# Presentation: 279385

## Arrears Management: 9 State Study

- Elaine Sorensen
- The Urban Institute
- June 4, 2007

- Note:  Data before and after FY 1999 are not comparable.  The increase in FY 1999 reflects a change in the reporting instructions to states regarding arrears to include interest and penalties.  Arrears may be overstated because arrears associated with interstate cases may be included in both states

**      ****National Child Support Arrears: FY 1987 to FY 2006**

## Research Questions

- Who Owes the Arrears?
- How Collectible are Arrears?
- Why have Arrears Grown So Rapidly?
- What are States doing to Manage their Arrears?

## The Urban Institute has completed its

**The Urban Institute has completed its**
**Analysis of National Arrears and Arrears in the Following Nine States:**
** **
**Arizona**
**Florida**
**Illinois**
**Michigan**
**New Jersey**
**New York**
**Ohio**
**Pennsylvania**
**Texas**
- Study is funded by the U.S Department of Health and Human Services, Office of Child Support Enforcement (OCSE) and Office of the Assistant Secretary for Planning and Evaluation (ASPE).  Findings presented today are preliminary and subject to change when final analysis is complete.

## Who Owes the Arrears?

- Most Arrears are Owed by a Relatively Small Percent of the Obligors
- Most Arrears are Owed by Obligors with Little or No Reported Income

## Distribution of Obligors and Arrears 

**Distribution of Obligors and Arrears **
**in Nine States, by Amount of Arrears Owed**

- Percent

## Distribution of Obligors and Arrears in Nine States, by Annual Reported Income

**Distribution of Obligors and Arrears in Nine States, by Annual Reported Income**

## How Collectible are the Arrears?

- Based on Simulation Models, we Estimate that less than half of the Arrears in the Study States are Likely to be Collected within 10 years.
- We also Estimate that Arrears will Grow by at least 50% over 10 years in these States if Policies and Procedures are Not Changed.

## Collectibility Estimates and Arrears Distribution in Seven States, by Amount of Arrears Owed

- Seven States are: Arizona, Illinois, Michigan, New Jersey, Ohio, Pennsylvania, and Texas

## What are the Primary Factors Contributing to Arrears Growth?

- Interest
- Lack of Compliance with Current Support Orders
- Orders Appear too High for Some Obligors with Little or No Reported Income
- Lack of Arrears Payments, Especially Among Arrears-Only Cases
- Assessing Retroactive Support

## State Policies Regarding Interest on Arrears

- 19 States Assess Interest on Arrears Routinely
- 18 States Assess Interest on Arrears Intermittently
- 14 States do Not Assess Interest on Arrears

## Child Support Arrears, by State’s Interest Policy

**Child Support Arrears, by State’s Interest Policy**

- Routine

- Intermittent

- No Interest

**Routine**

**Intermittent**

**No Interest**

## Total Amount of Current Support Due and Paid in the Last Year (in Seven States)

- Dollars are in Millions

**Total Amount of Current Support Due and Paid in the Last Year (in Seven States)**

## Median Order and Payments as a Percent of Reported Income in Seven States

**Median Order and Payments as a Percent of Reported Income in Seven States**

-     Seven States are: Arizona, Illinois, Michigan, New Jersey, Ohio, Pennsylvania, and Texas

## 
Orders are set by Default

Orders are Based on Imputed Income 

Orders are Rarely Modified Downward

- Orders are set by Default
- Orders are Based on Imputed Income
- Orders are Rarely Modified Downward

**Why do some Current Support Orders Appear too High for Obligors with Little or No Reported Income?**

## Characteristics of Obligors by their Type of Order (Seven States)

**Characteristics of Obligors by their Type of Order (Seven States)**

## Slide 17

## What are the Nine States Doing to Curb Arrears Growth?

-  Setting Realistic Orders
- Using Automated, Verifiable Data to help determine orders, such as:
- State and National Quarterly Earnings Records
- State Verification and Exchange System (SVES)
- State Income Tax Records
- Setting orders at $50 per month (or less) when no income information is available
- Adding Low-Income Provisions to their State Guidelines

## What are the Nine States Doing to Curb Arrears Growth?

-  Reducing Default Rates
-  Improving service of process
-  Using welcoming letters to encourage
-     customers to come to the office
-  Reducing Use and Length of Retroactive
-   Support

## Implementing Early Intervention
 Utilizing Reminder Calls and Letters

 Working Early on with Non-Payers to avoid 
		 Large Arrears Accumulation

  Improving Income Withholding Procedures
-	Working with Employers
-	Obtaining accurate employer addresses
Improving the Automated Process

-  Utilizing Reminder Calls and Letters
-  Working Early on with Non-Payers to avoid
- 		 Large Arrears Accumulation
-   Improving Income Withholding Procedures
- -	Working with Employers
- -	Obtaining accurate employer addresses
- Improving the Automated Process

**What are the Nine States Doing to Curb Arrears Growth?**

## What are the Nine States Doing to Curb Arrears Growth?

**Revising Interest Policy**
- Lowering the Interest Rate
- Not assessing interest if obligors pays 90% or more of their current support order
- Applying arrears payments to Principal before Interest

## Managing Existing Arrears
Implementing Arrears Compromise Programs
	- OCSE has made it clear (OCSE PIQ 00-03) that federal law allows states to compromise arrears that are permanently assigned to the state.  Some states have responded by setting up programs that compromise permanently assigned arrears if the arrears appear uncollectible and the obligor is willing to enter into a payment plan.
Reviewing Policies for Arrears-Only Cases
	-  Making sure that arrears-only cases have orders and that obligors understand that they must comply with those orders.
Targeting Cases for Review that owe the Largest Amounts of Arrears

- Implementing Arrears Compromise Programs
- 	- OCSE has made it clear (OCSE PIQ 00-03) that federal law allows states to compromise arrears that are permanently assigned to the state.  Some states have responded by setting up programs that compromise permanently assigned arrears if the arrears appear uncollectible and the obligor is willing to enter into a payment plan.
- Reviewing Policies for Arrears-Only Cases
- 	-  Making sure that arrears-only cases have orders and that obligors understand that they must comply with those orders.
- Targeting Cases for Review that owe the Largest Amounts of Arrears

**What are the Nine States Doing to Curb Arrears Growth?**

## Closing Cases 
Federal regulations allow case closure in certain circumstances.  States are conducting case cleanup, especially among arrears-only cases.

- Federal regulations allow case closure in certain circumstances.  States are conducting case cleanup, especially among arrears-only cases.

**What are the Nine States Doing to Curb Arrears Growth?**