Here is the County and State ‘Cash Cookie’ that we’ve been waiting to hear about. This is the part you want to pay close attention to…

Since the early days of the child support program, states have received federal incentive payments — but not unitl Congress overhauled the incentive system in 1998 were states held to specific performance standards. Until this overhaul, states were permitted to spend the incentive payments in any way they chose, and were not required to re-invest their incentive payments in the child support program (for example, some states returned the incentive payments to their state treasury). However, states that chose to spend their incentive payments on reimbursable child support activities were permitted to draw down federal matching funds.

The performance-based system enacted by Congressin 1998 includes both incentives and penalties. It is now a “carrots and sticks” approach to funding. States are measured on five performance measures. Failure to meet minimum standards will trigger a penalty against states ‘TANF’ block grant funds of 1 to 2 percent in the first year and up to 5 percent for multiple-year failures. States also are subject to penalties if they fail to maintain accurate child support data. If states perform adequately, they will receive neither a penalty nor an incentive payment. Improved performance can earn states a partial incentive payment. The better a state performs, the higher the incentive payment, up to a capped amount set by statute.

As a part of the redesigned performance incentive system, states are required to spend their incentive payments on reimbursable child support activites, unless the receive permission from the U.S. Department of Health and Human Service (HHS) to spend the money on closely related but non-reimbursable activites — fatherhood programs, for example. Congress intended that when states spend their incentive payments on reimbursable child support activities required under the state plan, they would receive federal reimbursement at the standard matching rate. The intent was to create an adequate pool of funds available to states, especially poorer and smaller states, to improve their child support performance. This pool was designed to include both the incentive payments and the draw-down on federal matching funds. (This paper’s Appendices contain the statutory and proposed language.).

In 2008 (the year the cut goes into effect), states will receive $483 million in incentive payments. However, the 66 percent federal match on those incentive payments is nearly twice as much — $937 million. The federal match effectively triples the funds a vailable to states to improve their performance and enforce child support. The combined pool of incentive payments and federal matching funds will be worth $1.4 billion to states ($483 million in incentive payments plus $937 million federal match).

It is the federal match — combined with the real threat of performance penalties — that helped drive dramatic performance imporvements in recent years. Together, the incentive payments and federal incentive match account for 25 percent of total program funds, providing states with a significant incentive to invest additional state funds and improve performance. Without the federal match, the performance incentive would be limited to 8.5 percent of program funds.

THESE CUTS WILL UNDERMINE a DECADE of DRAMATIC PROGRESS

This performance based funding system has accomplished exactly what it was designed to do. At the time the incentive system was redesigned, child support programs in most states were substantially under funded compared to other children’s programs, and performance was abysmal. In 1998, states were only collecting child support in 23 percent of cases. By 2004, states had more than doubled their collection rates from 1998 levels, collecting child support in 51 percent of cases. States have significantly improved their performace on every other measure as well, including paternity establishment, obtaining support orders, and cost-effectiveness. In fact, not only has state performance steadily improved every year since the performance incentive system was adopted, but collections have increased faster than spending.

The Office of Management and Budget ranks the child support program as one of the highest rated block/formula grants of all reviewed programs government wide under its Performace Assessment Rating Tool (PART). The President’s 2006 budget states that, “This high rating is due to its strong mission, effective management, and demonstration of measurable progress toward meeting annual and long term performance measures.

If the federal match on incentive payments is eliminated, state performance will almost certainly slip. The research is clear that child support performance is directly related to funding levels. With these cuts, states will have less money available to maintain and improve their child support performance, creating a downward spiral of reduced funding and performance. As state performance slips, states will lose incentive payments, and many states will fall into penalty status. States receive automatic penalties of 1 to 2 percent of their TANF funds in the first year for performance or data reliability problems. By law, a penalized state must replace the federal TANF funds withheld to pay the penalty with state funds. At the same time, the state will need to find additional funds to improve their child support performance if they are to avoid subsequent penalties.

REDUCED CHILD SUPPORT FUNDING MEANS HIGHER WELFARE COSTS

The child support program ensures that both parents support their children —-so that taxpayers do not need to. The child support program is a front-end program, collecting child support to help families remain self-sufficient. Every $1.00 spent by federal, state, and county governments yields $4.38 in private funds paid by non-custodial parents to support their children. Federal funds spent on the child support program directly reduce federal outlays in other programs. The Urban Institute found that the child support program more than pays for itself in reduced direct budgetary outlays in TANF, Medicaid, food stamps and other needs-based programs. It is in the federal government’s direct budgetary interest to fund the child support program at a level that reinforces parental responsibility and produces results for families. When families do not receive child support, they need more help from public assistance programs.

The cuts to child support funding will erode the progress made by states, resulting in fewer non-custodial parents supporting their children and more families signing up for public assistance. Child support performance will likely slip and more states will certainly incur penalties against their TANF funds as they cut child support costs and retrench enforcement efforts.

If you want to see the tables mentioned earlier and/or the appendix you mayClick Here

If you want to read responses to your comments, make sure to subscribe to the RSS feed! Click Here.

Tags: Federal Incentives - "The cash cow" /

This entry was posted by admin on Wednesday, October 7th, 2009 at 3:33 pm and is filed under Federal Incentives - "The cash cow" /, Uncategorized /. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.