The Child Support Enforcement Program: A Review of the Data

Contents

• Introduction
• CSE Caseload
• Paternity Establishment
• Establishment of Child Support Orders
• CSE Collections
• Child Support Collected on Behalf of TANF Families
• Collections on Current Support Obligations and Arrearage Payments
• CSE Administrative Expenditures
• Cost-Effectiveness of the CSE Program
• Conclusion

Summary

The Child Support Enforcement (CSE) program is a federal/state program that promotes self-sufficiency of families in which one of the biological parents is living outside of the home by ensuring that noncustodial parents meet their financial responsibility to their children. The CSE program provides several services on behalf of children including parent location, paternity establishment, establishment of child support orders, and collection and distribution of child support payments.

In FY1978, families who received cash welfare comprised 85% of the CSE caseload. By FY2003, they comprised only 17% of the CSE caseload and 9% of CSE collections. In FY2003, former cash welfare recipients comprised 47% of the CSE caseload and 40% of CSE collections. Families that had never received cash welfare comprised 36% of the CSE caseload and almost 52% of CSE collections. This is consistent with the underlying premise of the CSE program: as child support becomes a more consistent and stable income source/support, former cash welfare families will never have to return to the cash welfare rolls and families that never resorted to cash welfare will never have to do so. In FY2003, the CSE caseload was comprised of 15.9 million families. The CSE program is estimated to handle about 60% of all child support cases; the remaining cases are handled by private attorneys, collection agencies, or through mutual agreements between the parents. All of the data in this report are exclusively CSE program data.

Before a state can enforce/collect a child support obligation, paternity must be determined and a child support order must be established. During the period FY1999-FY2003, the number of paternities established or acknowledged fell 5% nationwide, from 1.6 million to 1.5 million. During the period FY1998-FY2002, the number of cases with a support order established dropped 2% nationwide, from 11.5 million to 11.3 million.

The CSE program is a program of paradoxes. The CSE program only collected 18% of the child support obligations for which it had responsibility in FY2003 (i.e., 58% of all current collections and 7% of obligations that were past-due). But, during the period FY1999-FY2003, child support payments collected by CSE agencies increased 33% for the nation as a whole, from $15.9 billion to $21.2 billion. Child support collections have continued to increase even though the CSE caseload has declined. Although the number and percent of CSE cases with collections have been increasing over time, the average monthly child support payment for families that actually receive a payment has been decreasing and is relatively small, amounting to only $221 per month in FY2003. Although states incurred a cost of $355 million for the CSE program in FY2003 and the federal government incurred a cost of almost $2.3 billion, $4.33 in child support was collected for every $1 spent on CSE activities. The CSE program began as a welfare cost-recovery program; however, in FY2003, 90% of CSE collections went to CSE families (rather than the federal government or the states); the comparable figure in FY1979 was no more than 56%. This report will not be updated.

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The Child Support Enforcement Program: A Review of the Data

Introduction

The Child Support Enforcement (CSE) program (Title IV-D of the Social Security Act) was enacted in January 1975 (P.L. 93-647). The CSE program is a federal/state program that promotes self-sufficiency of families in which one of the biological parents is living outside of the home by ensuring that noncustodial parents meet their financial responsibility to their children. While the federal government plays an important role in setting program standards and policy, evaluating state performance, and providing technical assistance and training, states are responsible for administering the CSE program (directly or through local CSE agencies and family or domestic courts).

All 50 states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands operate CSE programs and are entitled to federal matching funds. To qualify for federal matching funds, each state's CSE plan must be approved by the Office of Child Support Enforcement (OCSE), Department of Health and Human Services (HHS). States also are eligible to receive incentive payments, based on certain performance indicators. The CSE program provides seven major services on behalf of children: parent location, paternity establishment, establishment of child support orders, review and modification of support orders, collection of support payments, distribution of support payments, and establishment and enforcement of medical support. CSE services are provided to both welfare and non-welfare families.

Since 1975, the federal administration of the CSE program has been in the OCSE, which was originally located in the Department of Health, Education, and Welfare (HEW), renamed the Department of Health and Human Services (HHS) in 1979. From the beginning, OCSE has been required by law to review and approve state CSE plans, establish standards for effective state CSE programs, provide technical assistance to the states, assist them with reporting procedures, maintain records of program operations and child support expenditures and collections, audit state CSE programs, and prepare and submit an annual report to Congress. The annual report to Congress has always included collection, expenditure, and caseload data. In fact, Section 452(a)(10) of the Social Security Act stipulates that certain data must be included in the annual report.

In March 2004, the CSE program was cited by the Office of Management and Budget (OMB) as being the most cost-effective program among all social services and block grant/formula programs reviewed government-wide.¹ In FY2003, $21.2 billion was collected at a combined federal/state cost of $5.2 billion. Thus, in effect, four dollars in child support was collected for every dollar spent. While the extensive reforms made to the CSE program in 1996, 1997, and 1998 have helped to significantly improve child support collections and the number of paternities established, the CSE program has since its beginning in 1975 been a highly respected and valuable program which has made much progress in achieving its original goals of reducing public expenditures for actual and potential welfare recipients by obtaining ongoing support from noncustodial parents, and establishing paternity for children born outside marriage so child support could be obtained for them.

Many commentators agree that the mission of the CSE program has changed over the years. It began as a welfare cost-recovery program, but the Child Support Enforcement Amendments of 1984 (P.L. 98-378) broadened the mission to reflect service delivery. The criteria for making incentive payments to the states was broadened in 1984 to include collections for non-welfare families. Some commentators assert the service-delivery goal was reemphasized in 1996 legislation, which established the "family first" policy. To help assure that former welfare recipients stay off the TANF rolls,² the "family first" policy requires that such families are to receive any child support arrearage payments collected by the state before the state and federal governments retain their share of collections.³ Additionally, the sharp decline in the cash welfare rolls and reduced expenditures on cash welfare since the mid-1990s helped shift the program from recovering declining costs for a smaller population to collecting and paying child support to nonwelfare families.

For the past 20 years (since the 1984 Amendments), the CSE program and major changes or modifications to it have consistently had bipartisan congressional support. Child support proposals that were introduced in the 106^th, 107^th, and 108^th Congresses, and that have been reintroduced in the 109^th Congress, seek to fully implement a "family first" policy by ensuring that more of the child support collected on behalf of TANF families go to the family, and that all of the child support collected on behalf of former-TANF families go to the family. In addition, the proposed legislation has included additional child support collection methods/enforcement techniques to ensure that noncustodial parents of all children are made to be financially responsible for their children. These CSE proposals are broadly supported but generally have been incorporated into the controversial welfare reauthorization legislation, and therefore have not yet passed both houses of Congress. (See CRS Issue Brief IB10140, Welfare Reauthorization: Overview of the Issues.)

Table 1 presents a summary of child support program statistics for the nation as a whole over a 25-year time span. Between FY1978 and FY2003, child support payments collected by CSE agencies increased from $1 billion in FY1978 ($2.7 billion in 2003 dollars) to $21.2 billion in FY2003 (an almost seven-fold increase, adjusting for inflation). During that same period, the number of children whose paternity was established (or acknowledged) through the CSE program increased by 1,274%, from 111,000 to 1.525 million; and the number of child support obligations established increased by 269%, from 315,000 to 1.161 million. During that period, the CSE caseload expanded from 4.146 million in FY1978 to 15.923 million in FY2003, an increase of 284%. (The definition of "caseload" is explained in the next section of this report.) CSE expenditures also increased tremendously, from $312 million in FY1978 ($801 million in 2003 dollars) to $5.213 billion in FY2003 (a more than five-fold increase, adjusting for inflation). Expenditures per case increased from $75 in FY1978 ($193 in 2003 dollars) to $327 in FY2003 (a 69% increase, adjusting for inflation).

Figure 1 graphically shows CSE collections and expenditures over the 25-year period from FY1978-FY2003. The CSE program is estimated to handle about 60% of all child support cases; the remaining cases are handled by private attorneys, collection agencies, or through mutual agreements between the parents. All of the data in this report are exclusively CSE program data.

Although this report does not address some significant areas of the CSE program (e.g., medical child support and child support collections that have not been distributed), it examines CSE caseload, collection, and expenditure data over the period FY1978-FY2003. (FY1978 is the first year of complete data and the data for FY2003 are the most recent data available.) It also presents more detailed data on collections, expenditures, paternity establishment, child support order establishment, cost-effectiveness, and program financing impacts on the federal government and the states for the five-year period FY1999-FY2003. All of the tables in this report are based on data from OCSE, obtained from the OCSE Internet website. The information is taken from state-submitted reports on program status sent to OCSE quarterly for financial data and annually for statistical data. The reader should note that the 25-year trend data for CSE collections and caseload have been disaggregated into two categories: Temporary Assistance for Needy Families (TANF) cases and non-TANF cases. Before 1997, TANF cases were Aid to Families with Dependent Children (AFDC) cases and non-TANF cases were non-AFDC cases. Also, note that the tables that display TANF cases, collections, or expenditures include foster care cases as well, even though they are not labeled as such.⁴

Figure 1. Child Support Enforcement Program: Collections and Expenditures: FY1978-FY2003, Selected Years

Source: Office of Child Support Enforcement, HHS, Annual Reports—selected years. Figure prepared by the Congressional Research Service.

CSE Caseload

OCSE defines a CSE "case" as a noncustodial parent (mother, father, or putative/alleged father) who is now or eventually may be obligated under law for the support of a child or children receiving services under the CSE program. If the noncustodial parent owes support for two children by different women, that would be considered two cases; if both children have the same mother, that would be considered one case.

Families who receive TANF cash benefits are required to assign their child support rights to the state in order to receive TANF. In addition, such families must cooperate with the state if necessary to establish paternity and secure child support. Families receiving TANF cash benefits, Medicaid benefits, or whose children receive Title IV-E foster care payments automatically are enrolled (free of charge) into the CSE program.⁵ Collections on behalf of families receiving TANF cash benefits are used to reimburse state and federal governments for TANF payments made to the family (i.e., child support payments go to the state instead of the family, except for amounts that states choose to "pass through" to the family as additional income that does not affect TANF eligibility or benefit amount).⁶ Other families must apply for CSE services, and states must charge an application fee that cannot exceed $25. Child support collected on behalf of nonwelfare families goes to the family (usually via a state child support disbursement unit).

The CSE program defines a current assistance case as one in which the children are: (1) recipients of cash aid under TANF (Title IV-A of the Social Security Act) or (2) entitled to Foster Care maintenance payments (Title IV-E of the Social Security Act). In addition, the children's support rights have been assigned by a caretaker to the state, and a referral to the state CSE agency has been made. A former assistance case is defined as a case in which the children were formerly receiving TANF or foster care services. A never assistance case is defined as a case in which the children are receiving services under the CSE program, but are not currently eligible for and have not previously received assistance under TANF or foster care.

Figure 2 shows the trend in the CSE caseload, separated by TANF cases and non-TANF cases. Table 2 shows that TANF cases comprised 85% of the CSE caseload in FY1978, but dropped to 17% of the caseload in FY2003. By the same token, non-TANF cases represented only about 15% of the CSE caseload in FY1978, and increased to 83% of the caseload in FY2003. Available data show that non-TANF cases increasingly are families that formerly received TANF.

In FY1999, OCSE started reporting data for the following categories: current assistance, former assistance, and never received assistance rather than by TANF and non-TANF. The data indicate that the number and percentage of CSE families who currently receive TANF has decreased over time while the number and percentage of CSE families who formerly received TANF has increased. The data also show that the proportion of the CSE caseload comprised of families who had never received TANF has remained relatively stable for the period FY1999-FY2003 (see Figure 3). The decline in TANF families since 1994 (see Table 2), and the relative stability of the segment of the caseload that had never been on the TANF rolls, resulted in a smaller CSE caseload. Former TANF families represent the largest portion of the total CSE caseload.

In FY2003, the largest group of families who were participating in the CSE program were families who had left the TANF rolls (i.e., former TANF families—47%, see Figure 3).⁷ Families who had never been on TANF represented 36% of the CSE caseload and families who were currently receiving TANF benefits comprised 17% of the CSE caseload.⁸ Thus, although the majority of the CSE caseload is comprised of non-TANF families, most of them at some point in their lives received TANF/AFDC. This is consistent with the expanded mission of the CSE program. The expectation is that as child support becomes a more consistent and stable income source/support, these former TANF families will never have to return to the TANF rolls, and families that never resorted to the TANF program will never have to do so. In its strategic plan for the period FY2000-FY2004, the CSE agency stated:

It is our commitment to lead the child support program into the new century as a key component to assist families to become self-sufficient or to remain self-sufficient. It is our vision that child support is an important line of defense against children living in poverty.⁹

Figure 2. Child Support Enforcement Caseload, FY1978-FY2003

Source: Office of Child Support Enforcement, HHS, Annual Reports—selected years. Figure prepared by the Congressional Research Service.

Figure 3. Child Support Enforcement Caseload, FY1999-FY2003

Source: Figures prepared by the Congressional Research Service.

Paternity Establishment

A child born outside of marriage has a biological father but not a legal father. Legally identifying the father of a child is a prerequisite for obtaining a child support order. States generally follow a standard sequence of events in determining paternity. In order to be part of the CSE program, states are required to have procedures which permit the establishment of the paternity of a child at any time before the child reaches age 18. Federal CSE law also requires states to have laws and procedures for a simple civil process for voluntarily acknowledging paternity. Under such a process, the state must ensure that the rights and responsibilities of acknowledging paternity are explained to both parents and that due process safeguards are afforded to both parents. The statute requires that voluntary acknowledgment procedures include hospital-based programs that focus on the period immediately before or after the birth of a child. FY2003 was the first year for which data are available in which more fathers were legally identified through a voluntary paternity acknowledgment process (862,000) than through the courts or administratively via the CSE agency (663,000).

In FY2003, paternity was established or acknowledged for 1.5 million children in the CSE program. Table 4 shows that during the period FY1999-FY2003, the number of paternities established or acknowledged fell 5% nationwide, from 1.6 million in FY1999 to 1.5 million in FY2003. Over that period, the number of paternities established or acknowledged in Kansas increased by 218%, from 7,347 in FY1999 to 23,356 in FY2003. In contrast, in New Mexico the number of paternities established or acknowledged decreased by 85%, from 52,380 in FY1999 to 7,639 in FY2003.

State performance on paternity establishment is calculated as a percentage of either (1) all births in a given year for which paternity is established, or (2) all cases in the state CSE program for which paternity is established. Table 5 uses all cases in the state CSE program for which paternity is established as the base. Table 5 shows the paternity establishment performance measure for FY2003. For the nation as a whole, the paternity establishment percentage (PEP) was 77%. In other words, in FY2003, there were a little over 10 million children on the CSE rolls who had been born outside of marriage, and the CSE agencies had determined paternity for 7.7 million of them. In FY2003, the PEP ranged from a low of 20% in the District of Columbia to a high of 101% in Maine and Utah. The reader should note that Table 5 indicates that for some states the PEP was greater than 100%. This occurred because paternity is established for more than just the children who were born outside of marriage in the specified year. Most states acknowledge that while they have made significant improvement in establishing paternity for newborns they are performing poorly with respect to establishing paternity for older children.

Establishment of Child Support Orders

A child support order legally obligates noncustodial parents to provide financial support for their children and stipulates the amount of the obligation (current monthly obligation plus arrearages, if any) and how it is to be paid.

Although the FY2003 national total is available for child support order establishment, the data for the individual states and territories have not yet been published. Therefore, data for the five-year period FY1998-FY2002 were used in the following table. Table 6 shows that during the period FY1998-FY2002, the number of cases with a child support order established dropped by 2% nationwide, from 11.5 million in FY1998 to 11.3 million in FY2002. During that period, the District of Columbia established 40% fewer cases in FY2002 than it did in FY1998. In contrast, Hawaii established 72% more cases in FY2002 than it did in FY1998.

CSE Collections

Child support collection methods used by CSE agencies include income withholding, interception of federal and state income tax refunds, interception of unemployment compensation, liens against property, security bonds, reporting child support obligations to credit bureaus, regular billings, delinquency notices, garnishment of wages, revocation of various types of licenses (drivers', business, occupational, recreational), attachment of lottery winnings and insurance settlements, and seizure of assets held by public or private retirement funds and financial institutions. Income withholding accounted for 66% of total collections received (almost $16.7 billion) in FY2003. All jurisdictions also have civil or criminal contempt-of-court procedures and criminal nonsupport laws.

Table 7 shows that during the period FY1999-FY2003, child support payments collected by CSE agencies increased 33% for the nation as a whole, from $15.9 billion in FY1999 to $21.2 billion in FY2003. Child support collections increased in all states during the FY1999-FY2003 period, ranging from a 1% increase in Kansas to an 88% increase in Texas. Interestingly, child support collections continued to increase even though the CSE caseload declined. During the period FY1999-FY2003, the CSE caseload declined 8%, from 17.3 million in FY1999 to 15.9 million in FY2003 (See Table 1).

It appears that the broad array of child support collection/enforcement techniques has enabled states to provide some help to the entire spectrum of CSE families (i.e., current TANF families, former TANF families, and families that had never been on TANF/AFDC). During the FY1999-FY2003 period, CSE collections increased for each of the three segments of the CSE caseload. Table 8 shows average monthly child support collections per CSE case,¹⁰ by category of family, for FY1999 and FY2003. The greatest increase in collections occurred on behalf of former TANF families.

Although the number and percent of CSE cases with collections have been increasing over time, the average monthly child support payment for families that actually receive a payment has been decreasing over time. Table 9 shows that these payments decreased by 46% over the period FY1978-FY2003, from $408 in FY1978 to $221 in FY2003 (if adjusted for inflation). Table 9 also shows that the average monthly child support payment for families who actually received a payment was relatively small, amounting to $221 in FY2003. Table 10 shows the variation by state in average monthly child support payments for families that actually receive a payment. In FY2003, average monthly child support payments for families who received them ranged from a high of $300 in New Jersey to a low of $136 in Mississippi. During the five-year period FY1999-FY2003, average monthly child support payments increased 10%.

Child Support Collected on Behalf of TANF Families

The reader should note that the child support payments made on behalf of TANF children are paid to the state for distribution rather than directly to the family. If the child support collected is insufficient to lift the family's income above the state's TANF eligibility limit, the family receives its full TANF grant and the child support is collected by the state and distributed to the state treasury and the federal government in proportion to their assistance to the family. If the family's income, including the child support payments, exceeds the state's TANF limitations, the family's TANF cash benefits are ended and all child support payments are then sent directly to the family (via the state's child support disbursement unit).

When the CSE program was first enacted in 1975, welfare cost recovery was one of the primary goals of the program. There has been movement away from this goal, in part because of the changing nature of the CSE program. As discussed earlier (in the Caseload Section), the size of the component of the caseload that is comprised of TANF families is shrinking. Even though overall child support collections increased by 33% over the five-year period FY1999-FY2003, child support collections made on behalf of TANF families decreased by 27%. In FY2003, only 17% of the CSE caseload was comprised of TANF families. Thus, the policy shift from using the CSE program to recover welfare costs to using it as a mechanism to consistently and reliably get child support income to families is not surprising. In FY2003, only about 9% of CSE collections ($1.8 billion) were made on behalf of TANF families; a little less than half of that amount (46%) actually went to the families (pursuant to state child support "pass through" provisions), the rest was divided between the state and federal governments to reimburse them for TANF benefits to the families. This meant that in FY2003, 90% of CSE collections ($19.0 billion) went to the families on the CSE rolls. (See Table 11.)

According to the CSE Preliminary FY2003 Data Report, payments to families increased 6% from FY2002 to FY2003, and 41% from FY1999 to FY2003. In FY2003, the percent of child support payments that went to families was 86% or more in 47 states; in seven states, the percentage that went to families exceeded 95%.¹¹

The CSE strategic plan for the period FY2005-FY2009 states:

Child support is no longer primarily a welfare reimbursement, revenue-producing device for the Federal and State governments; it is a family-first program, intended to ensure families' self-sufficiency by making child support a more reliable source of income.¹²

Table 12 shows child support collected on behalf of TANF families for the period FY1999-FY2003, by state. As noted earlier, for the nation as a whole, child support collections made on behalf of TANF families decreased by 27% over that five-year period.

Collections on Current Support Obligations and Arrearage Payments

Table 13 shows that during the period FY1999-FY2003, CSE agencies increased the amount they collected on current child support obligations for the nation as a whole by 32%, from $11.9 billion in FY1999 to $15.7 billion in FY2003. All but one jurisdiction (the District of Columbia) increased their collections on current support during the period from FY1999 through FY2003. New Mexico increased its collections by 93%. Collections on current child support obligations fell in the District of Columbia by 9%.

In FY2003, $122.9 billion in child support obligations ($27.1 billion in current support and $95.8 billion in past-due support) was owed to families receiving CSE services, but only $22.2 billion was paid ($15.7 billion current, $6.5 billion past-due). This meant that the CSE program only collected 18% of the child support obligations for which it had responsibility. If current collections are examined separately, Table 14 indicates that the CSE program collected 58% of all current collections in FY2003. If collections on past-due support (i.e., arrearages) are examined separately, Table 15 shows that the CSE program collected only 7% of arrearage payments in FY2003. Table 15 shows that the total amount of arrearages reported in FY2003 for all previous fiscal years was $95.8 billion; however, $6.5 billion was collected in FY2003.

The CSE FY2003 Preliminary Data report states:

In 1999, 53% of the child support cases had arrearages owed. In 2003, the proportion was up to 68%. We obtained collections in 60% of these cases, so we know that child support professionals are working hard on them and that obligors are trying to work on their debts. But we collected an average of $600 per arrearage case, while the average amount of arrears per arrearage case is $9,000. So, even though we're collecting significant amounts of arrears, we don't seem to be making a dent in the problem, and the overall debt continues to grow.¹³

Table 16 shows that there were 10.8 million cases with arrearages due in FY2003 and collections were made in 6.4 million of those cases. This meant that 60% of noncustodial parents who owed past-due support made some payment toward their arrearages in FY2003. Table 13 and Table 14 indicate that although a majority of noncustodial parents who owe arrearages make some payment toward those arrearages, the percentages of all arrearages paid remains small.

CSE Administrative Expenditures

The CSE program is a federal-state matching grant program under which states must spend money in order to receive federal funding. For every dollar a state spends on CSE expenditures, it generally receives 66 cents from the federal government. Although the actual dollars contributed by the federal government are greater, the level of funding allocated by the state or local government determines the total amount of resources available to the CSE agency. The federal government reimburses each state 66% (more for paternity determination) of all allowable expenditures on CSE activities. The federal government's funding is "open-ended" in that it pays its percentage of expenditures by matching the amounts spent by state and local governments with no upper limit or ceiling. It also refunds to states 90% of the laboratory costs of establishing paternity.

Table 17 shows that during the period FY1999-FY2003, total CSE administrative expenditures increased 29%, from $4.0 billion in FY1999 to $5.2 billion in FY2003.

Although total administrative expenditure data are available for FY2003, the disaggregation of the data by state for the federal and state share of administrative costs is currently available only through FY2002. In FY1998, CSE administrative costs amounted to $3.585 billion. The federal government paid 66% of those CSE costs ($2.384 billion) and the states paid 34% of the costs ($1.201 billion). In FY2002, total CSE administrative costs amounted to $5.183 billion (see Table 17). The federal government paid 66% of those CSE costs ($3.432 billion) and the states paid 34% of the costs ($1.752 billion). (See Table 18 and Table 19.)

Table 18 shows that during the period FY1998-FY2002, the cost to the federal government of CSE administrative expenditures for the nation as a whole increased by 44% while the cost to states for CSE administrative expenditures increased by 46% (see Table 19). During that period, the cost to the federal government of the CSE program in Nebraska increased by 104% (from $16.7 million in FY1998 to $34.0 million in FY2002) and by 98% in Michigan (from $106 million in FY1998 to $210 million in FY2002). In contrast, the cost to the federal government of Hawaii's CSE program dropped by 49% (from $15.9 million in FY1998 to $8.1 million in FY2002). During the period from FY1998 through FY2002, the state share of CSE administrative expenditures dropped in only two states (Hawaii, by 49%; and Mississippi, by 18%).

Table 20 shows CSE administrative expenditures per CSE case for selected years during the period FY1978-FY2003. CSE expenditures per case increased from $75 in FY1978 ($193 in 2003 dollars) to $327 in FY2003 (a 69% increase, adjusting for inflation).

Cost-Effectiveness of the CSE Program

The CSE cost-effectiveness rate is the amount of child support collected for each dollar expended (as defined in P.L. 105-200, the Child Support Performance and Incentive Act of 1998). Table 21 shows that in FY2003, $4.33 in child support was collected for every $1 spent on CSE activities, for an increase of 5% over the FY1999 cost-effectiveness rate of $4.11. During the period FY1999-FY2003, the cost-effectiveness rate fell by 39% in Michigan, from $7.81 in FY1999 to $4.79 in FY2003. In contrast, the cost-effectiveness rate rose by 56% in Hawaii, from $3.25 in FY1999 to $5.08 in FY2003.

The collection-to-cost ratio is not the sole measure of an effective program. In the late 1990s, the CSE incentive payment system was revamped and Congress designated four additional indicators as reliable performance measures. The five performance measures in the CSE program currently are related to establishment of paternity (see Table 5), establishment of child support orders (this performance measure is not shown in this report), collections of current child support payments (see Table 14), collections of past-due child support payments (see Table 14), and cost-effectiveness (see Table 16).

Table 22 shows the difference between income and expenditures generated by the CSE program for both state and federal governments for FY1987-FY2003 (the dollars have been adjusted for inflation—i.e., converted to constant 2003 dollars). The reader should note that state "savings" or "costs" were computed by subtracting from total administrative expenses, the federal share of CSE administrative expenses, actual incentive payments to states, hold harmless payments to states, and the state share of CSE collections. Similarly, federal "costs" were computed by adding together the federal share of CSE administrative expenses, actual incentive payments, and hold harmless payments and then subtracting the federal share of CSE collections.¹⁴ Table 22 shows that the CSE program is no longer a "money-maker" for states. Since FY2000, the states, in the aggregate, have not incurred a "savings" on the CSE program; instead in aggregate states incurred a cost of $40 million on the program in FY2000, $193 million in FY2001, $359 million in FY2002, and $355 million in FY2003. In contrast, the federal government has always "lost" money on the CSE program. In FY1987, the federal government incurred a cost of $823 million on the CSE program and in FY2003 the CSE program cost the federal government almost $2.3 billion.

Part of the reason that the CSE program has been consistently "losing" money is because non-welfare collections are growing at a faster rate than welfare collections. While the state and federal governments share in a portion of welfare collections, non-welfare collections go to the custodial parent via the state's disbursement unit.

Conclusion

The CSE program is a very complex, multi-faceted program. Its purpose/mission has been evolving over the years, from welfare cost recovery and income producer for the states, to delivery of services to custodial parents and promotion of personal responsibility among noncustodial parents. This is not surprising given the changing composition of the CSE caseload, which is reflected in the decline in cash welfare families and the rise in former cash welfare families. So far, it seems that the multiple purposes or broadened mission has not had a negative effect on the effectiveness of the CSE program.

The data highlighted in this report bring the CSE program into focus. The data indicate that the program has grown tremendously. During the 25-year period FY1978-FY2003, CSE collections increased almost seven-fold to $21.2 billion (adjusting for inflation), program expenditures increased more than five-fold to $5.2 billion (adjusting for inflation), the number of children whose paternity was established or acknowledged (through the CSE program) increased almost 13-fold to 1.5 million, the number of child support obligations established increased three-fold to about 1.2 million, and the CSE caseload increased nearly three-fold to 15.9 million. From this viewpoint the CSE program is seen as very successful.

The data presented also show that even though the CSE agency is second only to the Internal Revenue Service (IRS) in terms of its collection/enforcement apparatus, it has consistently collected only a small fraction of the child support obligations for which it has responsibility—18% in FY2003. Although this percentage is higher if past-due child support payments (i.e., arrearages, which generally are hard to collect) are not considered in the equation, it is still relatively low at 58%—that is, in FY2003, the CSE program collected only 58% of current child support payments/obligations. CSE data indicate that the program is collecting child support for a greater number and higher percentage of families, but the average monthly child support payment for families that actually receive a payment is still relatively small, $221 per month in FY2003.

For the 10 million children in the CSE program in FY2003 who were born outside of marriage, the establishment of paternity is the first step in obtaining a child support obligation. FY2003 was the first year in which more fathers were legally identified through a voluntary paternity acknowledgment process (862,000) than through the courts or administratively via the CSE agency (663,000). Most states acknowledge that while they have made significant improvement in establishing paternity for newborns (primarily through voluntary paternity acknowledgment at hospitals when the child is born) they are performing poorly with respect to establishing paternity for older children. In FY2003, the CSE program had established paternity for only 77% of its caseload.

So, although the CSE program exhibits improved performance, there is much more to be achieved. Congress has consistently had high expectations for the CSE program. There was widespread congressional support for the CSE provisions that were incorporated into the controversial 1996 welfare reform legislation and there is agreement that more progress in the program is possible when all states are in full compliance with the automated systems requirements enacted in 1996 and 1998.

This report points out that in FY2003, only about 9% of CSE collections ($1.8 billion) were made on behalf of TANF families; about half of that amount actually went to the families and the rest was divided between the state and federal governments to reimburse them for TANF benefits to the families. This meant that in FY2003, 90% of CSE collections ($19.0 billion) went to the families on the CSE rolls. Thus, the data confirm that the "family first" policy that was begun with the 1996 welfare law (P.L. 104-193) is being effectively implemented. P.L. 104-193 required states to pay a higher fraction of child support collections on arrearages to families that have left welfare (i.e., former TANF families) by making these payments to the family first. The order of payment of the child support collection is of tremendous importance because in many cases past-due child support, i.e., arrearages, are never fully paid. The 1996 welfare reform law also gave states the option to pass through and disregard some, all, or none of the child support collected on behalf of TANF families (about half of the states currently pass-through and disregard some child support for TANF families).

If the currently pending TANF reauthorization legislation (H.R. 240, S. 667) becomes law, states will have new choices to make about how far to proceed with the service-delivery, stable income source/support perspective of the program. There will be more federal money available for states that decide to pass through and disregard more child support collected on behalf of families who are still receiving TANF cash benefits and there will be new options for states to distribute more child support collections to families who are former TANF cash benefit recipients. Thus, it is possible that in the near future even more child support collected by states on behalf of TANF families and former TANF families actually would go to families (rather than be kept by the states and the federal government to reimburse them for TANF cash benefits that were paid to the family).

A slightly different examination of the preceding discussion shows how pending CSE legislation could severely restrict the ability of the CSE program to recover cash welfare costs. The data in this report indicated that in FY2003, 17% of the CSE caseload was comprised of TANF families, 47% of the caseload was comprised of former TANF families, and 36% of the caseload had no TANF connection. This meant that in effect 64% of the CSE caseload had some TANF connection. Another viewpoint shows TANF families representing 17% of the caseload and non-TANF families representing 83% of the CSE caseload. Under current law, the state and federal governments can potentially receive reimbursements from 64% of the caseload. If pending welfare reauthorization legislation is passed, the state and federal governments would be able to receive reimbursements from only 17% of the CSE caseload.

Although sometimes overlooked, the CSE program is an integral component of welfare reform. It is not surprising that child support payments are now widely recognized as a very significant income source for single-parent families. The data presented in this report indicate that the CSE program is making great strides in ensuring that children get the support they are owed from their noncustodial parents.