The opinion of the court was delivered by: Moran, District Judge.
This action concerns the Illinois Department of Public Aid's
(IDPA) administration of the Aid to Families with Dependent
Children Program (AFDC). In question is IDPA's policy for
determining eligibility for an earned income tax credit.
AFDC, Title IV-A of the Social Security Act, 42 U.S.C.A. §§
601-615 (West Supp. 1982), is designed to enable dependent
children and their families to "survive the hardships of
poverty." Simpson v. Miller, 535 F. Supp. 1041, 1042 (N.D.Ill.
1982). See 42 U.S.C.A. § 601; Shea v. Vialpando, 416 U.S. 251,
253, 94 S.Ct. 1746, 1750, 40 L.Ed.2d 120 (1974). While funded
with matching funds by the federal government, the programs are
administered by the states. Participation by a state is
voluntary, but once a state agrees to participate its
administration of the program must conform to the provisions of
the Social Security Act and the rules and regulations promulgated
thereunder by the Department of Health and Human Services (DHHS).
See King v. Smith, 392 U.S. 309, 316-17, 88 S.Ct. 2128, 2132-33,
20 L.Ed.2d 1118 (1968); Simpson v. Miller, 535 F. Supp. at 1044;
Cannon v. Illinois Department of Public Aid, 76 Ill. App.3d 910,
912, 32 Ill.Dec. 502, 504, 395 N.E.2d 732, 734 (3d Dist. 1979).
The amount of aid given to needy families is determined by the
states. A participating state calculates a standard of basic
needs for its citizens. A family's income and resources, as
defined by the regulations, see 45 C.F.R. § 233.20(a)(6)(iii-ix),
are compared to the calculated standard. If a family's income and
resources are below that standard the family is eligible for AFDC
benefits and the amount it receives is dependent upon the
difference. See 45 C.F.R. § 230.20(a)(2)-(3) (1982); Shea v.
Vialpano, 416 U.S. at 253-54, 94 S.Ct. at 1750; Simpson v.
Miller, 535 F. Supp. at 1042-43. Obviously, the higher the
family's income, as calculated by the state, the less AFDC
assistance the family will receive.
Under section 43 of the Internal Revenue Code, 26 U.S.C.A. §
43, an earned income credit (EIC) is granted for eligible
low-income workers to supplement their income. To be eligible for
an EIC the wage-earner must support a child who, for tax
purposes, is considered a dependent of the recipient or the
wage-earner must be unmarried and provide over half the support
of the household. See I.R.C. §§ 2(a), 2(b) and 43(c). Dependency
for tax purposes requires the individual claiming the dependent
to supply the child with over half of the child's support. See
I.R.C. § 152(a). For purposes of determining whether the
wage-earner provides half of the child's support or half the
support of the household, AFDC and certain other welfare payments
count as support provided by the state and not by the wage
earner. See 47 Fed.Reg. 5660 (1982). Thus, a wage-earner is only
eligible for an EIC if AFDC and certain other transfer payments
received are less than the wage-earner's income.
The Internal Revenue Code allows wage-earners eligible for an
EIC to receive advance payment of the credit with their periodic
wage payments if they apply for such with their employer. See
I.R.C. § 3507. A wage-earner's EIC, whether paid in a lump sum at
the end of the year or in the form of advance payments, is
considered income for the purposes of determining eligibility
for, and the amount of assistance receivable from, a state's AFDC
program. See 42 U.S.C.A. § 602(d)(1). Under the regulations
states are required to determine whether the AFDC recipient is
eligible for an EIC and, if so, credit the recipient's monthly
income with the amount of EIC advance payments that could be
received if the individual applied for such. See
45 C.F.R. § 233.20(a)(6)(ix). This amount should be credited only if the
state "reasonably expects that the individual will be eligible to
receive the earned income credit for the current taxable year."
45 C.F.R. § 233.20(a)(6)(ix)(B)(1). The state is required to make
the determination based upon the requirements specified in the
Internal Revenue Code and the corresponding regulations which
establish eligibility criteria for receipt of the EIC and its
advance payments. Id.
Illinois participates in the AFDC program. The policy of the
IDPA in determining eligibility of recipients for an EIC is set
out in Regulation PO-615.4(g) of the state's AFDC manual.
Regulation PO-615.4(g) states: "If the client is potentially
eligible for the EIC payment, budget it as earned income even if
the client does not receive the payment." See also Illinois AFDC
Manual, PO-510.1(f). The IDPA credits wage-earners for receipt of
the EIC without a determination of whether or not the wage-earner
supplies over half the support of the wage-earner's child and is
therefore eligible for the EIC. The state claims "[i]t is
reasonable to expect that a working individual provides over
one-half of his or her child's support."*fn1
Plaintiffs brought suit in this court on behalf of themselves
and all persons similarly situated against Jeffrey Miller,
Director of the IDPA, and the IDPA itself. Plaintiffs are
claiming IDPA policies concerning the crediting of EIC payments
violate applicable federal regulations, applicable Illinois
statutes, and the due process and equal protection clauses of the
Fourteenth Amendment to the United States Constitution.
Plaintiffs asked for declaratory and injunctive relief. The
parameters of plaintiffs' class are not disputed by the parties.
This court's jurisdiction rests on 28 U.S.C. § 1331. The court
exercises pendent jurisdiction over the state claims. See United
Mineworkers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218
Before the court is plaintiffs' motion for preliminary
Standards for Determination
In granting or denying a request for a preliminary injunction
this court must examine four factors: (1) whether the plaintiff
will have an adequate remedy at law or will be irreparably harmed
if the injunction does not issue; (2) whether the plaintiff has
at least a reasonable likelihood of success on the merits; (3)
whether the threatened injury to the plaintiff outweighs the
threatened harm the injunction may inflict on the defendant; and
(4) whether the granting of a preliminary injunction will
disserve the public interest. Martin v. Helstad, 699 F.2d 387,
389 (7th Cir. 1983); Atari Inc. v. North American Philips
Consumer Electronics Corp., 672 F.2d 607, 613 (7th Cir. 1982),
cert. denied, 459 U.S. 880, 103 S.Ct. 176, 74 L.Ed.2d 145 (1982).
None of these factors is decisive and a court's decision must be
based on a totality of the factors. Reinder Brothers, Inc. v.
Rain Bird Eastern Sales Corp., 627 F.2d 44, 49 (7th Cir. 1980).
Plaintiffs carry the burden of persuasion as to all the
prerequisites to the granting of a preliminary injunction.
Ciechon v. City of Chicago, 634 F.2d 1055, 1057 (7th Cir. 1980).
Irreparable Injury and Absence of an Adequate Remedy at Law.
Plaintiffs claim the class is being irreparably harmed by the
IDPA's reduction in AFDC benefits. They claim the reduction in
benefits deprive the class members of essential food, shelter and
medical assistance. In addition, they claim the Eleventh
Amendment bars the court from awarding back benefits. See Edelman
v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974).
The defendant, on the other hand, argues that the IDPA has a
system for reimbursement of underpayments that will remedy any
shortfalls in AFDC payments. ...