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BETSON v. COHEN

December 29, 1983

Nancy BETSON, Annabelle Woodard and Cynthia Williams on behalf of themselves and all others similarly situated,
v.
Walter COHEN, Secretary of the Pennsylvania Department of Public Welfare, and Don Jose Stovall, Executive Director of the Philadelphia County Board of Assistance, and Margaret M. Heckler, Secretary of the United States Department of Health and Human Services



The opinion of the court was delivered by: WEINER

 WEINER, District Judge.

 This action was initially brought in July 1983 by Roseann Barnes on behalf of herself and a putative class challenging federal regulations and state implementation of a section added to the Social Security Act in 1981 regarding the treatment of lump sum income received by Aid to Families with Dependent Children (AFDC) assistance units. Her complaint was dismissed with prejudice as to her and without prejudice as to the putative class, by agreement of the parties. Thereafter, Nancy Betson, Annabelle Woodard, Cynthia Williams and a woman filing anonymously as Juana del Pueblo filed a motion to intervene and reinstate the complaint together with an intervenor's complaint, a second amended complaint and a motion for a temporary restraining order and/or preliminary injunction. *fn1" They have also filed a motion for class certification.

 Plaintiff Betson began receiving AFDC benefits in 1977. She has two children, ages four and six. She receives monthly child support of $60.00 *fn2" for her oldest child. Until her AFDC grant of $335.00 per month ceased, she paid $63.00 per month for rent in public housing, which was reduced to $ 6.00 per month once her grant ceased. Her utility bills occasionally reach $125.00 per month. She has a student loan, which is spent toward her schooling.

 In April 1982 plaintiff Betson was involved in an automobile accident resulting in injuries to her leg and jaw. In December 1982, in settlement of her claim for pain and suffering, she received $18,175.00. *fn3" No longer than two weeks after receipt of that money, DPW mailed a notice to her advising her that, in accordance with the lump sum rule, her and her children's AFDC grant would be terminated until July 1985. By June 1983 plaintiff Betson had exhausted the $18,175.00. She reapplied for AFDC and was told she would not be eligible for assistance until twenty-nine months had expired, in accordance with the lump sum rule. Her appeal resulted in a finding that she had exhausted her lump sum amount but that she remained ineligible for an AFDC grant due to the lump sum rule. She receives food stamps and medical assistance and, by agreement of the parties pending the outcome of this case, has been receiving an AFDC grant. Otherwise, she has no source of income.

 Plaintiff Woodard has been receiving an AFDC grant for herself and her son since 1974. In March 1983, as a result of injuries she sustained in an automobile accident, Woodard received $6600.00 of a $10,000.00 settlement for pain and suffering. She reported the settlement to DPW and was advised that she owed the department $1700.00 for assistance received while her accident claim was pending and would then be ineligible for an AFDC grant for fifteen months *fn4" based on the lump sum rule.

 Plaintiff Woodard has been receiving food stamps and medical assistance since July 1983. She has been receiving AFDC assistance pending a request for reconsideration of Cohen's decision. If her benefits are terminated she will have no other source of income.

 Plaintiff Williams has three children. She was a recipient of AFDC benefits until October 1983 and has had no earned income since the summer of 1982. At the time her grant ceased she was receiving $401.00 per month in AFDC assistance. In early August 1983 she received retirement benefits, for which she was required to apply as a condition of receiving AFDC benefits and for which she signed a confession of judgment in favor of DPW, totalling $4780.98. The $4780.98 was exhausted by the end of August. Her AFDC grant was terminated in September 1983 and by notice dated October 26, 1983 DPW advised her that she was ineligible for assistance for a period of time based on the lump sum rule. Her income consists of $39.03 per month in retirement benefits and $107.00 per month in child support which is restricted to the use of her six-year old child.

 As stated earlier, the plaintiffs challenge the validity of federal and state regulations implementing 42 U.S.C. § 602(a)(17) which was enacted as Section 2304 of the Omnibus Budget Reconciliation Act of 1981, P.L. 97-35, 95 Stat. 357, 845 (1981) ("OBRA"). This new section changed the treatment of lump sum payments received by AFDC applicants or recipients. Prior to the enactment, if an assistance unit received a nonrecurring lump sum of money, it was counted as income in the month of receipt. If the funds were expended and other eligibility conditions were met, the assistance unit would be eligible for AFDC in the next month.

 The new section provides:

 
§ 602. State plans for aid and services to needy families with children; contents; approval by Secretary (a) A State plan for aid and services to needy families with children must . . . .
 
(17) provide that if a person specified in paragraph (8)(A)(i) or (ii) receives in any month an amount of income which, together with all other income for that month not excluded under paragraph (8), exceeds the State's standard of need applicable to the family of which he is a member --
 
(A) such amount of income shall be considered income to such individual in the month received, and the family of which such person is a member shall be ineligible for aid under the plan for the whole number of months that equals (i) the sum of such amount and all other income received in such month, not excluded under paragraph (8), divided by (ii) the standard of need applicable to such family, and
 
(B) any income remaining (which amount is less than the applicable monthly standard) shall be treated as income received in the first month following the period of ineligibility specified in subparagraph (A); . . . .

 42 U.S.C. § 602(a)(17).

 The section incorporated in section ...


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