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HHS10 Align State Law Regarding the $50 Child Support Disregard Payments

Summary

Despite a change in federal law in 1996, California has continued to pay the first $50 of a Child Support collection directly to Temporary Assistance for Needy Families (TANF) recipients. Aligning state law with federal law will allow for the redirection of county resources to core child support enforcement activities.

Background

The Child Support Enforcement Program (CSEP) collects child support payments for custodial parents. In California, county child support departments, under the supervision of the state, administer the program.

Federal law establishes child support disregard payments

Title IV-D of the Social Security Act established the federal CSEP in 1975. [1] Key provisions of the Act gave states primary responsibility for operating CSEP pursuant to a state plan and charged them with the responsibility for locating absent parents, establishing paternity, and securing support for individuals receiving Aid to Families with Dependent Children (AFDC) and others who applied directly for child support enforcement services. [2] The Act also contained a provision that 40 percent of the first $50 collected on the monthly support obligation would be paid to the family without affecting AFDC eligibility or payment. Congress, in enacting this provision, intended the payment to promote cooperation of both absent parents and custodial parents and to encourage voluntary and timely compliance with child support orders. [3]

The Deficit Reduction Act of 1984 amended the Social Security Act to require states to pay the first $50 of support collected on the monthly support obligation to the AFDC family. [4] This statute also required states to disregard this payment when determining AFDC eligibility and the amount of the AFDC payment. [5] As a result, AFDC families affected by this statute had up to $50 of additional disposable income each month. [6]

The federal Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) repealed the federal law requiring states to make the $50 disregard (also called pass-through) payment. As a result, the issuance of a child support disregard payment became a "state option" effective October 1, 1996. [7] At the same time, the PRWORA increased the burden on parents to cooperate with child support or risk having benefits denied.

California law maintains disregard payments

Assembly Bill 1542 (Chapter 270, Statutes of 1997) allowed California to continue the $50 disregard provision. Pursuant to Family Code Section 17504, California pays to recipients of aid the first fifty dollars ($50) of any amount of child support collected and exempts this payment from consideration as income or resources in determining the amount of assistance to which they are entitled.

As of December 2003, only 14 states or territories have maintained the $50 disregard that originated under AFDC. Thirty-seven states or territories changed the disregard amount significantly. Of those, 27 states or territories discontinued the child support disregard payment completely. The remaining states: 1) retain all child support collected while increasing the TANF grant up to $50; or, 2) pass through all of the child support while disregarding some or all of the payment for the purposes of determining TANF eligibility. [8]

From October 1, 1996 (the date the federal government ceased participation in the disregard payment), through December 31, 2003, California has expended a total of $234.4 million (state general fund) to provide disregard payments to TANF recipients. [9] The amount forecast to be expended in Fiscal Year 2004-2005 is 29.5 million. [10]

Original intent of the disregard payments is accomplished in other ways

The original intent of the disregard payment was to encourage cooperation with child support enforcement. While some argue that continuation of the $50 disregard payment enhances cooperation, recent published research on the effects of pass-through and disregard policies does not support this hypothesis. [11] Further, TANF regulations mandate cooperation by custodial parents in the establishment and enforcement of child support orders and impose financial sanctions for failure to cooperate without good cause. Additionally, California has implemented other means to remove barriers to cooperation such as co-location of Child Support staff in the welfare offices and state directed outreach efforts to educate customers on the benefits of paternity and support order establishment.

Administering disregard payment diverts county resources from core enforcement activities

Local child support agencies contend that the issuance of the disregard payments require staff to spend considerable time explaining to customers the disregard eligibility requirements and payment history. In some counties the disregard payments are issued by the TANF agency. In many of these counties there is a lack of an effective electronic interface to exchange data needed to correctly issue the disregard payment resulting in manual completion and transmission of records/documents. [12]

Given the limited resources at the local level to provide core child support enforcement activities and the lack of evidence that directly correlates the payment of the $50 child support disregard payment with increased cooperation, the state should reconsider continuation of these state-only payments. [13] While this will result in less disposable income available to TANF recipients, the disregard income will no longer be counted as unearned income in determining food stamp eligibility, as currently required, and will result in a slight increase in the food stamp allotment.

Exhibit 1

In a household consisting of a mother and two children, the CalWORKs grant in Region 1 is $704.00. A standard deduction of $134.00 is applied in calculating the food stamp allotment. The food stamp benefit amount for a family receiving the $50.00 disregard would be $185 and $200 for the household not receiving the $50.00 disregard; a difference of $15.00 in food stamp benefits.

Recommendation

The Governor should work with the Legislature to repeal the requirement for the payment of the $50 disregard payment to TANF recipients.

Fiscal Impact

Elimination of the Child Support Disregard payment may result in some minimal cost related to revising the monthly notice of collection and distribution, which currently contains language specific to the Child Support disregard. However, these costs would be minor and absorbable.

This recommendation would result in annual General Fund savings of $29.5 million beginning in Fiscal Year (FY) 2005-2006. [14] These expenditures, however, are counted towards the federal maintenance-of-effort requirement for the TANF program. As a result, these savings would not be immediately achieved, but instead would be redirected.

The FY 2004-2005 Governor's Budget projected General Fund expenditures at the maintenance-of- effort level. There is, however, considerable pressure to spend more than the federally required level on an ongoing basis, as the cost of assistance payments and services continues to increase, and as an increasing share of people in the program have multiple barriers to employment. In addition, while Congress and the President will consider several key policy changes, federal reauthorization legislation introduced to date would significantly increase the number of TANF recipients engaged in job training, community service employment and other work-related activities. Substantial investments in child care and employment services would be needed in order to meet the increased participation. These savings may be used to absorb these cost pressures.

Endnotes

[1] Pub. L. 93-647.
[2] After enactment of the federal "Personal Responsibility and Work Opportunity Reconciliation Act of 1996" (P.L. 104- 193) (PRWORA), the AFDC program was subsequently renamed Temporary Assistance for Needy Families (TANF) at the federal level and CalWorks in California.
[3] Administration for Children and Families, Office of Child Support Enforcement, "OCSE-AT-84-9 Disregard of Child Support Payments; AFDC Regulations Implementing the Deficit Reduction Act of 1984," (September 19, 1984) http://www.acf.hhs.gov/programs/cse/pol/AT/at-8409.htm (last visited April 13, 2004); and Administration for Children and Families, Office of Child Support Enforcement, "OCSE-AT-88-11, Disregard of Child Support Payments-Final Regulation," (July 1,1988) http://www.acf.hhs.gov/programs/cse/pol/AT/at-8811.htm (last visited April 13, 2004). This provision expired September 30, 1976. Until the Deficit Reduction Act of 1984, no other similar provision was enacted.
[4] Pub. L. 98-369.
[5] Pub. L. 100-485; and, Administration for Children and Families, Office of Child Support Enforcement, OCSE-AT-91- 02, Final Rule-$50 Pass-through; Presumptive Support Guidelines," (May 16, 1990) http://www.acf.hhs.gov/programs/cse/pol/AT/at-9102.htm (last visited April 13, 2004).
[6] Administration for Children and Families, Office of Child Support Enforcement, "OCSE-AT-91-02, Final Rule- $50 Pass-through; Presumptive Support Guidelines," (May 16, 1990) http://www.acf.hhs.gov/programs/cse/pol/AT/at-9102.htm (last visited April 13, 2004). Subsequent to the Deficit Reduction Act of 1984, the Family Support Act of 1988 revised the disregard regulations to provide technical clarification of disregard eligibility requirements.
[7] Pub. L. 104-193. The PRWORA eliminated the requirement to distribute the "$50 pass-through" portion of a child support collection. States were given the option to continue the "pass-through" distribution using state only funds.
[8] Center for Law and Social Policy, "State Policy Regarding Pass-Through and Disregard of Current Month's Child Support Collected for Families Receiving TANF-funded Cash Assistance as of December 2003," by Paula Roberts and Michelle Jordan (Washington, D.C.), pp. 2-4.
[9] Interview with Joyce Coles, staff services manager I, Budget Support Unit-Local Assistance, California Department of Child Support Services, Rancho Cordova, California (April 14, 2004). Note: Counties participated in the cost of the disregard during the months of October 1996 and November 1996 at a sharing ratio of five percent.
[10] Department of Finance, "Governor's Budget May Revision, 2004-2005" (Sacramento, California, May 13, 2004).
[11] Wisconsin Department of Workforce Development, "Exploring Potential Effects of a Child Support Pass-Through and Disregard: Did Formal Child Support Payments Change when Mothers went on and off AFDC?" by Daniel R. Meyer and Maria Cancian (Wisconsin, December 1999) (consultant's report). This report found that while there is some indication of increased paternity and support order establishment when the entire child support payment is passed through to the family there was not "definitive evidence to support or reject the hypothesis that [the $50] pass-through and disregard policy affects child support payments."
[12] Interviews with George Holbrook, director, Imperial County Department of Child Support Services, El Centro, California (April 13, 2004); Brenda Morris, supervising child support distribution specialist, Ventura County Department of Child Support Services, Ventura, California (April 14, 2004); Stephen H. Kennedy, director, Monterey County Department of Child Support Services, Salinas, California (June 1, 2004); and Veronica Potter, child support specialist III, Ventura County Department of Child Support Services, Ventura, California (June 8, 2004). The California Performance Review A Government for the People for a Change 345
[13] Catherine Saillant, "65 County Workers Get Pink Slips," "Los Angeles Times," May 27, 2004; and Les Mahler, "San Joaquin Officials Warn of Layoffs, Cuts" "Lodi News Sentinel," May 18, 2004; and Helen Gao, "Budget-Cut Layoffs Hit Collections of Child Aid," "San Diego Union Tribune," May 3, 2004.
[14] Department of Finance, "Governor's Budget May Revision, 2004-2005."