SPEAKERS CONTENTS INSERTS Tables
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48–461 CC
1998
CHILD SUPPORT SYSTEM IMPROVEMENTS
HEARING
before the
SUBCOMMITTEE ON HUMAN RESOURCES
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
SEPTEMBER 10, 1997
Serial 105–21
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Printed for the use of the Committee on Ways and Means
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois
BILL THOMAS, California
E. CLAY SHAW, Jr., Florida
NANCY L. JOHNSON, Connecticut
JIM BUNNING, Kentucky
AMO HOUGHTON, New York
WALLY HERGER, California
JIM McCRERY, Louisiana
DAVE CAMP, Michigan
JIM RAMSTAD, Minnesota
JIM NUSSLE, Iowa
SAM JOHNSON, Texas
JENNIFER DUNN, Washington
MAC COLLINS, Georgia
ROB PORTMAN, Ohio
PHILIP S. ENGLISH, Pennsylvania
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
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WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
CHARLES B. RANGEL, New York
FORTNEY PETE STARK, California
ROBERT T. MATSUI, California
BARBARA B. KENNELLY, Connecticut
WILLIAM J. COYNE, Pennsylvania
SANDER M. LEVIN, Michigan
BENJAMIN L. CARDIN, Maryland
JIM McDERMOTT, Washington
GERALD D. KLECZKA, Wisconsin
JOHN LEWIS, Georgia
RICHARD E. NEAL, Massachusetts
MICHAEL R. McNULTY, New York
WILLIAM J. JEFFERSON, Louisiana
JOHN S. TANNER, Tennessee
XAVIER BECERRA, California
KAREN L. THURMAN, Florida
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
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Subcommittee on Human Resources
E. CLAY SHAW, Jr., Florida, Chairman
DAVE CAMP, Michigan
JIM McCRERY, Louisiana
MAC COLLINS, Georgia
PHILIP S. ENGLISH, Pennsylvania
JOHN ENSIGN, Nevada
J.D. HAYWORTH, Arizona
WES WATKINS, Oklahoma
SANDER M. LEVIN, Michigan
FORTNEY PETE STARK, California
ROBERT T. MATSUI, California
WILLIAM J. COYNE, Pennsylvania
WILLIAM J. JEFFERSON, Louisiana
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined. The electronic version of the hearing record does not include materials which were not submitted in an electronic format. These materials are kept on file in the official Committee records.
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C O N T E N T S
Advisory of September 3, 1997, announcing the hearing
WITNESSES
U.S. Department of Health and Human Services, Hon. David Gray Ross, Deputy Director, Office of Child Support Enforcement
U.S. General Accounting Office, Joel C. Willemssen, Director, Information Resources Management, Accounting and Information Management Division
American Public Welfare Association, Robert Doar
Arizona Department of Economic Security, Nancy Mendoza
Center for Law and Social Policy, Vicki Turetsky
Children's Defense Fund, Nancy Ebb
Department of Information Technology, Pontiac, MI, John E. Mahoney
Florida Department of Revenue, Jim Zingale
Missouri Division of Child Support Enforcement, Teresa Kaiser
New York State Office of Child Support Enforcement, Robert Doar
Policy Studies, Inc., Denver, CO, Robert G. Williams
SUBMISSIONS FOR THE RECORD
American Fathers Coalition, Stuart A. Miller, statement
Association for Children for Enforcement of Support, Inc., Geraldine Jensen, statement
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California, State of, Office of Child Support Enforcement, Leslie L. Frye, statement
Louisiana District Attorneys' Association, E. Pete Adams, statement
National Child Support Enforcement Association, Joel K. Bankes, letter and attachments
CHILD SUPPORT SYSTEM IMPROVEMENTS
WEDNESDAY, SEPTEMBER 10, 1997
House of Representatives,
Committee on Ways and Means,
Subcommittee on Human Resources,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:03 a.m., in room B–318, Rayburn House Office Building, Hon. E. Clay Shaw, Jr., (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
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ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
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SUBCOMMITTEE ON HUMAN RESOURCES
CONTACT: (202) 225–1025
FOR IMMEDIATE RELEASE
September 3, 1997
No. HR–7
Shaw Announces Hearing on Child Support
System Improvements
Congressman E. Clay Shaw, Jr., (R–FL), Chairman, Subcommittee on Human Resources of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on the Administration's proposal for a reformed child support incentives system and on the progress of States in meeting the child support automatic data processing requirements of the 1988 Family Support Act. The hearing will take place on Wednesday, September 10, 1997, in room B–318 of the Rayburn House Office Building, beginning at 10:00 a.m.
In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only. Witnesses will include representatives from the Administration, State child support program directors, child advocacy groups, and private companies participating in child support enforcement programs. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.
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BACKGROUND:
In each of the States and territories, the child support enforcement program is financed by three streams of money: Federal reimbursement of 66 percent of all valid State expenditures on the State child support program; a share of the child support collections in welfare cases; and incentive payments of up to 10 percent of collections.
For many years, critics have argued that Federal incentive payments, which now have reached nearly $500 million per year, do not effectively reward high performance by States. The biggest perceived flaw in the payment system is that States receive Federal payments of at least 6 percent of collections regardless of their program's efficiency. Thus, a State that spends $1 million dollars to collect $1 million dollars would still receive an incentive payment of $60,000.
The extensive amendments to the child support program contained in last year's welfare reform legislation (P.L. 104–193) required the Secretary of the Department of Health and Human Services (HHS) to study the incentive system and to make recommendations for reform of the system. Based on testimony received at the Subcommittee's March 20, 1997, hearing on the administration's report (which was completed in February 1997) and on subsequent discussions with individuals and groups interested in child support, the Subcommittee is preparing to consider legislation in this area. Witnesses have been asked to comment on potential legislation and related issues.
The hearing will also present an opportunity for HHS to update the Subcommittee on how many States are expected to meet the October 1, 1997, deadline for implementing the automatic data processing systems required by prior Federal legislation.
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In announcing the hearing, Chairman Shaw stated: ''There is almost universal agreement that the current child support incentive system is inadequate. Thanks to the bipartisan agreement we now have on the outlines of a new incentive system, we have a good chance to enact legislation this year that will greatly strengthen our nation's child support system.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement for the printed record of the hearing should submit at least six (6) single-space legal-size copies of their statement, along with an IBM compatible 3.5-inch diskette in ASCII DOS Text or WordPerfect 5.1 format only, with their name, address, and hearing date noted on a label, by the close of business, Tuesday, September 16, 1997, to A.L. Singleton, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. If those filing written statements wish to have their statements distributed to the press and interested public at the hearing, they may deliver 200 additional copies for this purpose to the Subcommittee on Human Resources office, room B–317 Rayburn House Office Building, at least one hour before the hearing begins.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a witness, any written statement or exhibit submitted for the printed record or any written comments in response to a request for written comments must conform to the guidelines listed below. Any statement or exhibit not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.
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1. All statements and any accompanying exhibits for printing must be typed in single space on legal-size paper and may not exceed a total of 10 pages including attachments. At the same time written statements are submitted to the Committee, witnesses are now requested to submit their statements on an IBM compatible 3.5-inch diskette in ASCII DOS Text or WordPerfect 5.1 format. Witnesses are advised that the Committee will rely on electronic submissions for printing the official hearing record.
2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a statement for the record of a public hearing, or submitting written comments in response to a published request for comments by the Committee, must include on his statement or submission a list of all clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the name, full address, a telephone number where the witness or the designated representative may be reached and a topical outline or summary of the comments and recommendations in the full statement. This supplemental sheet will not be included in the printed record.
The above restrictions and limitations apply only to material being submitted for printing. Statements and exhibits or supplementary material submitted solely for distribution to the Members, the press and the public during the course of a public hearing may be submitted in other forms.
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Note: All Committee advisories and news releases are available on the World Wide Web at 'HTTP://WWW.HOUSE.GOV/WAYS_MEANS/'.
The Committee seeks to make its facilities accessible to persons with disabilities. If you are in need of special accommodations, please call 202–225–1721 or 202–226–3411 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.
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Chairman SHAW. If people can start to take their seats, we will try to start on time this morning. If everybody can take their seats, we will proceed.
One of the unheralded achievements of last year's welfare reform law was the set of provisions that are now putting the Nation's child support program onto a sound business footing. As a result of this legislation, we can expect child support collections to continue the rapid rate of increase they have enjoyed for the past several years.
Today's hearing is designed to examine two important aspects of our attempts to make the child support program more efficient. Our first panel will examine legislative proposals for improving the child support incentive system. The development of this legislation gets my vote for the most rational and effective policy process of the last several years.
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Here is how we created this legislation: Recognizing the problems with the current incentive system in last year's welfare reform, Congress directed the Secretary to consult with the States and to propose revisions in the incentive system by March of this year.
The Secretary quickly appointed a work group composed primarily of administration officials and the directors of State child support programs. After several meetings, the group reached an accord on the outlines of a new incentive system. The Secretary organized these recommendations into an excellent and straightforward report and presented the report to Congress right on schedule.
Our first witness and good friend, Judge David Gray Ross, played a major role in organizing the incentive work group and in preparing the administration's report.
As many in this audience will recall, our Subcommittee held a hearing on the administrative report and recommendations on March 20. Since then, we have been meeting with advocates, administration officials, House and Senate staff, State child support directors, and others to develop bipartisan legislation. We have made drafts of the legislation available and have been getting comments on early drafts for the past 3 weeks.
Sandy and I will introduce our bipartisan bill early next week. We then intend to mark up the bill in Subcommittee and at Full Committee by the end of the month, with action on the House floor likely late this month or early next month. If we can achieve prompt Senate action, we expect to pass a bill the President can and will sign before the end of this season.
The second matter before the Subcommittee today is the status of automatic data processing in the States. We all are in agreement that a vital part of operating an efficient child support program is data processing.
Congress has now imposed two separate sets of data processing requirements on the States, one set in the Family Support Act of 1988 and a second set in last year's welfare reform bill. The Family Support Act required States to meet its data processing requirement by October 1, 1995. As a result of delays in the publication of regulations and other reasons, Congress changed that deadline to October 1, 1997, less than 1 month from today.
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I am happy to report that, as Judge Ross will discuss in more detail in a moment, between 35 and 40 States have met and are very close to meeting the deadline. This is a major achievement and shows that we are on the right track. I congratulate all of those States that will make the deadline. I also congratulate HHS for the excellent assistance that they have given the States, working toward implementing their data system. But we have at least 10 States that have not met the deadline.
Let me say that I know all these States have made a valiant effort to meet the deadline. So we must continue to work intensely with these States so they can create an efficient data system at the earliest possible moment, and we must give them incentives to do so.
I also want the States and others to understand that we will not change the deadline again. As the judge will explain, October 1 is the key date in the process that will last 6 to 8 months before actual fines are imposed on States. During this period, we will work with HHS and others on a bipartisan basis to study exactly why several States missed their deadline. We will look carefully at the penalty procedure and determine the best way to help all States create an efficient and effective data system.
Given our success in so many States and with continuing help from HHS, the States' vendors, and not least from the child advocacy community, I have no doubt that we can help every State create an effective and efficient system.
The child support program is working. The stellar bipartisan reform and last year's welfare reform are making the program work even better. When we pass the new incentive programs this fall, the program will work still better. The key to continued improvement is to do just what our Subcommittee is doing today, to build bipartisan consensus for legislating reforms and to learn from and overcome our problems.
[The opening statement follows:]
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Opening Statement of Hon. E. Clay Shaw, Jr.
One of the unheralded achievements of last year's welfare reform law was the set of provisions that are now putting the nation's child support program onto a sound business footing. As a result of this legislation, we can expect child support collections to continue the rapid rate of increase they have enjoyed for the past several years. Today's hearing is designed to examine two important aspects of our attempts to make the child support program more efficient.
Our first panel will examine legislative proposals for improving the child support incentive system. The development of this legislation gets my vote for the most rational and effective policy process of the last several years. Here's how we created this legislation.
Recognizing the problems with the current incentive system, in last year's welfare reform Congress directed the Secretary to consult with the states and to propose revisions in the incentive system by March of this year. The Secretary quickly appointed a work group composed primarily of administration officials and the directors of state child support programs. After several meetings, the group reached accord on the outlines of a new incentive system. The Secretary organized these recommendations into an excellent and straightforward report and presented the report to Congress right on schedule. Our first witness, Judge David Grey Ross, played a major role in organizing the incentive work group and in preparing the Administration's report.
As many in this audience will recall, our Subcommittee held a hearing on the Administration report and recommendations on March 20. Since then, we have been meeting with advocates, Administration officials, House and Senate staff, state child support directors, and others to develop bipartisan legislation.
We have made drafts of the legislation available and have been getting comments on early drafts for the past three weeks. Sandy and I will introduce our bipartisan bill early next week.
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We then intend to markup the bill in Subcommittee and at Full Committee by the end of this month, with action on the House Floor likely late this month or early next month. If we can achieve prompt Senate action, we expect to pass a bill the President can sign before the end of this session.
The second matter before the Subcommittee today is the status of automatic data processing in the states. We are all in agreement that a vital part of operating an efficient child support program is data processing. Congress has now imposed two separate sets of data processing requirements on the states—one set in the Family Support Act of 1988 and a second set in last year's welfare reform bill.
The Family Support Act required states to meet its data processing requirements by October 1, 1995. As a result of delays in the publication of regulations and other reasons, Congress changed the deadline to October 1, 1997—less than 1 month from today.
I am happy to report that, as Judge Ross will discuss in more detail in a moment, between 35 and 40 states have met or are very close to meeting the deadline. This is a major achievement and shows that we are on the right track. I congratulate all those states that will make the deadline. I also congratulate HHS for the excellent assistance they have given states working toward implementing their data systems.
But we have at least 10 states that have not met the deadline. Let me say that I know all these states have made valiant efforts to meet the deadline. We must continue to work intensively with these states so they can create an efficient data system at the earliest possible moment.
I also want the states and others to understand that we will not change the deadline again. As the Judge will explain, October 1 is a key date in a process that will last 6 to 8 months before actual fines are imposed on states. During this period, we will work with HHS and others on a bipartisan basis to study exactly why several states missed the deadline. We will look carefully at the penalty procedure and determine the best way to help all states create efficient and effective data systems. Given our success in so many states, and with continuing help from HHS, the states, vendors, and not least from the child advocacy community, I have no doubt that we can help every state create an effective and efficient system.
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The child support program is working. The stellar bipartisan reforms in last year's welfare reform law are making the program work even better. When we pass the new incentive program this fall, the program will work still better. The key to continued improvement is to do just what our Subcommittee is doing today—to build bipartisan consensus for legislating reforms and to learn from and overcome our problems.
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Chairman SHAW. At this time, I will yield to Mr. Levin for such opening statement as he cares to make.
Mr. LEVIN. Thank you, Mr. Chairman, and I salute you for your attention to an issue critically important to children, single-parent families, and to the effective implementation of welfare reform and the Federal child support enforcement program.
The job that pays a living wage is one component of self-sufficiency for families. And for single parents with a child support order, a noncustodial parent who supports the family every month can be equally important.
We have seen some progress since the seventies when Congress began to insist the States give priority to child support enforcement. Collections have risen from $1 billion a year to more than $11 billion in 1995. That same year, more than 5,000,000 parents were located and paternity was established for over 600,000 children. These, as you have indicated, are good results, but not good enough.
Of the 9.9 million females in the families who are eligible for child support, only 56 percent had child support orders. That means 4 1/2 million families did not even have an order to enforce. Those with child support orders often are not much better off. Only half of those due money from a noncustodial parent actually receive 100 percent of their court-ordered payment. And full automation, the cornerstone of a truly effective child support enforcement system, continues to elude many States, despite a decade-long commitment by the Federal Government to shoulder 90 percent of the cost. Today's hearing will look at both the current incentive structure as well as Federal requirements for an automated computer system.
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In the mideighties, when we designed the current incentive structure, we may have done the best we could with limited information available to us. After nearly a decade of experience, we are now in a position to create a more sophisticated system that truly rewards performance. Many thanks to the Department of Health and Human Services and all those involved—and there have been many—in putting together the proposal we have before us today.
By the way, Mr. Chairman, maybe it would be good to place that in the record since you—yes, the draft legislation. Do you want us to do that?
Chairman SHAW. Without objection, we will place it in the record, but with the explicit provision that this possibly could change from the bill that will actually be filed next week.
Mr. LEVIN. Good.
[The following was subsequently received:]
[The official Committee record contains additional material here.]
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Mr. LEVIN. The Chairman and myself and all of us on the Subcommittee want to continue to receive your comments. To be sure, a wholesale change of this magnitude may be a bit daunting to the States because of the uncertainty of the size of incentive payments coupled with the dramatic change that our entire welfare system must undergo.
Before we conclude that some States may lose Federal funds under the new system, let us remember that it will be several years before the new incentives are fully implemented, and the goal is for all States to continue working and to qualify for the new incentives.
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Let me make a few comments about the computer issue. I am pleased with the progress that has been made on the implementation of the automated systems which are essential to an effective child support enforcement program. But I am concerned that after several extensions, as many as 10 States, including my own, may not meet the October 1 deadline for implementation.
This is especially troubling since many of the child support reforms and the new welfare law depend on a fully functioning, efficient computer network. I am anxious to know just what is standing in the way for the remaining States.
I want to thank John Mahoney, the director of the Department of Information Technology of Oakland County, Michigan, for taking the time to share his insights on this problem with the Subcommittee.
Thank you, Mr. Chairman, and I am anxious now to receive the testimony.
[The opening statement follows:]
Opening Statement of Hon. Sander M. Levin
This morning, we focus our attention on an issue critically important to children, to single parent families, and to the effective implementation of welfare reform—the Federal Child Support Enforcement Program. A job that pays a living wage is one component of self-sufficiency for families, and for single parents, a child support order and a non-custodial parent who supports the family every month can be equally important.
We have seen some progress since the 1970's when Congress began to insist that States give priority to child support enforcement. Collections have risen from $1 billion a year to more than $11 billion in 1995. That same year, more than 5 million parents were located and paternity was established for over 600,000 children. These are good results.
But not good enough. Of the 9.9 million female-headed families in 1991 eligible for child support, only 56 percent had child support orders. That means 4.5 million families didn't even have an order to enforce. Those with child support orders aren't that much better off—only about half of those due money from a non-custodial parent actually receive 100% of the their court-ordered child support payment.
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And full automation—the cornerstone of a truly effective child support enforcement system—continues to elude many states, despite a decade-long commitment by the Federal government to shoulder 90 percent of the cost of such systems.
Today's hearing will look at both the current incentive structure as well as federal requirements for an automated computer system.
In the mideighties when we designed the current incentive structure, we may have done the best we could with limited information available to us. After nearly a decade of experience, we are now in a position to create a more sophisticated system that truly rewards performance. Many thanks to the Department of Health and Human Services and all those involved in putting together the proposal we have before us today.
To be sure, a wholesale change of this magnitude may be a bit daunting to states because of the uncertainty over the size of incentive payments coupled with the dramatic changes our entire welfare system is undergoing.
But before we conclude that some states may lose Federal funds under this new system, let's remember that it will be several years before the new incentives are fully implemented and the goal is for all states to continue working and qualify for the new incentives. Let me also make a few comments about the computer issue. I am pleased with the progress that has been made on implementation of the automated systems which are essential to an effective child support enforcement program.
But I am dismayed that after several extensions, as many as 10 States, including my own, may not meet the October 1, deadline for implementation. This is especially troubling since many of the child support reforms of the new welfare law depend on a fully functioning, efficient computer network.
I am anxious to know just what is standing in the way for the remaining States and I want to thank John Mahoney, the Director of the Department of Information Technology of Oakland County, Michigan for the taking the time to share his insights on this problem with the Subcommittee.
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Chairman SHAW. Thank you, Sandy.
I would like to point out, before Judge Ross starts his testimony, I would like to point out to the Members the items that are in your packet there in front of you. Dr. Haskins refers to this as exciting material. I might say that his excitement is set at a lower temperature than mine.
Mr. LEVIN. You come from Florida, Mr. Chairman.
Chairman SHAW. There are a list of functions that the State computer systems must perform as required by the 1988 Family Support Act and the 1996 welfare reform legislation. The second is a map drafted by HHS that shows the status of the States in implementing the 1988 computer system requirements. The third is a report from the report on States' implementation of the 1988 computer system requirements written by the HHS and Inspector General. The fourth is a report on State implementation on 1988 computer system requirements written by the General Accounting Office. And the fifth is a copy of the current version of the bipartisan committee bill creating the new and incentive systems.
I think that you might find this helpful as the witnesses testify this morning.
At this time, I would like to invite Judge Ross to the witness table. He is Deputy Director of the Office of Child Support Enforcement, U.S. Department of Health and Human Services, and has worked closely with this Subcommittee through the drafting of so much legislation.
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Judge Ross.
STATEMENT OF HON. DAVID GRAY ROSS, DEPUTY DIRECTOR, OFFICE OF CHILD SUPPORT ENFORCEMENT, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
Mr. ROSS. Mr. Chairman and Members of the Subcommittee, thank you very much for giving me the opportunity to testify today on the progress of child support information systems and the administration's recommendations for revamping the incentive system. Systems development and the restructuring of the distribution of incentives are two key elements in strengthening our Nation's child support program.
The administration and this Committee are in full agreement that child support is a central part of welfare reform. That sends a message of responsibility to both parents and is a vital part of moving families toward work and self-sufficiency. Child support can also act as a safety net that helps ensure that single-parent families don't need assistance. Once families obtain independence, child support can keep them from falling back on the public assistance rolls.
Today I would like to focus my testimony in two critical areas, a new incentive structure and State automated systems. Statewide automated systems are critical to the success of our program. Computerized systems are the only means to provide both prompt and reliable processing of information. With a current national caseload of more than 20 million, we must move forward aggressively with new technologies if we are to keep up with the massive volume of information and transactions in every State.
As of today, 16 States have been certified. Many others are close to completion. Meeting this certification requirement is crucial. While many States are using significant levels of automation to process child support cases as they move toward certification, a comprehensive statewide system is a necessary foundation for the new provisions enacted last year to track parents across State lines and assure that they pay what they owe.
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What happens if the State does not meet the October 1 statutory deadline? Having a comprehensive child support program operating statewide is a State plan requirement. Accordingly, by December 31, a State must certify to us through its State plan that its automated system meets Family Support Act requirements. Under current law, we will notify any State without such a system in place that we intend to disapprove its State plan and notify the State of its appeal rights.
The penalty under the law for failure to meet the statutory deadline is cessation of all Federal child support enforcement funding, including the 66 percent matching for program operating costs. I should note that if a State is not operating a child support enforcement program under an approved State plan, its TANF funds will also be lost.
Many States have succeeded in designing and implementing these critical computer systems. Together, we must continue our efforts to make automation a reality in all States.
Now, the Personal Responsibility and Work Opportunity Reconciliation Act required us, in consultation with State directors of IV–D programs, to recommend to Congress a new incentive funding system based on program performance. These recommendations were contained our report to you on March 15. In my last appearance, I gave testimony on the content of the report and our collaborative effort with the States to develop a new incentive funding system.
The jointly developed, revenue-neutral, incentive funding proposal is tough and would push States to improve performance. This formula will ensure good outcomes for children and families. Since the completion of the incentives report, we have moved forward with the States on developing standard data definitions to further improve performance reporting. The current funding system is based on maximizing child support collections relative to administrative costs.
A minimum incentive payment is made to all States regardless of whether performance is good or poor. Currently, States can run inefficient programs and still receive large amounts of incentives. We all recognize that this does not create a significant incentive for the achievement of program goals.
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To meet the congressional charge of the Secretary, we convened a work group of State and Federal partners. The work group developed a formula to reward States for their performance in five critical areas: Paternity establishment, support order establishment, collections on current support, collections on support past due, and cost effectiveness. There is full consensus from State partners that these measures represent the appropriate focus for the program. Under this plan, unlike the current, no incentive will be paid to the poor performers unless the State achieves a significant improvement in performance.
The amount of potential incentive payments for each measure available to each State will be based upon a percentage of its own State child support collections. However, we do recommend that collections of TANF cases and former TANF cases be weighted double.
Counting collections for incentive purposes this way accomplishes two objectives: States with large former TANF caseloads will no longer be penalized by a cap, as in the current formula, and many States are successful in moving families off welfare, and this success is not being recognized because of the cap in the current law.
Second, States have a strong incentive to pursue the action on TANF cases and former TANF cases. For these families, child support is critical for achieving independence and not returning to the public assistance rolls.
Because this system would, for the first time, be performance-based, some States would naturally lose incentives by moving to the new system. To help States prepare for this, we recommend the formula be phased in over a 2-year period.
Finally, I want to thank the Subcommittee for your work on behalf of America's children. Their future will be significantly improved because of the new collection tools and other reforms required of States by welfare reform.
[The prepared statement follows:]
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Statement of Hon. David Gray Ross, Deputy Director, Office of Child Support Enforcement, U.S. Department of Health and Human Services
Mr. Chairman and Members of the Committee: Thank you for giving me the opportunity to testify today on the progress of child support information systems development and the Administration's recommendations for revamping the incentive system for State child support enforcement programs. Systems development and restructuring of the distribution of incentives are two key elements in strengthening the child support enforcement program as envisioned under last year's welfare reform bill.
The Administration and this Committee are in full agreement that child support is an essential part of welfare reform. It sends a message of responsibility to both parents and is a vital part of moving families toward work and self-sufficiency. Child support also can act as a safety net to help ensure that single parent families don't need assistance. Once families have attained independence, child support can keep them from falling back onto public assistance rolls. We are proud of this Administration's record on child support enforcement and anxiously await the positive results that the provisions of welfare reform will bring to further meet these critical goals.
President Clinton has made improving child support enforcement and increasing child support collections a top priority. Since taking office, President Clinton has cracked down on non-paying parents and strengthened child support enforcement, resulting in record child support collections. In FY 1996, $12 billion in child support was collected on behalf of the children of America. This amount represented a 50 percent increase in child support collections since FY 1992. We estimate that in FY 1997 we will collect over $13 billion. Since FY 1992, the number of paying child support cases has increased by 36 percent. In addition, over one million paternities were established in FY 1996, including IV–D paternities and in-hospital paternity acknowledgements, almost doubling the number established in 1992. These accomplishments are impressive, but projections on the impact of the new provisions tell us they are only the beginning.
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The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) included the tough child support measures President Clinton called for from the start, including license revocation and the development of a national new hire reporting system. Child support enforcement at the Federal and State levels is being transformed by these measures. Today, I will focus my testimony on two critical areas: development of a new incentive structure and state automated systems.
Child Support Information Systems
Statewide automated enforcement systems are critical to the success of the child support program. Computerized systems are the only means to provide both prompt and reliable processing of information. With a current national caseload of 20 million, we must move forward aggressively with new technologies if we are to keep up with the massive volume of information and transactions in every State.
Since the inception of the child support program, we've all recognized the importance of automation. By the mid-1980's all IV–D agencies had some level of automation serving families in their States. Now, newer technologies allow us to consider ever-more advanced applications for child support information systems. With the Family Support Act of 1988, Congress acknowledged the increased importance of automation to child support and required statewide automated systems in all States by October, 1995 and later extended that deadline to October, 1997.
Automation of state child support programs:
(1) allows a worker to initiate a case or automatically initiates a case for families receiving public assistance;
(2) begins locating absent parents and tracks automated searches of State databases such as the Department of Motor Vehicles, and refers hard-to-find cases to the Federal Parent Locator Service;
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(3) tracks, monitors and reports on efforts to establish paternity and support orders;
(4) accepts and processes case updates and keeps the caseworker informed about due dates and activities;
(5) monitors compliance with support orders and initiates enforcement actions such as wage withholding or tax refund offset;
(6) bills cases, processes payments and makes disbursements; and
(7) maintains information for accounting, reporting and monitoring.
With required safeguards, States ensure that all of this information is secure and held in strictest privacy.
As of today, sixteen States have been certified as having computerized systems which are comprehensive and statewide. Many others are very close to completion. Meeting this certification requirement is crucial. While many States are using significant levels of automation to process child support cases as they move towards certification, a comprehensive and statewide system is a necessary foundation for new provisions enacted last year to track parents across State lines and ensure they pay what they owe. It is much more efficient and economical to handle child support cases with such a system, especially in an environment where greater than 30 percent of the cases involve more than one state.
What happens if a State does not meet the October 1, 1997 statutory deadline for completing their system? Having a comprehensive child support system operating statewide is a State Plan requirement. Accordingly, by December 31, 1997 a State must certify to us through its State Plan that its system meets Family Support Act requirements. Under current law we will notify any State without such a system in place that we intend to disapprove its State plan and notify the State of its appeal rights. The penalty for failure to meet the statutory deadline is cessation of all Federal child support enforcement funding including the 66 percent of program operating costs. I should note that if a State is not operating a child support enforcement program under an approved State plan, its TANF funds will also be lost.
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Our goal is to maintain State accountability, while working with States and providing the necessary assistance to ensure they have certified automated systems that will enable them to operate an effective child support enforcement program. All of us involved in developing these systems—the Office of Child Support Enforcement, State child support agencies, the corporate community—realize that completing these complex systems is not an easy task.
However, despite this complexity, many States have succeeded in designing and implementing these critical computer systems. Together we must continue our efforts to make automation a reality in all States.
Child Support Enforcement Incentive Funding
The Personal Responsibility and Work Opportunity Reconciliation Act required us, in consultation with State directors of IV–D programs, to recommend to Congress a new incentive funding system for the State child support enforcement programs based on program performance. These recommendations were contained in our Child Support Enforcement Incentive Funding Report to Congress which was submitted to this Committee on March 15, 1997. In my last appearance before you on March 20, 1997, I gave testimony on the content of this Report and our collaborative effort with the States to develop a new incentive funding system for the child support enforcement program.
The jointly-developed, revenue neutral incentive funding proposal is tough and would push States to improve performance. This formula will ensure good outcomes for families and has a broad consensus among the States and other child support enforcement stakeholders. Since the completion of the incentives report we have moved forward with the States on developing standard data definitions to improve child support performance reporting.
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The current incentive funding system is based on maximizing child support collections relative to administrative costs. A minimum incentive payment is made to all States regardless of whether performance is good or poor. Currently, States can run inefficient programs and still receive large amounts in incentives. We all recognize that this does not create a significant incentive for the achievement of program goals.
To meet the Congressional charge to the Secretary of HHS to change the incentive funding system, we convened a workgroup of State and Federal partners.
The workgroup developed a formula that rewards States for their performance in five critical areas: paternity establishment, support order establishment, collections on current support, collections on support past due (arrearages), and cost effectiveness. There is full consensus from State partners that these measures represent the appropriate focus for the program. The workgroup also established performance standards for each of the measures. These standards would determine the amount of incentive a State would receive for a certain level of performance and reward States for maintaining high performance or making substantial gains in improving their performance. The standards are designed to provide tough but reachable targets for performance by rewarding States with higher incentives as they improve. The standards for the first four measures include a performance threshold. Under this plan, and unlike the current system, no incentive would be paid unless a State achieves a significant improvement in performance. For the final measure on cost effectiveness, if a State collects less than two dollars for every one dollar expended, no incentive would be paid.
Each State would earn five scores based on performance on each of the five measures. Workgroup members believed all the measures were important, but the first three measures—paternity establishment, support order establishment and collections on current support—were critical. Paternity establishment and support order establishment are prerequisites of collecting current support, which is essential for family self-sufficiency. Performance on the first three measures could earn a slightly higher incentive than the last two measures—collections on arrearages and cost effectiveness.
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The amount of potential incentive payments for each measure available to each State would be based upon a percentage of its own State child support collections—its ''collections base.'' The collection base includes collections in both Temporary Assistance to Needy Families (TANF) cases and former assistance cases. The collections base also includes collections made for families who were never on assistance. However, we recommend that collections in TANF cases and former TANF cases be weighted double, e.g., every dollar collected counts as $2. Counting collections for incentives purposes in this way accomplishes three objectives:
• States with large former TANF caseloads would no longer be penalized by a cap as in the current formula. Many States are moving families off welfare and their success is not being recognized because of this cap under current law.
• States would have a strong incentive to pursue action on TANF cases and former TANF cases. For these families, child support is critical to achieving independence and not returning to public assistance rolls.
• Direct savings to State and Federal governments result from collecting child support in TANF cases. Costs of other public benefit programs such as Food Stamps and Medicaid could also be avoided by making collections in these cases.
Because this system would for the first time be performance-based, some States would naturally lose incentives by moving to the new system. To help States prepare for the new system, we recommend that the formula be phased in over two years. For FY 2000, a State would earn half of what it would have earned under the old formula and half of what it earns under the new calculation. In FY 2001, the new formula would be fully implemented. This would give States more time to adjust their programs, budget for any financial impact and improve their performance. Of course, the Office of Child Support Enforcement would continue to work with States to assist them during this transition.
The workgroup was concerned that with the enactment of welfare reform, the child support enforcement program is likely to change dramatically in the next few years. Therefore, the report recommends that the child support program's results and effects of the new incentive system should be reviewed periodically. Limited discretion should be granted to the Secretary of Health and Human Services to make appropriate changes, in consultation with the States, based on the program's actual results and effects every three to five years.
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The workgroup's report includes recommendations with respect to other aspects of program funding beyond incentives. We have endorsed the workgroup's recommendations with respect to the incentive formula itself, but have reserved judgment on other aspects of the recommendations because further work may be needed.
We now have the groundwork in place for a more results-oriented management of the National child support enforcement program. We strongly urge Congress to pass legislation on the recommended incentive funding system to allow the child support enforcement program to truly be driven by achieving results for families and children in need of support.
Conclusion
In conclusion, Mr. Chairman, let me restate:
• Much progress has been made in developing statewide automated child support systems. Continuing automation efforts are critical to future success in providing support to America's children.
• The recommended incentive funding formula, developed in consultation with the States, would reward performance and remain revenue neutral. It is tough but fair and will lead to positive results for families.
I want to thank the Committee for your work on behalf of America's children. Their future will be significantly improved because of the new collection tools and other reforms required of States by welfare reform.
—————
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Chairman SHAW. Thank you, Judge Ross, for fine testimony.
Mr. Camp.
Mr. CAMP. No questions.
Chairman SHAW. Sandy.
Mr. LEVIN. Well, once again, your testimony is received with a lot of support up here. And I don't think we have to manufacture any controversy that real. So let me just ask you a more general question about where this is all going. What is a realistic objective, do you think, for us to set in terms of child support payments in this country?
Mr. ROSS. I am entering into a performance agreement with the Secretary, which will have us at $20.8 billion by the end of this Presidential term, which is pretty high. And it seems to me that is a reasonable expectation in the next 3 years.
Not everybody agrees with me. But when we set the goal at $12 billion when we first came to this job, no one agreed with me on that one, and we made it. So it seems to me it is not an unreasonable expectation. That really amounts to a 15-percent increase compounded per year from the beginning of the term for the next 4 years. So I would hope that $20.8 billion can be achieved. That, of course, assumes the systems will be in place—and that we will continue to have the attention that has been given to us recently.
Mr. LEVIN. And that would be roughly what percentage of the amount involved in court orders?
Mr. ROSS. Well, it depends on whose figures you use—and I am happy to see you have in your folder several different sets of figures, but $34 billion is the figure we estimate as possible support. That includes, of course, people who find themselves lawyers and use them to make modifications in necessary orders.
But I would say in the terms of the percentage that it is just a percentage increase. Obviously, $20 billion compared to $8 billon collected when we started would be a good increase. That is a 150-percent increase over that time period.
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Mr. LEVIN. Thank you.
Chairman SHAW. Judge, to follow up on Mr. Levin's questioning, what percentage of the parents are in compliance with their obligation? Do we know that figure?
Mr. ROSS. Not a hard number. What we say is, in 50 percent of the cases where there are orders, they are partially compliant; 25 percent of those people pay the total amount, and another 25 percent pay nothing.
Chairman SHAW. Only 25 percent of the largely fathers are in compliance with the court order?
Mr. ROSS. The latest number I remember is in terms of the orders established and, again, there are a couple ways to count it.
Chairman SHAW. That is disgraceful. I think that certainly shows a need for what we need to do.
Mr. ROSS. Fifty percent is what they are telling me.
Chairman SHAW. Fifty percent of full compliance. That is still rather critical.
Mr. ROSS. Right.
Chairman SHAW. It shows a need for reform.
Mr. ROSS. Oh, absolutely.
Chairman SHAW. Mr. McCrery.
Mr. MCCRERY. Mr. Ross, as a part of your recommendations, do you include a requirement that all incentive payments be used by the States for child support enforcement?
Mr. ROSS. We certainly do. We think that is key to the improvement of the program.
We have a number of States now where the money, which essentially is child support money that goes back to the State, is then put in different programs. So the work group that formed this recommendation felt as though it should be included. I notice that the Committee's bill—of course, first draft of the bill—does include that.
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But the answer to the question is yes, the work group recommends that. And, frankly, it is important because it helps those States that are having problems with all the things they need to do to get up and running. Being able for child support purposes is important as opposed to building roads and doing other things.
I understand fully the States' financial problems, that they may need the money for other purposes, but it seems logical to me that child support incentives should be plowed back into child support programs until such time as we are performing at a much better rate than we are now.
Mr. MCCRERY. Well, what is the rationale, just the general rationale for incentive payments?
Mr. ROSS. The Old or New Testament, I think, says: Where the pocketbook is, there, the heart shall be also. It seems to me that if we are paying incentives to a program, we are going to pay them for good performance, then that will drive the program toward good performance.
Mr. MCCRERY. Well, sir, if I can try to rephrase——
Mr. ROSS. I am probably in trouble saying that. I just thought of it.
Mr. MCCRERY. No; I think it is apropos.
But if I might rephrase, you are saying if you give the States some financial incentive to collect child support payments, they will do a better job of collecting them? Is that pretty much the rationale?
Mr. ROSS. Yes, sir. And the reason for that——
Mr. MCCRERY. Let me continue then.
Mr. ROSS. OK.
Mr. MCCRERY. In my State, just to give you an example, the district attorneys, of course, are charged with the responsibility to carry out this program and to collect the child support, and they now use their incentive payments not only to support their operations with respect to child support enforcement but with other operations of their office. It is very important to many of them in terms of meeting their budget.
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It seems to me that if you require the district attorneys in Louisiana to put back all of their incentive payments into the child support enforcement program and not allow them to use those incentive payments for other operations in their office, it has a perverse effect, because then if they have all the money they need to run their child support enforcement and they are doing the best job they can possibly do in child support enforcement, there is no incentive then for them to do any better, because they got all they need. And the other operations are suffering.
So my DAs tell me that your proposal to force them to put all 100 percent of the money back into child support enforcement won't do them any good and, in fact, will make them less enthusiastic about the program. So if, in fact, your rationale is to encourage States to do a better job for child support enforcement, it seems to me you might want to rethink and this Subcommittee might want to rethink that particular requirement.
Chairman SHAW. Mr. Hayworth.
Mr. HAYWORTH. Thank you, Mr. Chairman.
Judge, thanks for coming down today and for that new HHS interpretation of scripture. It is always good to see the new international version, now the HHS version.
As you know, Judge, the Subcommittee is contemplating two actions regarding automatic data processing. First, we think the determination of all IV–D funding should be reserved for only the very worst cases in which the States define to the Federal Government. So we want to provide the Secretary with authority to impose fines on States that don't meet the October 1, 1997 deadline for completing their data systems.
Second, we would like to work with the administration and others to carefully examine the various recommendations we will hear today and to consider new approaches to helping States meet the new system requirements created by last year's welfare reform law.
Are you in support of these two actions?
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Mr. ROSS. Well, I have to obviously see what precisely we are talking about before I can take a position on it. But, as I am sure you are aware, Arizona is certified, so we are off to a good start, with the State of Arizona and Nancy Mendoza, you will hear from later.
I don't think anyone wants to hurt children, but at the same time there has to be, it seems to me, forward movement, and together we have to figure out how to do that. We need, obviously, the specific proposals to see what they are and work as part of a group to perhaps shape those proposals. But I think it certainly needs to be done.
Mr. HAYWORTH. Right. Well, I appreciate your kind words for Arizona and look forward to hearing from Ms. Mendoza in a little while. And I guess, to borrow a phrase—it is not scriptural, but I think Mr. Perot used—I guess we will all be all ears today to hear the different proposals and different solutions some States have found.
Thanks for coming, Judge.
And I have no questions, Mr. Chairman.
Chairman SHAW. Mr. Camp.
Mr. CAMP. Just to follow up on that line of questioning, a sanction that basically terminates the entire IV–D program may actually have the opposite effect.
Mr. ROSS. I hope so.
Mr. CAMP. And I wondered what your thoughts were on a sanction that really was maybe a smaller percentage of the funding as opposed to terminating the whole thing.
Mr. ROSS. Again, what I talked about earlier is what the law is now.
In terms of giving a recommendation here today, I think perhaps it is a little premature for me to do that for, frankly, a number of reasons. But the fact is that we certainly are willing to work with the Subcommittee in providing for new legislation.
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Mr. CAMP. All right. Thank you.
Thank you, Mr. Chairman.
Chairman SHAW. Thank you, Mr. Camp.
Mr. Collins, do you have any questions of Judge Ross?
Mr. COLLINS. No, sir.
Chairman SHAW. Judge Ross, we certainly appreciate your good work and your continuing attention to this problem and the fulfillment of your rosy predictions.
I think that all of us up here would agree that, in the long-term, we owe a responsibility to the kids to provide probably the best antidote to poverty and to—the best cure for poverty, excuse me—and to take care of these kids and make sure that there is parental responsibility for bringing these kids into the world as well as to see to their well-being.
Thank you very much.
Mr. ROSS. Thank you very much.
I can't resist saying, Mr. Chairman, the last time I was here, I promptly left and had a heart attack. So I am hoping that doesn't happen today.
Mr. HAYWORTH. Stay with us, Judge. Stay with us.
Chairman SHAW. I would like the record to show that we treated the judge with the greatest respect.
Mr. ROSS. Thank you.
Chairman SHAW. Thank you, Judge.
Our next panel will be discussing the incentive payment reform. We have Nancy Ebb, who is a senior staff attorney of the Children's Defense Fund of Washington, DC. We have Nancy Mendoza, who is the assistant director of the Division of Child Support Enforcement of the Department of Economic Security from Phoenix, Arizona. We have Teresa Kaiser, director of the Division of Child Support Enforcement for the Department of Social Services in Jefferson City, Missouri.
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Ms. Ebb, if you would proceed. We have all of your written testimony, which will be made a part of your record, and you may summarize as you see fit.
STATEMENT OF NANCY EBB, SENIOR STAFF ATTORNEY, CHILDREN'S DEFENSE FUND
Ms. EBB. Thanks for the opportunity to testify today.
Changing incentives to reward positive outcomes is an important step for children. The current system needs replacement. It rewards even poor performers and doesn't focus attention on outcomes that matter to children.
The proposal developed by HHS and States and reflected in the Subcommittee drafts is a very strong one. While there is some debate around the edges, broad consensus has developed about this proposal and it deserves passage.
Our written testimony highlights a number of ways the proposal can be and, we believe, should be strengthened. But I do want to underscore our basic support for its broad outlines. I would like to highlight some of our most important recommendations.
First, there should be an incentive to reward good medical support enforcement. Particularly in light of new funding for uninsured children enacted by Congress in H.R. 2015, States have exciting opportunities to expand effective medical support enforcement.
Since 1984, States have been required to seek medical support from the noncustodial parent where it is available at reasonable cost. But this is not a task many of them have taken seriously. According to GAO, in 27 HHS reviews of State medical support enforcement, 20 were not enforcing medical support orders, even where medical support was available through the noncustodial parent's employer.
H.R. 2015 provides new funding so that low-income parents, including noncustodial parents, can get insurance for their children at reasonable cost even if it is not available through the employer. And especially given this new funding, I think it is important that we take medical support enforcement seriously.
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Child support can make an extraordinary difference, and the Sacramento Child Support Office is a terrific example of this. There, the child support office offers noncustodial parents the chance, when a medical support order is entered, to sign up for either an HMO or Blue Cross through a plan operated by the child support agency. If the noncustodial parent becomes unemployed and can no longer continue to pay premiums, the agency offers the custodial parent the chance to pay premiums. This is very creative medical support enforcement programming.
I think we really need an incentive for medical support to encourage States to pursue medical orders where it is available to the noncustodial parents or to follow California's example of similar creative programming so we can reach some of the 10 million uninsured children.
Next, incentives for back support collections. The Subcommittee draft does include an incentive based on collections of back support. It doesn't distinguish between back support that goes to the State to offset past welfare expenditures and back support collections that go to families.
Failure to make this distinction creates an incentive that can reward States for collections that actually don't benefit families at all.
Under welfare reform, the basic principle in distributing back support on behalf of former welfare families is that the law puts families first. The one exception is that back support collected through the Federal tax intercept is kept by the States before it is paid to the families. This was a compromise from the House position, which would have put families first in all cases. It is reinforced in the current iteration of the back support incentive, and we think it should be corrected to reflect the intent of the policy that was embodied in welfare reform.
Third, should incentives be awarded based on State data that is incomplete or unreliable? We think not. Many States have actually struggled to produce reliable data. Last October, GAO noted that OCSC had collected reporting system reviews in 20 States, most of which found data inaccuracies and unreliable data. It is just plain not right to give States incentives based on this kind of data, and we think that a denial of incentives should actually match a penalty passed in H.R. 2015 for unreliable data.
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Finally, we urge that once performance-based incentives are in place, HHS do what GAO recommends: State program results audits that give us all some insight into why State programs are not making progress when they are not meeting performance standards or not getting incentives.
Our current audit system doesn't give us a sense, when States aren't making progress, of what the management barriers are, what are the barriers to progress that could be corrected as we try to progress toward performance-based outcomes. This kind of review would give us all some insight and help us all help States make progress toward desired outcomes.
Thanks for your attention and your work on this very critical issue.
[The prepared statement follows:]
Statement of Nancy Ebb, Senior Staff Attorney, Children's Defense Fund
The Children's Defense Fund (''CDF'') appreciates the opportunity to testify about the need for changes in child support enforcement incentives to states. CDF is a privately supported charity that advocates for the interests of low income children. We work intensively on child support. CDF receives no federal grants or contracts. In my testimony today, I am not representing any entity that receives federal grants or contracts. We welcome the opportunity to comment on proposals to improve incentives for state child support enforcement performance. With many other groups represented in this room, we worked hard on child support improvements included in the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA). We are proud of many of these changes, and hopeful that they will help make child support what it must be—a regular, reliable source of income for children that helps keep food on the table and a roof over their heads. In many states, there is still a chasm between that goal and the performance of state child support systems. Changing incentives so they reward positive outcomes for children is the next important step towards reducing the gap between promise and performance. The current system, based only on a state's cost-effectiveness ratio, needs to be replaced. Under the current system, every state, no matter how dismal its record, gets a minimum incentive payment. As the Congressional Research Service has noted, ''under the current financing arrangement, states can run inefficient programs and still make a profit from the CSE program.''(see footnote 1) This perpetuates mediocrity and ill-serves children.
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Incentives that measure only cost-effectiveness can skew efforts in favor of high-dollar, easy-to-work cases, and away from the harder ones (for example, labor-intensive cases where paternity is contested, or a non-custodial parent is self-employed and hiding income). Such incentives do nothing to measure whether states are achieving the outcomes that truly make a difference for children. We should reward states that establish paternity and support obligations where necessary, and that quickly enforce orders so child support is income a custodial parent and child can rely upon. If the system does not make progress towards these outcomes, then no matter how cost-effective it is, it is not succeeding for children. And particularly in a world of time-limited welfare, it is essential that child support enforcement is effective, so that custodial parents with low earnings can rely on child support to help supplement their own efforts and make work a viable alternative to welfare.
The PRWORA required the Secretary of Health and Human Services, in consultation with directors of state child support programs, to recommend to Congress a new incentive scheme based on program performance. In broad outline, we support the recommendations of the Incentive Funding Work Group made in response to this Congressional directive. Their recommendations take a big step towards a performance-based system that rewards outcomes that make a difference. They help ensure that federal expenditures will hold states accountable and put child support dollars in the pockets of single-parent families.
This testimony makes suggestions about how to improve the Work Group proposal to strengthen outcomes for children. At the same time, we wish to emphasize an important message: there is a broad degree of consensus about the core proposal. Congress has a window to enact performance-based incentives this session. We hope this Subcommittee will take a leadership role in ensuring that Congress makes the most of this opportunity.
Our testimony outlines specific ways the Work Group proposal can be strengthened:
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• There should be a reward for effective medical support enforcement
• The arrearage measure should be changed to reward states that put families first
• There should be a bonus for overall good performance
In addition, the testimony addresses issues that have arisen during discussions about the incentive proposal, and that have not yet been resolved:
• Incentives should be awarded only if state data used to claim them is complete and reliable
• Performance-based incentives should be coupled with program results audits by HHS that measure state progress towards achieving the performance goals established by incentives, identify barriers to progress, and recommend strategies to improve progress
• Phase-in of incentives should not be so prolonged that it defeats the performance-based focus of the new incentive scheme
• Incentive funds should be re-invested in the child support program, and should be used to supplement, not supplant, historical state expenditures
• Base funding for the program should be maintained at 66 percent to ensure that states have adequate resources to improve and sustain performance
Rewarding Effective Medical Support Enforcement. The proposal does not measure or reward state pursuit of medical support. We strongly urge that incentives include a measure of state effectiveness in obtaining and enforcing medical support awards. Since 1984, federal law has required that states take steps to obtain an order for medical support as well as for child support where insurance coverage is available through the noncustodial parent at reasonable cost. These requirements have been strengthened and clarified over the years. Particularly in light of new funding for uninsured children provided in H.R. 2015, states have exciting opportunities to expand medical support coverage for children. Medical support incentives should encourage state child support agencies to link with state health agencies and take advantage of the opportunity this bipartisan legislation creates.
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Historically, state medical support enforcement has been spotty at best. In FY 1994, according to OCSE data, 58 percent of support orders established included health insurance, up from 46 percent in 1991. However, only 32 percent of orders enforced or modified in FY 1994 included health insurance, down from 35 percent in 1991.
Moreover, obtaining an order does not mean that it is enforced—that a child actually is enrolled in a health plan so the child can see a doctor or get a prescription filled. According to a GAO report, in 27 reviews of state CSE medical support programs between 1987 and 1991 conducted by OCSE and HCFA, at least 13 state programs were not consistently petitioning to include health insurance in support orders, and 20 were not enforcing orders to provide health insurance. GAO noted that ''States are not ensuring that noncustodial parents provide health insurance for their children even when such insurance is available through the noncustodial parents' employers.''(see footnote 2)
Aggressive enforcement of medical support is important. Health coverage for children is eroding. In 1994 and 1995, the number of children reported by the Census Bureau to lack health coverage was at the highest level ever recorded—10 million children uninsured year round, or one in seven American children. Employer funding of family health coverage has dropped dramatically over time, with children losing health coverage at twice the rate of adult losses. Since 1989, the number of children without private coverage has grown by an average of 1.2 million a year, or nearly 3,300 a day.(see footnote 3)
States can expand coverage by pursuing support available through the non-custodial parent's employer. If that coverage is not available, then it is important to note that H.R. 2015 provides $4 billion in annual grants to states to cover uninsured children, either through Medicaid or a separate state program. Under this program, parents of low-income children can buy coverage for their children, paying premiums that would appear to meet the medical support definition of ''reasonable cost.'' As a general rule, states may pay some or all of child health insurance premium costs for families with incomes at or below 200 percent of the federal poverty line ($26,600 a year for a family of three). The remaining family share of child health insurance premiums could be paid by the non-custodial parent under a medical support order. Even if family income is too high to qualify for premium subsidies, states can permit families to purchase coverage for otherwise uninsured children by paying full premium costs. In such cases, states could similarly direct the non-custodial parent to pay premium costs under a medical support order.
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A pilot program by Sacramento, California's child support agency shows how a child support agency can be an effective link to such coverage. There, the agency offers a noncustodial parent who lacks other insurance the opportunity to buy a child coverage through a health maintenance organization or Blue Cross at the time he or she is ordered to pay child support and medical coverage. If the non-custodial parent loses employment, the custodial parent is offered the chance to sign up on behalf of the child so that insurance does not lapse.
The current incentive system, based on cost-effectiveness, provides no reward for effective medical support. Because medical support does not generate cash collections, success or failure in obtaining medical support has no consequence under the current incentive system. Indeed, expenditures to enforce medical support actually have negative effects under the cost-effectiveness incentive measure: medical enforcement costs drive up administrative expenditures without bringing in countable cash collections. This medical support ''disincentive'' should be changed under a new incentive system.
An initial objection to a medical support incentive was that states did not have the data to track whether medical support was obtained. However, the Office of Child Support Enforcement's Measuring Excellence through Statistics (METS) initiative, a cooperative effort with states, appears poised to agree on new reporting forms. These new forms include state reports of cases where health insurance is ordered and cases where health insurance is provided as ordered. Thus, data should be available to measure state performance in this area.
Recommendation
An incentive measure should be added to reward states that do a good job of pursuing medical support. If such a measure cannot be immediately enacted, then at a minimum the new legislation should follow the consultative process used to develop the proposed incentives and require that within a year the Secretary of Health and Human Services, in consultation with State directors of programs under part D of title IV of the Social Security Act and representatives of affected groups, develop a new medical support incentive measure to augment, in a revenue neutral manner, the system under section 458. The new system would provide incentive payments to any State based on such State's effective performance in establishing and enforcing medical support orders. Not later than October 1, 1998, the Secretary should be required to report on the new system to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate, and should have authority to incorporate these recommendations into the incentive scheme.
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Arrearages: Putting Families First.
The Work Group gives states an incentive for collections of arrearages. It does not distinguit welfare expenditures, and arrearages that go to families. Failure to make this distinction creates an incentive that may reward states for collections that do not benefit families.
Under distribution changes made by the PRWORA, the basic principle in distributing arrearages on behalf of former welfare families is that the law ''puts families first.'' Former welfare families are paid back child support owed to them before the state keeps back child support owed to the state to offset the cost of welfare. The one exception to this policy is that child support collected through the federal income tax intercept on behalf of former welfare families is kept by the state instead of being paid to the family. This was a compromise from the House position, which would have put families first in all cases, regardless of which enforcement technique was used to collect arrears.
The danger of this compromise is that states no longer have an incentive to use any arrears enforcement technique other than the federal income tax intercept, since arrears collected through any other mechanism go to families instead of to the state. It's an especially troubling compromise because the tax intercept is the most efficient, low-cost, first-line technique for collecting back support. States should be encouraged to use the tax intercept, because it is proven effective. At the same time, if states use it as their first strategy for collecting arrears, former welfare families are likely to be left out in the cold: states benefit before families do, despite the legislative intent to put families first.
The Work Group arrears proposal perpetuates this perverse incentive. Under its proposal, states that rely heavily on the tax intercept may qualify for an incentive even though former welfare families do not see any benefit from arrears collections.
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Recommendation
The best solution to this dilemma is to change the distribution scheme, restoring it to the House version in which all arrears go to families first, regardless of the method of collection. It was good policy the first time around. If that is not possible, however, then the arrearage incentive should be changed to distinguish between collections that go to states and collections that go to families. Incentives should be calculated based on collections that go to families. There is no reason to give states a double reward—allowing them to keep arrears instead of passing them on to families, and then paying them an incentive for doing so.
Rewarding Overall Good Performance.
The Work Group's proposal gives states incentives if they meet any of the performance measures. In addition to rewarding states for meeting individual measures, the incentive scheme should encourage states to improve overall performance. States that perform well across the board should receive special recognition and encouragement. These are the states that are genuinely making child support work for children, instead of meeting individual indicators that do not add up to good program performance.
Recommendation
The incentive proposal should include a bonus pool to reward states that qualify for incentives under all of the measures. Alternatively, it could give a bonus to states that qualify for incentives under the measures that receive the greatest weight.
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Awarding Incentives Based on Complete And Reliable Data.
When states do a good job on key performance measures, they deserve to be rewarded. Yet many states have struggled to produce reliable data. Last October, a GAO report noted that beginning in 1994, OCSE has ''increased its emphasis on auditing the accuracy of state program data and the systems through which states report their data to OCSE. At the time of GAO's review, OCSE had conducted reporting system reviews in 20 states, most of which found data inaccuracies and unreliable reporting systems.''(see footnote 4) States should not be able to claim incentives based on unreliable data that does not fairly measure performance.
A number of steps will help clean up the data: the collaborative federal-state METS project, which establishes uniform reporting definitions across states; automated systems; state self-assessments; and the H.R. 2015 provision that HHS must review at least every three years whether state data is reliable and complete, and has authority to penalize states if their data are incomplete or unreliable (unless that violation is of a technical nature). However, unless a comparable provision is included in the incentive legislation, we could face an odd scenario: a state could be under a penalty for unreliable data, and yet qualify for an incentive payment based on the same, unreliable data. This hardly seems right.
Recommendation
Provide that states cannot qualify for an incentive payment based on data that has been determined by HHS to be incomplete or unreliable. Direct the Secretary to provide states with guidance about what constitutes incomplete or unreliable data, and with technical assistance to help ensure data quality.
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Using Program Results Audits to Identify Barriers And Improve Performance.
New incentives take the next important step to improve state child support enforcement. On the eve of taking this step, it's important to ask what related steps should be taken to improve performance. There is one that is made possible by the development of new performance measures—program results audits that look at whether states are making progress towards these new performance outcomes, and that identify barriers to progress. Program results audits that pinpoint barriers to good outcomes, and ways to eliminate those barriers, can be an important management tool. They can reinforce the message that results for children count, and help states improve.
The current audit system does not mesh with the new incentive emphasis on results. Under current law, states are audited for ''compliance'' with procedural requirements, as well as the validity of their data. These are important measures, which give some insight into the program. Yet states have historically argued that child support enforcement is a ''process-driven'' system that does not measure or reward good performance. They are not systematically audited to determine what policies and management practices are working or failing in their programs—if states do not meet performance expectations, why is that happening? What are the barriers to performance, and how can they be eliminated?
Last year's GAO report suggests that program results reviews are an important supplement to performance measures such as the proposed incentives:
While OCSE has initiated certain management improvements to establish program goals and strengthen its partnership with states, limitations in its audit processes and the federal incentive funding structure continue to constrain improvements in program results. While we recognize that performance measures have yet to be approved, we continue to believe that OCSE should assess state program performance to identify problems states encounter that inhibit their effectiveness and, when appropriate, recommend actions to help states improve their performance... Moreover, program results audits could help OCSE respond to state requests for additional information on how to improve program performance.(see footnote 5)
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Such reviews could help states find problems and fix them. One of the most frustrating aspects of the current system is that the data often tell us that state child support systems do not serve children well. Yet there is little information about why that is so. Federal reviews that identify barriers to performance, and suggest management improvements, could be an important adjunct to performance-based incentives. Such reviews would be useful for program managers, legislators, and advocates trying to get a handle on why a state program is not making progress, and what should be done to get it moving in the right direction.
Recommendation
Require that HHS reviews include program results audits in addition to compliance and data oversight.
Phasing in New Incentives.
The Work Group proposes that the new incentive system be phased in over a two year period beginning in fiscal year 2000. This phase-in is desirable. Under the new system, some states will be winners. Poor performers will be losers. The phase-in gives states advance notice of how they must improve their system to avoid losing incentives. It gives them time to benefit from the many program improvements required under the PRWORA before they face the challenge of a performance-based incentive system. This strikes us as a fair balance between the need to move to a performance-based system and the need to give poor performers a chance to improve.
Some states and the American Public Welfare Association have sought a longer phase-in, arguing that they will be financially hurt unless they are given more time to prepare. It is in everyone's interest to ensure that programs have enough funding to perform effectively for children. However, it is also important to move ahead quickly to reward good performance and to deny rewards when states fail to perform. The two-year phase-in gives states ample notice.
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Recommendation
Adopt the Work Group's proposed phase-in. If a longer phase-in is adopted, at a minimum the incentives should include a medical support incentive, since a longer phase-in provides the opportunity to reach consensus and generate data on the issue.
Reinvesting Incentives in Child Support.
Incentives are funded out of the federal share of child support collected on behalf of children on welfare. This money is raised the hard way: instead of being paid to our poorest children, child support collected on their behalf is split between state and federal governments to fund incentives and to offset welfare costs. When dollars are diverted from such a poor population, there should an especially high standard for looking at where that money is reinvested. Instead of requiring that state incentive payments be used to expand or improve child support services, there is currently no restriction on how incentive payments can be used. Not all states reinvest incentive payments in the program. Rather, they deposit payments in general revenue funds, where they can be used to fund state costs(see footnote 6)—prisons, or highways, for example—that do not benefit low income children. Other states invest incentive payments in child support, but use the incentive payments to replace state expenditures, rather than to expand services or to demonstrate new approaches to effective enforcement. Id.
The Work Group proposes that incentive payments received by a state must be reinvested in child support. We agree. Discussions of the proposal have floated the prospect that incentives could be spent in related areas, such as domestic violence or work programs for noncustodial parents. These are issues worthy of increased public investment. At the same time, many child support programs are resource-starved. Their performance reflects that fact.(see footnote 7) Before incentives are invested in other programs, states should be required to ensure that their child support program is adequately funded and is at the highest performance level.
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Recommendation
Require that child support incentives be reinvested in child support, and supplement rather than supplant historical state expenditures.
Retaining Sufficient Base Funding to Get The Job Done.
Under current law, the federal government pays 66 percent of the administrative cost of child support enforcement. Discussions of incentive reform have included a proposal to lower this basic administrative match, and put more money in incentive payments. The Work Group indicates its ''strong belief'' that funding should remain at 66 percent so states have the resources and staff to operate effectively. We agree.
Incentives are important to spur better performance. Bad actors should not simply continue to collect federal dollars that do not translate into effective help for children. At the same time, one of the keys to improving poor performance is investing in the program. If the basic match for administrative costs is cut from 66 percent, states with poor records will have even fewer resources to improve. Caseloads will continue to be unmanageable. Even the economies of scale that better automation provide will not make up for resource-poor programs.
Recommendation
Retain the basic 66 percent match rate.
The Children's Defense Fund appreciates the opportunity to present testimony on a viable incentive scheme. We appreciate the hard work that has produced such a consensus on the broad outlines of an incentive proposal, and urge that Congress move quickly to put a new incentive plan in place. We look forward to working with you in this effort. We are grateful for your continuing interest in child support, an area which is as important to children as it is detailed and thorny.
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Chairman SHAW. Thank you, Ms. Ebb.
Ms. Mendoza.
STATEMENT OF NANCY MENDOZA, ASSISTANT DIRECTOR, ARIZONA DEPARTMENT OF ECONOMIC SECURITY
Ms. MENDOZA. Thank you, Chairman Shaw, Members of the Subcommittee.
I want to start by commending the Secretary and the process that was used in the development of the incentive formula. The process was inclusive, responsive, and flexible. The five performance factors that are being recommended are the right things to reward in this program and to direct and focus the energies of State child support enforcement programs.
In the 6 months since the incentive proposal was provided, there have been continuing discussions regarding additional refinements and improvements that need to be made to ensure successful implementation of the incentive formula. While there is broad consensus on the factors, there is a lack of accounting for variation in State demographics and State policies within the formula. Certain measures which are designed to gauge the performance of child support enforcement programs may, in fact, be indirect measures of key State policy demographics or policies.
For example, in terms of the out-of-wedlock birth rate, you will see attached to my statement a bar chart that depicts the variation among States in out-of-wedlock births from a low of 15 percent in one State to a high of 45.4 percent in another State. The job of achieving high performance in the area of paternity establishment is made more difficult for States with high out-of-wedlock birth rates, and the effects of that are compounded in the area of order establishment since a legal paternity is a prerequisite to order establishment.
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Congress has previously recognized that out-of-wedlock birth rates may impair a child support enforcement program's ability to perform well and allows the Secretary to adjust for that in the paternity establishment percentage. No similar provision is provided in the incentive formula.
Another area where there is variation from State to State is whether participation in the IV–D program is mandatory or voluntary. Arizona does not require nonpublic assistance cases to become IV–D cases. In States with such voluntary policies, a larger portion of the caseload is likely to be a public assistance caseload wherein it is more difficult to obtain orders of support and collections. Based on recent data, the range of nonpublic assistance cases and caseloads is from a low of 24 percent to a high of 76 percent. So the composition of States' caseloads varies significantly.
An incentive system that does not acknowledge variations among States holds State governments responsible for matters that are beyond their reasonable control and may penalize States for exercising policy discretion where no Federal requirement exists.
Congress historically has adjusted for demography State by State. Examples of this are in the Federal medical assistance percentage which varies from State to State based on per capita income, which results in the Federal share ranging from 50 to 78 percent of the Medicaid payment. In the recently enacted Budget Reconciliation Act, the Child Health Program, the allocation will be varied based on the number of low-income uninsured children and the cost in each State. Under the TANF grant, States were given three options for their block grant base to account for historic differences in welfare policies. While these kinds of State-by-State adjustments do add complexity to a formula, they often achieve a result that is more fair and based on the recognition of variations among States.
The recommendation is that while the incentive formula is being implemented, the Secretary conduct and report results of statistical analyses of these types of variations to determine whether adjustments to the formula are warranted to provide a more equitable distribution of funding still based on performance.
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The second issue I would like to address is related to the phase-in. There has been some discussion of that. The currently proposed phase-in is, in my opinion, too brief to allow for a good analysis of the impact of the formula and to make the kinds of adjustments for State demographics that I mentioned. Based on data that was provided to the work group, some reductions may seriously impair the ability of State programs to continue to improve their programs and to serve families. Furthermore, given the interstate nature of this program, losses in any one State will likely affect performance of other States, since one-third of the caseload is interstate in nature.
The recommendation is that we distinguish between the factors in the formula and the actual application of the funding. The factors, the five that have been mentioned, should be implemented immediately upon the enactment of the legislation. We need to give a clear and unambiguous message as to what is to be rewarded in this program.
However, the impact of the use of those factors should be mitigated by a longer phase-in. APWA has asked the Office of Child Support to examine what a 20 percent per year phase-in might be. There is no specific recommendation here about the timing of the phase-in just that it needs to be lengthened in order to continue to improve programs.
Finally, I would indicate that we need to look at how non-IV–D expenditures are accounted for in the formula under cost effectiveness.
Thank you for the opportunity to address the Subcommittee this morning.
[The prepared statement and attachments follow:]
Statement of Nancy Mendoza, Assistant Director, Arizona Department of Economic Security
Introduction
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My name is Nancy Mendoza. I am the Child Support Director for the State of Arizona. I have been involved with the development and subsequent analysis of the incentive formula in a variety of capacities. I represented Region IX on the Secretary's Incentive Work Group. I chair the Funding Subcommittee of the National Child Support Enforcement Association (NCSEA). I am a member of Child Support Subcommittee of the American Public Welfare Association (APWA) which is chaired by Dr. Linda J. Blessing, Director of the Arizona Department of Economic Security. In my remarks I will address issues raised by Arizona, as well as concerns and recommendations of the National Child Support Enforcement Association (NCSEA) and the American Public Welfare Association (APWA.) Attachments A and B contain the written statements from those organizations. The Arizona Child Support Enforcement program has made a sustained and concerted effort to improve performance in recent years. The program received the ''Most Improved State'' award from NCSEA in 1994. Arizona ranked first in the nation in increased collections from 1992–1996. (U.S. Department of Health and Human Service, HHS NEWS, October 23, 1996.) Based upon data published in the DHHS Twentieth Annual Report to Congress, Arizona ranked fifth in the nation in the increase in support orders established during fiscal year 1996. We achieved Level II certification of our automated system in July, 1996. We recognize that even with these accomplishments, many children continue to lack the financial support to which they are entitled. We continue to work aggressively on behalf of those children.
Background
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) required the Secretary of Health and Human Services to recommend to Congress a new incentive funding system for the State child support enforcement program to be implemented beginning in federal fiscal year 2000. The new formula is to be based on program performance and must be cost neutral to the federal government. The Secretary consulted with a work group of child support directors and submitted her recommendations to Congress in March, 1997. The process by which the incentive proposal was developed by the Secretary was inclusive, responsive and flexible. The resulting proposal serves as a sound foundation for the next phase of deliberation and refinement. The five performance factors: paternity establishment; support order establishment; collections on current support; collections on arrearages; and cost effectiveness, are the appropriate areas for which to reward achievement and to direct and focus the energies of state child support enforcement programs. While there is broad consensus that these are the correct factors to use in an incentive formula for the child support program, achievement on these factors is dependent to some degree on a state's demographics; the formula does not address demographic variation among the states. Arizona and a number of other states will be adversely impacted if these variations are not considered.
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Issue #1.—Variations in states' caseload demographics and policies are not addressed by the formula
All states' funding will be determined in like manner on the factors irrespective of unique state population characteristics. This is problematic for Arizona and for a number of other states. Key demographic characteristics and policies may work against a state's ability to achieve high ''scores'' on certain measures intended to gauge child support enforcement performance. These characteristics and policies include:
1. Higher than average out-of-wedlock birth rate.
Attachment C is a bar chart depicting the disparity among states on this factor. Nationally, the rate ranges from a low of 15.7% in Utah, to a high of 45.4% in Mississippi. Arizona falls within the 35–39.9 segment with an out-of-wedlock birth rate of 38.2%. (U.S. Department of Health and Human Services, Monthly Vital Statistics Report, Vol. 44, No. 11(S), Table 16, June 24, 1996.) It is more difficult to achieve the required paternity establishment ratios when starting with more out-of-wedlock births. The negative effects of this are compounded because without a high paternity establishment ratio, it is impossible to obtain a high ratio of support-ordered cases, as legal paternity is a prerequisite to the establishment of an order. Congress recognized that the out-of-wedlock birth rate in a state may impede a child support enforcement program from achieving required paternity establishment percentages. 42 USC, Section 652 (g)(3)(A) provides that the Secretary may take into account the ''percentage of children in a State who are born out of wedlock'' in determining the ability of a State to meet the paternity establishment percentage requirement. Although the Secretary has not used this discretionary authority, Congress acknowledged the need to allow for this consideration. No similar provision has been included in the incentive formula.
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2. State Policy Regarding Voluntary Participation in the IV–D Program.
Arizona does not require non public assistance cases to become IV–D cases. We actively publicize the availability of IV–D services to non public assistance families and make them available at no cost to the parties. In states with such voluntary policies, a larger portion of the caseload is comprised of public assistance cases in which it is often more difficult to obtain support payments. States that do not require non public assistance cases to be handled by the IV–D agency, may find themselves at a relative disadvantage under the proposed incentive formula. Based on the DHHS Twentieth Annual Report to Congress, non public assistance cases comprise from a low of 24% to a high of 76% of states' total caseloads.
The proposed formula does not adjust for these demographic and policy variables. It is assumed that a state's performance is related solely to its effectiveness and efficiency. An incentive system that does not acknowledge the variations among states, holds state governments responsible for matters that are beyond their reasonable control and penalizes states for exercising policy discretion in an area where no federal requirement exists.
Congress frequently and regularly adjusts funding mechanisms to account for the heterogeneity among states, both in areas of demography and policy. For example:
Federal Precedents for Formula Adjustments Based on Demographic Variables
• The Federal Medical Assistance Percentage (FMAP) is used to calculate the federal share of Medicaid and other payments to the states. This formula is adjusted in accordance with the average per capita personal income in each state. In 1996, the federal share ranged from 50% to 78%.
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• The recently enacted Balanced Budget Reconciliation Act of 1997 expanded health care coverage for children under a newly created Title XXI. For FYs 98–2000, the formula for this program provides that each state will receive a proportional allocation based on the number of uninsured low-income children in the state multiplied by a cost factor for that state.
• The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 created a program to promote the access of non-custodial parents to their children. The formula for the allocation of this program was based on the number of children in the state living with one biological parent.
Federal Precedent for Formula Adjustments Based on State Policy Variables
• The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 created the cash assistance block grant. Because of significant variation in historical welfare policies among states, Congress provided a multi-tier funding option which allowed states to receive either: (1) the average of federal payments based on expenditures for AFDC benefits and administration, Emergency Assistance, and JOBS in fiscal years 1992–94; or (2) federal payments in 1994; or (3) federal payments in fiscal year 1995.
While these adjustments based on state-by-state variations add complexity to funding formulae, they achieve a result which is more fair and which is based on a recognition of the differences among states. The American Public Welfare Association has had a long-standing policy calling for Congress to recognize variations among states in its consideration of new policies.
Recommendation.—The incentive legislation should direct the Secretary to conduct and report the results of statistical analyses of key sources of states' caseload demographic variation which are determined to be correlated to child support enforcement program performance. The legislation should require the Secretary to recommend adjustments in the application of the incentive formula where warranted as a result of the aforementioned research.
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Issue #2.—Phase-in time frame is not adequate
The Secretary's proposal includes a phase-in schedule which provides that in the first year of the formula, one-half of the incentives earned by a state will be based on the current formula and one-half will be based on the proposed formula. In the second year, the entire incentive allocation will be based on the new formula. This proposal relies unnecessarily on a dual system in the first year. Additionally, this short one-year phase-in plan also precludes the careful and measured analysis of the impact of the formula prior to its full application. Based upon data provided to the Incentives Work Group by the Office of Child Support Enforcement, it is projected that some states will experience incentive losses of a magnitude that would seriously impair the ability of those states to serve families and to improve their programs. Furthermore, given the interstate nature of the child support program, a negative impact on any one state will affect all other states.
Recommendation
Congress should adopt a more gradual phase-in of the funding component of the incentive formula. This will allow time for the Secretary to assess the impact of the formula and to propose adjustments for demographic variables which are determined statistically to be correlated to performance. While it is recommended that the funding component of the formula be phased-in over a longer period, it is also recommended that the new factors upon which incentives are based be implemented in a single year. This will simplify the calculation in the first year and provide a clear and unambiguous message that these are the areas of performance which Congress intends to reward.
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During the phase-in period, the amount of the increase or decrease in a state's incentives should be limited to a specific percent increase or decrease from a base year Under this approach, a state's performance on the new incentive factors would be calculated and an amount of incentive dollars der decrease of over X%, the amount would be adjusted to limit the gain or loss to the percent provided in the formula. APWA has requested that the Office of Child Support Enforcement produce estimates of this approach using a 20% gain or loss as an example. (See Attachment B.) Extending the phase-in period will also provide an opportunity for the Secretary to complete validations of data integrity. Data integrity has been a concern related to the implementation of the new incentive proposal.
Issue #3.—Non IV–D expenditures are included in the calculation of cost effectiveness
As a result of the enactment of PRWORA, state IV–D agencies will be required to perform certain activities on behalf of non IV–D cases. Beginning on October 1, 1998, states will process wage withholding payments on behalf of non IV–D cases with orders entered after January 1994. Additionally, states will be obtaining court orders on non IV–D cases and loading those orders into the State Case Registry. States will incur significant costs associated with these functions. The expenditures associated with these tasks are currently included in the cost effectiveness calculation. However, the collections on these cases are not considered in the collections base.
Recommendation
Exclude costs associated with the inclusion of non IV–D cases in the state case registry and non IV–D payment processing in the cost effectiveness ratio unless non IV–D collections are included in the collections base.
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Issue #4—Collections on behalf of persons diverted from public assistance are treated as ''never welfare'' collections
As states experiment with new ways to prevent welfare dependency, many are implementing programs that provide support services rather than cash assistance to persons in need of help. These individuals, under the previous AFDC program, would have been determined eligible for cash assistance. Under the new approach, they are ''diverted'' from assistance. Concerns have been expressed that states which utilize a diversion approach will be negatively impacted by the incentive formula because collections on behalf of ''diverted'' clients would be considered ''never welfare'' collections. These collections receive less weight in the collections base.
Recomme