CALIFORNIA

THE COLLECTIBILITY STUDY - EXAMINING CHILD SUPPORT ARREARS

Goal: The "Collectibility Study" sought to learn about the debtors who hold child support arrears in California including the reasons for debt accrual so that the state could maximize child support collections and minimize the accumulation of arrears.

Description: The California Department of Child Support Services (DCSS) contracted with the Urban Institute to conduct a study assessing the collectibility of Child Support arrears in California. DCSS also established an Advisory Group consisting of national, state and local child support experts and custodial and noncustodial parents to assist with the study.

As of March 2000, $14.4 billion of child support debt was owed in California. This debt was owed by a total of 834,908 debtors. Although debtors owed a wide range of debt amounts, the child support debt itself was concentrated among debtors with very large debts. The vast majority of the debt, 72 percent, was held by the 28 percent of debtors who held more than $20,000 in debt each. Seventy percent of the debt was owed to the government as recoupment for welfare paid to families; only 30 percent was classified as non-welfare debt owed to families.

Matching the debtors with various state and federal databases, including employment and tax databases, the Urban Institute was able to locate information on 85 percent of the child support debtors. A significant number of those debtors have either no recent, reported income or low recent, reported income. One-quarter of the debtors have no recent income, and another thirty-six percent have incomes below $10,000. Only one percent had income above $50,000.

Results: The Urban Institute estimated that California can expect to collect only about 26 percent ($3.8 billion) of the $14.4 billion in child support debt by 2010, and by 2010 the debt attributable to March 2000 debtors, including interest and new arrears, will have ballooned to $34 billion. This is because much of the debt is held by parent debtors with income below $10,000 who owe amounts in excess of $20,000.

The Urban Institute identified three basic reasons for the accumulation of arrears:

1. Order amounts are often set and maintained too high relative to the noncustodial parent's ability to pay;
2. Enforcement efforts are not fully successful;
3. Interest accumulates on unpaid arrears at 10% per year.

The Urban Institute estimated that 76% of the arrears that accrued during a one-year period was held by debtors who could not afford to pay their support obligations, while 24% was held by debtors who could afford to pay and did not. Additionally, the Urban Institute estimated that fully 27% of the arrears in March 2000 were attributable to interest.

The Urban Institute identified five reasons why child support orders are set or maintained too high:

1. for low-income obligors, initial guideline levels may be too high because of problems with the low-income adjustment;
2. orders are often entered by default without the participation of the noncustodial parent;
3. orders are often set too high because, when income information is unavailable, income is presumed at a level well above minimum wage;
4. retroactive support is added in welfare cases; and
5. orders are frequently not maintained through periodic review and modification as circumstances of the parents change.

The Urban Institute, in consultation with the Advisory Group, recommends a series of steps to prevent future arrears accumulation and to manage existing arrears (addressing current uncollectible arrears). The major recommendations are:

• Reduce default rates by improving service of process, simplifying the summons and complaint, and providing multiple notices to noncustodial parents prior to entering a default.

• Make the low-income adjustment to the child support guidelines presumptive, rather than discretionary and review its level.

• Obtain wage income information through New Hire reporting

• Attempt to obtain actual income information in all cases. If income information cannot be obtained, presume income at full-time minimum wage, and allow one year to set aside presumed income defaults.

• Adjust orders quickly on change of circumstances, and review presumed income orders regularly.

• Eliminate retroactive arrears for welfare cases, and treat welfare and non-welfare cases the same for the start date of the order.

• Prevent the accumulation of arrears by incarcerated obligors without income or assets by preventing support from accruing by operation of law.

• Reduce the interest rate for child support arrears, and apply payments to principal ahead of interest.

• Give DCSS the authority to leverage and manage arrears owed to the government.

DCCS is already implementing many of the recommendations and is working on legislation to implement many more.

Location: The study examined the entire caseload of delinquent noncustodial parents in California.

Funding: The research was initially funded through a private grant form the Rosenberg Foundation. The remainder of the project was funded by regular state and Federal child support funds.

Replication Advice: Establishing the Advisory Group to assist with the study proved extremely valuable both in developing the analytical process for the study and in developing recommendations that are broadly supported.

Contact:

Leora Gershenzon

Assistant Director

California Department of Child Support Services

(916) 464-5195

Email: leora.gershenzon@dcss.ca.gov