Deficit Reduction Act Has Child-Support Options for States to Meet TANF Work Requirements

No one doubts that child support helps families. The gold standard for child support—support paid regularly and on time while children are children—helps families stay off Temporary Assistance for Needy Families (TANF) and keeps them from returning to TANF after increased earnings from employment or other income enables them to leave it. But, under amendments to federal child-support law included in the Deficit Reduction Act of 2005 (S. 1932), child support paid regularly and on time can also help state TANF programs meet the drastically increased TANF work participation rates set under the Act and thus avoid the severe financial penalties that are imposed on states which fail to meet those rates.

Under federal law before the Deficit Reduction Act, TANF families assigned their right to the child support collected for the time they were on TANF to the government. The state and federal governments could keep the support collected to reimburse the state and federal coffers for the TANF cash benefits paid to the family. A state could, but was not required to, turn over (in child-support parlance, “pass through”) some or all of the support collected to the family. And support passed through came entirely out of the state share of the collection.

The Deficit Reduction Act’s amendments to Title IV-D of the Social Security Act, the law governing state child-support programs and their interplay with state TANF programs, give the states several options regarding the child support collected for both families receiving TANF benefits and families who formerly received TANF benefits. These options include paying more of the child support collected after a family exits TANF to the family and paying more of the support collected while a family is on TANF to the family.

States should take up the Deficit Reduction Act’s option to pass through more of the support collected while a family is on TANF to that family. Taking up the option should be states which are—especially states such as Illinois—in greatest jeopardy of failing to meet work participation rates and being penalized financially for that failure because of the Act’s changes in the way the rates are set. The option helps the states meet the higher TANF work participation rates and, by extension, helps families.

Specifically, under the Deficit Reduction Act the federal government waives its share of the child support collected for families on TANF up to $100 per month for one child and up to $200 per month for two or more children. (For Illinois, the federal government’s share is 50 percent; for poorer states, the federal share goes as high as 80 percent.) In order for the federal government to waive its share of the collected support, states must pass the collected support through the TANF families and disregard the amount passed through in calculating the families’ TANF grants. While passing through and disregarding child support would be good for all TANF families—enhancing their income and their stability and encouraging noncustodial parents’ payments—states could decide the specifics of which TANF families would be eligible for the child-support pass-through and disregard based on more immediate state TANF program needs. Some likely options for pass-through to categories of TANF families include

• passing through and disregarding all child support up to the $100 or $200 maximum for any family about to be terminated from TANF for earned income; and
• passing through and disregarding all child support up to the $100 or $200 maximum for any family whose approved work activities allow the state to count the family toward the state’s 50 percent work participation rate.
  

Such options would not only help the states meet their work participation rates by allowing families counted in the rate to remain on TANF but also increase those families’ incomes and help them achieve more financial stability before eventually exiting TANF. States have some time—the new child-support disregard policies go into effect October 1, 2008—to decide how to respond to the child-support options of the Deficit Reduction Act. But the time for states to use child-support payments more wisely in structuring their TANF programs has arrived.