CENTER FOR LAW AND SOCIAL POLICY
By Vicky Turetsky
Updated January 18, 2006
Families Will Lose At Least $8.4 Billion in Uncollected Child Support If Congress Cuts Funds —- and Could Lose Billions More
In December 2005, the House and Senate each passed a version of the conference agreement on budget reconciliation legislation (S. 1932) that makes substantial cuts in federal funding for child support enforcement. While the conference agreement dropped a provision to reduce the federal child support match rate from 66 percent to 50 percent, a provision remains that prohibits states from drawing down federal matching funds on state performance incentive paments when they are re-invested in the child support program. This federal incentive match cut was included despite clear instructions from both the House and Senate to conferees to avoid cuts to the child support program.
According to the Congressional Budget Office (CBO), the prohibition on the federal incentive match would result in a net reduction in federal funds of $4.9 billion over the next ten years (1.6 billion over the next five years). The CBO estimates that if states do not replace these funds, states would stand to lose $8.55 billion over ten years —- more than a 20 percent cut to federal child support funds. Tables 1 and 3 of this report offer estimates of the state-by-state funding cuts that would result from the elimination of the federal incentive match.
CHILD SUPPORT WILL GO UNCOLLECTED
Some proponents have argued that eliminatiing the federal incentive match would not hurt families, but would simply close an unintended loophole. This is not the case, however. States use the federal matching funds to establish and enforce support orders and collect money owed to families by non-custodial parents. The cut in federal funding would result in reduced child support payments taken directly out of the budgets of families. The CBO estimates that if states replace half of the spending reduction. $8.4 billion in child support owed by non-constodial parents over the next ten years — and $2.9 billion over five years — would go uncollected as a result of the federal incentive match cut. CLASP estimates that if states do not replace half of the spending reduction, the amount of uncollected support would be twice as high as the $8.4 billion estimate, or $17 billion. Table 2 provides CLASP’s state-by-state estimates of uncollected support payments based on the CBO score.
1 The author appreciates the assistance of Sharon Parrott and Arloc Sherman from the Center on Budget and Policy Priorities in preparing this report.
2 On December 14, the Senate voted 75 to 16 in favor of a motion from Senator Kohl (D-WI) to instruct Senate conferees to insist that the child support cuts in the House bill not be included in the conference agreement. On conferees to recede to the Senate, avoiding child support cuts.
3 Federal funding to the child support program includes 66 matching funds and incentive payments.
FEDERAL SAVINGS SCORED by the CBO ‘DO NOT’ REFLECT IMPACT OF CUTS on STATES
The CBO estimates that eliminating the federal incentive match would result in a net savings to the federal government of $4.9 billion over the next ten years. However, as noted above, the actual cut in federal funds is nearly twice as high, or $8.55 billion. This is because the $4.9 billion CBO estimate assumes that states would use their own funds to replace half of the lost federal child support funds. These state replacement funds would in turn be eligible for a federal match if spent on child support enforcement activities —- offsetting federal savings gained from eliminating the incentive match.
The assumption that states would replace half of the spending reduction may be generous. At the same time states are grappling with the child support cuts, they will be facing strong pressures to increase state funding in their Temporary Assistance to Needy Families (TANF) program to meet substantially increased work participation rates. The CBO has estimated that the cost of meeting new TANF requirements by increasing participation in program activities would be $8.4 billion over five years, but the bill provides no new TANF funds and only $1 billion in new child care funding. States that fail to meet participation rate requirements risk a penalty of loss of up to 5 percent of their TANF block grants. States also will be scrambling to replace reduced federal funding in their foster care program to be able to support children placed with their grandparents and other relatives.
States spend these federal funds on basic child support activities —- such as establishing paternity when a baby is born, going to court to obtain a support order, locating non-custodial parents and their assets, sending payroll withholding orders to employers, seizing bank accounts and income tax refrunds, processing and distributing support payments, providing cutomer call centers, using secure procedures for domestic violence victims, referring low-income non-custodial parents to job services, updating computers, and ensuring that data are accurate.
The child support program is highly regulated by the federal government to ensure effective interstate enforcement. States that fail to meet extensive federal requirements must forfeit federal funding. States are required to meet extensive federal requirements in operating their child support programs, or forfeit federal funding. Because states have limited flexibility to alter their programs, CBO concluded that the budget legislation would impose an intergovernmental mandate by decreasing the federal government’s responsibility to provide funding to states to administer the child support program.
THER FEDERAL MATCH is KEYto the PERFORMANCE INCENTIVE SYSTEM
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.