Use Excess Unexpended Balances of Child Support Retained Collections for Texas Families

The Legislature should appropriate 50 percent of child support retained collections in excess of the amounts in the Attorney General s method of finance to finance other programs serving Texas families.

Texas should see significant increases in chi ld support order establishment and collections during the next five years, provided the recommendations outlined in this report are implemented. Some of this revenue would accrue to the Child Support Retained Collections Account (CSRCA), which funds the op erations of the Child Support Enforcement (CSE) Program. The total volume of all recommendations affecting child support in this report are $30 million in 1994 and $42 million in 1995.

In non-Aid to Families With Dependent Children (AFDC) cases, the entire child support amount is sent to the custodial parent. In AFDC cases, CSE retains these collections after the recipient is sent a $50 disregard from the collected amount. The disregard does not count against the AFDC grant. If the amount of child suppor t collections exceeds the AFDC grant amount plus the $50 disregard, then the entire amount is sent to the custodial parent, who becomes ineligible for AFDC.

In most states, the collections retained by CSE fund AFDC grants, and the child support program operates from a general revenue appropriation. Texas won praise from the federal government in 1989 when the Legislature voted to reinvest all of the state s share of retained child support collections in the CSE program. Since that time, the agency has used the retained collections to draw federal matching funds and build the program. The CSE budget has increased from $30 million in 1988 to $114 million in 1993, which has allowed CSE to collect support for increasing numbers of Texas families without drawing on state general revenue.

The state has also allowed CSE to carry forward unexpended balances of the CSRCA from year to year and to spend half of the unexpended balances in the CSRCA in excess of the agency s method of finance.

Increasing the CSE budget is only one way to increase collections. With all the states facing severe budget deficits, attention has turned to developing more efficient and effective order establishment and enforcement processes. Although Texas has implemen ted some of these, such as immediate wage withholding, establishment of liens and development of a new automated system, much more could be done. These recommendations include some of the most effective strategies developed nationally to date.

Large increases in the CSE budget through retained collections could be difficult to absorb. Many factors affect child support collections other than the diligence of the state in pursuing them. Unemployment, out-of-wedlock births and other societal proble ms all reduce the ability of obligors to pay support in sufficient amounts to move their children off public assistance.

Without additional revenue, the state will not be able to adequately address some of the larger issues which determine the ability of child support obligors to pay. Adopting this proposal will allow the state to invest in other programs affecting Texas fam ilies.

The Legislature should direct, through a rider to the General Appropriation Act, that 50 percent of child support retained collections in excess of the amounts in the agency s method of finance be moved to unrestricted general revenue for use in programs for Texas families that draw federal matching funds at or above the federal Medicaid match rate.

The Legislature should consider directing the funds toward programs such as the employment and basic education initiative for child support obligors proposed in this report and other programs which strengthen the ability of families to become and remain se lf-sufficient.

These recommendations would allow CSE to continue to benefit from the Legislature s generous policy of reinvestment while allowing the state to use some of the excess and unexpended collections to address other needs of Texas families.

The recommendations would provide an incentive for the CSE program to set ambitious goals and to work to achieve those goals.

Excess retained collections used for other programs would no longer be available to draw CSE federal matching funds; however, these collections would be available to other programs for Texas families that also have federal matching funds available.

Fiscal Impact
The amount of the funds available in the General Revenue Fund as a result of this recommendation would depend upon the child support enforcement recommendations made in other parts of this report, the amount of the CSRCA appropriated to CSE each year and f ederal match rates of other programs.

The fiscal impacts estimated for this recommendation include federal matching funds of approximately 64 percent.

Imp lementing all the child support enforcement recommendations in this report would result in an additional $9.6 million in fiscal 1994 and $91.8 million for the five-year period. Moving 50 percent to unrestricted general revenue would result in $5.8 million in 1994 and an additional $45.9 million over the five-year period.

Using this revenue to match federal funds at the regular Medicaid match rate would provide Texas with $8.9 million in federal matching funds in 1994 and $70.8 million over five years. Thes e funds could be used to provide employment, education and other services to AFDC recipients and child support obligors.

Implementation of this recommendation without implementation of the other child support recommendations in this report could result in loss of funds to the CSE program.

Loss to the Child Net Gain to
Fiscal Gain to the General Support Retained Gain to Other Dedicated Change
Year Revenue Fund 001 Collections Account Federal Funds Accounts or Funds in FTEs

1994 $ 5,767,000 $ (5,767,000) $ 8,922,000 $3,155,000 0
1995 8,170,000 (8,170,000) 13,001,000 4,831,000 0
1996 9,416,000 (9,416,000) 14,644,000 5,228,000 0
1997 10,653,000 (10,653,000) 16,287,000 5,634,000 0
1998 11,889,000 (11,889,000) 17,930,000 6,041,000 0