How Do Child Support Order Amounts Affect Payments and Compliance? Optimizing Reliability and Collections Finding the ‘Win-Win’ for both parents

 Custodial parents want the maximum amount of sustainable support, and want it to be reliable – something they can count on.  Non-custodial parents want to support their children financially, but want an order they can meet without going into debt each month.

 Analysis of research done nationally over the past twenty years,  Analysis of over 100,000 California cases – matching income, expenses and orders with the corresponding performance of the cases.  There is a ‘sweet spot’ of reliability (regular payments) and collections, where both are maximized.

 Dr. Elaine Sorenson, Urban Institute, (2007) ◦ Non-Compliance of a current support order is another major factor is arrears growth ◦ Majority of arrears owed by a small percentage of obligors ◦ 11% of obligors owed 54% of the arrears ◦ Of those obligors, 3/4 had no reported income, or income less than $10,000 per year. ◦ Interest on support arrears is responsible for a large portion of arrears growth

 Setting Appropriate Orders is effective in reducing arrears growth: ◦ Turetsky, Vicki (2000) Center for Law and Social Policy ◦ Sorensen, Elaine, et al (2007) Urban Institute ◦ Meyer, Daniel (2003,2008) Institute for Research on Poverty ◦ Formoso, Carl (2003, 2010) Washington State  Specific link seen at 20% ‘tax rate’ – when support was over 20% of the obligor’s income, arrears grew

 While many researchers have done great work on child support collectability and arrears growth, many have had troubles with data.  Use of large government databases – Employment Department or census data against child support databases – not linked person-to-circumstances.

 102,332 cases, representing 142,730 children  All cases with orders established since December  Current Assistance: 36,198 cases  Former Assistance: 32,307 cases  Never Assisted: 33,827 cases

 Compliance Rates: ◦ Current: 40.8% ◦ Former: 61.6% ◦ Never: 70.6%  Median NCP Income : $1504/month  Average Visitation: 9.8%

 We expected to find a “Laffer Curve” of increasing rates bringing increasing collections, up to a point – after that point, as the order rises, collections actually decrease.

Compliance By Percentage of Income – One Child

Payments Per Child By Percentage of Income – One Child

By ROTW 1% Categories:

Minimum Wage vs. Non-Minimum Wage

The drops indicate negative compliance and Minimum Wage cases represent: ■ 62 % in the 1 child calculation ■ 66% in the 2 children calculation ■ 66% in the 3 children calculation

When is it used?  Used in defaults  Presumed Orders – Family Code 17400(d)(2)  Imputed orders – ’40 hours per week’ when obligor is really working 24 What are the results?  Lower overall compliance  Lower collections

That’s nice – but so what? How does this affect me, the Operational Manager?

 Using this data, we can see that income ‘fiction’ is very dangerous – imputing income, or using presumed income, may get a higher order, but does not increase collections.  Payment behavior is very closely linked to ‘provable’ income – not ‘should be’ income.

 Lessons: ◦ Take time to research real income – the extra time at the front end will be repaid by better compliance later. ◦ Income less than minimum wage floors is OK – and will result in higher compliance AND more dollars collected, than using artificial income.

 Based just on the ‘tax rate’, or percentage of gross income ordered for support, you can predict payment behavior.  Adding in variables such as education, criminal history, language issues, etc., gives you a very good predictive ability.

 If your order isn’t appropriate, don’t get it – which variable is wrong?  If your order is right, but the predictor tells you that compliance is low, identify this case for extra support, early intervention strategies, etc.

Green Square = 60% or better; Yellow Square = 40%-60%; Red Square = less than 40%

 It’s a mod, mod, mod world…..  Modifying orders will either: ◦ Upward: Increase collections at a small FPM3 cost; ◦ Down: Increase FPM3 at a small collections cost; ◦ No change – Increase FPM3 and collections by 11%

 Get a list of the high ‘tax-rate’ cases and intervene – until you can get them modified, call early and often.  Consider connecting these obligors with services – workforce panel, etc.

 To what extent do the following affect payment behavior? ◦ Education Level ◦ Obligor age when 1 st child born ◦ Criminal history ◦ Language ◦ Parental relationship with child  If ‘tax rate’ is the most important, to what degree to the factors above affect payments, and how can the CSS Program assist?