It is the Pennsylvania inclusion of mandatory payroll deductions which hitherto had been disregarded which is the focus of plaintiffs' claim in this case.
Reduced to its essentials, plaintiffs' claim is that the Pennsylvania work expense regulation to which I have just referred, which removes mandatory payroll deductions from the disregard category, is not justified, let alone required, by OBRA's statutory changes or by the associated newly adopted earned income disregard regulations. 45 C.F.R. § 233.20(a)(11).
Instead, plaintiffs contend that the Pennsylvania rules violate another set of longstanding HHS regulations which require states to consider only income and resources which are "actually available" to the recipient. See 45 C.F.R. 233.20(a)(3)(ii)(D). Because in plaintiffs' view the portion of an AFDC recipient's total income which is withheld due to mandatory payroll deductions is not "actually available" within the meaning of the regulation to which I have just referred, a state may not include mandatory payroll deductions as part of a recipient's income when calculating the level of need or eligibility itself. Thus, plaintiffs claim that by counting mandatory payroll deductions as part of an AFDC family's income, Pennsylvania has run afoul of the availability rule enshrined in the regulation, and, as plaintiffs contend, required by the statutory framework.
Now, to support this position, plaintiffs focus strongly on the early history of the Social Security Act. In particular, they cite the legislative history of the 1939 amendments which, for the first time, required states to give consideration to a recipient's income in calculating need.
Now, as plaintiffs observe, the early interpretation of this 1939 statutory change provided by the Social Security Board a year later, in 1940, makes it pretty clear that the states were only to consider income that was actually available for current use. The plaintiffs point to a memorandum dated December 20, 1940, from the Acting Secretary to the Board, Leona McKinnon. Now, in addition, the plaintiffs rely on the line of cases which commence with Chief Justice Warren's decision in King v. Smith, 392 U.S. 309, 88 S. Ct. 2128, 20 L. Ed. 2d 1118 (1968), and which follow on with Lewis v. Martin, 397 U.S. 552, 90 S. Ct. 1282, 25 L. Ed. 2d 561 (1970), VanLare v. Hurley, 421 U.S. 338, 95 S. Ct. 1741, 44 L. Ed. 2d 208 (1975), most particularly a discussion at 345-47, 95 S. Ct. at 1746-47. King v. Smith was a case in which the Court struck down an Alabama so-called "substitute father" regulation which denied AFDC benefits to the children of a mother who co-habited with a person not her husband.
Now, though the focus of the Court's opinion in King v. Smith was on the proper interpretation of the word "parent" under section 406(a) of the Social Security Act, a good deal of the reasoning stressed the concept of "available" income as being at the heart of the AFDC program. This is particularly clear from footnote 16 on page 318 of volume 392 U.S., 88 S. Ct. at 2134 Footnote 16. VanLare and Lewis v. Martin were similar cases in which the Court struck down restrictive state definitions of income and of resources and strongly emphasized that a state could only consider income actually available to a child's household, rejecting attributive sources of income which had no longer, or not sufficient, economic actuality.
Now, the focus of this group of decisions was an HEW regulation, 45 C.F.R. section 233.20(a)(3)(ii)(c), which provided that:
Only such net income as is actually available for current use on a regular basis will be considered.