This class action involves the right of indigent non-parent caretaker relatives in the State of Texas to receive public aid benefits under the state-administered, but federally assisted, program of Aid to Families with Dependent Children (AFDC). Mrs. Lopez is a caretaker relative who would be entitled to AFDC benefits except for the fact that §§ 34111 and 34542 of the Financial Services Handbook of the Texas State Department of Public Welfare deny aid to caretakers of needy dependent children if the caretakers are married and are living with their spouses. Mrs. Lopez complains that §§ 3411 and 3454 3 are inconsistent with § 406 of the Social Security Act, 42 U.S.C.A. § 606,4 *692and are therefore violative of the Supremacy Clause of the Constitution; alternatively, she alleges that' the challenged regulations violate the Equal Protection Clause of the Fourteenth Amendment. On a motion to dismiss for a failure to state a claim, the district court held as a matter of law that a State, with its broad discretion in defining need, has the power to determine unilaterally that all married caretaker relatives who live with their spouses are not needy and are therefore not entitled to receive AFDC assistance. We reverse.

Prior to January 1971, Mrs. Lopez and her husband were residing in San Benito, Texas, with their son, Eleno, and their daughter, Carmen, together with their second daughter, Margarita, and her three minor children. Having been abandoned by the children’s father, Margarita’s family was receiving a monthly AFDC payment of $119. This amount was computed by first analyzing Margarita’s total family needs according to certain minimum standards of need which the Texas State Department of Public Welfare had determined represent the cost of basic requisites essential for health and decency — in this instance $159.5 This figure included the needs of Margarita, the caretaker relative, as well as the needs of the three dependent children, since Margarita was needy and did not live with her spouse. As a means of limiting Texas’ welfare expenditures, the State applies a percentage factor of 75% to the family’s total needs to arrive at their recognizable needs. ' Non-exempt family income, which here was zero, is then deducted from this figure to determine the amount of the family’s AFDC grant.6

The other members of the Lopez family (the two grandparents, Eleno, and Carmen) were not receiving AFDC assistance. They were supported by Mr. Lopez’s weekly salary of approximately $35, out of which he paid for the person*693al needs of himself, Mrs. Lopez, Eleno, and Carmen, as well as for their pro rata share of the rent and utilities. Although Mr. Lopez’s salary was not sufficient to cover the minimum recognizable needs of his family ($152 v. $154), the members of the Lopez family were not eligible under § 406 of the Social Security Act for an AFDC grant because both parents were present in the home. See note 4 supra.

On November 29, 1970, Margarita died, leaving her three minor children in the care of their grandparents. On January 1, 1971, the AFDC grant was reduced from $119 to $56 because of the death of the caretaker relative.7 Thereafter, Mrs. Lopez requested that she be substituted on the grant for her deceased daughter as the caretaker relative of the children. Mrs. Lopez did not request that either her husband or her two children be made part of the grant, as she conceded that there was no basis for their eligibility. Although Mrs. Lopez was needy and was within the category of relatives eligible to be a caretaker, her request was denied pursuant to §§ 3411 and 3454 of the Texas Financial Services Handbook because she was living with her spouse and because she was neither incapacitated nor a recipient of another category of public assistance.

In November 1971, after the Appeals Hearing Officer of the Texas State Department of Public Welfare had sustained the denial of her request, Mrs. Lopez filed this suit, challenging the validity of the regulations. The district court dismissed her complaint in January 1972. Believing that the regulations in question “are directly related to the state’s determination of need,” the district court concluded that “§§ 3411 and 3454 . . . are reasonable, [and] do not contravene the provisions of the Social Security Act. . . . ” We disagree. The plain language, legislative history, and purposes of the Act make clear that so long as one is needy and qualifies as a caretaker relative within the meaning of § 406, 42 U.S.C.A. § 606, no further restriction on eligibility for assistance is permissible.

. [3] Although a State, in the interest of preserving the fiscal integrity of its welfare program by economically allocating limited resources, has the “undisputed power to set the level of benefits,” 8 the Supreme Court in Townsend v. Swank, 1971, 404 U.S. 282, 291, 92 S.Ct. 502, 508, 30 L.Ed.2d 448, held that “AFDC resources may not be protected by the device of adopting eligibility requirements restricting the class . made eligible by federal standards. . . . ” Thus, while_ a State may establish criteria for measuring need (e. g., Texas’ budgetary standards) and may limit its welfare expenditures by setting the level of benefits (e. g., Texas’ percentage factor at 75%), the class of persons eligible for assistance must be determined by reference to federal standards. See Jefferson v. Hackney, 1972, 406 U.S. 535, 92 S.Ct. 1724, 32 L.Ed.2d 285.

The challenged regulations are precisely the type of blanket exclusion from eligibility condemned by Townsend. Section 406(b)(1) defines “aid to families with dependent children” as payments to meet the needs of both the dependent children and the caretaker relative with whom the children reside. Nowhere does the statute indicate that the *694caretaker must be a single individual in order for his or her needs to be included in calculating the amount of the AFDC grant. For a family to be eligible for AFDC assistance, the needy children, in addition to living with certain specified relatives, must have been “deprived of parental support or care by reason of the death, continued absence from the home, or physical or mental incapacity of a parent.” 42 U.S.C.A. § 606(a) (emphasis supplied). It is the absence of a parent which is critical to AFDC eligibility, not the absence of a relative or the spouse of a relative. In fact, in defining a “dependent child” as one who resides with “one or more” of the specified relatives, § 406(a) explicitly recognizes that a child might be living with a married relative. Similai'ly, § 406(c) defines a “relative with whom any de- • pendent child is living” as “one of the relatives specified in subsection (a) of this section and with whom such child is living . . . in a place of residence maintained by such individual (himself or together with any one or more of the other relatives so specified) as his (or their) own home.” 42 U.S.C.A. § 606(c) (emphasis supplied). Thus, although money payments are generally available only to meet the needs of one of the relatives with whom the child is living, 42 U.S.C.A. § 606(b)(1), the presence of other relatives in the home, including the spouse of the caretaker relative, was clearly foreseen. Indeed, the Act not only contemplates the presence of the caretaker’s spouse, but specifies that in certain situations the spouse is also to receive aid, 42 U.S.C.A. § 606(b)(1). This particularization is- cogent evidence that Congress did not authorize the States to limit eligibility to unmarried caretakers. Cf. Townsend v. Swank, supra, 404 U.S. at 287, 92 S.Ct. 502. If the spouse of a caretaker, as well as the caretaker, is in some situations eligible to receive aid, certainly the mere presence of the spouse cannot disqualify the caretaker for assistance.

In sum, we conclude that §§ 3411 and 3454 of the Texas Financial Services Handbook are clearly in conflict with 42 U.S.C.A. § 606 and must, therefore, give way to the federal standards for AFDC eligibility. Because we find the regulations to be inconsistent with the Social Security Act, resolution of Mrs. Lopez’s Equal Protection claim is unnecessary.

The judgment of the district court is reversed and the cause is remanded for further proceedings consistent with this opinion.

Reversed and l’emanded.