The Potential Impact of Increasing Child Support Payments to TANF Families

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Abstract

The Deficit Reduction Act of 2005 includes incentives for states to increase the amount of child support that is "passed through" to families on welfare, rather than retained to offset welfare expenditures. Beginning October 1, 2008, the federal government will share in the costs of a $100 per month pass-through for families with one child and a $200 per month pass-through for families with two or more children. This brief discusses the potential benefits and costs to families, states, and the federal government if all states implemented a $100/$200 pass-through and disregard.

Introduction

For the past 30 years, Congress has viewed child support as a critical source of income for low-income families. Every major welfare reform initiative enacted during this period has included child support reforms in an effort to ensure that low-income families have greater access to child support income. In general, these efforts have been very successful. In 2005, 33 percent of poor custodial mothers received formal child support, up from 20 percent in 1983 (Grall 2007: U.S. Census Bureau 1985). Among poor custodial families that receive child support, it constitutes about 30 percent of their family income (Sorensen 2003).

But this effort to ensure greater access to child support has not always extended to families on welfare. Families on Temporary Assistance for Needy Families (TANF) must assign their right to receive child support to the government as a condition of receiving cash assistance. Although state governments may choose to pass through child support collected to the TANF family, the majority do not pass through any child support. In 2004, states collected approximately $635 million in child support on behalf of TANF families and distributed about 27 percent of it to TANF families, keeping the rest to reimburse the federal and state governments for welfare costs.

Recently, when Congress reauthorized TANF through the Deficit Reduction Act of 2005 (DRA), it provided incentives to states to distribute more child support to families on welfare. Starting October 1, 2008, states will be able to pass through up to $100 a month of child support to TANF families with one child and up to $200 a month of child support to TANF families with two or more children without reimbursing the federal government its share of the child support collected. The federal government will share in the cost of the pass-through if states disregard the amount of child support distributed to families when determining their TANF benefits.

If all states expanded their pass-through and disregard policy according to the parameters in the DRA, child support distributed to TANF families would more than double, increasing their average annual incomes by nearly $500 and decreasing their dependence on other means-tested benefits. This expansion would cost the federal and state governments between $117 and $145 million, which represents less than 1 percent of TANF costs.

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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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