Note: This is an updated consolidation of two posts made in August/September 2012.

Way back in 2012,  we were having a discussion where I was asserting that states can receive anywhere from $1 to $2 in Federal subsidy payments for every dollar they collect and administer in child support payments.  And it was during this discussion that one of our members asked the simple question, “Do you have any documentation on this?”.

There Is A Bunch Of Convoluted Government Math In This Post If You Want To Run Through The Methodology Of How Stuff Is Calculated, But Here Is The Short Story Version.

Administering child support payments is big business for states:

(1) States get reimbursed for 66% of the hard costs of collecting and administering child support.

(2) States receive bonus funds for the reimbursement of welfare programs using a formula consistent with Federal medical program reimbursements.

(3) States get bonus funds from a shared incentive pool, in which those incentives are driven by the nominal amount of child support collected and the performance in collecting it. In other words, states are incentivized to (a) maximize the amount of child support funds they administer, and (b) maximize the efficiency with which they collect it.

There are three revenue sources for States associated with the collection and administration of child support payments defined under the broad cover of the Social Security Act:

(1) 66% reimbursement for allowable expenditures, which are:

a. Costs for locating parents
b. Costs for establishing orders
c. Costs for collecting child support payments
d. Costs for establishing paternity
e. Any other misc. costs approved by the Secretary for reimbursement.
f.  And exception of 90% matching for the following two expenditures
i.  Improving management information systems
ii. Blood testing

(2) Welfare recovery and matching:

a. Recovered TANF payments are split between the Federal Government and States consistent with Federal reimbursement of medical benefits (I’m still not clear about exactly how this part works in practice.)

(3) Incentive pool (Public Law 105-200, the Child Support Performance and Incentive Act of 1988 ( enacted July 16, 1998 ).

With the incentive pool, states must compete for their share of the funds, which we estimate is currently, is around $491MM.

A. The incentive amount = State Incentive Pool (x) State Incentive Share

B. State Incentive Share = Incentive Base Amount For The State (/) Sum of Incentive Base Amounts For All States

C. Incentive Base Amount = Sum Of Applicable Percentages {defined by paragraph 6 of the Act} (x) Corresponding Maximum Incentive Base Amounts for each bonus category:
Bonus Categories Are:

A. Paternity Establishment Performance Level
B. Support Order Performance Level
C. Current Payment Performance Level
D. Arrearage Performance Level
E. Cost Effectiveness Performance Level

D. Maximum Incentive Base Amount = State Collections Base (as measured in performance categories A,B,C) + 75% state collections base ( performance categories D, E).

E. State Collections Base = Sum ( 2 (x) amount collected in which support is assigned to the State (bonus categories A or E), amount of support collected that was at the time of collection, not required to be assigned), total amount of support collected).

Current data for total Title V-D expenditures is currently unavailable. The last published data (2012) was $3.977 billion.

Title IV-D Reimbursements and Incentives Allocated To States (2012):

	Title IV-D	% Fed	Visitation	% Fed	Grants Rel
State	$ Received	Budget	$ Grants	Budget	To Title IVD
California	$490,125,776	12.32%	$946,820	9.35%	0.19%
Texas	$301,348,139	7.58%	$702,147	6.94%	0.23%
New York	$266,750,195	6.71%	$545,183	5.39%	0.20%
Ohio	$243,766,906	6.13%	$346,015	3.42%	0.14%
Florida	$212,471,610	5.34%	$502,438	4.96%	0.24%
Michigan	$179,977,527	4.53%	$284,554	2.81%	0.16%
New Jersey	$170,208,617	4.28%	$212,190	2.10%	0.12%
Pennsylvania	$150,486,866	3.78%	$344,452	3.40%	0.23%
Illinois	$125,814,504	3.16%	$192,761	1.90%	0.15%
Washington	$110,001,353	2.77%	$176,274	1.74%	0.16%
Minnesota	$106,643,740	2.68%	$133,346	1.32%	0.13%

North Carolina	$87,725,394	2.21%	$279,933	2.77%	0.32%
Maryland	$86,096,363	2.16%	$160,674	1.59%	0.19%
Georgia	$80,546,707	2.03%	$295,483	2.92%	0.37%
Wisconsin	$75,158,881	1.89%	$152,034	1.50%	0.20%
Arizona	$74,147,529	1.86%	$172,676	1.71%	0.23%
Virginia	$70,223,005	1.77%	$207,182	2.05%	0.30%
Louisiana	$68,945,314	1.73%	$145,278	1.44%	0.21%
Missouri	$65,754,372	1.65%	$169,898	1.68%	0.26%
Kentucky	$63,591,310	1.60%	$123,634	1.22%	0.19%
Indiana	$60,985,048	1.53%	$100,000	0.99%	0.16%
Oklahoma	$54,640,040	1.37%	$103,930	1.03%	0.19%
Massachusetts	$51,039,687	1.28%	$171,813	1.70%	0.34%

Iowa	$49,973,434	1.26%	$123,634	1.22%	0.25%
Tennessee	$49,377,836	1.24%	$181,834	1.80%	0.37%
Oregon	$46,717,248	1.17%	$100,000	0.99%	0.21%
Colorado	$44,275,072	1.11%	$121,309	1.20%	0.27%
Connecticut	$43,172,897	1.09%	$100,000	0.99%	0.23%
Alabama	$42,222,415	1.06%	$137,856	1.36%	0.33%
Indian Tribes	$42,000,000	1.06%	$100,000	0.99%	0.24%
Kansas	$39,126,333	0.98%	$100,000	0.99%	0.26%
Nevada	$37,536,710	0.94%	$100,000	0.99%	0.27%
South Carolina	$32,976,075	0.83%	$136,311	1.35%	0.41%
Mississippi	$32,474,920	0.82%	$107,089	1.06%	0.33%
Utah	$27,533,598	0.69%	$100,000	0.99%	0.36%

New Mexico	$27,209,782	0.68%	$100,000	0.99%	0.37%
West Virginia	$26,634,714	0.67%	$100,000	0.99%	0.38%
Nebraska	$25,263,754	0.64%	$100,000	0.99%	0.40%
Delaware	$23,737,900	0.60%	$100,000	0.99%	0.42%
Puerto Rico	$22,709,422	0.57%	$100,000	0.99%	0.44%
Maine	$18,090,754	0.45%	$100,000	0.99%	0.55%
Idaho	$17,506,554	0.44%	$346,886	3.43%	1.98%
District of Columbia	$16,855,375	0.42%	$100,000	0.99%	0.59%
Arkansas	$16,377,999	0.41%	$100,000	0.99%	0.61%
Hawaii	$15,469,849	0.39%	$100,000	0.99%	0.65%
Alaska	$15,385,076	0.39%	$100,000	0.99%	0.65%
North Dakota	$12,662,484	0.32%	$100,000	0.99%	0.79%

New Hampsire	$12,028,516	0.30%	$100,000	0.99%	0.83%
Montana	$9,835,041	0.25%	$100,000	0.99%	1.02%
Vermont	$9,016,968	0.23%	$100,000	0.99%	1.11%
South Dakota	$7,296,020	0.18%	$100,000	0.99%	1.37%
Rhode Island	$6,452,335	0.16%	$100,000	0.99%	1.55%
Wyoming	$4,016,126	0.10%	$100,000	0.99%	2.49%
Virgin Islands	$3,664,589	0.09%	$100,000	0.99%	2.73%
Guam	$2,986,321	0.08%	$100,000	0.99%	3.35%

Total

$3,977,035,000

$10,123,634

Source: https://www.acf.hhs.gov/sites/default/files/olab/cse.pdf

Access and Visitation Grants:

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) created the Access and Visitation Grants program.  Funding for the program began in FY 1997 with a capped entitlement of $10 million.

Each governor designated a state agency which uses these grant funds to establish and administer programs to support and facilitate non-custodial parents’ access to and visitation of their children.

The statute specifies certain activities which may be funded including:  voluntary and mandatory mediation, counseling, education, the development of parenting plans, supervised visitation, neutral drop-off and pick-up, and the development of guidelines for visitation and alternative custody arrangements.  This funding is separate from funding for federal and state administration of the CSE program.

Incentive Payments to States:

“While the federal government provides most of its funding for the child support program through matching payments to reimburse states for their expenditures for allowable expenses, it also makes incentive payments to reward states for strong performance on a range of measures, such as cost-effectiveness. Section 458(f) of the Social Security Act allows states to use their incentive payments to either “carry out the State plan” or “for any activity (including cost-effective contracts with local agencies) approved by the Secretary, whether or not the expenditures for the activity are eligible for reimbursement under this part, which may contribute to improving the effectiveness or efficiency of the State program operated under this part.”

~ Source: Office of Child Support Enforcement

(1) IN GENERAL- The incentive payment for a State for a fiscal year is equal to the incentive payment pool for the fiscal year, multiplied by the State incentive payment share for the fiscal year.

(2) INCENTIVE PAYMENT POOL-

(A) IN GENERAL- In paragraph (1), the term `incentive payment pool’ means–

(i) $422,000,000 for fiscal year 2000;

(ii) $429,000,000 for fiscal year 2001;

(iii) $450,000,000 for fiscal year 2002;

(iv) $461,000,000 for fiscal year 2003;

(v) $454,000,000 for fiscal year 2004;

(vi) $446,000,000 for fiscal year 2005;

(vii) $458,000,000 for fiscal year 2006;

(viii) $471,000,000 for fiscal year 2007;

(ix) $483,000,000 for fiscal year 2008;

(x) $496,000,000 for fiscal year 2009*;

(xi) $490,000,000 for fiscal year 2010*;

(xii) $496,000,000 for fiscal year 2011*;

(xiii) $490,000,000 for fiscal year 2012*;

(xiv)$490,000,000 for fiscal year 2013*;

(xv) $486,000,000 for fiscal year 2014*;

(xvi) $490,000,000 for fiscal year 2015*;

(xvii) $492,000,000 for fiscal year 2016*;

(xviii) $492,000,000 for fiscal year 2017*;

(xix) $491,000,000 for fiscal year 2018*;

Source: http://www.acf.hhs.gov/programs/cse/pol/related/3130.htm

* Data after 2008 for incentive pools is unavailable, so these are estimates using the government formula for establishing the incentive pool: for any succeeding fiscal year, the amount of the incentive payment pool for the fiscal year that precedes such succeeding fiscal year, multiplied by the percentage (if any) by which the CPI for such preceding fiscal year exceeds the CPI for the second preceding fiscal year.

(B) CPI- For purposes of subparagraph (A), the CPI for a fiscal year is the average of the Consumer Price Index for the 12-month period ending on September 30 of the fiscal year. As used in the preceding sentence, the term `Consumer Price Index’ means the last Consumer Price Index for all-urban consumers published by the Department of Labor. (Note: the government uses an average cpi figure from sept-sept; we’ve used the typical published values from dec-dec. This may create a small discrepancy with the estimates, but it should not be significant)

(3) STATE INCENTIVE PAYMENT SHARE- In paragraph (1), the term `State incentive payment share’ means, with respect to a fiscal year–

(A) the incentive base amount for the State for the fiscal year; divided by

(B) the sum of the incentive base amounts for all of the States for the fiscal year.

Now, here’s where it gets important, because this is where the base value figures are established:

(4) INCENTIVE BASE AMOUNT- In paragraph (3), the term incentive base amount’ means, with respect to a State and a fiscal year, the sum of the applicable percentages (determined in accordance with paragraph (6)) multiplied by the corresponding maximum incentive base amounts for the State for the fiscal year, with respect to each of the following measures of State performance for the fiscal year:

(5) MAXIMUM INCENTIVE BASE AMOUNT-

(A) IN GENERAL- For purposes of paragraph (4), the maximum incentive base amount for a State for a fiscal year is–

(i) with respect to the performance measures described in subparagraphs (A), (B), and (C) of paragraph (4), the State collections base for the fiscal year; and

(ii) with respect to the performance measures described in subparagraphs (D) and (E) of paragraph (4), 75 percent of the State collections base for the fiscal year.

Skipping some stuff here…

(C) STATE COLLECTIONS BASE- For purposes of subparagraph (A), the State collections base for a fiscal year is equal to the sum of–

(i) 2 times the sum of–

(I) the total amount of support collected during the fiscal year under the State plan approved under this part in cases in which the support obligation involved is required to be assigned to the State pursuant to part A or E of this title or title XIX; and

(II) the total amount of support collected during the fiscal year under the State plan approved under this part in cases in which the support obligation involved was so assigned but, at the time of collection, is not required to be so assigned; and

(ii) the total amount of support collected during the fiscal year under the State plan approved under this part in all other cases.

(A) The paternity establishment performance level.

(B) The support order performance level.

(C) The current payment performance level.

(D) The arrearage payment performance level.

(E) The cost-effectiveness performance level.

**So, you can see two important things here.

First, the reimbursements, payments, and bonuses are NOT determined by a reimbursement of State expenses incurred. In fact, the minimization of State Collection Costs is a bonus item.

Secondly, and this is really important, the figures used are the child support funds that States have under administration.

And here is something interesting. Check this out:

(c) TREATMENT OF INTERSTATE COLLECTIONS- In computing incentive payments under this section, support which is collected by a State at the request of another State shall be treated as having been collected in full by both States, and any amounts expended by a State in carrying out a special project assisted under section 455(e) shall be excluded.

***i.e. If two States are working together to collect funds, they both get credit for the purposes of establishing bonuses – this is pure gravy.

Note a couple of things here.

First, the bonus values are doubled for the categories of paternity test performance and cost performance.

So why would the Feds care about State costs? Because this is the bonus and incentive program, and States already receive a 66% dollar for dollar reimbursement for administrative costs (and I’m not sure, I’ll have to check, but i think there is a way they can finagle the remaining 34% to get even dollar for dollar match) under a different section of the Social Security Act.

So, In Summary:

States can get up to 100% reimbursement for administrative costs plus up to two times the bonus pool share for two categories along with the rest of it.

Now add to this, the fact that Courts often charge fees for posting these certified payments, and may assess additional fees and fines for enforcement, and you’ve got a very lucrative incentive for States and Courts to maximize child support payments.

Think of it is a pie. The objective for each state is to maximize their share of the pie (incentive base amounts relative to other states). And in this regard, you’ll note that the Fed’s apply a 25% penalty to the maximum incentive base amounts for two categories: (1) Support collected in arrears, and (2) Support Costs.

Secondly, you’ll note that the Fed’s place double the weight of state administered child support payments assigned to the State for collection; either by order or agreement.

So, with respect to incentive pools:

(1) An incentive to maximize the amount of child support ordered.
(2) An incentive to maximize the amount of child support collected.
(3) An incentive to avoid high collection costs.
(4) An incentive to assign collections to the state for administration.
(5) A penalty to incentive base amounts for child support amounts in arrears.

In other words, the name of the game here for states is to generate the biggest number possible (incentive base amount) constrained by the maximum incentive base amount. Once these numbers are in for the year, shares are created and the pie is split up.

Note: We would like to get current data. More specifically, we’d like to the Federal Government to post its expenditures on an annual basis.

We’d also like to get an accounting from states as to how they spend the incentive money they receive.

We’ll keep plugging away at the problem….