Existing law requires the parties to a proceeding in which child support is at issue to disclose whether a party is currently receiving, or intends to apply for, assistance under the California Work Opportunity and Responsibility to Kids (CalWORKs) program for the maintenance of the child.

This bill would instead require the parties to disclose whether a party is currently receiving, or currently applying for, that assistance.

Existing law requires, as a condition of eligibility for benefits under certain public assistance programs, including the CalWORKs and Medi-Cal programs, that applicants or recipients assign to the county any rights they may have to child support, as specified. Existing law delegates to the Department of Child Support Services and local child support agencies the responsibility for collecting and enforcing child support obligations, including child support delinquencies, as defined. Existing law sets the interest accrual rate on the principal amount of a money judgment that remains unsatisfied at 10%, and permits the Legislature to change that interest rate, if the change is applied prospectively.

This bill would instead prohibit the department and local child support agencies, with respect to delinquencies in child support that have been assigned to the county, from charging interest on the principal amount owed. agencies from collecting interest that accrues on or after January 1, 2022, on the principal amount of child support that has been assigned as described above.

GOVERNOR'S VETO

GV Bill Id:AB 1092

Author:(Jones-Sawyer)

As Enrolled Ver:September 16, 2019

2/3 vote

SUMMARY:

Limits the interest that may be charged on child support assigned to the county.

Major Provisions

1. Provides that if child support is assigned to the county, as provided, the Department of Child Support Services (DCSS) or the local child support agency (LCSA) shall not collect interest that accrues on or after January 1, 2022 on the principal amount assigned.
2. Adds chaptering out amendments with SB 337 (Skinner) of the current legislative session.

The Senate Amendments:

Limit application of the bill to interest that accrues on or after January 1, 2022, and add chaptering out language.

Governor’s Veto Message:

This bill would prohibit the collection of interest on past due child support arrears owed to the state and counties.

I appreciate the author's concern that charging interest on past due child support arrears can lead to uncollectable debt and make it harder for families to escape poverty. Reducing child poverty across our state is a key priority for me. To this end, in 2019 we have increased CalWORKs grants by almost 25%, increased the amount of earnings families on CalWORKs can retain every month from $225 to $600, and increased the level of savings and the value of the car families can have and qualify for CalWORKs. We also increased and expanded California's Earned Income Tax Credit to $1 billion annually, including an increase of $1,000 in the credit for families with children under the age of 6.

While I cannot support this bill as it would lead to an estimated revenue loss of millions of dollars outside the budget process, it is critical that child support agencies use their tools under current law to modify child support orders that help align the support with the person's ability to pay as doing so helps support low-income families. I am directing the Department of Child Support Services to review the compromise of arrears program and consider any needed changes to address uncollectable debts and increase collections.

COMMENTS:

Interest accrues on unpaid child support, like all other money judgements, at the statutory rate of 10% per year. This is to encourage timely payment of child support and to help pay custodial families for the time without support, for example to cover a loan the family had to take out in order to pay the rent in the absence of child support. However, not all child support is paid to the family. When families apply for CalWORKs they are required to assign to the county their right to receive any child support owed during the assistance period and to cooperate with the child support program in enforcement efforts. Thus, the interest on support owed to the county does not benefit the family. Moreover, the significant 10% interest is added to unpaid child support and can result, for some obligors, particularly those whose orders are set by default and not based on ability to pay, in debt that is effectively uncollectible. Large, uncollectible debt benefits no one, including the child, the custodial family, the obligor, or even the county.

In an effort to lessen the likelihood of large, uncollectible debts from accruing that may actually stop an obligor from paying support, this bill prevents the collection of interest charged on debt assigned to the county that accrues on or after January 1, 2022.

According to the Author:

AB 1092 will protect our state's poorest families from accumulating massive amounts of debt when failing to make a child support payment. For low-income parents, most of their child support payments do not go to their children. Instead, the majority of their payments go to the government to pay back public assistance received by the family. When a parent fails to make a timely child support payment, the payment owed becomes government debt and is assessed a ten percent interest rate, one of the highest in the nation. . . .

AB 1092 requires that the state set the interest rate for government owed child support debt no higher than that required by federal law. Doing so, will help stop cycles of poverty by ending the continual assessment of uncollectable, interest accruing debt that currently impacts only California's poorest families receiving public assistance.

Arguments in Support:

The sponsors of the bill, Anti-Recidivism Coalition, Good+ Foundation – Fatherhood Initiative, Insight Center for Community Economic Development, Policy Link, Tipping Point Community, and Western Center on Law and Poverty, write in support: "California should not charge interest on government-owed child support debt . . . . Doing so undermines the economic stability of poor families, and grows debt to levels that non-custodial parents are unable to pay. AB 1092 will change this and, by doing so, offers one important reform necessary to achieve a more just child support system which achieves the goal of supporting the wellbeing of children."

Legal Services for Prisoners with Children adds:

When a noncustodial parent of a CalWORKs recipient child falls into arrears on their child support payments, that debt accumulates. Currently, there is no requirement to expunge or expire debts owed by non-custodial parent as a result of a delinquent child support payments, even if it is deemed uncollectable. Moreover, because this is debt is owed to the government, laws that protect garnishment of wages do not apply. Instead, the wage garnishment takes a full quarter of all earnings no matter how small they are. Additionally, bank accounts and tax credits of non-custodial parents can also be sequestered to pay back the child support debt owed to the government. None of this money directly or indirectly benefits the children who are most in need of the resources.

AB 1092 brings fairness and decency to the manner in which child support payments are handled in California. It requires that the state set the interest rate for government owed child support debt to no higher than that required by federal law. Doing so will help stop cycles of poverty by ending the continual assessment of uncollectable, interest accruing debt that currently impacts only California's poorest families receiving public assistance.

Arguments in Opposition:

None

FISCAL COMMENTS:

According to the Senate Appropriations Committee, revenue loss to the state in the low hundreds of millions of dollars. (General Fund)

While some principal and interest are collected from child support obligors, it is not known how much of the amounts owed actually would be recouped (if the ability to charge interest going forward continues).

VOTES:

ASM JUDICIARY: 10-1-1

YES: Mark Stone, Chau, Chiu, Gonzalez, Holden, Kalra, Maienschein, Obernolte, Petrie-Norris, Reyes

NO: Gallagher

ABS, ABST OR NV: Fong

ASM APPROPRIATIONS: 14-3-0

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Eggman, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

NO: Bigelow, Brough, Diep

ASSEMBLY FLOOR: 42-28-8

YES: Aguiar-Curry, Arambula, Berman, Bloom, Bonta, Calderon, Carrillo, Chau, Chiu, Chu, Daly, Friedman, Gabriel, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Reyes, Luz Rivas, Robert Rivas, Santiago, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NO: Bauer-Kahan, Bigelow, Boerner Horvath, Brough, Cervantes, Chen, Choi, Cooper, Cunningham, Dahle, Diep, Flora, Frazier, Gallagher, Irwin, Kiley, Lackey, Mathis, Mayes, Melendez, Patterson, Petrie-Norris, Quirk-Silva, Ramos, Salas, Smith, Voepel, Waldron

ABS, ABST OR NV: Burke, Cooley, Eggman, Fong, Eduardo Garcia, Maienschein, Muratsuchi, Obernolte, Rodriguez, Blanca Rubio

SENATE FLOOR: 27-13-0

YES: Allen, Archuleta, Atkins, Beall, Bradford, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Hertzberg, Hill, Hueso, Jackson, Leyva, McGuire, Mitchell, Monning, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener

NO: Bates, Borgeas, Caballero, Chang, Dahle, Grove, Hurtado, Jones, Moorlach, Morrell, Nielsen, Stone, Wilk

ASSEMBLY FLOOR: 49-25-5

YES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Bonta, Calderon, Carrillo, Chau, Chiu, Chu, Cooley, Daly, Frazier, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Quirk, Quirk-Silva, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Santiago, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NO: Bigelow, Boerner Horvath, Brough, Cervantes, Chen, Choi, Cooper, Cunningham, Diep, Flora, Gallagher, Irwin, Kiley, Lackey, Maienschein, Mathis, Mayes, Melendez, Patterson, Petrie-Norris, Ramos, Salas, Smith, Voepel, Waldron

ABS, ABST OR NV: Burke, Eggman, Fong, Low, Obernolte

UPDATED:

VERSION: September 16, 2019

CONSULTANT: Leora Gershenzon / JUD. / (916) 319-2334 FN: 0002225 FN:

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1092

Author:(Jones-Sawyer)

As Amended Ver:September 6, 2019

Majority vote

SUMMARY:

Limits the interest that may be charged on child support assigned to the county.

Major Provisions

1. Provides that if child support is assigned to the county, as provided, the Department of Child Support Services (DCSS) or the local child support agency (LCSA) shall not collect interest that accrues on or after January 1, 2022 on the principal amount assigned.
2. Adds chaptering out amendments with SB 337 (Skinner) of the current legislative session.

The Senate Amendments:

Limit application of the bill to interest that accrues on or after January 1, 2022, and add chaptering out language.

COMMENTS:

Interest accrues on unpaid child support, like all other money judgements, at the statutory rate of 10% per year. This is to encourage timely payment of child support and to help pay custodial families for the time without support, for example to cover a loan the family had to take out in order to pay the rent in the absence of child support. However, not all child support is paid to the family. When families apply for CalWORKs they are required to assign to the county their right to receive any child support owed during the assistance period and to cooperate with the child support program in enforcement efforts. Thus, the interest on support owed to the county does not benefit the family. Moreover, the significant 10% interest is added to unpaid child support and can result, for some obligors, particularly those whose orders are set by default and not based on ability to pay, in debt that is effectively uncollectible. Large, uncollectible debt benefits no one, including the child, the custodial family, the obligor, or even the county.

In an effort to lessen the likelihood of large, uncollectible debts from accruing that may actually stop an obligor from paying support, this bill prevents the collection of interest charged on debt assigned to the county that accrues on or after January 1, 2022.

According to the Author:

AB 1092 will protect our state's poorest families from accumulating massive amounts of debt when failing to make a child support payment. For low-income parents, most of their child support payments do not go to their children. Instead, the majority of their payments go to the government to pay back public assistance received by the family. When a parent fails to make a timely child support payment, the payment owed becomes government debt and is assessed a ten percent interest rate, one of the highest in the nation. . . .

AB 1092 requires that the state set the interest rate for government owed child support debt no higher than that required by federal law. Doing so, will help stop cycles of poverty by ending the continual assessment of uncollectable, interest accruing debt that currently impacts only California's poorest families receiving public assistance.

Arguments in Support:

The sponsors of the bill, Anti-Recidivism Coalition, Good+ Foundation – Fatherhood Initiative, Insight Center for Community Economic Development, Policy Link, Tipping Point Community, and Western Center on Law and Poverty, write in support: "California should not charge interest on government-owed child support debt . . . . Doing so undermines the economic stability of poor families, and grows debt to levels that non-custodial parents are unable to pay. AB 1092 will change this and, by doing so, offers one important reform necessary to achieve a more just child support system which achieves the goal of supporting the wellbeing of children."

Legal Services for Prisoners with Children adds:

When a noncustodial parent of a CalWORKs recipient child falls into arrears on their child support payments, that debt accumulates. Currently, there is no requirement to expunge or expire debts owed by non-custodial parent as a result of a delinquent child support payments, even if it is deemed uncollectable. Moreover, because this is debt is owed to the government, laws that protect garnishment of wages do not apply. Instead, the wage garnishment takes a full quarter of all earnings no matter how small they are. Additionally, bank accounts and tax credits of non-custodial parents can also be sequestered to pay back the child support debt owed to the government. None of this money directly or indirectly benefits the children who are most in need of the resources.

AB 1092 brings fairness and decency to the manner in which child support payments are handled in California. It requires that the state set the interest rate for government owed child support debt to no higher than that required by federal law. Doing so will help stop cycles of poverty by ending the continual assessment of uncollectable, interest accruing debt that currently impacts only California's poorest families receiving public assistance.

Arguments in Opposition:

None

FISCAL COMMENTS:

According to the Senate Appropriations Committee, revenue loss to the state in the low hundreds of millions of dollars. (General Fund)

While some principal and interest are collected from child support obligors, it is not known how much of the amounts owed actually would be recouped (if the ability to charge interest going forward continues).

VOTES:

ASM JUDICIARY: 10-1-1

YES: Mark Stone, Chau, Chiu, Gonzalez, Holden, Kalra, Maienschein, Obernolte, Petrie‑Norris, Reyes

NO: Gallagher

ABS, ABST OR NV: Fong

ASM APPROPRIATIONS: 14-3-1

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Eggman, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

NO: Bigelow, Brough, Diep

ABS, ABST OR NV: Fong

ASSEMBLY FLOOR: 42-28-10

YES: Aguiar-Curry, Arambula, Berman, Bloom, Bonta, Calderon, Carrillo, Chau, Chiu, Chu, Daly, Friedman, Gabriel, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Reyes, Luz Rivas, Robert Rivas, Santiago, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NO: Bauer-Kahan, Bigelow, Boerner Horvath, Brough, Cervantes, Chen, Choi, Cooper, Cunningham, Dahle, Diep, Flora, Frazier, Gallagher, Irwin, Kiley, Lackey, Mathis, Mayes, Melendez, Patterson, Petrie-Norris, Quirk-Silva, Ramos, Salas, Smith, Voepel, Waldron

ABS, ABST OR NV: Burke, Cooley, Eggman, Fong, Eduardo Garcia, Maienschein, Muratsuchi, Obernolte, Rodriguez, Blanca Rubio

SENATE FLOOR: 27-13-0

YES: Allen, Archuleta, Atkins, Beall, Bradford, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Hertzberg, Hill, Hueso, Jackson, Leyva, McGuire, Mitchell, Monning, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener

NO: Bates, Borgeas, Caballero, Chang, Dahle, Grove, Hurtado, Jones, Moorlach, Morrell, Nielsen, Stone, Wilk

UPDATED:

VERSION: September 6, 2019

CONSULTANT: Leora Gershenzon / JUD. / (916) 319-2334 FN: 0002225

 THIRD READING  

Bill No: AB 1092

Author: Jones-Sawyer (D)

Amended: 9/6/19 in Senate

Vote: 21

SENATE JUDICIARY COMMITTEE: 7-1, 6/25/19

AYES: Jackson, Durazo, Lena Gonzalez, Monning, Stern, Umberg, Wieckowski

NOES: Jones

NO VOTE RECORDED: Borgeas

SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/30/19

AYES: Portantino, Bradford, Durazo, Hill, Wieckowski

NOES: Bates, Jones

ASSEMBLY FLOOR: 42-28, 5/29/19 - See last page for vote

SUBJECT: Child support: enforcement

SOURCE: All of Us or None

Anti-Recidivism Coalition

Good+ Foundation – Fatherhood Initiative

Insight Center for Community Economic Development

Legal Services for Prisoners with Children

PolicyLink

San Francisco Office of the Treasurer & Tax Collector-Financial

Justice Project

Tipping Point Community

Western Center on Law and Poverty

DIGEST:

This bill prohibits the Department of Child Support Services (DCSS) or a local child support agency (LCSA) from collecting interest that accrues on or after January 1, 2022, on the principal amount of past-due child support owed to the county.

Senate Floor Amendments of 9/6/19 add chaptering out provisions to ensure that this bill does not override provisions from SB 337 (Skinner), if that bill is signed into law before this one.

ANALYSIS:

Existing federal law:

1. Establishes the federal Temporary Assistance for Needy Families (TANF) program to provide aid to eligible families. (42 U.S.C. § 601 et seq.)
2. Provides an option in federal law for states to pass through to custodial parents receiving TANF benefits up to the first $100 in child support collected for one child and up to $200 for two or more children and to disregard those amounts when calculating TANF eligibility and grant amounts. (42 U.S.C. § 657)

Existing state law:

1. Imposes a 10 percent annual interest rate on the principal amount of a money judgment that remains unsatisfied. (Code Civ. Proc. § 685.010.)
2. Establishes DCSS as the single statewide agency responsible for the administration and management of California’s child support enforcement program. (Fam. Code § 17202.)
3. Requires each county to maintain an LCSA, which is responsible for promptly and effectively establishing, modifying, and enforcing child support obligations. (Fam. Code § 17400.)
4. Requires the DCSS and local child support agencies to promptly and effectively collect and enforce child support obligation in compliance with federal law. (Fam. Code § 175000(a).)
5. Establishes the CalWORKS program to administer TANF funds to eligible families for welfare-to-work services. (Welf. & Inst. Code § 11200 et seq.)
6. Provides that, as a condition of eligibility for cash assistance, an applicant or recipient must assign to the county their rights to any child support owed at the time of the application and during the receipt of benefits in an amount not to exceed the total cash assistance provided to the family. (Welf. & Inst. Code § 11477.)
7. Requires LCSAs to pay families receiving cash assistance the first $50 of any child support collected in a month in which child support is due, and that payment cannot be deducted from the amount of assistance to which the family would otherwise be eligible. (Fam. Code § 17504; Welf. & Inst. Code § 11475.3.)

This bill:

1. Prohibits the DCSS or an LCSA from collecting interest that accrues on or after January 1, 2022, on the principal amount of delinquent child support owed to the county.
2. Alters an existing disclosure requirement in child support proceedings when a party intends to apply for specified federal benefits to instead be triggered if the party is currently applying for the benefits.
3. Contains chaptering out provisions.

Background

Although federal law does not impose interest on past-due child support, California imposes a 10 percent annual interest rate on the principal amount of a money judgment—including past-due child support—that remains unsatisfied. (Code Civ. Proc. § 685.010.) This interest rate on child support is one of the highest in the country; other states, including New Jersey and South Dakota, have effectively eliminated interest for child support debt.^[1]

This interest is paid directly to the custodial family, unless they are a low-income family receiving assistance under the state’s California Work Opportunities and Responsibility to Kids (CalWORKs) program. In order to receive that assistance, the family must assign its rights to child support to the LCSA, which receives the interest and the principal, except for $50 per month that passes through to the family.

The 10 percent interest on missed payments owed to counties adds to the mounting financial distress of marginally employed, low-income parents, which increases their likelihood of missing additional payments and compounds the challenges they face. These policies make it harder to escape poverty, drive fractured families further apart, and ultimately harm child wellbeing.

This bill retains the 10 percent interest rate when the support is owed to families, but would, as of January 1, 2022, prohibit the DCSS or an LCSA from collecting interest that accrues on or after January 1, 2022, on the principal amount of delinquent child support owed to the county.

It should be noted that existing law provides several punishments against obligors with arrearages, including wage garnishments, reporting to credit companies, passport denial or revocations, and prosecution under state and federal laws. (See Fam. Code § 4700 et seq.; Pen. Code § 270; 42 U.S.C. § 652(k); 18 U.S.C. § 228.) Thus, even if the interest on past-due child support owed to counties is no longer collected, there would continue to be powerful incentives for making timely child support payments to the counties.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, revenue loss to the state in the low hundreds of millions of dollars. (General Fund)

While some principal and interest are collected from child support obligors, it is not known how much of the amounts owed actually would be recouped (if the ability to charge interest going forward continues).

SUPPORT: (Verified 9/6/19)

All of Us or None (co-source)

Anti-Recidivism Coalition (co-source)

Good+ Foundation – Fatherhood Initiative (co-source)

Insight Center for Community Economic Development (co-source)

Legal Services for Prisoners with Children (co-source)

PolicyLink (co-source)

San Francisco Office of the Treasurer & Tax Collector-Financial Justice Project (co-source)

Tipping Point Community (co-source)

Western Center on Law and Poverty (co-source)

Arts Bridging the Gap

Children’s Defense Fund – California

City and County of San Francisco

City of Long Beach Councilmember Rex Richardson

City of Long Beach Councilmember Rex Richardson

Community Coalition

Community Housing Partnership

Earn, Inc.

East Bay Community Law Center

Growing Greatness

Homeboy Industries

Lawyers’ Committee for Civil Rights of the San Francisco Bay Area

Legal Services for Prisoners with Children

MILPA

Rise Together

Root & Rebound

Rubicon Programs

San Bernardino Fatherhood

Showing Up For Racial Justice

Starting Over, Inc.

Underground Scholars Initiative at UC Riverside

OPPOSITION: (Verified 9/6/19)

None received

ARGUMENTS IN SUPPORT: The author writes, “AB 1092 will protect our state’s poorest families from accumulating massive amounts of debt when failing to make a child support payment. For low-income parents, most of their child support payments do not go to their children. Instead, the majority of their payments go to the government to pay back public assistance received by the family. When a parent fails to make a timely child support payment, the payment owed becomes government debt and is assessed a ten percent interest rate, one of the highest in the nation.

“The most recent available data shows that $3.9 billion of the state’s public child support debt is unpaid interest. The families affected by this debt are the poorest in California. Our state should not make money from the interest charged to their debt.”

The sponsors write, “California has some of the strongest wage garnishment laws for consumer debt in the country, protecting income earned until a family has an income that surpasses full-time employment with minimum wage earnings. However, this protection does not exist for the garnishment of a person’s wages to pay back child support public benefits debt owed to the government, which allows up to 65% of their wages to be garnished. Research indicates that non-custodial parents become disheartened and feel trapped when they realize their wages will be garnished at such a steep rate, and that the amount garnished will go to the state and not to their children or their child’s custodial parent. This leaves just 35 percent of wages coming home to pay for basic needs of the non-custodial parent and to support other children or family members. It also undermines the ability of a noncustodial parent to co-parent their own child as they lack resources to visit them or take time off work to attend school functions.”

ASSEMBLY FLOOR: 42-28, 5/29/19

AYES: Aguiar-Curry, Arambula, Berman, Bloom, Bonta, Calderon, Carrillo, Chau, Chiu, Chu, Daly, Friedman, Gabriel, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Reyes, Luz Rivas, Robert Rivas, Santiago, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NOES: Bauer-Kahan, Bigelow, Boerner Horvath, Brough, Cervantes, Chen, Choi, Cooper, Cunningham, Dahle, Diep, Flora, Frazier, Gallagher, Irwin, Kiley, Lackey, Mathis, Mayes, Melendez, Patterson, Petrie-Norris, Quirk-Silva, Ramos, Salas, Smith, Voepel, Waldron

NO VOTE RECORDED: Burke, Cooley, Eggman, Fong, Eduardo Garcia, Maienschein, Muratsuchi, Obernolte, Rodriguez, Blanca Rubio

Prepared by: Josh Tosney / JUD. / (916) 651-4113

9/9/19 18:26:04

**** END ****

1. The Payback Problem: How Taking Parents’ Child Support Payments to Pay Back the Cost of Public Assistance Harms California Low-Income Children & Families—A Call for Reform to Put Families First (Apr. 2019), p. 36. By comparison, the historical average annual return of the S&P 500, adjusted for inflation, is approximately 7 percent, not including tax. (Investopedia, What is the average annual return for the S&P 500? https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp. [as of Jun. 14, 2016].) ↑

 THIRD READING  

Bill No: AB 1092

Author: Jones-Sawyer (D)

Amended: 8/30/19 in Senate

Vote: 21

SENATE JUDICIARY COMMITTEE: 7-1, 6/25/19

AYES: Jackson, Durazo, Lena Gonzalez, Monning, Stern, Umberg, Wieckowski

NOES: Jones

NO VOTE RECORDED: Borgeas

SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/30/19

AYES: Portantino, Bradford, Durazo, Hill, Wieckowski

NOES: Bates, Jones

ASSEMBLY FLOOR: 42-28, 5/29/19 - See last page for vote

SUBJECT: Child support: enforcement

SOURCE: All of Us or None

Anti-Recidivism Coalition

Good+ Foundation – Fatherhood Initiative

Insight Center for Community Economic Development

Legal Services for Prisoners with Children

PolicyLink

San Francisco Office of the Treasurer & Tax Collector-Financial

Justice Project

Tipping Point Community

Western Center on Law and Poverty

DIGEST:

This bill prohibits the Department of Child Support Services (DCSS) or a local child support agency (LCSA) from collecting interest that accrues on or after January 1, 2022, on the principal amount of past-due child support owed to the county.

ANALYSIS:

Existing federal law:

1. Establishes the federal Temporary Assistance for Needy Families (TANF) program to provide aid to eligible families. (42 U.S.C. § 601 et seq.)
2. Provides an option in federal law for states to pass through to custodial parents receiving TANF benefits up to the first $100 in child support collected for one child and up to $200 for two or more children and to disregard those amounts when calculating TANF eligibility and grant amounts. (42 U.S.C. § 657)

Existing state law:

1. Imposes a 10 percent annual interest rate on the principal amount of a money judgment that remains unsatisfied. (Code Civ. Proc. § 685.010.)
2. Establishes DCSS as the single statewide agency responsible for the administration and management of California’s child support enforcement program. (Fam. Code § 17202.)
3. Requires each county to maintain an LCSA, which is responsible for promptly and effectively establishing, modifying, and enforcing child support obligations. (Fam. Code § 17400.)
4. Requires the DCSS and local child support agencies to promptly and effectively collect and enforce child support obligation in compliance with federal law. (Fam. Code § 175000(a).)
5. Establishes the CalWORKS program to administer TANF funds to eligible families for welfare-to-work services. (Welf. & Inst. Code § 11200 et seq.)
6. Provides that, as a condition of eligibility for cash assistance, an applicant or recipient must assign to the county their rights to any child support owed at the time of the application and during the receipt of benefits in an amount not to exceed the total cash assistance provided to the family. (Welf. & Inst. Code § 11477.)
7. Requires LCSAs to pay families receiving cash assistance the first $50 of any child support collected in a month in which child support is due, and that payment cannot be deducted from the amount of assistance to which the family would otherwise be eligible. (Fam. Code § 17504; Welf. & Inst. Code § 11475.3.)

This bill:

1. Prohibits the DCSS or an LCSA from collecting interest that accrues on or after January 1, 2022, on the principal amount of delinquent child support owed to the county.
2. Alters an existing disclosure requirement in child support proceedings when a party intends to apply for specified federal benefits to instead be triggered if the party is currently applying for the benefits.

Background

Although federal law does not impose interest on past-due child support, California imposes a 10 percent annual interest rate on the principal amount of a money judgment—including past-due child support—that remains unsatisfied. (Code Civ. Proc. § 685.010.) This interest rate on child support is one of the highest in the country; other states, including New Jersey and South Dakota, have effectively eliminated interest for child support debt.^[1]

This interest is paid directly to the custodial family, unless they are a low-income family receiving assistance under the state’s California Work Opportunities and Responsibility to Kids (CalWORKs) program. In order to receive that assistance, the family must assign its rights to child support to the LCSA, which receives the interest and the principal, except for $50 per month that passes through to the family.

The 10 percent interest on missed payments owed to counties adds to the mounting financial distress of marginally employed, low-income parents, increasing their likelihood of missing additional payments, compounding the challenges they face. These policies make it harder to escape poverty, drive fractured families farther apart, and ultimately harm child wellbeing.

This bill retains the 10 percent interest rate when the support is owed to families, but would, as of January 1, 2022, prohibit the DCSS or an LCSA from collecting interest that accrues on or after January 1, 2022, on the principal amount of delinquent child support owed to the county.

It should be noted that existing law provides several punishments against obligors with arrearages, including wage garnishments, reporting to credit companies, passport denial or revocations, and prosecution under state and federal laws. (See Fam. Code § 4700 et seq.; Pen. Code § 270; 42 U.S.C. § 652(k); 18 U.S.C. § 228.) Thus, even if the interest on past-due child support owed to counties is no longer collected, there would continue to be powerful incentives for making timely child support payments to the counties.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, revenue loss to the state in the low hundreds of millions of dollars. (General Fund)

While some principal and interest are collected from child support obligors, it is not known how much of the amounts owed actually would be recouped (if the ability to charge interest going forward continues).

SUPPORT: (Verified 8/30/19)

All of Us or None (co-source)

Anti-Recidivism Coalition (co-source)

Good+ Foundation – Fatherhood Initiative (co-source)

Insight Center for Community Economic Development (co-source)

Legal Services for Prisoners with Children (co-source)

PolicyLink (co-source)

San Francisco Office of the Treasurer & Tax Collector-Financial Justice Project (co-source)

Tipping Point Community (co-source)

Western Center on Law and Poverty (co-source)

Community Coalition

Lawyers’ Committee for Civil Rights of the San Francisco Bay Area

MILPA

Root & Rebound

Rubicon Programs

San Bernardino Fatherhood

OPPOSITION: (Verified 8/30/19)

None received

ARGUMENTS IN SUPPORT: The author writes, “AB 1092 will protect our state’s poorest families from accumulating massive amounts of debt when failing to make a child support payment. For low-income parents, most of their child support payments do not go to their children. Instead, the majority of their payments go to the government to pay back public assistance received by the family. When a parent fails to make a timely child support payment, the payment owed becomes government debt and is assessed a ten percent interest rate, one of the highest in the nation.

“The most recent available data shows that $3.9 billion of the state’s public child support debt is unpaid interest. The families affected by this debt are the poorest in California. Our state should not make money from the interest charged to their debt.”

The sponsors write, “California has some of the strongest wage garnishment laws for consumer debt in the country, protecting income earned until a family has an income that surpasses full-time employment with minimum wage earnings. However, this protection does not exist for the garnishment of a person’s wages to pay back child support public benefits debt owed to the government, which allows up to 65% of their wages to be garnished. Research indicates that non-custodial parents become disheartened and feel trapped when they realize their wages will be garnished at such a steep rate, and that the amount garnished will go to the state and not to their children or their child’s custodial parent. This leaves just 35 percent of wages coming home to pay for basic needs of the non-custodial parent and to support other children or family members. It also undermines the ability of a noncustodial parent to co-parent their own child as they lack resources to visit them or take time off work to attend school functions.”

ASSEMBLY FLOOR: 42-28, 5/29/19

AYES: Aguiar-Curry, Arambula, Berman, Bloom, Bonta, Calderon, Carrillo, Chau, Chiu, Chu, Daly, Friedman, Gabriel, Cristina Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Reyes, Luz Rivas, Robert Rivas, Santiago, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NOES: Bauer-Kahan, Bigelow, Boerner Horvath, Brough, Cervantes, Chen, Choi, Cooper, Cunningham, Dahle, Diep, Flora, Frazier, Gallagher, Irwin, Kiley, Lackey, Mathis, Mayes, Melendez, Patterson, Petrie-Norris, Quirk-Silva, Ramos, Salas, Smith, Voepel, Waldron

NO VOTE RECORDED: Burke, Cooley, Eggman, Fong, Eduardo Garcia, Maienschein, Muratsuchi, Obernolte, Rodriguez, Blanca Rubio

Prepared by: Josh Tosney / JUD. / (916) 651-4113

9/3/19 11:07:59

**** END ****

1. The Payback Problem: How Taking Parents’ Child Support Payments to Pay Back the Cost of Public Assistance Harms California Low-Income Children & Families—A Call for Reform to Put Families First (Apr. 2019), p. 36. By comparison, the historical average annual return of the S&P 500, adjusted for inflation, is approximately 7 percent, not including tax. (Investopedia, What is the average annual return for the S&P 500? https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp. [as of Jun. 14, 2016].) ↑

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

AB 1092 (Jones-Sawyer) - Child support: enforcement

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on August 30, 2019

Bill Summary:

AB 1092 would prohibits the Department of Child Support Services or a local child support agency from charging interest on delinquent child support assigned to the county.

Fiscal Impact:

Revenue loss to the state in the low hundreds of millions of dollars. (General Fund)

While some principal and interest are collected from child support obligors, it is not known how much of the amounts owed actually would be recouped (if the ability to charge interest going forward continues).

Author Amendments:

Prohibit the collection of interests that accrues on the principal on or after January 1, 2022.

-- END --

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

AB 1092 (Jones-Sawyer) - Child support: enforcement

Bill Summary:

AB 1092 would prohibits the Department of Child Support Services (DCSS) or a local child support agency (LCSA) from charging interest on delinquent child support assigned to the county.

Fiscal Impact:

Revenue loss to the state in the low hundreds of millions of dollars. (General Fund)

While some principal and interest are collected from child support obligors, it is not known how much of the amounts owed actually would be recouped (if the ability to charge interest going forward continues).

Background:

According to the analysis of this measure by the Senate Committee on Judiciary:

Existing law imposes a 10 percent interest rate on the principal amount of unpaid money judgments, including delinquent child support. This interest is paid directly to the custodial family, unless they are a low-income family receiving assistance under the state’s California Work Opportunities and Responsibility to Kids (CalWORKs) program. In order to receive that assistance, the family must assign its rights to child support to the LCSA, which receives the interest and the principal, except for $50 per month that passes through to the family.

The recouped interest of child support rights that are assigned to counties varies by program but overall the average distribution is roughly 48 percent to the federal government, 47 percent to the state, and 5 percent to the county.

Proposed Law:

This bill would prohibit DCSS and local child support agencies, with respect to delinquencies in child support that have been assigned to the county, from charging interest on the principal amount owed.

Related Legislation:

AB 1091 (Jones-Sawyer, 2019) would extend indefinitely a program to suspend the obligation to pay child support when the obligor is incarcerated or institutionalized involuntarily, as provided. AB 1091 is on the inactive file on the Assembly floor.

Staff Comments:

As of January 2019, there was $2.93 billion in assigned principal support owed to the government. AB 1092 would eliminate the charging of interest on money judgements assigned to LCSA going forward. By stopping the ability to charge interest on the principal, this measure would reduce the annual accumulation of assigned interest by approximately $293 million, of which approximately $147 million would go to the federal government, $139 million would go to the state, and $7 million would go to the counties.

In FY 2015-16, $71 million in assigned interest collections was distributed as recoupment to the federal ($34 million), state ($32 million), and county ($5 million) governments.

-- END --

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2019-2020 Regular Session

Bill No: AB 1092 (Author:Jones-Sawyer)

Version: March 28, 2019

Hearing Date: June 25, 2019

Fiscal: Yes

Urgency: No

Consultant: JT

SUBJECT

Child support: enforcement

DIGEST

This bill prohibits the Department of Child Support Services (DCSS) or a local child support agency (LCSA) from charging interest on delinquent child support owed to the county.

EXECUTIVE SUMMARY

Existing law imposes a 10 percent interest rate on the principal amount of unpaid money judgments, including delinquent child support. This interest is paid directly to the custodial family, unless they are a low-income family receiving assistance under the state’s California Work Opportunities and Responsibility to Kids (CalWORKs) program. In order to receive that assistance, the family must assign its rights to child support to the LCSA, which receives the interest and the principal, except for $50 per month that passes through to the family.

This bill, which is sponsored by a coalition of groups that seek to benefit families and children, would eliminate the 10 percent interest rate on missed payments that are directed to an LCSA. The bill would leave intact the 10 percent interest rate that applies when the support is owed to families. The bill has no known opposition.

PROPOSED CHANGES TO THE LAW

Existing federal law:

1. Establishes the federal Temporary Assistance for Needy Families (TANF) program to provide aid to eligible families. (42 U.S.C. § 601 et seq.)
2. Provides an option in federal law for states to pass through to custodial parents receiving TANF benefits up to the first $100 in child support collected for one child and up to $200 for two or more children and to disregard those amounts when calculating TANF eligibility and grant amounts. (42 U.S.C. § 657)

Existing state law:

1. Imposes a 10 percent annual interest rate on the principal amount of a money judgment that remains unsatisfied. (Code Civ. Proc. § 685.010.)
2. Establishes DCSS as the single statewide agency responsible for the administration and management of California’s child support enforcement program. (Fam. Code § 17202.)
3. Requires each county to maintain an LCSA, which is responsible for promptly and effectively establishing, modifying, and enforcing child support obligations. (Fam. Code § 17400.)
4. Requires the DCSS and local child support agencies to promptly and effectively collect and enforce child support obligation in compliance with federal law. (Fam. Code § 175000(a).)
5. Establishes the CalWORKS program to administer TANF funds to eligible families for welfare-to-work services. (Welf. & Inst. Code § 11200 et seq.)
6. Provides that, as a condition of eligibility for cash assistance, an applicant or recipient must assign to the county their rights to any child support owed at the time of the application and during the receipt of benefits in an amount not to exceed the total cash assistance provided to the family. (Welf. & Inst. Code § 11477.)
7. Requires LCSAs to pay families receiving cash assistance the first $50 of any child support collected in a month in which child support is due, and that payment cannot be deducted from the amount of assistance to which the family would otherwise be eligible. (Fam. Code § 17504; Welf. & Inst. Code § 11475.3.)

This bill:

1. Prohibits the DCSS or an LCSA from charging interest on delinquent child support owed to the county.
2. Alters an existing disclosure requirement in child support proceedings when a party intends to apply for specified federal benefits to instead be triggered if the party is currently applying for the benefits.

COMMENTS

1. Low-income families receiving public assistance must assign child support rights to the state

In 1975, Congress established the national child support program as Part D of Title IV of the Social Security Act (IV-D Program) to provide funds to states to establish paternity and child support orders and collect and distribute child support obligations. Under the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), a state’s TANF plan must contain an assurance that the state will operate a child support enforcement program pursuant to an approved IV-D plan. Basic responsibility for administering the program is left to the state, but the federal government plays a major role in dictating the major design features, funding, and evaluating state programs. The federal government provides a 66 percent match for any funds a state expends for reimbursable child support enforcement activities. Collections made on behalf of families receiving TANF assistance (and some other cash assistance programs) are shared 50:50 with the federal government.

The Child Support Program was originally designed by Congress as a cost-recovery program to reimburse state and federal governments for public assistance paid to children. However, since the implementation of welfare reform in 1996, the program has focused on family self-sufficiency and getting more child support dollars directly to families.

On February 8, 2006, President Bush signed the Deficit Reduction Act of 2005 (DRA). The DRA made substantial cuts in federal funding for child support enforcement, mandated some additional enforcement activities, and provided new state flexibility to pass through more child support dollars to children who currently receive or formerly received TANF-funded assistance.

Effective October 1, 2008, the federal government waived its 50 percent share of any child support collected on behalf of any TANF-funded family up to $100 per month for families with one child and up to $200 for families with two or more children, regardless of whether the child support is for current support or arrearages.

For current CalWORKs recipients, the first $50 of current support received from the noncustodial parent in the month due is passed through to the CalWORKs family and “disregarded” as income or resources in determining eligibility and grant amount.

The child support program is administered by the DCSS, and LCSAs carry out child support enforcement duties at the county level. The state’s child support program collects child support from noncustodial parents for the purpose of establishing child support orders, collecting child support payments from noncustodial parents, and distributing collected child support to custodial parents and their children. Forty-nine local child support agencies work to locate absent parents; certify paternity; establish, enforce, and modify child support orders; and collect and distribute payments. The child support program serves approximately one in every 10 Californians. According to DCSS, 26 percent of custodial families live in poverty, and 77 percent of the DCSS’s caseload consists of current or former recipients of public assistance. In 2018, the average monthly child support distributed was about $300.

2. Public assistance payback programs fray families and perpetuate poverty

Requiring low-income families to forfeit child support to pay back public assistance harms families in numerous ways, including: lowering payment rates among people who do not want to see their money go to the government instead of their children; driving noncustodial parents to exit the formal economy to avoid wage garnishment; and increasing conflict in already fraught relationships, further disconnecting children and noncustodial parents.

The sponsors of this bill recently produced a study on the harms and inefficiencies of the policy of requiring low-income families to sign over their child support rights to the government.^[1] In fiscal year 2017-18, California collected $368 million in child support payments from such families to pay back the government for the cost of public benefits. $176 million of these payments went to the federal government, $168 million went to the state, and $23 million went to California counties. Much of these payback payments come from parents whose families no longer receive public benefits, as noncustodial parents often continue to pay back debt and penalties even after their family stopped receiving assistance. The study made the following key findings:

• requiring parents to pay back public assistance deprives low-income children of valuable resources;
• public assistance payback debt levels are unrealistic for low-income parents to repay;
• charging high interest rates for outstanding child support debt (in California, 10 percent compound interest) grows the debt to levels that low-income parents cannot repay;
• requiring parents to pay back public assistance disproportionately impacts families of color;
• requiring parents to pay back public assistance pushes parents to exit the formal economy to avoid wage garnishments;
• penalties for nonpayment can trap low-income parents in a cycle of joblessness and incarceration;
• requiring parents to pay back public assistance drives families apart; and
• requiring parents to pay back public assistance is not cost-effective, as most of the debt is uncollectible.

3. Prohibits interest from being charged on past-due child support owed to counties

Although federal law does not impose interest on past-due child support, California imposes a 10 percent annual interest rate on the principal amount of a money judgment—including past-due child support—that remains unsatisfied. (Code Civ. Proc. § 685.010.) This interest rate on child support is one of the highest in the country; other states, including New Jersey and South Dakota, have effectively eliminated interest for child support debt.^[2]

Under California law, interest on past-due child support accrues regardless of whether the child support is owed to a family or to a county that has assumed the family’s right to child support. The 10 percent interest on missed payments owed to counties compounds the issues described above, adding to the mounting financial distress of marginally employed, low-income parents, increasing their likelihood of missing additional payments, further exacerbating the problem. These policies make it harder to escape poverty, drive fractured families farther apart, and ultimately harm child wellbeing.

A 2003 study sheds light on the collectability of child support arrears owed for families receiving public assistance.^[3] The study found that as of March 2000, $14.4 billion was owed in past-due child support and that 28 percent of the child support debtors held 72 percent of the debt. Sixty percent of the debtors had either no income or annual income below $10,000. Moreover, 70 percent of the debt was owed for past-due public assistance assigned to the county. In other words, 70 percent of the money owed would not be going to families, but instead to the government to recoup the assistance paid to the family. Much of that child support debt was clearly never going to be paid, although it would still accrue interest at 10 percent a year.

This bill would retain the 10 percent interest rate when the support is owed to families, but would eliminate it when the support is owed to the county. The author writes:

AB 1092 will protect our state’s poorest families from accumulating massive amounts of debt when failing to make a child support payment. For low-income parents, most of their child support payments do not go to their children. Instead, the majority of their payments go to the government to pay back public assistance received by the family. When a parent fails to make a timely child support payment, the payment owed becomes government debt and is assessed a ten percent interest rate, one of the highest in the nation.

The most recent available data shows that $3.9 billion of the state’s public child support debt is unpaid interest. The families affected by this debt are the poorest in California. Our state should not make money from the interest charged to their debt.

AB 1092 prohibits the state from charging interest on any principal amount owed to the government for the reimbursement of public benefits. Doing so will help stop cycles of poverty by ending the continual assessment of uncollectable, interest accruing debt that currently impacts only California’s poorest families receiving public assistance.

It should be noted that existing law provides several punishments against obligors with arrearages, including wage garnishments, reporting to credit companies, passport denial or revocations, and prosecution under state and federal laws. (See Fam. Code § 4700 et seq.; Pen. Code § 270; 42 U.S.C. § 652(k); 18 U.S.C. § 228.) Thus, even if the 10 percent interest rate is eliminated, there would continue to be powerful incentives for making timely child support payments to counties.

The sponsors write:

California has some of the strongest wage garnishment laws for consumer debt in the country, protecting income earned until a family has an income that surpasses full-time employment with minimum wage earnings. However, this protection does not exist for the garnishment of a person’s wages to pay back child support public benefits debt owed to the government, which allows up to 65% of their wages to be garnished. Research indicates that non-custodial parents become disheartened and feel trapped when they realize their wages will be garnished at such a steep rate, and that the amount garnished will go to the state and not to their children or their child’s custodial parent. This leaves just 35 percent of wages coming home to pay for basic needs of the non-custodial parent and to support other children or family members. It also undermines the ability of a noncustodial parent to co-parent their own child as they lack resources to visit them or take time off work to attend school functions.

4. Fiscal impact

According to the Assembly Appropriations Committee:

Lost revenue (GF/local funds), possibly in the hundreds of millions of dollars annually, on assigned principal child support owed. As of January 2019, there was $2.93 billion in assigned principal support owed to the state. This bill eliminates prospectively charging interest on money judgements, reducing the annual accumulation of assigned interest by approximately $293 million, of which approximately $147 million would have been owed to the federal government, $139 million would have been owed to the state and $7 million would have been owed to local counties.

SUPPORT

All of Us or None (co-sponsor)

Anti-Recidivism Coalition (co-sponsor)

Good+ Foundation – Fatherhood Initiative (co-sponsor)

Insight Center for Community Economic Development (co-sponsor)

Legal Services for Prisoners with Children (co-sponsor)

PolicyLink (co-sponsor)

San Francisco Financial Justice Project (co-sponsor)

Tipping Point Community (co-sponsor)

Western Center on Law and Poverty (co-sponsor)

Community Coalition

Lawyers’ Committee for Civil Rights of the San Francisco Bay Area

MILPA

Office of the Treasurer & Tax Collector, City and County of San Francisco

Root & Rebound

Rubicon Programs

San Bernardino Fatherhood

OPPOSITION

None known

RELATED LEGISLATION

Pending Legislation:

SB 337 (Skinner, 2019) would increase the child support pass-through and disregard for families receiving CalWORKs. That bill is pending before the Assembly Judiciary Committee.

AB 1091 (Jones-Sawyer, 2019) would continue a program to suspend child support while an obligor is incarcerated or institutionalized. That bill was held in the Assembly.

Prior Legislation: See Comment 1.

PRIOR VOTES:

Assembly Floor (Ayes 42, Noes 28)

Assembly Appropriations Committee (Ayes 14, Noes 3)

Assembly Judiciary Committee (Ayes 10, Noes 1)

**************

1. The Payback Problem: How Taking Parents’ Child Support Payments to Pay Back the Cost of Public Assistance Harms California Low-Income Children & Families—A Call for Reform to Put Families First (Apr. 2019). ↑

2. The Payback Problem: How Taking Parents’ Child Support Payments to Pay Back the Cost of Public Assistance Harms California Low-Income Children & Families—A Call for Reform to Put Families First (Apr. 2019), p. 36. By comparison, the historical average annual return of the S&P 500, adjusted for inflation, is approximately 7 percent, not including tax. (Investopedia, What is the average annual return for the S&P 500? https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp. [as of Jun. 14, 2016].) ↑

3. Elaine Sorensen, Examining Child Support Arrears in California: The Collectability Study, Urban Institute (Mar. 2003). ↑

ASSEMBLY THIRD READING

ATR Bill Id:AB 1092

Author:(Jones-Sawyer)

As Amended Ver:March 28, 2019

Majority vote

SUMMARY:

Limits the interest that may be charged on child support assigned to the county.

Major Provisions

Provides that if child support is assigned to the county, the Department of Child Support Services (DCSS) or the local child support agency (LCSA) may not charge interest on the principal amount owed.

COMMENTS:

Interest accrues on unpaid child support, like all other money judgements, at the statutory rate of 10% per year. This is to encourage timely payment of child support and to help pay custodial families for the time without support, for example to cover a loan the family had to take out in order to pay the rent in the absence of child support. However, not all child support is paid to the family. When families apply for CalWORKs they are required to assign to the county their right to receive any child support owed during the assistance period and to cooperate with the child support program in enforcement efforts. Thus, the interest on support owed to the county does not benefit the family. Moreover, the significant 10% interest is added to unpaid child support and can result, for some obligors, particularly those whose orders are set by default and not based on ability to pay, in debt that is effectively uncollectible. Large, uncollectible debt benefits no one, including the child, the custodial family, the obligor, or even the county.

In an effort to lessen the likelihood of large, uncollectible debts from accruing that may actually stop an obligor from paying support, this bill eliminates the interest charged on debt assigned to the county.

According to the Author:

AB 1092 will protect our state's poorest families from accumulating massive amounts of debt when failing to make a child support payment. For low-income parents, most of their child support payments do not go to their children. Instead, the majority of their payments go to the government to pay back public assistance received by the family. When a parent fails to make a timely child support payment, the payment owed becomes government debt and is assessed a ten percent interest rate, one of the highest in the nation. . . .

AB 1092 requires that the state set the interest rate for government owed child support debt no higher than that required by federal law. Doing so, will help stop cycles of poverty by ending the continual assessment of uncollectable, interest accruing debt that currently impacts only California's poorest families receiving public assistance.

Arguments in Support:

The sponsors of the bill, Anti-Recidivism Coalition, Good+ Foundation – Fatherhood Initiative, Insight Center for Community Economic Development, Policy Link, Tipping Point Community, and Western Center on Law and Poverty, write in support: "California should not charge interest on government-owed child support debt . . . . Doing so undermines the economic stability of poor families, and grows debt to levels that non-custodial parents are unable to pay. AB 1092 will change this and, by doing so, offers one important reform necessary to achieve a more just child support system which achieves the goal of supporting the wellbeing of children."

Legal Services for Prisoners with Children adds:

When a noncustodial parent of a CalWORKs recipient child falls into arrears on their child support payments, that debt accumulates. Currently, there is no requirement to expunge or expire debts owed by non-custodial parent as a result of a delinquent child support payments, even if it is deemed uncollectable. Moreover, because this is debt is owed to the government, laws that protect garnishment of wages do not apply. Instead, the wage garnishment takes a full quarter of all earnings no matter how small they are. Additionally, bank accounts and tax credits of non-custodial parents can also be sequestered to pay back the child support debt owed to the government. None of this money directly or indirectly benefits the children who are most in need of the resources.

AB 1092 brings fairness and decency to the manner in which child support payments are handled in California. It requires that the state set the interest rate for government owed child support debt to no higher than that required by federal law. Doing so will help stop cycles of poverty by ending the continual assessment of uncollectable, interest accruing debt that currently impacts only California's poorest families receiving public assistance.

Arguments in Opposition:

None

FISCAL COMMENTS:

According to the Assembly Appropriations analysis, lost revenue General Fund (GF/local funds), possibly in the hundreds of millions of dollars annually, on assigned principal child support owed. As of January 2019, there was $2.93 billion in assigned principal support owed to the state. This bill eliminates prospectively charging interest on money judgements, reducing the annual accumulation of assigned interest by approximately $293 million, of which approximately $147 million would have been owed to the federal government, $139 million would have been owed to the state and $7 million would have been owed to local counties.

VOTES:

ASM JUDICIARY: 10-1-1

YES: Mark Stone, Chau, Chiu, Gonzalez, Holden, Kalra, Maienschein, Obernolte, Petrie-Norris, Reyes

NO: Gallagher

ABS, ABST OR NV: Fong

ASM APPROPRIATIONS: 14-3-1

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Eggman, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

NO: Bigelow, Brough, Diep

ABS, ABST OR NV: Fong

UPDATED:

VERSION: March 28, 2019

CONSULTANT: Leora Gershenzon / JUD. / (916) 319-2334 FN: 0000519

Date of Hearing: April 24, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1092

Author:(Jones-Sawyer) – As Amended Ver:March 28, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill limits the interest that may be charged on child support assigned to the county. This bill also provides that if child support is assigned to the county, the Department of Child Support Services (DCSS) or the local child support agency (LCSA) may not charge interest on the principal amount owed.

FISCAL EFFECT:

Lost revenue (GF/local funds), possibly in the hundreds of millions of dollars annually, on assigned principal child support owed. As of January 2019, there was $2.93 billion in assigned principal support owed to the state. This bill eliminates prospectively charging interest on money judgements, reducing the annual accumulation of assigned interest by approximately $293 million, of which approximately $147 million would have been owed to the federal government, $139 million would have been owed to the state and $7 million would have been owed to local counties.

COMMENTS:

1. Purpose. According to author:

AB 1092 requires that the state set the interest rate for government owed child support debt no higher than that required by federal law. Doing so, will help stop cycles of poverty by ending the continual assessment of uncollectable, interest accruing debt that currently impacts only California’s poorest families receiving public assistance.

1. Background. Interest accrues on unpaid child support, like all other money judgements, at the statutory rate of 10% per year. This is to encourage timely payment of child support and to help pay custodial families for the time without support, for example to cover a loan the family had to take out in order to pay the rent in the absence of child support. However, not all child support is paid to the family. When families apply for CalWORKs they are required to assign to the county their right to receive any child support owed during the assistance period and to cooperate with the child support program in enforcement efforts. Thus, the interest on support owed to the county does not benefit the family. Moreover, the significant 10% interest is added to unpaid child support and can result for some obligors, particularly those whose orders are set by default and not based on ability to pay, debt that is effectively uncollectible.
2. Related Legislation. AB 1091 (Jones-Sawyer) continues a program to suspend child support while an obligor is incarcerated or institutionalized. AB 1091 is pending in this Committee.

Analysis Prepared by: Kimberly Horiuchi / APPR. / (916) 319-2081

Date of Hearing: March 26, 2019

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

ABPCA Bill Id:AB 1092

Author:(Jones-Sawyer) – As Introduced Ver:February 21, 2019

As Proposed to be Amended

SUBJECT: Child support: INTEREST ON DEBT OWED TO COUNTY

KEY ISSUE: TO PREVENT THE BUILD-UP OF UNCOLLECTABLE CHILD SUPPORT THAT BENEFITS NEITHER THE OBLIGOR PARENT NOR THE OBLIGEE AND CHILD, SHOULD THE STANDARD INTEREST THAT ACCRUES ON UNPAID MONEY JUDGEMENTS – CURRENTLY 10% PER YEAR – NOT ACCRUE ON PAST DUE CHILD SUPPORT ASSIGNED TO THE COUNTY FOR FAMILIES receiving public assistance?

SYNOPSIS

Interest accrues on unpaid child support, like all other money judgements, at the statutory rate of 10% per year. This is to encourage timely payment of child support and to help pay custodial families for the time without support, for example to cover a loan the family had to take out in order to pay the rent in the absence of child support. However, not all child support is paid to the family. When families apply for CalWORKs they are required to assign to the county their right to receive any child support owed during the assistance period and to cooperate with the child support program in enforcement efforts. Thus, the interest on support owed to the county does not benefit the family. Moreover, the significant 10% interest is added to unpaid child support and can result, for some obligors, particularly those whose orders are set by default and not based on ability to pay, in debt that is effectively uncollectible. Large, uncollectible debt benefits no one, including the child, the custodial family, the obligor, or even the county.

In an effort to lessen the likelihood of large, uncollectible debts from accruing that may actually stop an obligor from paying support, this bill eliminates the interest charged on debt assigned to the county. In support the author states that this bill will “help stop cycles of poverty by ending the continual assessment of uncollectable, interest accruing debt that currently impacts only California’s poorest families receiving public assistance.” This bill is sponsored by a coalition of groups which include Policy Link and the Western Center on Law and Policy. There is no reported opposition to the bill.

SUMMARY: Limits the interest that may be charged on child support assigned to the county. Specifically, this bill provides that if child support is assigned to the county, the Department of Child Support Services (DCSS) or the local child support agency (LCSA) may not charge interest on the principal amount owed.

EXISTING LAW:

1. Establishes DCSS as the single statewide agency responsible for the administration and management of California’s child support enforcement program. (Family Code Section 17202.)
2. Requires, at the local level, the child support enforcement program to be run by LCSAs, which have the responsibility for promptly and effectively establishing, modifying, and enforcing child support obligations. (Family Code Section 17400.)
3. Establishes a formula to calculate support orders under the state child support guideline. (Family Code Section 4050 et seq.)
4. Allows individuals seeking modification of their child support orders to either contact their LCSA or file a motion with the court requesting modification. Directs the Judicial Council to develop a simplified method for modifying support orders. Requires the LCSA to monitor child support cases and seek modifications when necessary. (Family Code Sections 3650 et seq., 3680, 3680.5.)
5. Provides that interest accrues at the rate of 10% per annum on the principal amount of a money judgment remaining unsatisfied. (Code of Civil Procedure Section 685.010.)
6. Establishes the federal Temporary Assistance for Needy Families (TANF) program to provide aid and welfare-to-work services to eligible families and, in California, provides that TANF funds for welfare-to-work services are administered through the California Work Opportunity and Responsibility to Kids (CalWORKs) program. Establishes income, asset and real property limits used to determine eligibility for the CalWORKs program. (42 U.S.C. 601 et seq.; Welfare & Institutions Code Section 11200 et seq.)
7. Provides that, as a condition of eligibility for cash assistance, an applicant or recipient must assign to the state their rights to any child support owed during the receipt of benefits, as provided, in an amount not to exceed the total cash assistance provided to the family. (Welfare & Institutions Code Section 11477.)
8. Requires LCSAs to pay to families receiving cash assistance the first $50 of any child support collected in a month in which the child support is due, and that payment cannot be deducted from the amount of assistance to which the family would otherwise be eligible. (Family Code Section 17504; Welfare & Institutions Code Section 11477.)
9. Requires DCSS to establish and operate a program to compromise child support arrears and interest owed to the state for reimbursement of aid paid to the family. (Family Code Section 17560.)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: Interest accrues on unpaid child support, like all other money judgements, at the statutory rate of 10% per year. This is to encourage timely payment of child support and to help pay custodial families for the time without support, for example to cover a loan the family had to take out in order to pay the rent in the absence of child support. However, not all child support is paid to the family. When families apply for CalWORKs they are required to assign to the county their right to receive any child support owed during the assistance period and to cooperate with the child support program in enforcement efforts. Thus, the interest on support owed to the county does not benefit the family. Moreover, the significant 10% interest is added to unpaid child support and can result, for some obligors, particularly those whose orders are set by default and not based on ability to pay, in debt that is effectively uncollectible. Large, uncollectible debt benefits no one, including the child, the custodial family, the obligor, or even the county.

In an effort to lessen the likelihood of large, uncollectible debts from accruing that may actually stop an obligor from paying support, this bill eliminates the interest charged on debt assigned to the county. In support the author writes:

AB 1092 will protect our state’s poorest families from accumulating massive amounts of debt when failing to make a child support payment. For low-income parents, most of their child support payments do not go to their children. Instead, the majority of their payments go to the government to pay back public assistance received by the family. When a parent fails to make a timely child support payment, the payment owed becomes government debt and is assessed a ten percent interest rate, one of the highest in the nation. . . .

AB 1092 requires that the state set the interest rate for government owed child support debt no higher than that required by federal law. Doing so, will help stop cycles of poverty by ending the continual assessment of uncollectable, interest accruing debt that currently impacts only California’s poorest families receiving public assistance.

Basic explanation of the federal child support program. In 1975, Congress established the national child support program to provide funds to states to establish paternity and child support orders, and to collect and distribute child support. Under the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), a state’s TANF plan must contain an assurance that the state will operate a child support enforcement program pursuant to an approved plan. Basic responsibility for administering the child support program is left to the states but the federal government plays a significant role in dictating the major design features, funding and evaluating state programs. The federal government provides a 66 percent match for any funds a state expends for reimbursable child support enforcement activities. Collections made on behalf of families receiving TANF assistance are shared equally with the federal government.

The child support program was originally designed by Congress in 1975 as a cost-recovery program to reimburse state and federal governments for public assistance paid to children. However, since 1996 welfare reform, the program has focused on family self-sufficiency and getting more child support dollars directly to families. As stated in federal policy established by The Office of Child Support Enforcement: “Child support is no longer primarily a welfare reimbursement, revenue-producing device for the Federal and State governments; it is a family-first program, intended to ensure families’ self-sufficiency by making child support a more reliable source of income.” (Office of Child Support Enforcement, U.S. Department of Health and Human Services, National Child Support Enforcement Strategic Plan FY 2005-2009, 1.)

While the federal government requires all states to have a child support guideline to determine the amount of child support to charge, states are free to set their own guidelines. California’s guidelines can be found at Family Code Section 4050 et seq. Likewise, the federal government does not require that interest be charged on unpaid child support, but if it is, it is treated as unpaid child support.

Treatment of child support collected on behalf of CalWORKs recipients. When families apply for CalWORKs – California’s TANF program – they are required to assign to the county their rights to any child support owed during the period they receive assistance and to cooperate with the child support program in enforcement efforts. There are complex federal distribution rules for determining how child support collections are allocated between families and the government. As a general rule, child support paid while a family receives assistance, after the first $50 which is paid to the family, is retained by the state and shared with the federal government. Once a family leaves assistance, the family is paid the current support and any arrears owed them first and the government recoups what is owed to them – the amount of support due when the family was on assistance, up to the amount of assistance paid to the family – after the family is fully paid. In no event can the government retain more than what was paid out in assistance. Any child support collected over and above what was paid out to the family in assistance must be paid to the family.

Significant uncollectible child support in California. In almost all cases, child support orders should be based on actual income information to ensure they best represent the parties’ ability to pay and are collectible. In actuality, orders are often set by default, and where no income information is known about the obligor parent, support can be set based on minimum wage income, which still may be an uncollectible amount, depending on the child support obligor. Unpaid child support, like all unpaid money judgements, accrues interest at the rate of 10% per year. (Code of Civil Procedure Section 685.010.) The Urban Institute’s Collectibility Study, although 15 years old, still sheds light on the collectibility of child support arrears owed for families receiving public assistance. (Elaine Sorensen, Examining Child Support Arrears in California: The Collectibility Study, Urban Institute (March 2003).) That report found that, as of March 2000, 14.4 billion was owed in past-due child support and that 28% of the child support debtors held 72% of the debt. Sixty percent of the debtors had either no income or annual income below $10,000. Moreover, 70% of the debt was owed for past-due public assistance assigned to the county. In other words, 70 percent of the money owed would not be going to families, but instead to the government to recoup the assistance paid to the family. Much of that child support debt was clearly never going to be paid, although it would still accrue interest at 10% a year.

Children and families benefit from child support they can count on every month, not large, uncollectible arrears especially owed to the government for recoupment of aid. Families, particularly low-income families who have left the CalWORKs program, rely on timely child support payments to survive. Interest on debt to the extent that it encourages obligors to pay their child support obligation first helps families.

However, large uncollectible arrears can actually make it more difficult to collect ongoing child support and cause harm to families both financially and emotionally. The following, while taken from a report on incarcerated child support obligors, applies also to obligors with large child support debt, particularly debt owed to the county for recoupment and not to the family:

Most people agree that parents should support their children to the best of their ability. However, children receive the most benefit from reliable long-term support from their parents, even if those payments are modest. The key to regular child support payments is steady employment. . . . Those who cannot maintain steady employment and keep up with their child support obligations fall deeply into debt, and their children lose out. . . .

When researchers from the Urban Institute asked recently released men what kept them from returning to prison, the largest percentage singled out support from their families and seeing their children as the most important factors: ties with family and children mattered even more than housing or employment. Strong family relationships are positively correlated with maintaining employment, staying away from drugs, and rebuilding a social network after incarceration—practices that also make society safer and save taxpayers money. Yet, when parents walk away from jobs, they often pull away from their children. Parents who see no end in sight to their child support debts are less likely to remain in low-wage jobs, to comply with child support obligations in the future, or to reunite with their children and reintegrate into society.

(Kristen D. Levingston and Vicki Turetsky, Debtor’s Prison – Prisoners’ Accumulation of Debt as a Barrier to Reentry, 41 Clearinghouse Review (July-Aug. 2007) (footnotes omitted).) Moreover, the accumulation of uncollectible debt, along with the reduction in current support payments will reduce the state’s performance on federal child support measures. This, in turn, directly reduces the incentive funding California receives from the federal government for its child support program.

This bill seeks to reduce the interest burden on child support obligors for debt owed to the government, but not debt owed to families. This bill seeks to reduce uncollectible debt and encourage more obligors to pay their child support timely by eliminating the interest due on child support owed to the county for recoupment of public assistance paid to the family. Thus, under this bill, no interest will accrue on the support due and assigned to the county. Interest accrues at the rate of money judgements on all other child support debt that is owed to the family. This change should help encourage obligors to pay the ongoing, current obligation to families as they leave assistance – when the families most need the child support to survive – without huge uncollectible debt with 10% interest added for recoupment of public assistance that could well discourage obligors from making any payments.

In order to avoid the accrual of uncollectible arrears, order must be set accurately in the first place and then modified immediately when circumstances change. The best way to ensure that child support payments are made fully and timely every month is to have them accurately set in the first place, based on actual, not imputed, income, and modify them immediately upon a change of income. It is hoped that DCSS and the LCSAs improve processes and programs to reduce defaults, obtain actual incomes of the parties, and modify orders as soon as incomes change. That is the best way to avoid the build-up of uncollectible arrears and help ensure that children fully and timely benefit from child support payments.

Proposed amendments delete the bill’s reference to federal law. As in print, the bill provides that, for child support that is assigned to the county, neither DCSS nor a LCSA may charge interest on the principal amount owed at a rate higher than the rate required by federal law. As discussed above, federal law does not require that interest be charged on past due child support and certainty does not set a minimum rate. However, a statutory reference to a federal law that does not exist could be confusing. Therefore, the author has rightly agreed to amend the bill to delete that provision:

Family Law Section 17500(e): If child support is assigned to the county, the department or local child support agency shall not charge interest on the principal amount owed at a rate higher than the rate required by federal law.

ARGUMENTS IN SUPPORT: The sponsors of the bill, Anti-Recidivism Coalition, Good+ Foundation – Fatherhood Initiative, Insight Center for Community Economic Development, Policy Link, Tipping Point Community, and Western Center on Law and Poverty, write in support: “California should not charge interest on government-owed child support debt . . . . Doing so undermines the economic stability of poor families, and grows debt to levels that non-custodial parents are unable to pay. AB 1092 will change this and, by doing so, offers one important reform necessary to achieve a more just child support system which achieves the goal of supporting the wellbeing of children.”

Legal Services for Prisoners with Children adds:

When a noncustodial parent of a CalWORKs recipient child falls into arrears on their child support payments, that debt accumulates. Currently, there is no requirement to expunge or expire debts owed by non-custodial parent as a result of a delinquent child support payments, even if it is deemed uncollectable. Moreover, because this is debt is owed to the government, laws that protect garnishment of wages do not apply. Instead, the wage garnishment takes a full quarter of all earnings no matter how small they are. Additionally, bank accounts and tax credits of non-custodial parents can also be sequestered to pay back the child support debt owed to the government. None of this money directly or indirectly benefits the children who are most in need of the resources.

AB 1092 brings fairness and decency to the manner in which child support payments are handled in California. It requires that the state set the interest rate for government owed child support debt to no higher than that required by federal law. Doing so will help stop cycles of poverty by ending the continual assessment of uncollectable, interest accruing debt that currently impacts only California’s poorest families receiving public assistance.

Related Legislation: AB 1091 (Jones-Sawyer) would continue a program to suspend child support while an obligor is incarcerated or institutionalized. That bill is also scheduled to be heard by this Committee today.

SB 337 (Skinner) would increase the child support pass-through and disregard for families receiving CalWORKs. That bill is scheduled to be heard in the Senate Human Services and Judiciary Committees in April.

REGISTERED SUPPORT / OPPOSITION:

Support

Anti-Recidivism Coalition (co-sponsor)

Good+ Foundation – Fatherhood Initiative (co-sponsor)

Insight Center for Community Economic Development (co-sponsor)

Policy Link (co-sponsor)

Tipping Point Community (co-sponsor)

Western Center on Law and Poverty (co-sponsor)

Legal Services for Prisoners with Children

Opposition

None on file

Analysis Prepared by: Leora Gershenzon / JUD. / (916) 319-2334