Money for Nothing

But still the checks came only intermittently. Once again, Baker assumed her husband was to blame. When she took him to court this time, however, she discovered he had been paying, through regular deductions from his paycheck. This time, it wasn’t his fault. It was the fault of the government agency charged with collecting the money from him and sending it on to her. When I asked officials to look into Baker’s case, it turned out that many checks had been delayed, one had been lost, and one payment was stuck in the agency’s bank account. The fate of the last was especially infuriating: The Michigan agency had made a mistake on the check sent to Ohio, but when Ohio sent it back, Michigan decided not to re-issue it. Why? Because a new state computer system couldn’t display information on certain lost or corrected checks. And it wasn’t fixed until September, when a programming upgrade kicked in. So a January payment from Baker’s ex-husband has sat in a Michigan bank account for months–along with another $9.3 million owed to other parents much like her, the vast majority of them former welfare recipients entitled to the money under new welfare reform rules. “We know who the recipients are,” says Jane Varner, the head of child support enforcement in Wayne County, Mich. “We just can’t get it to them.”

Michigan is not alone. Once upon a time, the biggest obstacle to child support for women like Baker was their ex-husbands. Today, though, state-run collection agencies have an impressive array of enforcement tools at their disposal, helping them collect billions in child support every year. But while states are getting better and better at collecting the money, they’re getting worse at distributing that money to whom it’s due. On any given day, the state agencies that collect child support are sitting on a pot of gold worth hundreds of millions of dollars; on Sept. 30, 2001, the end of the last federal fiscal year, $738 million worth of child support had been paid in by parents, but not yet paid out to custodial parents and their children. For these parents, most of them women, deadbeat dads aren’t the problem. Deadbeat states are.

And the crisis is intensifying. The problem of “undistributed collections,” as the feds call it, has been mentioned during congressional hearings, but has received scant news coverage. Although federal officials are well aware of the problem, the Bush administration has so far declined to step in and mandate reforms. Meanwhile, by this fall, some two million single parents will have been kicked off or left welfare thanks to the pressure of time limits established in 1996’s welfare reform law. Almost all of them are owed child support–money on which their ability to provide for themselves and their children in a post-welfare world depends.

When Congress established state-operated child support programs in 1975, its intent wasn’t to help children but to recoup welfare costs by, in effect, turning welfare into a debt that child support would partially repay. To receive welfare benefits, mothers signed over their rights to child support and agreed to help collection efforts by identifying the father and telling caseworkers where to find him. Women on welfare got little extra for their cooperation–$50 per month of the child support collected–and the state kept the rest until a mother’s welfare debt was satisfied.

Not surprisingly, collection rates were low. States lacked the technology and infrastructure to pursue the fathers–many poor themselves–and mothers had little incentive to cooperate. During the 1980s and 1990s, the federal government expanded the role of state child support programs to help families who were not on the welfare rolls, in the hope of keeping them that way. To increase the odds of collecting support, the federal government helped the state agencies upgrade their information technology, providing improved record-keeping and better information-sharing between county and state officials and to the federal government. Adding a stick to the carrot, the federal government also began to assess multimillion-dollar penalties against states that missed federal deadlines for updating computer systems.

They succeeded, at least in part. Centralized payment centers were established in each state, to take control from inefficient or ineffective local officials and to lessen the burden on employers, who had previously been charged with deducting wages and getting the payments to a bewildering array of county offices. Thus armed, state agencies began cracking down on a wider pool of deadbeat dads. As collections rose, so did expectations. Federal, state, and local laws were changed to get tough on delinquent parents. Federal tax refunds were seized–state refunds, too, in some states. Prosecutors began to publicize their efforts to track down and punish deadbeat dads, winning them public acclaim and the parents better enforcement.

Eventually, former welfare recipients also began to benefit. When Congress decided to implement stricter welfare standards in 1996, they also changed the rules to allow former welfare recipients to keep a larger share of child support collected by the state. Congress also passed legislation that improved collections across the board. Some fathers, for instance, had frustrated collection efforts by switching jobs, staying one step ahead of wage deduction orders. Under the new law, authorities could much more quickly find out when delinquent parents switched jobs and ensure that wage deduction orders got to the new employers. States also got better access to information on bank accounts and began to seize the assets of deadbeats.

As the states got better at roping in recalcitrant parents, state agencies began collecting enormous amounts of money. Instead of the $1 billion collected back in the late 1970s, state agencies brought in a total of $12 billion in 1996. In 2001, with enforcement powers further enhanced, they brought in a whopping $19 billion.

But there was a catch: The very reforms that boosted collection have overloaded the systems designed to deliver those funds to the families entitled to them. As a result, the more money states collect, the more goes undistributed. The dollar figure reported by the states to the federal government is a snapshot of the money held, undistributed, on one day–September 30 of each year. This figure has climbed rapidly over time. In 1999, the states reported $503 million in undistributed support. In 2000, it was $634 million. By 2001, it was $738 million. “The irony is, the better the collections, the bigger this problem will be,” says Vicki Turetsky, senior staff attorney for the Center for Law and Social Policy, an advocacy group for low-income families.

In Michigan, a massive effort to link all counties through a statewide computer system had the perverse effect of freezing payments, including those to Jane Baker and hundreds of other mothers. When state officials decided last year to switch over to the new computer system to meet an Oct. 1, 2001, federal deadline–rather than pay a $49 million penalty–they soon discovered that the software didn’t include the capabilities necessary for distributing some of the funds. In total, $9.3 million ended up frozen in the old county computer system for months. Many Michigan women who no longer get welfare and are desperate to get any child support they can will have had to wait almost an entire year for their full share of their child support. “While it’s a wonderful system,” concedes Wayne County official Jane Varner, “we’ve had our hurdles.”

Another major problem has been a federal mandate for each state to launch a centralized office to process payments, taking the job over from the counties. While the overhauls have made collections more efficient–Sherri Heller, commissioner of HHS’s Office of Child Support Enforcement, argues that the increase in undistributed funds suggests that the state units are doing a better job of keeping track of the money than the counties had been–they did create massive, if temporary, backlogs. In Alabama, this conversion delayed payments to Kendra Monroe for almost two years. Like many women, Monroe figured her ex-husband was to blame when his child support checks for their two young daughters stopped coming. She considered bringing him to court again, but he insisted the money was being deducted from his paychecks and sent to the state, as ordered. He even sent her payroll records from the construction company where he worked to prove it.

So she wrote to the Alabama Department of Human Resources, demanding information. They sent her a record of her account. It showed her ex-husband was telling the truth. He was indeed making payments to the state. She wrote the state again, demanding her money. Getting no reply, she wrote letter after letter, each one sounding more frustrated and angry. By her sixth letter, she was telling her local caseworker: “If your goal is not to help the children of Marshall County to get their due support and OBVIOUSLY [her emphasis] it is not, then perhaps you should find another position more suitable for your type.” Monroe says it reminded her of the time, soon after her divorce, when a state worker shrugged her off as she tried to plead that she was struggling financially and needed help to track down her ex-husband for support. As she remembers it, the worker turned away, saying, “Everybody has hard times.” Complains Monroe, “They don’t care.”

The head of Alabama’s child support unit, Tom Bernier, says there are too few workers to be able to respond to all complaints. Bernier described a kind of bureaucratic triage in which complainants who holler loudest get attention. But hollering didn’t help Monroe. It was only when I contacted Bernier’s office that his staff looked into the matter and discovered a series of mistakes had been made.

It turned out that in Alabama, when Monroe’s case was transferred to the new state office, there was a “conversion error”; an official had mistakenly decided that her child support was payable to the state to compensate for welfare benefits she had received. Although Monroe had been on welfare for about a year after her 1992 divorce, she has worked ever since. In her case, every dollar of the support the state of Alabama was holding belonged to her.

From October 2000 through May 2002, her ex-husband’s payments accumulated in her account, adding up to $4,971. But no one in the state agency noticed it. “That shouldn’t have happened,” concedes Bernier. But he says with the large caseloads they have, “it is not uncommon. We ought to be doing more. It’s an imperfect world. It does tend to be a resources issue. There are a lot of cases and a lot more that needs to be done.”

But the growth in enforcement cannot account–alone–for the size of the backlog. Rather, much of the problem stems from a familiar combination of understaffing, underfunding, bureaucratic indifference, and outmoded procedure. For instance, one widespread problem is that families move without notifying child-support officials. Michigan didn’t have a current address for the mother of John Rogers, and as a result, $21,000 paid by his father sat in a government bank account for three years. “Everything that could go wrong did go wrong,” in this case, says Wayne County’s Jane Varner.

Rogers’s father, James, worked for a Ford Motor company steel plant outside Detroit, and from 1996 until 1999 his paychecks were garnished weekly. But in October 1999, he got a letter saying he was behind. He hired a lawyer, who forced Wayne County to do an audit. They found that $21,000 had been collected, but not sent to his ex-wife, because she had moved without notifying the county of her new address. So the money didn’t go to the child. Instead, the family collected welfare.

After the audit was done, the state took $11,000 to reconcile the welfare debt, and sent the rest to the mother. Rogers’s current wife, Betty, asks a reasonable question: “Why didn’t they call us?” The child support agency knew the money was coming from the father, and the father knew where the child was living. “To contact the non-custodial parent and ask where the custodial parent is, with the volume of cases we have, that is not standard procedure,” Varner says. And, she adds, the law does not demand it. It only demands that the agency search for the non-paying parent. “We are making every effort to improve, and we are improving, but, do you know what I’m saying, there is some responsibility on the part of the custodial parent to tell us: ‘We’ve moved.'”

Varner has a point. No doubt, a certain number of would-be child-support recipients fail in this respect. But partly because of the bureaucratic problems and backlogs, many parents still receive child support only sporadically, if at all. It stands to reason that those not getting support regularly won’t necessarily remember to tell the child support agency they’re moving. “Why would they think about notifying the Friend of the Court?” admits Mary Beth Kelly, chief judge of the Wayne County, Mich. Circuit Court, which oversees the child support office (known as Friend of the Court). “They’ve given up hope of getting child support.”

Varner said she’d love to have enough staff to track down mothers. But her office has 247 employees for 220,000 child-support cases, almost 900 per worker, a caseload three times the national average. In Michigan, where state officials are coping with budget cuts for other social services, the resource issue is a question without a good answer. “Where do you put your resources?” asks Marcia McBrien, spokesman for the Michigan Supreme Court, which oversees county Friends of the Courts. “Today in state government everybody is strapped. Everybody is trying to do more with less.”

So what are states to do? With limited staff and resources, can child-support agencies be expected to track down mothers in the same way they track down fathers? Advocates say yes. Geraldine Jensen, president of the Association for Children for Enforcement of Support (ACES), a national advocacy group, has been raising the issue of undistributed collections every chance she gets. Her group has lobbied congressmen and senators and HHS officials to make changes that would force states to pay this money out quickly. “People have so many problems overcoming the disputes that occur when families break up, and then to have to overcome the barriers that government puts up when they hold on to the money, literally sends children to bed hungry,” says Jensen. She wants Congress to require states to use state and national parent locators, now available for finding absent parents, to find families awaiting checks.

In fact, some states are already making it work. Nick Young, director of the child-support program in Virginia, says that simply updating addresses in their files was a key to reducing his state’s undistributed collections. “I always tell my folks, if you want to find somebody, you can,” says Young. “People are not trying to evade you. They are findable.” His staff has access to a wide variety of databases and records to locate people, including banking and utility records. “We have interfaces with all the major utilities.” After a move, he says, “eventually they will get a cell phone.” His agency also tries to get contact names and phone numbers of relatives and employers for each parent, to improve their chances of finding families if they’ve moved by the time a support check comes in.

But it takes staff to do this. Two years ago, the state of Virginia had five people assigned to finding custodial parents. Now Young has 49 people devoted to the task. By contrast, Wayne County’s agency doesn’t have staff assigned exclusively to finding parents. Rather, it has 15 “parent locate” staff who also have other administrative duties. (The county also puts the names of custodial parents they can’t find on their Web site, posts them in court buildings, and even passes lists out in churches in an effort to find parents before the funds are considered abandoned property by the state.) And while the agency’s new computer systems allow them to search employment and credit bureau databases–which help them find some parents–the burden is still on the parent to notify the agency, not vice versa.

Virginia’s experience suggests that distribution problems can be solved with the right combination of funding and practice. You’d think, then, that federal authorities would make sure the best practices developed in one state are exported to the rest. Yet while officials at the Department of Health and Human Services acknowledge the problem, they are reluctant to intervene. “It is truly an important issue to reduce the undistributed collections–dramatically,” says David Siegel, deputy commissioner of the Office of Child Support Enforcement within HHS, which oversees child-support programs in the states, and pays two-thirds of administrative costs. But “not everything needs a regulation to fix,” he says. “Not everything requires a new law.” Siegel’s boss, Sherri Heller, is satisfied that the states are trying their best and don’t need a push from the feds. In fact, she told me she counts on the news media to apply that pressure. States take action, she says, “because they don’t want to get bad press.”

Instead of recommending new mandates to force states to solve the problem, the Bush administration turned to consultants–and excuses. Excuses that minimize the problem, by pointing out that undistributed funds are only three percent of total collections; excuses that obscure the problem, by pointing out that a portion–they’ve never bothered to figure out how much–of the undistributed money can be held legally for six months because it comes from tax refunds. To confuse matters more, the states are allowed, under federal law, to take two days to process the undistributed money before paying it out. But no one knows how much of the money is being processed at any given time. (Heller is “wrestling” with whether to mandate more detailed reporting from the states.)

The consultants, meanwhile, are hired both to give “technical assistance” to states that are looking for causes and solutions and to survey states to hear their explanations for why collected money sits undistributed. Not surprisingly, these consultants have discovered the same problems activists and local officials have been complaining about for years: difficulties in finding good addresses for custodial parents, for instance, or payments coming into the agency without enough identifying information. Even more frustrating is that much of what the consultants have reported was already known to HHS. The last time the agency did an audit of these funds was in 1997, when the department looked at 11 states and found most were underreporting the amounts that were undistributed. In some states, the audit found, “undistributed collections were not always being handled and processed in a timely manner; unidentified collections were not being researched in a timely manner and unclaimed checks which were returned to States’ treasurers were not being reported properly.”

But thanks to the 1996 welfare law–which, in part, was intended to reduce paperwork for the states–HHS doesn’t audit the programs any more. Instead of audits, HHS relies on “self-assessments” performed by the states themselves–that is, the same states that have already been shown to underreport the problem. And without audited figures to guide them, HHS officials admit they don’t really know the true size of the problem. “I can’t quantify how much of the [$738 million] that the states report is a problem of reporting and how much is a problem of it not getting to families,” says Heller.

“This is a national problem,” says Nick Young of Virginia. He is a recent past president of a national group of child-support directors and speaks to his counterparts around the country about the issue of undistributed collections. “We have a saying here, ‘It is better to have not collected it, than to collect it and let it sit,'” says Young. The amounts each state reports as undistributed range widely, from a low of $332,000 in Colorado to a high of $190 million in California. State audits and news accounts have told stories of troubles getting money to families in Illinois, Tennessee, Ohio, Florida, Georgia, and California. Young says Virginia started working on the problem after meeting with Jensen of ACES a few years ago. “She was right,” he says. “We weren’t paying attention to it. We meant well,” Young says. “It was not through malfeasance. It wasn’t mean-spiritedness. There was just too much going on.”

Calls made for this article finally got results for Kendra Monroe and Jane Baker. Alabama sent Monroe the $4,971 that had accumulated over two years. Michigan traced Baker’s missing check and sent it to her. The other Michigan families–owed a total of $9.3 million–had to wait for the September computer fix. Both women were pleased to get the money, outraged about how difficult it had been, and worried about other families in the same spot. “I’m not the only one this is happening to,” says Baker. “It’s such a struggle all the time. It’s not been easy.” As Monroe puts it, “Just imagine all the women out there they’re doing the same thing to, if they don’t have somebody to push it through.”

But that somebody is–or should be–the federal government. Because the child-support collection system was originally designed to recoup welfare costs, it’s still structured to favor collection over distribution. As a result, today, the federal government pays financial incentives to the states if they do a good job collecting child support and penalizes them if they don’t comply with federal requirements. Yet there are no incentives for doing a good job–or penalties for doing a bad job–of distributing the support to families. It makes perfect sense for the federal government to push states to reduce undistributed collections, especially if welfare reform is to remain a success. According to a University of Wisconsin study of divorced women in that state, those who leave welfare are much more likely to return to welfare if they don’t get child support. Without support, there was a 31-percent chance the woman would return to welfare within six months. With support, even a small amount, there was only a 10-percent chance of returning to welfare.

This fall, Congress will get a second chance. The welfare reauthorization law being debated specifically addresses the issue of undistributed collections, and if passed, will direct HHS to take a leading role in estimating the size of the problem, figuring out how long the delays are and how to shorten them, and recommending to Congress how to reduce undistributed collections. Which is exactly how it should be. After all, child-support enforcement in the United States is a federal program in all but name. The federal government calls the shots. It’s their law. For the most part, it’s their money, too. Now, it’s time for the federal government to make sure the program works.