Lawmakers propose to stop collecting child support debt owed to the government in cases where a parent’s only source of income comes from certain cash assistance programs. But advocates had asked the Legislature to go farther by forgiving old, uncollectible debt and to stop imposing a 10% interest.
California lawmakers have advanced a budget proposal to stop collecting child support debt from some parents who are receiving cash assistance, but the proposed solutions are a far cry from what advocates for those debt-holders sought in January.
The Legislature’s budget proposal would reduce or expunge debt owed to the government – not the debt owed to families – for parents whose only source of income is from Supplemental Security Income or State Supplementary Payment, the Cash Assistance Program for Immigrants, a combination of SSI/SSP and Social Security Disability Insurance benefits, or Veterans Administration disability benefits.
The proposal could cut a break for a narrow subset of the larger population of Californians who owe child support debt to the government; the state did not release to CalMatters the exact number of people receiving those benefits who owe child support debt, and it’s unclear if the state has that number.
For context, the Senate Appropriations Committee found that removing all people in arrears from child support debt would cost the state hundreds of millions of dollars and save only $3.7 million in the general fund by letting go of 98 full-time Department of Child Support Services employees who work in child support debt collection.
The proposal still needs to be negotiated with the Newsom administration.
Push for more child support debt forgiveness
“We’re not intending for money owed to families to go away, but just the money owed to the state,” state Sen. Susan Eggman, a Stockton Democrat, said during a Senate budget subcommittee hearing on the proposal last month.
Still, advocates for the poor had asked the state to go farther by forgiving old, uncollectible debt. And the current proposal leaves the state’s 10% interest rate on child support debt, one of the highest interest rates of its kind in the country.
“That is something that is definitely within the control of the Legislature to change,” said Jhumpa Bhattacharya, vice-president of programs and strategies at the Oakland-based Insight Center, a nonprofit economic justice group. “They just have to get the will to do it.”
The theory behind child support is that a parent who doesn’t have custody of a child supports the child with monthly payments. But that’s not how it works in practice for parents who also receive cash assistance from the federal welfare-to-work Temporary Assistance to Needy Families program, known as CalWORKS in California.
As CalMatters and The Salinas Californian reported last month, California takes a piece of the child support payments owed to custodial parents, usually mothers, receiving these cash benefits. In some cases, that piece is more than half of the total payment. Meanwhile, if the noncustodial parent falls behind on child support payments, that debt piles up through an interest rate of 10%.
Misconception about high interest rates
The state itself, in a report commissioned by the child support services agency, has had academics saying since at least 2003 that much of that debt is uncollectible. If states don’t recover the money from parents, the state itself owes the federal government the debt. Some states have begun to pass through 100% of child support payments to families, and Colorado passed a law dictating that the state repay the federal government.
Most states are like California, which passes through $100 for families on public assistance with one child and $200 for families with two or more children. Last year, Gov. Gavin Newsom vetoed an Assembly measure that would have eliminated California’s 10% interest charges, saying the state needs the money.
Bhattacharya said a misconception persists that high interest rates will get people to pay their debts faster, or at all.
“But the reality is, this is a debt that people simply cannot afford to pay,” she said. “This is a debt that’s being charged to low-income mostly Black and brown folks, being asked to basically reimburse the government for their safety net.
“These are poor people, and they can’t afford to pay in the first place, and now you’re charging 10% interest on top of that. And it just compounds.”
California collects high portion of child support debt
Last week, the governor’s office told CalMatters that “given the revenue impact” of ending collections on child support debt, Newsom “sought to have this issue addressed through the budget process” when he vetoed the Assembly measure.
It seems that day has arrived.
Federal data shows California is keeping an unusually high portion of the child support payments — more than 3½ times the national average. That has a knock-on effect for the parents responsible for that debt: They have a harder time getting and keeping jobs, their drivers’ licenses are subject to revocation and the children and noncustodial parents receive less.
“I know that can create a (financial) hole for the state,” Eggman said, “but at the same time, we know there’s going to be some money right now. So why don’t we use it to care for families and not be worried about interest that’s been accrued on past things?”
This article is part of the California Divide, a collaboration among newsrooms examining income inequality and economic survival in California.