Darlene Smith, on Behalf of Herself and All Others Similarly Situated v. C. Patrick Babcock, Director of the Michigan Department of Social Services

KENNEDY, Circuit Judge,

dissenting.

Because I believe the District Court’s interpretation of the Earned Income Disregard (“EID”) provision of the Aid to Families with Dependent Children (“AFDC”) program was the correct one, I respectfully dissent.

The panel begins its analysis with the principle that the courts should defer to the administrative agency charged with the interpretation of the statute and must therefore defer to the Michigan Department of Social Services’ (“MDSS”) interpretation. If the interpretation were that of the Department of Health and Human Services (“HHS”), I would agree that deference is required. But Michigan is only one of 50 states. If some states construe the statute one way and others construe it another, deferring courts would reach opposite results as to the meaning of the statutory language. I do not believe the principle of deference to an agency has any application where 50 different state agencies would have to be deferred to.1

*267I believe that the plain language of the statute requires us to affirm the District Court.

For the MDSS Deduction Policy to be valid, it must be consistent with the “disregard sanctions” of the Social Security Act, 42 U.S.C. § 602(a)(8)(i). To the extent it is inconsistent with the controlling statute, it is invalid. King v. Smith, 392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968). In deciding whether the state policy is consistent with the federal statute, we look first to the statutory language in an effort to determine its plain meaning. Patterson Trust v. United States, 729 F.2d 1089, 1094 (6th Cir.1984). “Except in ‘rare and exceptional circumstances,’ such as where Congress ‘expressly indicates’ its intent that the plain language of the statutory language be avoided, unambiguous statutory language ‘is to be regarded as conclusive.’ ” Id. at 1095 (citations omitted); Public Citizen v. United States Dep’t of Justice, 491 U.S. 440, 109 S.Ct. 2558, 105 L.Ed.2d 377 (1989) (citations omitted) (courts will only look to legislative intent “[w]here the plain language of the statuté would lead to ‘patently absurd consequences,’ that ‘Congress could not possibly have intended.’”), id. at 470, 109 S.Ct. at 2574 (Kennedy, J., concurring) (quoting United States v. Brown, 333 U.S. 18, 27, 68 S.Ct. 376, 381, 92 L.Ed. 442 (1948); FBI v. Abramson, 456 U.S. 615, 640, 102 S.Ct. 2054, 2069, 72 L.Ed.2d 376 (1982) (O’Connor, J., dissenting)); Boettger v. Bowen, 923 F.2d 1183, 1191 (6th Cir.1991) (Ryan, J., dissenting) (“Courts may not properly extend statutory language beyond its plain meaning in order to reach a result that is consistent with Congress’ probable intention. Our business is to determine what Congress said, not what it probably intended.”).

Here, the statutory language at issue provides that “with respect to any month, the State agency shall not disregard ... any earned income of any one of the persons specified in subparagraph (A)(ii) if such person terminated his employment or reduced earned income without good cause within such period (of not less than thirty days) preceding such month_” 42 U.S.C. § 602(a)(8)(B)(i)(I). Similarly, the HHS regulations implementing the AFDC program provide that:

(in) The applicable earned income disregards ... do not apply to the earned income of the individual for the month in which one of the following conditions apply to him:
(A) An individual terminated his employment or reduced his earned income without good cause (as specified in the State plan) within the period of SO days preceding such month....

45 C.F.R. § 233.20(a)(ll)(iii) (emphasis added). I agree with the District Court that the phrase “any month” in section 602(a)(8)(B)(i)(I) refers to the month in which the recipient earned income and that the subsequent use of the phrase “such month” clearly refers back to and is synonymous with “any month.”2 Thus, as applied to the specific facts of this case, the federal statute instructs that:

With respect to January (plaintiffs income earning month), the MDSS shall not disregard the earned income of Ms. Smith if she terminated her employment within 30 days prior to January (i.e., in December).

*268In other words, the State agency, may not disregard the income earned during the month following the month a recipient terminates her employment without cause. Here, because Smith terminated her employment in January, the federal statute seems to direct the MDSS to deny her the benefit of the disregards as to any income earned by her in February.

Consequently, the unambiguous statutory language, read in its common and generally understood sense, rather plainly does not authorize the MDSS to deny Smith the benefit of EIDs for income earned in January (the job-quit month), and the MDSS does not seem to claim that a literal straightforward reading of the statutory language, unaided by interpretation, warrants any other conclusion. The MDSS instead argues that common sense suggests that Congress must have intended to permit state agencies to disallow EIDs in the month a recipient terminates her employment without cause, given its overall purpose in enacting the legislation. Specifically, the MDSS argues that a literal interpretation of the EID penalty provision and implementing regulation renders them almost meaningless as applied to AFDC applicants or recipients who terminate employment because if (as happened here) an applicant quits her job in January, she is unlikely to have any earned income in February which would be subject to the EID penalty. While common sense might support this argument, the Supreme Court has said that:

Judicial perception that a particular result would be unreasonable may enter into the construction of ambiguous provisions, but cannot justify disregard of what Congress has plainly and intentionally provided.

Commissioner of Internal Revenue v. Asphalt Prods. Co., 482 U.S. 117,121,107 S.Ct. 2275, 2278, 96 L.Ed.2d 97 (1987). While it might have been sensible for Congress to authorize states to disallow EIDs for the month in which a recipient terminated her employment, it did not do so.

Additionally, this is not one of those rare and exceptional circumstances where applying the plain language of the statute would lead to “patently absurd consequences that ‘Congress could not have possibly intended.’ ” As the District Court pointed out and the panel acknowledges, section 602(a)(8)(B)(i)(I) is addressed to two distinct groups: the AFDC applicant who purposely reduces her earned income in order to qualify for the EIDs and the current AFDC recipient who terminates her employment without cause. While applying the plain language of the statute to AFDC recipients might lead to a strange result (because it is unlikely a recipient who quit her job in Month A will, have income in Month B to which the EIDs can be applied), the District Court reasoned that

[t]he purpose of the statute becomes more clear when applied to the AFDC applicant who reduces her income to qualify for AFDC benefits. The provisions, as construed by the Court, puts this applicant on notice that she will not benefit from the earned income disregards in the month following her calculated reduction of income.

Moreover, Smith offered a very plausible reason why Congress meant what it said in section 602(a)(8)(B)(i)(I):

Congress sought methods of ensuring that the disregards would “get people off the AFDC rolls, not put them on,” by ensuring that only those already receiving or eligible to receive AFDC would qualify for the disregards. Two alternative qualifying tests were created as a result. The “30 and a third” disregards would be made available, only to families (1) whose earnings were so low they would be eligible for AFDC even without application of the disregard or (2) who had received AFDC in one of the four prior months. 42 U.S.C. § 602(a)(8)(B)(ii)(I). Thus, a family could receive the benefit of the Earned Income Disregards either by passing the income test or by being “grandfathered.”
Congress also recognized the possibility that individuals who were not currently eligible for AFDC based on their gross earnings could make an “end run” around that qualifying test by temporarily reducing their earned income to a level that would make them AFDC eligible even without application of the disregards, enabling them to pass the income test. Then, once they had received AFDC for at *269least a month, they could remain on AFDC in future months — even with higher earnings that would have disqualified them from receiving AFDC in the first instance — by qualifying for the Earned Income Disregards under the grandfather clause.

Smith contends that the EID penalty provision was directed toward closing this “loophole.”

This contention is supported by the Legislative History which provides that

[i]n order to avoid situations where ‘people under the AFDC program would deliberately bring their earnings down in order to qualify for the earnings exemption, [the statute] provides that individuals who deliberately terminate their employment within a period of not less than 80 days specified by the Secretary before applying for aid will not qualify for the earnings exemption.

S.Rep. No. 744, 90th Cong., 1st Sess., reprinted in 1967 U.S.Code Cong. & Admin.News 2834 at 2996 (emphasis added). This Court has also stated that, with respect to section 602(a)(8)(B)(i), “[although the language is not the easiest to understand, when ‘translated,’ it simply means that you cannot quit a job or refuse a job to become eligible for benefits.” Boettger, 923 F.2d at 1187 (emphasis added). Thus, there is support for the position that Congress intended to prevent those who deliberately reduce their income, in order to qualify for AFDC, from using the EIDs (which ordinarily would be available under the “grandfather clause”) to stay on AFDC. The District Court’s conclusion that the EID disqualification applies to an individual’s earnings in the month following the month in which earnings were reduced (or terminated) is consistent with this Congressional purpose.3 Accordingly, the result of applying the plain language'of the statute is not “patently absurd.”

The MDSS has proffered several alternative interpretations of the statute which it claims are consistent with Congressional intent. These interpretations, however, also all seem to contravene the plain language of the statute.

First, the MDSS contends that the District Court erred in finding that the relevant statutory and regulatory language requires states to consider only employment terminations that occur within a 30-day period that begins and ends prior to the job-quit (or penalty/budget) month. The MDSS attempts instead, to expand the period represented by “such period (of not less than 30 days)” to reach into the job-quit month. Specifically, the MDSS claims that the statute can be read to mean that in order for a state agency to disallow EIDs for the month in which an individual quits her job, the employment termination must have occurred within a period that includes the job-quit month and extends SO days before this month. However, as noted above, the statute in. question expressly provides that, with respect to any month, a participating state shall not disregard an individual’s earned income if that individual terminated her employment or reduced her income without good cause within such period (of not less than 30 days) preceding such month. § 602(a)(8)(B)(i)(I). As the District Court explained:

“Period” normally refers to the beginning and end of an interval of time. “Preceding” normally refers to that which passes before. Within such period thus refers to a window of time stretching to, at one end, the beginning of a month (here, the earned income month) and stretching from, at the other end, thirty days before the beginning of the earned income month. This is the clear import of the language. Defendant’s attempt to construe the language to include a portion of the earned' income month lacks any support.

The MDSS further contends that the term “month” could refer to the month in which the state pays the AFDC grant to the recipient (what the MDSS refers to as the “payment month”). As applied to this ease, the statute would instruct that . .

*270with respect to March (the payment month), the MDSS shall apply the EID penalty if Ms. Smith terminated her employment within such period of not less than 30 days preceding March.

Because Smith quit her job in January, this interpretation might seem to support the MDSS’ action of disallowing the EIDs. However, the MDSS’ interpretation is problematic. First, MDSS’ interpretation will produce results which vary from state to state depending on the state’s choice of budgeting cycle, a situation Congress could not have intended.

Pursuant to 42 U.S.C. § 602(a)(13), a state may calculate AFDC in one of three ways. The three types of AFDC budgeting cycles are: (1) Prospective Budgeting — Month C’s [e.g., March] earned income is predicted to calculate Month C’s AFDC grant; (2) One Month Retrospective Budgeting — Month B’s [e.g., February] earned income is used to calculate Month C’s [March] AFDC grant; and (3) Two Month Retrospective Budgeting — Month A’s [January] earned income is reported in Month B [February] and is used to calculate Month C’s [March] AFDC grant.

Michigan uses Two Month Retrospective Budgeting.4 However, for states that employ Prospective Budgeting, the MDSS’ interpretation that “such month” refers to the “payment month” and not the “earned income month” runs into problems. Under prospective budgeting, the earned income month is the payment month. Thus, a job-quit which occurs during the earned income month (January in this case) cannot have occurred “within such period (of not less than thirty days) preceding” such payment month (also January). This is just one of the many problems resulting from the MDSS’ interpretation of the word “month” to mean “payment month.” The MDSS even concedes that its interpretation leads to illogical and inconsistent results which could not have been intended by Congress. Additionally, as explained above, and as found by the District Court, “[t]he clear, and only possible, referent for ‘any month’ is the earned income month.” Consequently, MDSS’s policy of disallowing EIDs in the same month (and not the following month) during which an AFDC recipient terminates her employment without cause, contravenes the Social Security Act, 42 U.S.C. § 602(a)(8)(B)(i)(I).

I would AFFIRM the judgment of the District Court.

. MDSS contends that the District Court erred by not giving sufficient deference to the Secretary's interpretation of § 602(a)(8)(B)(i)(I). In response to a letter from the MDSS seeking clarification of its regulations implementing the EID disqualification provision, the HHS stated:

We have consulted with policy staff in our Central Office who fully concur that the regulation is ambiguous and open to interpretation. The language of the regulation mirrors that of the statute. While it predates the introduction of prospective/retrospective budgeting, no issues have surfaced concerning its application. ... It would, however, defeat the intent to penalize to apply the penalty to the month after the job-quit month, when it is improbable that earned income would be present.
Our Central Office concurs with our opinion that Michigan's application of the regulation is consistent with the AFDC budgeting requirements at 45 C.F.R. 233.31(b)(2)_ In practice 45 C.F.R. 233.20(a)(ll)(iii)(A) has been supplanted by more precise regulations, such as 45 C.F.R. 233.31(b)(2). Michigan’s current practice of withholding deductions and disregards in the budget/job-quit month is acceptable.

Even assuming, arguendo, that this letter constitutes an agency interpretation, "[t]he traditional deference courts pay to agency interpretation is not to be applied to alter the clearly expressed intent of Congress.” K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291, 108 S.Ct. 1811, 1817, 100 L.Ed.2d 313 (1988) (quoting Board of Gover*267nors, FRS v. Dimension Financial Corp., 474 U.S. 361, 368, 106 S.Ct. 681, 686, 88 L.Ed.2d 691 (1986)). Furthermore,

The interpretation put on the statute by the agency charged with administering it is entitled to deference, but the courts are the final authorities on issues of statutory construction. They must reject administrative constructions of the statute, whether reached by adjudication or by rulemaking, that are inconsistent with the statutory mandate or that frustrate the policy that Congress sought to implement.

Federal Election Comm'n v. Democratic Senatorial Campaign Comm., 454 U.S. 27, 31-32, 102 S.Ct. 38, 41-42, 70 L.Ed.2d 23 (1981) (citations omitted). It seems that the agency’s position (as set forth in a letter and not by adjudication or rulemaking) is . inconsistent with the statutory mandate (and its implementing regulations) that the EID penalty only applies to income earned in the month following the job-quit month.

. The District Court relied on the dictionary definition to support its interpretation that the adjective “such” as used in § 602(a)(8)(B)(i)(I)-refers to something previously indicated. The dictionary is one of the most legitimate sources available for determining what the statutory language means. Boettger, 923 F.2d at 1189 (Ryan, J., dissenting).

. The MDSS contends that the District Court erred in finding that the EID disqualification provision only applied to applicants and not to recipients. This is not, however, what the court found. The court merely recognized that the statutory language makes more sense when applied to applicants than to recipients.

. The MDSS contends that for states like Michigan which adopt a two-month retrospective budgeting system, Congress and the HHS have prescribed a period of 60 days preceding the payment month within which employment terminations are to be subject to the EID penalty. Thus, because Smith terminated her employment in January (60 days preceding the March payment month), the EID penally provision applies. The MDSS claims that the 1982 regulations, allowing states to adopt prospective or retrospective budgeting, supports its position. The MDSS further claims that this interpretation is entirely consistent with § 602(a)(8)(B)(i)(I) which allows HHS to adopt a penalty period of "not less than” 30 days. However, pursuant to 45 C.F.R. § 233.20(a)(ll)(iii)(A) it is clear HHS has adopted a 30 day limit. This regulation provides that a state agency shall not apply EIDs to the earned income of an individual for the month in which

[a]n individual terminated his employment or reduced his earned income without good cause ... within the period of 30 days preceding such month.

The MDSS' contention that the 1982 regulations supplant § 233.20 because that section has remained virtually unchanged since 1969 is without merit. To this day, § 233.20(a)(ll)(iii)(A), imposing a 30 day limit, has not been amended by HHS.