STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
LORI LYNN FLOWERS; JAMES WAYNE FLOWERS )
and SHAWN ALLEN FLOWERS, by and through ) LORI LYNN FLOWERS, their mother and ) next friend; DORIS BRIGHT; ROBERT ) JENKINS, JANICE BRIGHT, ROBIN BRIGHT, ) THERESA BRIGHT and MELISSA BRIGHT, by )
and through DORIS BRIGHT, their grand- ) mother and next friend; TAYLEE ) THOMPSON, by and through DORIS BRIGHT, )
her godmother and next friend; BETTY ) CASE NO. 89-1581RP JEAN HEATH; PAMELA HEATH, TONYA HEATH, )
CHRISTOPHER HEATH, WILLIE BURGESS, ) SANDRA BURGESS, BRENDA GOMEZ and )
LINDA GOMEZ, by and through BETTY JEAN ) HEATH, their mother and next friend, )
)
Petitioners, )
)
vs. )
)
STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
)
FINAL ORDER
Pursuant to notice, a formal hearing was held in this case on April 27, 1989, in Tallahassee, Florida, before the Division of Administrative Hearings, by its designated Hearing Officer, Diane K. Kiesling.
APPEARANCES
For Petitioner: Cindy Huddleston
Attorney at Law
Florida Legal Services, Inc.
345 South Magnolia Drive Suite A-27
Tallahassee, Florida 32301
Paulette Ettachild
Legal Services of Greater Miami
225 NE 34th Street, Suite 300 Miami, Florida 33135
For Respondent: Ken Muszynski
Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700 STATEMENT OF THE ISSUE
The issue is whether the proposed amendments to Rule 10C-1.085, Florida Administrative Code, constitute an invalid exercise of delegated legislative authority.
BACKGROUND AND PROCEDURAL MATTERS
On February 24, 1989, the Department of Health and Rehabilitative Services (the Department) published notice of proposed amendments to Rule 10C-1.085 (hereinafter the Rule) in the Florida Administrative Weekly, Vol. 15, No. 8, pp. 868-870. Petitioner filed a challenge to the proposed amendments to the Rule on March 17, 1989.
The Department filed a Motion to Dismiss on April 12, 1989. After hearing on the Motion, the Motion was denied. The Department renewed the Motion to Dismiss during the formal hearing. The renewed Motion to Dismiss is denied herein as more particularly set forth in the Conclusions of Law.
During the formal hearing, the Department also moved to exclude evidence of and to foreclose argument on the sufficiency of the standard of need in Florida as it relates to the extreme hardship provision of the Rule, based on the Order Granting Plaintiffs' Motion for Summary Judgment in Godboldt, et al. v. Coler, Case No. 81-2862 (Cir. Ct., Leon County, April 20, 1987). Ruling was reserved pending review of the Godboldt case. The motion is granted herein, as more particularly set forth in the Conclusions of Law.
Petitioners presented the testimony of Richard D. Coe and had Petitioners' Exhibits 1-7 and 9-16 admitted in evidence. The record was left open for filing of Petitioners' Exhibit 17, however Petitioners' never filed same. The Department presented the testimony of Paul Bartlett, Lynn Bergstrom, and William
Seckler, and had Respondent's Exhibit 1 admitted in evidence. Joint Exhibit 1, the depositions of the Petitioners, was also admitted in evidence.
The transcript was filed on May 2, 1989. Petitioners timely filed their proposed findings of fact and conclusions of law on May 12, 1989. The Department filed its proposed findings of fact and conclusions of law on May 16, 1989, four days late. On May 19, 1989, the Department filed a Motion to Accept Late Filed Proposed Order. The Petitioners did not concur. The Department's Motion is DENIED. The Department's proposed findings of fact are not considered. All timely proposed findings of fact and all proposed conclusions of law have been considered. A specific ruling on each timely filed finding of fact is made in the Appendix attached hereto and made a part of this Final Order.
FINDINGS OF FACT
The Rule, proposed amendments to Rule 10C-1.085, attached hereto and incorporated, relates to recoupment of overpayments made under the AFDC (Aid to Families with Dependent Children) program. The current rule provides for
recoupment at a flat rate of 5% of the AFDC grant of current recipients or at 5% of the net monthly income of former recipients or 5% of the AFDC payment standard as applied to the net income of the former assistance group, whichever is less.
The Rule increases AFDC overpayment recoupment rates and provides for a sliding scale for recoupment rates to be applied in cases of "extreme hardship."
The Department purported to estimate the economic impact of the Rule in an Economic Impact Statement (EIS).
The Rule doubles the basic current AFDC overpayment recoupment rates.
Currently, the maximum recoupment rate imposed on overpaid AFDC recipients is 5% of the AFDC payment standard for the size of the assistance group.
Currently, the maximum recovery rate imposed on overpaid former AFDC recipients is the level at which the assistance group's net income after repayment is not less than 95% of the AFDC payment standard for the size of the assistance group.
The current AFDC overpayment recovery rates were implemented on December 1, 1983.
Under the amendments proposed by the Rule, the maximum rate of repayment of a current AFDC recipient's overpayment will be increased to 10% of the AFDC payment standard for the size of the assistance group.
Under the amendments proposed by the Rule, the maximum rate of repayment of a former AFDC recipient's overpayment will be increased to allow the former recipient net income of no more than 90% of AFDC payment standard for the size of the assistance group.
Extreme hardship is being unable to provide for essential basic needs.
Extreme hardship means having an income level that is inadequate to provide for minimal basic needs of the household.
There are no costs for forms reflected in the EIS.
The Department did not mention costs for forms in its EIS because it had not yet had to print them.
The Department will have to revise forms to implement the Rule.
The Department did not mention any costs associated with making extreme hardship determinations in its EIS because these determinations will be handled by existing staff.
The economic impact of the Rule on AFDC recipients is calculated in the EIS by doubling the current average monthly grant reduction of current recipients to reflect a doubling of the recoupment rate. The Department acknowledges that this calculation does not accurately reflect economic impact in dollars which will actually be recouped.
The economic impact of the Rule on AFDC recipients is calculated in the EIS as if all current recipients would be recouped at a 10% rate.
At the time the Rule was published, the Department had not even made a definite decision as to whether the Rule would apply to current recipients who were already being recouped at 5%.
Not all AFDC recipients will be recouped at a 10% rate.
The EIS presupposes that no person will be entitled to a hardship reduction.
The EIS presupposes a 10% recoupment rate on all current recipients.
The Department did not consider the economic impact of the Rule on former AFDC recipients in its EIS.
The Rule has an economic impact on former AFDC recipients, in that the repayment rate applied to them will double from 5% to 10% or $25 which even is greater.
The Department did not undertake any studies to estimate the number of persons who will successfully claim hardship under the Rule.
The Department did not undertake any studies to estimate the number of persons who would be eligible for relief under the Rule's hardship exception provisions.
The Department did not anticipate the numbers or amounts of recoupment under the Rule.
The Department has not evaluated how many hardship claims to anticipate under the Rule.
The EIS does not mention the economic impact of reducing AFDC income on the recipient.
All Petitioners who receive AFDC would have the burden of establishing extreme hardship under the Rule.
Petitioners Lori Lynn Flowers and her youngest child are AFDC recipients.
Petitioner Lori Lynn Flowers' youngest child is sixteen months old.
Lori Lynn Flowers' oldest son is physically handicapped.
Petitioner Lori Flowers has been overpaid in AFDC due to agency error.
Petitioner Lori Flowers' AFDC benefits are subject to recoupment of AFDC overpayment.
The Petitioners in the Flowers family who receive AFDC are subject to the Rule.
Petitioner Flowers' household receives food stamps.
Petitioner Lori Flowers' oldest son receives SSI.
Petitioner Lori Flowers' rent includes both rent and electricity.
Petitioner Lori Flowers does not pay any utility bills directly.
The gas Petitioner buys is bottled.
Under the Rule, Petitioner Flowers would have the burden of establishing extreme hardship.
If Petitioner Lori Flowers does not meet her burden to show extreme hardship, her overpayment will be recouped at 10%.
If the Rule did not consider SSI and Food Stamp income in calculating hardship, Petitioner Flowers would be eligible for zero recoupment.
Petitioner Doris Bright and three of the children she cares for, Petitioners Janice, Robin and Theresa Bright, are AFDC recipients.
The Bright Petitioners who receive AFDC are subject to the provisions of the Rule.
Petitioner Doris Bright cares for Taylee Thompson but does not receive AFDC for her.
Petitioner Doris Bright receives AFDC for herself and all of her grandchildren but Melissa and Robert.
Petitioner Doris Bright has an AFDC agency-error overpayment of about
$604.
Petitioner Doris Bright receives food stamps.
Petitioner Doris Bright's utilities are included in her rent.
Under the Rule, Ms. Bright would have the burden to show extreme hardship.
If Petitioner Bright does not meet her burden to show extreme hardship, her overpayment will be recouped at 10%.
Under the Rule, Petitioner Doris Bright's telephone would not be considered a utility for purposes of calculating rent reduction.
Ms. Bright may be eligible for lesser percent recoupment if her food stamp income is excluded.
Petitioner Betty Heath has an AFDC overpayment.
Petitioner Betty Heath is no longer receiving AFDC.
Petitioner Betty Heath cares for her seven children, Petitioners Linda Gomez, Brenda Gomez, Sandra Burgess, Willie Burgess, Pamela Heath, Tonya Heath and Christopher Heath.
The Heath Petitioners are currently ineligible for AFDC.
The Heath Petitioners receive food stamps.
Petitioner Betty Heath is liable for repayment of the AFDC overpayment which occurred when she received AFDC.
Petitioner Betty Heath is liable for repayment at an increased rate under the Rule.
If Petitioner Heath does not make repayment at this increased rate, she may be subject to civil liability.
Ms. Heath would be unable to provide three months of utility bills to document extreme hardship under the Rule.
The Rule does not provide for a hardship exception for former AFDC recipients.
The Department developed the Rules' extreme hardship provisions based only on a survey it conducted of other states' recoupment procedures (the survey) and Paul Bartlett's experience. Paul Bartlett is the Program Administrator of the Department's Economic Services, Overissuance, Overpayment, Fraud and Recoupment Program.
The results of the survey were used in formulating the Rule to a large extent.
The Department did not consider the AFDC payment standard or standard of need in Florida in developing the Rule.
The Department utilized a combination of New York's and Connecticut's extreme hardship policy for the Rule.
No study or empirical data supports the use of a 40% expenses to income ratio to invoke a hardship reduction of the recoupment rate.
The Rule uses the Thrifty Food Plan to reflect food needs.
AFDC recipients claiming extreme hardship cannot substitute documents showing transportation, clothing, unpaid shelter, personal or household incidentals or non-special food needs in place of the documents listed at (5)(b)(1)-(3) of the Rule in order to document extreme hardship.
The Rule requires AFDC recipients to document extreme hardship by providing the items listed at (5)(b)(1)-(3) of the Rule.
Rule does not expressly provide for any exceptions to the documentation policy.
The Rule does not expressly provide for alternative methods of documentation of hardship.
There is no published rule requiring social workers to accept other documentation of extreme hardship, however the Department made assurances in its testimony that alternate documentation would be considered.
There is no published rule requiring social workers to work with a client in providing exceptions to the documentation policy, however the Department made assurances that the workers would work with the clients and would have discretion to accept alternate documentation of the three expense items.
Under the Rule, it is irrelevant whether someone is living in substandard housing for hardship purposes.
If a family is unable to pay shelter expenses, the Department will not consider shelter expense in determining hardship under the Rule.
If a family is unable to pay its utilities, the Department will not consider utility expenses in determining hardship under the Rule.
A homeless overpaid AFDC recipient will be unable to have her shelter needs considered for purposes of computing extreme hardship since she does not pay rent.
An overpaid AFDC recipient who is behind on her rent may be unable to have her shelter needs considered for purposes of computing extreme hardship since she is not paying her rent.
An overpaid AFDC parent who is unable to buy herself clothes for work will be unable to have her clothing needs considered as an expenditure for purposes of computing extreme hardship.
An overpaid AFDC parent who is unable to afford gas to drive to work will be unable to have her transportation needs considered as an expenditure for purposes of computing extreme hardship.
An overpaid AFDC parent who is unable to pay bus fare to get to work will be unable to have her transportation needs considered as an expenditure for purposes of computing extreme hardship.
If an overpaid AFDC recipient cannot document a utility expense, her utility needs will not be considered for purposes of computing extreme hardship.
If an overpaid AFDC recipient's utilities have been turned off, her utility needs may not be considered for purposes of computing extreme hardship since she cannot document a current utility obligation.
The Rule does not consider transportation as a necessary expense for purposes of computing extreme hardship.
The only expenses considered for computation of an extreme hardship are the Thrifty Food Plan, utilities, shelter as paid, and special medical needs not covered by Medicaid.
The recoupment rate will be 10% under the Rule unless recipients request and meet the criteria for extreme hardship.
Unless a recipient requests an extreme hardship determination, the Department will not conduct an extreme hardship determination.
The Rule does not expressly require the Department to inform overpaid AFDC recipients or former recipients of the extreme hardship rate reduction policy.
Forms 3401A and 3402, incorporated in the Rule, do not inform overpaid AFDC recipients of the opportunity to claim and method to establish extreme hardship.
Forms 3401A and 3402 do not inform recipients of their right to an extreme hardship reduction.
Form 3401A does not inform overpaid AFDC recipients of the circumstances under which assistance will be continued without reduction if a hearing is requested.
Form 3401A does not inform recipients of the date by which a hearing must be requested in order to continue to receive full AFDC benefits.
Form 3402 currently states that repayment will be 5% of the payment standard, but will be amended when the Rule is applied.
All income to the household is considered as income to the AFDC family under the Rule.
SSI income, whether contributed or not, is considered as income under the Rule.
Under the Rule, "household" means everyone who lives at the same address.
All income, regardless of its type, is considered under the Rule.
If an overpaid AFDC recipient who alleges an extreme hardship receives food stamps, the full value of her coupon allotment must be considered as income under the Rule.
If SSI and food stamps are not considered in computation of extreme hardship under the Rule, AFDC recipients may be eligible for a lower recoupment rate.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. Section 120.54(4), Florida Statutes (1987).
Petitioner challenges the validity of the proposed amendments to Rule 10C-1.085, Florida Administrative Code, of the economic impact statement (EIS), and of the forms incorporate by reference in the Rule. Copies of the proposed amendments, the EIS, and the challenged forms are attached hereto and are incorporated by reference herein.
Petitioners' Standing
The test for standing in Section 120.54(4) challenges to proposed rules is whether the petitioner would be substantially affected by the proposed rule when it became affective. Division of Health and Rehabilitative Services
v. Alice P. et al., 367 So.2d 1045 (Fla. 1st DCA 1979). Because a challenge to a proposed rule of necessity involves future injury, the threat of injury must be "both real and immediate, not conjectural or hypothetical." Montgomery v. Division of Health and Rehabilitative Services, 468 So.2d 1014 (Fla. 1st DCA 1985). See also Florida Department of Offender Rehabilitation v. Jerry, 353 So.2d 1230 (Fla. 1st DCA 1978).
Petitioners Flowers and Bright, together with the members of their assistance groups, are current AFDC recipients who have been overpaid in the past and who are subject to recoupment. Under the current rule, they are subject to a 5% recoupment rate from their AFDC grant. Under the proposed Rule, they will be required to make repayment at a rate of 10% of the AFDC payment standard for the size of the assistance group unless they can prove entitlement to a rate reduction based on extreme hardship. Extreme hardship is defined in subsection (1)(j) of the proposed Rule and its computation is made under subsection (10) of the proposed Rule. The client, herein Petitioners Flowers and Bright, will be required to apply for and to provided mandatory documentation to show entitlement to the extreme hardship rate reduction. Clearly Petitioners Flowers and Bright both experience a real and immediate threat of injury under the proposed Rule in that each will be required to repay at the 10% rate unless each can prove entitlement to a hardship reduction. They have standing to bring this action.
HRS argues that Flowers and Bright will probably be entitled to a hardship reduction to a recoupment rate of 3% if all factors remain the same and if each applies for the extreme hardship reduction and if each is able to provide the required documentation to prove entitlement to a reduction. Petitioners Flowers and Bright have proved that the threat of injury is "real and immediate." It is the arguments of HRS which are "conjectural and hypothetical." Montgomery and Jerry, supra.
Petitioner Heath is a former AFDC recipient who is subject to repayment for a past overpayment. Under the current rule, former AFDC recipients are subject to repayment at a rate of 5% of the person's net monthly income. Under the proposed Rule, former recipients will be required to make repayment at a rate of 10%. This change will affect Petitioner Heath in a substantial way by doubling her recoupment rate. Further under the proposed Rule, Petitioner Heath will not be eligible to apply for a rate reduction under the extreme hardship provision because subsection (5)(b) of the proposed Rule allows only current assistance groups to seek an extreme hardship reduction. Clearly a 100% increase in the repayment rate required of Petitioner Heath will substantially affect her. Petitioner Heath also has standing.
The Economic Impact Statement
Section 120.54(2)(b), Florida Statutes, requires agencies to prepare an economic impact statement (EIS) when they propose a rule. The EIS must include an "estimate of the cost or economic benefit to all persons directly affected by the proposed action" as well as a "detailed statement of the data and method used in making" this cost estimate. Section 120.54(2)(b)2 and 4. A summary of the detailed EIS must be published at least 28 days prior to intended action along with the proposed rule itself, its purpose and effect, and its specific legal authority. Section 120.54(1). Failure to provide an adequate EIS is grounds for holding the rule invalid within one year of its effective date. Section 120.54(2)(d).
Preparation of an EIS is statutorily mandated in order to:
promote agency introspection in administrative rule making; to ensure a comprehensive and accurate analysis of economic factors, which factors work together with social factors and legislative goals underlying agency action; to direct agency attention to key considerations and thereby facilitate informed decision making; and finally, to expose the administrative process to public scrutiny.
Department of Health and Rehabilitative Services v. Wright, 439 So.2d 937, 940 (Fla. 1st DCA 1983). See also Florida-Texas Freight, Inc. v. Hawkins, 379 So.2d 944, 946 (Fla. 1979). While it is a procedure subject to the "harmless error" test, the absence or insufficiency of an EIS requires a finding that the rule is invalid if the rule has an economic impact or the agency failed to "fully consider ... the asserted economic factors and impact." Wright, 439 So.2d at
940-941. Likewise, although EIS mandates do not "command adherence to form over substance," there must be substantial compliance to Section 120.54(2)(b).
Florida-Texas Freight, 379 So.2d at 946. See also State Department of Health and Rehabilitative Services v. Framat, 407 So.2d 238, 242 (Fla. 1st DCA 1981). As the court in Wright, 439 So.2d at 941 noted:
[T]he materiality of the economic
impact statement to the rule-making process cannot be given short shrift. Preparation of the statement is a sobering task, one designed to arrest agency discretion bordering on the despotic, and to channel it through logic and reason to a rational end.
Compiled conscientiously, an economic impact statement can shield an otherwise valid rule from collateral attack on the basis that, as applied, the rule would be devastating economically and therefore arbitrary and capricious.
The Florida Supreme Court made clear the role to be played by the EIS in Florida-Texas Freight, supra at p. 946, when it said:
The process of formulating rules and regulations involves an interplay between social and economic factors and the legislative goals underlying agency action. In order to ensure a comprehensive and accurate analysis of economic factors in this calculus, the legislature has instructed an agency, through section 120.54(2)(a), to prepare an explicit statement delineating the short- and long-term economic consequence of a proposed rule. Such a procedure directs agency attention to certain key considerations and thereby facilitates informed decision making.
In the Florida-Texas Freight case, the Supreme Court did refuse to elevate form over substance in applying the harmless error rule "in absence of some evidence to the contrary or a showing of prejudice by a protestant." See also Wright, supra at pp. 940-941.
Finally, the court in Wright, supra at p. 941, made it clear that
the:
insufficiency of an economic impact statement is harmless error if it is established that the proposed action will have no economic impact, i.e., by its merely implementing already established procedures, or if it is shown that the agency fully considered the asserted economic factors and impact.
The Department has proposed a rule whose sole economic effect is on
past and present AFDC recipients. Yet the Department did not consider the Rule's economic impact on former AFDC recipients. The Department admits that it erroneously calculated the amount to be recouped from current recipients. In fact, the Department's analysis of the economic impact of the Rule was so deficient that the Department developed and published the Rule's EIS before it had even decided who would be subject to the Rule. Far from undergoing agency introspection to ensure a comprehensive and accurate analysis of economic impact, the Department did not consider the cost of the Rule on all persons directly affected by it. Thus, the Department did not substantially comply with Section 120.54(2)(b) and the Rule, in part, must be invalidated for this reason alone.
The portion of the EIS which is fatally deficient is that portion which fails to estimate the economic impact on former AFDC recipients who are subject to repayment of an overpayment which occurred while they were receiving AFDC. Except for this deficiency, all other flawed portions of the EIS are subject to the harmless error rule. For example, the EIS estimate of the economic impact on current recipients is erroneous only to the extent that it estimates that a greater sum will be recouped than will actually be recouped under the proposed rule. This does not operate to the detriment of any current AFDC recipients. There has been no showing of prejudice to a protestant in this regard. Subsections 10C-1.085(5)(c) and (d) as amended by the proposed Rule are the only two portions which have a direct economic cost to persons directly affected which was not considered or mentioned in the EIS. Therefore, only these two subsections are invalid for failure to provide an adequate statement of economic impact. Section 120.54(2)(d).
Standard for Determining an Invalid Exercise of Delegated Legislative Authority
The seminal case setting forth the standard to be applied in rule challenges is Agrico Chemical Co. v. Department of Environmental Regulation, 365 So.2d 759 (Fla. 1st DCA 1978), cert.den.sub nom., Askew v. Agrico Chemical Co.,
376 So.2d 74 (Fla. 1979). That standard is stated in Agrico at p. 763:
The burden is upon one who attacks the proposed rule to show that the agency, if it adopts the rule, would exceed its authority; that the requirements of the rule are not
appropriate to the ends specified in the legislative act; that the requirements contained in the rule are not reasonably related to the purposes of the enabling legislation or that the proposed rule or the requirements thereof are arbitrary or capricious.
The standard has been further defined by statute in 1987 in Section 120.52(8):
"Invalid exercise of delegated legislative authority" means action which goes beyond the powers, functions, and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one or more of the following apply:
The agency has materially failed to follow the applicable rule making procedures set forth in section 120.54;
The agency has exceeded its grant
of rulemaking authority, citation to which is required by section 120.54(7);
The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by section 120.54(7);
The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridle discretion in the agency; or
The rule is arbitrary or capricious.
It is well recognized "that agencies are given wide discretion in the exercise of their lawful rulemaking authority." Austin v. Department of Health and Rehabilitative Services, 495 So.2d 777, 779 (Fla. 1st DCA 1986).
"An agency's construction of a statute is entitled to great weight an is not to be overturned unless clearly erroneous.
[Citations omitted]. Austin, supra at 779. The validity of a proposed rule is to be tested against both the Agrico standard and Section 120.52(8). The court in Agrico elaborated on the standard at page 763 when it said:
A capricious action is one which is taken without thought or reason or irrationally.
An arbitrary decision is one not supported by facts or logic, or despotic.
However, it is recognized that the burden of demonstrating that agency action is an invalid exercise of delegated legislative authority "is a stringent one indeed." Agrico, supra at p. 763. The agency's shaping of rules to interpret statutes within their regulatory care is not to be overly restricted. Division of Health and Rehabilitative Services v. Framat Realty, Inc., 407 So.2d 238 (Fla. 1st DCA 1981).
Permissible interpretations of a statute must and will be sustained, though other interpretations are possible and may even seem preferable according to some views.
Id at P. 242.
Proposed Rule 10C-1.085
The Rule at issue is attached hereto and incorporated herein. It is authorized by and implements Section 409.335, which states in relevant part:
Whenever it becomes apparent that any person or provider has received any benefits under this chapter to which he is not entitled, either through simple mistake or fraud, the department shall take all necessary steps to recover the overpayment, unless it is determined that extreme hardship would result if repayment were forced at that time. The department may make appropriate settlements and shall establish a policy and cost-effective rules to be used in the recovery of such overpayments.
45 CFR 233.20(a)(13) requires states to correct and recover AFDC overpayments. Subparagraph (A)(1) requires that repayment be either by recovery from the overpaid individual or "by reducing the amount of any aid payable to the assistance unit of which he or she is a member, or both."
The federal regulation is founded on 42 USC 602 (a)(22), which mandates that the State plan:
provide that the State agency will promptly take all necessary steps to correct any overpayment or underpayment of aid under the State plan, and, in the case of--
an overpayment to an individual who is a current recipient of such aid (including a current recipient whose
overpayment occurred during a prior period of eligibility), recovery will be made by repayment by the individual or by reducing the amount of any future aid payable to the family of which he is a member, except that such recovery shall not result in the reduction of aid payable for any month, such that the aid, when added to such family's liquid resources and to its income (without application of paragraph (8), is less than 90 percent of the amount payable under the State plan to a family of the same composition with no other income (and, in the case of an individual to whom no payment is made for a month solely by reason of recovery of an overpayment, such individual shall be deemed
to be a recipient of aid for such month);
an overpayment to any individual who is no longer receiving aid under the
plan, recovery shall be made by appropriate action under State law against the income or resources of the individual or the family; and
an underpayment, the corrective payment shall be disregarded in determining the income of the family, and shall be disregarding in determining its resources in the month the corrective payment is made and in following month;
except that no recovery need be attempted or carried out under subparagraph (B) in any case, other than a case involving fraud on the part of the recipient, where (as determined by the State agency in accordance with criteria for determining cost- effectiveness, and with dollar limitations, which shall be prescribed by the Secretary in regulations) the cost of recovery would equal or exceed the amount of the overpayment involved.
Petitioners' Arguments
Petitioners argue that the proposed rule violates federal law by decreasing the amount of AFDC benefits because of the receipt of food stamps. This argument is rejected.
As cited above, the United States Code requires the state to establish uniform recoupment policies. The entire AFDC program is established by the federal government and is then turned over to the states to administer through each state's own enactments. Within a scheme such as this, at least some consideration must be given to the terms of the federal laws and codes which form the basis for the state's AFDC program.
It is readily recognized that the administrative forum is not the appropriate place to seek a declaration that a state rule conflicts with or violates a federal law or rule on the same subject. However, this case involves a challenge to a proposed rule which implements a state statute which in turn relates back to a federal rule and law. If in fact the Rule conflicts with or contravenes the federal law and rule, within a scheme such as we have here, then such a rule may be arbitrary or capricious. It is for this reason alone that Petitioners' argument is even considered in this case in this forum.
A reading of the cited federal law and rules makes it clear that any prohibition against inclusion of food stamps in the definition of income applies only when AFDC benefits are being determined. In the present case, consideration of food stamps is only relevant in determining the recoupment rate. The recipient is still entitled to the same AFDC benefit, but part of that benefit may be withheld for recoupment. The recoupment is no different than repayment of a debt. The AFDC recipient is entitled to the same benefit level, but a portion of the benefit grant is channeled to repayment of the debt.
The amount of AFDC benefit is not decreased as a direct result of the receipt of food stamps as Petitioners argue. Instead, the portion of the benefit which the recipient actually receives is reduced.
Petitioners also argue that the proposed rule requires the inclusion of disregarded and exempt income in violation of federal law. The types of income referred to are loans, grants, income tax refunds, SSI income, food stamp allotments, unearned income, earned income and $50.00 of child support. Again, these arguments are considered for the same reasons as the immediately preceding arguments were considered, and they are rejected for the same reasons.
In support of their argument, Petitioners quote various portions of federal law and rules. However, they fail to quote the portions of these laws and rules which show that they are to be applied when calculating the amount of an AFDC benefit. As noted above, the proposed rule does not alter the amount of the benefit grant, it only reduces the amount of the benefit actually paid directly to the recipient. For this reason, Petitioners' arguments are rejected.
Petitioners next argue that the proposed rule violates Section 409.335(1) by precluding former AFDC recipients from demonstrating extreme hardship. This argument is construed to mean that the proposed rule contravenes the specific provisions of law implemented, Section 409.335(1) [previously quoted at page 22 of this Final Order]. That section specifically mandates that the Department "shall take all necessary steps to recover the overpayment, unless it is determined that extreme hardship would result if repayment were forced at that time." By this very clear language, the Department has been told to recover overpayments from all persons who have been overpaid unless forced recovery would result in extreme hardship for the person who had been overpaid. The statute does not tell the Department to force recovery from former AFDC recipients regardless of whether extreme hardship would result.
The proposed rule defines extreme hardship in Subsection (1)(j) and it provides a formula to be used in computing extreme hardship in subsection (10). That computation formula is to be used to "determine whether or not a 10 percent recoupment will cause an extreme hardship." However, under the Rule, the recovery rate reductions for extreme hardship in subsection (10) are available only to current AFDC recipients. For former recipients who owe an overpayment, subsections (5)(c) and (d) and (6)(b) mandate recovery at 10% or $25 whichever is greater "unless repayment at that rate would result in available income to the person's assistance group of less than 90 percent of the AFDC payment standard for the size of the assistance group." If such a result would occur, the monthly payment amount is to "be reduced to a level where the former assistance group's net income after repayment is 90 percent of the AFDC standard." Hence, under the proposed rule, former recipients will be required to repay either:
1. $25.00,
10% of the net monthly income, or
10% of the AFDC payment standard for a similarly sized assistance group.
Because former recipients cannot avail themselves of the rate reduction available to current recipients so as to avoid extreme hardship, these three alternative repayment amounts create an irrebuttable presumption that extreme hardship will not occur when former recipients are forced to repay at one of
these three amounts. This irrebuttable presumption directly contravenes the provisions of Section 409.335 which precludes forced repayment when it would result in extreme hardship.
The court in Austin v. Department of Health and Rehabilitative Services,
495 So.2d 777 (Fla. 1st DCA 1986), determined that what appeared to be an irrebuttable presumption was actually rebuttable because HRS showed that there really was discretion given to the AFDC office and that errors in the procedure could be shown during a fair hearing process. In the present case, the Department has acknowledged that the extreme hardship rate reductions are not available to former recipients. Hence, the interpretation which saved the proposed rule in Austin cannot be used to save this proposed rule.
Petitioners also argue that the proposed rule violates the due process clause of the U.S. and Florida Constitutions and federal regulations. The Department argues that the Division of Administrative Hearings is precluded from hearing and determining constitutional challenges to rules. Contrary to the Department's argument, it is well settled that the Division of Administrative Hearings is without jurisdiction to determine the constitutionality of a rule or statute, but the Division of Administrative Hearings, through its Hearing Officers, is empowered to determine the constitutionality of a proposed rule. Department of Environmental Regulations
v. Leon County, et al., 344 So.2d 297 (Fla. 1st DCA 1977). However, no such determination is necessary in this case except to the extent that consideration must be given to the constitutionality when determining if the proposed rule is either arbitrary or capricious. It would seen axiomatic that promulgation of a rule which is contrary to constitutional provisions must on its face constitute an arbitrary or capricious action of the agency.
The question of whether this proposed rule or the forms incorporated by reference therein, violate the due process clause cannot be reached in this case. The rights assured under the due process clause are real rights. It is the failure to provide notice to affected persons which is a violation. Here, a proposed rule is at issue. Any allegation that due process notice requirements will not be met if the rule is applied is mere speculation at this time. Only a person entitled to such notice, who fails to receive such notice when the rule is applied to him or her, may argue that his or her due process rights have been abrogated.
Petitioners further argue that the rigid verification requirements of the proposed rule are unreasonable and violate federal law. It is undisputed that subsections 10C-1.08(5)(b) and (10) set forth rigid verification requirements and seem to preclude proof of extreme hardship by alternative means. The Department's representatives testified that the documentation terms of the proposed Rule would not be rigidly enforced and that the social workers would have discretion to accept alternative documentation to establish the three variable expense items-- shelter as paid, utilities, and special needs. Additionally, a client is entitled to a hearing on the calculation of extreme hardship. Section 409.285, Florida Statutes. In Austin, supra, a similarly rigid proposed rule was challenged. In that case, the court refused to invalidate the rule because HRS had assured the court, during oral argument, that there was discretion in the rule and that the client could raise defenses in a fair hearing to prevent cut off of AFDC benefits. The discretion vested in the AFDC office was not mentioned in the rule there, but apparently assurances by the Department that such discretion in fact existed was enough to save that proposed rule. In applying Austin to the instant case, it must be concluded that Petitioners' argument be rejected. HRS has made assurances that discretion
will be exercised. If said discretion is not exercised in individual cases, then those cases may be ripe for further challenges to the rule. However, such assurances are sufficient to save this proposed rule from invalidation solely on this argument by Petitioners.
Finally, Petitioners argue that the proposed rule is arbitrary and capricious.
The legislature has mandated that the Department take all necessary steps to recover overpayments, "unless it is determined that extreme hardship would result if payment were forced at that time." Section 409.335. Federal law, likewise, requires HRS to promptly recover overpayments so long as recoupment is no more than 10% of the maximum AFDC grant. Federal law permits the state to recover at a rate less than 10%. 45 C.F.R. 233.20(a)(13). Within the parameters of state and federal law, HRS has broad, but not unfettered, discretion to promulgate rules. HRS' administrative discretion "must be reasoned" and the requirements of its rule must be "appropriate to the ends specified in the legislative act." Agrico Chemical Co. v. Department of Environmental Regulation, 365 So.2d 759, 763 (Fla. 1st DCA 1979). Further, "the agency's interpretation of a statute need not be the sole possible interpretation or even the most desirable one; it need only be within the range of possible interpretations. [Citations omitted]. Department of Professional Regulation, Board of Medical Examiners v. Durrani, 455 So.2d 515, 517 (Fla. 1st DCA 1984).
While the Department could have considered more evidence in drafting this proposed rule, it cannot be said that its action was taken "without thought or reason or irrationally" or that it was "not supported by facts or logic." Agrico, supra at p. 763. The basic scheme for calculating extreme hardship is sound and is based on both the experience of other states and the experience of those persons within the Department who actually drafted this rule. The Department need not do more to prove that its interpretation is within the reasonable range of possibilities and is supported facts and logic.
In essence, entitlement to a recovery rate reduction because of extreme hardship is based on a simple formula. Four specified items of expenses (the Thrifty Food Plan by family size, shelter as paid, average utility obligations for the last three months, and special needs) are deducted from all income available to the assistance group. If the necessary expenses are equal to or greater than 40% of the assistance group's monthly income, the recovery rate from AFDC benefits is reduced below 10%. The recovery rates for different expense to income percentages is as follows:
0% | to | 39% | = | recovery | rate | of 10% |
40% | to | 49% | = | recovery | rate | of 7% |
50% | to | 59% | = | recovery | rate | of 5% |
60% | to | 97% | = | recovery | rate | of 3% |
98% | to | 100% | = | recovery | rate | of 0% |
It is concluded that this formula and the use of adjusted recovery rates is reasonable, is supported by the facts presented, and is within the range of possible interpretations of Section 409.335. If this Rule was not invalid for the reasons specified earlier, it would not be invalidated based on this argument by Petitioners.
Petitioners also urge that extreme hardship should be defined and determined by consideration of the state needs plan. Petitioners argue that the
state needs plan is insufficient on its face and that any recovery against AFDC benefits is per se hardship. This argument is also rejected. The sufficiency of the state needs plan is already the subject of a court order in Godboldt v. Coler, Case No. 81-2862 (Cir. Ct. Leon County, April 20, 1987). Additionally, challenges based on insufficiency of state needs plans have been rejected by federal courts. Jefferson v. Hackney, 406 U.S. 535, 32 L.Ed.2d 285, 92 S.Ct.
1724 (1972); State of Minnesota v. Heckler, 739 F.2d 370 (8th Cir. 1984); Swasey
V. Whalen, 562 F.2d 831 (1st Cir. 1977); Dale v. State of Vermont, 630 F. Supp
107 (D.C. Vt. 1986); and Metcalf v. Trainor, 472 F. Supp. 576 (N.D. Ill. 1979).
CONCLUSIONS
Proposed Rule 10C-1.085 is invalid because it contravenes Section 409.335(1), by requiring forced repayment from former AFDC recipients without regard to whether extreme hardship will result. Section 120.52(8)(c). Were it not invalid for this reason, the definition of extreme hardship and the computation formula for determining the recovery rate reduction for extreme hardship would be upheld as sound and reasonable. Finally, the proposed amendments to 10C-1.085(5)(c) and (d) are invalid for the additional reason that the economic impact statement failed to address the economic effects of those sections which raised the recoupment rate for former AFDC recipients. Sections 120.52(8)(a) and 120.54(2)(d).
Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the proposed amendments to Rule 10C-1.085 are an invalid
exercise of delegated legislative authority.
DONE and ORDERED this 9th day of June, 1989, in Tallahassee, Florida.
DIANE K. KIESLING
Hearing Officer
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, FL 32399-1550
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1989.
APPENDIX TO FINAL ORDER IN CASE NO. 89-1581RP
The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the timely proposed findings of fact submitted in this case.
Specific Rulings on Proposed Findings of Fact Submitted by Petitioners.
Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 3-9(3-9);
45(10); 46(11); 69-73(12-15); 75-86(16-27); 89(28); 94-103(29-38); 106-130(39-
63); 132(65); 133(66); 135(67); 136(68); 139-169(68-98); 171(99); 172(100);
174(101); and 176(102).
Proposed findings of fact 1, 10-18, and 20-23 are unnecessary.
3. Proposed findings of fact 24-41, 44, 47, 52, 53, 55, 59-64, 67, 68, 91,
92, 93, 104, 105, 131, 134, 137, 138, 170, and 175 are rejected as being irrelevant.
4. Proposed findings of fact 42, 43, 48-51, 54, 56, 57, 58, 65, and 66 are unsupported by the competent, substantial evidence.
5. Proposed findings of fact 2, 19, 74, 87, 88, 90, and 173 are subordinate to the facts actually found in this Final Order.
COPIES FURNISHED:
Sally Schmidt, Attorney at Law Florida Rural Legal Services
572 Southwest Second Street Belle Glade, Florida 33430
Cindy Huddleston, Attorney at Law Florida Legal Services, Inc.
345 South Magnolia Drive, Suite A-27 Tallahassee, Florida 32301
Paulette Ettachild, Attorney at Law Legal Services of Greater Miami
225 Northeast 34th street, Suite 300 Miami, Florida 33127
Ken Muszynski
Assistant General Counsel Department of Health and
Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407
Tallahassee, Florida 32399-0700
Liz Cloud, Chief
Bureau of Administrative Code 1802 The Capitol
Tallahassee, FL 32301
Carroll Webb, Executive Director Administrative Procedure Committee
120 Holland Building Tallahassee, FL 32301
Gregory L. Coler, Secretary
Department of Health and Rehabilitative Services 1323 Winewood Boulevard
Building One, Room 407 Tallahassee, FL 32399-0700
Sam Power, Clerk
Department of Health and Rehabilitative Services 1323 Winewood Boulevard
Building One, Room 407 Tallahassee, FL 32399-0700
A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.
| Issue Date | Proceedings |
|---|---|
| Jun. 09, 1989 | Final Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jun. 09, 1989 | DOAH Final Order | Economic Impact Statement standard of review. Proposed rule permitting HRS to force recovery of overpaid Aid For Dependent Children regardless of hardship is invalid. Irrebuttable presumption. |
QUEST, INC., WILLIAMS ROAD CLUSTER vs AGENCY FOR HEALTH CARE ADMINISTRATION, 89-001581RP (1989)
WILLIAM T. PFEIL vs DEPARTMENT OF LAW ENFORCEMENT, 89-001581RP (1989)
AGENCY FOR HEALTH CARE ADMINISTRATION vs ASHER HEALTH CARE, LLC, 89-001581RP (1989)
QUEST, INC., LAUREL HILLS CLUSTER vs AGENCY FOR HEALTH CARE ADMINISTRATION, 89-001581RP (1989)
