No. 86-566
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
TINA D'EWART,
Plaintiff and Respondent,
-vs-
NANCY NEIBAUER, DIRECTOR OF HILL
COUNTY WELFARE DEPARTMENT, AND DAVID
M. LEWIS, DIRECTOR OF THE MONTANA
DEPARTMENT OF SOCIAL AND REHABILITATION
SERVICES,
Defendants and Appellants.
APPEAL FROM: District Court of the Twelfth Judicial District,
In and for the County of Hill,
The Honorable Chan Ettien, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Michael S. Becker, Dept. of SRS, Helena, Montana
David Rice, Hill County Attorney, Havre, Montana
For Respondent :
Steven L. Bunch, Montana Legal Services, Helena,
Montana
Submitted on Briefs: May 28, 1987
Decided: September 15, 1987
Filed: SEP 1 5 18,
91
Clerk
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
Plaintiff Tina DIEwart filed an action for declaratory
judgment in the District Court of the Twelfth Judicial Dis-
trict, Hill County. The District Court held that
5 46.10.512, ARM, was invalid as applied to the plaintiff,
holding accrued but unpaid child care costs could be claimed
as deductions from gross income when figuring AFDC payments.
The Hill County Welfare Department and the Montana Department
of Social and Rehabilitation Services (SRS) appeal. We
reverse and remand.
The issue is:
Can the AFDC child care deduction found in 5 46.10.512,
ARM, be applied to child care costs which have accrued but
not been paid?
The parties stipulated. to the essential facts in this
case. Tina DIEwart is a single parent with three young
children. Ms. DIEwart relies on assistance, in addition to
wages she earns, from the Aid to Families with Dependent
Children (AFDC) program to provide shelter and other necessi-
ties for herself and her children. AFDC is a federally
funded welfare program that is administered in Montana by SRS
and the respective county welfare departments, in this case
the Hill County Welfare Department. The state and county
must administer the AFDC program in compliance with and in a
manner consistent with federal law and regulations.
A family in which the claimant parent works may receive
an AFDC payment if income eligible. Income eligibility for
our purposes requires subtraction from income of items called
"disregards." The key "disregard" in this case is the pay-
ment made for day care of children of the claimant. Benefits
are calculated by "retrospective budgeting." This means that
the computations for the month of January are based upon
income and expenses during the month of November.
It is the Hill County Welfare Department's policy that
a child care disregard is allowed for those day care costs
actually incurred and paid in the budget month as well as
those charges incurred in the month immediately prior to the
budget month but paid in the budget month. The disregard of
day care costs that were incurred but remain unpaid is not
allowed.
After a hearing concerning September 1 9 8 4 AFDC bene-
fits, the hearing officer concluded that unpaid child care
costs should be disregards in the budget month incurred. Ms.
D'Ewart then reapplied for benefits. Ms. DIEwart's January
1 9 8 5 and February 1 9 8 5 AFDC benefits were based on her Novem-
ber 1 9 8 4 and December 1 9 8 4 income and expenditures due to the
retrospective budgeting process. Her day care costs for
November and December were not subtracted from her November
and December income because they were not actually paid, but
only incurred.
The benefit months at issue are January, February, and
April of 1 9 8 5 . The amounts incurred for day care for those
three months have not been paid by Ms. D'Ewart. Ms. D'Ewart
is asking that the incurred, but unpaid day care costs from
the budget months of November and December 1 9 8 4 and February
1 9 8 5 be included as disregards. If included as disregards,
the amount of benefits due Ms. DIEwart are:
BUDGET MONTH BENEFIT MONTH AMOUNT
November January
December February
-
February April 33.00
TOTAL: $147.00
Ms. D'Ewart has paid her day care in full every month from
March 1 9 8 5 to the present.
Ms. D'Ewart had a second hearing on March 11, 1986.
The hearing officer reversed his earlier ruling on the mer-
its, holding day care disregards would only be allowed to the
extent actually paid. This decision was appealed to the SRS
appeals board which affirmed the decision.
Ms. DIEwart then filed a petition for declaratory
judgment with the District Court. The District Court ruled
that 5 46.10.512, ARM, was invalid as applied to Ms. D'Ewart
and ordered back child care costs paid to her. This ruling
in effect held that day care costs incurred but not paid
could be disregarded or deducted from a claimant's income.
SRS and the Hill County Welfare Department appealed.
Can the AFDC child care deduction found in § 46.10.512,
ARM, be applied to child care costs which have accrued but
not been paid?
Section 46.10.512 (1), ARM, provides in pertinent part:
When testing net monthly income and determining
grant amount, the following disregards are sub-
tracted .. .
(b) Expenses for the care of each working person's
dependent child . ..
(i) The amount actually paid in the budget month
will be deducted. This amount may include payments
for charaes incurred in the month immediately prior
to the bidget month; however, charges incurGed -but
not paid in the budget month will not be allowed
- - - -
under -- (Emphasis added. )
thisrule.
SRS and the Hill County Welfare Department contend that the
District Court erred in its declaratory judgment ruling and
that 5 46.10.512, ARM, is valid and consistent with federal
law. The applicable federal statute, 42 U.S.C.A.
S 602 (a)(8)(A)(iii), provides in pertinent part:
A State plan for aid and services to needy families
with children must ...
(8)(A) provide that, with respect to any month, in
making the determination under paragraph ( 7 ) , the
State agency . . .
(iii) shall disregard from the earned income of
any child, relative, or other individual specified
in-clause (ii), an amount equal to expenditures for
care in such month for a dependent child
- . . .
(~mphasis added.)
The lower court framed the issue as follows:
The court must determine under 42 USCA 602,
(8) (A) (iii) [sic- should read 42 U.S.C.A.
602 (a)(8)(A)(iii)] whether or not unpaid but obli-
gated babysitting services should be considered
disregardable "expenditures" or whether or not such
child care costs are an "expenditure" only to the
extent they are actually paid for.
After discussing the purpose of the AFDC program and
accounting principles the District Court held:
. . . the term "expenditure" was intended by Con-
gress to mean: an outlay, or the creation of a
liability, or an asset or expense item; that Con-
gress in the instant case meant "expenditure" for
day care to mean either cash payment, or those
child care costs which are accrued and obligated
but not paid.
The court then concluded that 5 46.10.512, ARM, was inconsis-
tent and more restrictive than 42 U.S.C.A.
S 602 (a)(8)(A)(iii) and thus was invalid as to Ms. D'Ewart.
The federal regulation pertaining to this issue, found
at 45 C.F.R. 233.20 (a)(11)(i)(C), provides:
For purposes of eligibility determination, the
State must disregard from the monthly earned income
...
(C) An amount equal to the actual cost, but not to
exceed$160 ... (~msasis added.)
After consideration of the federal and Montana statutes and
regulations pertaining to the AFDC program, we conclude that
Montana's administrative rule on AFDC child care disregards,
§ 46.10.512, ARM, correctly implements federal congressional
intent. Day care costs which have been incurred, but not
paid, in the budget month should not be allowed as disre-
gards. Only those child care costs actually paid in the
budget month should be deducted.
We reach this conclusion for several reasons. First,
our reading of 42 U.S.C.A. $ 602(a) (8)(A)(iii) and 45
C.F.R. 233.20 (a) (11)(i)(C) persuades us that Congress intended
only those child care costs actually paid to be deducted.
The federal statute itself speaks of "expenditures." Black's
Law Dictionary 518 (rev. 5th ed. 1979) , defines an expendi-
ture as " [s]pending or payment of money; the act of expend-
ing, disbursing, or laying out of money; payment. " The
federal regulation is even more explicit in its intention
when it states, "[aln amount equal to the actual costs." The
regulation does not mention accrued or incurred costs, but
actual costs. "Actual" is defined in Black's Law Dictionary
33 (rev. 5th ed. 1979) as:
[r]eal; substantial; existing presently in act;
having a valid objective existence as opposed to
that which is merely theoretical or possible.
Opposed to potential, possible, virtual, theoreti-
cal, hypothetical, or nominal. Something real; in
opposition to constructive or speculative; . . .
In addition, AFDC eligibility determinations are made
using cash basis accounting principles. When figuring AFDC
income standards, it is clear the wage or salary must be
actually received. See 45 C.F.R. 5 233.20 (a)(6)(iii). Thus,
it follows that deductions from income must also be actually
paid. Our reading of the federal statutes and regulations,
along with the definitions of the key terms, convinces us
that Congress intended child care costs actually be paid and
not simply incurred.
Second, we conclude that S 46.10.512, ARM, correctly
incorporates the federal law as intended. The construction
of a statute by the person or agency responsible for its
execution should be followed unless there are compelling
indications that the construction is wrong. Red ion Broad-
casting Company v. F.C.C. (1969), 395 U.S. 367, 381, 89 S.Ct.
1794, 1802, 23 L.Ed.2d 371, 384. As this Court stated in
Department of Revenue v. Puget Sound Power and Light Company
(1978), 179 Mont. 255, 262, 587 P.2d 1282, 1286:
When faced with a problem of statutory construction
great deference must be shown to the interpretation
given the statute by the officers or agency charged
with its administration.
We conclude SRS has correctly interpreted 42 U.S.C.A.
S 602(a) (8) (A)(iii), and hold that 5 46.10.512, ARM, is
consistent with and implements congressional intent. We also
emphasize that the Montana regulation allows child care
expenses to be paid in the month they are incurred, as well
as in the subsequent month. The ARM is flexible enough to
allow a working AFDC mother to increase her working hours,
but not be required to pay the increased day care costs until
the following month when she receives her additional income
from the added hours.
Third, practical considerations convince us that only
day care costs actually paid should be allowed as an income
disregard. The efficient administration by the State of the
AFDC program requires that the money budgeted by the AFDC
family for day care expenses is actually spent on the day
care expenses. While we do not believe Ms. D'Ewart intended
in any way to perpetrate a fraud on the AFDC program, we can
see that potential problems could develop if AFDC recipients
were allowed to accrue day care expenses (perhaps to a rela-
tive or friend) with no intention of ever paying those ex-
penses. Also, if the SRS were required to set up a
bookkeeping procedure to record day care expenses incurred
months or even years earlier, then the paper work involved
could materially increase the complexity of operation.
Ms. D'Ewart argues that the officer's decision concern-
ing the benefit month of September 1984 barred subsequent
adjudication of this matter. At that administrative hearing
the position of the SRS and the Hill County Welfare Depart-
ment was presented not by an attorney but by a social worker
at the local level. The controversy involved a small amount
of money, and SRS did not appeal the decision to the next
administrative level.
At the time of the first hearing, 5 46.10.512 (1) (b)(i),
ARM, provided:
The amount actually paid in the budget month will
be deducted. This amount may include payment for
charges incurred in the month immediately prior to
the budget month; however, payments in the budget
month will not be allowed as a deduction under this
rule.
The regulation was contradictory. It began by providing that
the amount actually paid would be deducted, but then stated
that payments in the budget month would not be deducted. The
inconsistencies were removed by an amendment effective Sep-
tember 26, 1985, which read:
The amount actually paid in the budget month will
be deducted. This amount may include payment for
charges incurred in the month immediately prior to
the budget month; however, charges incurred but not
paid in the budget month will not be allowed under
this rule.
Considering these circumstances and especially the inconsis-
tent ARM, we conclude it would be unjust to require the SRS
to follow the hearing officer's initial determination in all
subsequent proceedings.
Accordingly, we reverse the District Court's decision
and hold that $ 46.10.512, ARM, is valid and applicable as
applied to Ms. D'Ewart and other AFDC recipients. We also
hold that S 46.10.512, ARM, is consistent and not more re-
strictive than 42 U. S.C.A. $ 602 (a)(8)(A)(iii). We remand
this case to the District Court for ap proceedings.
We Concur:
/f
Mr. Justice John C. Sheehy, dissenting:
The majority in this case have established a few
"disregards" of their own, which in turn ought to be
disregarded.
They have disregarded the purpose of AFDC payments,
which is to benefit children. The concern of the AFDC
program is for children, for their food, clothing, and
shelter, to aid their expenses. Any restrictive regulation
which reduces AFDC payments reduces benefits applicable to
children. The protection of children is the paramount goal
of the AFDC program. Rosen v. Hursh (8th Cir. 1972), 464
F.2d 731.
The majority disregarded that their interpretation of
the federal statutes and regulations may result in the
elimination of any AFDC payments to these children. The
earnings of the mother may be such that refusal of the
deduction of incurred costs for day care places the mother in
an income bracket where she is not eligible to receive AFDC
payments on behalf of her children.
Finally the majority have disregarded the work-incentive
nature of the federal law permitting the deduction of day
care costs. The majority reduce the value of the
work-incentive by their decision.
The AFDC program is designed to provide financial
assistance to needy dependent children and the
parents or relatives who live with and care for
them. A principle purpose of the program, as
indicated by 43 U.S.C. 601, is to help such parents
and relatives "to attain or retain capability for
the maximum self-support and personal independence
consistent with the maintenance of continuing
parental care and protection. . ."
Shea v. Vialpando (1974), 416 U.S. 251, 253, 94 S.Ct. 1746,
1750, 40 L.Ed.2d 120, 125.
The principle to which we should adhere in this case is
that day care expenses reasonably attributable to the earning
of income by the parent should be disregarded when incurred.
Simpson v. Miller (D.C. 111. 19821, 535 F-SUPP- 1041.
The intent of Congress and the federal agencies to limit
deductions for day care to costs actually paid and not
incurred costs is not as clear as the majority would make
out. The departmental regulations allow the deduction of
" (c) an amount equal to the actual cost, but not to exceed
$160 ... for the care of each dependent child ... I
, 45
.
C.F.R. 233.20 (a) (11)(i)(c)
The term "actual cost" does not necessarily mean
"actually paid" costs. It may indeed include incurred costs
because incurred costs are as actual as those for which
payment has been made. No federal case that I can find
applies the majority rule set out here. The United States
Supreme Court enunciated in Shea v. Vialpando, supra, that
"we read this language as a congressional directive that no
limitation, apart from that of reasonableness, may be placed
upon the recognition of expenses attributable to the earning
of income . . ." 416 U.S. at 260, 94 S.Ct. at 1753, 40
L.Ed. 2d at 129. The Supreme Court, in Shea, relied on the
congressional history set forth in S.Rep. No. 1589, 87th
Cong. 2d Sess. 17-18 (1962):
Under present law ... states are permitted, but
not required, to take into consideration the
-
expenses an individual has in earning any income
(this practice is not uniform in the country and in
a substantial number of states full consideration
of such expenses is not given.) The committee
believes that it is only reasonable for the states
to take these expenses fully into account. Under
existing - - these work expenses - -
law if are not
considered - determining need, they - -
in have the
effect of providinq a disincentive to working since
-that poTtion - - family budgetPspent
of the-
expenses - - effect of reducinq the amount
has the
--
for work
available - -
for food, clothing, and shelter. The
bill has, therefore, added a provision in all
assistance titles requiring thg states to give
consideration to any expenses reasonably
attributable to the earning of income. (~mphasis
added in original.)
416 U.S. 263, 94 S.Ct. 1755, 40 L.Ed.2d 131.
An incurred cost for day care, though not paid, is an
expense reasonably attributable to the earning of income in
the case of a working mother.
A weak argument by the majority is that to allow
incurred costs in the month in which the day care costs are
incurred would result in extra bookkeeping, complex paper
work, and inefficient administration. This must be true: if
costs of day care, whether incurred or paid for, are
disregarded in the month the day care is supplied, the actual
cost of day care will always be the amount disregarded. No
additional bookkeeping is required under this procedure.
There is far more bookkeeping involved in recording monthly
paid and unpaid costs of day care, and the accounting of day
care costs paid in subsequent months, then there would be in
taking "these expenses fully into account" in the month when
the expenses are incurred.
Equally weak is the argument that somehow through fraud,
a working parent may over a three-month period squander $147
of the children's benefits. It is entirely consonant with
ordinary experience that payment of bills may sometimes be
deferred. The legal obligation to pay remains. No fraud is
involved in the deferral.
The District Court was correct in its determination, and
it order ought to be affirmed.
J u s t i c e John C . H a r r i s o n c o n c u r s in-the foregoing d i s s e n t .
J u s t i c e William E . Hunt, Sr., '&rs i n t h e foregoing d i s s e n t .