The federal statute governing the Aid to Families With Dependent
Children (AFDC) program requires participating States to consider a
family's "income and resources" in determining whether it is needy,
and prohibits the payment of benefits in any month in which either
income or resources exceed state-prescribed limits. Because income
and resources are separately computed and generally subject to
different state limits, whether and for how long a family that
acquires a sum of money is rendered ineligible for AFDC benefits
may depend on whether the sum is classified as income or as a
resource. Prior to 1981, the Department of Health and Human
Services (HHS) required that States treat any income acquired in a
given month as a resource in following months. However, because of
HHS' concern that recipients that acquired a large amount of income
had an incentive to spend it as quickly as possible in order to
reduce their resources to a level beneath the state limit, Congress
amended the AFDC statute to provide that recipients who receive
income exceeding the State's standard of need are ineligible for
benefits for as many months as that income would last if the
recipients spent an amount equal to the State's standard each
month. In response to this amendment, the Virginia Department of
Social Services (VDSS) revised its AFDC regulations to treat
various lump-sum payments, including personal injury awards, as
income rather than resources, although the regulations continued to
treat property damage awards as resources. Respondents, personal
injury award recipients who were thereby rendered ineligible for
AFDC benefits under Virginia's revised regulations, filed a class
action in Federal District Court against the Secretary of HHS and
petitioner Commissioner of VDSS. The District Court granted summary
judgment to the class, holding that the common meaning of "income"
precluded application of the term to personal injury awards, and
that it was irrational to treat personal injury awards as income
while treating property damage awards as resources. The Court of
Appeals affirmed.
Held: The judgment is reversed.
774 F.2d 1270, reversed.
JUSTICE SCALIA, joined by THE CHIEF JUSTICE, JUSTICE WHITE, and
JUSTICE STEVENS, concluded that respondents have not
demonstrated
Page 481 U. S. 369
that Virginia's policy of treating personal injury awards as
income is inconsistent with the AFDC statute or HHS' regulations.
Pp.
481 U. S.
374-383.
(a) Virginia's revised regulations are consistent with the
meaning of "income" as used in the AFDC statute. Respondents'
premise that the common usage of "income" as involving gain
excludes personal injury awards because of their purely
compensatory nature is false, since such awards often compensate
for the loss of gain in the form of lost wages, and, to that extent
at least, must be considered income. More importantly, the AFDC
statute itself contradicts respondents' contention, as is
demonstrated by
Heckler v. Turner, 470 U.
S. 184, in which it was held that, under a provision not
involved here, the part of an employee's salary that is allocated
to work-related expenses -- clearly not a "gain" in the sense that
respondents use that term -- is properly treated as "income" under
the statute. Pp.
481 U. S.
374-376.
(b) The fact that personal injury awards are expressly excluded
from income under the Internal Revenue Code, the Food Stamp
Program, and the HHS poverty guidelines does not mean that such
awards are automatically excluded from "income" but, in fact,
supports the opposite proposition that they are included when, as
in the AFDC statute, Congress is silent on the subject. Moreover,
no presumption of a common definition of "income" can be inferred
from the fact that the AFDC statute, the Food Stamp Program, and
the HHS poverty guidelines all attempt to define who is needy,
since the explicit differences in the three programs' treatment of
"income" are too great. Pp.
481 U. S.
376-377.
(c) Virginia's treatment of personal injury awards is consistent
with the administrative and legislative history of the AFDC
statute. Contrary to respondents' contention, the evidence
indicates that HHS has for many years interpreted the statute at
least to
permit the inclusion of such awards in "income,"
which interpretation is entitled to deference. Pp.
481 U. S.
377-380.
(d) There is no merit to the contention that personal injury
awards must be treated as resources because healthy bodies are
resources and personal injury awards merely compensate for healthy
bodies. The AFDC statute and regulations count only real and
personal property as "resources." Pp.
481 U. S.
380-381.
(e) Treating property damage awards as resources does not
violate an HHS regulation requiring that eligibility conditions not
result in arbitrary exclusions or inequitable treatment, since
property damage awards can be distinguished from personal injury
awards on the ground that they merely restore resources to previous
levels. Moreover, HHS' conclusion that Virginia's regulations are
consistent with HHS' regulations is entitled to substantial
deference. Pp.
481 U. S.
381-383.
JUSTICE BLACKMUN concluded that the Virginia regulations should
not be upheld on an endorsement of the Virginia interpretation
but,
Page 481 U. S. 370
flatly, on the deference owed the Secretary of HHS in his
interpretation of the complex governing statutes. Pp.
481 U. S.
383-384.
SCALIA, J., announced the judgment of the Court and delivered an
opinion in which REHNQUIST, C.J., and WHITE and STEVENS, JJ.,
joined. BLACKMUN, J., filed an opinion concurring in the judgment,
post, p.
481 U. S. 383.
POWELL, J., filed a dissenting opinion, in which BRENNAN, MARSHALL,
and O'CONNOR, JJ., joined,
post, p.
481 U. S.
384.
Page 481 U. S. 371
JUSTICE SCALIA announced the judgment of the Court and delivered
an opinion, in which THE CHIEF JUSTICE, JUSTICE WHITE, and JUSTICE
STEVENS join.
In this case, the United States Court of Appeals for the Fourth
Circuit held that a state social services agency could not lawfully
treat personal injury awards as income when determining the
eligibility of families seeking Aid to Families with Dependent
Children (AFDC) benefits.
Reed v. Health & Human
Services, 774 F.2d 1270 (1985). The United States Court of
Appeals for the Seventh Circuit has reached the opposite
conclusion.
Watkins v. Blinzinger, 789 F.2d 474 (1986). We
granted certiorari to resolve the conflict. 477 U.S. 903
(1986).
I
Under the AFDC program, participating States that provide
financial assistance to families with needy, dependent children are
partially reimbursed by the Federal Government. 49 Stat. 627, as
amended, 42 U.S.C. §§ 601-615 (1982 ed. and Supp. III). Although
the States are largely free to determine the appropriate standard
of need and the level of assistance, they must administer their
assistance plans in conformity with applicable federal statutes and
with regulations promulgated by the United States Department of
Health and Human Services (HHS). Those statutes require States to
consider a family's "income and resources" when determining whether
or not it is needy, 53 Stat. 1379, as amended, 42 U.S.C. §
602(a)(7)(A) (1982 ed., Supp. III), and prohibit them from
providing AFDC benefits for any month in which either income or
resources exceed state-prescribed limits (subject to a federal
ceiling), 95 Stat. 844, as amended, 42 U.S.C. §§ 602(a)(7)(B),
602(a)(17), 602(a)(18) (1982 ed., Supp. III).
Because income eligibility and resource eligibility are
separately computed (and also because state limits for the two
generally differ), whether and for how long a family that acquires
a sum of money is rendered ineligible for AFDC benefits
Page 481 U. S. 372
may depend on whether the sum is classified as income or as a
resource. Prior to 1981, however, the importance of the
classification was minimized by an HHS requirement that States
treat any income received in a given month as a resource in
following months. Thus, a family that received an amount of income
that exceeded the State's income limit would be automatically
ineligible for one month; whether or not it remained ineligible in
subsequent months would depend on whether the amount of that income
that had not yet been spent, combined with the value of the
family's other resources, exceeded the State's resource limit. The
Secretary of HHS became concerned that AFDC recipients who acquired
a large amount of income had an incentive to spend it as rapidly as
possible, in order to regain eligibility by reducing their
resources to a level beneath the State's resource limit. To solve
this problem, the Secretary proposed and Congress passed an
amendment to the AFDC statute. Under that amendment, AFDC
recipients who receive an amount of income that exceeds the State's
standard of need are rendered ineligible for as many months as that
income would last if the recipients spent an amount equal to the
State's standard of need each month. Section 2304 of the Omnibus
Budget Reconciliation Act of 1981 (OBRA), 95 Stat. 845, as amended,
42 U.S.C. § 602(a)(17) (1982 ed., Supp. III).
Because the OBRA amendment applies by its terms only to income,
the distinction between income and resources took on new
importance. If a given sum of money were treated as a resource, the
family that received the sum would be ineligible only until it
spent enough of the sum to bring its resources down to the State's
resource limit; but if the sum were treated as income, no matter
how much was spent, the family would remain ineligible for the
statutory period. In response to the OBRA amendment, the Virginia
Department of Social Services (the agency responsible for
administering Virginia's AFDC program) revised its regulations
to
Page 481 U. S. 373
treat various lump-sum payments, including personal injury
awards, as income, rather than as resources. Virginia Department of
Social Services, ADC Manual (Va. ADC Manual) § 305.4C (Jan.1983),
App. to Pet. for Cert. 71. [
Footnote 1] It did not, however, alter its policy of
treating the proceeds of the sale or conversion of real or personal
property -- including property damage awards -- as resources. §
303.3, App. 25.
Respondents, who had received personal injury awards and were
disqualified from Virginia's AFDC program for varying periods
pursuant to Virginia's revised regulations, filed a class action
against the Secretary and petitioner Lukhard, the Commissioner of
the Virginia Department of Social Services, in the United States
District Court for the District of Western Virginia. They alleged
that treating personal injury awards as income was inconsistent
with the federal AFDC statute, and they sought monetary,
injunctive, and declaratory relief under Rev.Stat. § 1979, as
amended, 42 U.S.C. § 1983, 5 U.S.C. §§ 701-706, and 28 U.S.C. §§
2201-2202. After certifying a class of those whose AFDC benefits
had been or would be decreased as a result of Virginia's revised
regulations, the District Court granted summary judgment in the
class' favor. It held that the common meaning of the term "income"
precluded application of that term to personal injury awards, and
that it was irrational for Virginia to treat personal injury awards
as income, but at the same time treat awards for property loss
as
Page 481 U. S. 374
resources. The District Court therefore issued an injunction
forbidding Lukhard to apply the revised regulations to recipients
of personal injury awards, ordering him to begin paying AFDC
benefits to the named plaintiffs and other class members who would
presently have been receiving them but for application of the
revised regulations, and requiring him to notify AFDC recipients
who had been deprived of past AFDC benefits as a result of the
revised regulations. The court declined, however, to order Lukhard
to pay retroactive AFDC benefits, and stayed the injunction pending
appeal except insofar as it required Lukhard to begin paying AFDC
benefits to the named plaintiffs. Lukhard and the Secretary
appealed, and the respondents cross-appealed. After the Court of
Appeals for the Fourth Circuit affirmed the judgment in all
respects,
Reed v. Health & Human Services, 774 F.2d
1270 (1985), Lukhard filed this petition. The Secretary did not
file a separate petition but supported Lukhard's petition and
supports Lukhard's position on the merits.
II
Respondents' principal contention is that Virginia's revised
regulations are inconsistent with the meaning of "income" and
"resources" as those terms are used in the AFDC statute. To support
this argument, they first advance the broader proposition that it
does violence to common usage to interpret "income" to include
personal injury awards. This argument begins from the premise that,
since personal injury awards are purely compensatory, they do not
result in any gain to their recipients. And since both general and
legal sources define "income" as involving gain,
see,
e.g., Webster's Third New International Dictionary 1143 (1976)
("a gain or recurrent benefit that is usu. measured in money . .
."); 42 C.J.S., Income, p. 531 (1944) ("In common speech
income' generally is understood as gain or profit . . . "
(footnote omitted)); Eisner v. Macomber, 252 U.
S. 189, 252 U. S.
207
Page 481 U. S. 375
(1920) ("
I
ncome may be defined as the gain derived from capital, from labor,
or from both combined,' provided it be understood to include profit
gained through a sale or conversion of capital assets . . ."
(quoting
Stratton's Independence, Ltd. v. Howbert,
231 U. S. 399,
231 U. S. 415
(1913);
Doyle v. Mitchell Brothers Co., 247 U.
S. 179,
247 U. S. 185
(1918))), respondents conclude that personal injury awards cannot
fairly be characterized as income. But the premise that personal
injury awards cannot involve gain is obviously false, since they
often are intended in significant part to compensate for the loss
of gain,
e.g., lost wages.
See Watkins v.
Blinzinger, 789 F.2d at 476. Since the gain would have been
income, surely at least that part of a personal injury award that
replaces it must also be income. [
Footnote 2] More importantly, however, as Lukhard and the
Secretary point out, general and legal sources also commonly define
"income" to mean "any money that comes in," without regard to any
related expenses incurred and without any requirement that the
transactions producing the money result in a net gain.
See,
e.g., 5 Oxford English Dictionary 162 (1933) ("That which
comes in . . . (considered in reference to its amount, and commonly
expressed in money); . . . receipts . . ."); 42 C.J.S., Income, p.
529 (1944) ("Generally or ordinarily the term means all that comes
in; . . . something which is paid over and delivered to the
recipient; . . . without reference to the outgoing expenditures . .
." (footnotes omitted));
Heckler v. Turner, 470 U.
S. 184 (1985) ("income" under the AFDC statute means
gross income, without reference to expenses reasonably attributable
to its earning).
Heckler is particularly significant,
since there we indicated that the part of an employee's salary that
is allocated to work-related expenses -- clearly not a gain in the
sense that term is used by respondents -- is properly treated as
"income" under the AFDC statute.
Id. at
470 U. S. 202.
Although that conclusion
Page 481 U. S. 376
was based in part on a provision not involved in this case, it
demonstrates that the AFDC statute itself contradicts the theory
that payments that do not constitute gain (as respondents use the
term) to their recipients cannot reasonably be described as
"income." Thus, contrary to respondents' assertion, Virginia's
revised regulations are consistent with a perfectly natural use of
"income."
Respondents also seek to derive support from the fact that
personal injury awards are not treated as income under the Internal
Revenue Code, the Food Stamp program, or the HHS poverty
guidelines.
See 26 U.S.C. § 104(a); 91 Stat. 962, 7 U.S.C.
§ 2014(d)(8); 48 Fed.Reg. 7010, 7011 (1983). But in each of these
instances, there is an
express provision that personal
injury awards are not to be treated as income -- which causes them
not only to fail to support the proposition that the term "income"
automatically excludes personal injury awards, but to support the
opposite proposition that, absent express exclusion, it embraces
them. Moreover, the fact that Congress was silent in the AFDC
statute, but has elsewhere been explicit when it wished to exclude
personal injury awards from income tends to refute, rather than
support, a legislative intent to exclude them from AFDC
computations. [
Footnote 3]
Cf. Russello v. United States, 464 U. S.
16,
464 U. S. 23
Page 481 U. S. 377
(1983). Nor is there any merit to respondents' slightly
different argument that, since the relevant provisions of the Food
Stamp program, the HHS poverty guidelines, and the AFDC statute
have the common goal of defining who is needy, they should be
presumed to have a common definition of "income" -- one that
necessarily excludes personal injury awards. The explicit
differences between the definition of "income" in the Food Stamp
program and the HHS poverty guidelines on the one hand and the AFDC
statute on the other, are simply too great to permit any such
presumption.
Compare 91 Stat. 962, 7 U.S.C. § 2014(d)(8)
(Food Stamp program excludes all nonrecurring lump-sum payments,
including retroactive lump-sum Social Security benefits),
and 48 Fed.Reg. 7010, 7011 (1983) (HHS poverty guidelines
exclude capital gains, gifts, and lump-sum inheritances),
with Brief for Respondents 47 (conceding that retroactive
Social Security benefits and other lump-sum payments that represent
a true gain are income under the AFDC statute).
Respondents' next contention is that Virginia's treatment of
personal injury awards is inconsistent with the administrative and
legislative history of the AFDC statute. They first argue that, for
many years, and at least until 1981, HHS in fact took the position
that personal injury awards were not "income" under the AFDC
statute. But the materials upon which respondents rely do not
support this contention, and indicate, at most, that HHS took no
position on the question.
See HHS Handbook of Public
Assistance Administration, Part IV, S-3120, Supplement for
Administrative Use (Sept. 6, 1957), App. 58 (retroactive Social
Security payments are income, but an award to compensate for the
loss of a hand or foot might not be); HHS Memorandum of June 7,
1973, App. 55-56 (retroactive Social Security payments are income);
Brief for United States as
Amicus Curiae in
Lockhart
v. Harden, No. C74-390A (ND Ga.), App. 61 (HHS regulations
Page 481 U. S. 378
require that retroactive Social Security payments be treated as
income, but do not require that awards for damages be so treated).
In fact, as Lukhard and the Secretary point out, there is evidence
that HHS has for many years interpreted the AFDC statute to at
least
permit States to treat personal injury awards as
income.
See, e.g., 51 Fed.Reg. 9191, 9196 (1986) ("[U]nder
longstanding federal policy . . . . a State agency has had the
option to treat [
e.g., personal injury awards] as
resources instead of as income"); HHS Letter of October 17, 1983,
App. 66 ("Based on longstanding precedent, States have historically
had the option to consider nonrecurring lump-sum payments as either
unearned income or resources. With the implementation of [the OBRA
amendment], States continued to exercise this latitude"); HHS
Memorandum of July 6, 1983, App. 47 (under current HHS policy,
States are free to treat insurance settlements either as income or
as resources; California apparently treats them as income); HHS
Letter of April 8, 1982, App. 62-63 (States are free to treat
damage claim settlements as income or as resources).
See
also Brief for State of Illinois
et al. as
Amici
Curiae 5 (HHS has permitted States to treat personal injury
awards as income under the OBRA amendment). [
Footnote 4] Thus, the Secretary's interpretation
of the AFDC statute -- which is entitled to deference,
see,
e.g., 470 U. S. v.
Natural Resources Defense Council, Inc.,
Page 481 U. S. 379
470 U. S. 116,
470 U. S. 125
(1985) [
Footnote 5] -- actually
undermines, rather than supports, respondents' claim that Virginia
cannot lawfully treat personal injury awards as income.
Respondents also make two arguments based upon the legislative
history of the 1981 OBRA amendment. First, they argue that the
Congress that passed the OBRA amendment must have been aware of
HHS' longstanding position that "income" excluded personal injury
awards, and that its use of "income" in the OBRA amendment
therefore necessarily indicated an intent that the term be
interpreted in that manner. It is of course not true that, whenever
Congress enacts legislation using a word that has a given
administrative interpretation, it means to freeze that
administrative interpretation in place.
See Helvering v.
Wilshire Oil Co., 308 U. S. 90,
308 U. S.
100-101 (1939). But if that were the case here, it would
damage, rather than aid, respondents' cause, since, as we have
seen, HHS' position at the time of the OBRA amendment was that it
was permissible for States to treat personal injury awards as
income.
At oral argument, respondents sought to derive support from a
legislative hearing conducted while the OBRA amendment was under
consideration, in which the Secretary submitted to the House Ways
and Means Committee a document estimating that the amendment would
eliminate 5,000 families from the AFDC rolls each year. Hearings on
Tax Aspects of the President's Economic Program before the House
Committee on Ways and Means, 97th Cong., 1st Sess., pt. 1, pp.
265-266 (1981), App. 75-76. The record suggests
Page 481 U. S. 380
that Virginia has been terminating over 400 families each year
under the revised regulations it promulgated to implement the OBRA
amendment. Since Virginia has only 1.6% of the national AFDC
caseload, respondents argue, it should only be terminating 80
families each year according to the Secretary's estimate. But even
granting the accuracy of respondents' numerical analysis -- which
petitioner and the Secretary have had no opportunity to contest --
and ignoring the dubious authority of an unexplained forecast made
during a committee hearing, the disparity respondents note does not
provide the faintest support for an inference that the Congress
which passed the OBRA amendment understood the AFDC statute to
exclude personal injury awards from income. The record indicates
that only about one-third of the families removed from the rolls in
Virginia were removed as a result of personal injury awards; since
the number of remaining terminations still far exceeds the
Secretary's forecast (about 270 instead of 80), the disparity
certainly is not explicable by Virginia's decision to treat
personal injury awards as income. One is left with the suspicion
that the error was in the Secretary's forecast. Nothing respondents
have identified in the legislative history of the OBRA amendment
supports the conclusion that Virginia's revised regulations are
unlawful.
Respondents' penultimate argument is that logic requires
personal injury awards to be treated as resources, rather than
income. The argument rests upon the following syllogism: (1)
healthy bodies are resources; (2) personal injury awards merely
compensate for damage to healthy bodies; and therefore (3) personal
injury awards necessarily are resources too. We have already noted
that the minor premise of this syllogism is false,
see
supra, at
481 U. S.
375-376. More importantly, however, so is the major
premise. Although there is a sense in which a healthy body can be
said to be a resource, it certainly is not one within the meaning
of the AFDC statute and regulations, which count only real and
personal property (including liquid assets).
See 95 Stat.
844,
Page 481 U. S. 381
as amended, 42 U.S.C. § 602(a)(7)(B) (1982 ed., Supp. III); 45
CFR §§ 233.20(a)(3)(i)(B), (ii)(E) (1986). Since healthy bodies are
worth far more than the statute's $1,000 family resource limit, 42
U.S.C. § 602(a)(7)(B), acceptance of respondents' major premise
would render every family ineligible for AFDC benefits. The fact
that the AFDC statute and its implementing regulations consider
only real and personal property in determining families' resources
permits (if it does not indeed require) the conclusion that
personal injury awards are compensation for diminution of wellbeing
of a kind not covered by the AFDC statute, except to the extent
they compensate for lost wages (to which extent they clearly are
gain,
see supra at
481 U. S. 375)
or for economic expenses caused by the injury (to which extent
Virginia permits them to be in large part offset,
see
n 1,
supra). Thus,
personal injury awards are almost entirely a gain in wellbeing, as
wellbeing is measured under the AFDC statute, and can reasonably be
treated as income even on respondents' definition of the term.
Once this is understood, it is clear that Virginia's policy of
treating personal injury awards as income, but property damages
awards as resources, is also reasonable. The former can be viewed
as increasing their recipients' pecuniary wellbeing, and the latter
as merely restoring resources to previous levels. The existence of
this distinction, coupled with the substantial deference owed to
the Secretary's conclusion that Virginia's revised regulations are
consistent with HHS' regulations,
see, e.g., Lyng v.
Payne, 476 U. S. 926,
476 U. S. 939
(1986), leads us to reject respondents' argument that the
difference in treatment violates HHS' regulation requiring that
"eligibility conditions imposed must not exclude individuals or
groups on an arbitrary or unreasonable basis, and must not result
in inequitable treatment of individuals or groups. . . ."
45 CFR § 233.10(a)(1) (1986). [
Footnote 6]
Page 481 U. S. 382
It is, of course, true that, by considering only real and
personal property as the measure of wellbeing, the AFDC program
evaluates need in a way that does not reflect the fullness of life.
That portion of a personal injury award which constitutes
compensation for loss of earnings will not result in a loss of
eligibility, since it merely replaces future income that would
otherwise have been earned; but the portion attributable to pain
and suffering replaces no other economic income, and will reduce
AFDC payments. It can reasonably be urged that a family with
monthly pain-and-suffering award income, but with a family member
in physical and emotional pain, is not better off than the family
without that additional income, but also without that suffering.
Physical and emotional wellbeing, however, is not what the AFDC
statute is designed to take into account -- as is evident from the
fact that there is no argument for increasing AFDC payments above
the normal income limit where pain and suffering exists
without a tortfeasor who is compensating it. Compensating
for the noneconomic inequities of life is a task
Page 481 U. S. 383
daunting in its complexity, and the AFDC statute is neither
designed nor interpreted unreasonably if it leaves them
untouched.
Finally, we do not agree with the dissent's contention that our
holding "
override[s] the States' traditional power to define
the measure of damages applicable to state-created causes of
action.'" Post at
481 U. S. 389 (quoting Norfolk & Western R. Co.
v. Liepelt, 444 U. S. 490,
444 U. S. 500,
n. 3 (1980) (BLACKMUN, J., dissenting)). That could not possibly be
so, since, in this case, Virginia wants to treat the
proceeds of personal injury awards as income. It is a peculiar
solicitude for States' prerogatives that would prevent Virginia
from striking its own balance between directing limited AFDC funds
to the least wealthy and compensating tort victims. It is true that
the Secretary has now promulgated a regulation requiring States to
treat personal injury awards as income under the AFDC statute.
See n 5,
supra. But since this is not a case in which a State
challenges that regulation, the dissent's objection is simply
irrelevant.
III
Respondents have not demonstrated that Virginia's policy of
treating personal injury awards as income is inconsistent with the
AFDC statute or HHS' regulations. The contrary judgment of the
Court of Appeals is
Reversed.
[
Footnote 1]
The revised regulations also permitted recipients to deduct from
such a payment any directly related expenses that were incurred
prior to or within 30 days after receipt of the payment. Va. ADC
Manual § 305.4C (Jan.1983), App. to Pet. for Cert. 72. During the
pendency of this lawsuit, Congress amended the OBRA amendment to
give States the option of reducing the period of ineligibility
otherwise mandated, so as to take into account various expenditures
related to the lump-sum payment. Section 2632(a) of the Deficit
Reduction Act of 1984, 98 Stat. 1141, 42 U.S.C. § 602(a)(17) (1982
ed., Supp. III). Virginia has since availed itself of this option.
Va. ADC Manual § 305.4C (Oct.1984), App. to Pet. for Cert.
83-86.
[
Footnote 2]
Moreover, as we discuss below,
see infra at
481 U. S.
380-383, other typical components of personal injury
awards, including compensation for pain and suffering, can
reasonably be treated as gain under the AFDC statute.
[
Footnote 3]
The dissent apparently thinks it appropriate to speculate upon
what Congress
would have said if it
had spoken.
Post at
481 U. S. 389
("[I]f Congress had considered the question, it is reasonable to
believe that it would have . . . excluded [personal injury awards]
from income"). As we demonstrate below, it also is reasonable to
believe that Congress would have included personal injury awards in
income. More importantly, however, the legality of Virginia's
policy must be measured against the AFDC statute Congress passed,
not against the hypothetical statute it is most "reasonable to
believe" Congress would have passed had it considered the question
of personal injury awards. For the purpose of determining the
application of an existing agency-interpreted statute to a point on
which "Congress did not actually have an intent,"
Chevron
U.S.A. Inc. v. Natural Resources Defense Council,
Inc., 467 U. S. 837,
467 U. S. 845
(1984), we have held that "a court may not substitute its own
construction . . . for a reasonable interpretation made by the
administrator of an agency."
Id. at
467 U. S. 844.
As we note below,
see infra this page and
481 U. S.
378-379, Virginia's policy is consistent with the
Secretary's interpretation.
[
Footnote 4]
Respondents observe that none of the evidence relied upon by
Lukhard and the Secretary antedates the passage of the OBRA
amendment. Although true, the observation is of dubious
significance. Older documents
demonstrating the existence
of a longstanding interpretation would of course be better evidence
than are recent documents
asserting its existence. But in
the absence of any contrary evidence, the latter form of evidence
is certainly sufficient to support a conclusion that the
interpretation existed. Similarly, although respondents observe
that the record does not reveal whether any States actually availed
themselves of the option allegedly given them prior to passage of
the OBRA amendment, we see no reason to draw any inference at all
from that lacuna.
[
Footnote 5]
After this suit was filed, the Secretary proposed a rule
requiring States to treat all lump-sum payments as income.
49 Fed.Reg. 45558, 45568 (1984). Such a rule has since been
promulgated. 45 CFR § 233.20(a)(3)(ii)(F) (1986). Lukhard and the
Secretary argue that the Secretary's determination that this rule
is consistent with the AFDC statute and the OBRA amendment is
entitled to deference, while respondents argue that the rule was
invalidly promulgated, and is in any event due no deference. Since
we uphold Virginia's practice without reference to the new HHS
regulation, we need not reach these questions.
[
Footnote 6]
As has already been noted, since this suit was filed, Virginia
has altered its treatment of personal injury awards by adopting a
regulation reducing the ineligibility period established by the
OBRA amendment to take into account various expenditures related to
the award and other equitable considerations. Va. ADC Manual §
305.4C (Oct.1984), App. to Pet. for Cert. 83-86. Moreover, the
Secretary contends that a new regulation he has promulgated, 45 CFR
§ 233.20(a)(3)(ii)(F) (1986), requires Virginia to treat property
damages awards as income, thus rendering prospectively moot
respondents' claim that Virginia's disparate treatment violates the
HHS regulation. Respondents claim, however, that the new regulation
is invalid because improperly promulgated, that it does not require
Virginia to alter its treatment of property damages awards, and
that, even if it did, it would not result in equal treatment of
personal injury awards and property damages awards. We need not
consider the consequences of these subsequent developments. The
legality of the original disparity in treatment is still a live
issue, since its resolution will determine whether respondents were
entitled to the AFDC benefits they have received under the
injunction issued by the District Court. And our conclusion that
the original disparity was not unreasonable necessarily implies
that the diminished disparity created by Virginia's subsequently
more lenient treatment of personal injury awards is not
unreasonable.
JUSTICE BLACKMUN, concurring in the judgment.
I join the judgment of the Court, but not the opinion of the
plurality, for I would base my vote to reverse not on an
endorsement of the original Virginia interpretation but, flatly, on
the deference that is due the Secretary of Health and Human
Services in his interpretation of the governing statutes. In a
statutory area as complicated as this one, the administrative
authorities are far more able than this Court to determine
congressional intent in the light of experience in the field. If
the result is unacceptable to Congress, it has
Page 481 U. S. 384
only to clarify the situation with language that unambiguously
specifies its intent.
JUSTICE POWELL, with whom JUSTICE BRENNAN, JUSTICE MARSHALL, and
JUSTICE O'CONNOR join, dissenting.
Today the Court holds that personal injury awards may be treated
as income for the purpose of determining whether a family is
eligible for Aid to Families with Dependent Children (AFDC).
Because such treatment is inconsistent with the compensatory nature
of personal injury awards, and may work a substantial hardship on
needy families that Congress intended to assist through the AFDC
program, I dissent.
I
Congress established the AFDC program, 42 U.S.C. §§ 601-615
(1982 ed. and Supp. III), to assist needy children and those who
care for them.
Shea v. Vialpando, 416 U.
S. 251,
416 U. S. 253
(1974). The AFDC statute provides that a family is eligible for
AFDC benefits if its income and resources are not sufficient to
maintain it at a subsistence level established by the State. The
statute does not define either "income" or "resources." [
Footnote 2/1] Prior to 1981, excess income
received in one month was counted as a resource in succeeding
months. The Secretary of Health and Human Services (HHS) concluded
that needy families receiving lump sums of nonrecurring income
might spend the money as rapidly as possible to reduce their
resources and regain eligibility for AFDC benefits. In 1981,
Congress responded to the Secretary's concern by amending the
statute to provide that a family receiving excess
Page 481 U. S. 385
income in one month is ineligible for AFDC benefits for the
number of months that the excess income would support the family at
a subsistence level. Omnibus Budget Reconciliation Act of 1981, 95
Stat. 845, 42 U.S.C. § 602(a)(17) (1982 ed., Supp. III). Although
the 1981 amendments changed the treatment of excess income,
"neither the language of [the amendment] nor its legislative
history indicates that Congress intended to change the meaning of
'income' in 1981."
Brief for Secretary of HHS 15. Accordingly, the Secretary
advised the States to adhere to their existing definitions of
income. 47 Fed.Reg. 5648, 5656 (1982).
Virginia responded to the 1981 amendments by promulgating a rule
that payments for personal injuries must be counted as income in
determining eligibility for AFDC benefits. Virginia Department of
Social Services, ADC Manual (Va. ADC Manual) § 305.4C (Jan.1983),
App. to Pet. for Cert. 71. Under the Virginia regulation at issue
in this case, medical and legal expenses incurred prior to or
within 30 days after the receipt of the award were not counted in
income. The remainder of the personal injury award, "representing
pain and suffering, loss of earning capacity, future medical
expenses, and punitive damages," was included in income. Brief for
Petitioner 5, n. 5. [
Footnote 2/2]
The named respondents,
Page 481 U. S. 386
who had been entitled to AFDC benefits ranging from $181 to $255
per month, received personal injury or worker's compensation awards
of between $700 and about $10,250. App. 13-19; Brief for
Respondents 3-5. As a result, the Virginia Department of Social
Services ruled them ineligible for AFDC benefits for periods of
from 2 months to 27 months. The respondents spent the awards
primarily on basic living expenses, repayment of debts, and items
such as used automobiles and appliances. App. 13-19. In each case,
the families exhausted the modest awards long before they regained
eligibility for AFDC benefits.
II
The AFDC statute, as noted above, does not define "income."
"A fundamental canon of statutory construction is that, unless
otherwise defined, words will be interpreted as taking their
ordinary, contemporary, common meaning."
Perrin v. United States, 444 U. S.
37,
444 U. S. 42
(1979). The plurality recognizes that income commonly is defined
as
""
the gain derived from capital, from labor, or from both
combined,' provided it be understood to include profit gained
through a
Page 481 U. S.
387
sale or conversion of capital assets. . . .""
Ante at
481 U. S. 375
(quoting
Eisner v. Macomber, 252 U.
S. 189,
252 U. S. 207
(1920) (quoting
Stratton's Independence, Ltd. v. Howbert,
231 U. S. 399,
231 U. S. 415
(1913);
Doyle v. Mitchell Brothers Co., 247 U.
S. 179,
247 U. S. 185
(1918))). In light of
Macomber, which held that stock
dividends are not taxable income, the Solicitor of Internal Revenue
concluded:
"If an individual is possessed of a personal right that is not
assignable and not susceptible of any appraisal in relation to
market values, and thereafter receives either damages or payment in
compromise for an invasion of that right, it can not be held that
he thereby derives any gain or profit. It is clear, therefore, that
the Government can not tax him on any portion of the sum
received."
I-1 Cum.Bull. 93 (1922).
In a later tax case, the Court defined income as "accessions to
wealth, clearly realized, and over which the taxpayers have
complete dominion."
Commissioner v. Glenshaw Glass Co.,
348 U. S. 426,
348 U. S. 431
(1955). In
Glenshaw Glass, the Court observed that
"[d]amages for personal injury are, by definition, compensatory
only,"
id. at
348 U. S. 432,
n. 8, and cited
"[t]he long history of departmental rulings holding personal
injury recoveries nontaxable on the theory that they roughly
correspond to a return of capital . . . "
ibid. (citing 2 Cum.Bull. 71 (1920); I-1 Cum.Bull. 92,
93 (1922); VII-2 Cum.Bull. 123 (1928); 1954-1 Cum.Bull. 179,
180).
Congress continues to exclude personal injury awards from income
under the Internal Revenue Code. 26 U.S.C. § 104(a). Congress also
excludes personal injury awards from income for the purpose of
determining eligibility for food stamps, 7 U.S.C. § 2014(d)(8), and
under the HHS poverty guidelines, 48 Fed.Reg. 7010, 7010-7011
(1983). [
Footnote 2/3] Indeed,
Page 481 U. S. 388
the plurality does not cite a single statute in which Congress
has defined income to include personal injury awards, and I am
aware of none.
The plurality nevertheless concludes that Virginia reasonably
interpreted the AFDC statute to include personal injury awards in
income, even if such awards do not result in any gain to the
recipient.
Ante at
481 U. S.
375-376. The plurality observes that the Internal
Revenue Code, the Food Stamp statute, and the HHS poverty
guidelines
expressly exclude personal injury awards from
income. In the plurality's view,
"the fact that Congress was silent in the AFDC statute, but has
elsewhere been explicit when it wished to exclude personal injury
awards from income, tends to refute, rather than support, a
legislative intent to exclude them from AFDC computations."
Ante at
481 U. S. 376
(citation omitted; footnote omitted). This inference from
congressional silence is unwarranted. Congress made a considered
decision to exclude personal injury awards from income for purposes
of the Internal Revenue Code and the Food Stamp statute. In
contrast, as the Court of Appeals for the Seventh Circuit
observed,
"The inescapable fact is that Congress wanted to compel
recipients of AFDC to budget lump-sum receipts of 'income,' but did
not consider what 'income' might be."
Watkins v. Blinzinger, 789 F.2d 474, 480 (1986).
Page 481 U. S. 389
The fact that Congress did not define income for purposes of the
AFDC statute hardly justifies an assumption that it considered the
narrower question whether personal injury awards should be included
in income. On the contrary, if Congress had considered the
question, it is reasonable to believe that it would have treated
personal injury awards as it has in a variety of other
circumstances, and excluded them from income. Finally, as discussed
below, the effect of including personal injury awards in income is
to deprive AFDC families of the benefits of tort and worker's
compensation remedies, most of which are provided by state law. I
would not infer from the silence of Congress a "purpose to override
the States' traditional power to define the measure of damages
applicable to state-created causes of action."
Norfolk &
Western R. Co. v. Liepelt, 444 U. S. 490,
444 U. S. 500,
n. 3 (1980) (BLACKMUN, J., dissenting). [
Footnote 2/4]
The plurality also concludes that personal injury awards "can
reasonably be treated as gain."
Ante at
481 U. S.
374-375, and n. 2. To be sure, some components of
personal injury awards do result in gain to the plaintiff. Punitive
damages, in the exceptional case in which they are awarded, are a
windfall to the plaintiff, rather than compensation.
See
Commissioner v. Glenshaw Glass Co., supra (punitive damages
are taxable income). As a practical matter, an impoverished family
is unlikely to receive a large award for lost income. If it does,
however, it is reasonable to treat such an award as income.
See
ante at
481 U. S. 375.
I cannot agree, however, that it is reasonable to treat the entire
personal injury award as income. Damages for pain and suffering,
physical injury, disfigurement,
Page 481 U. S. 390
loss of consortium, and the like are intended to compensate the
recipient for nonpecuniary losses. In other contexts, Congress
excludes the full amount of personal injury awards from income, to
avoid the necessity for "a complex and administratively burdensome
system" or to "confer a humanitarian benefit on the victim or
victims of the tort."
Norfolk & Western R. Co. v. Liepelt,
supra, at
444 U. S. 501
(BLACKMUN, J., dissenting).
The plurality recognizes the elementary fact that
"a family with monthly pain-and-suffering-award income, but with
a family member in physical and emotional pain, is
not
better off than the family without that additional income, but also
without that suffering."
Ante at
481 U. S. 382
(emphasis in original). The plurality nevertheless concludes that
the AFDC program is not designed to take into account physical and
emotional wellbeing. But tort law and workers' compensation
statutes are designed to take these into account. The AFDC statute
surely is not designed to deprive impoverished families of remedies
for personal injury, most of which are provided by state law. To be
sure,
"there is no argument for increasing AFDC payments above the
normal limit where pain and suffering exists
without a
tortfeasor who is compensating it."
Ibid. (emphasis in original). By the same token, there
is no argument for
decreasing AFDC payments for families
who are free of pain and suffering. [
Footnote 2/5]
Page 481 U. S. 391
During the period at issue in this case, the Virginia Department
of Social Services also included in income moneys intended for
continuing medical and rehabilitative expenses.
See Brief
for Petitioner 5, n. 5. [
Footnote
2/6] Thus, the Virginia regulation put impoverished families to
a hard choice between obtaining medical care and providing for the
basic needs of their children. One of the named respondents, Ona
Mae Reed, actually faced this choice: she could not afford to see a
physician while her family was ineligible for AFDC benefits. App.
15. I cannot accept the Court's conclusion that Congress intended
to permit such a harsh result.
III
It is beyond dispute that "[c]ompensating for the noneconomic
inequities of life is a task daunting in its complexity. . . ."
Ante at
481 U. S.
382-383. As I view this case, however, the issue
presented is relatively straightforward. Our legal system
compensates individuals for personal injuries by awarding damages
in tort actions and workers' compensation proceedings. In a variety
of circumstances, Congress has
Page 481 U. S. 392
recognized that injured persons and their families should be
permitted to retain the full amount of these awards, awards that,
for the most part, are compensatory in nature. It is unjust, and
inconsistent with the basic purposes of the AFDC statute, to deny
needy families the compensation our legal system affords to the
rest of society. Accordingly, I dissent.
[
Footnote 2/1]
The AFDC statute provides that the States must exclude from
resources the family home and one automobile worth up to $1,500. 42
U.S.C. § 602(a)(7)(B); 45 CFR § 233.20(a)(3)(i) (1986). The States
also are required to disregard certain earnings of family members
and relatives in determining income. 42 U.S.C. §§ 602(a)(8)(A),
602(a)(31). Congress provided no further guidance to the Secretary
and the States in defining "income" and "resources."
[
Footnote 2/2]
Virginia subsequently modified its rule in response to a
congressional amendment giving States the option of reducing the
period of ineligibility to account for expenditures related to a
lump-sum payment. Section 2632 of the Deficit Reduction Act of
1984, 98 Stat. 1141, 42 U.S.C. § 602(a)(17) (1982 ed., Supp. III).
The State now provides that the period of ineligibility must be
reduced to reflect future medical expenses. Va. ADC Manual § 305.4C
(Oct.1984), App. to Pet. for Cert. 84.
In addition, the Secretary recently promulgated a rule requiring
the States to treat personal injury awards as income. 45 CFR §
233.20 (a)(3)(ii)(F) (1986). The plurality declines to consider the
Secretary's new rule.
Ante at
481 U.S. 379, n. 5. It nevertheless
concludes that Virginia's decision to treat personal injury awards
as income during the period at issue in this case was in accord
with the Secretary's prior interpretation of the AFDC statute, and
so is entitled to deference.
Ante at
481 U. S.
378-379.
See Chevron U.S.A. Inc. v.
Natural Resources Defense Council, Inc.,
467 U. S. 837,
467 U. S.
842-845 (1984). Prior to the passage of the 1981
amendments, however, the Secretary's only comment on this subject
was that "a settlement of industrial compensation as the result of
loss of hand or foot
might represent a
lump sum'
payment." HHS Handbook of Public Assistance Administration, Part
IV, S-3120, Supplement for Administrative Use (Sept. 6, 1957), App.
58 (emphasis added). Moreover, as the plurality concedes, there is
no evidence in the record that any State included personal injury
awards in income prior to the 1981 amendments. Ante at
481 U. S. 378,
n. 4. Based on this record, I conclude that the Secretary took no
position on the treatment of personal injury awards prior to
1981.
JUSTICE BLACKMUN would defer to the Secretary's interpretation
of the statute. Because I conclude that the Secretary's
interpretation is inconsistent with the statute, I do not think it
is entitled to the customary deference.
[
Footnote 2/3]
The plurality concludes that
"[t]he explicit differences between the definition of 'income'
in the Food Stamp program and the HHS poverty guidelines on the one
hand, and the AFDC statute on the other, are simply too great"
to allow a presumption that they share a common definition of
income.
Ante at
481 U. S. 377.
It is true that "income" is defined to exclude all nonrecurring
lump-sum payments for purposes of the Food Stamp program, 7 U.S.C.
§ 2014(d)(8), and that the HHS poverty guidelines exclude capital
gains, gifts, and lump-sum inheritances, 48 Fed.Reg. 7010, 7011
(1983). It also is undisputed that lump-sum payments representing a
gain to the family, such as retroactive Social Security payments,
must be included in income under the AFDC program. But the decision
to include some lump-sum gains under the AFDC program that are
excluded under other poverty programs does not indicate that
Congress also intended to include payments that do
not
represent a gain, and that Congress has not included in income
under
any program.
[
Footnote 2/4]
The plurality asserts that this objection is "simply
irrelevant,"
ante at
481 U. S. 383,
because Virginia officials chose to treat personal injury awards as
income. But Congress could not know in advance whether the
treatment of personal injury awards would be left to the States.
Indeed, as noted above, the Secretary now
requires the
States to include personal injury awards in income.
See
481
U.S. 368fn2/2|>n. 2,
supra. In my view, the
possibility that AFDC families would be deprived of state tort
remedies is sufficient to preclude inclusion of personal injury
awards in income.
[
Footnote 2/5]
In my view, Virginia's treatment of personal injury awards was
inconsistent with the Secretary's "equitable treatment regulation,"
which states that
"the eligibility conditions imposed must not exclude individuals
or groups on an arbitrary or unreasonable basis, and must not
result in inequitable treatment."
45 CFR § 233.10(a)(1) (1986). During the period at issue in this
case, Virginia treated money received as a result of a property
loss as a resource, rather than income. Va.ADC Manual § 303.3
(Jan.1983), App. 25. Thus, if an AFDC family received compensation
for a damaged automobile it could spend the money as it wished, but
if it received compensation for an injury to a family member, it
was obliged to use the money to meet basic needs. The plurality
concludes that casualty awards do not increase their recipients'
wellbeing, since they "merely restor[e] resources to previous
levels."
Ante at
481 U. S. 381.
Because personal injury awards are designed to compensate
individuals, rather than to increase their level of wellbeing, I
conclude that it is unreasonable to treat personal injuries less
favorably than property losses. Virginia's treatment of awards for
property losses also demonstrates that it failed to adhere
consistently to a definition of income as "any money that comes
in."
See ante at
481 U. S.
375.
[
Footnote 2/6]
During this period, Virginia excluded from income only those
amounts of the award used for medical care, rehabilitation, and
legal services incurred prior to or within 30 days after the
receipt of the award.
See supra at
481 U. S. 385;
Va.ADC Manual § 305.4C (Jan.1983), App. to Pet. for Cert. 72.
Petitioner concedes that
"the amount of a lump sum personal injury award subject to the
rule is that portion representing pain and suffering, loss of
earning capacity,
future medical expenses, and punitive
damages."
Brief for Petitioner 5, n. 5 (emphasis added). As noted above,
481
U.S. 368fn2/2|>n. 2,
supra, Virginia has amended
its rules to provide that the period of ineligibility must be
reduced to reflect medical expenses incurred subsequent to receipt
of the lump sum. Va.ADC Manual § 305.4C (Oct.1984), App. to Pet.
for Cert. 84.