Funding and Incentives
By Doug Dante DougDante1@yahoo.com Updated: March 11, 2009
US CODE TITLE 42 > CHAPTER 7 > SUBCHAPTER IV > Part D > § 655.Payments to States
Provides for 66 percent payments to cover basically all expenses related to child support establishment, payment handling, etc. This is the big direct payment to the states from the federal government. The more work there is to do, the more the federal government repays the states. To maximize program income, the child support enforcement agency should maximize the number of cases, and the number of dollars and processing time per case. It is therefore necessary to discourage parents from making their own arrangements for payment, and to strongly encourage divorces or a breakup of cohabitation between parents. Joint custody laws have been shown to cut the divorce rate. It is unsurprising that most child support agencies often strongly oppose them, along with most family lawyers. From various newspaper articles, it seems that the Michigan Friend of the Court (Assists Michigan courts in enforcing child support and parenting time orders) sends to the federal government documentation for wages and benefits of full time equivalent employees. Each hour a that FOC enforcement officer works, 66% of his/her pay comes from the federal government (plus incentive payments based on performance). I do not believe that the FOC distinguishes between time spent collecting fines, which go to the FOC itself, and time spent collecting child support, which go to the parents who care for the children. Other states likely have equivalent billing mechanisms.
US CODE TITLE 42 > CHAPTER 7 > SUBCHAPTER IV > Part D > 658a. Incentive payments to States
$483,000,000 for fiscal year 2008 to be shared amongst all states. (2)(A) Each state's portion is based on its "incentive base amount" which is supposed to be calculated from its paternity establishment performance level, support order performance level, current payment performance level, arrearage payment performance level, and cost effectiveness performance level. All except the first are improved by getting higher child support orders per case, which means sole physical custody for the parent earning the least money. However, for states maximizing revenue, the state collections base, i.e. Support collected, is, I believe, the only value used to calculate performance (5)(A). There is what may be termed a “loophole” which is used by states to effectively get near 100% funding of child support enforcement. This was closed under the Deficit Reduction Act of 2005, but was recently reopened for two years retroactive to October 2008 under the 2009 American Recovery and Reinvestment Act (a.k.a. Stimulus Package). The “loophole” allows states to use federal incentive money to cover their 34% payment to get § 655 funds. In effect, the states only needed to pass the appropriate laws complying with Title IV-Maintain a certain performance level, and then the federal government will pay for most, if not all, of their child support enforcement efforts. In some cases, the states could even profit by collecting more in incentive payments than was required to cover their 34% base share.
http://www.whitehouse.gov/the_press_office/arra_public_review(See Section 2104)
US CODE TITLE 42 > CHAPTER 7 > SUBCHAPTER IV > Part D > 669b.Grants to States for access and visitation programs
90% federal match or $100,000 per state minimum. It seems to me that most states are missing the boat on getting the most money here. This is may be because they're aware that strong enforcement of parenting time may be an inhibitor to a future divorces, which can reduce child support awards and therefore cut into program income.
It's not clear that these courts are respecting the disbursement laws in the 2005 Deficit Reduction Act, and may be using these additional payments, received by check, to pay themselves interest-like fines on arrears.
Also, in some case, courts in some states may be respecting the income limits, but evading the restrictions on disbursement by collecting that portion of child support which is intended to pay down arrears as fees. Local child support enforcement agencies then such as the Michigan Friend of the Court then have a financial incentive to find that parents have in the past failed to support their children for an extended period, or that they owe substantial fees such as lawyer fees as child support. As the paying parent will likely not be able to pay off these fees for a long time, the agency can then create an income stream as large as 5% of the parent’s net income (based on the amount collected for arrears), and disburse that to itself as interest-like fines on the arrears that parents owe, rather than to the child they are intended to serve. This creates a very strong incentive to add the legal bills of the other party or other fees onto the child support obligation of the paying parent, in order to establish large arrears up front which then help create large interest-like fines that then create a steady future pay stream for the agency. The establishment of these arrears also create a strong financial incentive to deny modifications of child support payments when parents lose their jobs, or to prevent parents who owe arrears but are actually the custodians of the children for whom they pay child support to modify their obligations to receive support instead, which is normally defined by law as being in the best interests of the children. For some local agencies who are adept at finding parents in arrears, these interest-like fines may represent a substantial income stream. For those income streams established before the 2005 Deficit Reduction Act, the agency's immediate loss of those income streams, caused by new federal laws requiring them to pass that money onto the children they serve, can be a bitter pill to swallow. It should come as no surprise that some parents have raised concerns that their local agency may be failing to follow the changes in the federal disbursement law. Local agencies may also fine parents for the cost of enforcing support obligations, including court costs, costs of police time, cost of agency time in enforcing obligations, the costs of prosecuting attorneys, and jail costs. These additional costs can sometimes create a conflict of interest for the agencies. However, finding the proper balance of enforcement in each case is a delicate matter, and we in the public should try to show reasonable deference to agencies and people who are honestly acting in what they believe is the best interests of children and parents, and who are doing their best to apply the law in a reasonable manner.
Undistributed Collected Funds
In some cases, child support collected is never disbursed to the parent who is caring for the child. Sometimes that parent “does not want the money”. Sometimes that parent fails to cooperate, and sometimes the money is just lost. Usually, the state keeps this money for itself, either through the general treasury or through the child support collection agency. These undistributed collected funds can add up to substantial income. States have a financial conflict of interest in providing this money to the children which are to benefit from it. This may include making it difficult for people to find out what funds are not being collected or disbursed, even for the paying parent or the child in question, and even after that child turns 18. For example, in Michigan, only the recipient can find the funds using his/her name and social security number.