Legislation designed to improve the child support system was the focus of a May 18 hearing held by the House Ways and Means Subcommittee on Human Resources. The subcommittee reviewed a bill (H.R. 4469) sponsored by Subcommittee Chair Nancy Johnson (R-CT), as well as a measure (H.R. 3824) sponsored by the panel’s ranking member, Rep. Benjamin Cardin (D-MD).
Both bills aim to continue efforts started as part of the 1996 welfare reform law (P.L. 104-193), which included several changes to child support collection. In contrast to many issues debated as part of welfare reform, the child support provisions—strongly backed by the Congressional Caucus for Women’s Issues—enjoyed bipartisan support (see The Source, 9/24/00, p. 5).
Opening the hearing, Rep. Johnson commented on the effects of the child support changes. “As compared with five years ago, we now have at least one million additional former welfare mothers working to support their children,” she said.
Pass-Through of Payments
Both bills would simplify the child support process for custodial and noncustodial parents. In addition, both measures would expand the “pass through” of support payments.
Most child support cases involve a court order outlining support obligations. Under current law, support is collected in those cases by state governments, with some federal funding assistance. Rather than being passed through to the custodial parent, some of the funds are kept by the state to help pay administrative costs. If the custodial parent is receiving welfare benefits, the entire child support payment is kept by the state to help offset the cost of the welfare benefits.
Under Rep. Johnson’s bill, states would still keep child support funds during the time that custodial parents receive welfare assistance. After that time, the entirety of support payments would be passed through to the custodial parents. The bill also would institute a policy known as “families first,” which would ensure that custodial parents leaving the welfare rolls are awarded all child support arrearages collected while they were on welfare.
In contrast, Rep. Cardin’s bill would pass through support payments even while custodial parents are on welfare. Rep. Cardin said the passed-through funds would be beneficial to custodial parents and their children, and they also would serve as an incentive to noncustodial parents. “Often, these parents see their money going to the state and they don’t want to pay, but if they see that the money is going to their children they are more likely to pay,” he said.
Rep. Johnson said her bill doesn’t combine welfare benefits with passed-through child support because “we don’t want to make it any easier for mothers to stay on welfare.” However, she invited Rep. Cardin to offer his proposal as an amendment when her bill is marked up, saying, “We can pass a good bill no matter how Congress acts on your provision.”
Private Collection Companies
The bill crafted by Rep. Johnson also would allow states to contract with private companies for collection and enforcement of child support. Rep. Johnson cited a report by the Congressional Research Service, which found that at least $40 billion in child support is past due nationwide. She said private companies are needed because it is “hard to believe that we are going to put up the additional federal and state public dollars that would be required to greatly improve this record.”
Many of the hearing’s witnesses, along with Rep. Cardin, were critical of the plan to involve private companies. Representing the Clinton Administration, Olivia Golden of the Department of Health and Human Services (HHS) said that allowing private companies access to the “sensitive data needed to process and enforce child support cases” would raise “serious concerns” about the privacy of families. She said private collection agencies are unregulated and “there is little ability to oversee their activities or use of information.” In addition, Ms. Golden said private collection companies are compensated with a percentage of the collected amount, “often 30 percent or even more of each child support payment.”
Joan Entmacher of the National Women’s Law Center emphasized the unregulated status of private collection companies, noting that they would have access to federal enforcement activities such as “intercepting federal tax refunds, credit bureau reporting, passport sanctions, financial institution data matches, and income withholding from unemployment insurance benefits.” She said collection fees usually run “25 to 40 percent,” adding: “Better Business Bureau records reflect that…custodial parents have complained of money lost to scam artists who collect application fees, then vanish into the night, and to companies that collect money from the noncustodial parent—and keep it for themselves.”
Similar concerns were expressed by other witnesses, including Wendell Primus of the Center on Budget and Policy Priorities, Geraldine Jensen of the Association for Enforcement of Support, Vicki Turetsky of the Center for Law and Social Policy, Laura Kadwell of the Minnesota Department of Human Services, and Marilyn Ray Smith of the Massachusetts Department of Revenue.
However, Texas Deputy Attorney General Howard Baldwin said the collection and enforcement of child support in his state is split between state agencies and private companies, adding, “I believe that there can never be too many resources brought to bear on the problem of nonsupport.” Referring to concerns about privacy, he said state officials “can ensure that adequate safeguards are in place to prevent any inappropriate use of these tools and information.” Vanessa Diaz of Supportkids.com—a private collection company—told the subcommittee is it “inherently unfair” to deny custodial parents “the use of valuable enforcement tools.”
In terms of the fees taken off the top by private companies, she said, “In the case of child support, the wrong lies with the parent who fails to provide the support, not with the enforcement provider who finally secures the support.”
Rep. Johnson called on critics of her plan to “consider the details of how my plan is written.” She noted that her bill would provide for state supervision of private companies, with a two-year implementation delay for HHS to issue guidance to states on the matter. “This is not an open carte blanche for private companies to do as they please,” she said.
Income Tax Refund Withholding
Rep. Mike Castle (R-DE) testified on a child support-related bill (H.R. 4071) he has introduced. Under current law, federal tax refunds for noncustodial parents can be intercepted and used to pay overdue child support. However, the tool can only be used when the custodial parent is receiving welfare benefits, the child in the case is a disabled adult, or the child is a minor.
Rep. Castle said the mechanism cannot be used once a child is age 18 or older, “even if the child support deficit accrued while the child was a minor.” He added: “The unintended effect of the program is that it rewards noncustodial parents who are successful in avoiding their child support obligations while their children are minors.” As a result, Rep. Johnson’s bill contains a provision based on H.R. 4071 that would lift the age restriction.
