L.A. v. Essex Cnty. Div. of Welfare

Full title: L.A., Petitioner-Appellant, v. ESSEX COUNTY DIVISION OF WELFARE…

Court: SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

Date published: May 29, 2012

DOCKET NO. A-5917-10T2 (App. Div. May. 29, 2012)

Opinion

DOCKET NO. A-5917-10T2

05-29-2012

L.A., Petitioner-Appellant, v. ESSEX COUNTY DIVISION OF WELFARE, Respondent-Respondent.

Manuel R. Grova, Jr., argued the cause for appellant (Mandelbaum, Salsburg, Lazris & Discenza, P.C., attorneys; Mr. Grova, of counsel and on the brief; Phillip G. Ray, on the brief). Gerard Hughes, Deputy Attorney General, argued the cause for respondent (Jeffrey S. Chiesa, Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Mr. Hughes, on the brief).

PER CURIAM

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

Before Judges Cuff and Lihotz.

On appeal from the New Jersey Department of Human Services, Division of Family Development, Docket No. GA38421.

Manuel R. Grova, Jr., argued the cause for appellant (Mandelbaum, Salsburg, Lazris & Discenza, P.C., attorneys; Mr. Grova, of counsel and on the brief; Phillip G. Ray, on the brief).

Gerard Hughes, Deputy Attorney General, argued the cause for respondent (Jeffrey S. Chiesa, Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Mr. Hughes, on the brief). PER CURIAM

L.A. receives Work First New Jersey (WFNJ)/General Assistance (GA) benefits and food stamps through the Essex County Division of Welfare. She is also enrolled at Drake College, which offers financial aid to students that includes a forgivable line of credit to successful students. L.A. appeals from a final decision of the Director of the Division of Family Development (DFD) reducing her GA and food stamp benefits. We hold that the DFD Instruction directing county welfare agencies to treat the line of credit as countable income violates the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -25, because the Director avoided rulemaking, and because reliance on the Instruction by the county welfare agency and DFD Director is improper. We reverse.

In 2010, L.A. applied for and received full benefits for a single-person family unit through the GA program and a $200 monthly food stamp allotment. In September 2010, L.A. obtained employment; her GA benefits were terminated and her food stamp allotment was reduced from $200 to $155. In November 2010, L.A. enrolled in a medical assistant program at Drake College. She was denied GA benefits and her food stamp allotment was reduced from $155 to $61, effective January 2011, because an element of her financial aid package was not treated as exempt income.

Drake College is a vocational school with approximately 1000 students at its Newark campus. The medical assistant program in which L.A. enrolled takes seven months to complete.

Tuition is $16,700. Students incur other school-related expenses, such as transportation, childcare, and books. These expenses plus tuition comprise the cost of attendance. Drake College assists students to pay for their education through financial aid packages. L.A. received a Pell Grant ($5500), a Drake College institutional loan ($1,500), two federal loans ($9454), and a forgivable credit line ($350 bi-weekly). L.A.'s total cost of attendance was $27,500.

To preserve their eligibility for the credit line, students must attend eight out of ten classes each month and either maintain a 3.0 grade point average or graduate on time. If students fail to meet the attendance and grade point average requirements, the credit line will not be extended to them until they restore their eligibility. The credit line must be repaid, if a student does not graduate on time or does not have a 3.0 grade point average at graduation. Drake College earmarks the forgivable credit line funds for "cost of attendance" expenses.

At the time of her appeal, L.A. was in the sixth month of her program, had perfect attendance and was on track to graduate on time. Thus, the credit line would be forgiven at graduation.

On January 14, 2011, the DFD issued DFD Instruction No. 11-1-7 and GA Program Instruction No. 11-1-3 (collectively, the Instruction). DFD stated that the purpose of the Instruction was to advise county welfare offices how to treat the Drake College bi-weekly stipend/loan for eligibility for the food stamp program and the GA program. For food stamps, the Instruction stated that educational assistance, i.e, grants, scholarships, fellowships, work study and educational loans, may be excluded from countable income, if used for "[t]uition; [m]andatory school fees; [b]ooks; [s]upplies; [t]ransportation; and [m]iscellaneous personal expenses, other than normal living expenses; [o]rigination fees an insurance premiums on educational loans; or [d]ependent care." The Instruction addresses the $350 bi-weekly stipend as follows: "The Food and Nutrition Service (FNS) has determined that the $350 bi-weekly stipend/loan does not fall under any of the allowable expenses listed above; therefore, these monies are countable as unearned income."

For GA purposes, the Instruction stated that the stipend is to be considered unearned income. The Instruction provides:

The $350 bi-weekly stipend received by GA recipients while attending Drake College or similar educational "stipend" programs shall be treated as unearned income and is not excluded in the GA program. County and Municipal agencies are to review their caseloads to identify recipients attending Drake College or similar educational "stipend" programs and ensure that recipients are properly notified regarding their ineligibility.

The DFD refers to N.J.A.C. 10:87-5.5(a)4, 10:87-5.9(a)7, 10:87-5.11, and 10:90-3.19(a)9, as authority for the Instruction.

L.A. filed a timely appeal of the reduction of her benefits. The matter was referred to the Office of Administrative Law as a contested case, and on June 23, 2011, an Administrative Law Judge (ALJ) rendered an Initial Decision. The ALJ found that the $700 received by L.A. from the Drake College credit line "covers most of petitioner's costs for books, transportation and lunch money." Citing the Instruction, the ALJ found L.A.'s "ineligibility for GA after the publication of a clarification via DFD 11-7-7 Notification is effective February 15, 2011." The ALJ reasoned that the Drake College stipend increased L.A.'s income above the income limits for receipt of GA. The Instruction prevents the stipend from being excluded as countable income. Accordingly, the ALJ held that the determination of the county welfare agency to deny GA benefits and to reduce food stamp benefits correctly applied the eligibility criteria for these benefits. DFD adopted the Initial Decision.

On appeal, L.A. argues the forgivable credit line is excludable income for GA and food stamp benefits. She also argues that the Instruction issued by DFD improperly evaded the rulemaking requirements of the APA. The State responds that GA and food stamps are designed for the truly needy; therefore, the regulations define income broadly and exclusions from countable income should be construed consistent with the purpose of the programs. The State also contends that the Instruction addressing the Drake College stipend should be considered as nothing more than intra-agency advice.

In 1996, Congress enacted the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). Pub. L. No. 104-193, 100 Stat. 2105 (codified as amended in scattered sections of 42 U.S.C.A.); M.F. v. Dep't of Human Servs., Div. Of Family Dev., 395 N.J. Super. 18, 25 (App. Div. 2007). In response to PRWORA, New Jersey enacted the WFNJ program. N.J.S.A. 44:10-55 to -70; Sojourner A. v. N.J. Dep't of Human Servs., 177 N.J. 318, 327 (2003). The Legislature recognized that PRWORA provided an opportunity to the "state to establish and design its own welfare program," N.J.S.A. 44:10-56a, and "working individuals . . . needing temporary assistance should have the transitional support necessary to obtain and keep a job in order to be able to avoid cycling back onto public assistance[,]" N.J.S.A. 44:1-56c. In Sojourner A., the Court recognized that "the primary purpose of [WFNJ] is to encourage employment, self-sufficiency and family stability." 177 N.J. at 327.

The WFNJ program is established in the Department of Human Services, N.J.S.A. 44:10-58a; however, it is administered at the municipal and county levels, N.J.S.A. 44:10-59c. The Commissioner of the Department of Human Services is authorized to establish regulations governing eligibility and other requirements for the WFNJ program. N.J.S.A. 44:10-59e. The "[r]egulations shall include provisions for the deeming of income, when appropriate . . . ." Ibid.

Pursuant to this authority, the Commissioner has adopted rules governing the WFNJ program, including financial eligibility for GA and food stamp benefits. N.J.A.C. 10:90-3.1 to -3.23; N.J.A.C. 10:87-5.1 to -5.11. The regulations for both benefits exclude certain income as countable or exempt income. N.J.A.C. 10:90-3.19; N.J.A.C. 10:87-5.8 to -5.11. This non-countable or exempt income includes education financial assistance. N.J.A.C. 10:90-3.19(a)8, governing WFNJ, provides as follows:

The following sources of income shall be exempt:
. . . .
8. Any grant, scholarship, student loan or other financial aid received by an . . . eligible adult who is a student, . . . so long as the eligible . . . adult continues to attend school and meets the conditions under which such moneys are granted and complies with required WFNJ work
requirements at N.J.A.C. 10:90-4. Income received through a college work study program is not exempt for GA recipients[.]

N.J.A.C. 10:87-5.11(b)3-4, and -5.11(c), governing food stamps, provides that educational assistance is not considered included or countable income, if the educational assistance is awarded to a household member enrolled in a vocational education program or a vocational school, and the educational assistance is used for identified or earmarked by the school for allowable expenses. Those allowable expenses include tuition, mandatory school fees, books, supplies, transportation, miscellaneous personal expenses, origination fees and insurance premiums, and dependent care. N.J.A.C. 10:87-5.11(c)1-8. "Educational assistance includes grants, scholarships, fellowships, work study, educational loans on which payment is deferred, veterans' educational benefits and the like." N.J.A.C. 10:87-5.11(a).

The Instruction directs that "[t]he $350 bi-weekly stipend received by GA recipients while attending Drake College or similar educational 'stipend' programs shall be treated as unearned income and is not excluded in the GA program." In addition, the Instruction directed municipal and county agencies to review their caseloads to identify recipients of such stipends "and ensure that recipients are properly notified regarding their ineligibility."

L.A. contends that the Instruction effects a clear and substantial change to existing regulations defining educational assistance that is excluded as countable income. We agree.

An administrative rule includes "each agency statement of general applicability and continuing effect that implements or interprets law or policy, or describes the organization, procedure or practice requirements of any agency." N.J.S.A. 52:14B-2(e). The APA also recognizes that executive agencies perform many functions and take many actions that cannot be considered rulemaking. Ibid. Therefore, the definition of administrative rule does not include "(2) intraagency advice and interagency statements; and (3) agency decisions and findings in contested cases." Ibid. On the other hand, the APA recognizes that an agency action that implements law or policy may be an administrative rule. Metromedia, Inc. v. Dir., Div. Of Taxation, 97 N.J. 313, 330 (1984); N.J.S.A. 52:14B-2(e). This court has recognized that "an administrative rule may encompass the issuance of an agency 'instruction' or an adjudication of a particular person's case if it contains the characteristics of a rule." B.H. v. State of N.J., Dep't of Human Servs., 400 N.J. Super. 418, 430 (App. Div. 2008).

Whether agency action is rulemaking, adjudication, or informal action, intra-agency or interagency advice is often a close question, and the various kinds of action can overlap. Metromedia, supra, 97 N.J. at 332; B.H., supra, 400 N.J. Super. at 430. However, in Metromedia, the Court provided considerable guidance in determining whether agency action should be considered an administrative rule and subject to the rulemaking procedures of the APA. Justice Long instructed that an administrative rule is usually present when the determination or instruction

(1) is intended to have wide coverage encompassing a large segment of the regulated or general public, rather than an individual or a narrow select group; (2) is intended to be applied generally and uniformly to all similarly situated persons; (3) is designed to operate only in future cases, that is, prospectively; (4) prescribes a legal standard or directive that is not otherwise expressly provided by or clearly and obviously inferable from the enabling statutory authorization; (5) reflects an administrative policy that (i) was not previously expressed in any official and explicit agency determination, adjudication or rule, or (ii) constitutes a material and significant change from a clear, past agency position on the identical subject matter; and (6) reflects a decision on administrative regulatory policy in the nature of the interpretation of law or general policy. These relevant factors can, either singly or in combination, determine in a given case whether the essential agency action must be rendered through rule-making or adjudication.
[97 N.J. at 331-32.]

Furthermore, "[i]f the several relevant features that typify administrative rules and rulemaking weigh in favor of action that is quasi-legislative in character, rather than quasi-judicial or adjudicatory, that balance should determine the procedural steps required to validate the ultimate agency action." Id. at 332.

DFD contends that the Instruction is simply a clarification of existing rules. According to DFD, "it merely clarified how the line of credit, a unique form of payment affecting only individuals attending Drake, should be treated pursuant to these regulations." In Woodland Private Study Group v. New Jersey Department of Environmental Protection, 109 N.J. 62, 75 (1987), the Court defined an intra-agency statement as "(1) a communication between agency members that (2) does not have a substantial impact on (3) the rights or legitimate interests of the regulated public." The relevant inquiry is whether this statement has a "'substantial impact' on the rights or interests of the parties." Id. at 74.

Here, the Instruction more closely resembles an administrative rule rather than an intra-agency statement. By its terms, the Instruction has a broader reach than Drake College. It expressly provides it is applicable to any similar stipend program offered by any other vocational institution. Before the ALJ, the Drake College administrators familiar with the program outlined an assistance package consistent with existing regulations governing educational financial assistance. Rather than focusing on whether the recipient used the stipend for the qualifying expenses, the Instruction effectively amends the definition of educational financial assistance. Finally, application of the Instruction to L.A. and other similarly situated students at Drake College and similar institutions caused a loss of or a sharp reduction in benefits. The Instruction cannot be considered simply an internal instruction imposing a procedure for implementation of a regulation or a reiteration of an existing policy. See, e.g.. Bullet Hole, Inc. v. Dunbar, 335 N.J. Super. 562, 583-84 (App. Div. 2000) (finding that charging a fee for the processing of criminal history requests as required by regulation is not rulemaking, in part, because it does not impose a detailed set of eligibility requirements). The direction contained in the Instruction impacts the right of L.A. and others to continue to receive GA and food stamps. The alteration effected by the Instruction is subject to the formal rulemaking provisions of the APA and cannot form the basis to deny GA and reduce L.A.'s food stamp allotment.

DFD urges that the record does not contain evidence that L.A. used the stipend to pay for qualified educational expenses, such as transportation, lunch, and books. The ALJ, however, found that "[t]he $700 covers most of petitioner's costs of books, transportation and lunch money." The DFD Director adopted those findings. We defer to the findings of the ALJ and agency head when those findings are supported by the credible evidence in the record. Doering v. Bd. of Review, 203 N.J. Super. 241, 245 (App. Div. 1985). These findings are supported by L.A.'s testimony. The basis for the GA denial and reduced food stamp allotment was the Instruction. The agency action is infected by an alteration of the plain language of a regulation and cannot form the basis to deny or reduce benefits to L.A.

Reversed.

I hereby certify that the foregoing is a true copy of the original on file in my office.

CLERK OF THE APPELLATE DIVISION