Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Maryland Department of Human Resources
Docket No. A-97-58
Decision No. 1667
DECISION
The Maryland Department of Human Resources (Maryland) appealed the decision of the Administration for Children and Families (ACF) disallowing $2,007,107 in federal financial participation (FFP). Maryland claimed this FFP on its June 1996 Quarterly Expenditure Report pursuant to the Emergency Assistance (EA) provisions of title IV-A of the Social Security Act (Act) as a retroactive claim for the quarter ending March 31, 1996.
ACF disallowed this FFP because it was for expenditures incurred by Maryland for providing benefits and services to children who were within the jurisdiction of Maryland's 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 the EA program for expenditures for benefits or services to children in the juvenile justice system.
Maryland seeks to have the disallowance reversed pursuant to two alternative legal theories. First, Maryland 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, Maryland argued that, even if AT-95-9 is not a legislative rule, it is substantively invalid because coverage of services provided to children in the juvenile justice system is fully consistent with the purposes of the EA program.
The Board has previously addressed the procedural and the substantive validity of AT-95-9. 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 a number of factors, principally that AT-95-9 sets forth ACF's interpretation of the requirements of sections 403(a)(5) and 406(e)(1) of the Act. 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.
In Pennsylvania Dept. Of Public Welfare, DAB No. 1634 (1997), the Board reaffirmed that AT-95-9 was an interpretative rule. The Board also determined that AT-95-9 was substantively valid because it sets forth a reasonable interpretation of EA statutory and regulatory provisions.
Maryland has not presented any arguments in this case that would call into question our analyses in Tennessee or Pennsylvania. 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. 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.
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, while not binding on courts, 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 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 Sess. 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. Maryland was one of the states that sought reimbursement for such services. Maryland asserted that ACF's approval of State Plan Transmittal No. 94-02 (State Ex. 24) expanded its EA program to include services to children under the jurisdiction of its Department of Juvenile Justice. This amendment was effective July 1, 1994. Maryland first began to claim reimbursement for juvenile justice services in a retroactive claim filed for the quarter ending June 1995.
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. AT-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 a state "'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 should 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.
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 No. 104-193 (August 22, 1996).
Analysis
In this case, Maryland 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 constituted 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 substantively invalid because it was inconsistent with EA statutory and regulatory provisions. Below we discuss these two theories.
A. Whether AT-95-9 is a 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. "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.
Maryland 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 the fact that AT-95-9 set forth a policy that was binding on states makes it a legislative rule.
First, Maryland argued that AT-95-9 should not be considered interpretative because it enacts "binding policy" that services to children in the juvenile justice system are not reimbursable under EA. We have previously considered and rejected this argument in Tennessee and Pennsylvania. 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 the 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).
(2) Whether AT-95-9 interpreted the term "emergency" as used in sections 403(a)(5) and 406(e)(1) of the Act.
Second, Maryland argued that AT-95-9 is not interpretative because "it does not merely explain what the terms of the EA statute require." Maryland Br. at 33. Maryland argued that the statute "defines 'emergency assistance' broadly, leaving it up to the states to define the types of services they wish to provide in order to 'avoid destitution of a [covered] child.'" Id. at 33-34. It pointed out that title IV-A does not expressly exclude services provided to children in the juvenile justice system and that ACF had recognized that states "remain free, under Federal policy, to develop their own definition of the kind of emergencies they will meet under the [EA] program." State Ex. 34, SSA-AT-78-44, at 2. Maryland concluded that--
[w]hat ACF has done through the Action Transmittal is to exercise its general judgment by stating its belief that costs for services provided to children in the juvenile justice system . . . bear no such "valid relationship" to the context or purpose of the EA program and, therefore, do not qualify for Federal matching under it. Id. at 36, quoting AT-95-9, at 2.
The Board rejected this argument in Tennessee and Pennsylvania when it found that AT-95-9 is an interpretation of what constitutes an "emergency" under sections 403(a)(5) and 406(e)(1) of the Act. As ACF explained in AT-95-9, a child's placement in the juvenile justice system results from a child's behavior rather than the type of family emergencies envisioned by Congress when it passed the EA statute. ACF also relied on the language in the Act concerning the requirement that children eligible for the EA system be "without available resources." It noted that placement of children in the juvenile justice system is not an emergency related to lack of resources.
Maryland complained that the action transmittal did not set out a definition of "emergency," did not expressly refer to the language of the Act, and did not say that there was no "emergency" when a child was removed from his/her home or in need of the types of services provided by the juvenile justice system. We agree that the action transmittal could have been drafted to incorporate these elements. However, as the Court of Appeals in Chief Probation Officers concluded, the purpose of the action transmittal is the interpretation of the concept of "emergency" in the EA statute, as it relates to the juvenile justice system. Chief Probation Officers at 1334. AT-95-9 does not purport to set out a comprehensive definition of emergency because its only purpose was to address juvenile justice system expenditures. Therefore, its failure to do more than it was designed to do does not make AT-95-9 a legislative rule.
(3) Whether a change in an agency's interpretation of a statute must be promulgated pursuant to APA notice and comment procedures.
Third, Maryland argued that the fact that AT-95-9 reversed ACF's practice of allowing reimbursement for juvenile justice services necessarily makes it a legislative rule. It is undisputed that 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. (Maryland asserted and ACF did not deny that ACF eventually approved plan amendments in 23 states covering 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. Maryland argued that AT-95-9 changed agency policy and therefore the action transmittal should have been promulgated pursuant to notice and comment requirements of the APA.
We rejected this argument in Tennessee and Pennsylvania for the following reasons. First, as the district court in Chief Probation Officers 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 at 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 veterans' 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 dependent. 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).
In support of its argument, Maryland cited Paralyzed Veterans of America v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997). That case involved the legislative rulemaking authority of the Department of Justice (DOJ). DOJ was charged with responsibility for promulgating standards to implement the Act's mandate that newly constructed facilities subject to the ADA be "readily accessible to and usable by individuals with disabilities." ADA at . 12183(a)(1). The regulation at issue in that case was Standard 4.33.3, which provides that wheelchair areas shall have "lines of sight comparable to those for members of the general public." 28 C.F.R. Part 36, App. A, . 4.33.3. Developers of a sports arena challenged DOJ's interpretation of the regulation which held that comparable lines of sight meant that wheelchair seats must afford sightliness over both sitting and standing spectators.
The developers argued, among other things, that DOJ's present interpretation of this regulation constituted a change from a prior interpretation and that this change had to be promulgated pursuant to the APA. While the court did not agree that DOJ's interpretation constituted a change, it did address the question of whether an agency can change its interpretation of its own regulation without resort to the notice and comment procedures of the APA. The court concluded that, while an agency can change its interpretation of a statute, "[o]nce an agency gives its regulation an interpretation, it can only change that interpretation as it would formally modify the regulation itself; through the process of notice and comment rulemaking." Paralyzed Veterans, 117 F.3d at 586.
The court explicitly recognized that agency interpretations of statutes and regulations are subject to two different standards. The court stated:
. . . Congress has delegated implicitly to administrative agencies . . . the authority to reconcile, within reason, ambiguities in statutes that the agencies . . . are charged with administering. . . . That delegation is . . . itself a continuing one; there is no barrier to an agency altering its initial interpretation to adopt another reasonable interpretation--even one that represents a new policy response generated by a different administration. Id. at 586.
The court went on to state that agency interpretations of substantive regulations (i.e., those adopted pursuant to legislative rulemaking authority) are subject to a different standard because, "[u]nder the APA, agencies are obliged to engage in notice and comment before formulating regulations, which applies to 'repeals' or 'amendments'." Id. The court concluded that to allow an agency "to make a fundamental change in its interpretation of a substantive regulation without notice and comment would undermine those APA requirements." Id. Maryland's reliance on this case is misplaced. Paralyzed Veterans involved an agency's interpretation of its legislative rules, while this case involves an agency's interpretation of a statute. AT-95-9 sets forth ACF's interpretation of the meaning of "emergency" pursuant to sections 403(a)(5) and 406(3)(1) of the Act, not, as Maryland asserts, an interpretation of "services" in 45 C.F.R. . 233.120(b)(2). That regulation lists the types of services that are appropriate for EA reimbursement rather than the types of emergencies that qualify as emergencies for EA reimbursement. Therefore, the concerns expressed by the court in Paralyzed Veterans are not relevant. See Chief Probation Officers of California, 118 F.3d at 1334.
Finally, we note that, contrary to Maryland's assertions in the introductory part of its initial brief, ACF was not acting pursuant to any legislative rulemaking authority vested in it by section 406(e)(1)(B) of the Act. This section appears to be a congressional delegation of legislative authority to the Secretary for the limited purpose of specifying services which must be considered emergency services. 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. In Tennessee and Pennsylvania, the Board rejected the states' arguments that AT-95-9 was promulgated pursuant to the authority to define services. Tennessee at 28, Pennsylvania at 21-22. As we explained, consideration of what constitutes a service would entail a discussion of services, e.g., counseling, rent payments, medical care, and homemaker services. Similarly, the Court of Appeals in Chief Probation Officers also concluded that ACF did not act pursuant to any grant of legislative rulemaking authority to define service. Chief Probation Officers of California, 118 F.3d at 1334.
(4) Whether the fact that ACF previously approved state plans providing for EA reimbursement for juvenile justice expenditures makes AT-95-9 a legislative rule.
Maryland argued that ACF's refusal to reimburse states for juvenile justice expenditures under EA "disturbs the scheme of 'cooperative federalism' embodied in the acceptance of Maryland's State Plan." State Reply Br. at 1. Maryland asserted--
By approving these state plans, ACF authoritatively adopted a position that juvenile justice services are consistent with and contemplated by Title IV-A. If ACF wanted to change its established policy, it was required to comply with APA notice and comment procedures.
State Reply Br. at 3.
Maryland also argued that approval of a state plan creates "an arrangement akin to a contract" (State Reply Br. at 3) and represents "formal agency action upon which affected parties could reasonably rely." Id. quoting Paralyzed Veterans.
For the following reasons, the Board concluded in Tennessee that approval of a state plan pursuant to an interpretation of a statute does not bind the agency in perpetuity to that interpretation or require it to use legislative rulemaking to change the interpretation.
For the same reasons, we also conclude that approval of a state plan does not create some sort of contractual arrangement which can only be modified by notice and comment rulemaking.
The regulations concerning the approval and operation of title IV-A state plans explicitly contemplate that a state's claiming rights under a state plan may change as federal policy interpretations change. Section 201.3 of 45 C.F.R provides:
After approval of the original plan by the Administration, all relevant changes, required by new statutes, rules, regulations, interpretations, and court decisions, are required to be submitted currently so that the Administration may determine whether the plan continues to meet Federal requirements and policies. (Emphasis added).
Section 201.3(d) further provides:
Basis for approval. Determinations as to whether State plans (including plan amendments and administrative practice under the plans) originally meet or continue to meet, the requirements for approval are based on relevant Federal statutes and regulations. Guidelines are furnished to assist in the interpretation of the regulations. (Emphasis added).
Finally, section 201.6 of 45 C.F.R. addresses the circumstances under which the Secretary may withhold funds for noncompliance of a state plan. Subsection 201.6(a)(2) provides in relevant part:
A question of noncompliance of a State plan may arise from an unapprovable change in the approved State plan, [and] the failure of the State to change its approved State plan to conform to a new Federal requirement . . . .
Thus, the regulations expressly provide that agency interpretations and guidelines are to be used in determining whether state plans meet and continue to meet statutory and regulatory requirements for approval. Further, a state's failure to conform its plan to a new federal interpretation, not just a new statute or regulation, is grounds for withholding funds. Consequently, the act of approving a state plan does not bind the agency to all interpretations used in that approval nor require the agency to subsequently use legislative rulemaking to change its prior interpretations. Quite appropriately, the agency is entitled to change its interpretations in light of its experience in administering the program, and state plans must be adjusted in accordance with such changes.
Finally, Maryland's relied on the case of Pennhurst State School and Hospital v. Halderman. In Pennhurst, the Supreme Court addressed the consequences of a state's acceptance of federal funds for the care and treatment of the developmentally disabled under the Developmentally Disabled Assistance and Bill of Rights Act, 42 U.S.C. .. 6000 et seq. The Court concluded that acceptance of the federal funds did not obligate the state to comply with the "bill of rights" section of that Act because that section was not a condition for receipt of federal funds under the Act. In making this finding, the Court noted that legislation pursuant to Congress' spending power was "much in the nature of a contract" and that "if Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously." Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 17 (1981).
Maryland's reliance on Pennhurst is misplaced. Pennhurst involved the question of whether states were under an affirmative obligation to provide a certain level of treatment because they had accepted federal funds. The problem the Court was addressing was states' liability for additional state spending flowing from the states' acceptance of federal funds. In contrast, AT-95-9 sets forth limitations on the use of federal funds, not affirmative requirements for the additional expenditure of state funds. Since it is undisputed that this case involves no imposition of fiscal liability on states to comply with federal standards, Pennhurst is not relevant. For the preceding reasons, we conclude that AT-95-9 constitutes an interpretative rule and was not subject to the notice and comment provisions of the APA.
B. Whether 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 on the Board or a court. Consequently, we must consider whether AT-95-9 constitutes a reasonable interpretation of the EA provisions of title IV-A. 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). 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 Maryland had adequate notice of AT-95-9. We must therefore consider whether the statutory interpretation set forth in AT-95-9 is reasonable.
Maryland asserted that AT-95-9 was invalid because it was inconsistent with the EA statute and regulations. For authority for this proposition, Maryland cited language from cases asserting that states had broad discretion in fashioning their EA programs. See Quern v. Mandley, 436 U.S. 725, 743 n. 19, 745 (1978) (States have "the ultimate decision-making authority in fashioning their own [EA plans]," and "broad discretion" to define their EA programs); Coker v. Sullivan, 902 F.2d 84, 86 (D.C. Cir. 1990) ("States have more control over the services they provide in their EA programs" and "have greater leeway in establishing eligibility standards for EA"); Bacon v. Toia, 648 F.2d 801, 805 (2d Cir. 1981), aff'd sub nom.; Blum v. Bacon, 457 U.S. 132 (1982) (State had "substantial flexibility in determining the scope of emergency assistance programs suitable under local conditions"); Canaday v. Koch, 608 F.Supp. 1460, 1472 (S.D.N.Y.), aff'd, 768 F.2d 501 (2d Cir. 1985) ("The federal policy expressed in the statute is to refrain from meddling in each state's attempts to fashion an EA program suited to its own particular needs and circumstances").
It is undisputed that section 403(a)(5) gave states broad discretion to design their EA programs. However, this discretion was never unlimited. As ACF said in AT-95-9, "federal policy has provided each State with authority '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.)" As ACF found, the purpose and scope of the EA program and the purpose and scope of the juvenile justice system are different. Children are placed in the juvenile justice system as result of their behavior "rather than a family emergency" within the meaning of the EA statute. AT-95-9 at 3. The purpose of the placement of children in the juvenile justice system is "to protect society" and "to enable the juvenile to return to society in a responsible capacity." Id. Finally, "the statutory requirement in section 406(e) . . . that a child sought to be served by the EA program be 'without available resources' need not be met" in juvenile justice cases. Id.
In light of the plain language of the Act and its legislative history, we agree that AT-95-9 sets forth a reasonable interpretation of section 403(a). 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. ACF therefore reasonably may exclude problems experienced by children in the juvenile justice system--which are substantially different and more long-term in nature--from its definition of the emergencies for which EA funds were available. It is also clear from the language and legislative history of the Act that emergencies under the EA provisions were to be those involving poor children. Again, as ACF pointed out in AT-95-9, whether a child is placed in the juvenile justice system is not related to child's and the family's income but to the child's behavior.
Further, the case language cited by Maryland on state latitude and discretion, while expansive, was written in the context of considering specific narrow issues (whether certain types of EA could be denied to AFDC recipients (Blum); whether homeless families were being provided with emergency housing (Canaday); whether states were complying with their EA state plans (Coker); and whether states could operate an emergency needs program under the Aid to Families with Dependent Children program rather than under the EA program (Quern)). In the context of these cases, this language cannot be read to support the principle that a state's latitude under EA included the right to shift half of the costs of components of its juvenile justice system to the federal government.
Finally, we note that to rule for Maryland, the Board would have to conclude that Congress intended to create an uncapped funding stream for states' juvenile justice systems. Given that juvenile justice has traditionally been a state responsibility, it is difficult to believe that Congress would adopt such a program without considerable discussion of its intent and its reasons for assuming an enormous new financial initiative.
Conclusion
For the foregoing reasons, we uphold this disallowance in full.
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Cecilia Sparks Ford
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Donald F. Garrett
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M. Terry Johnson
Presiding Board Member