472 P.3d 472
Cal.2020Background
- Kerrie Reilly lives with a developmentally disabled adult daughter (K.R.) and since 1998 received a Section 8 tenant-based voucher; she is paid by California’s IHSS program to provide in‑home care for K.R.
- Reilly entered a repayment agreement with Marin Housing Authority (MHA) over prior misstatements and missed payments; MHA terminated her voucher after missed installments and included IHSS payments when calculating annual income.
- Reilly sought judicial review arguing IHSS payments to a family provider are excluded from “annual income” under 24 C.F.R. § 5.609(c)(16); lower courts sustained MHA’s position.
- IHSS is a state program (partly federally funded) to avoid institutionalization by authorizing/compensating in‑home services; states may pay family members as providers.
- HUD regulation § 5.609(c)(16) excludes from annual income “amounts paid by a State agency to a family with a member who has a developmental disability…to offset the cost of services and equipment needed to keep [that member] at home.”
- The California Supreme Court (majority) reversed the Court of Appeal, holding IHSS payments to a parent provider are excluded from annual income; Chief Justice Cantil‑Sakauye dissented on statutory reading and policy grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether IHSS payments to a parent provider are excluded from “annual income” under 24 C.F.R. § 5.609(c)(16) | Reilly: IHSS payments are "amounts paid by a State agency…to offset the cost" of keeping a developmentally disabled family member at home and thus are excluded, regardless of whether paid to a family member or third‑party | MHA: The exclusion applies only where the family actually incurs monetary costs (e.g., hires a third party); parent compensation is income that substitutes for wages | Court: IHSS parent payments are excluded under § 5.609(c)(16); the terms “offset” and “cost” permit a broad reading and HUD’s rulemaking intent supports exclusion |
| Meaning of “offset the cost” / “cost” in the exclusion | Reilly: “Cost” includes nonmonetary expenditures and family uses of funds to support care; offset need not mean reimbursement of out‑of‑pocket expenses only | MHA: “Offset” implies counterbalancing a monetary expense the family itself incurs; payments to a parent do not offset a family’s costs | Court: “Offset” and “cost” read broadly (includes expenditure of time/labor and costs avoided by state institutionalization); exclusion not limited to direct monetary reimbursement |
| Role of HUD rulemaking and agency deference | Reilly: HUD’s contemporaneous rulemaking explains the exclusion’s purpose—encourage families to avoid institutionalization—and supports excluding family‑provider payments | MHA (and HUD as amicus): HUD interprets the rule as excluding reimbursements, not parent wages; deference not decisive | Court: HUD’s rulemaking and purpose support the broader reading; Auer/Skidmore/Mead deference analysis considered but majority rests on plain/regulatory language and intent |
| Policy/fiscal parity and program impact | Reilly: Excluding IHSS prevents forcing families to choose between housing and in‑home care; furthers federal/state goals to avoid institutionalization | MHA: Broad exclusion creates inequities, treats similar families differently, and will shift scarce Section 8 funds to IHSS recipients | Court: Acknowledges policy concerns but holds interpretation should follow regulation and rulemaking intent; dissent emphasizes fiscal and equity harms |
Key Cases Cited
- Nozzi v. Housing Authority of City of Los Angeles, 806 F.3d 1178 (9th Cir. 2015) (overview of Section 8 subsidy calculation)
- Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (1994) (agency intent at time of rule promulgation informs interpretation)
- Auer v. Robbins, 519 U.S. 452 (1997) (deference to reasonable agency interpretations of their own regulations)
- Kisor v. Wilkie, 139 S. Ct. 2400 (2019) (limits/conditions on Auer deference)
- United States v. Mead Corp., 533 U.S. 218 (2001) (measure of deference varies with circumstances)
- Commissioner v. Schleier, 515 U.S. 323 (1995) (rule that exceptions/exclusions should be construed narrowly)
- Ali v. Director of Human Services, 938 N.W.2d 835 (Minn. 2020) (construed § 5.609(c)(16) narrowly to exclude only reimbursements)
- Basden v. Wagner, 181 Cal.App.4th 929 (2010) (discussion of IHSS design and family providers)
- Briggs v. Eden Council for Hope & Opportunity, 19 Cal.4th 1106 (1999) (different words imply different meanings in statutory/regulatory context)
- Hodel v. Virginia Surface Mining & Reclam. Assn., 452 U.S. 264 (1981) (cooperative federalism principles)