[House Report 105-422]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
 2d Session             HOUSE OF REPRESENTATIVES                105-422
_______________________________________________________________________


 
          CHILD SUPPORT PERFORMANCE AND INCENTIVE ACT OF 1998

                                _______
                                

 February 27, 1998.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

    Mr. Archer, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3130]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Ways and Means, to whom was referred the 
bill (H.R. 3130) to provide for an alternative penalty 
procedure for States that fail to meet Federal child support 
data processing requirements, to reform Federal incentive 
payments for effective child support performance, and to 
provide for a more flexible penalty procedure for States that 
violate interjurisdictional adoption requirements, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
 I. Introduction.................................................    12
        A. Purpose and Summary...................................    12
         B. Background and Need for Legislation..................    12
         C. Legislative History..................................    15
II.  Explanation of Provisions...................................    16
III. Vote of The Committee.......................................    38

IV.  Budget Effects of The Bill..................................    38
        A. Committee Estimate of Budgetary Effects...............    38
        B. Statement Regarding New Budget Authority And Tax 
            Expenditures.........................................    38
        C. Cost Estimate Prepared by The Congressional Budget 
            Office...............................................    38
 V.  Other Matters Required to Be Discussed Under The Rules of
       The House.................................................    43
         A. Committee Oversight Findings And Recommendations.....    43
         B. Summary of Findings And Recommendations of The 
            Government Reform And Oversight Committee............    44
         C. Constitutional Authority Statement...................    44
VI.  Changes in Existing Laws Made by The Bill, as Reported......    44

  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Child Support Performance and 
Incentive Act of 1998''.

SEC. 2. TABLE OF CONTENTS.

  The table of contents of this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.

          TITLE I--CHILD SUPPORT DATA PROCESSING REQUIREMENTS

Sec. 101. Alternative penalty procedure.
Sec. 102. Authority to waive single Statewide automated data processing 
and information retrieval system requirement.

                TITLE II--CHILD SUPPORT INCENTIVE SYSTEM

Sec. 201. Incentive payments to States.

                     TITLE III--ADOPTION PROVISIONS

Sec. 301. More flexible penalty procedure to be applied for failing to 
permit interjurisdictional adoption.

                    TITLE IV--TECHNICAL CORRECTIONS

Sec. 401. Technical corrections.

          TITLE I--CHILD SUPPORT DATA PROCESSING REQUIREMENTS

SEC. 101. ALTERNATIVE PENALTY PROCEDURE.

  Section 455(a) of the Social Security Act (42 U.S.C. 655(a)) is 
amended by adding at the end the following:
  ``(4)(A) If--
          ``(i) the Secretary determines that a State plan under 
        section 454 would (in the absence of this paragraph) be 
        disapproved for the failure of the State to comply with section 
        454(24)(A), and that the State has made and is continuing to 
        make a good faith effort to so comply; and
          ``(ii) the State has submitted to the Secretary a corrective 
        compliance plan that describes how, by when, and at what cost 
        the State will achieve such compliance, which has been approved 
        by the Secretary,
then the Secretary shall not disapprove the State plan under section 
454, and the Secretary shall reduce the amount otherwise payable to the 
State under paragraph (1)(A) of this subsection for the fiscal year by 
the penalty amount.
  ``(B) In this paragraph:
          ``(i) The term `penalty amount' means, with respect to a 
        failure of a State to comply with section 454(24)--
                  ``(I) 4 percent of the penalty base, in the case of 
                the 1st fiscal year in which such a failure by the 
                State occurs;
                  ``(II) 8 percent of the penalty base, in the case of 
                the 2nd such fiscal year;
                  ``(III) 16 percent of the penalty base, in the case 
                of the 3rd such fiscal year; or
                  ``(IV) 20 percent of the penalty base, in the case of 
                the 4th or any subsequent such fiscal year.
          ``(ii) The term `penalty base' means, with respect to a 
        failure of a State to comply with section 454(24) during a 
        fiscal year, the amount otherwise payable to the State under 
        paragraph (1)(A) of this subsection for the preceding fiscal 
        year.
  ``(C)(i) The Secretary shall waive a penalty under this paragraph for 
any failure of a State to comply with section 454(24)(A) during fiscal 
year 1998 if--
          ``(I) by December 31, 1997, the State has submitted to the 
        Secretary a request that the Secretary certify the State as 
        having met the requirements of such section;
          ``(II) the Secretary has provided the certification as a 
        result of a review conducted pursuant to the request; and
          ``(III) the State has not failed such a review.
  ``(ii) If a State with respect to which a reduction is made under 
this paragraph for a fiscal year achieves compliance with section 
454(24)(A) by the beginning of the succeeding fiscal year, the 
Secretary shall increase the amount otherwise payable to the State 
under paragraph (1)(A) of this subsection for the succeeding fiscal 
year by an amount equal to 75 percent of the reduction for the fiscal 
year.
  ``(iii) The Secretary shall reduce the amount of any reduction that, 
in the absence of this clause, would be required to be made under this 
paragraph by reason of the failure of a State to achieve compliance 
with section 454(24)(B) during the fiscal year, by an amount equal to 
20 percent of the amount of the otherwise required reduction, for each 
State performance measure described in section 458A(b)(4) with respect 
to which the applicable percentage under section 458A(b)(6) for the 
fiscal year is 100 percent, if the Secretary has made the determination 
described in section 458A(b)(5)(B) with respect to the State for the 
fiscal year.
  ``(D) The preceding provisions of this paragraph (except for 
subparagraph (C)(i)) shall apply, separately and independently, to a 
failure to comply with section 454(24)(B) in the same manner in which 
the preceding provisions apply to a failure to comply with section 
454(24)(A).''.

SEC. 102. AUTHORITY TO WAIVE SINGLE STATEWIDE AUTOMATED DATA PROCESSING 
                    AND INFORMATION RETRIEVAL SYSTEM REQUIREMENT.

  (a) In General.--Section 452(d)(3) of the Social Security Act (42 
U.S.C. 652(d)(3)) is amended to read as follows:
  ``(3) The Secretary may waive any requirement of paragraph (1) or any 
condition specified under section 454(16), and shall waive the single 
statewide system requirement under sections 454(16) and 454A, with 
respect to a State if--
          ``(A) the State demonstrates to the satisfaction of the 
        Secretary that the State has or can develop an alternative 
        system or systems that enable the State--
                  ``(i) for purposes of section 409(a)(8), to achieve 
                the paternity establishment percentages (as defined in 
                section 452(g)(2)) and other performance measures that 
                may be established by the Secretary;
                  ``(ii) to submit data under section 454(15)(B) that 
                is complete and reliable;
                  ``(iii) to substantially comply with the requirements 
                of this part; and
                  ``(iv) in the case of a request to waive the single 
                statewide system requirement, to--
                          ``(I) meet all functional requirements of 
                        sections 454(16) and 454A;
                          ``(II) ensure that calculation of 
                        distributions meets the requirements of section 
                        457 and accounts for distributions to children 
                        in different families or in different States or 
                        sub-State jurisdictions, and for distributions 
                        to other States;
                          ``(III) ensure that there is only 1 point of 
                        contact in the State which provides seamless 
                        case processing for all interstate case 
                        processing and coordinated, automated 
                        intrastate case management;
                          ``(IV) ensure that standardized data 
                        elements, forms, and definitions are used 
                        throughout the State;
                          ``(V) complete the alternative system in no 
                        more time than it would take to complete a 
                        single statewide system that meets such 
                        requirement; and
                          ``(VI) process child support cases as 
                        quickly, efficiently, and effectively as such 
                        cases would be processed through a single 
                        statewide system that meets such requirement;
          ``(B)(i) the waiver meets the criteria of paragraphs (1), 
        (2), and (3) of section 1115(c); or
          ``(ii) the State provides assurances to the Secretary that 
        steps will be taken to otherwise improve the State's child 
        support enforcement program; and
          ``(C) in the case of a request to waive the single statewide 
        system requirement, the State has submitted to the Secretary 
        separate estimates of the total cost of a single statewide 
        system that meets such requirement, and of any such alternative 
        system or systems, which shall include estimates of the cost of 
        developing and completing the system and of operating and 
        maintaining the system for 5 years, and the Secretary has 
        agreed with the estimates.''.
  (b) Payments to States.--Section 455(a)(1) of such Act (42 U.S.C. 
655(a)(1)) is amended--
          (1) by striking ``and'' at the end of subparagraph (B);
          (2) by striking the semicolon at the end of subparagraph (C) 
        and inserting ``, and''; and
          (3) by inserting after subparagraph (C) the following:
          ``(D) equal to 66 percent of the sums expended by the State 
        during the quarter for an alternative statewide system for 
        which a waiver has been granted under section 452(d)(3), but 
        only to the extent that the total of the sums so expended by 
        the State on or after the date of the enactment of this 
        subparagraph does not exceed the least total cost estimate 
        submitted by the State pursuant to section 452(d)(3)(C) in the 
        request for the waiver;''.

                TITLE II--CHILD SUPPORT INCENTIVE SYSTEM

SEC. 201. INCENTIVE PAYMENTS TO STATES.

  (a) In General.--Part D of title IV of the Social Security Act (42 
U.S.C. 651-669) is amended by inserting after section 458 the 
following:

``SEC. 458A. INCENTIVE PAYMENTS TO STATES.

  ``(a) In General.--In addition to any other payment under this part, 
the Secretary shall, subject to subsection (f), make an incentive 
payment to each State for each fiscal year in an amount determined 
under subsection (b).
  ``(b) Amount of Incentive Payment.--
          ``(1) In general.--The incentive payment for a State for a 
        fiscal year is equal to the incentive payment pool for the 
        fiscal year, multiplied by the State incentive payment share 
        for the fiscal year.
          ``(2) Incentive payment pool.--
                  ``(A) In general.--In paragraph (1), the term 
                `incentive payment pool' means--
                          ``(i) $422,000,000 for fiscal year 2000;
                          ``(ii) $429,000,000 for fiscal year 2001;
                          ``(iii) $450,000,000 for fiscal year 2002;
                          ``(iv) $461,000,000 for fiscal year 2003;
                          ``(v) $454,000,000 for fiscal year 2004;
                          ``(vi) $446,000,000 for fiscal year 2005;
                          ``(vii) $458,000,000 for fiscal year 2006;
                          ``(viii) $471,000,000 for fiscal year 2007;
                          ``(ix) $483,000,000 for fiscal year 2008; and
                          ``(x) for any succeeding fiscal year, the 
                        amount of the incentive payment pool for the 
                        fiscal year that precedes such succeeding 
                        fiscal year, multiplied by the percentage (if 
                        any) by which the CPI for such preceding fiscal 
                        year exceeds the CPI for the 2nd preceding 
                        fiscal year.
                  ``(B) CPI.--For purposes of subparagraph (A), the CPI 
                for a fiscal year is the average of the Consumer Price 
                Index for the 12-month period ending on September 30 of 
                the fiscal year. As used in the preceding sentence, the 
                term `Consumer Price Index' means the last Consumer 
                Price Index for all-urban consumers published by the 
                Department of Labor.
          ``(3) State incentive payment share.--In paragraph (1), the 
        term `State incentive payment share' means, with respect to a 
        fiscal year--
                  ``(A) the incentive base amount for the State for the 
                fiscal year; divided by
                  ``(B) the sum of the incentive base amounts for all 
                of the States for the fiscal year.
          ``(4) Incentive base amount.--In paragraph (3), the term 
        `incentive base amount' means, with respect to a State and a 
        fiscal year, the sum of the applicable percentages (determined 
        in accordance with paragraph (6)) multiplied by the 
        corresponding maximum incentive base amounts for the State for 
        the fiscal year, with respect to each of the following measures 
        of State performance for the fiscal year:
                  ``(A) The paternity establishment performance level.
                  ``(B) The support order performance level.
                  ``(C) The current payment performance level.
                  ``(D) The arrearage payment performance level.
                  ``(E) The cost-effectiveness performance level.
          ``(5) Maximum incentive base amount.--
                  ``(A) In general.--For purposes of paragraph (4), the 
                maximum incentive base amount for a State for a fiscal 
                year is--
                          ``(i) with respect to the performance 
                        measures described in subparagraphs (A), (B), 
                        and (C) of paragraph (4), the State collections 
                        base for the fiscal year; and
                          ``(ii) with respect to the performance 
                        measures described in subparagraphs (D) and (E) 
                        of paragraph (4), 75 percent of the State 
                        collections base for the fiscal year.
                  ``(B) Data required to be complete and reliable.--
                Notwithstanding subparagraph (A), the maximum incentive 
                base amount for a State for a fiscal year with respect 
                to a performance measure described in paragraph (4) is 
                zero, unless the Secretary determines, on the basis of 
                an audit performed under section 452(a)(4)(C)(i), that 
                the data which the State submitted pursuant to section 
                454(15)(B) for the fiscal year and which is used to 
                determine the performance level involved is complete 
                and reliable.
                  ``(C) State collections base.--For purposes of 
                subparagraph (A), the State collections base for a 
                fiscal year is equal to the sum of--
                          ``(i) 2 times the sum of--
                                  ``(I) the total amount of support 
                                collected during the fiscal year under 
                                the State plan approved under this part 
                                in cases in which the support 
                                obligation involved is required to be 
                                assigned to the State pursuant to part 
                                A or E of this title or title XIX; and
                                  ``(II) the total amount of support 
                                collected during the fiscal year under 
                                the State plan approved under this part 
                                in cases in which the support 
                                obligation involved was so assigned 
                                but, at the time of collection, is not 
                                required to be so assigned; and
                          ``(ii) the total amount of support collected 
                        during the fiscal year under the State plan 
                        approved under this part in all other cases.
          ``(6) Determination of applicable percentages based on 
        performance levels.--
                  ``(A) Paternity establishment.--
                          ``(i) Determination of paternity 
                        establishment performance level.--The paternity 
                        establishment performance level for a State for 
                        a fiscal year is, at the option of the State, 
                        the IV-D paternity establishment percentage 
                        determined under section 452(g)(2)(A) or the 
                        statewide paternity establishment percentage 
                        determined under section 452(g)(2)(B).
                          ``(ii) Determination of applicable 
                        percentage.--The applicable percentage with 
                        respect to a State's paternity establishment 
                        performance level is as follows:
      

------------------------------------------------------------------------
``If the paternity establishment performance level is:                  
-------------------------------------------------------  The applicable 
            At least:                 But less than:     percentage is: 
------------------------------------------------------------------------
80%..............................  ...................         100      
79%..............................  80%................         98       
78%..............................  79%................         96       
77%..............................  78%................         94       
76%..............................  77%................         92       
75%..............................  76%................         90       
74%..............................  75%................         88       
73%..............................  74%................         86       
72%..............................  73%................         84       
71%..............................  72%................         82       
70%..............................  71%................         80       
69%..............................  70%................         79       
68%..............................  69%................         78       
67%..............................  68%................         77       
66%..............................  67%................         76       
65%..............................  66%................         75       
64%..............................  65%................         74       
63%..............................  64%................         73       
62%..............................  63%................         72       
61%..............................  62%................         71       
60%..............................  61%................         70       
59%..............................  60%................         69       
58%..............................  59%................         68       
57%..............................  58%................         67       
56%..............................  57%................         66       
55%..............................  56%................         65       
54%..............................  55%................         64       
53%..............................  54%................         63       
52%..............................  53%................         62       
51%..............................  52%................         61       
50%..............................  51%................         60       
0%...............................  50%................         0.       
------------------------------------------------------------------------

                        Notwithstanding the preceding sentence, if the 
                        paternity establishment performance level of a 
                        State for a fiscal year is less than 50 percent 
                        but exceeds by at least 10 percentage points 
                        the paternity establishment performance level 
                        of the State for the immediately preceding 
                        fiscal year, then the applicable percentage 
                        with respect to the State's paternity 
                        establishment performance level is 50 percent.
                  ``(B) Establishment of child support orders.--
                          ``(i) Determination of support order 
                        performance level.--The support order 
                        performance level for a State for a fiscal year 
                        is the percentage of the total number of cases 
                        under the State plan approved under this part 
                        in which there is a support order during the 
                        fiscal year.
                          ``(ii) Determination of applicable 
                        percentage.--The applicable percentage with 
                        respect to a State's support order performance 
                        level is as follows:
      

------------------------------------------------------------------------
     ``If the support order performance level is:                       
-------------------------------------------------------  The applicable 
            At least:                 But less than:     percentage is: 
------------------------------------------------------------------------
80%..............................  ...................         100      
79%..............................  80%................         98       
78%..............................  79%................         96       
77%..............................  78%................         94       
76%..............................  77%................         92       
75%..............................  76%................         90       
74%..............................  75%................         88       
73%..............................  74%................         86       
72%..............................  73%................         84       
71%..............................  72%................         82       
70%..............................  71%................         80       
69%..............................  70%................         79       
68%..............................  69%................         78       
67%..............................  68%................         77       
66%..............................  67%................         76       
65%..............................  66%................         75       
64%..............................  65%................         74       
63%..............................  64%................         73       
62%..............................  63%................         72       
61%..............................  62%................         71       
60%..............................  61%................         70       
59%..............................  60%................         69       
58%..............................  59%................         68       
57%..............................  58%................         67       
56%..............................  57%................         66       
55%..............................  56%................         65       
54%..............................  55%................         64       
53%..............................  54%................         63       
52%..............................  53%................         62       
51%..............................  52%................         61       
50%..............................  51%................         60       
0%...............................  50%................         0.       
------------------------------------------------------------------------

                        Notwithstanding the preceding sentence, if the 
                        support order performance level of a State for 
                        a fiscal year is less than 50 percent but 
                        exceeds by at least 5 percentage points the 
                        support order performance level of the State 
                        for the immediately preceding fiscal year, then 
                        the applicable percentage with respect to the 
                        State's support order performance level is 50 
                        percent.
                  ``(C) Collections on current child support due.--
                          ``(i) Determination of current payment 
                        performance level.--The current payment 
                        performance level for a State for a fiscal year 
                        is equal to the total amount of current support 
                        collected during the fiscal year under the 
                        State plan approved under this part divided by 
                        the total amount of current support owed during 
                        the fiscal year in all cases under the State 
                        plan, expressed as a percentage.
                          ``(ii) Determination of applicable 
                        percentage.--The applicable percentage with 
                        respect to a State's current payment 
                        performance level is as follows:
      

------------------------------------------------------------------------
    ``If the current payment performance level is:                      
-------------------------------------------------------  The applicable 
            At least:                 But less than:     percentage is: 
------------------------------------------------------------------------
80%..............................  ...................         100      
79%..............................  80%................         98       
78%..............................  79%................         96       
77%..............................  78%................         94       
76%..............................  77%................         92       
75%..............................  76%................         90       
74%..............................  75%................         88       
73%..............................  74%................         86       
72%..............................  73%................         84       
71%..............................  72%................         82       
70%..............................  71%................         80       
69%..............................  70%................         79       
68%..............................  69%................         78       
67%..............................  68%................         77       
66%..............................  67%................         76       
65%..............................  66%................         75       
64%..............................  65%................         74       
63%..............................  64%................         73       
62%..............................  63%................         72       
61%..............................  62%................         71       
60%..............................  61%................         70       
59%..............................  60%................         69       
58%..............................  59%................         68       
57%..............................  58%................         67       
56%..............................  57%................         66       
55%..............................  56%................         65       
54%..............................  55%................         64       
53%..............................  54%................         63       
52%..............................  53%................         62       
51%..............................  52%................         61       
50%..............................  51%................         60       
49%..............................  50%................         59       
48%..............................  49%................         58       
47%..............................  48%................         57       
46%..............................  47%................         56       
45%..............................  46%................         55       
44%..............................  45%................         54       
43%..............................  44%................         53       
42%..............................  43%................         52       
41%..............................  42%................         51       
40%..............................  41%................         50       
0%...............................  40%................         0.       
------------------------------------------------------------------------

                        Notwithstanding the preceding sentence, if the 
                        current payment performance level of a State 
                        for a fiscal year is less than 40 percent but 
                        exceeds by at least 5 percentage points the 
                        current payment performance level of the State 
                        for the immediately preceding fiscal year, then 
                        the applicable percentage with respect to the 
                        State's current payment performance level is 50 
                        percent.
                  ``(D) Collections on child support arrearages.--
                          ``(i) Determination of arrearage payment 
                        performance level.--The arrearage payment 
                        performance level for a State for a fiscal year 
                        is equal to the total number of cases under the 
                        State plan approved under this part in which 
                        payments of past-due child support were 
                        received during the fiscal year and part or all 
                        of the payments were distributed to the family 
                        to whom the past-due child support was owed 
                        (or, if all past-due child support owed to the 
                        family was, at the time of receipt, subject to 
                        an assignment to the State, part or all of the 
                        payments were retained by the State) divided by 
                        the total number of cases under the State plan 
                        in which there is past-due child support, 
                        expressed as a percentage.
                          ``(ii) Determination of applicable 
                        percentage.--The applicable percentage with 
                        respect to a State's arrearage payment 
                        performance level is as follows:
      

------------------------------------------------------------------------
   ``If the arrearage payment performance level is:                     
-------------------------------------------------------  The applicable 
            At least:                 But less than:     percentage is: 
------------------------------------------------------------------------
80%..............................  ...................         100      
79%..............................  80%................         98       
78%..............................  79%................         96       
77%..............................  78%................         94       
76%..............................  77%................         92       
75%..............................  76%................         90       
74%..............................  75%................         88       
73%..............................  74%................         86       
72%..............................  73%................         84       
71%..............................  72%................         82       
70%..............................  71%................         80       
69%..............................  70%................         79       
68%..............................  69%................         78       
67%..............................  68%................         77       
66%..............................  67%................         76       
65%..............................  66%................         75       
64%..............................  65%................         74       
63%..............................  64%................         73       
62%..............................  63%................         72       
61%..............................  62%................         71       
60%..............................  61%................         70       
59%..............................  60%................         69       
58%..............................  59%................         68       
57%..............................  58%................         67       
56%..............................  57%................         66       
55%..............................  56%................         65       
54%..............................  55%................         64       
53%..............................  54%................         63       
52%..............................  53%................         62       
51%..............................  52%................         61       
50%..............................  51%................         60       
49%..............................  50%................         59       
48%..............................  49%................         58       
47%..............................  48%................         57       
46%..............................  47%................         56       
45%..............................  46%................         55       
44%..............................  45%................         54       
43%..............................  44%................         53       
42%..............................  43%................         52       
41%..............................  42%................         51       
40%..............................  41%................         50       
0%...............................  40%................         0.       
------------------------------------------------------------------------

                        Notwithstanding the preceding sentence, if the 
                        arrearage payment performance level of a State 
                        for a fiscal year is less than 40 percent but 
                        exceeds by at least 5 percentage points the 
                        arrearage payment performance level of the 
                        State for the immediately preceding fiscal 
                        year, then the applicable percentage with 
                        respect to the State's arrearage payment 
                        performance level is 50 percent.
                  ``(E) Cost-effectiveness.--
                          ``(i) Determination of cost-effectiveness 
                        performance level.--The cost-effectiveness 
                        performance level for a State for a fiscal year 
                        is equal to the total amount collected during 
                        the fiscal year under the State plan approved 
                        under this part divided by the total amount 
                        expended during the fiscal year under the State 
                        plan, expressed as a ratio.
                          ``(ii) Determination of applicable 
                        percentage.--The applicable percentage with 
                        respect to a State's cost-effectiveness 
                        performance level is as follows:
      

------------------------------------------------------------------------
   ``If the cost effectiveness performance level is:                    
-------------------------------------------------------  The applicable 
            At least:                 But less than:     percentage is: 
------------------------------------------------------------------------
5.00.............................  ...................         100      
4.50.............................  4.99...............         90       
4.00.............................  4.50...............         80       
3.50.............................  4.00...............         70       
3.00.............................  3.50...............         60       
2.50.............................  3.00...............         50       
2.00.............................  2.50...............         40       
0.00.............................  2.00...............         0.       
------------------------------------------------------------------------

  ``(c) Treatment of Interstate Collections.--In computing incentive 
payments under this section, support which is collected by a State at 
the request of another State shall be treated as having been collected 
in full by both States, and any amounts expended by a State in carrying 
out a special project assisted under section 455(e) shall be excluded.
  ``(d) Administrative Provisions.--The amounts of the incentive 
payments to be made to the States under this section for a fiscal year 
shall be estimated by the Secretary at or before the beginning of the 
fiscal year on the basis of the best information available. The 
Secretary shall make the payments for the fiscal year, on a quarterly 
basis (with each quarterly payment being made no later than the 
beginning of the quarter involved), in the amounts so estimated, 
reduced or increased to the extent of any overpayments or underpayments 
which the Secretary determines were made under this section to the 
States involved for prior periods and with respect to which adjustment 
has not already been made under this subsection. Upon the making of any 
estimate by the Secretary under the preceding sentence, any 
appropriations available for payments under this section are deemed 
obligated.
  ``(e) Regulations.--The Secretary shall prescribe such regulations as 
may be necessary governing the calculation of incentive payments under 
this section, including directions for excluding from the calculations 
certain closed cases and cases over which the States do not have 
jurisdiction.
  ``(f) Reinvestment.--A State to which a payment is made under this 
section shall expend the full amount of the payment to supplement, and 
not supplant, other funds used by the State--
          ``(1) to carry out the State plan approved under this part; 
        or
          ``(2) for any activity (including cost-effective contracts 
        with local agencies) approved by the Secretary, whether or not 
        the expenditures for the activity are eligible for 
        reimbursement under this part, which may contribute to 
        improving the effectiveness or efficiency of the State program 
        operated under this part.''.
  (b) Transition Rule.--Notwithstanding any other provision of law--
          (1) for fiscal year 2000, the Secretary shall reduce by \1/3\ 
        the amount otherwise payable to a State under section 458 of 
        the Social Security Act, and shall reduce by \2/3\ the amount 
        otherwise payable to a State under section 458A of such Act; 
        and
          (2) for fiscal year 2001, the Secretary shall reduce by \2/3\ 
        the amount otherwise payable to a State under section 458 of 
        the Social Security Act, and shall reduce by \1/3\ the amount 
        otherwise payable to a State under section 458A of such Act.
  (c) Regulations.--Within 9 months after the date of the enactment of 
this section, the Secretary of Health and Human Services shall 
prescribe regulations governing the implementation of section 458A of 
the Social Security Act when such section takes effect and the 
implementation of subsection (b) of this section.
  (d) Studies.--
          (1) General review of new incentive payment system.--
                  (A) In general.--The Secretary of Health and Human 
                Services shall conduct a study of the implementation of 
                the incentive payment system established by section 
                458A of the Social Security Act, in order to identify 
                the problems and successes of the system.
                  (B) Reports to the congress.--
                          (i) Report on variations in state performance 
                        attributable to demographic variables.--Not 
                        later than October 1, 2000, the Secretary shall 
                        submit to the Congress a report that identifies 
                        any demographic or economic variables that 
                        account for differences in the performance 
                        levels achieved by the States with respect to 
                        the performance measures used in the system, 
                        and contains the recommendations of the 
                        Secretary for such adjustments to the system as 
                        may be necessary to ensure that the relative 
                        performance of States is measured from a 
                        baseline that takes account of any such 
                        variables.
                          (ii) Interim report.--Not later than March 1, 
                        2001, the Secretary shall submit to the 
                        Congress an interim report that contains the 
                        findings of the study required by subparagraph 
                        (A).
                          (iii) Final report.--Not later than October 
                        1, 2003, the Secretary shall submit to the 
                        Congress a final report that contains the final 
                        findings of the study required by subparagraph 
                        (A). The report shall include any 
                        recommendations for changes in the system that 
                        the Secretary determines would improve the 
                        operation of the child support enforcement 
                        program.
          (2) Development of medical support incentive.--
                  (A) In general.--The Secretary of Health and Human 
                Services, in consultation with State directors of 
                programs operated under part D of title IV of the 
                Social Security Act and representatives of children 
                potentially eligible for medical support, shall develop 
                a performance measure based on the effectiveness of 
                States in establishing and enforcing medical support 
                obligations, and shall make recommendations for the 
                incorporation of the measure, in a revenue neutral 
                manner, into the incentive payment system established 
                by section 458A of the Social Security Act.
                  (B) Report.--Not later than October 1, 1999, the 
                Secretary shall submit to the Congress a report that 
                describes the performance measure and contains the 
                recommendations required by subparagraph (A).
  (e) Technical Amendments.--
          (1) In general.--Section 341 of the Personal Responsibility 
        and Work Opportunity Reconciliation Act of 1996 (42 U.S.C. 658 
        note) is amended--
                  (A) by striking subsection (a) and redesignating 
                subsections (b), (c), and (d) as subsections (a), (b), 
                and (c), respectively; and
                  (B) in subsection (c) (as so redesignated)--
                          (i) by striking paragraph (1) and inserting 
                        the following:
          ``(1) Conforming amendments to present system.--The 
        amendments made by subsection (a) of this section shall become 
        effective with respect to a State as of the date the amendments 
        made by section 103(a) (without regard to section 116(a)(2)) 
        first apply to the State.''; and
                          (ii) in paragraph (2), by striking ``(c)'' 
                        and inserting ``(b)''.
          (2) Effective date.--The amendments made by this section 
        shall take effect as if included in the enactment of section 
        341 of the Personal Responsibility and Work Opportunity 
        Reconciliation Act of 1996.
  (f) Elimination of Predecessor Incentive Payment System.--
          (1) Repeal.--Section 458 of the Social Security Act (42 
        U.S.C. 658) is repealed.
          (2) Conforming amendments.--
                  (A) Section 458A of the Social Security Act, as added 
                by section 201(a) of this Act, is redesignated as 
                section 458.
                  (B) Section 455(a)(4)(C)(iii) of such Act (42 U.S.C. 
                655(a)(4)(C)(iii)), as added by section 101 of this 
                Act, is amended--
                          (i) by striking ``458A(b)(4)'' and inserting 
                        ``458(b)(4)'';
                          (ii) by striking ``458A(b)(6)'' and inserting 
                        ``458(b)(6)''; and
                          (iii) by striking ``458A(b)(5)(B)'' and 
                        inserting ``458(b)(5)(B)''.
                  (C) Subsection (d)(1) of this section is amended by 
                striking ``458A'' and inserting ``458''.
          (3) Effective date.--The amendments made by this subsection 
        shall take effect on October 1, 2001.
  (g) General Effective Date.--Except as otherwise provided in this 
section, the amendments made by this section shall take effect on 
October 1, 1999.

                     TITLE III--ADOPTION PROVISIONS

SEC. 301. MORE FLEXIBLE PENALTY PROCEDURE TO BE APPLIED FOR FAILING TO 
                    PERMIT INTERJURISDICTIONAL ADOPTION.

  (a) Conversion of Funding Ban Into State Plan Requirement.--Section 
471(a) of the Social Security Act (42 U.S.C. 671(a)) is amended--
          (1) by striking ``and'' at the end of paragraph (21);
          (2) by striking the period at the end of paragraph (22) and 
        inserting ``; and''; and
          (3) by adding at the end the following:
          ``(23) provides that the State shall not--
                  ``(A) deny or delay the placement of a child for 
                adoption when an approved family is available outside 
                of the jurisdiction with responsibility for handling 
                the case of the child; or
                  ``(B) fail to grant an opportunity for a fair 
                hearing, as described in paragraph (12), to an 
                individual whose allegation of a violation of 
                subparagraph (A) of this paragraph is denied by the 
                State or not acted upon by the State with reasonable 
                promptness.''.
  (b) Penalty for Noncompliance.--Section 474(d) of such Act (42 U.S.C. 
674(d)) is amended in each of paragraphs (1) and (2) by striking 
``section 471(a)(18)'' and inserting ``paragraph (18) or (23) of 
section 471(a)''.
  (c) Conforming Amendment.--Section 474 of such Act (42 U.S.C. 674) is 
amended by striking subsection (e).
  (d) Retroactivity.--The amendments made by this section shall take 
effect as if included in section 202(b) of the Adoption and Safe 
Families Act of 1997.

                    TITLE IV--TECHNICAL CORRECTIONS

SEC. 401. TECHNICAL CORRECTIONS.

  (a) Section 413(g)(1) of the Social Security Act (42 U.S.C. 
613(g)(1)) is amended by striking ``Economic and Educational 
Opportunities'' and inserting ``Education and the Workforce''.
  (b) Section 422(b)(2) of the Social Security Act (42 U.S.C. 
622(b)(2)) is amended by striking ``under under'' and inserting 
``under''.
  (c) Section 432(a)(8) of the Social Security Act (42 U.S.C. 
632(a)(8)) is amended by adding ``; and'' at the end.
  (d) Section 453(a)(2) of the Social Security Act (42 U.S.C. 
653(a)(2)) is amended--
          (1) by striking ``parentage,'' and inserting ``parentage 
        or'';
          (2) by striking ``or making or enforcing child custody or 
        visitation orders,''; and
          (3) in subparagraph (A), by decreasing the indentation of 
        clause (iv) by 2 ems.
  (e)(1) Section 5557(b) of the Balanced Budget Act of 1997 (42 U.S.C. 
608 note) is amended by adding at the end the following: ``The 
amendment made by section 5536(1)(A) shall not take effect with respect 
to a State until October 1, 2000, or such earlier date as the State may 
select.''.
  (2) The amendment made by paragraph (1) shall take effect as if 
included in the enactment of section 5557 of the Balanced Budget Act of 
1997 (Public Law 105-33; 111 Stat. 637).
  (f) Section 473A(c)(2)(B) of the Social Security Act (42 U.S.C. 
673b(c)(2)(B)) is amended--
          (1) by striking ``November 30, 1997'' and inserting ``April 
        30, 1998''; and
          (2) by striking ``March 1, 1998'' and inserting ``July 1, 
        1998''.
  (g) Section 474(a) of the Social Security Act (42 U.S.C. 674(a)) is 
amended by striking ``(subject to the limitations imposed by subsection 
(b))''.
  (h) Section 232 of the Social Security Act Amendments of 1994 (42 
U.S.C. 1314a) is amended--
          (1) in subsection (b)(3)(D), by striking ``Energy and''; and
          (2) in subsection (d)(4), by striking ``(b)(3)(D)'' and 
        inserting ``(b)(3)''.

                            I. INTRODUCTION

                         A. Purpose and Summary

    The Committee proposal allows the Secretary of Health and 
Human Services to use an alternative penalty procedure in 
dealing with States that failed to implement by October 1, 1997 
the automatic data processing system required by the Family 
Support Act of 1988. Under current law, States that miss the 
deadline are penalized by the loss of all of their Federal 
child support funds under Title IV-D of the Social Security Act 
and all of their funds from the Temporary Assistance for Needy 
Families block grant under Title IV-A of the Social Security 
Act. In hearings and through personal contacts, Members of the 
Committee have found that virtually no group or individual 
thinks it would be wise to impose these enormous penalties on 
any State at this time. Thus, the Committee, after consultation 
with States, advocates, members of the Senate, and officials in 
the Clinton Administration, developed an alternative penalty 
procedure that enjoys widespread bipartisan support.
    In addition, the Committee proposal contains extensive 
revisions of the current child support incentive system. The 
current system has two major shortcomings. First, incentive 
payments are based almost exclusively on collections without 
providing adequate incentives for the program outcomes--such as 
paternity establishment--upon which collections are based. 
Second, States receive incentive payments that are guaranteed 
regardless of their efficiency in making collections. Along 
with other child support reforms enacted in the 1996 welfare 
reform legislation, the new incentive system is expected to 
have a major impact by increasing both the effectiveness and 
efficiency of the child support programs conducted by the 
States. Among other notable outcomes, the new system will help 
families leave welfare and maintain their independence from 
welfare.
    The Committee proposal also contains a modification of the 
penalty procedure used against States that violate the 
jurisdictional barriers provision of last year's adoption 
legislation. As with child support data systems, the penalty 
contained in current law--in this case, loss of all Federal 
funds under Title IV-E of the Social Security Act--is too 
severe. The new penalty procedure would substantially reduce 
the financial impact on States while nonetheless maintaining a 
real deterrent against violations of the prohibition on 
delaying or denying adoptions across county or State lines.

                 B. Background and Need for Legislation

    The following are the major features of the new penalty 
procedures and the new child support performance and incentive 
system that would be established under the Committee proposal:

                 Title I: Alternative Penalty Procedure

    Eligibility for alternative penalty.--If a State is making 
a good faith effort to comply with the data processing 
requirements of the 1988 Family Support Act and if the State 
submits to the Secretary of the Department of Health and Human 
Services (HHS) a corrective compliance plan describing how, by 
when, and at what cost it will comply, the State may avoid the 
penalty in current law and qualify for the new penalty. The new 
penalty would be 4 percent, 8 percent, 16 percent, and 20 
percent, respectively, for the first, second, third, and fourth 
or subsequent years of failing to comply with the data 
processing requirements; this percentage would be applied to 
the amount payable to the State in the previous year as Federal 
administrative reimbursement under the child support program.
    Penalty waiver.--All penalties would be waived if, by 
December 31, 1997, a State has submitted to the Secretary a 
request that the Secretary certify the State as meeting the 
1988 data processing requirements and the State is subsequently 
certified as a result of a review conducted pursuant to the 
request.
    Partial penalty forgiveness.--If a State operating under 
the penalty procedure achieves compliance with the data 
processing requirements before the first day of the next fiscal 
year, then the penalty for the current fiscal year would be 
reduced by 75 percent.
    Penalty reduction for good performance.--In addition to 
complying with the data processing requirements of the 1988 
Act, States would have to comply with the data processing 
requirements imposed by the 1996 welfare reform law by October 
1, 2000. In the case of the 1996 requirements, a State that 
fails to comply may nonetheless have its annual penalty reduced 
by 20 percent for each performance measure under the new child 
support incentive system (see summary of Title II provisions, 
below) for which it achieves a maximum score.
    Expansion of waiver provision.--The authority of the 
Secretary to waive certain data processing requirements and to 
provide Federal funding for a wider range of State data system 
activities would be expanded to include waiving the single 
Statewide system requirement under certain conditions and 
providing Federal funds to develop and enhance local systems 
linked to State systems. To qualify, a State would have to 
demonstrate that it can develop an alternative system that:
          Can help the State meet the paternity establishment 
        requirement and other performance measures;
          Can submit required data to HHS that is complete and 
        reliable;
          Substantially complies with all requirements of the 
        child support enforcement program;
          Achieves all the functional capacity for automatic 
        data processing outlined in the statute;
          Meets the requirements for distributing collections 
        to families and governments, including cases in which 
        support is owed to more than one family or more than 
        one government;
          Has one point of contact for interstate case 
        processing and intrastate case management;
          Is based on standardized data elements, forms, and 
        definitions that are used throughout the State;
          Can be operational in no more time than it would take 
        to achieve an operational single Statewide system; and
          Can process child support cases as quickly, 
        efficiently, and effectively as would be possible with 
        a single Statewide system.
    Federal payments under waiver.--In addition to the various 
waiver requirements described above, and to the requirements in 
current law, the State would have to submit to the Secretary 
separate estimates of the cost of developing and implementing a 
single Statewide system and the alternative system being 
proposed by the State plus the costs of operating and 
maintaining these systems for 5 years from the date of 
implementation. The Secretary would have to agree with the 
estimates. If a State elects to operate an alternative system, 
the State would be paid the regular 66 percent Federal 
administrative reimbursement only on costs up to the amount of 
the estimated cost of the single Statewide system.

                Title II: Child Support Incentive System

    Amount of incentive payments.--The incentive payment for a 
State for a given year would be calculated by multiplying the 
incentive payment pool for the year by the State's incentive 
payment share for the year. The incentive payment pool would be 
equal to the Congressional Budget Office estimate of incentive 
payments for each year under current law. Specifically, the 
amounts (in millions) for fiscal years 2000 through 2008, 
respectively, would be: $422, $429, $450, $461, $454, $446, 
$458, $471, and $483. Specifying these amounts in the statute 
assures that the new incentive payments system would be budget 
neutral. After 2008, the incentive payment pool would increase 
each year by an amount equal to the rate of inflation.
    Calculating incentive payments.--In addition to the 
incentive payment pool, incentive calculations would be based 
on the various factors defined below. The general approach 
wouldbe to pay to each State its share of the incentive payment 
pool based on the quality of its performance on the five incentive 
performance measures. The five measures would be: paternity 
establishment; establishment of support orders; collections on current 
payments; collections on arrearages; and cost effectiveness.
    Treatment of interstate collections.--In computing 
incentive payments, support collected by a State at the request 
of another State would be treated as having been collected by 
both States. State expenditures on a special interstate project 
carried out under section 455(e) would be excluded from 
incentive payment calculations.
    Regulations.--The Secretary of Health and Human Services 
would be required to prescribe regulations necessary to 
implement the incentive payment program within 9 months of the 
date of enactment. These regulations could include directions 
for excluding certain closed cases and cases over which the 
State has no jurisdiction.
    Reinvestment.--States would be required to spend their 
child support incentive payments to carry out their child 
support enforcement program or to conduct activities approved 
by the Secretary which may contribute to improving the 
effectiveness or efficiency of the State child support 
enforcement program. In so doing, States must supplement and 
not supplant other funds used by the State to conduct its child 
support enforcement program.
    Transition rule.--The new incentive system would be phased 
in over 2 years beginning in fiscal year 2000 In fiscal year 
2000, \1/3\rd of each State's incentive payment would be based 
on the new incentive system and \2/3\rds on the old system. In 
fiscal year 2001,\2/3\rds of each State's incentive payment 
would be based on the new incentive system and \1/3\rd on the 
old system. The new system would be fully operational in fiscal 
year 2002.
    General effective date.--Except for the elimination of the 
current incentive program, the amendments made by this 
legislation would take effect on October 1, 1999.

                     Title III: Adoption Provisions

    The current penalty for violating the provision on adoption 
across jurisdictional lines would be terminated and a new 
penalty substituted. Under the new penalty, States that violate 
this adoption provision would receive a penalty equal to the 
loss of 2 percent of the Federal funds for foster care and 
adoption under Title IV-E of the Social Security Act for the 
first violation, 3 percent for the second violation, and 5 
percent for the third and subsequent violations.

                    Title IV: Technical Corrections

    The current law on data sources to calculate the adoption 
incentive payments only allows the use of data reported by 
States by November 30, 1997, and approved by the Secretary by 
March 1, 1998. The new provision would give States an 
additional 5 months to report data (until April 30, 1998) and 
the Secretary an additional 4 months to approve the data (until 
July 1, 1998).
    The 1996 welfare reform law required States to collect 
Social Security numbers on applications for State licenses for 
purposes of matching in child support cases by January 1, 1998. 
The Illegal Immigration Reform and Immigrant Responsibility Act 
of 1996 required States to collect Social Security numbers on 
applications for State drivers' licenses for purposes of 
checking the identity of immigrants by October 1, 2000. This 
technical amendment would conform the two requirements by 
changing the date in the Social Security Act by which States 
must collect Social Security Numbers on applications for State 
drivers' licenses to October 1, 2000, or such earlier date as 
the State selects.

                         C. Legislative History

Committee bill

    H.R. 3130 was introduced on January 28, 1998 by Chairman 
Shaw and Mr. Levin of the Subcommittee on Human Resources. The 
Subcommittee on Human Resources considered H.R. 3130 and 
ordered it favorably reported to the full Committee on February 
3, 1998 by voice vote, with a quorum present. The full 
Committee on Ways and Means considered the Subcommittee 
reported bill on February 25, 1998 and ordered it favorably 
reported, as amended, on Wednesday, February 25, 1998, by voice 
vote. On September 18, 1997 the Subcommittee on Human Resources 
ordered favorably reported to the full Committee, as amended, 
H.R. 2487, the ``Child Support Incentive Act of 1997,'' by 
voice vote. The full Committee on Ways and Means considered the 
Subcommittee reported bill and ordered it favorably reported as 
amended, on September 23, 1997, by voice vote. On September 29, 
1997, H.R. 2487 passed the House with amendment, by voice vote. 
A version of this legislation is included as Title II of H.R. 
3130, modified from last year's legislation in order to ensure 
a budget neutral incentive system.

Legislative hearings

    The Subcommittee on Human Resources held a hearing on 
modifying child support penalties for automatic data processing 
and on the child support incentive payment proposal on January 
29, 1998, which included testimony from Members of Congress, 
the Administration, child support administrators, organizations 
representing noncustodial parents, and child advocacy groups. 
The Subcommittee also held a hearing on September 10, 1997 on 
data system improvements, which included testimony from the 
Administration, State child support program directors, child 
advocacy groups, and private companies participating in child 
support enforcement programs. The Subcommittee held prior 
hearings on the child support incentive payment proposal on 
September 19, 1996 and March 20, 1997, which included testimony 
from the Administration, national organizations of child 
support administrators, organizations representing noncustodial 
parents, child advocacy groups, and the Congressional Research 
Service.

                     II. EXPLANATION OF PROVISIONS

                             1. Short Title

Present law

    No provision.

Explanation of provision

    This Act may be cited as the ``Child Support Performance 
and Incentive Act of 1998''.

Reason for change

    Not applicable.

          Title I--Child Support Data Processing Requirements

            1. Eligibility for Alternative Penalty Procedure

Present law

    No provision. Under current law, if a State failed to 
implement a Statewide automated data processing and information 
retrieval system by October 1, 1997 (which is a child support 
enforcement State plan requirement), the Office of Child 
Support Enforcement is required to, after an appeals process, 
``disapprove'' the State's child support enforcement plan and 
suspend Federal funding for the State's child support 
enforcement program. Moreover, pursuant to title IV-A 
(Temporary Assistance for Needy Families; TANF) law, a State 
that cannot certify that it has an approved Child Support 
Enforcement plan when it amends its TANF plan (generally every 
2 years), is not eligible for TANF block grant funding. Thus, a 
State that failed to implement a Statewide automated data 
processing and information retrieval system is in eventual 
jeopardy of losing its TANF block grant allocation along with 
its Federal Child Support Enforcement funding.

Explanation of provision

    If the Secretary determines that a State is making good 
faith efforts to comply with the data processing requirements 
and if the State submits a corrective compliance plan 
describing how it will comply, by when, and at what cost, the 
State may avoid the penalty in current law and qualify for the 
new penalty procedure outlined below.

Reason for change

    The Committee found broad bipartisan agreement that the 
current law penalty of ending both the Federal child support 
and TANF funds of any State that violated the October 1, 1997 
automated data processing deadline was too severe. Penalties 
should be high enough to serve as an incentive to meet Federal 
requirements but not severe enough to cripple State programs. 
The new penalty recommended by the Committee meets this test, 
especially because it starts at a modest level and then 
increases in subsequent years if States continue to fail to 
come into compliance with the data processing requirements. In 
the unlikely case of a State that willfully and repeatedly 
defies Federal requirements, the Secretary may still use the 
full penalty of ending all Federal child support and TANF 
funds.

                           2. Penalty Amount

Present law

    As noted above, the penalty for noncompliance with a Child 
Support Enforcement State plan requirement is loss of all 
Federal Child Support Enforcement funding and eventually all 
TANF funding as well.

Explanation of provision

    The percentage penalty is 4 percent, 8 percent, 16 percent, 
and 20 percent respectively for the first, second, third, and 
fourth and subsequent years of failing to comply with the data 
processing requirements. The percentage penalty is applied to 
the amount payable to the State in the previous year as Federal 
administrative reimbursement under the child support 
enforcement program.

Reason for change

    The specific penalty percentages adopted by the Committee 
represent a compromise between those, especially child 
advocates, who wanted higher penalties, and those, especially 
State officials, who wanted lower penalties. The percentage 
amounts, as well as other penalty provisions (see below), were 
adjusted to reach a compromise between these two basic 
perspectives.

                           3. Penalty Waiver

Present law

    No provision.

Explanation of provision

    If by December 31, 1997 a State has submitted to the 
Secretary a request that the Secretary certify the State as 
meeting the 1988 data processing requirements and is 
subsequently certified as a result of a review pursuant to the 
request, all penalties are waived.

Reason for change

    Even though the deadline under current law for implementing 
the data systems is October 1, 1997, States were not required 
to report that they are out of compliance until December 31, 
1997. After the States report they are out of compliance, HHS 
will notify them within a month or so that HHS intends to 
invoke the penalty. States then have up to 60 days to respond 
to HHS's notice of intent. Even after these various exchanges 
have taken place, States can delay the actual withholding of 
funds by appealing the HHS decision through the courts. If a 
State comes into compliance during this protracted period of 
time, the State would pay no penalty. Given that the intent of 
the Committee bill is to reduce the magnitude of child support 
penalties if States are making good faith efforts to comply 
with Federal requirements, the Committee did not want to impose 
the new penalty on States that may not have been penalized 
under current law. To avoid this outcome, the Committee 
included this provision which would exempt from penalties any 
State that had notified HHS by December 31, 1997 that it was 
ready to undergo the certification process and that was 
subsequently certified as a result of the process initiated by 
the State's letter. If this provision had not been included, 
some States that could have avoided the penalty under current 
law would have been forced to pay the new penalty.

                     4. Partial Penalty Forgiveness

Present law

    No provision.

Explanation of provision

    If a State operating under the penalty procedure achieves 
compliance with the data processing requirements before the 
first day of the next fiscal year, then the penalty for the 
current fiscal year is reduced by 75 percent.

Reason for change

    In order to encourage States to comply with data processing 
requirements during the course of a given fiscal year, the 
Committee bill proposes to provide States that come into 
compliance with a financial reward by reducing the penalty for 
that year. This provision is also part of the compromise 
between those who wanted higher and those who wanted lower 
penalties. More specifically, those wanting lower penalties 
agreed to relatively higher penalties in exchange for this 
partial forgiveness provision.

               5. Penalty Reduction for Good Performance

Present law

    No provision.

Explanation of provision

    States must comply with all the data processing 
requirements imposed by the 1996 welfare reform law by October 
1, 2000. Some data processing requirements must be fulfilled 
before this date. A State that fails to comply with any of the 
1996 data processing requirements may nonetheless have its 
annual penalty reduced by 20 percent for each performance 
measure under the new incentive system (see Title II below) for 
which it achieves a maximum score. Thus, for example, a State 
being penalized would have its penalty for a given year reduced 
by 60 percent if it achieved maximum performance on three of 
the five performance measures.

Reason for change

    During one of the meetings conducted by the Committee with 
groups interested in the penalty provision, several States 
pointed out that the overall goal of the child support 
legislation is to improve child support performance. If the new 
incentive system is enacted by Congress (see Title II below), 
Congress will have in place an effective way to measure the 
effectiveness of State programs in achieving the fundamental 
goals of child support enforcement--establishing paternity and 
child support orders, collecting child support payments, and 
operating efficiently. If a State has not fully complied with 
the data processing requirements, but nonetheless conducts an 
effective and efficient child support program as measured by 
the incentive system, then the State should be able to avoid at 
least part of the penalty for failing to implement the 
automatic data systems. Thus, the Committee included this 
provision to provide partial relief from penalties for States 
that achieve highly effective performance. This provision, 
however, applies only to the data processing requirements 
imposed by the 1996 welfare reform legislation (not the 
requirements established in 1988). States receive penalty 
reductions only by achieving the highest rating on the various 
performance measures.

 6. Penalty Procedure Applies to Requirements of 1988 Act and 1996 Act

Present law

    P.L. 104-193 requires that as part of their State child 
support enforcement plans all States, by October 1, 2000, have 
in effect a single Statewide automated data processing and 
information retrieval system that meets all of the specified 
requirements, except that the deadline is extended by one day 
for each day (if any) by which the Secretary fails to meet the 
deadline for final regulations on the new data processing 
requirements (i.e., which is not later than August 22, 1998). 
The disapproval procedures described above also would apply to 
these new data processing requirements.

Explanation of provision

    With the exception of the December 31, 1997 waiver 
provision, which applies only to the 1988 requirements, and the 
penalty reduction provision for good performance, which applies 
only to the 1996 requirements, the new penalty procedure 
applies to data processing requirements of both the 1988 Family 
Support Act and the 1996 welfare reform legislation.

Reason for change

    One way to avoid the problem of States' missing data system 
deadlines is to be certain that States know well in advance 
exactly what penalties will be imposed for failing to meet the 
deadlines. Given the huge penalties that would be imposed on 
States that failed to meet the 1988 requirements, it is 
entirely possible that State officials assumed that these 
penalties would never be imposed. The penalties would have 
ruined States' child support and welfare programs and caused a 
firestorm of protest. Further, there are numerous examples of 
prior penalties in Federal social programs that should have 
been imposed on States but were not. However, once the 
amendments proposed by the Committee bill are enacted, at least 
16 States will be required to pay penalties for failing to meet 
the 1988 requirements. By putting the new penalty procedure in 
place, and by ensuring that several States actually receive a 
penalty a few of which may be quite substantial the Committee 
provision reinforces the understanding that penalties will 
actually be imposed on States that fail to meet Federal 
requirements. This action will in turn increase the likelihood 
that States will comply with Federal requirements in the future 
including the 1996 data processing requirements.

                    7. Expansion of Waiver Provision

Present law

    Current law states that the Secretary of the Department of 
Health and Human Services may waive any requirement related to 
the advance planning automated data processing document or the 
automated data processing and information retrieval system. The 
Secretary may grant such waivers if the State demonstrates to 
her satisfaction that the State has an alternative system or 
systems that enable the State to be in substantial compliance 
with all requirements of the child support enforcement program. 
The waiver must also meet the following conditions: (1) it must 
be designed to improve the financial well-being of children or 
otherwise improve the operation of the child support 
enforcement program; (2) it may not permit modifications in the 
child support enforcement program which would have the effect 
of disadvantaging children in need of support; and (3) it must 
not result in increased cost to the Federal government under 
the TANF program; or the State must provide assurances to the 
Secretary that steps will be taken to otherwise improve the 
State's child support enforcement program.

Explanation of provision

    This provision would expand the Secretary's authority to 
grant waivers. More specifically, States would be allowed to 
meet the automated system requirements through an alternative 
system configuration that links local child support systems 
electronically so that they function as a Statewide system. 
However, the proposed alternative system must allow the State 
to develop and implement an automated system that operates as 
quickly, efficiently, and effectively as a single Statewide 
system. This provision also would expand the Secretary's 
authority to fund the development of an alternative system 
configuration, permitting Federal funds to be used for the 
development of new local systems and for making major changes 
or enhancements to existing local systems, while ensuring that 
total Federal reimbursement not exceed the amount the State 
would have received to build and operate a single Statewide 
system.
    To obtain a waiver, a State must demonstrate to the 
satisfaction of the Secretary that the proposed alternative 
system will be completed in no more time than would be required 
to complete a single Statewide system. The State also must 
demonstrate that the alternative system will meet all 
applicable certification requirements for a single Statewide 
system. The Committee provision highlights six specific 
functions that alternative systems configurations must meet in 
order to be eligible for a waiver. These include: meeting (both 
the linked system and each local system) all the functional 
requirements of section 454(16); accounting for all child 
support distributions; having a single point of contact in the 
State for all interstate case processing; and, using 
standardized and uniform data elements throughout the State.
    The distribution of child support collections is of 
particular concern to the Committee. The bill requires that 
alternative systems meet the distribution requirements in 
section 457 of the Act. The bill further requires that the 
system must appropriately account for the distribution of 
collections to children residing with different custodial 
parents in different States or different jurisdictions within 
the State.
    Although the Committee provision directs the Secretary to 
carefully examine waiver applications and specifies in 
considerable detail the functions an alternative system must 
perform, it is not the intent of the Committee that States 
applying for a waiver from the single Statewide system 
requirement be subject to all of the requirements appropriate 
for single Statewide systems. The requirements that would not 
apply to linked systems include:
          The system represents the sole system effort for 
        administration of the IV-D program within the State;
          The system's design must not require duplicative 
        application software development or application 
        software maintenance;
          There is no duplicative application software; that 
        is, the same functions are not performed by different 
        software modules; and
          There is only one single application software 
        development and maintenance effort and organization.
    On the other hand, the Committee provision is designed to 
ensure that many of the requirements of single Statewide 
systems do apply to alternative system configurations. In 
addition to those outlined above, these include:
          The IV-D agency, through the Statewide, comprehensive 
        system, must have the ability to control, account for, 
        and monitor all factors in support collection and 
        paternity determination processes;
          There must be no duplicative data entry. Common data 
        elements contained in more than one component must be 
        entered only once and updates to common data elements 
        must be made automatically in all components; that is, 
        the data in all components must be electronically 
        synchronized; and
          All system components must be electronically linked 
        and the linkage must be transparent to users.
    The principles of transparent linkage and avoidance of 
duplicate data entry are essential for States opting for an 
alternative system configuration. The intent is to ensure that 
child support caseworkers using different local systems within 
the State, and in other States, are not adversely impacted in 
processing child support cases by the State's decision to 
implement an alternative system configuration rather than a 
single Statewide system. The alternative system configuration 
must ensure that the linkage between systems within a State 
will not result in duplicative data entry when a case transfers 
from one local system within the State to another local system 
within that State. The proposed design for the linkage between 
local systems within a State must ensure the electronic 
transmission of data among systems.
    The alternative system configuration also must ensure 
coordinated, automated intrastate case management by the IV-D 
agency. Through the State's automated child support enforcement 
system, including all linked systems, the IV-D agency must be 
able to control, account for, and monitor all factors in 
support collection and paternity determination processes.
    The Committee is concerned about both the costs of 
developing and implementing an alternative system configuration 
and the costs of operating and maintaining that system. To 
address this concern, the Committee provision caps both 
categories of costs at a single total amount. The provision 
requires that as part of its waiver request, a State provide to 
the Secretary estimates of the costs associated with developing 
and implementing both the proposed alternative system and a 
single Statewide system of comparable functionality, plus 
estimates of the costs associated with operating and 
maintaining these systems for a period of 5 years from the date 
each system would be implemented. The Secretary must agree with 
these estimates.
    The Committee's bill would cap Federal financial 
participation (FFP) for an alternativesystem configuration 
waiver at a level determined by the Secretary that would not exceed the 
amount of Federal reimbursement the state would have received to build 
a single Statewide system. If the alternative system configuration 
costs more to develop or operate than the amount initially approved by 
the Secretary, the State would be responsible for making up any 
shortfall.
    The Committee does not expect the Secretary to adjust cost 
estimates periodically to reflect cost increases. Rather, the 
Committee expects that the only time HHS would increase the 
cost cap for an alternative system configuration would be if a 
State proposed to increase the functionality of the system. The 
revised cost cap would be based on a comparison of the costs of 
the revised alternative system configuration and a single 
Statewide system of comparable functionality. The Committee 
reiterates that States implementing alternative systems are 
expected to assume the financial risks that such systems may 
cost more to maintain and enhance than expected.
    The intent of this provision is to provide additional 
flexibility in the statute and subsequent regulations and 
polices related to alternative system configurations. Because 
of the need to make this new flexibility available to States as 
quickly as possible, the Committee provision does not require 
regulations. It is the intent of the Committee that current 
regulations and policies related to the HHS systems waiver 
process and documentation requirements be followed where not in 
direct conflict with these new provisions. It is assumed that 
HHS will provide clarification on the new flexibility provided 
by this provision through issuance of an Action Transmittal as 
quickly as possible.
    The provision requires the Secretary to approve a waiver 
request once she determines to her satisfaction that it meets 
the requirements of the statute. This provision does not 
eliminate or diminish the Secretary's authority to review the 
material submitted by a State to ensure compliance with 
statutory requirements and to assess the reasonableness of 
States' costs estimates.

Reason for change

    This provision was a matter of great controversy in 
testimony presented to the Subcommittee on Human Resources and 
in numerous meetings Subcommittee Members and staff had with 
the various parties interested in this legislation. The 
controversy was caused by the fear, especially among child 
advocates and other critics of State programs, that States 
would use the waiver provision to establish inferior automatic 
data processing programs. These critics charged that States 
were unwilling to force local governments to conform to the 
requirements of a single, Statewide data system. States and 
local governments, on the other hand, argued that many local 
systems were highly effective and had been in operation for 
many years. Thus, it made little sense to require local 
governments to give up these effective systems in order to 
adopt a new system that would be used by all local governments 
in the State.
    This basic conflict was aggravated in a few cases by 
attempts to actually impose Statewide systems on local 
governments. In California, for example, several counties 
participated in the initial stage of a plan to bring a single 
system to all counties in the State. The participating counties 
gave up their data systems to adopt, on a trial basis, a new 
system that the State hoped to eventually use in every county. 
According to California officials who testified before our 
Committee, one of the many reasons for failure was that the new 
system actually reduced the data system capacity of some of the 
counties. After about 6 months, the counties refused to use the 
new system any longer. Other States had similar experiences in 
trying to adopt single, Statewide systems.
    In several meetings of the Committee's bipartisan working 
group, the General Accounting Office (GAO) assured the 
Committee that the technology needed to link these disparate 
local systems together to achieve the advantages of a Statewide 
system was readily available. Thus, at least in theory, States 
could build linked, local systems that would allow counties to 
keep the systems they were already using and yet achieve the 
advantages of a Statewide system. In the end, given the 
Committee's reluctance to force counties to give up their data 
systems and the assurance from GAO that the technology to build 
linked systems was readily available, the Committee decided to 
allow linked systems under some circumstances.
    Based on our work with advocates and other interested 
parties, the Committee provision spells out in substantial 
detail the requirements that linked systems must meet before 
the Secretary can allow States to implement them. States 
wishing to build linked systems must present a detailed plan to 
the Secretary that spells out how the linked system will meet 
all the statutory requirements. If the Secretary concludes that 
the proposed linked system will not be effective, she is 
required by the Committee provision to reject the waiver 
request. Allowing linked systems, but imposing strict 
requirements on the capabilities, cost, and timing of these 
alternative systems, seems to Members of the Committee to be 
the fairest and most effective way to ensure that States build 
effective data processing systems. The burden to prove that an 
alternative system will be equal to the single State system 
required under current law rests with the State. The Committee 
expects the Department of Health and Human Services to take 
very seriously its responsibility to approve or disapprove any 
waiver request. The success of the nation's child support 
enforcement program depends on it.

               8. Federal Payments Under Waiver Provision

Present law

    To be approved for a waiver, a State must demonstrate that 
the proposed project: (1) is designed to improve the financial 
well-being of children or otherwise improve the operation of 
the child support program; (2) does not permit modifications in 
the child support program that would have the effect of 
disadvantaging children in need of support; and (3) does not 
result in increased cost to the Federal government under the 
TANF program.

Explanation of provision

    In addition to the various waiver requirements described in 
provision #7 above, and to the requirements in current law, the 
State must submit to the Secretary separate estimates of the 
costs of developing and implementing both a single Statewide 
system and the alternative system being proposed by the State 
plus the costs of operating and maintaining these systems for 5 
years from the date of implementation. The Secretary must agree 
with the estimates. If a State elects to operate such an 
alternative system, the State would be paid the 66 percent 
Federal administrative reimbursement only on expenditures up to 
the estimated cost of the single Statewide system.

Reason for change

    Under current statutes, States that obtain waivers from 
child support data processing requirements generally are not 
eligible for Federal financial participation in implementing 
the waiver provision. By contrast, the Committee provision 
allows States to claim Federal financial participation for 
alternative data systems, but only in an amount up to the 
amount that would have been required to implement the single 
Statewide system. Thus, if extra costs are involved in 
implementing the alternative data system, those costs must be 
borne entirely by the State. As long as Federal taxpayers do 
not pay additional costs, States should not be prevented from 
spending additional State funds on their linked data systems.

                Title II--Child Support Incentive System

                    1. Amount of Incentive Payments

Present law

    Each State receives an incentive payment equal to at least 
6 percent of the State's total amount of child support 
collected on behalf of TANF families for the year, plus at 
least 6 percent of the State's total amount of child support 
collected on behalf of non-TANF families for the year. (Note: 
P.L. 98-378, the Child Support Enforcement Amendments of 1984, 
stipulates that political subdivisions of a State that 
participate in the costs of support enforcement must receive an 
appropriate share of any incentive payment given to the State. 
P.L. 98-378 also requires States to develop criteria for 
passing through incentives to localities, taking into account 
the efficiency and effectiveness of local programs.)

Explanation of provision

    The incentive payment for a State for a given year is 
calculated by multiplying the incentive payment pool for the 
year by the State's incentive payment share for the year.

Reason for change

    As discussed below, multiplying the incentive payment pool 
by the incentive payment share for each State is the last step 
in the series of steps required by the new method ofcomputing 
incentive payments. In order to create a budget neutral method of 
making incentive payments to States, the Committee decided to match 
incentive payments each year under the new system to the exact annual 
amount of incentive payments to States that CBO estimates would occur 
under current law. Because this amount varies every year, the 
mathematical strategy in performing the annual calculation is to treat 
each year's amount as 100 percent and then to determine the percentage 
share earned by each State. This percentage share is then multiplied by 
the particular amount in the incentive pool each year.

                       2. Incentive Payment Pool

Present law

    No provision.

Explanation of provision

    The incentive payment pool is equal to the CBO estimate of 
incentive payments for each year under current law. 
Specifically, the amounts (in millions) for fiscal years 2000 
through 2008 respectively are: $422, $429, $450, $461, $454, 
$446, $458, $471 and $483. Stating these amounts in the statute 
assures that the incentive payments will be budget neutral. 
After 2008, the incentive payment pool would increase each year 
by an amount equal to the rate of inflation.

Reason for change

    The incentive payment pool is simply a device for ensuring 
that the new incentive system is budget neutral between 2000 
and 2008. The amount of money in the pool each year equals the 
amount of money CBO estimates would be spent on incentive 
payments each year under current law. The rest of the 
calculations (see below) are designed to divide up the 
incentive payment pool each year among States based on the 
relative quality of their child support performance.

                   3. Calculating Incentive Payments

Present law

    The maximum incentive payment for a State could reach a 
high of 10 percent of child support collected on behalf of 
families in the Temporary Assistance for Needy Families (TANF) 
program plus 10 percent of child support collected on behalf of 
non-TANF families. There is a limit, however, on the incentive 
payment for non-TANF child support collections. The incentive 
payments for such collections may not exceed 115 percent of 
incentive payments for TANF child support collections.

Explanation of provision

    In addition to the incentive payment pool, incentive 
calculations are based on the five computational factors 
defined here and the five incentive performance measures (see 
#6, #7, #8, #9, and #10 below). The general approach is to pay 
to each State its share of the incentive payment pool based on 
the quality of its performance on the five incentive 
performance measures. The five computational factors are:
    (1) State collections base is used to ensure that incentive 
payments are proportional to the amount of child support 
collected by the State; collections for welfare cases are given 
double the weight of collections for nonwelfare cases in the 
calculations;
    (2) Maximum incentive base amount is simply a device to 
give extra weight to three of the five incentive performance 
measures because these measures are thought to be more 
important to State performance. Specifically, paternity 
establishment, establishment of support orders, and collections 
on current support receive full weight in the calculations, 
while collections on past-due support and the cost-
effectiveness performance level receive a weight of only 75 
percent of the other three measures;
    (3) Applicable percentage is the actual measure of 
performance effectiveness and is determined by looking up the 
raw performance level in a table; there is a different table 
for each of the five performance measures (see section 201 of 
bill text);
    (4) Incentive base amount is the total of the applicable 
percentages for each of the five performance measures 
multiplied by their respective maximum incentive base amounts 
(either 1.00 or 0.75);
    (5) State incentive payment share is a percentage 
calculated by using the four factors defined above. This 
measure specifies the percentage share of the annual payment 
pool that each State receives. The State incentive payment 
share takes into account the State's performance on all five 
incentive performance measures, the weighting of the five 
incentive performance measures, its collections in the TANF and 
non-TANF caseloads, and its performance relative to other 
States.

Reason for change

    One of the major deficiencies of the incentive system in 
current law is that its rewards are based almost entirely on 
child support collections. The Committee believes that a better 
approach is to reward both collections and State performance on 
the underlying factors on which collections are based. Thus, 
the new system rewards paternity establishment and 
establishment of legal child support orders because these are 
the foundations of collections; without paternity and support 
order establishment, collections are impossible. The new system 
retains a measure of collections on current support (support 
that is not past-due) but also adds collections on past-due 
support as a performance measure. The Committee has received 
extensive testimony that States are sometimes reluctant to work 
cases with past-due support (arrearages) because they are 
frequently difficult to bring to successful completion. By 
providing a separate performance measure of arrearage payments, 
the legislation encourages States not to ignore these important 
cases. Finally, because efficiency should be an ingredient of 
any incentive system, the legislation includes a measure of the 
efficiency with which States collect payments.
    Perhaps the greatest shortcoming of the current incentive 
system is that States get a substantial portion of their 
incentive payment without regard to performance. The new system 
involves a computational approach that overcomes this 
deficiency. First, the quality of State performance is 
calculated on each of the five performance measures, usually by 
calculating a percentage that represents the fraction of 
perfect performance the State achieved. To take paternity 
establishment as an example, the calculation is simply the 
number of out-of-wedlock births in which paternity is 
established divided by the total number of out-of-wedlock 
births. This percentage is then located in a table that, based 
on previous performance by all States on this measure, converts 
this percentage to a second percentage called the ``applicable 
percentage'' (see section 201 of bill text). This step is 
necessary to convert the absolute percentage performance on 
each performance measure to a relative percentage reflecting 
quality of performance relative to previous performance on each 
measure by the States.
    A notable feature of the performance tables is that for 
inferior performance (usually below about 50 percent of maximum 
achievement), States would receive no incentive payments unless 
they substantially increase their performance from the previous 
year. This feature of the new system ensures that States that 
do not achieve at least a modestly effective level of 
performance receive either very low incentive payments or no 
incentive payment at all.

 4. Data Used to Calculate Ratios Required to be Complete and Reliable

Present law

    No provision.

Explanation of provision

    The payment on each of the five performance measures is 
zero unless the Secretary determines that the data submitted by 
the State for each measure is complete and reliable.

Reason for change

    States sometimes report data to the Department of Health 
and Human Services that are incomplete and unreliable. Usually, 
there is little that the Federal government can do about this 
problem. However, in the case of the incentive system, the 
Committee bill gives the Secretary the authority to refuse 
payments if the data for the performance measures are not 
complete and reliable. The Secretary can refuse payments on one 
or more measures and award payments on the others. Given the 
substantial sums of money involved, this authority to refuse to 
makepayments should ensure high quality data.

                       5. state collections base

Present law

    Although the ``collections base'' terminology is not used 
in current law, the incentive payment is based on total child 
support collected on behalf of TANF families (i.e., TANF 
collections) plus total child support collected on behalf of 
non-TANF families (i.e., non-TANF collections). Collections 
made on behalf of Title IV-E foster care children are 
considered TANF collections for purposes of the incentive 
payment.

Explanation of provision

    The collections base for a fiscal year is the sum of two 
categories of child support collections by the State. The first 
category is collections on cases in the State child support 
welfare caseload. This category includes families that are 
currently or were formerly receiving benefits from TANF (or its 
predecessor program Aid to Families with Dependent Children) 
under Title IV-A of the Social Security Act, from Medicaid 
under Title XIX, or from foster care under Title IV-E. Total 
collections from this category are doubled in the State 
collections base calculation. The second category is 
collections from all other families receiving services from the 
State child support enforcement program.

Reason for change

    Applying the sum of State incentive percentages to the 
collections base has the effect of retaining the most important 
outcome measure--the actual collection of payments--as the 
central and most highly rewarded feature of the new system. In 
effect, collections are counted twice, once under the 
collection performance measures for current support and for 
arrearages and again when the incentive percentages for all 
five measures are applied to the State collections base. A 
second important feature of the State collections base is that 
collections in welfare or former welfare cases are doubled. 
Thus, $1 of collections in welfare cases is equivalent to $2 of 
collections in non-welfare cases. The purpose of this approach 
is to encourage States to emphasize collections for the most 
needy families and to avoid the temptation to concentrate their 
resources simply on cases with the highest potential payments.

6. determination of applicable percentages for paternity establishment 
                           performance level

Present law

    No provision.

Explanation of provision

    The paternity establishment performance level for a State 
for a fiscal year is, at the option of the State, either the 
paternity establishment percentage of cases in the child 
support program or the paternity establishment percentage of 
all births in the State. In both cases, the paternity 
establishment percentage is obtained by dividing the cases in 
which paternity is established by the total number of 
nonmarital births. The applicable percentage is then determined 
in accord with the table in section 201(A) of the bill text.
    Special rule for computing the applicable percentage for 
paternity establishment.--If the paternity establishment 
performance level of a State is less than 50 percent but 
exceeds by at least 10 percentage points the paternity 
establishment performance level of the State for the 
immediately preceding fiscal year, then the applicable 
percentage for the State paternity establishment performance 
level is 50 percent.

Reason for change

    As explained above, an important characteristic of the new 
incentive system is that State performance on several measures 
other than collections is rewarded. As one of the most 
important foundations of child support, paternity establishment 
is included as one of the new performance measures. The special 
rule for States operating at a very low performance level is 
included so that States that perform poorly can receive at 
least a minimum payment if they improve their performance 
substantially. This approach provides even the lowest-
performing States with financial incentives to improve.

  7. determination of applicable percentages for child support order 
                           performance level

Present law

    No provision.

Explanation of provision

    The support order performance level for a State for a 
fiscal year is the percentage of cases in the child support 
program for which there is a support order. The applicable 
percentage is then determined in accord with the table in 
section 201(B) of the bill text.
    Special rule for computing the applicable percentage for 
child support orders.--If the support order performance level 
of a State is less than 50 percent but exceeds by at least 5 
percentage points the support order performance level of the 
State for the immediately preceding fiscal year, then the 
applicable percentage for the State's support order performance 
level is 50 percent.

Reason for change

    Like paternity establishment, establishment of support 
orders is one of the foundations of an effective child support 
enforcement system. Collections are virtually impossible in 
cases that do not have support orders. Thus, including 
establishment of support orders as a performance measure is 
well justified. As in the case of paternity establishment, a 
special rule for very low performing States is included to 
maintain a financial incentive for these States to improve 
their performance.

 8. determination of applicable percentages for collections on current 
                  child support due performance level

Present law

    No provision.

Explanation of provision

    The current payment performance level for a State for a 
fiscal year is the total amount of current support collected 
during the fiscal year from all cases in the child support 
program (both welfare and non-welfare cases) divided by the 
total amount owed on support which is not past due. The 
applicable percentage is then determined in accord with the 
table in section 201(C) of the bill text.
    Special rule for computing the applicable percentage for 
current payments.--If the current payment performance level is 
less than 40 percent but exceeds by at least 5 percentage 
points the current payment performance level of the State for 
the immediately preceding fiscal year, then the applicable 
percentage for the State's current payment performance level is 
50 percent.

Reason for change

    As the most important outcome measure, collections play a 
central role in the new incentive system. However, the new 
system distinguishes between collections on current support and 
collections on past-due support in order to maintain an 
incentive for States to collect on arrearage cases. Again, a 
special rule is included to maintain an incentive for States 
that perform poorly if they substantially improve their 
performance.

  9. determination of applicable percentages for collections on child 
                  support arrearages performance level

Present law

    No provision.

Explanation of provision

    The arrearages payment performance level for a State for a 
fiscal year is the total number of cases in the State child 
support program that received payments on past-due child 
support divided by the total number of cases in the State child 
support program in which a payment of child support is past 
due. The applicable percentage is then determined in accord 
with the table in section 201(D) of the bill text.
    Special rule for computing the applicable percentage for 
arrearages.--If the arrearages payment performance level of a 
State for a fiscal year is less than 40 percent but exceeds by 
at least 5 percentage points the arrearages payment performance 
level for the immediately preceding fiscal year, then the 
applicable percentage for the State's arrearages performance 
level is 50 percent.
    The importance of this measure, relative to paternity 
establishment, support order establishment, and collections on 
current payments, is somewhat reduced in the incentive 
calculations by assigning a weight of 0.75 to this measure and 
a weight of 1.0 to the first three measures.

Reason for change

    Collections on past-due support are included as a 
performance measure in order to maintain an incentive for 
States to collect on arrearage cases. These cases are more 
difficult than cases involving current support because the 
parent owing money is often more difficult to locate, needed 
documents are more difficult to locate, and parents who owe 
arrearages are often the most reluctant to pay support. Again, 
a special rule is included to maintain an incentive for States 
that perform poorly if they substantially improve their 
performance. The computations weight this measure at 75 percent 
of the value of the first three measures because there is 
consensus that this measure and the measure of cost 
effectiveness (see #10 below) are less important than the first 
three measures.

  10. determination of applicable percentages for cost-effectiveness 
                           performance level

Present law

    Incentive payments are made according to the collection-to-
cost ratios (ratio of TANF collections to total child support 
enforcement administrative costs and ratio of non-TANF 
collections to total child support enforcement administrative 
costs) shown below.

        Collection-to-cost ratio              Incentive payment received
Less than 1.4 to 1............................................      6.0%
At least 1.4 to 1.............................................      6.5%
At least 1.6 to 1.............................................      7.0%
At least 1.8 to 1.............................................      7.5%
At least 2.0 to 1.............................................      8.0%
At least 2.2 to 1.............................................      8.5%
At least 2.4 to 1.............................................      9.0%
At least 2.6 to 1.............................................      9.5%
At least 2.8 to 1.............................................     10.0%

    For purposes of calculating these ratios, interstate 
collections are credited to both the initiating and responding 
States. In addition, at State option, laboratory costs (for 
example, for blood testing) to establish paternity may be 
excluded from the State's administrative costs in calculating 
the State's collection-to-cost ratios for purposes of 
determining the incentive payment.

Explanation of provision

    The cost-effectiveness performance level for a State for a 
fiscal year is the total amount collected during the fiscal 
year from all cases in the State child support program divided 
by the total amount expended during the fiscal year on the 
State child support program. The applicable percentage is then 
determined in accord with the table in section 201(E) of the 
bill text.
    The importance of this measure, relative to paternity 
establishment, support order establishment, and collections on 
current payments is somewhat reduced in the incentive 
calculations by assigning a weight of 0.75 to this measure and 
a weight of 1.0 to the first three measures.

Reason for change

    The current incentive system is based in part on program 
efficiency. Thus, including an efficiency performance measure 
does not represent a change in the new system. Moreover, the 
calculation of efficiency is identical in both the current and 
the proposed incentive systems (total collections divided by 
total administrative expenditures). The computations under the 
new system, however, weight this measure at 75 percent of the 
value of the first three measures because there is consensus 
that this measure, like collections on arrearages, is less 
important than the other three measures.

                11. treatment of interstate collections

Present law

    As noted above, in computing incentive payments, child 
support collected by one State at the request of another State 
(i.e., interstate collections) is credited to both the 
initiating State and the responding State. State expenditures 
on special interstate projects carried out under section 455(e) 
of the Social Security Act must be excluded from the incentive 
payment calculation.

Explanation of provision

    In computing incentive payments, support collected by a 
State at the request of another State is treated as having been 
collected by both States. State expenditures on a special 
interstate project carried out under section 455(e) are 
excluded from incentive payment calculations.

Reason for change

    The procedure of counting collections in interstate cases 
as collections in both the State collecting the money and the 
State receiving the money is identical to current law.

                     12. administrative provisions

Present law

    The Secretary's incentive payments to States for any fiscal 
year are estimated at or before the beginning of the year based 
on the best information available. The Secretary makes such 
payments on a quarterly basis. Each quarterly payment must be 
reduced or increased to the extent of overpayments or 
underpayments for prior periods.

Explanation of provision

    The Secretary's incentive payments to States are based on 
estimates computed from previous performance by the States. 
Each year, the Secretary must make quarterly payments based on 
these estimates. After final data are received by HHS, each 
quarterly payment must be reduced or increased to the extent of 
overpayments or underpayments for prior periods.

Reason for change

    The administrative provision in the new bill for payments 
to States is based on current law and represents no change in 
policy.

                            13. regulations

Present law

    Not applicable.

Explanation of provision

    The Secretary of Health and Human Services must prescribe 
regulations necessary toimplement the incentive payment program 
within 9 months of the date of enactment. These regulations may include 
directions for excluding certain closed cases and cases over which the 
State has no jurisdiction.

Reason for change

    Most new legislation contains instructions for the 
Secretary to issue regulations. Thus, this provision is not a 
change in policy.

                            14. Reinvestment

Present law

    No provision.

Explanation of provision

    States must spend their child support incentive payments to 
carry out their child support enforcement program or to conduct 
activities approved by the Secretary which may contribute to 
improving the effectiveness or efficiency of the State child 
support enforcement program. In so doing, States are required 
to supplement and not supplant State spending.

Reason for change

    Unlike current law, the incentive system proposed by the 
Committee bill requires States to spend all their incentive 
payments on the child support enforcement program. Three 
considerations justify this change. First, it makes no sense 
for Congress to design a child support program that provides 
States with money to use for other purposes such as building 
bridges and roads. Second, given the modest performance of most 
States in conducting their child support program, there is a 
great need for States to spend more money on building the 
infrastructure and hiring the personnel necessary to improve 
child support performance. Third, the agency that must carry 
the burden in improving State child support performance is the 
child support agency. Allowing incentive money to be spent by 
other agencies, as is often done under the current system, can 
be expected to reduce the impact of performance incentive 
payments on improving the child support program.

                          15. Transition Rule

Present law

    Not applicable.

Explanation of provision

    The new incentive system is phased in over 2 years 
beginning in fiscal year 2000. In fiscal year 2000, \1/3\rd of 
each State's incentive payment is based on the new incentive 
system and \2/3\rds on the old system. In fiscal year 2001, \2/
3\rds of each State's incentive payment is based on the new 
incentive system and \1/3\rd on the old system. The new system 
is fully operational in fiscal year 2002.

Reason for change

    Several States will lose money under the new incentive 
system unless they improve their performance. In order to give 
these States time to make the program adjustments and 
improvements necessary to increase their performance as 
measured under the new system, the Committee wanted to be 
certain that several years elapsed before the new system was 
fully implemented. After discussion, the Committee decided to 
wait until October 1, 1999 to implement the program and then to 
spread the implementation over a 2-year period. In effect, this 
approach will provide States with up to 4 years to adjust to 
the new system.

                               16. Review

Present law

    No provision.

Explanation of provision

    The Secretary of Health and Human Services must conduct a 
study of the implementation of the incentive payment program in 
order to identify problems with and successes of the program. 
An interim report must be presented to Congress not later than 
March 1, 2001. By October 1, 2003, the Secretary must submit a 
final report. Recommendations for changes that the Secretary 
determines would improve program operation must be included in 
the final report.

Reason for change

    As is the case with any new program, problems with 
implementation are to be expected. Some of these will be solved 
at the State or local level. Others, however, may be due to 
flaws in the way the program was conceived by Congress or in 
the way the statute is written. Given these potential problems, 
it is wise to have the Secretary conduct an unbiased study of 
the new program both during its early stages and after it is 
fully implemented. If there are problems that require 
Congressional action, legislators will have timely information 
to use in taking remedial steps. The Committee included a 
provision requiring the Secretary to study the impact of 
demographic and economic factors on State incentive payments 
because of the striking demographic and economic differences 
between States, especially in factors such as poverty rates, 
rates of out-of-wedlock births, and per capita income, that 
might be expected to play amajor role in the potential for 
collecting child support payments. At some point, Congress may 
want to contemplate designing an incentive system that adjusts 
for these demographic and economic differences.

                               17. Study

Present law

    No provision.

Explanation of provision

    The Secretary, in consultation with State IV-D directors 
and representatives of children potentially eligible for 
medical support, must develop a new medical support incentive 
measure based on effective performance. A report on this new 
incentive measure must be submitted to Congress not later than 
October 1, 1999.

Reason for change

    Several witnesses who appeared before the Committee 
recommended that we consider including medical child support as 
a performance measure. After discussion, the Committee decided 
not to include this measure because of the lack of information 
about the reliability of State data on medical support as well 
as lack of historical information about State performance on 
the measure that could be used to estimate payments. However, 
because medical support is of central importance to a good 
child support system, the Committee decided to ask the 
Secretary to study the feasibility of using medical support as 
a performance measure and to report her findings to Congress.

                18. Technical and Conforming Amendments

Present law

    No provision.

Explanation of provision

    This section contains two technical and conforming 
amendments.

Reason for change

    These technical amendments conform the current statutes to 
the changes created by this legislation.

              19. Elimination of Current Incentive Program

Present law

    No provision. (The current incentive payment system is a 
permanent provision of law.)

Explanation of provision

    The current incentive program under section 458 of the 
Social Security Act is repealed on October 1, 2001. On that 
date, section 458A is redesignated as section 458.

Reason for change

    Once the new system is fully implemented in fiscal year 
2002, the old system is repealed and the statute is rearranged 
so that the number of the old system (section 458) becomes the 
number of the new system (section 458) and the number used for 
the new system during the transition period (section 458A) is 
discontinued.

                       20. General Effective Date

Present law

    The current incentive payment system took effect on October 
1, 1985.

Explanation of provision

    Except for the elimination of the current incentive program 
(see item #19), the amendments made by this legislation take 
effect on October 1, 1999.

Reason for change

    This provision is not a change in current law; it simply 
specifies a general effective date for the provisions of this 
legislation.
    As explained previously, the Committee intended to allow 
ample time for States to adjust to the new incentive system and 
to improve their collection and reporting of the data on which 
the new system is based. For this reason, the Committee delayed 
the effective date until October 1, 1999 and gave States 3 
years to implement the new system.

                     Title III--Adoption Provisions

1. More Flexible Penalty Procedure to be Applied for Failing to Permit 
                      Interjurisdictional Adoption

Present law

    Under section 474(e) of the Social Security Act (as 
established by P.L. 105-89), a State is not eligible for any 
foster care or adoption assistance payments under Title IV-E if 
the Secretary finds that the State has denied or delayed a 
child's adoptive placement when an approved family is available 
outside the jurisdiction, or that the State has failed to grant 
an opportunity for a fair hearing to anyone who alleges that 
the State violated this provision or failed to act promptly on 
a complaint of such violation.

Explanation of provision

    The current penalty of losing all Federal Title IV-E funds 
for violating the jurisdictional provision is dropped and a new 
penalty is substituted. Under the new penalty, States that 
violate the adoption provision would receive a penalty equal to 
2 percent of the Federal funds for foster care and adoption 
under Title IV-E of the Social Security Act for the first 
violation, 3 percent for the second violation, and 5 percent 
for the third and subsequent violations.

Reason for change

    The Committee made this change in the adoption penalty on 
geographical barriers to avoid imposing severe penalties on 
States. Terminating a State's IV-E money would be a devastating 
blow for the State's child protection programs and would 
certainly not be in the best interests of children. Moreover, 
imposing the more modest but nonetheless substantial penalty 
called for by the Committee provision can be expected to give 
States plenty of incentive to permit adoptions across 
geographical barriers but without dealing a severe blow to 
States that violate the requirement.

                    Title IV--Technical Corrections

                        1. Technical Corrections

Present law

    Most of the provisions in this section make minor 
corrections to section references or other references in 
current statutes. Two provisions, however, require some 
explanation:
    First, under section 473A of the Social Security Act (as 
established by P.L. 105-89), States may receive financial 
incentives for increasing the number of adoptions of foster 
children above an annual base level. In determining the base 
levels for each State, the Secretary uses data from the 
Adoption and Foster Care Analysis and Reporting System 
(AFCARS). However, in determining the base levels for fiscal 
years 1995 through 1997, the Secretary may use alternative data 
sources, as reported by a State by November 30, 1997, and 
approved by the Secretary by March 1, 1998.
    Second, the 1996 welfare reform law required States to 
collect Social Security numbers on applications for State 
licenses for purposes of matching in child support cases by 
January 1, 1998. The Illegal Immigration Reform and Immigrant 
Responsibility Act of 1996 required States to collect Social 
Security numbers on applications for State licenses for 
purposes of checking the identity of immigrants by October 1, 
2000.

Explanation of provision

    Current law on alternative data sources to calculate the 
adoption incentive amount only allows the use of data reported 
by States by November 30, 1997 and approved by the Secretary by 
March 1, 1998. The new provision provides States with an 
additional 5 months to report data (until April 30, 1998) and 
the Secretary with an additional 4 months to approve the data 
(until July 1, 1998).
    The technical amendment on State licenses changes the 
January 1, 1998 date in the welfare reform bill to October 1, 
2000, or such earlier date as the State selects.

Reason for change

    The Committee approved the provision on adoption data at 
the request of the Administration to allow States more time to 
collect and report data for computing adoption incentive 
payments. There is general agreement in the States, in the 
Administration, and in the Committee that States can use the 
extra time to improve the quality and amount of data reported 
to HHS.
    The Committee changed the date by which States must collect 
Social Security Numbers both to give States more time to change 
their law and their license application procedures and to avoid 
having two conflicting dates in the Federal statutes.

                       III. VOTE OF THE COMMITTEE

    In compliance with clause 2(l)(2)(B) of rule XI of the 
Rules of the House of Representatives, the following statements 
are made concerning the vote of the Committee in its 
consideration of the bill, H.R. 3130.

                       Motion to Report the Bill

    The bill, H.R. 3130, as introduced, was ordered favorably 
reported with amendment by voice vote on February 25, 1998, 
with a quorum present.

                     IV. BUDGET EFFECTS OF THE BILL

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 7(a) of rule XIII of the Rules of 
the House of Representatives, the following statement is made:
    The Committee agrees with the estimate prepared by the 
Congressional Budget office (CBO) which is included below.

    B. Statement Regarding New Budget Authority and Tax Expenditures

    In compliance with clause 2(l)(3)(B) of rule XI of the 
Rules of the House of Representatives, the Committee states 
that the Committee bill results in no new budget authority and 
no new tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 2(l)(3)(C) of rule XI of the 
Rules of the House of Representatives requiring a cost estimate 
prepared by the Congressional Budget Office (CBO), the 
following report prepared by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 27, 1998.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3130, the Child 
Support Performance and Incentive Act of 1998.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sheila Dacey.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

H.R. 3130--Child Support Performance and Incentive Act of 1998

    Summary: H.R. 3130, the Child Support Performance and 
Incentive Act of 1998, would make several changes to the child 
support enforcement program. It would establish an alternative 
penalty procedure for states that fail to operate a single 
statewide automated child support enforcement system, allow the 
federal government to fund alternative configurations of 
automated systems, change the formula for awarding incentive 
payments to States, and lower the penalties on states that 
delay adoptions across state lines. CBO estimates the bill 
would have no net budgetary effect over the 1999-2003 period--
it would save $200 million from 1999 to 2001 and cost $200 
million in the following two years.
    H.R. 3130 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act of 1995 
(UMRA). The bill includes other provisions that will generate 
both costs and savings to states, but these amounts would net 
to zero over the 1999-2003 period.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 3130 is shown in the following table.

                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                                  1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING                                           
                                                                                                                
Alternate penalty procedure:                                                                                    
    Estimated budget authority................................      -105       -65       -40        40       160
    Estimated outlays.........................................      -105       -65       -40        40       160
Authority to waive statewide computer system requirement:                                                       
    Estimated budget authority................................         5         5         0         0         0
    Estimated outlays.........................................         5         5         0         0         0
Total:                                                                                                          
    Estimated budget authority................................      -100       -60       -40        40       160
    Estimated outlays.........................................      -100       -60       -40        40       160
----------------------------------------------------------------------------------------------------------------

    The costs of this legislation fall within budget function 
600 (Income Security).

                           basis of estimate

Alternative penalty procedure

    Current law requires states to have implemented, by October 
1, 1997, statewide automated systems to be used for managing 
child support cases, monitoring compliance, initiating 
enforcement actions, and reporting on performance. Many states 
failed to meet that deadline. This bill would change the way 
the Secretary of Health and Human Services (HHS) would collect 
penalties from states that do not meet the requirement. CBO 
estimates that the new penalty structure would reduce federal 
outlays by $10 million over the 1999-2003 period and would have 
no effect thereafter.
    Current Law.--The child support enforcement program helps 
families collect child support payments from absent parents. 
Federal and state governments jointly fund the program, with 
the federal government paying 66 percent of the administrative 
costs. Federal spending for such administrative costs totaled 
over $2 billion for all states in 1997. The program is operated 
by states, but the federal government sets many of the 
program's requirements, including a requirement to operate a 
statewide automated child support system.
    The HHS Secretary audits states every few years to ensure 
they are in compliance with program requirements. If a state is 
not in compliance and remains out of compliance for more than a 
year, the Secretary is required to charge the state a penalty. 
The initial penalty is 1 or 2 percent of the state's funding 
under the Temporary Assistance for Needy Families (TANF) 
program--a $16.5 billion grant program. The penalty rises for 
each year of continued non-compliance up to 5 percent of the 
TANF grant.
    In January 1998, the Secretary sent letters to sixteen 
states informing them that they were not in compliance with the 
automated system requirement. According to HHS staff, the 
majority of these states will probably complete their automated 
system within a year or two, but a few could be several years 
away from having a fully functional system. CBO expects that 
the Secretary will audit states that do not meet the 
requirement, but that most states will complete their systems 
during the audit or the following year. CBO estimates that a 
few large states will remain out of compliance and the 
Secretary will assess penalties totaling $250 million; $50 
million in 2001, $100 million in 2002, and $100 million in 
2003.
    The penalties on states could be much higher than the audit 
penalties if the Secretary disapproves some state plans for 
child support enforcement. States are only eligible for federal 
funding of child support administrative costs if they have an 
approved state plan. As of October 1, 1997, the Secretary is 
required to disapprove any state plan if the state is not 
operating a statewide automated system. If a state plan is 
disapproved, then the state cannot receive any money from the 
federal government to run its child support program. Also, if a 
state does not have an approved state plan for child support, 
it may not receive any funding under TANF.
    CBO has assumed, however, that HHS will not disapprove any 
state plans. A state may appeal the Secretary's notice of her 
intention to disapprove its state plan through a process that 
may take many years. The state plan would not be disapproved an 
funding withheld until all appeals are exhausted. The estimate 
assumes that all states complete their automated systems before 
appeals are exhausted so that the Secretary would never need to 
disapprove a state plan.
    H.R. 3130.--The bill would give the Secretary an 
alternative to applying the audit penalties or disapproving 
state plans. The alternative penalty would rise from 4 percent 
of child support administrative expenses in the first year of 
noncompliance to a maximum of 20 percent of expenses for the 
fourth and all subsequent years of noncompliance. If a state 
achieves compliance with the automated system requirement 
during the following year, the Secretary would forgive 75 
percent of the previous year's penalty.
    While the maximum penalty on states under the bill is lower 
than the maximum penalty under current law, CBO estimates that 
slightly higher penalties would be collected under the bill. If 
all states were assessed the maximum audit penalty, they would 
be charged $800 million ($16.5 billion multiplied by 5 
percent). If all states received the maximum alternative 
penalty under H.R. 3130, they would be charged about $600 
million in 2002 ($3 billionmultiplied by 20 percent). However, 
under H.R. 3130, the Secretary could charge penalties sooner because 
HHS would not have to do a full audit of a state or allow a year for 
the state to come into compliance. Because penalties would be applied 
sooner, fewer states would have completed systems when penalties are 
charged, and more states would pay penalties. CBO estimates that states 
would pay penalties totaling $260 million over the 1999-2003 period.

Authority to waive statewide automated system requirement

    H.R. 3130 would allow the federal government to fund 
alternative configurations of automated systems. Under current 
law the federal government provides matching dollars only to 
build a single statewide automated system. The Secretary has 
the authority to approve alternative configurations of 
automated systems, but has only limited ability to fund them. 
An alternative system configuration links various automated 
systems together so that they operate as a unified statewide 
system even though the component systems may use different 
hardware and software. Under HHS regulations, federal matching 
funding for alternative system configurations is limited to 
paying for a central database, any linkages, and minor upgrades 
to component systems that are linked.
    H.R. 3130 would allow federal matching funds for 
alternative configurations, including upgrades to component 
parts of a linked system. CBO surveyed automated system experts 
in federal and state governments. The experts did not agree 
whether an alternative system would be more or less expensive 
than a single statewide system. Most agreed that it is not 
possible to determine which is cheaper in the abstract--the 
relative costs depend on particular elements of the systems 
being compared. Based on these conversations, CBO estimates 
that funding of alternative systems would not necessarily cost 
more or less, in general, than funding single statewide 
systems.
    The only instance in which the new funding would clearly 
cost the federal government is if a state was committed to 
building an alternative system under the current law and 
planned to use state funding for significant upgrades to 
component systems. If federal funding is made available for 
alternative configurations, such a state would receive more 
federal funding than under current law. Only one state, 
Illinois, has committed to an alternative system configuration 
and still has significant work remaining to completion. Based 
on information from the state of Illinois and HHS staff, CBO 
estimates that Illinois would receive an extra $5 million in 
federal funding in each of the fiscal years 1999 and 2000 if 
H.R. 3130 is enacted.

Incentive payments

    H.R. 3130 would change the funding of incentive payments to 
states. It would set a guaranteed level for the total amount of 
incentives to be paid to all states, regardless of states' 
overall performance in collecting child support payments. 
Because the bill sets the national level of incentive payments 
each year equal to CBO's estimate of incentive payments under 
current law, CBO estimates no budgetary effect from the new 
incentive payment system.
    Under current law, the federal government pays each state a 
percentage of all of the child support it collects. A state 
that runs a very cost-effective program earns higher federal 
incentive payments, but only about half a dozen states have 
qualified for higher incentives in recent years. In 1997, the 
federal government paid states $401 million in incentives. CBO 
estimates these payments will rise to $422 million in 2000 and 
to $483 million by 2008.
    H.R. 3130 would set a national level of incentive payments 
for each year 2000 through 2008. After 2008 the level of 
incentive payments would increase with inflation. Each state's 
share of the total incentive payments would be based on its 
performance on five measures: paternity establishment, 
establishment of support orders, collections of current 
support, collections of past-due support, and cost 
effectiveness.

Adoption provisions

    Title III of H.R. 3130 would lower the penalties on states 
that delay adoptions across state lines. Those penalties were 
added to the federal foster care law as part of H.R. 867, the 
Adoption and Safe Families Act of 1997. CBO does not expect 
that any penalties would be imposed as a result of the Adoption 
and Safe Families Act of 1997, and therefore does not estimate 
any budgetary effects from weakening these provisions under 
H.R. 3130.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act of 1985 establishes pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts. The projected changes in direct spending are shown in 
the table below for fiscal years 1999-2008. For purposes of 
enforcing pay-as-you-go procedures, however, only the effects 
in the current year, budget year, and the succeeding four years 
are counted.

                                        SUMMARY OF PAY-AS-YOU-GO EFFECTS                                        
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                   1999    2000    2001    2002    2003    2004    2005    2006    2007    2008 
----------------------------------------------------------------------------------------------------------------
Change in outlays..............     -100     -60     -40      40     160       0       0       0       0       0
Change in receipts.............                                                                                 
(9)Not applicable                                                                                               
----------------------------------------------------------------------------------------------------------------

    Estimated impact on State, local, and tribal governments: 
H.R. 3130 contains no new intergovernmental mandates as defined 
in UMRA. While the bill would change the penalties that states 
incur if they fail to comply with child support system 
requirements, it would not change the underlying requirements. 
These penalties take the form of reductions in federal 
assistance to states.
    Total penalties paid by states failing to meet those 
requirements would increase in each year from 1999 through 
2001. CBO estimates that additional penalties paid during those 
years would total $210 million. We estimate that penalties for 
noncompliance would be reduced in 2002 and 2003 by $40 million 
and $160 million, respectively. When compared to the current 
system, the distribution of these penalties among states would 
change; some states would face larger reductions in federal 
assistance, while others would face smaller cuts.
    The bill would also allow the Secretary of HHS to waive 
certain statewide computer system requirements when awarding 
federal assistance for child support administrative costs. As 
previously noted, CBO estimates that one state, Illinois, would 
receive an additional $5 million in each of fiscal years 1999 
and 2000 because of this waiver provision.
    The bill would also lower penalties for states that delay 
interjurisdictional adoptions. However, CBO did not estimate 
any penalty collections under current law, so lowering those 
penalties would have no budgetary effect on state governments.
    Estimated impact on the private sector: The bill contains 
no private-sector mandates as defined in the Unfunded Mandates 
Reform Act of 1995.
    Estimate prepared by: Federal cost: Child Support--Sheila 
Dacey, Adoption--Justin Latus; Impact on State, local, and 
tribal governments: Leo Lex; Impact on the private sector: 
Nabeel Alsalam.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.

 V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the need for this legislation was confirmed by the 
oversight hearings of the Subcommittee on Human Resources. The 
Subcommittee on Human Resources held a hearing on modifying 
child support penalties for automatic data processing and on 
the child support incentive payment proposal on January 29, 
1998 and the Subcommittee also held hearings on September 10, 
1997 and March 20, 1997, on child support system improvements 
and the child support incentive payment proposal.
    In the 104th Congress, the Subcommittee on Human Resources 
held a hearing on September 19, 1996 on the child support 
incentive payment proposal.

B. Summary of Findings and Recommendations of the Government Reform and 
                          Oversight Committee

    In compliance with clause 2(l)(3)(D) of rule XI of the 
Rules of the House of Representatives, the Committee states 
that no oversight findings or recommendations have been 
submitted to the Committee on Government Reform and Oversight 
regarding the subject of the bill.

                 C. Constitutional Authority Statement

    With respect to clause 2(l)(4) of rule XI of the Rules of 
the House of Representatives, relating to Constitutional 
Authority, the Committee states that the Committee's action in 
reporting the bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have power to lay 
and collect taxes, duties, imposts and excises, to pay the 
debts and to provide for * * * the general Welfare of the 
United States * * *'').

        VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

                          SOCIAL SECURITY ACT

          * * * * * * *

TITLE IV--GRANTS TO STATES FOR AID AND SERVICES TO NEEDY FAMILIES WITH 
                CHILDREN AND FOR CHILD-WELFARE SERVICES

          * * * * * * *

   PART A--BLOCK GRANTS TO STATES FOR TEMPORARY ASSISTANCE FOR NEEDY 
                                FAMILIES

          * * * * * * *

SEC. 413. RESEARCH, EVALUATIONS, AND NATIONAL STUDIES.

  (a) * * *
          * * * * * * *
  (g) Report on Circumstances of Certain Children and 
Families.--
          (1) In general.--Beginning 3 years after the date of 
        the enactment of this Act, the Secretary of Health and 
        Human Services shall prepare and submit to the 
        Committees on Ways and Means and on [Economic and 
        Educational Opportunities] Education and the Workforce 
        of the House of Representatives and to the Committees 
        on Finance and on Labor and Resources of the Senate 
        annual reports that examine in detail the matters 
        described in paragraph (2) with respect to each of the 
        following groups for the period after such enactment:
          * * * * * * *

                   PART B--CHILD AND FAMILY SERVICES

                   Subpart 1--Child Welfare Services

          * * * * * * *

                 STATE PLANS FOR CHILD WELFARE SERVICES

  Sec. 422. (a) * * *
  (b) Each plan for child welfare services under this subpart 
shall--
          (1) * * *
          (2) provide for coordination between the services 
        provided for children under the plan and the services 
        and assistance provided under title XX, under the State 
        program funded under part A, under the State plan 
        approved under subpart 2 of this part, under the State 
        plan approved [under] under the State plan approved 
        under part E, and under other State programs having a 
        relationship to the program under this subpart, with a 
        view to provision of welfare and related services which 
        will best promote the welfare of such children and 
        their families;
          * * * * * * *

             Subpart 2--Promoting Safe and Stable Families

          * * * * * * *

SEC. 432. STATE PLANS.

  (a) Plan Requirements.--A State plan meets the requirements 
of this subsection if the plan--
          (1) * * *
          * * * * * * *
          (8) provides that the State agency will furnish such 
        reports, containing such information, and participate 
        in such evaluations, as the Secretary may require; and
          * * * * * * *

          Part D--Child Support and Establishment of Paternity

          * * * * * * *

                        DUTIES OF THE SECRETARY

  Sec. 452. (a) * * *
          * * * * * * *
  (d)(1) * * *
          * * * * * * *
  [(3) The Secretary may waive any requirement of paragraph (1) 
or any condition specified under section 454(16) with respect 
to a State if--
          [(A) the State demonstrates to the satisfaction of 
        the Secretary that the State has an alternative system 
        or systems that enable the State, for purposes of 
        section 409(a)(8), to achieve the paternity 
        establishment percentages (as defined under section 
        452(g)(2)) and other performance measures that may be 
        established by the Secretary, and to submit data under 
        section 454(15)(B) that is complete and reliable, and 
        to substantially comply with the requirements of this 
        part; and
          [(B)(i) the waiver meets the criteria of paragraphs 
        (1), (2), and (3) of section 1115(b), or
          [(ii) the State provides assurances to the Secretary 
        that steps will be taken to otherwise improve the 
        State's child support enforcement program.]
  (3) The Secretary may waive any requirement of paragraph (1) 
or any condition specified under section 454(16), and shall 
waive the single statewide system requirement under sections 
454(16) and 454A, with respect to a State if--
          (A) the State demonstrates to the satisfaction of the 
        Secretary that the State has or can develop an 
        alternative system or systems that enable the State--
                  (i) for purposes of section 409(a)(8), to 
                achieve the paternity establishment percentages 
                (as defined in section 452(g)(2)) and other 
                performance measures that may be established by 
                the Secretary;
                  (ii) to submit data under section 454(15)(B) 
                that is complete and reliable;
                  (iii) to substantially comply with the 
                requirements of this part; and
                  (iv) in the case of a request to waive the 
                single statewide system requirement, to--
                          (I) meet all functional requirements 
                        of sections 454(16) and 454A;
                          (II) ensure that calculation of 
                        distributions meets the requirements of 
                        section 457 and accounts for 
                        distributions to children in different 
                        families or in different States or sub-
                        State jurisdictions, and for 
                        distributions to other States;
                          (III) ensure that there is only 1 
                        point of contact in the State which 
                        provides seamless case processing for 
                        all interstate case processing and 
                        coordinated, automated intrastate case 
                        management;
                          (IV) ensure that standardized data 
                        elements, forms, and definitions are 
                        used throughout the State;
                          (V) complete the alternative system 
                        in no more time than it would take to 
                        complete a single statewide system that 
                        meets such requirement; and
                          (VI) process child support cases as 
                        quickly, efficiently, and effectively 
                        as such cases would be processed 
                        through a single statewide system that 
                        meets such requirement;
          (B)(i) the waiver meets the criteria of paragraphs 
        (1), (2), and (3) of section 1115(c); or
          (ii) the State provides assurances to the Secretary 
        that steps will be taken to otherwise improve the 
        State's child support enforcement program; and
          (C) in the case of a request to waive the single 
        statewide system requirement, the State has submitted 
        to the Secretary separate estimates of the total cost 
        of a single statewide system that meets such 
        requirement, and of any such alternative system or 
        systems, which shall include estimates of the cost of 
        developing and completing the system and of operating 
        and maintaining the system for 5 years, and the 
        Secretary has agreed with the estimates.
          * * * * * * *

                     FEDERAL PARENT LOCATOR SERVICE

  Sec. 453. (a)(1) The Secretary shall establish and conduct a 
Federal Parent Locator Service, under the direction of the 
designeeof the Secretary referred to in section 452(a), which 
shall be used for the purposes specified in paragraphs (2) and (3).
  (2) For the purpose of establishing [parentage,] parentage or 
establishing, setting the amount of, modifying, or enforcing 
child support obligations, [or making or enforcing child 
custody or visitation orders,] the Federal Parent Locator 
Service shall obtain and transmit to any authorized person 
specified in subsection (c)--
          (A) information on, or facilitating the discovery of, 
        the location of any individual--
                  (i) * * *
          * * * * * * *
                  (iv) who has or may have parental rights with 
                respect to a child,
        including the individual's social security number (or 
        numbers), most recent address, and the name, address, 
        and employer identification number of the individual's 
        employer;
          * * * * * * *

                           PAYMENTS TO STATES

  Sec. 455. (a)(1) From the sums appropriated therefor, the 
Secretary shall pay to each State for each quarter an amount--
          (A) equal to the percent specified in paragraph (2) 
        of the total amounts expended by such State during such 
        quarter for the operation of the plan approved under 
        section 454,
          (B) equal to the percent specified in paragraph (3) 
        (rather than the percent specified in subparagraph (A)) 
        of the sums expended during such quarter as are 
        attributable to the planning, design, development, 
        installation or enhancement of an automatic data 
        processing and information retrieval system (including 
        in such sums the full cost of the hardware components 
        of such system), [and]
          (C) equal to 90 percent (rather than the percentage 
        specified in subparagraph (A)) of so much of the sums 
        expended during such quarter as are attributable to 
        laboratory costs incurred in determining paternity[;], 
        and
          (D) equal to 66 percent of the sums expended by the 
        State during the quarter for an alternative statewide 
        system for which a waiver has been granted under 
        section 452(d)(3), but only to the extent that the 
        total of the sums so expended by the State on or after 
        the date of the enactment of this subparagraph does not 
        exceed the least total cost estimate submitted by the 
        State pursuant to section 452(d)(3)(C) in the request 
        for the waiver;
          * * * * * * *
  (4)(A) If--
          (i) the Secretary determines that a State plan under 
        section 454 would (in the absence of this paragraph) be 
        disapproved for the failure of the State to comply with 
        section 454(24)(A), and that the State has made and is 
        continuing to make a good faith effort to so comply; 
        and
          (ii) the State has submitted to the Secretary a 
        corrective compliance plan that describes how, by when, 
        and at what cost the State will achieve such 
        compliance, which has been approved by the Secretary,
then the Secretary shall not disapprove the State plan under 
section 454, and the Secretary shall reduce the amount 
otherwise payable to the State under paragraph (1)(A) of this 
subsection for the fiscal year by the penalty amount.
  (B) In this paragraph:
          (i) The term ``penalty amount'' means, with respect 
        to a failure of a State to comply with section 
        454(24)--
                  (I) 4 percent of the penalty base, in the 
                case of the 1st fiscal year in which such a 
                failure by the State occurs;
                  (II) 8 percent of the penalty base, in the 
                case of the 2nd such fiscal year;
                  (III) 16 percent of the penalty base, in the 
                case of the 3rd such fiscal year; or
                  (IV) 20 percent of the penalty base, in the 
                case of the 4th or any subsequent such fiscal 
                year.
          (ii) The term ``penalty base'' means, with respect to 
        a failure of a State to comply with section 454(24) 
        during a fiscal year, the amount otherwise payable to 
        the State under paragraph (1)(A) of this subsection for 
        the preceding fiscal year.
  (C)(i) The Secretary shall waive a penalty under this 
paragraph for any failure of a State to comply with section 
454(24)(A) during fiscal year 1998 if--
          (I) by December 31, 1997, the State has submitted to 
        the Secretary a request that the Secretary certify the 
        State as having met the requirements of such section;
          (II) the Secretary has provided the certification as 
        a result of a review conducted pursuant to the request; 
        and
          (III) the State has not failed such a review.
  (ii) If a State with respect to which a reduction is made 
under this paragraph for a fiscal year achieves compliance with 
section 454(24)(A) by the beginning of the succeeding fiscal 
year, the Secretary shall increase the amount otherwise payable 
to the State under paragraph (1)(A) of this subsection for the 
succeeding fiscal year by an amount equal to 75 percent of the 
reduction for the fiscal year.
  (iii) The Secretary shall reduce the amount of any reduction 
that, in the absence of this clause, would be required to be 
made under this paragraph by reason of the failure of a State 
to achieve compliance with section 454(24)(B) during the fiscal 
year, by an amount equal to 20 percent of the amount of the 
otherwise required reduction, for each State performance 
measure described in section 458A(b)(4) with respect to which 
the applicable percentage under section 458A(b)(6) for the 
fiscal year is 100 percent, if the Secretary has made the 
determination described in section 458A(b)(5)(B) with respect 
to the State for the fiscal year.
  (D) The preceding provisions of this paragraph (except for 
subparagraph (C)(i)) shall apply, separately and independently, 
to a failure to comply with section 454(24)(B) in the same 
manner in which the preceding provisions apply to a failure to 
comply with section 454(24)(A).
          * * * * * * *

                     [INCENTIVE PAYMENTS TO STATES

  [Sec. 458. (a) In order to encourage and reward State child 
support enforcement programs which perform in a cost-effective 
and efficient manner to secure support for all children who 
have sought assistance in securing support, whether such 
children reside within the State or elsewhere and whether or 
not they are eligible for aid to families with dependent 
children under a State plan approved under part A of this 
title, and regardless of the economic circumstances of their 
parents, the Secretary shall, from support collected which 
would otherwise represent the Federal share of assistance to 
families of noncustodial parents, pay to each State for each 
fiscal year, on a quarterly basis (as described in subsection 
(e)) beginning with the quarter commencing October 1, 1985, an 
incentive payment in an amount determined under subsection (b).
  [(b)(1) Except as provided in paragraphs (2), (3), and (4), 
the incentive payment shall be equal to--
          [(A) 6 percent of the total amount of support 
        collected under the plan during the fiscal year in 
        cases in which the support obligation involved is 
        assigned to the State pursuant to section 402(a)(26) or 
        section 471(a)(17) (with such total amount for any 
        fiscal year being hereafter referred to in this section 
        as the State's ``AFDC collections'' for that year), 
        plus
          [(B) 6 percent of the total amount of support 
        collected during the fiscal year in all other cases 
        under this part (with such total amount for any fiscal 
        year being hereafter referred to in this section as the 
        State's ``non-AFDC collections'' for that year).
  [(2) If subsection (c) applies with respect to a State's AFDC 
collections or non-AFDC collections for any fiscal year, the 
percent specified in paragraph (1)(A) or (B) (with respect to 
such collections) shall be increased to the higher percent 
determined under such subsection (with respect to such 
collections) in determining the State's incentive payment under 
this subsection for that year.
  [(3) The dollar amount of the portion of the State's 
incentive payment for any fiscal year which is determined on 
the basis of its non-AFDC collections under paragraph (1)(B) 
(after adjustment under subsection (c) if applicable) shall in 
no case exceed--
          [(A) the dollar amount of the portion of such payment 
        which is determined on the basis of its AFDC 
        collections under paragraph (1)(A) (after adjustment 
        under subsection (c) if applicable) in the case of 
        fiscal year 1986 or 1987;
          [(B) 105 percent of such dollar amount in the case of 
        fiscal year 1988;
          [(C) 110 percent of such dollar amount in the case of 
        fiscal year 1989; or
          [(D) 115 percent of such dollar amount in the case of 
        fiscal year 1990 or any fiscal year thereafter.
  [(4) The Secretary shall make such additional payments to the 
State under this part, for fiscal year 1986 or 1987, as may be 
necessary to assure that the total amount of payments under 
this section and section 455(a)(1)(A) for such fiscal year is 
no less than 80 percent of the amount that would have been 
payable to that State and its political subdivisions for such 
fiscal year under this section and section 455(a)(1)(A) if 
those sections (including the amendment made by section 
5(c)(2)(A) of the Child Support Enforcement Amendments of 1984) 
had remained in effect as they were in effect for fiscal year 
1985.
  [(c) If the total amount of a State's AFDC collections or 
non-AFDC collections for any fiscal year bears a ratio to the 
total amount expended by the State in that year for the 
operation of its plan approved under section 454 for which 
payment may be made under section 455 (with the total amount so 
expended in any fiscal year being hereafter referred to in this 
section as the State's ``combined AFDC/non-AFDC administrative 
costs'' for that year) which is equal to or greater than 1.4, 
the relevant percent specified in subparagraph (A) or (B) of 
subsection (b)(1) (with respect to such collections) shall be 
increased to--
          [(1) 6.5 percent, plus
          [(2) one-half of 1 percent for each full two-tenths 
        by which such ratio exceeds 1.4;
except that the percent so specified shall in no event be 
increased (for either AFDC collections or non-AFDC collections) 
to more than 10 percent. For purposes of the preceding 
sentence, laboratory costs incurred in determining paternity in 
any fiscal year may at the option of the State be excluded from 
the State's combined AFDC/non-AFDC administrative costs for 
that year.
  [(d) In computing incentive payments under this section, 
support which is collected by one State at the request of 
another State, including amounts collected under section 
466(a)(14), shall be treated as having been collected in full 
by each such State, and any amounts expended by the State in 
carrying out a special project assisted under section 455(e) 
shall be excluded.
  [(e) The amounts of the incentive payments to be made to the 
various States under this section for any fiscal year shall be 
estimated by the Secretary at or before the beginning of such 
year on the basis of the best information available. The 
Secretary shall make such payments for such year, on a 
quarterly basis (with each quarterly payment being made no 
later than the beginning of the quarter involved), in the 
amounts so estimated, reduced or increased to the extent of any 
overpayments or underpayments which the Secretary determines 
were made under this section to the States involved for prior 
periods and with respect to which adjustment has not already 
been made under this subsection. Upon the making of any 
estimate by the Secretary under the preceding sentence, any 
appropriations available for payments under this section shall 
be deemed obligated.]

SEC. 458A. INCENTIVE PAYMENTS TO STATES.

  (a) In General.--In addition to any other payment under this 
part, the Secretary shall, subject to subsection (f), make an 
incentive payment to each State for each fiscal year in an 
amount determined under subsection (b).
  (b) Amount of Incentive Payment.--
          (1) In general.--The incentive payment for a State 
        for a fiscal year is equal to the incentive payment 
        pool for the fiscal year, multiplied by the State 
        incentive payment share for the fiscal year.
          (2) Incentive payment pool.--
                  (A) In general.--In paragraph (1), the term 
                ``incentive payment pool'' means--
                          (i) $422,000,000 for fiscal year 
                        2000;
                          (ii) $429,000,000 for fiscal year 
                        2001;
                          (iii) $450,000,000 for fiscal year 
                        2002;
                          (iv) $461,000,000 for fiscal year 
                        2003;
                          (v) $454,000,000 for fiscal year 
                        2004;
                          (vi) $446,000,000 for fiscal year 
                        2005;
                          (vii) $458,000,000 for fiscal year 
                        2006;
                          (viii) $471,000,000 for fiscal year 
                        2007;
                          (ix) $483,000,000 for fiscal year 
                        2008; and
                          (x) for any succeeding fiscal year, 
                        the amount of the incentive payment 
                        pool for the fiscal year that precedes 
                        such succeeding fiscal year, multiplied 
                        by the percentage (if any) by which the 
                        CPI for such preceding fiscal year 
                        exceeds the CPI for the 2nd preceding 
                        fiscal year.
                  (B) CPI.--For purposes of subparagraph (A), 
                the CPI for a fiscal year is the average of the 
                Consumer Price Index for the 12-month period 
                ending on September 30 of the fiscal year. As 
                used in the preceding sentence, the term 
                ``Consumer Price Index'' means the last 
                Consumer Price Index for all-urban consumers 
                published by the Department of Labor.
          (3) State incentive payment share.--In paragraph (1), 
        the term ``State incentive payment share'' means, with 
        respect to a fiscal year--
                  (A) the incentive base amount for the State 
                for the fiscal year; divided by
                  (B) the sum of the incentive base amounts for 
                all of the States for the fiscal year.
          (4) Incentive base amount.--In paragraph (3), the 
        term ``incentive base amount'' means, with respect to a 
        State and a fiscal year, the sum of the applicable 
        percentages (determined in accordance with paragraph 
        (6)) multiplied by the corresponding maximum incentive 
        base amounts for the State for the fiscal year, with 
        respect to each of the following measures of State 
        performance for the fiscal year:
                  (A) The paternity establishment performance 
                level.
                  (B) The support order performance level.
                  (C) The current payment performance level.
                  (D) The arrearage payment performance level.
                  (E) The cost-effectiveness performance level.
          (5) Maximum incentive base amount.--
                  (A) In general.--For purposes of paragraph 
                (4), the maximum incentive base amount for a 
                State for a fiscal year is--
                          (i) with respect to the performance 
                        measures described in subparagraphs 
                        (A), (B), and (C) of paragraph (4), the 
                        State collections base for the fiscal 
                        year; and
                          (ii) with respect to the performance 
                        measures described in subparagraphs (D) 
                        and (E) of paragraph (4), 75 percent of 
                        the State collections base for the 
                        fiscal year.
                  (B) Data required to be complete and 
                reliable.--Notwithstanding subparagraph (A), 
                the maximum incentive base amount for a State 
                for a fiscal year with respect to a performance 
                measure described in paragraph (4) is zero, 
                unless the Secretary determines, on the basis 
                of an audit performed under section 
                452(a)(4)(C)(i), that the data which the State 
                submitted pursuant to section 454(15)(B) for 
                the fiscal year and which is used to determine 
                the performance level involved is complete and 
                reliable.
                  (C) State collections base.--For purposes of 
                subparagraph (A), the State collections base 
                for a fiscal year is equal to the sum of--
                          (i) 2 times the sum of--
                                  (I) the total amount of 
                                support collected during the 
                                fiscal year under the State 
                                plan approved under this part 
                                in cases in which the support 
                                obligation involved is required 
                                to be assigned to the State 
                                pursuant to part A or E of this 
                                title or title XIX; and
                                  (II) the total amount of 
                                support collected during the 
                                fiscal year under the State 
                                plan approved under this part 
                                in cases in which the support 
                                obligation involved was so 
                                assigned but, at the time of 
                                collection, is not required to 
                                be so assigned; and
                          (ii) the total amount of support 
                        collected during the fiscal year under 
                        the State plan approved under this part 
                        in all other cases.
          (6) Determination of applicable percentages based on 
        performance levels.--
                  (A) Paternity establishment.--
                          (i) Determination of paternity 
                        establishment performance level.--The 
                        paternity establishment performance 
                        level for a State for a fiscal year is, 
                        at the option of the State, the IV-D 
                        paternity establishment percentage 
                        determined under section 452(g)(2)(A) 
                        or the statewide paternity 
                        establishment percentage determined 
                        under section 452(g)(2)(B).
                          (ii) Determination of applicable 
                        percentage.--The applicable percentage 
                        with respect to a State's paternity 
                        establishment performance level is as 
                        follows:
      

------------------------------------------------------------------------
 If the paternity establishment performance level is:                   
-------------------------------------------------------  The applicable 
            At least:                 But less than:     percentage is: 
------------------------------------------------------------------------
80%..............................  ...................         100      
79%..............................  80%................         98       
78%..............................  79%................         96       
77%..............................  78%................         94       
76%..............................  77%................         92       
75%..............................  76%................         90       
74%..............................  75%................         88       
73%..............................  74%................         86       
72%..............................  73%................         84       
71%..............................  72%................         82       
70%..............................  71%................         80       
69%..............................  70%................         79       
68%..............................  69%................         78       
67%..............................  68%................         77       
66%..............................  67%................         76       
65%..............................  66%................         75       
64%..............................  65%................         74       
63%..............................  64%................         73       
62%..............................  63%................         72       
61%..............................  62%................         71       
60%..............................  61%................         70       
59%..............................  60%................         69       
58%..............................  59%................         68       
57%..............................  58%................         67       
56%..............................  57%................         66       
55%..............................  56%................         65       
54%..............................  55%................         64       
53%..............................  54%................         63       
52%..............................  53%................         62       
51%..............................  52%................         61       
50%..............................  51%................         60       
0%...............................  50%................         0.       
------------------------------------------------------------------------

                        Notwithstanding the preceding sentence, 
                        if the paternity establishment 
                        performance level of a State for a 
                        fiscal year is less than 50 percent but 
                        exceeds by at least 10 percentage 
                        points the paternity establishment 
                        performance level of the State for the 
                        immediately preceding fiscal year, then 
                        the applicable percentage with respect 
                        to the State's paternity establishment 
                        performance level is 50 percent.
                  (B) Establishment of child support orders.--
                          (i) Determination of support order 
                        performance level.--The support order 
                        performance level for a State for a 
                        fiscal year is the percentage of the 
                        total number of cases under the State 
                        plan approved under this part in which 
                        there is a support order during the 
                        fiscal year.
                          (ii) Determination of applicable 
                        percentage.--The applicable percentage 
                        with respect to a State's support order 
                        performance level is as follows:
      

------------------------------------------------------------------------
      If the support order performance level is:                        
-------------------------------------------------------  The applicable 
            At least:                 But less than:     percentage is: 
------------------------------------------------------------------------
80%..............................  ...................         100      
79%..............................  80%................         98       
78%..............................  79%................         96       
77%..............................  78%................         94       
76%..............................  77%................         92       
75%..............................  76%................         90       
74%..............................  75%................         88       
73%..............................  74%................         86       
72%..............................  73%................         84       
71%..............................  72%................         82       
70%..............................  71%................         80       
69%..............................  70%................         79       
68%..............................  69%................         78       
67%..............................  68%................         77       
66%..............................  67%................         76       
65%..............................  66%................         75       
64%..............................  65%................         74       
63%..............................  64%................         73       
62%..............................  63%................         72       
61%..............................  62%................         71       
60%..............................  61%................         70       
59%..............................  60%................         69       
58%..............................  59%................         68       
57%..............................  58%................         67       
56%..............................  57%................         66       
55%..............................  56%................         65       
54%..............................  55%................         64       
53%..............................  54%................         63       
52%..............................  53%................         62       
51%..............................  52%................         61       
50%..............................  51%................         60       
0%...............................  50%................         0.       
------------------------------------------------------------------------

                        Notwithstanding the preceding sentence, 
                        if the support order performance level 
                        of a State for a fiscal year is less 
                        than 50 percent but exceeds by at least 
                        5 percentage points the support order 
                        performance level of the State for the 
                        immediately preceding fiscal year, then 
                        the applicable percentage with respect 
                        to the State's support order 
                        performance level is 50 percent.
                  (C) Collections on current child support 
                due.--
                          (i) Determination of current payment 
                        performance level.--The current payment 
                        performance level for a State for a 
                        fiscal year is equal to the total 
                        amount of current support collected 
                        during the fiscal year under the State 
                        plan approved under this part divided 
                        by the total amount of current support 
                        owed during the fiscal year in all 
                        cases under the State plan, expressed 
                        as a percentage.

                          (ii) Determination of applicable 
                        percentage.--The applicable percentage 
                        with respect to a State's current 
                        payment performance level is as 
                        follows:

      

------------------------------------------------------------------------
     If the current payment performance level is:                       
-------------------------------------------------------  The applicable 
            At least:                 But less than:     percentage is: 
------------------------------------------------------------------------
                                                                        
80%..............................  ...................         100      
79%..............................  80%................         98       
78%..............................  79%................         96       
77%..............................  78%................         94       
76%..............................  77%................         92       
75%..............................  76%................         90       
74%..............................  75%................         88       
73%..............................  74%................         86       
72%..............................  73%................         84       
71%..............................  72%................         82       
70%..............................  71%................         80       
69%..............................  70%................         79       
68%..............................  69%................         78       
67%..............................  68%................         77       
66%..............................  67%................         76       
65%..............................  66%................         75       
64%..............................  65%................         74       
63%..............................  64%................         73       
62%..............................  63%................         72       
61%..............................  62%................         71       
60%..............................  61%................         70       
59%..............................  60%................         69       
58%..............................  59%................         68       
57%..............................  58%................         67       
56%..............................  57%................         66       
55%..............................  56%................         65       
54%..............................  55%................         64       
53%..............................  54%................         63       
52%..............................  53%................         62       
51%..............................  52%................         61       
50%..............................  51%................         60       
49%..............................  50%................         59       
48%..............................  49%................         58       
47%..............................  48%................         57       
46%..............................  47%................         56       
45%..............................  46%................         55       
44%..............................  45%................         54       
43%..............................  44%................         53       
42%..............................  43%................         52       
41%..............................  42%................         51       
40%..............................  41%................         50       
0%...............................  40%................         0.       
------------------------------------------------------------------------

                        Notwithstanding the preceding sentence, 
                        if the current payment performance 
                        level of a State for a fiscal year is 
                        less than 40 percent but exceeds by at 
                        least 5 percentage points the current 
                        payment performance level of the State 
                        for the immediately preceding fiscal 
                        year, then the applicable percentage 
                        with respect to the State's current 
                        payment performance level is 50 
                        percent.
                  (D) Collections on child support 
                arrearages.--
                          (i) Determination of arrearage 
                        payment performance level.--The 
                        arrearage payment performance level for 
                        a State for a fiscal year is equal to 
                        the total number of cases under the 
                        State plan approved under this part in 
                        which payments of past-due child 
                        support were received during the fiscal 
                        year and part or all of the payments 
                        were distributed to the family to whom 
                        the past-due child support was owed 
                        (or, if all past-due child support owed 
                        to the family was, at the time of 
                        receipt, subject to an assignment to 
                        the State, part or all of the payments 
                        were retained by the State) divided by 
                        the total number of cases under the 
                        State plan in which there is past-due 
                        child support, expressed as a 
                        percentage.
                          (ii) Determination of applicable 
                        percentage.--The applicable percentage 
                        with respect to a State's arrearage 
                        payment performance level is as 
                        follows:
      

------------------------------------------------------------------------
    If the arrearage payment performance level is:                      
-------------------------------------------------------  The applicable 
            At least:                 But less than:     percentage is: 
------------------------------------------------------------------------
80%..............................  ...................         100      
79%..............................  80%................         98       
78%..............................  79%................         96       
77%..............................  78%................         94       
76%..............................  77%................         92       
75%..............................  76%................         90       
74%..............................  75%................         88       
73%..............................  74%................         86       
72%..............................  73%................         84       
71%..............................  72%................         82       
70%..............................  71%................         80       
69%..............................  70%................         79       
68%..............................  69%................         78       
67%..............................  68%................         77       
66%..............................  67%................         76       
65%..............................  66%................         75       
64%..............................  65%................         74       
63%..............................  64%................         73       
62%..............................  63%................         72       
61%..............................  62%................         71       
60%..............................  61%................         70       
59%..............................  60%................         69       
58%..............................  59%................         68       
57%..............................  58%................         67       
56%..............................  57%................         66       
55%..............................  56%................         65       
54%..............................  55%................         64       
53%..............................  54%................         63       
52%..............................  53%................         62       
51%..............................  52%................         61       
50%..............................  51%................         60       
49%..............................  50%................         59       
48%..............................  49%................         58       
47%..............................  48%................         57       
46%..............................  47%................         56       
45%..............................  46%................         55       
44%..............................  45%................         54       
43%..............................  44%................         53       
42%..............................  43%................         52       
41%..............................  42%................         51       
40%..............................  41%................         50       
0%...............................  40%................         0.       
------------------------------------------------------------------------

                        Notwithstanding the preceding sentence, 
                        if the arrearage payment performance 
                        level of a State for a fiscal year is 
                        less than 40 percent but exceeds by at 
                        least 5 percentage points the arrearage 
                        payment performance level of the State 
                        for the immediately preceding fiscal 
                        year, then the applicable percentage 
                        with respect to the State's arrearage 
                        payment performance level is 50 
                        percent.
                  (E) Cost-effectiveness.--
                          (i) Determination of cost-
                        effectiveness performance level.--The 
                        cost-effectiveness performance level 
                        for a State for a fiscal year is equal 
                        to the total amount collected during 
                        the fiscal year under the State plan 
                        approved under this part divided by the 
                        total amount expended during the fiscal 
                        year under the State plan, expressed as 
                        a ratio.
                          (ii) Determination of applicable 
                        percentage.--The applicable percentage 
                        with respect to a State's cost-
                        effectiveness performance level is as 
                        follows:
      

------------------------------------------------------------------------
    If the cost effectiveness performance level is:                     
-------------------------------------------------------  The applicable 
            At least:                 But less than:     percentage is: 
------------------------------------------------------------------------
5.00.............................  ...................         100      
4.50.............................  4.99...............         90       
4.00.............................  4.50...............         80       
3.50.............................  4.00...............         70       
3.00.............................  3.50...............         60       
2.50.............................  3.00...............         50       
2.00.............................  2.50...............         40       
0.00.............................  2.00...............         0.       
------------------------------------------------------------------

  (c) Treatment of Interstate Collections.--In computing 
incentive payments under this section, support which is 
collected by a State at the request of another State shall be 
treated as having been collected in full by both States, and 
any amounts expended by a State in carrying out a special 
project assisted under section 455(e) shall be excluded.
  (d) Administrative Provisions.--The amounts of the incentive 
payments to be made to the States under this section for a 
fiscalyear shall be estimated by the Secretary at or before the 
beginning of the fiscal year on the basis of the best information 
available. The Secretary shall make the payments for the fiscal year, 
on a quarterly basis (with each quarterly payment being made no later 
than the beginning of the quarter involved), in the amounts so 
estimated, reduced or increased to the extent of any overpayments or 
underpayments which the Secretary determines were made under this 
section to the States involved for prior periods and with respect to 
which adjustment has not already been made under this subsection. Upon 
the making of any estimate by the Secretary under the preceding 
sentence, any appropriations available for payments under this section 
are deemed obligated.
  (e) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary governing the calculation of 
incentive payments under this section, including directions for 
excluding from the calculations certain closed cases and cases 
over which the States do not have jurisdiction.
  (f) Reinvestment.--A State to which a payment is made under 
this section shall expend the full amount of the payment to 
supplement, and not supplant, other funds used by the State--
          (1) to carry out the State plan approved under this 
        part; or
          (2) for any activity (including cost-effective 
        contracts with local agencies) approved by the 
        Secretary, whether or not the expenditures for the 
        activity are eligible for reimbursement under this 
        part, which may contribute to improving the 
        effectiveness or efficiency of the State program 
        operated under this part.
          * * * * * * *

    Part E--Federal Payments for Foster Care and Adoption Assistance

          * * * * * * *

           STATE PLAN FOR FOSTER CARE AND ADOPTION ASSISTANCE

  Sec. 471. (a) In order for a State to be eligible for 
payments under this part, it shall have a plan approved by the 
Secretary which--
          (1) * * *
          * * * * * * *
          (21) provides for health insurance coverage 
        (including, at State option, through the program under 
        the State plan approved under title XIX) for any child 
        who has been determined to be a child with special 
        needs, for whom there is in effect an adoption 
        assistance agreement (other than an agreement under 
        this part) between the State and an adoptive parent or 
        parents, and who the State has determined cannot be 
        placed with an adoptive parent or parents without 
        medical assistance because such child has special needs 
        for medical, mental health, or rehabilitative care, and 
        that with respect to the provision of such health 
        insurance coverage--
                  (A) * * *
          * * * * * * *
                  (D) in determining cost-sharing requirements, 
                the State shall take into consideration the 
                circumstances of the adopting parent or parents 
                and the needs of the child being adopted 
                consistent, to the extent coverage is provided 
                through a State medical assistance program, 
                with the rules under such program; [and]
          (22) provides that, not later than January 1, 1999, 
        the State shall develop and implement standards to 
        ensure that children in foster care placements in 
        public or private agencies are provided quality 
        services that protect the safety and health of the 
        children[.]; and
          (23) provides that the State shall not--
                  (A) deny or delay the placement of a child 
                for adoption when an approved family is 
                available outside of the jurisdiction with 
                responsibility for handling the case of the 
                child; or
                  (B) fail to grant an opportunity for a fair 
                hearing, as described in paragraph (12), to an 
                individual whose allegation of a violation of 
                subparagraph (A) of this paragraph is denied by 
                the State or not acted upon by the State with 
                reasonable promptness.
          * * * * * * *

SEC. 473A. ADOPTION INCENTIVE PAYMENTS.

  (a) * * *
          * * * * * * *
  (c) Data Requirements.--
          (1) * * *
          * * * * * * *
          (2) Determination of numbers of adoptions.--
                  (A) * * *
                  (B) Alternative data sources permitted for 
                fiscal years 1995 through 1997.--For purposes 
                of the determination described in subparagraph 
                (A) for fiscal years 1995 through 1997, the 
                Secretary may use data from a source or sources 
                other than that specified in subparagraph (A) 
                that the Secretary finds to be of equivalent 
                completeness and reliability, as reported by a 
                State by [November 30, 1997] April 30, 1998, 
                and approved by the Secretary by [March 1, 
                1998] July 1, 1998.
          * * * * * * *

                PAYMENTS TO STATES; ALLOTMENTS TO STATES

  Sec. 474. (a) For each quarter beginning after September 30, 
1980, each State which has a plan approved under this part 
[(subject to the limitations imposed by subsection (b))] shall 
be entitled to a payment equal to the sum of--
          (1) * * *
          * * * * * * *
  (d)(1) If, during any quarter of a fiscal year, a State's 
program operated under this part is found, as a result of a 
review conducted under section 1123A, or otherwise, to have 
violated [section 471(a)(18)] paragraph (18) or (23) of section 
471(a) with respect to a person or to have failed to implement 
a corrective action plan within a period of time not to exceed 
6 months with respect to such violation, then, notwithstanding 
subsection (a) of this section and any regulations promulgated 
under section 1123A(b)(3), the Secretary shall reduce the 
amount otherwise payable to the State under this part, for that 
fiscal year quarter and for any subsequent quarter of such 
fiscal year, until the State program is found, as a result of a 
subsequent review under section 1123A, to have implemented a 
corrective action plan with respect to such violation, by--
          (A) * * *
          * * * * * * *
  (2) Any other entity which is in a State that receives funds 
under this part and which violates [section 471(a)(18)] 
paragraph (18) or (23) of section 471(a) during a fiscal year 
quarter with respect to any person shall remit to the Secretary 
all funds that were paid by the State to the entity during the 
quarter from such funds.
          * * * * * * *
  [(e) Notwithstanding subsection (a), a State shall not be 
eligible for any payment under this section if the Secretary 
finds that, after the date of the enactment of this subsection, 
the State has--
          [(1) denied or delayed the placement of a child for 
        adoption when an approved family is available outside 
        of the jurisdiction with responsibility for handling 
        the case of the child; or
          [(2) failed to grant an opportunity for a fair 
        hearing, as described in section 471(a)(12), to an 
        individual whose allegation of a violation of paragraph 
        (1) of this subsection is denied by the State or not 
        acted upon by the State with reasonable promptness.]
          * * * * * * *
                              ----------                              


    SECTION 341 OF THE PERSONAL RESPONSIBILITY AND WORK OPPORTUNITY 
                       RECONCILIATION ACT OF 1996

SEC. 341. PERFORMANCE-BASED INCENTIVES AND PENALTIES.

  [(a) Development of New System.--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, 
shall develop a new incentive system to replace, in a revenue 
neutral manner, the system under section 458 of such Act. The 
new system shall provide additional payments to any State based 
on such State's performance under such a program. Not later 
than March 1, 1997, the Secretary shall 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.]
  [(b)] (a) Conforming Amendments to Present System.--Section 
458 (42 U.S.C. 658) is amended--
          (1) * * *
          * * * * * * *
  [(c)] (b) Calculation of Paternity Establishment 
Percentage.--
          (1) * * *
          * * * * * * *
  [(d)] (c) Effective Dates.--
          [(1) Incentive adjustments.--
                  [(A) In general.--The system developed under 
                subsection (a) and the amendments made by 
                subsection (b) shall become effective on 
                October 1, 1999, except to the extent provided 
                in subparagraph (B).
                  [(B) Application of section 458.--Section 458 
                of the Social Security Act, as in effect on the 
                day before the date of the enactment of this 
                section, shall be effective for purposes of 
                incentive payments to States for fiscal years 
                before fiscal year 2000.]
          (1) Conforming amendments to present system.--The 
        amendments made by subsection (a) of this section shall 
        become effective with respect to a State as of the date 
        the amendments made by section 103(a) (without regard 
        to section 116(a)(2)) first apply to the State.
          (2) Penalty reductions.--The amendments made by 
        subsection [(c)] (b) shall become effective with 
        respect to calendar quarters beginning on or after the 
        date of the enactment of this Act.
          * * * * * * *
                              ----------                              


            SECTION 5557 OF THE BALANCED BUDGET ACT OF 1997

SEC. 5557. EFFECTIVE DATE.

  (a) * * *
  (b) Exception.--The amendments made by section 5532(b)(2) of 
this Act shall take effect as if the amendments had been 
included in the enactment of section 103(a) of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 
(Public Law 104-193; 110 Stat. 2112). The amendment made by 
section 5536(1)(A) shall not take effect with respect to a 
State until October 1, 2000, or such earlier date as the State 
may select.
          * * * * * * *
                              ----------                              


       SECTION 232 OF THE SOCIAL SECURITY ACT AMENDMENTS OF 1994

SEC. 232. MEASUREMENT AND REPORTING OF WELFARE RECEIPT.

  (a) * * *
  (b) Development of Welfare Indicators and Predictors.--The 
Secretary of Health and Human Services (in this section 
referred to as the ``Secretary'') in consultation with the 
Secretary of Agriculture shall--
          (1) * * *
          * * * * * * *
          (3) not later than 2 years after the date of the 
        enactment of this section, provide an interim report 
        containing conclusions resulting from the development 
        and assessment described in paragraphs (1) and (2), 
        to--
                  (A) * * *
          * * * * * * *
                  (D) the Committee on [Energy and] Commerce of 
                the House of Representatives;
          * * * * * * *
  (d) Annual Welfare Indicators Report.--
          (1) * * *
          * * * * * * *
          (4) Submission.--The Secretary shall submit such a 
        report not later than 3 years after the date of the 
        enactment of this section and annually thereafter, to 
        the committees specified in subsection (b)(3)[(D)]. 
        Each such report shall be transmitted during the first 
        60 days of each regular session of Congress.
          * * * * * * *

                                
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