APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (No. 80-2192)
Before Seitz, Chief Judge, Garth, Circuit Judge, and Pollak, District Judge.*fn*
The Secretary of Health and Human Services appeals from a final order of the district court granting Zoraida Zambardino's motion for class certification and granting Zambardino's motion for summary judgment in a modified form. This court has jurisdiction under 28 U.S.C. § 1291 (1976).
On February 29, 1980, the Social Security Administration (SSA) determined that Zoraida Zambardino had become eligible for disability benefits under the Supplemental Security Income (SSI) program, 42 U.S.C. §§ 1381-1383 (1976) as of September, 1979. Two months later, the SSA district office in Jersey City, New Jersey, notified Zambardino that she was entitled to an initial lump sum payment of $1,170.00 for the period from September 1979, the date of her disability, to May 1980, when she received her first monthly SSI check of $130.
During this period of retroactive entitlement, Zambardino had been receiving $81.00 per month under the Aid to Families with Dependent Children program (AFDC), 42 U.S.C. §§ 601-644 (1976). Pursuant to a regulation promulgated by the Secretary, 20 C.F.R. 416.1151(a)(2) (1979), the Jersey City SSA office, in calculating Zambardino's lump sum SSI payment, deducted the AFDC benefits she had received between September 1979 and May 1980 from her retroactive entitlement. The regulation excludes assistance payments from an SSI recipient's income in computing benefit levels if such payments are "funded wholly by a state or by a political subdivision of a state." 20 C.F.R. 416.1151(a)(2) (1979) (current version codified at 20 C.F.R. § 416.1124(c)(2) (1981)). Because the federal government provides fifty percent of the funding for New Jersey's AFDC program, the SSA counted all of Zambardino's interim AFDC benefits as income to reduce her retroactive SSI payment dollar-for-dollar.
Zambardino requested reconsideration of the retroactive payment, arguing that the regulation impermissibly narrows 42 U.S.C. § 1382a(b)(6) (1976), which excludes from income assistance "based on need and furnished by any state." The request was denied. After an administrative law judge upheld the Secretary's determination, it was affirmed by the Appeals Council. This action followed.
Zambardino alleged that 20 C.F.R. 416.1151(a)(2) directly conflicts with 42 U.S.C. § 1382a(b)(6), and sought a declaratory judgment that the regulation was invalid.*fn1 On behalf of herself and a class of similarly situated New Jersey SSI recipients, she sought an order directing the Secretary to pay the amount withheld from lump sum SSI payments by reason of 20 C.F.R. § 416.1151(a) (2). Both parties moved for summary judgment.
The district court held that the Secretary's regulation impermissibly conflicts with section 1382a(b)(6) of the statute. The court granted Zambardino's motion for summary judgment in part, however, holding that that statute permits the Secretary to offset the federal contribution to AFDC recipients but not the state's portion as well. The court concluded that Zambardino was entitled to receive only the state portion of AFDC benefits that the Secretary had deducted pursuant to the regulation. The court also granted Zambardino's motion for class certification against the Secretary's objection that the unnamed class members had failed to exhaust their administrative remedies.
The SSI program is designed to meet basic subsistence needs of aged, blind, or disabled individuals. The benefit level of eligible recipients is reduced by any income that is not excluded under 42 U.S.C. § 1382a(b) (1976). Before 1976, section 1382a(b)(6) excluded from income "assistance described in section 1382e(a) of this title which is based on need and furnished by any State or political subdivision of a State." Section 1382e(a) described "Optional State Supplementation" programs that were cash payments made on a regular basis as part of an approved plan of state supplementation of SSI. In 1976, Congress amended section 1382a(b)(6) to provide:
(b) In determining the income of an individual (and his eligible spouse) ...