BILL ANALYSIS
SB 578
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Date of Hearing: July 8, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 578 (Wright) - As Amended: June 26, 2009
Policy Committee: JudiciaryVote:10
- 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill allows certain non-custodial parents who owe child
support to have the interest waived on the past-due child
support if they pay their current month's support payment in
full. Specifically, this bill:
1)Provides that interest accrual for child support arrearages
that have been assigned to the state, because the family
received welfare cash assistance, shall be suspended during
those months in which the obligor has paid the current month's
court-ordered payment of current support and arrearages.
2)Provides that interest accrual will resume on the first day of
the month following the month in which a court-ordered payment
of support and arrearages is not received.
3)Requires the Department of Child Support Services (DCSS) to
implement that provision by letters or similar instructions.
4)Becomes operative on January 1, 2011.
FISCAL EFFECT
1)DCSS data shows that in 68% of the 51,000 current assistance
cases where a non-custodial parent has both a current child
support obligation and arrearages, the non-custodial parent is
paying at least part of their required payment each month.
Given that information, the state could lose approximately $15
million per year in accrued interest payments if half of the
people with arrearages who are paying any child support are
paying the entire court-ordered amount each month.
SB 578
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2)If this legislation results in more non-custodial parents
paying their child support, the GF loss mentioned above could
be partially offset. DCSS assumes that 10% of the
non-custodial parents who owe both current support and
arrearages but are not paying either will start to pay their
current monthly support payments. If that happens, the state
would receive an additional $2 million in GF revenue.
COMMENTS
1)Rationale . This bill, sponsored by DCSS, seeks to address the
issue of growing child support arrearages and encourage child
support obligors to pay their court-ordered support in a
timely manner by suspending interest accrual on state-assigned
child support arrearages during months in which an obligor is
current on their court-ordered payments.
The author's intent is to encourage noncustodial parents to
pay their current child support obligations by waiving the
accrual of interest on any arrearages. The suspension of
interest would apply until a payment is missed and/or the full
monthly obligation is not met. Interest would accrue and be
assessed prospectively from the point a payment is missed but
would not be charged retroactively as a result of
non-compliance.
2)Background . When a custodial parent applies for and receives
CalWORKs cash benefits, a child support case is opened. As a
condition of receiving CalWORKs benefits, the custodial party
automatically assigns all rights to child, spousal, and
medical support to the state up to the amount of aid paid.
This includes all current and past-due support and continues
as long as a family is receiving aid. Any current child
support payments that exceed the amount of aid paid to the
family are sent to the custodial parent.
3)Child Support Arrearages . March 2009 child support data shows
that noncustodial parents in California owe almost $20 billion
in past-due child support. Of that amount, almost $16 billion
is for current and former assistance cases. The remaining $4
billion is for families that were never on assistance. Unpaid
child support arrearages accrue interest at the rate of 10%
per year.
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Information provided by DCSS shows that almost 210,000 child
support cases owe current and past-due child support. Of
those cases, 32% are not paying current child support while
the remaining 68% are paying their current monthly support.
In 2003, when California's cumulative arrearages balance was
$14.4 billion, the state contracted with the Urban Institute
to conduct a study on the arrearages owed in California. The
Urban Institute's study found that 75% of the debt was over
2.5 years old; 70% of arrearages were held by individuals with
incomes below $10,000 per year; 70% of the arrearages were
owed to the government under public assistance assignment; 27%
of the debt was interest; and California could realistically
expect to collect 26% of the debt over a 10-year period. The
main reason for the high arrearages was that orders were not
correctly established in the first place, with support being
set by default using presumed, but not actual, income.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081