Child Support Enforcement: Effects of Declining Welfare Caseloads Are
Beginning to Emerge (Letter Report, 06/30/1999, GAO/HEHS-99-105).

The expected outcomes of welfare reform are changing the fiscal and
political environment in which the Child Support Enforcement (CSE)
Program operates. Declining caseloads--both in the Temporary Assistance
for Needy Families and CSE welfare--have reduced the revenue some states
have historically realized from the CSE program. At the same time, newly
mandated methods for collecting more child support from noncustodial
parents have increased states' responsibilities and costs. The federal
government, on the other hand, has continued to incur program costs
primarily because it reimburses states for a two-thirds share of their
CSE expenditures. Moreover, the federal government's net costs are
likely to grow as caseloads shrink and states spend more on
administrative costs to implement enforcement tools required by the
welfare reform law. Rising net costs for the states and the federal
government will likely encourage both program partners to (1) reexamine
how the CSE program is financed and (2) weight these new fiscal
realities against the program's social and fiscal benefits of promoting
parental responsibility and recovering welfare costs.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-99-105
     TITLE:  Child Support Enforcement: Effects of Declining Welfare
	     Caseloads Are Beginning to Emerge
      DATE:  06/30/1999
   SUBJECT:  Child support payments
	     State-administered programs
	     Welfare benefits
	     Parents
	     Debt collection
	     Federal/state relations
	     Law enforcement
	     Cost control
	     Government collections
	     Intergovernmental fiscal relations
IDENTIFIER:  HHS Temporary Assistance for Needy Families Program
	     Aid to Families with Dependent Children Program
	     HHS Child Support Enforcement Program
	     AFDC

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    United States General Accounting Office GAO                Report
    to the Chairman, Subcommittee on Human Resources, Committee on
    Ways and Means, House of Representatives June 1999          CHILD
    SUPPORT ENFORCEMENT Effects of Declining Welfare Caseloads Are
    Beginning to Emerge GAO/HEHS-99-105 GAO      United States General
    Accounting Office Washington, D.C. 20548 Health, Education, and
    Human Services Division B-280957 June 30, 1999 The Honorable Nancy
    L. Johnson Chairman, Subcommittee on Human Resources Committee on
    Ways and Means House of Representatives Dear Madam Chair: Nearly
    two-thirds of the 13.7 million American women and men raising
    children alone did not receive any child support in 1995. Many of
    these custodial parents head poor families that receive cash
    assistance under the Temporary Assistance for Needy Families
    (TANF) program, while others care for families not currently
    receiving cash assistance but who are at risk of becoming
    impoverished. The Child Support Enforcement (CSE) program, a
    federal-state partnership, was designed to * promote parental
    responsibility for children in welfare and nonwelfare families, *
    help the federal government and states recover their welfare
    payments to needy families by allowing these entities to retain
    the child support payments they collect from noncustodial parents
    who owe support, and * keep families currently not on welfare from
    becoming welfare recipients by helping them collect child support
    payments owed to them. As a condition of receiving federal TANF
    funds, states are required to operate CSE programs that are
    approved by the federal Office of Child Support Enforcement (OCSE)
    within the Department of Health and Human Services (HHS). TANF
    families are required to participate in the CSE program. Families
    that do not receive TANF may request CSE services, for which they
    are usually charged a nominal fee. The Personal Responsibility and
    Work Opportunity Reconciliation Act of 1996 (P.L. 104-193) changed
    welfare law to help families become less dependent on welfare and
    move them toward self-sufficiency, in part, by improving child
    support collections and limiting to 5 years the amount of time
    families can receive welfare payments. For example, the law
    required that the federal government and states create directories
    of new employee hires to more effectively locate parents who owe
    child support. It also required that families be given priority in
    receiving past due child support payments once they leave welfare.
    In addition, the law required HHS to revise its performance
    incentive system. As a result, states are now Page 1
    GAO/HEHS-99-105 Child Support Financing B-280957 required to
    reinvest the incentive payments in their CSE programs. Once
    families leave the welfare rolls, they can continue to receive the
    CSE services they need. Such services include locating absent
    parents, establishing paternity and child support orders, and
    collecting payments owed. In fiscal year 1997, child support
    collections nationwide for welfare and nonwelfare families totaled
    $2.8 billion and $10.5 billion, respectively. However, since 1994,
    an increasing number of states have begun to pay out more to
    operate their CSE programs than they receive back in recovered
    welfare payments and incentive payments.1 Several states attribute
    this change to the decline in welfare caseloads, which began in
    1994 and has accelerated since the passage of the welfare reform
    law. This welfare caseload decline has meant fewer CSE welfare
    cases where the federal government and the states keep the
    recovered collections (generally referred to as retained
    collections). At the same time, CSE nonwelfare caseloads and
    collections, which are paid directly to families, have increased.
    Given the overall decline in CSE welfare caseloads, the steady
    growth in CSE nonwelfare caseloads, and the welfare reform changes
    affecting the federal government's and states' financing of the
    program, you asked us to address the following questions: * How
    have CSE welfare collections changed since 1994? * What have been
    the net savings/cost experiences of state and federal CSE
    programs? * For those states that have experienced declines in CSE
    welfare collections, how have these declines affected their
    state's CSE program funding? * What are the future implications of
    caseload declines and welfare reform changes for the CSE program?
    To answer these questions, we analyzed annual report data for
    fiscal years 1990 through 1996 and preliminary data for fiscal
    years 1997 and 1998 from OCSE.2, 3 We also interviewed CSE
    officials in the seven states that have experienced declines in
    their retained collections-the portion of welfare 1This is
    referred to as net cost. Net savings result when a state pays out
    less to operate its CSE program than it receives in recovered
    welfare payments and incentive payments. The CSE program may
    produce other savings, such as cost avoidance in welfare, Food
    Stamps, and Medicaid. See Laura Wheaton and Elaine Sorensen,
    "Reducing Welfare Costs and Dependency: How Much Bang for the
    Child Support Buck?" Georgetown Public Policy Review (Fall 1998).
    These estimated savings are not included in OCSE calculations of
    CSE net savings or costs. 2The preliminary fiscal year 1998 data
    are not yet complete. Some fiscal year 1998 collections have not
    yet been distributed among the federal government, the states, and
    families. 3Our analysis covered the 50 states, the District of
    Columbia, Guam, Puerto Rico, and the Virgin Islands, herein
    referred to as states. Page 2
    GAO/HEHS-99-105 Child Support Financing B-280957 collections not
    given to families or to the federal government-between fiscal
    years 1995 and 1997. We conducted our work between July 1998 and
    April 1999 in accordance with generally accepted government
    auditing standards. Results in Brief    Despite significant
    declines in TANF caseloads and CSE welfare caseloads, total state
    CSE welfare collections nationwide increased 11 percent between
    fiscal years 1994 and 1997. While declines in CSE welfare cases
    might have been expected to lower CSE welfare collections for the
    states and federal government, the CSE program's ability to
    intercept more money from delinquent noncustodial parents' income
    tax refunds more than offset the effects of the caseload declines.
    However, collections decreased for some individual states. Seven
    states (Indiana, Maryland, Missouri, South Carolina, Tennessee,
    Vermont, and Wisconsin) experienced a drop in the amount of CSE
    collections that they kept in fiscal year 1997 relative to the
    amount that they retained in fiscal year 1995. During the period
    from fiscal year 1994 to fiscal year 1997, a declining majority of
    states realized net savings from the CSE program while the federal
    government experienced net costs. In fiscal year 1997, the states
    collectively spent about $1.1 billion to operate their CSE
    programs and retained about $1.6 billion in recovered welfare
    payments and incentive payments. The federal government, on the
    other hand, spent about $2.3 billion to fund the CSE program and
    retained about $1 billion in recovered welfare benefits. The
    differing results for the states and federal government are not
    surprising since the federal government pays two-thirds of the
    program's administrative costs and also awards the states
    incentive payments from its share of CSE welfare collections.
    Between fiscal years 1994 and 1997, the numbers of states
    experiencing net costs increased from 12 to 22 because of
    increased administrative costs, reduced CSE welfare collections,
    and declining incentive payments. While declining caseloads have
    resulted in lower retained collections in seven states, CSE
    officials in those states said the decline did not negatively
    affect their CSE program funding. The way a state chooses to
    finance its CSE program determines its sensitivity to fluctuations
    in CSE welfare collections. For example, if a state pays for its
    program from its general fund, its program funding may not be
    affected by a reduction in retained collections. If, however, a
    program is at least partially funded from the amounts collected
    and retained, a reduction in such amounts could have a Page 3
    GAO/HEHS-99-105 Child Support Financing B-280957 considerable
    effect on program funding. Only one of the seven states used
    retained collections as a funding source. The effects of TANF
    caseload declines and welfare reform changes are just beginning to
    emerge. Future caseload declines-evidence of a significant
    reduction in families' dependence on government cash assistance-
    are likely to reduce retained state and federal CSE welfare
    collections. At the same time, nonwelfare caseloads and costs are
    likely to increase. The welfare reform provision that gives
    families a greater priority in receiving past due payments will
    also reduce the amount of CSE welfare collections retained by the
    states and federal government. The implementation of a new
    incentive payment program will result in less stable program
    revenues for the states. The welfare reform law, however, also
    required the federal government and the states to create powerful
    new tools to enforce the collection of child support, such as
    federal and state directories of CSE orders and new employee hire
    information, that may ameliorate the expected declines in CSE
    welfare collections, yet increase states' administrative costs. In
    addition, some states are considering expanding their service fees
    for CSE nonwelfare cases; such fees could serve to defray federal
    and state CSE costs. In this connection, we recommended in 1992
    that the Congress require states to charge a minimum percentage
    service fee for each successful CSE nonwelfare collection. The
    Congress has considered this option, but to date no action has
    been taken to require such fees. We continue to believe that this
    recommendation has merit. Background    The Congress created the
    federal CSE program as title IV-D of the Social Security Act in
    1975. OCSE in HHS is responsible for providing leadership,
    technical assistance, and standards for state CSE programs. States
    or local offices, under state supervision, deliver CSE services to
    families. The federal government and the states share
    administrative costs to operate the program at the rate of 66 and
    34 percent, respectively, and also share any recovered costs and
    fees at the same rate. In fiscal year 1997, administrative costs
    for the program were $3.4 billion and welfare and nonwelfare
    collections totaled almost $13.4 billion. The federal and state
    governments share CSE collections from welfare cases by the same
    percentage as they funded welfare benefits in fiscal year 1996.
    The federal government's share is inversely related to state per
    capita income and ranges from 50 percent in high per capita income
    states, such as California, to about 80 percent in low per capita
    income states, Page 4                                   GAO/HEHS-
    99-105 Child Support Financing B-280957 such as Mississippi. The
    collections that the federal and state CSE programs keep are
    referred to as retained collections. Currently, the federal
    government awards incentive payments to states solely on the basis
    of each state's cost efficiency in collecting child support in
    both welfare and nonwelfare cases.4 Incentive payments are paid
    out of the federal government's share of retained collections.
    States can earn incentive payments ranging from 6 to 10 percent of
    both welfare and nonwelfare collections, depending upon their cost
    efficiency.5 The welfare reform law required HHS and the states to
    develop a new incentive program. The Child Support Performance and
    Incentive Act of 1998 (P.L. 105-200) amended the law to provide
    that states' incentive payments be based upon five performance-
    based outcome measures.6 Starting in fiscal year 2000, this new
    incentive plan will be phased in and will include a fixed pool of
    incentive payments for which all states must compete.7 The CSE
    program unlike most other federal social programs generates
    revenue for its federal and state partners. Thus, the program is
    often discussed in terms of savings and costs realized. The
    states' and federal government's net financial savings or costs
    from the CSE program are determined by their respective share of
    (1) retained CSE welfare collections, (2) performance incentives
    paid or received for both welfare and nonwelfare cases, and (3)
    administrative costs incurred, as illustrated in figure 1. 4Cost
    efficiency is determined by dividing welfare and nonwelfare
    collections each by total administrative costs. 5A state's total
    nonwelfare incentive payment, however, is limited to 115 percent
    of its welfare incentive payment. All but two states reached the
    115-percent cap on nonwelfare incentive payments in fiscal year
    1994. Therefore, reductions in welfare collections affect both the
    welfare and nonwelfare incentive payments. 6GAO recommended that
    the incentive payment system be aligned with performance-based
    outcome goals for collection and noncollection results. See Child
    Support Enforcement: Families Could Benefit From Stronger
    Enforcement Program (GAO/HEHS-95-24, Dec. 27, 1994) and Child
    Support Enforcement: Reorienting Management Toward Achieving
    Better Program Results (GAO/HEHS/GGD-97-14, Oct. 25, 1996). 7The
    five performance measures are the paternity establishment
    percentage, the percentage of cases with support orders, the
    collection rate for current support, the percentage of cases with
    collections on arrears, and the total dollars collected per dollar
    of expenditures. Page 5
    GAO/HEHS-99-105 Child Support Financing B-280957 Figure 1: State
    and Federal CSE Savings/Cost Formula Federal 66% of Net Child
    Support           Share of Retained                Incentive
    Payments =
    Administrative  Savings or Costs              Collections
    to States                            Costs State Incentive
    Payments                        34% of Net Child Support
    Share of Retained =
    Received From                       Administrative + Savings or
    Costs              Collections                  Federal Government
    Costs The welfare reform law made significant changes in the
    nation's welfare policy and the CSE program. TANF represents a
    significant departure from the Aid to Families With Dependent
    Children (AFDC) program, introducing a 5-year limit on federal
    cash assistance to ensure that such assistance is temporary for
    most recipients.8, 9 AFDC and its successor program, TANF, have
    experienced a 45-percent decline in the numbers of families
    receiving cash assistance since the AFDC program reached its all-
    time high in 1994. As illustrated in figure 2, the total numbers
    of families began to decline in 1995, and the decline accelerated
    in 1996 when the welfare reform law was enacted. Caseload declines
    between 1994 and 1998 ranged from about 20 percent in Hawaii to a
    high of almost 90 percent in Wisconsin and Wyoming (see app. I).
    8Before the welfare reform law passed in 1996, 14 states were
    granted waivers under section 1115 of the Social Security Act,
    allowing them to experiment with assistance time limits ranging
    from 18 months to 5 years. While state policies regarding
    exemptions and extensions varied, these state waivers were the
    first efforts to make assistance temporary for a specified period
    of time. 9Federal TANF assistance to a family including an adult
    is limited to 60 months (whether or not they are consecutive).
    However, some states, such as Georgia and Utah, adopted shorter
    time limits as part of their TANF programs. For families reaching
    time limits, states may continue to provide aid with state funds.
    Page 6                                                 GAO/HEHS-
    99-105 Child Support Financing B-280957 Figure 2: Families
    Receiving AFDC/TANF, 1936-98              Families in Millions 6 5
    4 3 2 1 0 1936     1946          1956         1966         1976
    1986             1998 1996 Year Note: Data for 1998 are as of
    December 1998. Source: HHS Administration for Children and
    Families. Because almost every welfare case results in one or more
    CSE welfare cases, this decline in AFDC/TANF families resulted in
    a decline in CSE welfare cases and a corresponding increase in CSE
    nonwelfare cases in most states (see app. II).10 As figure 3
    shows, CSE welfare cases began to decline from 10Clients may
    request a good cause exemption from cooperating with the CSE
    program if their cooperation could result in physical or emotional
    harm to the child or the parent. Federal regulations require
    states to automatically open a CSE nonwelfare case for a former
    welfare recipient unless that person specifically declines
    continued services. Page 7
    GAO/HEHS-99-105 Child Support Financing B-280957 their all-time
    highs in fiscal year 1994 while CSE nonwelfare cases continued to
    rise.11 Figure 3: Welfare and Nonwelfare CSE Caseloads, FY 1994-97
    Caseloads in Millions 10 9 8 7 6 5 4 7,985,983
    8,189,569    7,879,725            8,783,238    7,379,629
    9,347,875    6,461,723    9,947,678 3 2 1 0
    1994                              1995
    1996                 1997 Year Welfare Nonwelfare Note:
    Preliminary data from OCSE indicate that this trend continued
    through fiscal year 1998, with welfare and nonwelfare caseloads of
    about 5.7 million and 11 million, respectively. Source: OCSE data.
    11State administrative actions may also affect caseload declines.
    For example, Arizona, Georgia, Illinois, New Mexico, and Puerto
    Rico reported an increase in the number of CSE case closures in
    fiscal year 1995 because of either data clean-up efforts that were
    necessary for data conversion into new computer systems or revised
    criteria for case closure. Page 8
    GAO/HEHS-99-105 Child Support Financing B-280957 Welfare Child
    Support States have experienced a sharp decline in the numbers of
    TANF families Collections Have                and CSE welfare
    cases, yet their total CSE welfare collections generally increased
    between fiscal years 1994 and 1997. While declining CSE welfare
    Risen as TANF                   cases would be expected to result
    in lower CSE welfare collections, total Caseloads Have
    CSE welfare collections rose 11 percent largely because CSE
    programs have been able to intercept more money from the income
    tax refunds of Declined                        delinquent
    noncustodial parents. The federal and state shares of collections
    rose even higher because of a welfare law change that allows them
    to retain a greater share of CSE welfare collections. In designing
    the 1996 welfare reform legislation, the Congress recognized that
    one or more of its changes could adversely affect the amount of
    retained state CSE collections. Therefore, the welfare reform law
    contained a provision to hold states harmless for declines in
    their CSE welfare collections. That is, it guaranteed that
    starting in fiscal year 1997, states would receive a supplemental
    payment, commonly referred to as a hold harmless payment, if their
    retained collections dropped below their fiscal year 1995 levels.
    In fiscal year 1997, seven states were not able to maintain their
    retained CSE welfare collections at 1995 levels and thus were
    eligible to receive hold harmless payments from the federal
    government. Total Welfare Child             Between fiscal years
    1994 and 1997, total CSE welfare collections increased Support
    Collections             11 percent. As shown in table 1, CSE
    welfare collections peaked in fiscal Generally Increased
    year 1996 and declined slightly in fiscal year 1997.12 At the same
    time, the Between Fiscal Years 1994       portion of collections
    retained by the states and federal government and 1997
    increased by 30 percent and 37 percent, respectively, as a result
    of a welfare reform provision that allows them to retain a greater
    share of CSE welfare collections that were formerly paid to
    welfare families. 12Between fiscal years 1990 and 1993, CSE
    welfare collections increased 38 percent. This suggests a slowing
    in the rate of CSE welfare collection growth. Page 9
    GAO/HEHS-99-105 Child Support Financing B-280957 Table 1: State
    and Federal Shares of Total CSE Welfare Collections, FY
    Dollars in thousands 1994-97
    Fiscal year 1994            1995            1996             1997
    Total welfare CSE collections              $2,549,723 $2,689,392
    $2,855,066 $2,842,681a Federal share
    762,341        821,551         888,258      1,044,288 State share
    890,717        938,865       1,013,666      1,158,831 Incentive
    payments to states                   407,242        399,919
    409,142        411,527 Payments to families
    457,125        474,428         480,406        157,033b Medical
    support payments                        32,299          54,629
    63,570           70,683 aPreliminary data from OCSE for fiscal
    year 1998 indicate that welfare collections declined to about $2.6
    billion. bPayments to families that are no longer required since
    the passage of the welfare reform law are not included. Source:
    OCSE data. As the numbers of TANF cases and CSE welfare caseloads
    have declined, there has been a corresponding increase in the
    number of CSE nonwelfare cases in which collections go directly to
    families. From fiscal year 1994 to 1997, CSE nonwelfare caseloads
    increased 21 percent (see fig. 3), and CSE nonwelfare collections
    increased 44 percent as families have transitioned from the
    welfare rolls (see fig. 4).13 13Preliminary data from OCSE
    indicate a higher nonwelfare caseload increase of 34 percent
    between fiscal years 1994 and 1998 and a 60 percent increase in
    nonwelfare collections during the same period. Page 10
    GAO/HEHS-99-105 Child Support Financing B-280957 Figure 4: CSE
    Welfare and Nonwelfare Collections, FY 1994-97
    Collections in Billions 12 10.5 10
    9.2 8.1 8                  7.3 6 4 2.9                  2.8 2.5
    2.7 2 0             1994              1995                 1996
    1997 Year Welfare Nonwelfare Note: Preliminary data from OCSE for
    fiscal year 1998 indicate that welfare collections declined to
    about $2.6 billion while nonwelfare collections increased to about
    $11.5 billion. Source: OCSE data. An increase in the amount of
    money intercepted from delinquent noncustodial parents' federal
    income tax refunds significantly increased the amount of total CSE
    welfare collections. Under the federal income tax refund offset
    program, state CSE agencies submit to the Internal Revenue Service
    (IRS) the names, Social Security numbers, and amount of past-due
    Page 11
    GAO/HEHS-99-105 Child Support Financing B-280957 child support of
    people who are behind in their child support payments.14 When IRS
    processes tax returns, it identifies the returns of those who owe
    past-due child support. If a tax refund is due, all or part of it
    is intercepted to offset past-due child support payments. From
    1994 to 1997, the amount of money intercepted for CSE welfare
    cases increased 59 percent from $442 million to $704 million.15
    Over this same period, the amount of money intercepted for
    nonwelfare cases increased 72 percent from $181 million to $311
    million. Intercepting income tax refunds is the second largest
    source of CSE collections after wage withholding. In addition to
    the total increase in CSE welfare collections, the proportion of
    these collections retained by the states and federal government
    also increased. The new welfare reform law eliminated the $50
    disregard provision, which previously required that the first $50
    of support collected each month be passed through to welfare
    families and not deducted from their welfare cash assistance
    payment. In fiscal year 1997, this change provided almost $300
    million in additional funds to be split between the states and
    federal government. States were allowed to continue a family pass-
    through policy if they so chose; however, the federal government
    no longer helps to finance such a policy. The Center for Law and
    Social Policy reported that about 23 states have continued some
    type of disregard policy. As noted in table 1, reported payments
    to families declined from $480 million in fiscal year 1996 to $157
    million in fiscal year 1997. However, fiscal year 1997 statistics
    do not include state-only payments to families that may be made
    out of the state share of collections. Some States Received
    In fiscal year 1997, seven states-Indiana, Maryland, Missouri,
    South Supplemental Federal       Carolina, Tennessee, Vermont, and
    Wisconsin-were eligible for hold Payments Because Their
    harmless payments totaling about $14 million because their
    retained CSE Welfare Collections    collections dropped below
    their fiscal year 1995 levels. The hold harmless Declined 14Most
    states have state tax refund offset programs as well. In fiscal
    year 1997, states intercepted $66 million in state tax refunds for
    CSE welfare cases and $53 million for nonwelfare cases. 15The
    increase in tax refund collections suggests that more noncustodial
    parents were working and had reportable income. This increase is
    somewhat offset by a decline in the amount of unemployment
    payments intercepted. They declined from $85 million in fiscal
    year 1994 to $63 million in fiscal year 1997. Page 12
    GAO/HEHS-99-105 Child Support Financing B-280957 payments ranged
    from about $480,000 in Missouri to $5.4 million in Tennessee.16 In
    six of the seven states, CSE officials attributed the decline in
    CSE welfare collections to the decline in TANF caseloads. In
    Missouri, collections declined because the state temporarily moved
    its federal TANF cases into a state-only welfare program to delay
    the start of welfare recipients' time limits. The welfare reform
    law does not require states to use their hold harmless payments to
    fund CSE programs. However, in four of the seven hold harmless
    states-Indiana, Missouri, South Carolina, and Tennessee-the hold
    harmless payment went to the CSE agency. A fifth state, Vermont,
    is currently seeking legislative authority to reinvest its hold
    harmless payment in its CSE program. Wisconsin returned the hold
    harmless payment to its Department of Workforce Development, the
    agency that houses its CSE program. Finally, in Maryland, the
    state is investing its hold harmless payment in its TANF program.
    While fiscal year 1998 statistics are not yet complete, HHS staff
    estimate that as many as 20 states will be eligible for hold
    harmless payments as a result of declining retained CSE welfare
    collections. The Congressional Budget Office estimates that hold
    harmless payments to states will reach approximately $50 million
    in fiscal year 2000, gradually declining to $40 million in fiscal
    year 2004. However, the administration's proposed budget for
    fiscal year 2000 calls for the elimination of hold harmless
    payments. Despite Overall         From fiscal year 1994 to fiscal
    year 1997, states continued to experience Savings, More States
    net savings from the CSE program, while the federal government's
    net costs continued to rise. Although the federal government has
    always paid the Are Joining the         lion's share of program
    costs, a growing number of states are beginning to Federal
    Government      experience net costs from their CSE programs, and
    individual states' savings or costs varied widely. Four of the 32
    states that continued to in Experiencing Net     experience net
    savings also received hold harmless payments because Costs
    their fiscal year 1997 retained collections fell below their 1995
    levels. Although more states are experiencing net costs, they are
    not permitted to use unspent TANF funds to make up for reductions
    in their CSE revenues. 16Tennessee's fiscal year 1997 collections
    were $7.7 million lower than its fiscal year 1995 collections.
    However, the state's hold harmless payment was limited to the
    federal share of collections from that state. Page 13
    GAO/HEHS-99-105 Child Support Financing B-280957 States Unevenly
    Share        In 1997, states experienced estimated net savings of
    $467 million from Program Savings and Costs    their CSE programs
    while the federal government experienced an estimated net cost of
    $1.3 billion. A state's savings or costs are determined by
    combining its retained collections and incentive payments and
    subtracting its one-third share of administrative costs. Federal
    savings or costs are determined by taking the federal government's
    share of retained collections and subtracting the state incentive
    payments and the federal government's two-thirds share of
    administrative costs. Because of this basic financing structure,
    states have always realized net savings, while the federal
    government has always experienced net costs. As illustrated in
    figure 5, this basic pattern continued between fiscal years 1994
    and 1997. Page 14                                  GAO/HEHS-99-105
    Child Support Financing B-280957 Figure 5: State and Federal Net
    CSE Savings or Costs, FY 1994-97             Dollars in Millions
    500 0 -500 -1000 -1500           1994                     1995
    1996                 1997 Fiscal Year Total Net Costs States' Net
    Savings Federal Net Costs Note: HHS estimates that overall state
    savings will continue until fiscal year 2001, when states overall
    will begin to show net costs. Source: OCSE data. The states'
    program savings or costs varied widely in fiscal year 1997, as
    shown in appendix III. California led the 32 states experiencing
    net savings from their CSE programs, receiving back about $178
    million more than its program cost; Arkansas experienced the
    largest net costs of about $6 million. The numbers of states
    experiencing net program savings Page 15
    GAO/HEHS-99-105 Child Support Financing B-280957 declined from 42
    in 1994 to 32 in 1997 as a result of increased administrative
    costs, reduced CSE welfare collections, and declining incentive
    payments (see fig. 6). 17,18 Figure 6: Number of States
    Experiencing Net Costs or Savings in     Number of States CSE
    Programs                            50 43 40
    38 35 32 30 22 20
    19 16 11 10 0              1994            1995
    1996                 1997 Year Net Savings Net Costs Note: HHS
    estimates that 30 states experienced net costs in fiscal year
    1998. Source: OCSE data. 17Hold harmless payments are not
    considered in OCSE's calculation of net savings or costs. If hold
    harmless payments were considered, the number of states
    experiencing net savings would increase to 34. 18Alabama, Alaska,
    Delaware, Nevada, New Hampshire, and Puerto Rico attributed the
    increases in fiscal year 1995 administrative costs to increased
    expenditures for automated systems. Page 16
    GAO/HEHS-99-105 Child Support Financing B-280957 Some States That
    Because the hold harmless payment is based on changes in retained
    Experienced Net Savings                collections only and not
    the entire net savings or costs equation, four Also Received Hold
    states experienced net savings and were also eligible for hold
    harmless Harmless Payments                      payments totaling
    almost $7 million for fiscal year 1997. These four states realized
    total net savings of almost $15 million in fiscal year 1997;
    however, this was a decline of $25 million from their fiscal year
    1995 net savings (see table 2). Declines in net savings can occur
    if retained collections decline, earned incentive payments
    decline, or administrative costs increase (see fig. 1). Table 2:
    State Share of Program Savings or Costs, Fiscal Years 1995
    FY 1995 program FY 1997 program                       Change, FY
    and 1997, for States That Received     State
    saving or (costs) saving or (costs)a                      1995-97
    Hold Harmless Payments in Fiscal       Indiana
    $18,261,945             $10,311,881             ($7,950,064) Year
    1997                              Maryland
    4,819,028                (321,631)             (5,140,659)
    Missouri                                  7,694,840
    1,850,554              (5,844,286) South Carolina
    190,946                (817,850)             (1,008,796) Tennessee
    7,519,056                (947,506)             (8,466,562) Vermont
    1,557,276                 745,853                (811,423)
    Wisconsin                                12,694,857
    1,982,694            (10,712,163) Total
    52,737,948             12,803,995             (39,933,953) aThe
    calculation of the states' net program savings or costs do not
    include the hold harmless payments the states received for fiscal
    year 1997. Source: OCSE data. Unspent TANF Funds
    Although some states have large unspent balances of state TANF
    funds, HHS Cannot Be Used to Offset               has determined
    that these funds cannot be used to offset reductions in Reductions
    in CSE                      states' CSE revenue. The unspent
    balances of state TANF funds resulted Revenue
    from the welfare reform law's fundamental change in the way the
    federal government finances cash assistance to families. The law
    eliminated the open-ended entitlement of the AFDC program and
    replaced it with a flexible, capped block grant. The amount of
    each state's block grant is based on time periods when welfare
    caseloads and federal spending were at historically high levels.
    From January 1996 to December 1998, however, the number of
    families receiving TANF declined by almost 40 percent. While
    states must maintain a statutory "maintenance-of-effort" level
    relative to their previous spending limits, they are also allowed
    to carry forward Page 17
    GAO/HEHS-99-105 Child Support Financing B-280957 unused TANF funds
    without fiscal year limitation.19 Some states have begun to accrue
    large unspent TANF balances because of declining welfare caseloads
    and the fixed block grant funding mechanism. As of September 1998,
    32 states had accumulated unspent TANF balances totaling $2.7
    billion. These balances ranged from about $6 million in Vermont to
    $606 million in New York (see app. III). With an increasing number
    of states beginning to experience net costs from their CSE
    programs, some states have asked whether they can use their
    unspent TANF funds to offset reductions in their CSE revenues. We
    asked HHS for its interpretation of section 404(a)(1) of the
    Social Security Act, which covers this issue, and it provided a
    written response (see app. V). HHS said that while CSE services
    are "reasonably calculated" to accomplish the purposes of the TANF
    program, unspent TANF balances may not be used to pay for required
    CSE services such as locating noncustodial parents, establishing
    paternity and support orders, and enforcing support orders.20
    However, states may spend TANF funds on supplemental CSE services
    or activities not required under the CSE program. One example of
    an allowable supplemental CSE service might be a job-training
    program for noncustodial parents that could increase their
    potential for paying child support. Declining Collections Did
    State budgeting practices and policies determine how CSE programs
    are Not Affect CSE Funding in    financed and whether CSE revenues
    are returned to the program. The way Seven States
    a state chooses to finance its program determines the extent to
    which a decline in collections might affect its CSE program. In
    the President's budget for fiscal year 1999, the Office of
    Management and Budget directed HHS to consult with its state
    partners and stakeholders and propose a new overall financing
    structure for the CSE program. As part of this process, HHS
    contracted with The Lewin Group to develop information on how the
    states finance their CSE programs and use the retained collections
    and incentive payments that go to the states. Lewin reported that
    states have 19States are required to maintain at least 75 percent
    of their historic welfare spending levels. Maintenance-of-effort
    requirements are based on states' fiscal year 1994 spending on
    AFDC, Job Opportunities and Basic Skills (JOBS), and Emergency
    Assistance programs; related administrative costs; and AFDC-
    related child care programs such as the AFDC/JOBS child care,
    Transitional Child Care, and At-Risk Child Care programs. See
    Welfare Reform: Monitoring Required State Spending Levels
    (GAO/HEHS-99-20R, Nov. 30, 1998). 20HHS also determined that state
    expenditures for required CSE services could not be claimed toward
    states' maintenance-of-effort requirements. Page 18
    GAO/HEHS-99-105 Child Support Financing B-280957 chosen to fund
    their CSE programs in one of four ways.21 The method chosen
    determines how sensitive a state's CSE program funding is to
    changes in retained collections and incentive payments, from the
    more stable financing in category 1 to the least stable financing
    in category 4. Figure 7 shows the funding sources that states used
    to finance their programs in fiscal year 1997. 21The Lewin Group,
    Inc., ECONorthwest, "State Financing of Child Support Enforcement
    Programs: Briefing on Findings" (Briefing prepared for Assistant
    Secretary for Planning and Evaluation and the OCSE, HHS, Nov. 23,
    1998). Page 19
    GAO/HEHS-99-105 Child Support Financing B-280957 Figure 7: Sources
    of CSE Funding, by State Category 1:   General/Special Funds10
    States Category 2:   General/Special Funds and Earmarked Federal
    CSE Incentives25 States Category 3:   General/Special Funds,
    Earmarked Federal CSE Incentives, and Retained CSE Welfare
    Collections11 States and District of Columbia Category 4:
    Federal CSE Incentive Payments and Retained CSE Welfare
    Collections4 States Source: The Lewin Group. Page 20
    GAO/HEHS-99-105 Child Support Financing B-280957 The Lewin Group's
    work provides a good framework for examining how changes in
    retained collections and incentive payments might affect a state's
    CSE program. For example, a category 1 state CSE program relies on
    general/special funds and may not be directly affected by changes
    in retained collections and incentive payments. A category 4 state
    CSE program, however, would be directly affected if retained
    collections and incentive payments changed because these are the
    sole funding sources. State CSE officials in six of the seven hold
    harmless states said the fiscal year 1997 decline in their CSE
    welfare collections had little or no effect on their CSE agencies'
    funding because they do not use retained collections to fund their
    CSE programs. Maryland, Tennessee, Vermont, and Wisconsin returned
    their collections to their welfare agencies as reimbursement for
    welfare payments; South Carolina placed its collections in a
    social services discretionary fund; and Indiana deposited its
    collections in the state's general revenue fund. Missouri is the
    only hold harmless state that used retained collections to fund
    its CSE program. However, state officials said declining CSE
    collections had no effect on Missouri's program in fiscal year
    1997 because the state had sufficient retained CSE collections to
    cover program costs.22 Caseload Declines             As states
    implement welfare reform strategies that emphasize finding and
    Welfare Reform            employment for welfare recipients and
    helping them to become less dependent on government cash
    assistance, further TANF caseload declines Changes Will Affect
    are possible along with reductions in retained state and federal
    CSE welfare State and Federal             collections. In
    addition, the new policy that gives families a greater priority in
    receiving past due support will result in fewer CSE retained
    collections, Child Support                 and the new incentive
    payment program will likely result in less stable CSE Programs
    program financing. The expected declines in CSE program revenues,
    however, may be ameliorated as states gain experience with the new
    enforcement tools mandated under welfare reform. More states may
    also seek to increase CSE revenues by adopting expanded service
    fees for CSE nonwelfare cases. Caseload Declines and         The
    large decrease in the size of welfare caseloads nationally
    indicates a Families First Policy Will    significant reduction in
    families' dependence on cash assistance-an Exert a Negative
    Influence    intended consequence of the 1996 welfare reform law.
    As more families on Retained Collections       leave the welfare
    rolls, however, more CSE payments collected will be 22Declines in
    collections and incentive payments may also have an impact on
    local CSE programs if a state shares these revenues with them. Our
    review and analysis did not include the effects of declining CSE
    welfare collections on local programs. Page 21
    GAO/HEHS-99-105 Child Support Financing B-280957 given directly to
    the families, resulting in fewer CSE retained welfare collections
    to be divided between the states and federal government. In
    addition, the welfare reform law contained a provision that gives
    families greater priority in receiving arrearage payments once
    they leave welfare. The implementation of this "families first"
    policy will also affect the amount of collections retained by the
    states and federal government. As this policy is phased in between
    fiscal years 1998 and 2001, more CSE collections will go to
    families to help them stay off welfare. Conversely, fewer
    collections will be retained by the states and federal government.
    New Incentive Payment       The Child Support Performance and
    Incentive Act of 1998 amended some Program Will Bring
    welfare reform provisions and required OCSE to base the states'
    incentive Changes to Child Support    payments on five
    performance-based outcome measures that will be Financing
    phased in starting in fiscal year 2000. The new measures are
    likely to change both positively and negatively the incentive
    payment amounts states receive, depending upon the outcomes under
    each performance measure. In addition, incentive payments to the
    states will no longer be open-ended. Rather, a fixed pool of
    incentive payments, shared by all the states, will be established.
    Each state's performance, therefore, will be judged and rewarded
    in relation to every other state's performance at the end of the
    fiscal year, making it harder for states to plan in advance for
    expected incentive payments. The 1998 act also requires states to
    reinvest their federal incentive payments in their CSE programs
    starting in fiscal year 2000. This requirement is not likely to
    provide substantial amounts of new revenues to the states' CSE
    programs. According to the Lewin study, about 70 percent of
    federal incentive payments are already distributed to state and/or
    local CSE programs. However, states that currently fund their CSE
    programs solely with general/special funds could experience some
    funding instability. These states are considered to have the most
    stable funding because they do not rely upon CSE program revenues,
    which vary from year to year, to run their programs. If these
    states use incentive payments to supplant rather than supplement
    their program funds, as the law requires, they will introduce some
    uncertainty into their financing streams. Whether more or less
    money will be available to these programs remains to be seen.
    However, if these states use the incentive payments to supplement
    their current funding, the payments will provide increased funding
    for CSE programs. Page 22
    GAO/HEHS-99-105 Child Support Financing B-280957 New Enforcement
    Tools          The welfare reform law included new tools that
    could help CSE programs and Adopting Fees Could        increase
    their efficiency and maintain their collections from a declining
    Offset Effects of Declining    CSE welfare caseload. The law
    required OCSE and the states to create TANF and CSE Welfare
    federal and state registries of CSE orders, directories of new
    employee 23 Caseloads and Revenues         hires,  and quarterly
    wage reports to aid in the location of noncustodial parents and
    the enforcement of child support orders. In addition, the law
    established new custodial parent cooperation requirements and
    penalties to strengthen existing requirements and to simplify the
    paternity establishment process.24 Finally, the law required
    states to perform data matches with financial institutions and
    revoke noncustodial parents' driver's, professional and
    occupational, and recreational licenses if they fail to comply
    with CSE orders. The national new-hire and support order
    registries offer significant potential for increasing CSE
    collections, especially those from interstate cases, which
    constitute about one-third of the total caseload. For example, in
    fiscal year 1998, its first year of operation, the National
    Directory of New Hires enabled OCSE to match over 1 million state
    requests to locate noncustodial parents against its central
    registry and provide states with information about them. In
    addition, the new custodial parent cooperation requirements could
    result in more accurate and more complete noncustodial parent
    information at the time a welfare case is opened, thus helping
    states locate noncustodial parents. To help defray rising
    administrative costs that decrease state child support revenues,
    CSE programs can collect fees from nonwelfare parents who receive
    services resulting in successful collections. Parents receiving
    TANF benefits receive free child support services, but nonwelfare
    families must pay an application fee of up to $25. For nonwelfare
    families, states can charge fees on a sliding scale, pay the fees
    out of state funds, or recover fees from noncustodial parents. As
    we noted in a previous report and testimony, many nonwelfare
    parents receiving child support services could afford to pay some
    of the costs of these services, yet most states had 23Employers
    are required to report identifying information on all new hires to
    state directories of new hires, where the information is matched
    against databases of CSE orders so that enforcement activities,
    such as the implementation of wage withholding orders, can begin.
    This information, in turn, is forwarded to a national directory of
    new hires for use by all states. 24The welfare reform law moved
    the determination of custodial parent cooperation from the welfare
    agency to the CSE agency, and mandated that welfare assistance be
    reduced by at least 25 percent if a custodial parent does not
    cooperate with the CSE agency. It also gave the CSE agency the
    authority to order genetic testing in contested cases, and
    stipulated that a signed acknowledgement of paternity be
    considered a legal finding of paternity unless rescinded within 60
    days. Page 23
    GAO/HEHS-99-105 Child Support Financing B-280957 not collected any
    significant portion of these costs.25 For example, in 1992 we
    reported that of the 617,962 women requesting child support
    services in 1989, 42 percent reported incomes exceeding 200
    percent of the poverty level and 21 percent exceeded 300 percent.
    However, 31 states charged an application fee of $1 or less, and
    most of these states paid the fee for the nonwelfare family. Also,
    Lewin noted in its 1998 study that fees constitute a small share
    of state CSE revenues, although Louisiana, North Carolina, and
    Ohio are now considering expanding their service fees. We continue
    to believe that states could significantly offset declining child
    support revenues by charging a percentage service fee. On the
    basis of our past work we found that a 15-percent service fee
    would have recovered all 1994 administrative costs incurred by
    states for nonwelfare parents. A percentage fee, ultimately set by
    the Congress, would not require up-front costs to nonwelfare
    parents as the current application fees do and should not
    discourage them from seeking the child support services they need
    even if collections are not realized. Also, percentage fees would
    not impose a financial burden on parents with limited income
    because fees would be collected only when child support payments
    are received. States could continue to retain the option to pay
    the fee themselves or pay the fee and recover it from the
    noncustodial parent. Moreover, such fees would be easy to
    administer by state child support offices. Citing GAO's work, the
    House Budget Committee's report on the fiscal year 1996 budget
    resolution suggested that a percentage service fee on nonwelfare
    collections be considered as a budget savings option.26 To date,
    the Congress has not enacted such fees. Observations    The
    expected outcomes of welfare reform are changing the fiscal and
    political environment in which the CSE program operates. Declining
    caseloads-both TANF and CSE welfare-have reduced the revenue some
    states have historically realized from the CSE program. At the
    same time, newly mandated methods for collecting more child
    support from noncustodial parents have increased states' program
    responsibilities and costs. The federal government, on the other
    hand, has continued to incur program costs primarily because it
    reimburses states for a two-thirds share of their CSE
    expenditures. Moreover, the federal government's net 25Child
    Support Enforcement: Opportunity to Defray Burgeoning Federal and
    State Non-AFDC Costs (GAO/HRD-92-91, June 5, 1992) and Child
    Support Enforcement: Opportunity to Reduce Federal and State Costs
    (GAO/T-HEHS-95-181, June 13, 1995). 26H.R. Rep. No. 104-120, at
    108 (1995). Page 24
    GAO/HEHS-99-105 Child Support Financing B-280957 costs are likely
    to grow as caseloads shrink and states spend more in
    administrative costs to implement enforcement tools required by
    the welfare reform law. Growing net costs for the states and
    federal government will likely encourage both program partners to
    (1) reexamine how the CSE program is financed and (2) weigh these
    new fiscal realities against the program's social and fiscal
    benefits of promoting parental responsibility and recovering
    welfare costs. Matter for         In our previous work we have
    concluded that individuals who use Congressional      nonwelfare
    CSE services should pay some portion of the costs incurred by the
    states and federal government. We previously recommended that the
    Consideration      Congress amend title IV-D of the Social
    Security Act to require states to charge a minimum percentage
    service fee for each successful CSE nonwelfare collection in order
    to defray the cost of providing CSE nonwelfare services. The
    Congress has considered this option but to date has not enacted
    such fees. CSE nonwelfare costs continue to rise as CSE welfare
    caseloads decline, signaling future declines in CSE revenues. The
    Congress and states may wish to reconsider the option of charging
    a minimum percentage service fee on CSE nonwelfare collections
    that would be shared at the same rate the federal government and
    states share administrative costs-two-thirds and one-third,
    respectively. This would, to some extent, alleviate the growing
    financial burden to the federal government and states. Agency
    Comments    We requested comments from HHS on a draft of this
    report, but none were provided. We are sending copies of this
    report to the Honorable William V. Roth, Jr., Chairman, and the
    Honorable Daniel Patrick Moynihan, Ranking Minority Member, Senate
    Committee on Finance; the Honorable John H. Chafee, Chairman, and
    the Honorable John B. Breaux, Ranking Minority Member, of the
    Finance Committee's Subcommittee on Social Security and Family
    Policy; the Honorable Donna E. Shalala, Secretary of Health and
    Human Services; and the Honorable Olivia Golden, Assistant
    Secretary for Children and Families, HHS. We will also make copies
    available to others on request. If you or your staff have any
    questions about this report, please contact Cynthia M. Fagnoni or
    Karen A. Whiten at (202) 512-7215. Key contributors Page 25
    GAO/HEHS-99-105 Child Support Financing B-280957 to this
    assignment were Kevin M. Kumanga, Christopher Morehouse, and
    Regina Santucci. Sincerely yours, Richard L. Hembra Assistant
    Comptroller General Page 26                              GAO/HEHS-
    99-105 Child Support Financing Page 27      GAO/HEHS-99-105 Child
    Support Financing Contents Letter
    1 Appendix I
    30 Total AFDC/TANF Families, January 1994 Through December 1998
    Appendix II
    32 Changes in Average CSE Welfare and Nonwelfare Caseloads, FY
    1994-97 Appendix III
    34 Selected State Program Statistics Appendix IV
    36 Estimates of State CSE Program Savings, FY 1997 Appendix V
    38 HHS Clarification of Whether TANF Funds May Be Used to Support
    CSE Programs Related GAO Products
    40 Page 28      GAO/HEHS-99-105 Child Support Financing Contents
    Tables     Table 1: State and Federal Shares of Total CSE Welfare
    10 Collections, FY 1994-97 Table 2: State Share of Program Savings
    or Costs, Fiscal Years                17 1995 and 1997, for States
    That Received Hold Harmless Payments in Fiscal Year 1997 Figures
    Figure 1: State and Federal CSE Savings/Cost Formula
    6 Figure 2: Families Receiving AFDC/TANF, 1936-98
    7 Figure 3: Welfare and Nonwelfare CSE Caseloads, FY 1994-97
    8 Figure 4: CSE Welfare and Nonwelfare Collections, FY 1994-97
    11 Figure 5: State and Federal Net CSE Savings or Costs, FY 1994-
    97              15 Figure 6: Number of States Experiencing Net
    Costs or Savings in               16 CSE Programs Figure 7:
    Sources of CSE Funding, by State
    20 Abbreviations AFDC         Aid to Families With Dependent
    Children CSE          Child Support Enforcement HHS
    Department of Health and Human Services IRS          Internal
    Revenue Service JOBS         Job Opportunities and Basic Skills
    OCSE         Office of Child Support Enforcement TANF
    Temporary Assistance for Needy Families Page 29
    GAO/HEHS-99-105 Child Support Financing Appendix I Total AFDC/TANF
    Families, January 1994 Through December 1998 Percentage change
    State                   Jan. 1994    Jan. 1995     Jan. 1996
    Jan. 1997    Jan. 1998    Dec. 1998     1994-97       1994-98a
    Alabama                   51,181        47,376       43,396
    37,972       25,123        20,850         (26)           (59)
    Alaska                    12,578        12,518       11,979
    12,224       10,392         8,388          (3)           (33)
    Arizona                   72,160        71,110       64,442
    56,250       41,233        36,125         (22)           (50)
    Arkansas                  26,398        24,930       23,140
    21,549       14,419        12,486         (18)           (53)
    California               902,900      925,585       904,940
    839,860      727,695      641,359           (7)           (29)
    Colorado                  41,616        39,115       35,661
    31,288       21,912        15,367         (25)           (63)
    Connecticut               58,453        60,927       58,124
    56,095       51,132        37,944          (4)           (35)
    Delaware                  11,739        11,306       10,266
    10,104        7,053         5,087         (14)           (57)
    District of Columbia      26,624        26,624       25,717
    24,752       22,451        19,751          (7)           (26)
    Florida                  254,032      241,193       215,512
    182,075      121,006        91,791         (28)           (64)
    Georgia                  142,459      141,284       135,274
    115,490       84,318        61,475         (19)           (57)
    Guam                       1,840         2,124        2,097
    2,349        2,213         2,361         28              28 Hawaii
    20,104        21,523       22,075       21,469       23,578
    16,562           7            (18) Idaho
    8,677         9,097        9,211        7,922        1,920
    1,502          (9)           (83) Illinois                 238,967
    240,013       225,796      206,316      175,445      139,806
    (14)           (41) Indiana                   74,169        68,195
    52,254       46,215       37,298        36,866         (38)
    (50) Iowa                      39,623        37,298       33,559
    28,931       25,744        22,193         (27)           (44)
    Kansas                    30,247        28,770       25,811
    21,732       14,595        12,784         (28)           (58)
    Kentucky                  79,437        76,471       72,131
    67,679       54,491        44,494         (15)           (44)
    Louisiana                 88,168        81,587       72,104
    60,226       46,593        45,401         (32)           (49)
    Maine                     23,074        22,010       20,472
    19,037       15,526        14,012         (17)           (39)
    Maryland                  79,772        81,115       75,573
    61,730       49,075        39,014         (23)           (51)
    Massachusetts            112,955      104,956        90,107
    80,675       68,651        59,154         (29)           (48)
    Michigan                 225,671      207,089       180,790
    156,077      128,892      100,676          (31)           (55)
    Minnesota                 63,552        61,373       58,510
    54,608       48,893        46,322         (14)           (27)
    Mississippi               57,689        53,104       49,185
    40,919       25,510        18,292         (29)           (68)
    Missouri                  91,598        91,378       84,534
    75,459       62,872        53,788         (18)           (41)
    Montana                   12,080        11,732       11,276
    9,644        6,789         5,517         (20)           (54)
    Nebraska                  16,145        14,968       14,136
    13,492       13,809        11,844         (16)           (27)
    Nevada                    14,077        16,039       15,824
    11,742       11,263         9,064         (17)           (36) New
    Hampshire             11,427        11,018        9,648
    8,293        6,489         6,455         (27)           (44) New
    Jersey               121,361      120,099       113,399
    102,378       89,030        68,522         (16)           (44) New
    Mexico                33,376        34,789       34,368
    29,984       20,219        25,692         (10)           (23) New
    York                 449,978      461,006       437,694
    393,424      347,536      301,918          (13)           (33)
    North Carolina           131,288      127,069       114,449
    103,300       78,473        64,470         (21)           (51)
    North Dakota               6,002         5,374        4,976
    4,416        3,351         3,123         (26)           (48) Ohio
    251,037      232,574       209,830      192,747      147,093
    123,902          (23)           (51) (continued) Page 30
    GAO/HEHS-99-105 Child Support Financing Appendix I Total AFDC/TANF
    Families, January 1994 Through December 1998 Percentage change
    State             Jan. 1994    Jan. 1995       Jan. 1996    Jan.
    1997    Jan. 1998    Dec. 1998     1994-97     1994-98a Oklahoma
    47,475        45,936         40,692       32,942       25,860
    20,895         (31)         (56) Oregon              42,695
    40,323         35,421       25,874       19,249        16,829
    (39)         (61) Pennsylvania       208,260      208,899
    192,952      170,831      140,446      117,828          (18)
    (43) Puerto Rico         59,425        55,902         51,370
    48,359       43,474        38,159         (19)         (36) Rhode
    Island        22,592        22,559         21,775       20,112
    19,242        19,135         (11)         (15) South Carolina
    53,178        50,389         46,772       37,342       27,514
    20,205         (30)         (62) South Dakota         7,027
    6,482          6,189        5,324        3,956         3,476
    (24)         (51) Tennessee          111,946      105,948
    100,884       74,820       53,837        57,691         (33)
    (48) Texas              285,680      279,911         265,233
    228,882      158,252      121,606          (20)         (57) Utah
    18,063        17,195         15,072       12,864       10,931
    10,191         (29)         (44) Vermont              9,917
    9,789          9,210        8,451        7,591         6,696
    (15)         (32) Virgin Islands       1,090         1,264
    1,437        1,335        1,167         1,139         22
    4 Virginia            74,717        73,920         66,244
    56,018       44,247        39,295         (25)         (47)
    Washington         103,068      103,179          99,395
    95,982       82,852        64,933          (7)         (37) West
    Virginia       40,869        39,231         36,674       36,805
    18,914         9,943         (10)         (76) Wisconsin
    78,507        73,962         65,386       45,586       13,860
    10,185         (42)         (87) Wyoming              5,891
    5,443          4,975        3,825        1,340          893
    (35)         (85) Total             5,052,854    4,963,071
    4,627,941    4,113,775    3,304,814    2,783,456         (19)
    (45) aThrough December 1998. Page 31
    GAO/HEHS-99-105 Child Support Financing Appendix II Changes in
    Average CSE Welfare and Nonwelfare Caseloads, FY 1994-97
    Percentage      Percentage change change in CSE      in CSE
    nonwelfare State                   welfare caseload
    caseload Alabama                              (27)
    20 Alaska                                 1                    21
    Arizona                              (44)                   17
    Arkansas                             (22)                   20
    California                             4                     6
    Colorado                             (18)                   23
    Connecticut                           (3)                   21
    Delaware                             (14)                    6
    District of Columbia                  (8)                   50
    Florida                              (48)                   31
    Georgia                              (40)                   10
    Guam                                  46                    26
    Hawaii                                24                   (10)
    Idaho                                  4                    87
    Illinois                             (14)                   27
    Indiana                              (48)                    (1)
    Iowa                                 (21)                   39
    Kansas                               (23)                   38
    Kentucky                             (24)                   23
    Louisiana                            (36)                   44
    Maine                                (10)                   17
    Maryland                               4                    34
    Massachusetts                        (20)                   37
    Michigan                               5                    26
    Minnesota                            (13)                   43
    Mississippi                          (59)                   82
    Missouri                             (35)                    4
    Montana                              (26)                   15
    Nebraska                             (19)                    (5)
    Nevada                                (2)                   14 New
    Hampshire                        (29)                   39 New
    Jersey                           (27)                    1 New
    Mexico                           (33)                   17 New
    York                             (18)                   13 North
    Carolina                       (22)                   41 North
    Dakota                         (16)                   46
    (continued) Page 32                 GAO/HEHS-99-105 Child Support
    Financing Appendix II Changes in Average CSE Welfare and
    Nonwelfare Caseloads, FY 1994-97 Percentage      Percentage change
    change in CSE      in CSE nonwelfare State
    welfare caseload              caseload Ohio
    (11)                   11 Oklahoma
    (22)                   34 Oregon
    (30)                   42 Pennsylvania
    (20)                    1 Puerto Rico
    (27)                   26 Rhode Island
    (15)                  (24) South Carolina
    (39)                   31 South Dakota
    (26)                   33 Tennessee
    (47)                    (7) Texas
    (17)                   44 Utah
    (21)                   65 Vermont
    (16)                   34 Virgin Islands
    15                     3 Virginia
    (30)                   44 Washington
    (15)                   19 West Virginia
    (16)                   72 Wisconsin
    (66)                   80 Wyoming
    (68)                  758 Total
    (19)                   21 Page 33
    GAO/HEHS-99-105 Child Support Financing Appendix III Selected
    State Program Statistics State FY 1995-97 change in
    Hold                        program State share of
    State                    harmless          Unspent         savings
    Change in AFDC/TANF/           Paid           share of
    Net        payment             TANF               or      program
    foster care incentives,administrative               change,
    (if any), FY       balance,        (costs),b     savings, State
    collections        actual            costsa        FY 1995-97
    1997           9/30/98       FY 1997 FY 1995-97 Alabama
    $1,406,248     $254,839        $3,778,116         $5,439,203
    $37,377,861     ($3,290,905) $5,381,539 Alaska
    1,549,948      572,377           (774,700)        1,347,625
    5,628,650     1,427,751 Arizona              1,990,041
    401,145          1,061,566         3,452,752
    34,189,609      (3,344,885) 3,459,585 Arkansas
    1,099,101      505,222         (6,924,713)       (5,320,390)
    (5,641,213) (5,505,745) California          86,241,904 19,102,159
    (35,753,112)       69,590,951
    177,731,427 66,957,702 Colorado             3,906,439      910,602
    (2,329,346)        2,487,695                      81,206,230
    8,999,890     1,509,940 Connecticut         12,340,603
    1,317,352        (1,728,091)       11,929,864
    17,120,569 13,444,311 Delaware               285,200
    (30,135)       (1,172,726)         (917,661)
    (1,281,765) (1,097,458) District of Columbia               376,200
    (97,178)          (66,971)          212,051
    24,406,030        (375,821)      208,989 Florida
    11,128,606     2,219,282       (11,872,261)        1,475,627
    252,922,151      11,547,158       (249,731) Georgia
    4,567,643 (1,048,940)          (4,194,014)         (675,311)
    51,695,673       4,950,930 (5,849,793) Guam
    6,098       (29,219)          (65,834)          (88,955)
    (727,038)       42,713 Hawaii                 721,994       54,440
    256,465         1,032,899                        6,100,900
    1,645,645     1,106,254 Idaho                   82,314
    (86,888)       (1,175,466)       (1,180,040)
    29,502,444        (358,589) (1,023,744) Illinois
    11,386,935     1,841,402       (10,583,405)        2,644,932
    6,609,567     2,644,931 Indiana             (1,311,594)
    (2,857,785)         (1,056,205)       (5,225,584)    $1,311,594
    10,311,881 (7,950,064) Iowa                 1,357,125
    (333,772)       (2,805,556)       (1,782,203)
    28,873,740      10,173,323 (2,386,677) Kansas
    1,100,482       (56,195)        5,749,025         6,793,312
    21,616,607       3,651,692     6,874,005 Kentucky
    1,567,800      134,603         (2,518,813)         (816,410)
    43,885,017       1,691,156 (2,004,980) Louisiana
    1,311,207       (81,541)           14,793         1,244,459
    123,516,902      (1,027,718) 1,070,050 Maine
    2,707,889      842,635         (1,179,723)        2,370,801
    10,146,483     3,787,571 Maryland            (1,155,414)
    (1,652,711)         (3,195,918)       (6,004,043)     1,155,414
    79,856,787        (321,631) (5,140,659) Massachusetts
    912,441 (1,318,675)          (1,763,088)       (2,169,322)
    22,964,102 (2,503,738) Michigan             6,743,610 (2,754,507)
    (17,463,017) (13,473,914)
    89,260,877      32,652,828 (16,903,867) Minnesota
    3,567,047        (8,088)       (5,189,046)       (1,630,087)
    136,927,526      10,559,586 (1,390,253) Mississippi
    920,768       61,855           (211,899)          770,724
    (2,523,105)      812,430 Missouri              (479,278)
    (527,042)       (4,583,311)       (5,589,631)       479,278
    1,850,554 (5,844,286) Montana                522,931      185,435
    (1,275,913)         (567,547)
    (260,039)      (297,470) Nebraska             1,063,986
    188,222         (3,291,813)       (2,039,605)
    24,624,396      (3,409,424) (2,139,339) Nevada
    725,413      638,492         (4,831,982)       (3,468,077)
    (4,158,831) (3,257,149) New Hampshire              286,055
    72,767            (57,355)          301,467
    5,953,212      1,577,606       420,304 New Jersey
    5,301,698      104,896         (4,637,177)          769,417
    170,258,386      17,605,878       635,954 New Mexico
    492,281       (39,650)       (3,346,118)       (2,893,487)
    30,899,415      (4,074,136) (2,990,814) (continued) Page 34
    GAO/HEHS-99-105 Child Support Financing Appendix III Selected
    State Program Statistics State FY 1995-97 change in
    Hold                         program State share of
    State                       harmless           Unspent
    savings Change in AFDC/TANF/           Paid           share of
    Net       payment              TANF                 or
    program foster care incentives,administrative              change,
    (if any), FY        balance,         (costs),b         savings,
    State               collections        actual             costsa
    FY 1995-97              1997           9/30/98        FY 1997 FY
    1995-97 New York             22,843,288     5,751,867
    (6,878,650)     21,716,505                       605,881,273
    63,961,714 20,081,540 North Carolina        5,955,684       58,173
    (7,194,608)      (1,180,751)                       93,148,981
    1,587,632 (1,265,801) North Dakota            123,028
    (21,444)           (68,021)         33,563
    821,150           33,563 Ohio                  9,778,686
    573,337        (19,095,949)      (8,743,926)
    (3,674,606) (9,435,284) Oklahoma              1,255,304
    322,315           (926,404)         651,215
    110,238,480        3,150,124           908,697 Oregon
    403,728       70,212         (3,704,582)      (3,230,642)
    1,767,372 (3,780,388) Pennsylvania          4,074,539 (1,106,633)
    (4,254,637)      (1,286,731)                     245,036,264
    30,183,573           (787,286) Puerto Rico             271,527
    (190,599)        2,309,534        2,390,462
    (7,390,997) (2,228,606) Rhode Island          2,126,115
    985,234           (211,284)       2,900,065
    6,526,593       9,183,961       3,041,709 South Carolina
    (717,524)     (354,597)          125,158         (946,963)
    717,524        23,810,926         (817,850) (1,008,796) South
    Dakota            353,172       (56,571)         (699,623)
    (403,022)                        7,981,636       1,098,701
    (239,690) Tennessee            (7,662,533) (1,347,549)
    (213,219)      (9,223,301)      5,392,257        48,265,922
    (947,506) (8,466,562) Texas                10,781,476
    3,059,596        (8,138,850)       5,702,222
    410,190 (5,801,427) Utah                    926,859      134,222
    (1,179,215)        (118,134)                       13,550,431
    (1,395,212)         130,334 Vermont                (573,318)
    27,030             58,451         (487,837)        573,318
    5,571,572          745,853          (811,423) Virgin Islands
    75,241       55,263           (536,151)        (405,647)
    (227,358)         666,655 Virginia              2,030,935
    (91,323)          568,582        2,508,194
    9,215,419       2,116,483 Washington            8,135,630
    346,001         (1,086,477)       7,395,154
    141,452,770       33,264,513       7,395,154 West Virginia
    1,385,471      357,425           (946,544          796,352
    80,717,433       (1,777,699)         706,014 Wisconsin
    (4,452,505) (3,962,831)         (5,094,779) (13,510,115)
    4,452,505        49,019,541       1,982,694 (10,712,163) Wyoming
    127,749      (252,810)         (618,290)        (743,351)
    (681,634)         (767,894) Total              $219,966,273
    $22,841,717 $197,124,556 $439,932,546 $14,081,890 $2,704,275,585c
    $467,084,559 $45,584,879 aA negative number represents an increase
    in costs from FY 1995 to FY 1997. bHold harmless payments are not
    included in the calculation of program savings or costs. cTotal
    does not include unspent TANF balances for Guam, Puerto Rico, and
    the Virgin Islands. Page 35
    GAO/HEHS-99-105 Child Support Financing Appendix IV Estimates of
    State CSE Program Savings, FY 1997 State share of
    State share of AFDC/TANF/foster care     State incentive
    administrative State program savings State
    collections         payments      expendituresa              or
    (costs)b,c Alabama                             6,275,920
    3,598,175        13,165,000                (3,290,905) Alaska
    8,661,147          3,232,503         6,265,000
    5,628,650 Arizona                             8,380,583
    4,203,232        15,928,000                (3,344,185) Arkansas
    4,489,920          3,247,867        13,379,000
    (5,641,213) California                        263,233,517
    74,627,910       160,130,000              177,731,427 Colorado
    16,669,043          5,863,847        13,533,000
    8,999,890 Connecticut                        24,770,770
    7,862,799        15,513,000               17,120,569 Delaware
    3,529,167          1,058,068         5,869,000
    (1,281,765) District of Columbia                2,815,419
    1,008,760         4,200,000                 (375,821) Florida
    42,741,234         16,074,924        47,269,000
    11,547,158 Georgia                            18,068,352
    11,008,578        24,126,000                4,950,930 Guam
    259,905            208,057         1,195,000
    (727,038) Hawaii                              5,704,850
    1,687,795         5,747,000                1,645,645 Idaho
    2,895,003          1,849,408         5,103,000
    (358,589) Illinois                           36,523,099
    11,412,468        41,326,000                6,609,567 Indiana
    14,305,146          5,941,735         9,935,000
    10,311,881 Iowa                               14,956,569
    5,979,754        10,763,000               10,173,323 Kansas
    11,128,194          3,999,498        11,476,000
    3,651,692 Kentucky                           11,148,123
    5,576,033        15,033,000                1,691,156 Louisiana
    6,570,232          3,781,050        11,379,000
    (1,027,718) Maine                               9,886,078
    5,733,405         5,473,000               10,146,483 Maryland
    17,849,696          5,047,673        23,219,000
    (321,631) Massachusetts                      33,422,193
    9,467,909        19,926,000               22,964,102 Michigan
    66,344,288         21,135,540        54,827,000
    32,652,828 Minnesota                          28,818,840
    8,970,746        27,230,000               10,559,586 Mississippi
    4,342,334          3,248,561        10,114,000
    (2,523,105) Missouri                           18,583,251
    7,826,303        24,559,000                1,850,554 Montana
    2,373,720          1,389,241         4,023,000
    (260,039) Nebraska                            4,567,088
    1,805,488         9,782,000                (3,409,424) Nevada
    4,053,331          2,708,838        10,921,000
    (4,158,831) New Hampshire                       4,694,002
    1,478,604         4,595,000                1,577,606 New Jersey
    43,625,445         12,481,433        38,501,000
    17,605,878 New Mexico                          2,596,841
    1,385,023         8,056,000                (4,074,136) New York
    100,437,812         31,373,902        67,850,000
    63,961,714 North Carolina                     25,947,433
    10,718,199        35,078,000                1,587,632 North Dakota
    1,858,914            973,236         2,011,000
    821,150 (continued) Page 36                           GAO/HEHS-99-
    105 Child Support Financing Appendix IV Estimates of State CSE
    Program Savings, FY 1997 State share of
    State share of AFDC/TANF/foster care            State incentive
    administrative State program savings State
    collections                 payments                 expendituresa
    or (costs)b,c Ohio                         48,013,415
    16,939,979                    68,628,000
    (3,674,606) Oklahoma                      7,181,327
    3,657,797                    7,689,000
    3,150,124 Oregon                       10,242,906
    5,383,466                   13,859,000
    1,767,372 Pennsylvania                 52,433,761
    16,933,812                    39,184,000
    30,183,573 Puerto Rico                     580,627
    388,376                    8,360,000
    (7,390,997) Rhode Island                  8,515,395
    3,645,566                    2,977,000
    9,183,961 South Carolina                5,604,580
    3,566,570                    9,989,000
    (817,850) South Dakota                  2,059,940
    1,150,761                    2,112,000
    1,098,701 Tennessee                     5,936,304
    5,431,190                   12,315,000
    (947,506) Texas                        38,248,009
    16,756,181                    54,594,000
    410,190 Utah                          5,366,098
    3,181,690                    9,943,000
    (1,395,212) Vermont                       1,916,409
    1,182,444                    2,353,000
    745,853 Virgin Islands                  145,576
    112,066                      485,000
    (227,358) Virginia                     21,701,453
    6,060,966                   18,547,000
    9,215,419 Washington                   54,484,696
    16,363,817                    37,584,000
    33,264,513 West Virginia                 4,154,214
    2,180,087                    8,112,000
    (1,777,699) Wisconsin                    18,057,573
    8,458,121                   24,533,000
    1,982,694 Wyoming                       1,661,719
    566,647                    2,910,000
    (681,634) Total                    $1,158,831,461
    $409,926,098               $1,101,673,000
    $467,084,559 aOCSE estimate. bHold harmless payments are not
    included in the calculation of program savings or costs. cGAO
    calculation based on preliminary OCSE data. Page 37
    GAO/HEHS-99-105 Child Support Financing Appendix V HHS
    Clarification of Whether TANF Funds May Be Used to Support CSE
    Programs Page 38       GAO/HEHS-99-105 Child Support Financing
    Appendix V HHS Clarification of Whether TANF Funds May Be Used to
    Support CSE Programs Page 39
    GAO/HEHS-99-105 Child Support Financing Related GAO Products
    Supplemental Security Income: Increased Receipt and Reporting of
    Child Support Could Reduce Payments (GAO/HEHS-99-11, Jan. 12,
    1999). Welfare Reform: Early Fiscal Effects of the TANF Block
    Grant (GAO/AIMD-98-137, Aug. 18, 1998). Welfare Reform: Child
    Support an Uncertain Income Supplement for Families Leaving
    Welfare (GAO/HEHS-98-168, Aug. 3, 1998). Welfare Reform: States
    Are Restructuring Programs to Reduce Welfare Dependence (GAO/HEHS-
    98-109, June 18, 1998). Child Support Enforcement: Certification
    Process for State Information Systems (GAO/AIMD-98-134, June 15,
    1998). Child Support Enforcement: Strong Leadership Required to
    Maximize Benefits of Automated Systems (GAO/AIMD-97-72, June 30,
    1997). Child Support Enforcement: Early Results on Comparability
    of Privatized and Public Offices (GAO/HEHS-97-4, Dec. 16, 1996).
    Child Support Enforcement: States' Experience With Private
    Agencies' Collection of Support Payments (GAO/HEHS-97-11, Oct. 23,
    1996). Child Support Enforcement: States and Localities Move to
    Privatized Services (GAO/HEHS-96-43FS, Nov. 20, 1995). Child
    Support Enforcement: Timely Action Needed to Correct System
    Development Problems (GAO/IMTEC-92-46, Aug. 13, 1992). Medicaid:
    Ensuring That Noncustodial Parents Provide Health Insurance Can
    Save Costs (GAO/HRD-92-80, June 17, 1992). (116021)      Page 40
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