This report describes the current system of child support financing, analyzes trends in child support collections and expenditures, and discusses the effect of declining Temporary Assistance for Needy Families (TANF) rolls on Child Support Enforcement (CSE) program financing. It also explains how child support collections are distributed to families and to the state and federal governments. In addition, the report includes two appendices. Appendix A presents several state-by-state tables, which include an examination of state income and expenditures for every state for FY1999 and FY2009, collection and expenditure data by state for selected years from FY1999 to FY2010, average monthly child support payments in cases in which a collection was made for every state for selected years from FY1999 to FY2009, and child support collections made on behalf of TANF families as a percentage of total CSE collections for every state for selected years from FY1999 to FY2009. Appendix B describes the distribution of child support payments and the "family first" policy. The CSE program was passed by Congress in 1975 ( P.L. 93-647 ) with two primary goals. The first goal was to reduce public expenditures for actual and potential welfare recipients by obtaining ongoing support from noncustodial parents. The second goal was to establish paternity for children born outside marriage so that child support could be obtained. The December 1974 Finance Committee report on the CSE legislation stated, " The problem of welfare in the United States is, to a considerable extent, a problem of the non-support of children by their absent parents ." It also stated that the result of a new federal-state CSE program would be to lower welfare costs to the taxpayer and to deter fathers from abandoning their families. Both welfare and nonwelfare families are eligible for CSE services. Although federal matching funds for CSE program expenditures on nonwelfare cases have been available to states since the program's enactment, they were authorized only on a temporary basis until 1980. P.L. 96-272 (enacted on June 17, 1980) made federal matching funds for CSE nonwelfare services available on a permanent basis. Since 1989, nonwelfare families have exceeded welfare families in the CSE caseload. States are responsible for administering the CSE program, but the federal government plays a major role in dictating the major design features of state programs, funding state and local programs, monitoring and evaluating state programs, providing technical assistance, and giving direct assistance to states in locating absent parents and obtaining child support payments. All 50 states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands operate CSE programs and are entitled to federal matching funds. To qualify for federal matching funds, each state's CSE plan must be approved by the Office of Child Support Enforcement (OCSE), Department of Health and Human Services (HHS). The CSE program provides seven major services on behalf of children: parent location, paternity establishment, establishment of child support orders, review and modification of support orders, collection of support payments, distribution of support payments, and establishment and enforcement of medical child support orders. Collection methods used by state CSE agencies include income withholding, intercept of federal and state income tax refunds, intercept of unemployment compensation, liens against property, reporting child support obligations to credit bureaus, intercept of lottery winnings, sending insurance settlement information to CSE agencies, authority to withhold or suspend driver's licenses, professional licenses, and recreational and sporting licenses of persons who owe past-due support, and authority to seize assets of debtor parents held by public or private retirement funds and financial institutions. Moreover, federal law authorizes the Secretary of State to deny, revoke, or restrict passports of debtor parents. All jurisdictions also have civil or criminal contempt-of-court procedures and criminal nonsupport laws. In addition, federal criminal penalties may be imposed in certain cases. Federal law also requires states to enact and implement the Uniform Interstate Family Support Act (UIFSA), and expand full faith and credit procedures. Federal law also provides for international enforcement of child support. P.L. 104-193 , the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, replaced the Aid to Families with Dependent Children (AFDC) entitlement program with a TANF block grant and made major changes to the CSE program. P.L. 104-193 allowed all states to link up to an array of databases, and permitted the Federal Parent Locator Service (FPLS) to be used for the purpose of establishing parentage; establishing, setting the amount of, modifying, or enforcing child support obligations; or enforcing child custody or visitation orders. It required that a designated state agency, directly or by contract, conduct automated comparisons of the Social Security numbers reported by employers to the state directory of new hires and the Social Security numbers of CSE cases that appear in the records of the state registry of child support orders. (The 1996 welfare reform law required the HHS Secretary to conduct similar comparisons of the federal directories.) When a match occurs, the state directory of new hires is required to report to the state CSE agency the name, date of birth, Social Security number of the employee, and employer's name, address, and identification number. The CSE agency then, within two business days, is required to instruct appropriate employers to withhold child support obligations from the employee's paycheck, unless the employee's income is not subject to withholding. P.L. 104-193 required employers to remit to the state disbursement unit income withheld within seven business days after the employee's payday. P.L. 104-193 required states to operate a centralized collection and disbursement unit to send child support payments to custodial parents within two business days. P.L. 104-193 also established what is often referred to as the "family first" policy, wherein a family that is no longer receiving TANF benefits has first claim on all child support paid by the noncustodial parent. This means that the states not only pay current child support that is collected to former TANF families, but also pay a higher proportion of arrearages (i.e., collections on past-due child support payments) to former TANF families. Among other things, P.L. 109-171 (a budget reconciliation measure, referred to as the Deficit Reduction Act (DRA) of 2005) made a number of changes to the CSE program. P.L. 109-171 reduced the federal matching rate for laboratory costs associated with paternity establishment from 90% to 66%, ended the federal matching of state expenditures of federal CSE incentive payments reinvested back into the program, and required states to assess a $25 annual user fee for child support services provided to families with no connection to the welfare system. P.L. 109-171 also simplified CSE distribution rules and extends the "families first" policy by providing incentives to states to encourage them to allow more child support to go to both former welfare families and families still on welfare. In addition, P.L. 109-171 revised some child support enforcement collection mechanisms and added others. Since the 1996 welfare reform changes, the TANF rolls have decreased significantly. As of December 2011, there were about 2 million TANF families on the rolls per month, and 40% of those families consisted of child-only families; in FY1994, there were about 5 million cash welfare families. Moreover, annual federal and state TANF expenditures have decreased from almost $23 billion in FY1994 to $9.6 billion in FY2011. Reduced cash welfare rolls have resulted in a reduced share of welfare families in the CSE caseload, which means that the CSE program has a lesser amount of welfare costs to recover. The CSE program serves both TANF recipients and non-TANF recipients. In FY2010, the CSE system handled 15.9 million cases, of which 6.9 million (43%) were families who had never been on TANF, 6.8 million (43%) were former-TANF families, and 2.2 million (14%) were families who were receiving TANF assistance (see Figure 1 ). Former-TANF cases are families that are no longer on TANF, therefore they are really non-TANF cases. OCSE defines a CSE "case" as a noncustodial parent (mother, father, or putative/alleged father) who is now or eventually may be obligated under law for the support of a child or children receiving services under the CSE program. If the noncustodial parent owes support for two children by different women, that would be considered two cases; if both children have the same mother, that would be considered one case. The CSE program defines a current assistance case as one in which the children are (1) recipients of cash aid under TANF (Title IV-A of the Social Security Act) or (2) entitled to Foster Care maintenance payments (Title IV-E of the Social Security Act). In addition, the children's support rights have been assigned by a caretaker to the state, and a referral to the state CSE agency has been made. A former assistance case is defined as a case in which the children were formerly receiving TANF or foster care services. A never assistance case is defined as a case in which the children are receiving services under the CSE program, but are not currently eligible for and have not previously received assistance under TANF or foster care. In FY1978, AFDC/TANF cases comprised 85% of the CSE caseload, but dropped to 14% of the caseload in FY2010. Available data show that non-TANF cases increasingly are families who formerly received TANF.