for Collection Efforts of Child Support and Declarations of Paternity
Why is there not a fathers' group gathering the statistics of how much the States receive, the methods used, and the errors made?
National Women's Law Center
Testimony Before the Subcommittee on Human Resources
Hearing on the Administration's
March 20, 1997
Mr. Chairman and members of the Subcommittee, I appreciate the invitation to appear before you today on behalf of the National Women's Law Center to discuss the Child Support Enforcement Incentive Funding report submitted to you by the U.S. Department of Health and Human Services (HHS). The Center agrees with the recommendations in the HHS report, with some suggestions for improvement, and urges Congress to adopt HHS's proposed incentive system with the modifications suggested in this testimony.
The National Women's Law Center is a non-profit organization that has been working since 1972 to advance and protect women's legal rights. The Center focuses on major policy areas of importance to women and their families, including child support, employment, education, reproductive rights and health, child and adult dependent care, public assistance, tax reform and Social Security -- with special attention given to the concerns of low-income women.
The Center wishes to commend the Subcommittee for its strong leadership on child support issues. We are heartened by many of the improvements made in the federal-state Child Support Enforcement program in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), enacted last summer. These provisions will, for the most part, strengthen the program contained in Title IV-D of the Social Security Act, often referred to as the IV-D program.
As Congress recognized in enacting the PRWORA, however, improvements still need to be made in the way federal funding is provided to the states for their child support enforcement programs, specifically in the way in which federal "incentive payments" are made. In Section 341 of the PRWORA Congress therefore required that HHS, in consultation with state IV-D directors, develop a new performance-based incentive system that is cost-neutral, and report to Congress on the new system by March 1, 1997. In response to this mandate, an Incentive Funding Work Group (Work Group) comprised of 15 state or local IV-D directors and 11 HHS officials was formed in October, 1996, and a report on a proposed new incentive system was filed with the Secretary of HHS in late January, 1997. Sent to the Congress in March, 1997, this report is the focus of today's hearing.
There is broad consensus among federal policy makers, advocates and
state child support officials that the current incentive
1. The current base match rate (Federal Financial Participation or FFP) is 66 percent; that is, for every $1.00 the state spendsWhile there is no limit on the dollar amount that states can earn in incentive payments based on the percentage of child support collections for families receiving assistance under Part IV-A of the Social Security Act, there is a cap on the dollar amount states can
earn in incentive payments based on the percentage of non-IV-A collections. The money for incentive payments to the states is
provided by reducing the federal government's share of child support collected from noncustodial parents of children who are
receiving or have received IV-A assistance.
Under this incentive system, the initial six percent incentive payment
bears no relation to state performance -- states that
In response to these widely accepted problems, the Work Group recommended
to HHS a revised incentive system, which
2. The Work Group also recommended that the current FFP of 66 percent be maintained. HHS reserved judgement on this andI. Summary of HHS's Child Support Enforcement
Incentive Funding Formula Plan
Under the new system proposed by the Work Group in the HHS Report to
Congress (hereinafter "HHS plan"), states would be provided incentive payments
based on established state performance in five key areas. States would
receive a maximum
Under the HHS plan, states would be provided incentive payments based
on established state performance in five key areas:
The paternity establishment rate would be either (at state option) 1) the ratio of the total number of children in the IV-D caseload (either in the fiscal year or at the end of the fiscal year) who were born out of wedlock and have paternity established to the total number of children in the IV-D caseload (as of the end of the preceding fiscal year) who were born out of wedlock; or 2) the total number of children born out of wedlock who have paternity established during the fiscal year to the total number of children born out of wedlock during the preceding fiscal year;
The support order establishment rate would be the ratio of the number of IV-D cases with support orders to the total number of IV-D cases;Upper and Lower Performance Rates
Under the HHS plan, each key area has a upper and lower performance
level and set benchmarks in between which establish
In the first performance area, paternity establishment, if a state has a paternity establishment rate under 50 percent, it must improve its rate over that of the previous year by 10 percent in order to earn 1/2 its maximum incentive payment for that area. If it has a rate of 50 percent it earns 60 percent of its maximum incentive payment. The performance level required and the corresponding percentage of the maximum incentive payment increase gradually until the top performance rate of 80 percent yields the total maximum incentive payment.
In the second performance area, establishment of child support orders, if a state has an order establishment rate under 50 percent, it must improve its rate by five percent in order to earn 1/2 its maximum incentive payment for that area. If it has a rate of 50 percent it earns 60 percent of its maximum incentive payment. The performance level required and the corresponding percentage of the maximum incentive payment increase gradually until the top performance rate of 80 percent yields the total maximum incentive payment.
In the third performance area, collections of current support, if a state has an order establishment rate under 40 percent, it must improve its rate by five percent or reach a rate of 40 percent in order to earn 1/2 its maximum incentive payment for that area. The performance level required and the corresponding percentage of the maximum incentive payment increase gradually until the top performance rate of 80 percent yields the total maximum incentive payment.
In the fourth performance area, collections of past-due support, if a state has an order establishment rate under 40 percent, it must improve its rate by five percent or reach a rate of 40 percent in order to earn 1/2 its maximum incentive payment for that area. The performance level required and the corresponding percentage of the maximum incentive payment increase gradually until the top performance rate of 80 percent yields the total maximum incentive payment.
Finally, in the fifth performance area, cost effectiveness, if a state has a cost-effectiveness ratio of below 1.99, it does not receive any incentive payment. If it has a ratio of 2.00-2.49 it receives 40 percent of its maximum incentive payment, increasing gradually until the top ratio of 5.00 yields the total maximum incentive payment.
Calculating the Incentive Payment
To calculate the incentive payment for each area, the HHS plan assigns a value to each performance measure. For the first three measures (paternity establishment, order establishment and collections of current support), a scoring at the upper threshold level earns the maximum incentive payment of one percent of the collection base (as defined below), while lower scores earn a percentage of the one percent.(3) For the last two measures (collections of arrears and cost-effectiveness), a scoring at the upper threshold level earns a maximum incentive payment of .75 percent of the collection base, with lower scores earning a percentage of the .75 percent.(4) Added together, the three measures of one percent and the two measures of .75 percent equal 4.5 percent of the collection base.
3. A state that had a collection base of $160 million, for example, would collect $1.6 million in incentive dollars if itThe collection base roughly equals the total child support collected on behalf of IV-A and non-IV-A families in the IV-D system. While there would no longer be a cap on incentives based on non-IV-A child support collections, IV-A cases would be given more weight in the calculation of the incentive payment by doubling their worth in the formula. Specifically, the collection base equals two times the IV-A and former IV-A collections plus the non-IV-A collections ( 2(IV-A collections + former IV-A collections) + non-IV-A collections = collection base).
Reinvestment in the IV-D Program
Under the HHS plan, states would be required to reinvest their incentive payments in the IV-D program.
Implementation of the New Incentive System
Under the HHS plan, the new incentive system would be phased in over
one year beginning in fiscal year 2000. In fiscal year 2000, a state would
receive an incentive payment based on half of what it would have earned
under the old incentive system and half of what it would earn under the
new incentive system. In fiscal year 2001, the new incentive system would
be fully phased in.
II. Analysis of HHS's Child Support
In selecting the five performance areas -- establishment of paternities,
establishment of child support orders, collections of
First, as Congress recognized in the 1993 and the 1996 child support reforms, paternity establishment is important for children born outside of marriage; the large number of children born out of wedlock who do not have paternity established has left many children without the legal ability to secure support from their fathers.
Second, IV-D agencies must improve their records in obtaining child support orders -- the critical first step to collecting child support for families; in 1994, just over half the IV-D caseload had a child support order.
Third, collecting current child support -- that is, ensuring that families receive child support in the month it is due -- is crucial if families are to count on regular, reliable support.
Fourth, collecting arrears -- obtaining for a family back-due child support -- is important for many families, particularly those trying to leave and stay off welfare.
Finally, cost-efficiency helps assure that states yield the greatest results from their investment in the system -- particularly as state governments trim budgets and demand more efficiency in government programs. Only when states significantly improve in these five key areas will child support programs be effective in serving custodial parents and their children.(5)
5. While these five categories are good measures of state performance, they are not all-inclusive. Indeed, there areIt is important that HHS has limited the number of key performance areas. If there were too many categories, the incentive money would be spread so thin that states could simply reallocate resources and give up on problematic areas since the money lost from any particular area would not be significant.
In fact, even with just five performance areas, states have an incentive to shift resources and obtain incentive payments in areas in which they are strongest. For example, a state that has a very low collection rate for back-due support could decide it is not worth the increased resources to improve in that area since doing so would take resources away from areas in which it could more readily secure an incentive payment. Audit and penalty provisions should be used to counteract any incentive to shift resources; if states not only lose incentive payments but face a penalty as well for poor performance in a certain area, states will be less likely to shift resources. Current law (enacted in 1993 and revised in the PRWORA) contains a provision for auditing and penalizing states that do not meet required performance measures in paternity establishment, and that provision has had some effect in moving states toward higher paternity establishment rates.
The technical amendments to the PRWORA, now pending in Congress, would clarify that the Secretary has authority to establish other performance-based standards and to audit and penalize states that do not meet these standards. Congress should adopt these amendments, and HHS should be encouraged to establish other performance standards that help achieve the goals of its proposed incentive payment system.(6)
6. There is an anomaly in the HHS plan in the area of paternity establishment. Beginning at the 50 percent threshold, statesWhile the performance areas recommended by HHS emphasize the right goals for state IV-D agencies, three reforms are needed so that the incentive system better encourages improvements in state performance.
First, the paternity establishment performance area does not adequately
take into account that there will be certain children
7. Under the PRWORA, as a condition of IV-A assistance, custodial parents must cooperate with the IV-D agency in establishing paternity and in establishing and enforcing a support order unless they are found to have "good cause" not to cooperate. "Good cause" cases could include, for example, cases in which the mother's cooperation would put the mother and/or child in danger of harm by the noncustodial parent or cases in which the child is the product of incest or rape.In the HHS plan, these children are included in the denominator of the paternity establishment ratio. This may lead states to be extraordinarily reluctant to grant good cause, even in worthy cases, since they will, in effect, be held responsible for establishing paternity for these children and will therefore want the mother's cooperation. In contrast, in establishing a penalty for state failure to meet the paternity establishment provision of current law, Congress excluded from the denominator any cases in which good cause has been granted. The incentive structure should do the same.
Second, in the performance area on collection of current support, under HHS's plan successful enforcement of current support is measured by comparing the amount of current child support dollars collected to the amount of current child support dollars due. This is a better system than comparing the number of cases in which current support is collected to the number of cases in which current support is due since the latter option would "over count" cases in which only very low partial payments are made.
However, a dollars-based system gives states an incentive to emphasize collections in high-award cases and deemphasize those in low-award cases, although the latter cases often involve custodial parents who are the most dependent on monthly child support payments to meet their children's needs.(8) A better performance measure would be case-based, but only count cases in the numerator in which a certain percentage (say, 50 percent) of the current award due is collected in the month due.
8. For example, a state that is trying to enforce a $100 order and a $1,000 order would have a better collection rate based on dollars received to dollars owed if it collected the $1,000 but ignored the $100 order. If the state collected the $1,000 order but ignored the $100 order, it would have collected 91 percent of the dollars due; if the state collected the $100 order but ignored the $1,000 order, it would have collected just 9 percent of the dollars due.Third, as the HHS plan recognizes, there is still work to be done on performance measure standards to assure that all states are using the same measures consistently over time, and that they are collecting the same data to meet the measures. For example, states have routinely defined "case" differently: in some states each child in the system is a "case"; in some states, each family is a "case"; and in some states each time the child's status changes (AFDC, post-AFDC, arrears-only) counts as a "case," making it virtually impossible to compare the performance of one state to another or to a national standard.
Moreover, states do not always use the same definitions in their own systems from year to year, making it hard to measure their own performance over time. The PRWORA recognizes the importance of the states' use of uniform, reliable data in determining whether states have met the statute's audit requirements by requiring HHS to define, and the states to use, uniform terms, and by penalizing states that produce incomplete, unreliable and inconsistent data. A similar solution should be a part of the incentive system.
Otherwise, at best, states could produce data for incentive payments that is unreliable; at worst, states could manipulate their data to achieve the desired results. Congress should mandate, therefore, that HHS define, and states use, uniform terms, and forbid states from securing incentive payments based on incomplete, unreliable or inconsistent data.
Upper and Lower Performance Rates
The HHS plan appropriately recognizes that states should receive higher payments for higher performance levels, but some payment even for less than adequate performance levels if they have sufficiently improved their performance over that of the prior year.
First, it is important that at the lower levels states receive something for sufficient improvement, even if they have not achieved HHS's lower threshold. Otherwise states could decide that it is too hard and not monetarily worth allocating the resources to achieve the lower threshold level. For example, a state that only has established child support orders for 25 percent of its caseload could decide that it is not worth the effort and resources to secure orders for 50 percent of its caseload if that is what is necessary to secure any incentive payment.
Second, it is important that states in the middle (between lower and upper thresholds) are rewarded for improvements, but are not required to improve as dramatically as states that are below the lower threshold in order to receive incentive payments. Especially as states reach the higher levels of performance, it becomes harder to make dramatic improvements; the easier-to-work cases have been taken care of and the harder-to-work cases -- particularly those in which there are factors outside the agency's control -- are left.
Third, it is appropriate that as long as states continue to meet the upper threshold level they receive the maximum incentive payment.
Although the concept behind the HHS plan is sound, there are problems with the performance rate structure at the lower levels that need to be reformed.
First, the HHS plan unwisely permits states with performance levels below the lower threshold to secure a significant incentive payment (1/2 the maximum payment) even when they have not made serious improvements. While in the area of paternity establishment a state has to improve by 10 percent to receive an incentive payment, in three other areas (child support order establishment, current child support collections and arrears collections), a state only has to improve by five percent.
Second, compounding this problem is that in two areas (current child support and arrears collections), there really is no lower performance threshold since states could earn the same amount (1/2 the maximum incentive payment) by having a 40 percent rate without making improvements as they would by having a lower rate and making improvements of five percent.
One solution would be to increase the required rate of improvement -- that is, in the areas of child support order establishment, current child support collections, and arrears collections, states would have to improve their performance by 10 percent in order to secure an incentive payment. However, rewarding small improvements is valuable in pushing a state along; if the improvements necessary are too large and states are struggling, they are not likely to make a full effort to improve but rather to simply write off that area for an incentive payment.
The better solution, therefore, would be to use an improvement rate of five percent for all four areas (including paternity), but pay less incentive money -- 1/4 of the maximum incentive payment -- for achieving that level of improvement. A state would thus have to improve by 10 percent in all four areas in order to receive 1/2 of the maximum incentive payment. In addition, for current child support and arrears collections, 40 percent is too low a lower threshold to be considered adequate. Rather, these two areas should be treated like the first two areas; states should have to make improvements of at least five percent until they reach a 50 percent performance rate in order to earn an incentive payment.
Finally, while rewarding states for improvements at the lower levels makes sense, there should be a bottom below which no incentive payment should be made. Just as in the cost-effectiveness area, states must realize that at some level (below 20 percent, perhaps) performance is so bad, even with five percent improvements, that incentive payments should be out of the question.
Calculating the Incentive Payment
The HHS plan appropriately proposes incentive payments to the states that reflect the value of the performance measures.
First, the plan gives the most weight to the areas in which it is most
important that states improve -- paternity establishment,
Second, the plan gives states an incentive to emphasize IV-A and former IV-A collections by double-weighting this category in determining the collection base. At the same time, it encourages states to continue to secure non-IV-A collections by lifting the cap on this category. It is very important that states provide effective child support services to IV-A, former IV-A and non-IV-A families alike; as low-income families face time limits and reduced welfare benefits, child support will become the crucial safety net for many of these families.
Reinvestment in the IV-D Program
The HHS plan appropriately ensures that incentive payments be returned
to the child support program rather than put into the
Implementation of the New Incentive System
The implementation schedule is designed to ease states into the new incentive program. It is meant to allow states to have as much possible notice to prepare and plan for the new system and work to boost their performance rates. In preparing for the new system, however, HHS must ensure that states do not close large numbers of cases improperly in an effort to clear their caseloads of hard-to-work cases -- cases which could bring down their performance rates once the new system is implemented.
In the next few years, as states prepare for the new system, HHS should be required to provide states with guidance about case closing, including detailing which cases are appropriate and inappropriate to close.
HHS has proposed an incentive system designed to encourage states to improve their child support programs. While the premise of the incentive system and its overall structure is basically sound, some of its components should be reworked -- particularly those that reward states for very little effort. The HHS plan is a very good place to start in trying to overhaul the incentive funding system, and we recommend that it be used as the basis for Congress' upcoming work on crafting a new incentive program. We look forward to working with both Congress and the Administration in this very worthwhile effort.
The National Women's Law Center thanks Joan Entmacher of the Women's Legal Defense Fund and Vicki Turetsky of the Center for Law and Social Policy for their helpful comments in preparing this testimony.