Child Support financial processing is one of the most complex undertakings in the social services arena. Anyone who has studied Child Support distribution rules knows that the “buckets” required to track all possible destinations of an incoming collection make the mandated automation of the distribution process difficult and costly. If the process of distributing child support payments could be simplified, it would greatly reduce the risk and costs of automation. Colorado, Minnesota and Vermont have already ended the practice of cost recovery, and I’m encouraged to see a growing number of Child Support leaders joining the discussion about whether and how to eliminate it.
First, a quick refresher: Following the Family Support Act of 1988, Child Support agencies have been required to perform cost recovery. Suppose a custodial parent applies for and receives public benefits. When the non-custodial parent is located and begins paying child support, the state collects a portion of that as “repayment” for the public benefits.
A subsequent law – the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 – reformed welfare and made Child Support cost recovery more complex by creating “reserve buckets” to further categorize money to track collections that may be recovered in the future if the custodial parent were to resume receiving public benefits.
Whether these complex and sometimes confusing rules around child support cost recovery are even worth the effort is a debate. The U.S. Partnership on Mobility from Poverty whitepaper, Transforming Child Support into a Family-Building System, notes that a shrinking number of families served by the Child Support system are also receiving Temporary Assistance for Needy Families (TANF). Of the 14.5 million families in the Child Support system in 2016, just 1.4 million were TANF beneficiaries. About 6.2 million were former TANF recipients, and half had never gotten cash assistance at all. Not surprisingly, in fiscal year 2015, just 5 percent of the $32.4 billion collected by Child Support programs went to pay back governments for welfare expenses. Because of the shrinking TANF rolls, cost recovery simply may no longer be warranted.
Of all human services technology modernization efforts, we know that Child Support systems are some of the more complex and costly to build, partly due to the complexity of the financial business processes to repay welfare costs. The Federal Office of Child Support Enforcement indicates that the average Child Support system costs between $80 and $120 million and takes on average four years to build. When the hard work of locating non-custodial parents, establishing paternity, establishing obligations and obtaining payments is done, a straight pass-through of the payments collected to the family rather than the government would simplify the systems, reduce the time to automate processes, and ultimately drive down development and maintenance costs. In addition, the payment that the non-custodial parent has worked so hard to provide would directly benefit his family and not repay the government.
It all raises an interesting question: Would a complete pass-through of payments do more to stabilize vulnerable families and help lift them out of poverty?
Although major policy change is required for state Child Support programs to end cost recovery, three states have already shown that it can be done. I believe it’s time to turn up the volume on this discussion – and start pointing out the opportunity costs we’ve all been paying through this decades-long practice:
- Cost recovery is expensive and rarely, if ever, yields a dollar-for-dollar return. How might those funds be better spent in the service of a state’s vulnerable families?
- Cost recovery creates a time-consuming and complex work load for caseworker financial specialists. Instead of spending an inordinate amount of time tracing and then explaining to customers where the payment went, how might state agencies utilize these workers to perform tasks that better serve constituents?
- Cost recovery can feel confusing or punitive to the families affected by it. How might passing through all payments from non-custodial to custodial parents benefit these families and their children? How might this approach motivate continued contributions rather than leaving parties feeling frustrated and defeated?
- Child Support programs exist to support an essential fiduciary function. How might outcomes improve if these agencies could extend their focus to more wrap-around services designed to educate and empower parents?
For the sake of building up families, let’s get serious about putting our energy where it will make the most impact. Ending cost recovery could be a place to start.