Report Prepared for the Child Support Directors Association Of California
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Note: This report is available in its entirety in the Portable Document Format (PDF).
Background
California's Child Support Program works to promote family self-sufficiency and child well being through the collection and distribution of child support. In each county, local child support agencies work to establish paternity (when necessary), establish orders for support, and collect child support payments for families. Program leadership, oversight, and funding are provided at the state level by the California Department of Child Support Services, and at the federal level by the Child Support Enforcement (CSE) Program.
The CSE Program was established in 1975 in an effort by Congress to reduce public expenditures on welfare. Through a process referred to as "cost recovery," the government keeps most of the child support collected on behalf of current welfare recipients, and some of the child support collected on behalf of former welfare recipients, as reimbursement for the welfare benefits provided to the family.1
Cost recovery remains an important component of the CSE Program. However, there has been increasing recognition of the importance of child support in helping families achieve and maintain self-sufficiency, and Congress has taken steps to increase the amount of child support distributed to families. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) included "family first" child support distribution rules that allow former welfare recipients to keep more of the child support collected on their behalf, and the Temporary Assistance for Needy Families (TANF) reauthorization bills currently before Congress include provisions that would allow current and former welfare recipients to receive even more of the child support collected on their behalf.2
As more child support is targeted to helping families achieve and maintain self-sufficiency, less is available for cost recovery. Yet even the goal of promoting self-sufficiency suggests some financial benefits for government, as increased levels of financial stability and independence mean that families require less assistance from the government in other areas, such as food, housing, and medical assistance. These financial benefits—referred to here as "cost avoidance"—accrue not just from current or former welfare recipients, but also from families whose child support (when combined with other income) has enabled them to avoid welfare entirely and to reduce or eliminate their need for assistance from other government programs. Cost avoidance occurs when child support income reduces the benefit a family receives under a government means-tested transfer program, or is sufficient to render a family ineligible for assistance or to cause an eligible family to decide not to participate in the program. Any government program that counts a family's income when determining eligibility or benefits, and that includes child support as part of that income, is a potential candidate for child support cost avoidance.3
Data on the extent of cost recovery is readily available, but cost avoidance estimates are much harder to obtain, and relatively little work has been done in this area.4 In order to provide greater insight into this issue, the federal Office of Child Support Enforcement (OCSE) recently contracted with the Urban Institute to develop a national cost avoidance estimate (Wheaton 2003). The Urban Institute study showed that cost avoidance is quite substantial, amounting to $2.6 billion nationally in 1999.
In 2003, the Child Support Directors Association of California (CSDA) contracted with the Urban Institute to develop a cost avoidance estimate for California using the same methodology as had been used for the OCSE study.5 The results of that study are presented here (for state fiscal year (SFY) 2000-01) and cover the following programs: the California Work Opportunity and Responsibility to Kids (CalWORKs) program, the Food Stamp Program, Medi-Cal, the Supplemental Security Income (SSI) program, and federal housing assistance.6 SFY 2000-01 was selected as the year for analysis because that was the most recent year for which data were available.7 The results likely understate the full extent of cost avoidance, as not all sources of cost avoidance are captured for some of the analyzed programs, and as additional cost avoidance occurs in programs not covered by the analysis.
Note: This report is available in its entirety in the Portable Document Format (PDF).
1 In order to receive cash assistance under the California Work Opportunity and Responsibility to Kids (CalWORKs) program or the former Aid to Families with Dependent Children (AFDC) program, a custodial parent is required to assign her rights to child support to the government. With the exception of a $50 monthly child support "pass-through", child support collected on behalf of a current CalWORKs recipient is retained by the government in order to help recoup the benefits provided to the recipient. Rules governing distribution of child support to former welfare recipients are complex, but in general, the government retains child support collected on obligations accrued during the assistance period and on collections obtained through the federal income tax intercept (Roberts 2000).
2 For further discussion of the TANF reauthorization bill, see Turetsky (2003).
3 Cost avoidance is possible even in programs that do not count child support when determining eligibility and benefits. For example, cost avoidance can occur if the additional income from child support is enough to cause a family to decide not to seek assistance. To the extent that child support affects behavior (such as by improving child educational outcomes or discouraging divorce and out-of-wedlock child bearing) other benefits to society may occur.
4 See Barnow et al (2000) for a comprehensive review of the cost avoidance literature.
5 See the Technical Appendix for a detailed discussion of the methodology used in this analysis.
6 CalWORKs is the name of California's TANF program, and Medi-Cal is the name of the state's Medicaid program.
7 As discussed in the Technical Appendix, the cost avoidance estimates rely on data from the March 2001 and March 2002 Current Population Surveys. The March 2003 Current Population Survey (which provides data for calendar year 2002) was not available in time for use in this analysis.
Acknowledgments
The author gratefully acknowledges the comments and advice received from members of the Child Support Directors Association of California (CSDA) and the CSDA cost avoidance working group, which includes local child support directors, CSDA staff, and staff from the California Department of Child Support Services (DCSS), Legislative Analyst's Office, and Department of Finance. The author also thanks DCSS staff for providing the data on California's child support collections used to develop the estimates presented in this report, and Brian Bruen, Kenneth Finegold, Linda Giannarelli, Elaine Maag, and Elaine Sorensen of the Urban Institute for their advice and input to this project.
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
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