
Docket Nos. A-97-94,
A-97-134, A-97-135,
A-97-163
Decision No. 1634
DECISION
The Pennsylvania Department of Public Welfare
(Pennsylvania) appealed the decision of the
Administration for Children and Families (ACF)
disallowing $8,023,286 (Docket No. A-97-94), $22,206,517
(Docket No. A-97-134), $4,195,239 (A-97-135), and
$4,890,859 (Docket No. A-97-163) in federal financial
participation (FFP). Pennsylvania had claimed this FFP
pursuant to the Emergency Assistance (EA) provisions of
title IV-A of the Social Security Act (Act) on its
quarterly expenditure statements for the quarters ending
June 30, 1996, September 30, 1996, December 31, 1996, and
March 31, 1997.
ACF disallowed FFP in expenditures incurred by
Pennsylvania for providing benefits and services to
children who were within the jurisdiction of its juvenile
justice system. In issuing the disallowance, ACF relied
on Action Transmittal 95-9 (AT-95-9). That action
transmittal provides that, as of January 1, 1996, FFP is
not available under EA for expenditures for benefits or
services to children in the juvenile justice system.
Pennsylvania seeks to have the disallowance reversed
based on two alternative legal theories. First,
Pennsylvania argued that AT-95-9 is invalid because it is
a legislative rule which, under sections 533(b) and (c)
of the Administrative Procedure Act (APA), can be
effective only after publication in the Federal Register
and opportunity for comment. Second, Pennsylvania argued
that, even if AT-95-9 is an interpretative rule (and
therefore need not be published), it is invalid because
it is contrary to EA statutory and regulatory provisions,
Supreme Court decisions, and existing agency policy. 1/
In Tennessee Dept. of Human Services, DAB No. 1619
(1997), the Board concluded that AT-95-9 is an
interpretative rule that was promulgated pursuant to APA
requirements. We based this conclusion on the following
factors: AT-95-9 sets forth ACF's interpretation of the
requirements of sections 403(a)(5) and 406(e)(1) of the
Act; in AT-95-9, ACF did not purport to promulgate a
legislative rule; AT-95-9 is consistent with the existing
regulations implementing the EA program; and to the
extent that AT-95-9 modifies any unpromulgated ACF
interpretation, its effect is consistent with ACF's prior
practice of some twenty years concerning what constitutes
an emergency for EA purposes. We therefore concluded
that AT-95-9 constituted appropriate notice to states
under the APA that, as of January 1, 1996, juvenile
justice costs were not reimbursable under EA. We did not
specifically discuss the substantive validity of AT-95-9,
as Tennessee had not raised it.
Pennsylvania has not presented any arguments in this case
that would change our decision in Tennessee that AT-95-9
was not invalid because it was not promulgated as a
legislative rule. Below we first discuss the APA and the
EA program. We then explain why AT-95-9 constitutes an
interpretative rule. Finally, we discuss why AT-95-9 is
also substantively valid because it sets forth a
reasonable interpretation of EA statutory and regulatory
provisions. Based on these conclusions, we uphold the
disallowance in full.
Background and Relevant Federal Authority
A. The APA
When a federal agency adopts, amends, or repeals a rule,
the APA requires the federal agency to publish notice of
the proposed change in the Federal Register and give
interested persons "an opportunity to participate in the
rulemaking through the submission of written data, views,
or arguments." 5 U.S.C. § 553(c). However, the APA
provides an exception to the notice and comment
requirement for "interpretative rules, general statements
of policy, and rules of agency organization, procedure,
or practice." 5 U.S.C. § 553(b). (Emphasis added).
Therefore, interpretative rules may be promulgated
without notice and comment while other rules, usually
referred to as substantive or legislative rules, may
not. 2/
Courts have consistently held that agency rules are
invalid if an agency fails to comply with APA
requirements. Buschmann v. Schweiker, 676 F.2d 352, 358
(9th Cir. 1982); cf. Chrysler Corp. v. Brown, 441 U.S.
281, 313 (1979) ("[c]ertainly regulations subject to the
APA [notice and comment requirements] cannot be afforded
the `force and effect of law' if not promulgated pursuant
to the statutory procedural minimum found in that Act").
As discussed below, since we find that AT-95-9 is an
interpretative rather than a legislative rule, there is
no basis for Pennsylvania's position that that document
is invalid under the APA. As also discussed below, while
not binding, an interpretative rule is entitled to
deference under the appropriate circumstances.
B. The EA Program
The EA program was established in 1967 as an optional
component of title IV-A of the Act. It provided
reimbursement to states at an FFP rate of 50% for the
amount "expended under the State plan . . . as emergency
assistance to needy families with children." Section
403(a)(5) of the Act. Section 406(e)(1) of the Act, as
in effect during the period in question, defined
emergency assistance as follows:
The term "emergency assistance to needy families
with children" means any of the following, furnished
for a period not in excess of 30 days in any 12-
month period, in the case of a needy child under the
age of 21 who is (or, within such period as may be
specified by the Secretary, has been) living with
any of the relatives specified in subsection (a)(1)
in a place of residence maintained by one or more of
such relatives as his or their own home, but only
where such child is without available resources, the
payments, care, or services involved are necessary
to avoid destitution of such child or to provide
living arrangements in a home for such child, and
such destitution or need for living arrangements did
not arise because such child or relative refused
without good cause to accept employment or training
for employment--
(A) money payments, payments in kind, or such
other payments as the State agency may specify with
respect to, or medical care or any other type of
remedial care . . . and
(B) such services as may be specified by the
Secretary.
The Secretary has promulgated rules implementing the EA
program at 45 C.F.R. § 233.120.
By fiscal year 1990, some 20 years after the enactment of
EA, 32 jurisdictions operated EA programs. According to
state plans on file with the Department of Health and
Human Services (DHHS), as of October 1988, most EA
programs covered natural disasters (23 jurisdictions),
such as floods and fires, and "unspecified crisis
threatening family or living arrangements (21
jurisdictions)." House Comm. on Ways and Means, Overview
of Entitlement Programs, WMCP No. 102-44, 102d Congress,
2d Session 631 (1992). Typical qualifying causes for EA
specified by states --
included (in order of frequency): eviction,
potential eviction, or foreclosure; homelessness;
utility shut-off or loss of heating energy supply or
equipment; loss of employment or strike; civil
disorders or crimes of violence; health
hazards/risks to health and safety; emergency
medical needs; an illness, accident, or injury.
Id.
Sometime in the early 1990's, ACF allowed an expansion of
these traditional types of emergencies by reimbursing
certain states under EA for their expenditures on behalf
of children in the custody of or under the supervision of
the state's juvenile justice system. Pennsylvania was
one of these states. Effective April 1, 1994,
Pennsylvania amended the EA portion of its title IV-A
state plan to cover EA reimbursement for services to
children in its juvenile justice system. State Ex. 5.
Pursuant to this plan amendment, Pennsylvania claimed and
ACF paid EA reimbursement for services and administrative
expenses for children under the jurisdiction of
Pennsylvania's Juvenile Probation Office. 3/
On September 12, 1995, ACF issued AT-95-9. The purpose
of this action transmittal was to notify states that FFP
would no longer be available under EA for the costs of
benefits or services provided to children in a juvenile
justice system. In it, ACF discussed its view of the
purpose of EA, as demonstrated by its legislative
history. ACF wrote:
The context of the EA program is the family and its
purpose is to help family members by providing
financial assistance and services to enable them to
meet family emergencies that they are experiencing.
ACF-95-9, at 1-2. ACF cited portions of the legislative
history of EA to support its conclusion that the focus of
EA is family emergencies typically associated with lack
of resources to meet such emergencies.
Both the report of the House Ways and Means
Committee and the report of the Senate Finance
Committee on the 1967 Social Security Amendments
state that the EA program is designed to deal with
crisis situations threatening a family such as
"eviction, or when utilities are turned off, or when
an alcoholic parent leaves children without food."
H. Rep. No. 544, 90th Cong., 1st Sess., 109 (1967);
S. Rep. No. 744, 90th Cong., 1st Sess., 165 (1967).
Id. ACF noted that federal policy allowed states "`to
define the types of emergencies it will cover . . . so
long as the program's scope . . . bears a valid
relationship to the intent and purpose of the program.'
(SSA-AT-82-28, p.2.)" It then concluded that
expenditures for children in the juvenile justice system
did not bear such a relationship to EA and therefore did
not qualify for EA reimbursement. ACF wrote:
The central purposes and goals of the juvenile
justice system are different from those of the EA
program. The placement of a child in the juvenile
justice system due to delinquency results from
behavior that would be a criminal offense committed
against society as defined under State law if done
by an adult. A principal purpose of the placement
of such children is to protect society. While it is
true that rehabilitative services are provided to
the child, the purpose is to enable the juvenile to
return to society in a responsible capacity.
When a child is placed in the juvenile justice
system due to a need for supervision, it is because
of the child's behavior rather than a family
emergency. In many instances, the minor may have
committed delinquent acts. Since the placement is
made to address the child's behavioral problem
rather than to alleviate a family emergency, the
associated program and administrative costs would
not be subject to Federal matching under the EA
program.
Finally, the statutory requirement in section 406(e)
of the Social Security Act that a child sought to be
served by the EA program be "without available
resources" need not be met before a child is placed
in the juvenile justice system for either of the
above two reasons. Children are not placed in the
juvenile justice system because they are destitute
or in need of living arrangements. Indeed, such
considerations are not even relevant.
ACF concluded that FFP is not available under EA for
expenditures for benefits or services to children in the
juvenile justice system --
who have been removed as a result of the child's
alleged, charged, or adjudicated delinquent
behavior, or who have otherwise been determined to
be in need of State supervision by reason of the
child's behavior.
The action transmittal was effective immediately for
states that had not amended their state plans to include
EA reimbursement for such children. States that had
amended their plans and had been receiving EA
reimbursement were given until January 1, 1996 to submit
conforming state plan amendments and to change their
claiming procedures. ACF did not dispute Pennsylvania's
representations that the elimination of EA reimbursement
effective January 1, 1996 for these children had a
"substantial financial and programmatic impact on
Pennsylvania's service delivery system for children and
families." State Ex. 6, at 1. See also State Exs. 12-
15.
In October 1995, the Office of the Inspector General
(OIG) of the DHHS issued a report titled "Review of
Rising Costs in the Emergency Assistance Program." The
report documented the expansion of EA and traced the
causes of that expansion. The report explained that--
[t]he EA expenditures increased by over 400 percent
or $600 million from Fiscal Year (FY) 1991 to 1994.
Information available at the Administration for
Children and Families (ACF) shows that EA
expenditures will exceed $1 billion by FY 1996 or
about a 550 percent increase from FY 1991 EA
expenditures.
State Ex. 5, at i.
As causes, the report identified ACF's approval of state
plan amendments--
which enabled States to maximize Federal revenue by
obtaining EA funding for services traditionally
State funded. These services, predominantly
juvenile justice, tuition, foster care, and child
welfare usually address long-term problems while EA
was intended to address temporary emergencies.
Id.
The report stated that in the course of conducting the
review, the OIG had recommended to ACF that it revise or
rescind its policies that allowed states to claim EA for
these types of expenditures. The report noted that ACF
had taken one such action by issuing AT-95-9. The OIG
estimated that this action alone would result in annual
federal savings of $240 million for three of the states
(California, Pennsylvania, and New York) reviewed in the
report.
Federal reimbursement for EA under section 403(a)(5) of
the Act was repealed by section 103 of the Personal
Responsibility and Work Opportunity Reconciliation Act of
1996, Public Law 104-193 (August 22, 1996).
Analysis
In this case, Pennsylvania put forth two alternative
legal theories as to why AT-95-9 was not a valid basis
for this disallowance. First, it argued that AT-95-9 was
invalid because it constitutes a legislative rule that
should have been promulgated pursuant to the notice and
comment provisions of the APA in order to be effective.
Second, it argued that, even if AT-95-9 did not violate
the APA, it was arbitrary and capricious and violated the
EA statutory and regulatory provisions, Supreme Court
precedent and agency policy. Below we discuss these two
theories.
A. Whether AT-95-9 is a substantive or legislative
rule that should have been promulgated in
accordance with APA standards
While there is considerable diversity in the standards
courts have used to distinguish between legislative and
interpretative rules, it is generally agreed that when an
agency is exercising its rule-making power in order to
interpret or clarify an existing statute or regulation,
the agency is considered to be engaged in interpretative
rulemaking. 4/ "An interpretative rule simply states
what the administrative agency thinks the statute means
. . . ." General Motors Corp. v. Ruckelshaus, 742 F.2d
1561, 1565 (D.C. Cir. 1984) (en banc), cert. denied, 471
U.S. 1074 (1985); see also Alcaraz v. Block, 746 F.2d
593, 613 (9th Cir. 1984) (interpretative rule "simply
explained something the statute already required").
In contrast, courts also agree that when an agency acts
to create new law, rights, or duties in what amounts to a
legislative act, it is engaged in legislative rulemaking.
White v. Shalala, 7 F.3d 296, 303 (2d Cir. 1993); Metr.
School Dist. of Wayne Township v. Davila, 969 F.2d 485,
489-490 (7th Cir. 1992), cert. denied, 113 S.Ct. 1360
(1993); United Technologies Corp. v. EPA, 821 F.2d 714,
718 (D.C.Cir. 1987). See also Alcaraz, 746 F.2d at 613
(legislative rules impose general, extra-statutory
obligations pursuant to authority properly delegated by
the legislature); Cabais v. Egger, 690 F.2d 234, 238 & n.
9 (D.C.Cir. 1982) (legislative rules have effects
completely independent of the statute).
In addition to the necessity for notice and comment,
Kenneth Culp Davis, in Administrative Law Treatise,
identifies three principal differences between
legislative and interpretative rules. These distinctions
are as follows.
o "First, a legislative rule has the same
binding effect as a statute. It binds members
of the public, the agency, and even the
courts, in the sense that courts must affirm a
legislative rule as long as it represents a
valid exercise of agency authority." 1
Kenneth Culp Davis et al., Administrative Law
Treatise § 6.3 (3rd ed. 1994). In contrast,
"[a] court may choose to give binding effect
to an interpretative rule . . . but it is the
court that provides the binding effect of law
through its process of statutory
interpretation." Id. 5/
o Second, "an agency has the power to issue binding
legislative rules only and to the extent Congress
has authorized it to do so . . . . By contrast,
any agency has the inherent power to issue
interpretative rules." Id.
o Third, "a legislative rule can impose distinct
obligations on members of the public in addition
to those imposed by statute, as long as the rule
is within the scope of rulemaking authority
conferred on the agency by statute. By contrast,
an interpretative rule cannot impose obligations
on citizens that exceed those fairly attributable
to Congress through the process of statutory
interpretation." Id.
Given these principles and distinctions, we conclude that
AT-95-9 is an interpretative rule for the following
reasons.
o AT-95-9 sets forth ACF's interpretation of what
constitutes an "emergency" for purposes of EA
reimbursement. Section 403(a)(5) authorizes FFP
for "emergency assistance to needy families with
children." That phrase is defined at section
406(e)(1) of the Act. It authorizes EA match for
emergency assistance for a child "where such
child is without available resources" and "the
payments, care, or services involved are
necessary to avoid destitution of such child or
to provide living arrangements in a home for such
child." In AT-95-9, ACF informed states that, as
of January 1, 1996, a state's juvenile justice
system's assertion of jurisdiction over a child
did not constitute the type of emergency that
Congress intended federal EA funds to address.
o In AT-95-9, ACF did not purport to be acting
pursuant to a congressional delegation of
legislative authority by which it could impose
obligations in addition to those imposed by the
statute itself. 6/ Rather, ACF looked to the
legislative history of the statute for authority
for its conclusion that Congress' intent was to
assist in family emergencies, typically
associated with lack of resources to meet such
emergencies. This reliance on legislative
history supports a finding that ACF was seeking
to interpret congressional intent rather than
promulgate binding standards "that exceed those
fairly attributable to Congress through the
process of statutory interpretation." Davis at
234. See Metr. School Dist. of Wayne Township,
969 F.2d at 490 (case law, language, and
legislative history are classic tools of agency
interpretation).
o As we discuss below in reviewing the substantive
validity of AT-95-9, the result set forth in AT-
95-9 is well within that attributable to Congress
through statutory interpretation. The
legislative history shows that Congress sought to
assist states in addressing short-term family
crises such as eviction, utility termination, or
the need for resources such as food or medical
care, rather than the type of long-term problems
experienced by delinquent or ungovernable
children and their families.
o AT-95-9 is not inconsistent with any existing
rule governing the EA program. Rather, AT-95-9
is consistent with the plain language of 45
C.F.R. § 233.120(b)(2), which provides that
federal participation is available for services
"that meet needs attributable to emergency or
unusual crisis situations." AT-95-9 clarifies
what ACF considers to be "emergency or unusual
crisis situations."
o If ACF had originally disapproved states'
juvenile justice EA amendments on the grounds
that a child's involvement with the juvenile
justice system is outside the boundaries of what
Congress meant emergency assistance to address,
no one would have argued that ACF had to
promulgate a rule prior to such disapprovals.
ACF's action would have been regarded as within
the scope of its authority to interpret the EA
provisions. A state might appeal the disapproval
on the grounds that ACF had misinterpreted the
Act. However, the question on appeal would
simply be whether ACF's disapproval of the plan
amendment was based on a reasonable
interpretation of the Act. The fact that ACF
approved some plan amendments for juvenile
justice EA services, and has now reconsidered the
correctness of its interpretation, does not
render AT-95-9 a legislative rule. In issuing
AT-95-9, ACF is continuing to interpret the
proper scope of the EA program in light of its
experience in administering the EA program.
The question of whether AT-95-9 is an interpretative rule
or a legislative rule has been addressed by one court of
appeals. In Chief Probation Officers of California v.
Shalala, 118 F.3d 1327 (9th Cir. 1997), the Ninth Circuit
determined that AT-95-9 was an interpretative rule. 7/
Pennsylvania set forth several arguments as to why AT-95-
9 should be considered a legislative rule. Below we
address each of these arguments and explain why they are
not persuasive.
1. Whether an action transmittal that enacts
"binding policy" must be promulgated pursuant to
notice and comment
Pennsylvania argued that AT-95-9 enacted "binding policy"
that necessarily must be promulgated as a legislative
rule. While we do not question that AT-95-9, if upheld
by a court as a reasonable interpretation of the EA
statute, would preclude a state's EA claim for juvenile
justice services, we disagree that this "binding" effect
makes the action transmittal a legislative rule.
Whether a rule is interpretative depends not on whether
the rule is "binding" but on whether the agency was
acting pursuant to its authority to interpret the
language of a statute or rule or acting pursuant to its
authority to legislate standards that go beyond the
language of the statute. Therefore, a rule may have a
substantial or "binding" impact on a party and still be
an interpretative rule as long as rule rests on an
agency's interpretation of a statute. See Dia Navigation
Company, Limited v. Pomeroy, 34 F. 3d 1255, 1265 (3rd
Cir. 1994); Alcaraz v. Block, 746 F.2d at 613; American
Postal Workers Union v. USPS, 707 F.2d 548, 560 (D.C.
Cir. 1983), cert. denied, 465 U.S. 1100 (1984).
As the cases cited by Pennsylvania demonstrate, the
critical question is the legal basis for the rule, i.e.,
whether the agency is invoking its congressionally
delegated authority to adopt rules that go beyond the
requirements of the statute. For example, in Hoctor v.
USDA, 82 F.3d 165 (7th Cir. 1996), the United States
Department of Agriculture (USDA) promulgated a rule
providing that all dangerous animals must be kept within
a perimeter fence that was at least 8 feet high. The 8
foot requirement was challenged as an invalidly
promulgated legislative rule. The court determined that
it was a legislative rule, not because it was "binding"
but because USDA was not interpreting any statutory or
regulatory provision in setting the height limit at 8
feet. Rather, the court concluded that USDA was acting
pursuant to its legislatively delegated rule-making
authority to "promulgate such rules, regulations, and
orders as [the Secretary] may deem necessary in order to
effectuate the purposes of [the Act]." 7 U.S.C. § 2151.
In contrast, AT-95-9 constitutes a interpretation of the
terms of sections 403(a)(5) and 406(e)(1) of the Act. As
the Board wrote in Tennessee:
[T]he directives of AT-95-9 are well within those
attributable to Congress through statutory
interpretation. Section 403(a)(5) of the Act
provides funding for "emergency" assistance. The
legislative history shows that Congress sought to
address family crises such as eviction, utility
termination, or need for resources such as food or
medical care rather than to address long-term
familial difficulties caused by the delinquent or
ungovernable behavior of a child. AT-95-9
reasonably interprets this section on the basis of
the plain language of the Act and its legislative
history.
Tennessee at 28.
2. Whether a change in agency interpretation must be
promulgated pursuant to APA notice and comment
procedures
As of 1993, ACF began reimbursing a number of states
under EA for the provision of benefits and services to
children under the jurisdiction of their juvenile justice
systems. (Pennsylvania asserted and ACF did not deny that
ACF eventually approved plan amendments in 23 states for
juvenile justice services.) AT-95-9 provided notice to
these states and all others that such expenses would no
longer be reimbursable under EA as of January 1, 1996.
Pennsylvania argued that AT-95-9 changed substantive
agency policy and therefore the transmittal should have
been promulgated pursuant to notice and comment
requirements of the APA. 8/
We reject this argument for the following reasons.
First, as the district court in Chief Probations Officers
of California noted, courts have recognized that "a
change in agency position does not necessarily make a
rule legislative." Chief Probation Officers of
California, 1996 WL 134890, *9. Similarly, as the Court
of Appeals wrote, the approval of these plans "simply
represented the Agency's prior (short-lived)
interpretation of the statute. The Agency was free to
change that interpretation." Chief Probation Officers of
California, 118 F.3d 1327, 1334. The determinative
factor should be the legal basis for the rule, i.e.,
whether the agency is invoking its congressionally
delegated authority to adopt rules that go beyond the
requirements of the statute, not whether the new rule
changes a prior agency interpretation of the statute.
An instructive case on this point is White v. Shalala.
White involved a ruling by the Social Security
Administration (SSA) requiring veteran's benefits paid to
a veteran for the support of the veteran's dependent to
be counted as the dependent's unearned income in
calculating the dependent's Supplemental Security Income
(SSI) benefits. Prior to the issuance of the ruling,
SSA's policy had been to treat such benefits as the
unearned income of the veteran. This prior policy was
judicially invalidated. The plaintiffs argued that SSA's
new ruling, which had the effect of reducing dependents'
SSI benefits, was a legislative rule. The court looked
to whether SSA was exercising its rulemaking power to
clarify an existing statute, or to create new law,
rights, or duties in what amounted to a legislative act.
It concluded that the new rule remained interpretative
because SSA was interpreting the terms "income" and
"received" in the existing statute and implementing
regulations. The court wrote:
The plaintiffs argue that SSR 82-31 is legislative
because it is a change from the Secretary's prior
interpretation of s 1382a(a)(2)(B) under which the
augmented portion of the benefit was counted as
income to the veteran rather than the veteran's
dependant. However, an interpretive rule changing
an agency's interpretation of a statute is not
magically transformed into a legislative rule
. . . . If the rule is an interpretation of a
statute rather than an extra-statutory imposition of
rights, duties or obligations, it remains
interpretive even if the rule embodies the
Secretary's changed interpretation of the statute.
White v. Shalala, 7 F.3d at 304 (emphasis added). See
also Metro. School Dist. of Wayne Township, 969 F.2d at
492 (agency's change in reading of statute did not make
rule announcing change legislative); American Postal
Workers Union, 707 F.2d at 559 (new agency position does
not make rule substantive rather than interpretative).
Second, the Board has previously considered whether a
change in an agency's policy requires that the new policy
be considered a legislative rule. In New Jersey Dept. of
Human Services, DAB No. 1071 (1989), New Jersey
challenged the validity of certain Medicaid policies that
HCFA issued as revisions to part of its State Medicaid
Manual. New Jersey argued that the manual provisions
were a substantive modification of the law, restricting
entitlements, and were subject to notice and comment
rulemaking procedures. The Board determined that "a
policy interpretation established by informal means could
be changed in the same way." DAB No. 1071, at 9. See
also Maine Dept. of Health Services, DAB No. 712 (1985).
Therefore, even if AT-95-9 modified ACF's prior
interpretation on the allowability of juvenile justice
costs, this does not make it a legislative rule. EA had
existed for over 20 years before ACF began reimbursing
juvenile justice costs in the early 1990's. ACF's
interpretation, that section 406(e)(1) allowed such
reimbursement, was not effectuated by rulemaking or by
action transmittal or by any sort of formal policy
announcement. Consequently, AT-95-9 simply modified an
unpromulgated interpretation that had been implemented
through state plan approval in a minority of states. It
is entirely appropriate that ACF amended this
unpromulgated interpretation by means of an action
transmittal. See New York State Dept. of Social Services
v. Bowen, 835 F.2d 360, 366 (D.C. Cir. 1987), cert.
denied, 486 U.S. 1055 (1988) (recognizing an action
transmittal as a vehicle for formal statement of official
ACF interpretations). As the district court wrote in
Chief Probation Officers of California:
For a brief period beginning sometime around 1993,
HHS approved a limited number of state plans which
requested EA reimbursement funds to cover services
provided through juvenile justice systems programs.
In 1995, however, the agency issued the Action
Transmittal to revise this practice and to provide
an interpretation of the emergency assistance
program which was more consistent with the agency's
historical view of the statute and the legislative
intent of Congress. The brief prior period of
agency approval of state plans including juvenile
justice system programs does not convert this
interpretative announcement into a substantive rule
requiring APA notice and comment procedures.
Chief Probation Officers of California, 1996 WL 134890,
*9 (emphasis added).
3. Whether ACF was acting pursuant to legislative
rulemaking authority vested in it by section
406(e)(1)(B) of the Act
Section 406(e)(1) of the Act defines emergency assistance
to needy families as "(A) money payments, payments in
kind, or such other payments as the State agency may
specify with respect to, or medical care or any other
type of remedial care . . . and (B) such services as may
be specified by the Secretary." Pennsylvania argued that
subsection (B) of section 406(e)(1) vested legislative
rulemaking authority in ACF and that ACF acted pursuant
to this authority when it issued AT-95-9.
We reject this argument for the following reasons.
First, an agency's characterization of the authority
pursuant to which it is acting is entitled to
consideration in determining whether a rule is
legislative. United Technologies, 821 F.2d at 718;
Metro. School Dist. of Wayne Township v. Davila, 969 F.2d
at 489; General Motors Corp. v. Ruckelshaus, 742 F.2d at
1565. Cabais v. Egger, 690 F.2d at 258, n. 7. ACF did
not purport to be acting pursuant to any authority vested
in it by section 406(e)(1)(B).
Second, AT-95-9 does not address what constitutes a
"service." Consideration of what constitutes a service
would entail a discussion of services, i.e., counseling,
rent payments, medical care, and homemaker services.
Rather, AT-95-9 addresses what is to be considered an
"emergency" within the meaning of section 403(a)(5) of
the Act. It speaks to the fact that ACF has allowed
states to define the types of emergencies they would
address "so long as the program's scope bears a valid
relationship to the intent and purpose of the program."
AT-95-9, at 2, citing AT-82-28, at 2. The action
transmittal goes on to explain why ACF concluded that
juvenile justice situations "bear no such `valid
relationship' to the context or purpose of the EA program
. . . ." Id. We note also that the argument that ACF
acted pursuant to a grant of legislative rule-making
authority was considered and rejected by both the
district court and the appellate court in the Chief
Probation Officers of California cases.
B. AT-95-9 constitutes a reasonable interpretation
of the EA provisions of title IV-A and
implementing regulations.
Since AT-95-9 is not a legislative rule, it is not
binding. However, the courts have consistently held that
they will defer to a federal agency's interpretation of a
statute or regulation if it is reasonable and not
inconsistent with congressional intent. See, e.g.,
Petersen v. Dole, 956 F.2d 1219 (D.C. Cir. 1992), and
Conecuh-Monroe Community Action Agency v. Bowen, 852 F.2d
581 (D.C.Cir. 1988), both citing Chevron v. NRDC, 467
U.S. 837 (1984). 9/ In addition, the Board has held
that, where a statute or regulation is subject to more
than one interpretation, the federal agency's
interpretation is entitled to deference as long as the
interpretation is reasonable and the grantee had adequate
notice of that interpretation or, in the absence of
notice, did not reasonably rely on its own contrary
interpretation. Community Action Agency of Franklin
County, DAB No. 1581 (1996), and decisions cited therein.
There is no dispute that Pennsylvania had adequate
notice of AT-95-9. 10/ We must therefore review
whether the statutory interpretation in AT-95-9 is
reasonable.
We conclude that the interpretation in AT-95-9 is
reasonable in light of the plain language of the Act and
its legislative history. Section 403(a)(5) of the Act
specifies that funds are available for "emergency"
assistance. As previously noted, Congress gave as
examples of emergencies "eviction, or when utilities are
turned off, or when an alcoholic parent leaves children
without food." AT-95-9, at 2, quoting H. Rep. No. 544,
90th Cong., 1st Sess., 109 (1967); S. Rep. No. 744, 90th
Cong., 1st Sess., 165 (1967). Based on these examples,
ACF determined that Congress intended EA funds to be used
to address short-term family crises. 11/ ACF
therefore reasonably excluded problems experienced by
children in the juvenile justice system and their
families--which are more long-term in nature--from its
definition of the emergencies for which EA funds were
available.
Pennsylvania argued, however, that various situations in
which children in the juvenile justice system may be
involved are covered by the express language of section
406(e) of the Act and 45 C.F.R. § 234.120. Pennsylvania
pointed specifically to the requirements in both the
statute and the regulation that the child be without
resources and that emergency assistance be necessary to
avoid destitution of the child or to provide living
arrangements in a home for the child. However,
Pennsylvania itself indicated that children in the
juvenile justice system are not necessarily threatened
with destitution. See State Br. at 30. Indeed, there
are likely many children in the juvenile justice system
whose families are able to provide for them.
Pennsylvania nevertheless argued that even if some
children in the juvenile justice system were not
reasonably covered by EA, it was wrong to determine that
EA coverage of children in the juvenile justice system is
improper in all cases. Pennsylvania did not allege that
it could separately identify those children in the
juvenile justice system who qualified for EA funds on the
basis of risk of destitution, however.
Pennsylvania also asserted that a child's arrest is
clearly a "family emergency" within the meaning of the
Act. State Br. at 30. While it is undoubtedly true that
a child's arrest may disrupt family life, the Act refers
to "emergency assistance for needy families . . . ." As
just stated, children in the juvenile justice system do
not necessarily meet the criteria for such assistance.
Even if, as Pennsylvania argued, the provision of
"adequate treatment for the child is as much a family
duty as the provision of food and shelter," that does not
mean that EA was intended to provide for the former
simply because "families lack sufficient resources to
make such provisions themselves." State Reply Br. at
12. 12/
Pennsylvania also maintained that "Congress has always
left the states broad discretion in shaping welfare
service programs such as EA." State Br. at 25.
Pennsylvania cited language in a Senate report on the
bill that authorized the title XX social services program
to the effect that states "would have maximum freedom to
determine . . . the persons eligible for such services,
the manner in which such services are provided, and any
limitations or conditions on the receipt of such
services." S. Rep. No. 1356, 93rd Cong., 2nd Sess., 6
(1974). The report also states, however, that the
states' authority to fashion their own programs is
subject to "the limits of funding established by the
Congress." Id. Thus, state programs must conform to any
limits on the use of EA funds set out in the authorizing
statute or the legislative history of that program.
Pennsylvania also relied on language in the Senate and
House reports quoted in AT-95-9 stating that one of the
objectives of the Social Security Amendments of 1967,
which established the EA program, was to give states
"flexible and appropriate tools" to "assure needed care
for children" in order to make funds available to "meet
the great variety of situations faced by needy children
in families with emergencies." See H. Rep. No. 544, 90th
Cong., 1st Sess. 109 (1967); S. Rep. No. 744, 90th Cong.,
1st Sess. 4, 165-166 (1967). However, the import of this
language is that states should have flexibility with
respect to which services should be provided to assist
needy children in emergency situations. The language
does not give states a license to expand the scope of the
EA program to provide services to children in situations
which do not qualify for that program.
Pennsylvania also contended that AT-95-9 "conflicts with
the Supreme Court's view of determining eligibility for
EA." State Br. at 26. Pennsylvania cited the statement
in Quern v. Mandley, 436 U.S. 725 (1978), that, under the
EA statute, federal funds "are available for emergency
aid to intact families with children if threatened with
destitution, regardless of the cause of their need."
However, the phrase "regardless of the cause of their
need" does not suggest that the family need not be
threatened with destitution, but means that the reason
the family is threatened with destitution is not
material. As indicated above, however, not all children
in the juvenile justice system are without resources.
Thus, ACF's determination that a child in the juvenile
justice system could not qualify for EA funds is not
inconsistent with the Court's holding.
Pennsylvania further argued that AT-95-9 is inconsistent
with ACF's past policy and administrative practice.
Pennsylvania noted that the Department had approved 23
state plans that included EA services for children in the
juvenile justice system. As discussed earlier, however,
this action was merely evidence of an unpromulgated
interpretation that had been implemented through state
plan approval in a minority of states. 13/ Even if
this action reflected agency policy, ACF was free to
adopt a new policy "which was more consistent with the
agency's historical view of the statute and the
legislative intent of Congress." Chief Probation
Officers of California, 1996 WL 134890, *9.
Pennsylvania also maintained that AT-95-9 is inconsistent
with two earlier action transmittals, AT-78-44, issued
December 27, 1978, and AT-82-28, issued November 5, 1982.
The former states in pertinent part that the Quern
decision "supports the Department's policy of allowing
states flexibility in the development of Emergency
Assistance programs. It permits a State to define the
types of emergencies it will cover . . . ." The latter
states in pertinent part that "[s]tates have been given
extensive latitude by the Department regarding the scope
of their Emergency Assistance programs. . . ." It
continues: "While states have discretion to determine
the scope of their Emergency Assistance program, this
discretion must be exercised in accordance with the
`equitable treatment' regulations found at 45 CFR §
233.10(a)(1). That regulation provides that individuals
or groups must not be excluded on an arbitrary or
unreasonable basis, and decisions must not result in
inequitable treatment of individuals or groups."
According to Pennsylvania, the interpretation in AT-95-9
not only impairs state discretion to define the scope of
the EA program but also violates the policy prohibiting
inequitable treatment.
We do not find Pennsylvania's arguments persuasive.
First, it appears that both of the action transmittals
were addressing the question of whether a state could
provide for an EA program that was less expansive than
that authorized by the Act and the regulations. The
Quern decision referred to in AT-78-44 held that
Illinois' less expansive EA program did not violate
federal law. AT-82-28 refers to a regulation that
addresses the circumstances under which a state may
exclude individuals or groups from the EA program. There
is nothing in either of these action transmittals that
precludes ACF from determining the parameters of the EA
program in the first instance. Moreover, as discussed
above, the "extensive latitude" which AT-78-44 said the
states have concerning "the scope of" the EA program is
subject to the limits Congress imposed on the program.
Thus, AT-95-9 does not unduly reduce this latitude.
Furthermore, there is no basis for Pennsylvania's
contention that AT-95-9 results in the inequitable
treatment of children in the juvenile justice system in
violation of AT-82-28 and the regulation it cites.
AT-95-9 excludes such children from the EA program on the
ground that they do not meet the statutory requirements
for inclusion in the program, as reasonably interpreted
by ACF. The fact that they are treated differently from
children who do meet the statutory requirements does not
make the treatment of children in the juvenile justice
system inequitable. 14/
Pennsylvania also argued that the distinction made by
AT-95-9 between children in the juvenile justice system
and children in the child welfare system (who may be
eligible for EA) is arbitrary and capricious since there
is a substantial overlap between the services provided by
these systems. Pennsylvania asserted that the range of
services provided to children and their families in the
juvenile justice system, e.g., family counseling,
placement in-home or facility, and mental health and
substance abuse treatment, is much the same as that which
would be provided by the child welfare system.
Pennsylvania also noted that "child welfare and juvenile
justice are both integral departments of the State's
comprehensive family welfare system and are governed by
identical rules of procedures, statutes and standards for
residential child care programs." State Reply Br. at 13.
In addition, Pennsylvania took the position that ACF
improperly distinguished between juvenile justice
services and child welfare services on the basis of the
purpose of the services. Pennsylvania asserted that,
contrary to ACF's view, the purpose of its juvenile
justice system is not to punish the juvenile offender and
protect society, but rather to provide rehabilitation.
15/ Pennsylvania also suggested that children in the
juvenile justice system were similar to children in the
child welfare system because the behavior which results
in a child's entry into the juvenile justice system may
arise from "lack of parental skills and other family and
environmental problems that threaten the child's
welfare." State Br. at 34.
Pennsylvania's arguments have no merit. As stated above,
the EA program provides emergency assistance to needy
families with children. The similarity between services
provided by the juvenile justice and child welfare
systems is irrelevant since the issue is not the type of
services which are provided but what precipitates the
need for them. Moreover, the fact that the
administrative structure of the juvenile justice system
is the same as that of the child welfare system or that a
delinquent child may be placed in the same type of
facility as a dependent child does not establish that the
delinquent child's placement is due to an emergency
situation which rendered the child in need. In addition,
even if the purpose of the juvenile justice system is
rehabilitation, that does not change the fact that a
child's behavior--not the family situation from which the
child's behavior may result--is the basis for entry into
the juvenile justice system. Similarly, while delinquent
and dependent children may experience similar family
problems, such problems are not the direct cause of a
child's entry into the juvenile justice system. 16/
Conclusion
For the foregoing reasons, we uphold these disallowances.
____________________________
Cecilia Sparks Ford
____________________________
Norval D. (John) Settle
____________________________
M. Terry Johnson
Presiding Board Member
CRG/DK:W drive/11-4-97/ FINAL:dlf A-97-94.DEC
* * * Footnotes * * *
1. In its notice of appeal, Pennsylvania also
argued that a portion of the disallowed costs was not for
services provided to children in the juvenile justice
system. See Notice of Appeal dated 3/27/97, at 2.
However, Pennsylvania did not pursue this argument in its
briefing and did not object to the observation in ACF's
brief that Pennsylvania appeared to have abandoned this
argument.
2. Section 553(a)(2) of the APA also provides
for an exception for matters relating to grants.
However, the Department of Health and Human Services
(DHHS) has chosen to abide generally by the provisions of
section 553, notwithstanding this exception. 36 Fed.
Reg. 2532 (1971).
3. Under the "emergency protective service for
children" portion of its state plan, Pennsylvania covered
a wide range of services. These included case
management, counseling, and in-home family services;
parenting education and training; child care, respite
care, medical care and other support and assistance; and
shelter care, foster family care, or residential group
care (including juvenile detention services and secure
residential services at a private or public facility).
In addition, Pennsylvania claimed costs for supporting
administrative activities including investigation of
emergency conditions, determining eligibility,
information, referral, court related and legal services,
and securing shelter. State Exhibit (Ex.) 5 at
unnumbered page 7.
4. The rationale for exempting interpretative
rules from notice and comment procedures has been
explained in this way:
Interpretive rules articulate positive law that
already exists in the form of statute or legislative
rule. The theory is that the agency's interpretive
document merely explains, but does not add to, the
substantive law that already exists. Because
Congress (or the agency, in a prior legislative
rule) has legislated previously, a further act of
legislation (through notice-and-comment procedures)
is conceptually unnecessary to give effect to the
interpretive proposition set forth in the document.
That proposition, at least in the agency's opinion,
already possesses the force of law. It has that
effect not because the agency endows it with that
effect, but because it represents the meaning of a
statute or legislative rule that is already law.
The agency, by issuing its document, asserts that
existing legislation already has established by
implication the position that the agency
interpretation now specifies. The interpretation,
therefore, does not project new legal effect of its
own.
"`Interpretive' Rules, `Legislative' and `Spurious'
Rules: Lifting the Smog," 8 Admin. L.J. of Am. Univ. 1
(1994).
5. As the Supreme Court wrote in Batterton v.
Francis:
Legislative, or substantive, regulations are "issued
by an agency pursuant to statutory authority and . .
. implement the statute, as, for example, the proxy
rules issued by the Securities and Exchange
Commission . . . . Such rules have the force and
effect of law." U.S. Dept. of Justice, Attorney
General's Manual on the Administrative Procedure Act
30 n. 3 (1947). . . . By way of contrast, a court
is not required to give effect to an interpretative
regulation. Varying degrees of deference are
accorded to administrative interpretations, based on
such factors as the timing and consistency of the
agency's position, and the nature of its expertise.
Batterton v. Francis, 432 U.S. 416, 425 n. 9.
6. Section 406(e)(1)(B) gives ACF the authority
to identify services which must be considered emergency
services. This appears to be a congressional delegation
of legislative authority to ACF for this limited purpose.
However, ACF did not invoke this authority and viewed
itself as addressing the issue of what can be considered
an emergency under section 403(a)(5) rather than
addressing what constitutes a service.
7. That decision affirmed the district court
decision which held that AT-95-9 was an interpretative
rule. Chief Probation Officers of California v. Shalala,
No. C-95-4644-DLJ, 1996 WL 134890, *8 (N.D. Cal. Mar. 14,
1996).
8. ACF argued that it had never established an
agency policy concerning the allowability of EA
reimbursement for juvenile justice costs. ACF Br. at 7 -
8. It pointed out that it had never formally announced
an interpretation on this issue and it disputed
Tennessee's position that the approval of state plan
provisions by Regional Offices created any substantive
policy.
For the purposes of this decision, we do not reach the
question of whether ACF adopted a policy concerning these
expenditures. As we explain below, ACF's action in
reimbursing some states for juvenile justice costs
cannot, by any stretch of the imagination, be
characterized as legislative rule-making. Therefore,
even if we assume that action reflected agency policy,
ACF may subsequently alter its interpretation of the
requirements of the EA statute without engaging in
legislative rule-making.
9. Pennsylvania argued that the appropriate
standard of review for interpretative rules was
enunciated in Skidmore v. Swift, 323 U.S. 134 (1944).
That decision states that rulings of the Administrator
regarding the circumstances under which injunctions would
be sought under the Fair Labor Standards Act "constitute
a body of experience and informed judgment to which
courts and litigants may properly resort for guidance,"
and listed a number of factors on which "[t]he weight of
such judgment" will depend, including "the thoroughness
evident in its consideration, the validity of its
reasoning, [and] its consistency with earlier and later
pronouncements . . . ." At 140. However, this standard
is inapposite since the court specifically stated that
the rulings in question did not constitute an
interpretation of the Fair Labor Standards Act.
10. Pennsylvania did assert that the "policy
change" effectuated by AT-95-9 "is particularly
unsettling in that it occurred in the middle of
[Pennsylvania's] fiscal year after Pennsylvania . . .
relied on the continued receipt of FFP for the entire
fiscal year in preparing its annual budget." State Br.
at 35. However, AT-95-9 was not effective until the
quarter following the quarter in which it was published.
Accordingly, Pennsylvania had notice of the "policy
change" before the costs in question here were incurred.
11. Pennsylvania argued that the examples in
the legislative history of situations calling for
emergency assistance "are not intended to be exclusive."
State Reply Br. at 15. However, there is nothing in AT-
95-9 which limits the availability of EA to these
specific situations, and we find reasonable ACF's
interpretation that the emergencies covered by EA should
be of the same type as those cited by Congress.
12. Pennsylvania also asserted that the loss of
income or child care when a child who was a wage earner
or provided child care for siblings enters the juvenile
justice system justified EA funding because such funding
would expedite the child's return home and thus carry out
the purpose of the EA program to prevent welfare
dependency. Although this is an underlying purpose of
the EA program, EA must still be limited to situations
meeting the statutory and regulatory requirements.
13. Since it is not clear that ACF in fact had
a prior policy which was different from the policy
applied here, the case law cited by Pennsylvania to the
effect that "[w]here the agency's position conflicts or
is inconsistent with its earlier position, it is entitled
to little or no deference" is not on point. State Br. at
28, n. 10.
14. Pennsylvania also argued that AT-95-9
unreasonably distinguishes between children in secure
facilities and children in non-secure facilities.
However, the action transmittal made no such distinction.
Instead, it notified states that FFP would not be
available under EA for the costs of benefits or services
provided to children --
who have been removed as a result of the child's
alleged, charged, or adjudicated delinquent
behavior, or who have otherwise been determined to
be in need of State supervision by reason of the
child's behavior.
AT-95-9, at 3. Thus, EA funds were not available for any
children in the juvenile justice system, regardless of
the type of facility in which they resided (or whether
the children resided at home).
15. In this connection, Pennsylvania asserted
that AT-95-9 "ignores the federal courts' recognition
that juvenile delinquents have a constitutional right to
rehabilitative treatment." State Reply Br. at 15.
However, Pennsylvania cited no authority for the
proposition that the Constitution guarantees federal
payment for rehabilitative treatment.
16. Pennsylvania argued that "[t]he Supreme
Court has specifically recognized that the child's
placement in the juvenile justice system is precisely not
because of the child's behavior but, rather, because of
family circumstances." State Reply Br. at 9-10 (emphasis
in original). However, the language on which
Pennsylvania relied, in Justice White's concurring
opinion in McKeiver v. Pennsylvania, 403 U.S. 528 (1971),
does not support this argument. To say, as Justice White
did, that "[r]eprehensible acts by juveniles are not
deemed the consequence of . . . choice but of
environmental pressures . . . or other forces beyond
their
control. . . ," is not to deny that the child's behavior
is the cause of the child's placement but merely to
recognize that the behavior is driven by forces beyond
the child's control.
-1-