Human Services & Welfare Committee

HHS ANNOUNCES THAT ALL STATES RECEIVE CHILD SUPPORT INCENTIVE AWARDS; FOURTEEN STATES ALSO RECEIVE PENALTIES

November 18, 2003

Yesterday, HHS officially notified every state that it had won federal child support enforcement incentive funds based on one of five measures. Those measures are paternity establishment, support order enforcement, current collections, cases with payment on arrearages, and cost-effectiveness. At the same time, 14 states also received notice of financial penalties for noncompliance, including a potential loss of Temporary Assistance to Needy Families (TANF) funding.

The same law governing incentive payments also subjects states to penalties based on their performance on three of those measures-paternity establishment, support order establishment, and current collections. A penalty is assessed if the state is unable to pass a data reliability audit for any measure or fails to attain a specified level of performance in the three penalty performance measures. The penalty is actually imposed if a state fails to meet either condition (performance or data reliability) with respect to the same performance measure for a second year. Fourteen states, commonwealths or territories received letters that stated that a penalty would be imposed. Ten failed for the second year in a row (for FY 01 and FY 02) to meet data reliability standards, and thus are in penalty status. They are Hawaii, D.C, Indiana, Louisiana, New Mexico, Rhode Island, the Virgin Islands, Delaware, Guam and Puerto Rico. A significant number of states failed to meet data reliability standards for FY 01, but improved enough in FY 02 that they were not assessed a penalty. The data reliability standard is that the data must be 95% reliable. Three states-Alabama, Nevada, and New Hampshire-failed to meet a performance standard in both FY 01 and 02 and received a penalty. These three states failed to meet the standard for paternity establishment for the IVD population. One state, Kansas, will receive a penalty for failing to meet paternity establishment goals for the general population.

In some cases, the amount of the child support payment incentive is larger than the amount of the TANF penalty imposed. However, it is important to remember that a state must reinvest its incentive award in its child support enforcement program, but penalties are assessed from the TANF funding stream. The penalty that will be imposed on the fourteen states, commonwealths or territories is 1% of their TANF funding for FY 2004. Penalty states would find that each quarterly payment for the year would be reduced for a total of the TANF penalty amount. These states will additionally have to expend an equivalent amount of state funds in FY 2005 to replace any reduction of federal funds.

States have the right to appeal their penalties, and if they do so, the TANF penalty is delayed pending the outcome of the appeal. An appeal must be made with in 60 days to HHS's Departmental Appeals Board.

If you are a state legislator, you may want to check with your IV D Director regarding the amount of your state's incentive award. If your state received a penalty, you may want to find out if your executive branch intends to appeal the award.

A legislative change that is in the Senate Finance Committee TANF reauthorization bill and supported by NCSL and the American Public Human Services Association, would give states an extra year to make improvements before a penalty was imposed. Currently, states do not actually have a full year from the time that they receive an initial notice of a deficiency in which to take corrective action. But Senate floor action and a House/Senate conference must occur before TANF reauthorization is completed, and that will not happen until next year. Furthermore, the legislative provision in the Senate Finance Committee bill does not have an effective date, so it is unclear whether current penalty states would get an immediate reprieve. It is possible that efforts may be made by penalty states during the last days of Congress to delay or alter these child support penalties.

For question regarding federal rules on child support enforcement programs, please contact Sheri Steisel or Lee Posey at fedhumserv-info@ncsl.org, or call NCSL's D.C. office at (202) 624-5400.