Regular child support helps state lower cost of welfare assistance.

The federal Child Support Enforcement program was established in 1975 by Title IV-D of the Social Security Act to ensure that non-custodial parents provide appropriate financial support for their kids. The program also provides cost recovery for state and federal government through retention of all or most child support dollars paid when custodial families receive cash assistance through Title IV-A.

With diminishing numbers on cash assistance, the cost recovery aspect is becoming less important. In fiscal year 2006, Washington state collected $663 million in child support. Of that amount, the state retained only $76 million, but paid $1.03 billion in cash assistance (Temporary Assistance for Needy Families), food stamps and Medicaid services for custodial families in the state's child support system.

Cost avoidance--money distributed directly to families with the goal of curtailing the use of expensive public services--is becoming increasingly important with diminishing cost recovery. In Washington state, records show that since 1993, when full child support payments are regularly received by custodial families, they are much less likely to use expensive public services. A dependable child support payment, even if it is small, provides stability for a custodial family. With one element of stability, it is easier for others to develop. The evidence on custodial parent work and earnings supports this idea. When custodial parents are on TANF, regular full child support payments do not make a difference to the number of families on welfare or the rates for finding or losing work. When not on TANF, custodial parents with regular full payments find jobs faster and keep jobs longer. Compared with working custodial parents with irregular payments, working custodial parents with regular full payments work more hours and have higher earnings. This dependable stream of child support income can improve a custodial parent's employability and family life.

In addition, the child support system can order private medical coverage for custodial children, reducing dependency on Medicaid. These child support services lead to an estimated $106 million in the state's cost savings for TANF, food stamps, and Medicaid in FY 2006.

Custodial Parents

Custodial parents cost savings are realized when they do not use services. Average costs for custodial parents with regular full payments are much lower because at all earning levels, fewer individuals will use TANF, food stamps, or Medicaid. Figure 1 compares FY 2006 average monthly costs for custodial parents with regular payments to costs for those without regular payments. Custodial parents with regular full payments show less than half the cost of food stamps and Medicaid, and less than a third of the cost of TANF.

Children

The payment status for the custodial parent is included with medical coverage in considering cost avoidance for children. This provides four classifications for children (medical coverage)and regular payments, no medical coverage and regular payments, medical coverage and no regular payments, and no medical coverage and no regular payments). About 80 percent of child Medicaid cost savings arise from not using services, with about 20 percent coming from reduced costs when services are used (sometimes only partial private coverage is available). Figure 2 compares 2006 average monthly Medicaid costs for children in the four classifications. Children's costs are cut by a third when medical coverage or regular payments are established and by more than three-quarters when both factors are active.

Figure 1:SFY06 Average Monthly Costs

             Regular    Not Regular

Food Stamps    $38        $79
TANF           $15        $49
Medicaid       $63        $131

Note: Table made from bar graph.

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Cost Avoidance History

Washington state has records showing the monthly cost-avoidance history for the entire child support caseload since January 1999. Figure 3 shows this information where custodial parent and child Medicaid cost savings are combined. The figure includes about 250,000 custodial parents and about 325,000 children each month. Over this period, total cost savings grew from $69 million in FY 2000 to $106 million in FY 2006. The bulk of cost savings, and the increase over time, comes from Medicaid. An increase in the number of custodial parents with regular payments from a monthly average of 52,600 in 1999 to 62,800 in 2006 contributes to increased cost savings.

Figure 2: SFY06 Average Monthly Medicaid Costs

Cov&Reg       $21
NoCov&Reg     $59
Cov&NotReg    $61
NoCov&NotReg  $92

Note: Table made from bar graph.

[FIGURE 2 OMITTED]

[FIGURE 3 OMITTED]

CarolWelch is chief of Washington state's Economic Services Administration Management Accountability and Performance Statistics Unit. Carl Formoso is a research and development manager and Qinghua Liu is a senior research manager.