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F I S C A L I M P A C T R E P O R T

SPONSOR Griego

DATE TYPED 1/26/05

HB

SHORT TITLE Limit Child Support Payments to Principal

SB 195

ANALYST Weber

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HB 162

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department

Attorney General

SUMMARY

Synopsis of Bill

Senate Bill 195 limits the powers of the Child Support Enforcement Division (CSED) to the

collection of child support principal only and relieves CSED from assessing, calculating,

collecting, and distributing interest

.

Significant Issues

The Human Services Department comments.

CSED has just over 70,000 child support cases, 36,023 of them have established court orders,

with stipulations to accrue interest on delinquent debt. The number of cases where interest was

billed in January 2005 was 29,650 (indicating that they have had a delinquency in paying child

support). The number of cases where monthly payments are being made, including interest, is

estimated at 18,151 or 61%. Therefore, 11,500 are not making monthly payments on their

accruing balance, which includes interest.

Statistically, 60 % of non-custodial parents (NCPs) make less than $20,000.00 annually. The

vast majority of our delinquent cases are low-income non-custodial parents. So each month that

Senate Bill 195 -- Page 2

goes by has more and more NCPs that cannot afford to pay anything more than their current

support amounts, because like a credit card debtor they have balances, which can never be paid

off by just paying the minimum payment.

The federal Office of Child Support Enforcement (OCSE) has recognized this trend nationally.

Its Strategic Plan of December 2004, stressed the need for have states to implement innovative

programs to prevent the build-up of unpaid support and interest.

Currently, under statute 40-4-7.3, CSED is empowered to assess interest on delinquent child

support at the rate of four percent. The 46

th

Legislative Session decreased the interest rate from

8 ¾ percent from the law’s effective date forward. As CSED implemented this change across its

administrative systems, the change proved more complicated than first envisioned. The idea to

eliminate interest altogether seemed even more feasible than just reducing it to four percent.

The bill change would:

- Allow the Department to discontinue assessing interest on cases.

- Reduce the time Department attorneys and the courts must spend on each case.

- Preserve the right of the custodial parent to bring a separate action to collect interest

(because there are situations where child support obligors definitely should be assessed

interest).

- Also preserves the right of CSED to attempt to assess and collect interest in certain

extremely egregious cases

PERFORMANCE IMPLICATIONS

HSD reports the following two performance indicators may be impacted.

Amount of child support collected, in millions of dollars.

Percent of current support owed that is collected.

FISCAL IMPLICATIONS

There is no direct impact on revenues or expenditures. HSD does anticipate some savings

related to a simpler administrative tasks.

TECHNICAL ISSUES

The Attorney General notes.

1. Statutes are prospective only unless the Legislature makes clear that a statute applies

retroactively. The principal only limitation may be applicable only to future support orders. The

Legislature should clarify whether the department will continue to collect interest in the future

under existing child or spousal support orders that include assessment of interest.

2. The authority allowing HSD to assess and collect interest if "the department determines that

the circumstances warrant assessment and collection of interest" may be impermissibly vague

.

MW/yr