Maximizing Collections
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California's child support enforcement efforts are
complicated by a wide diversity among the 58
county child support programs and by the need for
counties to coordinate efforts. |
![]() | Federal welfare reforms require the State to
centralize some of the task of collecting child
support. That change, along with the growing
number of state agencies becoming involved in
child support, raise the question of whether the
child support program should be restructured. | |
![]() | The State Franchise Tax Board provides a
valuable service to counties in collecting
delinquent child support, but built-in disincentives
discourage counties from taking full advantage of
this chance to boost collections. |
Maximizing Collections
Finding 3: In dividing child support enforcement duties between the counties
and the State, the opportunity is being missed to develop efficient and flexible
solutions that encourage ongoing innovations that will maximize collections.
Among policy makers and program managers, organizational design
is essential to creating an effective, efficient and accountable
service delivery system. Too often limited resources force the
State to make incremental changes -- no matter how inadequate the
existing structure. Too often the optimal design is compromised to
preserve the status quo.
Three events are requiring the State to again reconsider the traditional
alignment of functions associated with enforcing child support. First, as
more agencies have been enlisted to find missing parents and their
assets, it has become clear that some of those agencies have the skills
and aptitude to better perform some functions than many of the county
family support divisions. At the same time, entrepreneurial counties are
showing that dramatic progress can be achieved without consolidating
functions at the State. And finally, federal reforms require the State to
centralize at least a portion of the collections function -- opening the
broader issue of how much of the collections and enforcement function
should be left to county district attorneys.
The challenge facing California policy makers is how to realign functions
in a way that best improves service to custodial parents, non-custodial
parents and children. Of equal importance is creating a system that
provides flexibility without sacrificing accountability, and capitalizes on
the best performers now while encouraging ongoing innovation.
Aligning Proficiency and Responsibility
Child Support Enforcement is a federal program in which the duties
have been delegated to the State. In California, the State
Department of Social Services is responsible for the program. It has
delegated most of the actual functions involved -- finding missing
parents, securing court orders for support, collecting and redistributing
the support payments -- to the county district attorneys.
As the effort to make parents financially responsible for their children
has escalated, a number of other public agencies have been enlisted.
Some have been recruited for their
expertise, such as the Franchise Tax
Board for its collection capabilities.
Other agencies have become involved
because they provide a public service
that policy makers want to deny to
parents who shirk their familial
responsibilities -- the Department of
Motor Vehicles licenses drivers, and now
revokes the licenses of California
motorists who fall behind in child support
payments. Still other agencies have
become involved because they have information that helps the counties
do their jobs. The Employment Development Department's records have
proven invaluable in finding parents and their paychecks.
As this network of involved agencies has grown, California's
organizational structure has become increasingly controversial -- as poor
coordination stymies success and as some advocates seek to give more
authority to those agencies displaying the most competence.
Some of the coordination problems are the result of each county
operating unique and distinct enforcement programs. Most of
California's metropolitan areas encompass several counties and child
support cases multiply in their complexity when either the mother or the
father moves across the river, across the bay or down the coast. With
more than 2 million cases to juggle in the state, the ones most easily
dropped are those that fall in the cracks between county lines: In some
cases, county workers do not know that a case has been opened in
another county. When they do know another case exists, it can take a
year to transfer a case from one county to another. Other times, the
involved counties agree to leave a case in the first county so that the
support order is not derailed at a critical juncture, preserving the process
while confusing the parents.
In any event, the counties have operated with different forms, different
procedures, different proficiencies and different priorities. That diversity,
while frustrating for parents, has been tolerated as a necessary evil of
local control. Allowed to develop their own methods, the theory holds,
counties will implement the methods most suitable for their needs.
Some of the diversity has reached beyond legitimacy. As described in
Finding 2, federal auditors have found that counties routinely violate
federal guidelines for reporting data and accounting for funds. The
auditors believe these discrepancies are the product of a highly
decentralized system lacking effective internal management controls.(90)
The solution advocated by some is to eliminate the barriers between the counties and bring uniformity to procedures by consolidating the day-to day-functions at the state level. Some advocates go a step further, to urge that the support order establishment process be taken out of the courts and consolidated in an administrative agency at the state level. The groups are buoyed by efforts in other states to consolidate functions in revenue departments. The Association for Children for Enforcement of Support (ACES) testified that Massachusetts, Arkansas, Alaska and Florida have charged the tax collector with primary program responsibilities:
Currently 38 states have state-run systems. The benefits of a state-run system are uniformity of procedures and accountability at the state level. A county-run system has a lack of accountability because the state does not have jurisdiction over the counties. It is just as difficult to enforce orders between two California counties as it is between two states.... Each county interprets, implements and enforces federal and state laws differently and creates 58 separate county policies... California needs a unified single child support statewide system under the Franchise Tax Board. A state run system will give parents who must use the system uniformity of procedure. It also addresses the accountability issue because parents will be dealing with just one agency to hold responsible.(91)
Both state and county child support enforcement officials bristle at the recommendation. One family support director said the proposal tops his list of worries:
My biggest concern is the State taking over child support. The criminal enforcement aspect would suffer. The state wouldn't be doing any prosecutions. It wouldn't be effective to refer prosecutions to the DA because the DA wouldn't control what cases got referred and how and the State would have no control over caseworkers trying to collect money and the DA going another direction.(92)
Other county officials argue the essential characteristic of the program
is assisting families, and an agency based in Sacramento would not have
the compassion to help families in all of the diverse situations presented
in California.
The concern among county officials of a "state takeover" of child support
enforcement is so strong that some efforts to improve the program have
been misshapen by fear. The Statewide Automated Child Support
System (SACSS) is used by the counties and DSS as their best defense
against efforts to centralize child support enforcement. The computer
network, they maintain, will provide uniformity of process and forms,
and lower the barriers between counties. Ironically, implementation of
the system has been frustrated in part by the diversity among counties.
And the adaptability of the system is limited by the small centralized
memory node -- which was designed in part to preserve county control
of information and case management.
But three important events have occurred while the state has been
preoccupied with implementing SACSS: The Franchise Tax Board has
displayed enterprise in developing a collections service for delinquent
child support, some counties have developed effective and efficient
automation on their own, and the federal government decided that all
states should have centralized collections units. These three
developments provide an opportunity and obligation to realign child
support enforcement functions.
FTB Collections
In 1993, the Legislature with AB 3589 (Speier) created a pilot project
using the Franchise Tax Board to collect delinquent child support. The
pilot project involved six counties, which turned over selected cases to
the FTB. During the first 12 months of the project, the FTB collected
$34.6 million. This success generated the signing of AB 923 in 1994,
which expanded the program so that any county could ask for FTB's
help in collecting delinquent support. In the next year, 20 counties took
advantage of the board's collection expertise and collections reached
$66 million.
One of the surprising results was that FTB actually collected more in
welfare-related cases than in non-welfare cases, displaying the board's
ability to collect in cases that traditionally were considered uncollectible.
The FTB begins by sending non-paying parents a demand letter, bluntly
telling them that the case has been turned over to the FTB and that they
have 10 days to pay off the debt before FTB goes after the child support
debt with the same persistence that it pursues tax debt. In fiscal year
1995-96, 7 percent of the money collected through the program was
generated by the demand letter alone.
The FTB then searches employment records, financial records and tax
records. If it finds an employer, it can assign up to 50 percent of the
worker's wages. If it finds assets, it seizes them. In both instances, the
FTB uses administrative authorities granted to it as the state tax
collector to take action quicker than counties could take historically. The
FTB also contracts with private collectors -- as it does in its tax cases ---
to pursue out-of-state collections.
The FTB attributes the program's success to three factors: political
leadership, unrestricted legislation and a hard-forged relationship
between the FTB and the county district attorneys.(93)
The program also has a central characteristic not often found in
government -- it is truly a voluntary service to its customers. Counties
can chose whether to participate in the program, and can decide which
cases to send. That dynamic has created an incentive for FTB to meet
the needs of its customers -- to develop the working relationship with
the counties that it cites for its success. FTB, by linking its tax
authorities and its computerized processing, has entrepreneurially done
for the counties what they could not do for themselves.
Two-thirds of FTB's administrative costs are paid by federal child support
reimbursements, and the balance comes in the form of a commission
from the counties. The counties receive a 6 percent incentive bonus on
their collections from the federal government, and they split that
incentive payment with FTB for money it collects. In fiscal year 1995-96, FTB's share of the incentive money came to $1.4 million. The
funding arrangement expires at the end of fiscal year 1998-99.
FTB does not accept cases in which there is a tax liability. Under the
law, child support debt receives priority when wage assignments are
used to collect debt. If FTB pursues cases where the parent also owed
taxes, it may end up having to collect child support debt before
satisfying its initial charge of collecting state revenue. In 1995-96, FTB
returned one in three cases to the counties -- often to avoid the potential
conflict between its child support and its tax collecting responsibilities.
The question now is how to build on FTB's success. FTB believes some counties have not participated because they are unwilling to share the incentives they receive on collections they make. The FTB believes that once connected electronically through SACSS, 51 of California's 58 counties will send at least some of their delinquent cases to the tax collector.
Unfortunately the current funding structure may not encourage all county district attorneys to submit all delinquent cases to FTB for collection because they must share their much needed incentive payments with FTB. In an effort to retain incentive payments, some county district attorneys choose not to participate, while others elect to refer only difficult cases that are unlikely to be collected.(94)
FTB supporters say the program shows the benefits of centralizing
functions in agencies with specific competencies needed to improve
child support enforcement and believe that all counties should be
compelled to turn over delinquent debt to FTB. Some advocates would
go even further, to rely on FTB to satisfy federal requirements that the
State establish a centralized collection unit by making FTB responsible
for all collections, current and delinquent.
Local Automation
Over the last 10 years some of the better-performing county family
support divisions have developed their own automation systems --
to organize or process cases, link databases with cases or take
enforcement actions.
In that sense, the counties have operated like laboratories, finding new
ways to process forms and checks. Many of the counties have
incrementally developed and paid for their computer infrastructure: As
a function is automated, they become more efficient and earn more in
incentives. With the additional funds, they automate another function,
becoming more efficient and earning more incentive money.(95)
As explained in greater detail in Finding 4, many of these counties are
now reluctant to turn off functioning computer systems and connect to
a malfunctioning Statewide Automated Child Support System. But
beyond the SACSS dilemma, as enterprising counties have automated
they have put pressure on the existing organization structure -- searching
for new functions, new authorities and even seeking the business of
other counties.
The San Diego County family support division, for example, recently
reclaimed functions that had been delegated to other county
departments and developed its own automation system. To find missing
parents or their assets, it made more extensive use of U.S. Department
of Defense databases than other counties or state agencies. To more
quickly process payments, it developed check-scanning capabilities that
are as efficient as those at the largest banks. San Diego officials are
now considering the possibility of contracting their services to other
family support divisions.
Other automated counties want to expand their authorities to capitalize
on their technological abilities -- arguing that if they had the same
authorities as the FTB to administratively tap bank records and attach up
to 50 percent of a debtor's wages they could increase collections.(96) To
that end, FTB's entrepreneurial spirit has inspired counties to think about
new ways to solve perennial child support enforcement problems.
In turn, some counties are willing to become customers of agencies that
can perform a function better than they can. Los Angeles County, for
instance, is by far FTB's largest customer -- sending the tax collector
virtually every case that falls 30 days delinquent. By letting FTB worry
about its delinquent cases, the Los Angeles district attorney can focus
on ways to improve its order establishment process -- such as helping to
automate court procedures so the clerks and judges can keep up with
the cases generated by the district attorney's new computer system.
Centralized Collections
The centralization vs. decentralization debate that has waged in
Sacramento also has waged in the nation's capital. Congress,
persuaded that California and other large states had not seriously
considered realigning functions to improve efficiency, in 1996 required
states to centralize the functions that have shown to most often deliver
economies of scale -- collections and distribution.
Some provisions of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 are definitive. The law requires the
centralized unit to be in place by October 1, 1998. It also clearly
requires that employers be provided one place to send wage
assignments. The law also requires that the disbursement -- at least
those for non-welfare parents -- has to be accomplished within two days.
From there, certainty in the law begins to evaporate. While the law
seeks to create centralized collections and distribution units, it allows for
states to establish a centralized unit by linking local distribution units --
provided that approach will not cost more or take more time to operate.
An even greater ambiguity lies in the role required of the centralized unit
in enforcing orders when payments are not made. Some stakeholders
have interpreted the law to say that enforcement actions -- which are
now delegated to the counties -- must also be centralized. Carried to its
logical end, if a state agency is going to collect and distribute child
support payments and enforce orders when compliance is not voluntary,
then the State will effectively take over management of a case from the
moment a support order is established.
No matter how it is interpreted, however, implementing the federal law
in California is complicated by the bias against the state operation of
child support functions and the decentralized design and operational
shortcomings of SACSS.
Currently nearly all of these functions are performed by the local
governments. With the exception of tax intercepts, which are collected
by the State, child support payments are made to counties, which
process the checks and allocate and disburse the funds among parents
and government agencies being reimbursed for welfare expenditures.
SACSS was designed to reflect this assignment of functions -- retaining
at the county level all of the information needed to take in payments and
disburse support. The central node of SACSS will make the
determination of how to allocate the money.
The Department of Social Services, with the help of a consultant, is
developing a plan for satisfying the federal requirement that would retain
at the counties some of the collection and disbursement functions, while
looking to a centralized unit to collect wage assignments and allocate the
money among the different receivers.
In analyzing the options, the department and consultant considered a
combination of factors. Some of
them relate to efficiency and
effectiveness, while others
consider political factors such as
whether a specific alternative
would preserve county control of
an important function. As a
result, it is difficult to tell from
the analysis whether the solutions
under consideration represent the
best business solution -- and by
extension the best solution for
California children -- or whether
the product will reflect a
combination of business and
political considerations.
None of the options rely on
SACSS to perform all of the
collections tasks because its
decentralized design prevents it
from being easily adapted to take on a centralized role. At the same
time, all of the plans considered by the State assume that SACSS will
be operating by October 1, 1998 -- an assumption that county family
support directors who have worked with the system seriously question.
In addition to deciding the structure of a collections unit, state policy
makers will have to decide whether the function will be performed by a
public agency or private entity. Among the contenders are the State
Controller, the Franchise Tax Board and Lockheed-Martin, the prime
contractor for SACSS.
Opportunities and Criteria for Realignment
The success of the Franchise Tax Board's child support program, the
success of some local automation efforts, and the requirement to
centralize some collections and distribution provides an opportunity for
the State to realign the assignments of child support functions.
Traditionally, program managers have been highly protective of the
county-based structure -- tolerating a wide disparity in proficiencies in
order to preserve local control. Some policy makers and children's
advocates, frustrated by the persistent poor performance in some
counties, see the current realignment debate as the State's best
opportunity to centralize functions.
The realignment debate should be framed by two important questions:
If the State is going to take over a function, does it have to perform that
function better than all counties are currently performing, or just better
than the worst performers? And, if the State takes over a function, how
can policy makers ensure that the State agency will constantly improve
its performance -- as some counties have demonstrated is possible?
Among the options for realignment:
While driven by contemporary developments, the alternatives reflect
long-standing preferences by the interests involved on how to best
assign functions. One stumbling block to an effective debate is the lack
of an agreed-upon criteria for analyzing the State's options. The
potential criteria should satisfy a number of policy concerns.
Among the criteria that should be considered to ensure that state policy
makers will make the best long-term decision are:
Expanding the Enforcement Tools
In some instances, creating a better alignment requires granting the
necessary authority tocarry out an established function more
effectively. Three additional authorities would bolster the functions
performed by counties: a felony penalty for failing to pay child support,
a statewide property lien registry and an administrative bank lien.
Felony
In California, it is a misdemeanor not to pay child support. California
once had a felony provision,
but the law was declared
unconstitutional because of the
way it was crafted. While most
child support cases are brought
civilly, county prosecutors do
bring some misdemeanors.
Restoring the felony provision,
they assert, would give them a
tool for extradicting delinquent
parents residing in other states.
In most instances, the DAs are using the misdemeanor criminal statute as a hook, to get the attention of non-complying parents. The threat of jail time works for some who are unfazed by other enforcement hammers. The head deputy of the Los Angeles District Attorney's prosecuting unit explained:
The intent of the statutes is toget people to support their kids, not to send them to jail. We'll work with you. If you pay your current support and agree to a plan to pay arrears, we'll put you on diversion. But if you don't, or if you don't live up to the terms of the probation, you go to jail. We have carrots and sticks.(98)
The re-establishment of a felony
child support provision has wide support. It is one of the few issues that
DSS and family advocates, such as ACES, agree upon. Thirty states
have a felony law, according to ACES.
Advocates of a felony provision say it would elevate child support as a public issue. ACES testified:
California needs a felony law to send the message to non-payers that failure to pay support is a serious crime that will no longer be tolerated in California.(99)
The more direct legal effect of a felony law would be to allow district
attorneys to use federal marshals to bring fugitives back to California
under provisions for unlawful flight to avoid prosecution. At least one
county has sought the help of federal officials to obtain warrants in
misdemeanor criminal child support cases for the same purpose, but no
formal process exists for that procedure.
The federal Child Support Recovery Act 1992 allows federal prosecutors
to take felony action against parents who willfully avoid supporting their
children who live in another state. But federal authorities do not have
the resources to take on many cases, and the federal law is under fire in
the courts. In 1993, the first year the law was in effect, federal
authorities brought two cases nationwide. In 1994 they brought 12. In
1995 they brought 80. District courts in three states have found that
the law exceeds the federal jurisdiction over interstate commerce, while
other courts have found it to be constitutional.(100)
The weakness in the federal law could be bolstered by state law. From
a legal standpoint, a felony provision would allow prosecutors to process
more interstate cases. In some counties, as many as 30 percent of the
cases involve parents who have left the state.(101)
Statewide Property Lien
For 30 years, child support enforcement officials say they have
bucked the objections of title companies in an unsuccessful effort to
create a statewide property lien. The counties collect millions of dollars
by filing liens on real property owned by delinquent parents. The liens
at the very least inconvenient non-custodial parents by showing up on
credit reports, providing another incentives for parents to pay support.
The liens also allow the government to recover funds -- either for welfare
reimbursement or to support the family -- out of the proceeds of property
sales.
The current procedures, however, require counties to file the liens in
individual counties and to know about a sale in order to ensure success.
According to the California District Attorneys Association, the individual
liens create a heavy burden and expense on the part of child support
agencies and the county recorders. As a result of these hurdles, not all
of the child support that could be collected with property liens is
collected.
The Department of Social Services in 1992 concluded that it was
possible to use commercially available data and existing computer
infrastructure to create a property record registry. Similarly, the district
attorneys have advocated that a central registry for child support orders
-- already legislated, but not implemented -- could automatically create
liens on property owned by delinquent parents.(102)
Better use of real and personal property liens is considered one way to
more effectively reach self-employed parents. The Interstate Child
Support Commission concluded: "Liens are not imposed regularly, and
one of the major reasons given is the costly and time-consuming nature
of the lien imposition process."(103)
The interstate commission encouraged states to routinely place and update liens on title certificates for real and personal property belonging to delinquent non-custodial parents. It also recommended that streamlined procedures be adopted for challenging the validity of liens and releasing liens.
Administrative Bank Liens
County authorities have access to 1099 information, which record
interest, dividends and other non-wage income. But they receive
that information from the federal child support agency, which receives
the information from the Internal Revenue Service. As a result the
information can be 10 to 20 months old. When accurate and current,
the information can be used to seek a court order to seize bank assets
to pay delinquent child support.
One of the tools used by the FTB has been an administrative bank lien,
allowing it to quickly seize assets -- accounting for about 9 percent of
the money it collects. The federal welfare reform law requires child
support agencies to have administrative bank lien authority. Counties
that are automated believe they ought to have the same administrative
authorities as the FTB.
Summary
When the mail arrives, what matters most to struggling families is
that absent parents are held financially responsible for their
children. They are not overly concerned with whether the check was
processed in Sacramento or in Siskiyou County.
The organizational design of child support enforcement, however, can
yield efficiencies that increase the reliability and the effectiveness of the
program. Automation, federal requirements and some much needed
enterprise on the part of some child support enforcers have given a
renewed impetus to the long-standing issue of how to best align
enforcement functions. The challenge for policy makers is to make
choices that not only provide the highest possible level of child support
enforcement now, but that encourage ongoing improvement.
Recommendation 3: The State should centralize functions that it is compelled
to by federal law or that it can inherently do more efficiently and effectively than
all counties. Otherwise, the State should encourage partnerships and pilot
projects that foster competition, innovation and provide counties with options
for enforcing orders and collecting support.
Many factors appropriately influence reorganization efforts, such as the
collection and disbursement of child support. The system has to be
secure, it has to satisfy federal rules and it has to be cost-effective. One
dynamic demonstrated by the Franchise Tax Board's collections program
is that competition between government agencies can spur
improvements just like competition between private-sector businesses.
These valid considerations should guide an ongoing reassessment and
realignment of child support functions. Preserving a division of labor for
the sake of tradition should not be a factor in the debate. Measures the
State should take include the following: