BILL ANALYSIS
AB 2669
Page 1
Date of Hearing: March 30, 2004
ASSEMBLY COMMITTEE ON JUDICIARY
Ellen M. Corbett, Chair
AB 2669 (Garcia) - As Amended: March 25, 2004
SUBJECT : ENFORCEMENT OF SUPPORT ORDERS
KEY ISSUE : SHOULD THE LAW ENCOURAGE COMPLIANCE WITH CHILD
SUPPORT ORDERS BY PERMITTING SUPPORT PAYMENTS TO BE CREDITED
AGAINST PRINCIPAL BEFORE INTEREST OWED TO IMPROVE COMPLIANCE AND
MINIMIZE THE RISK THAT PARENTS GIVE UP PAYING ANY SUPPORT AND
DISAPPEAR FROM THEIR CHILDREN'S LIVES ALTOGETHER?
SYNOPSIS
This non-controversial bill, sponsored by the Department of
Child Support Services, seeks to encourage compliance with child
support orders by permitting support payments to be credited
against principal before interest, consistent with the practice
of most other states. The bill also appropriately makes
statutory changes so the state treats welfare and non-welfare
support cases similarly in California. According to the author,
the proposed changes in the bill implement some of the key
recommendations made in the so-called "Collectibility Study"
mandated by SB 542 (Burton) of 1999, and thereby will increase
support payments to families and the General Fund, and will help
improve California's performance on federal incentive measures.
The author notes this will, in turn, increase the funding for,
and the performance of, California's child support program.
SUMMARY : Seeks to implement many of the recommendations from
the legislatively- mandated Collectibility Study. Specifically,
this bill :
1)Requires that after child support is first credited against
the current month's support, the money shall next be credited
against principal before interest owed.
2)Makes needed statutory changes so the state appropriately
treats welfare and non-welfare support cases similarly in
California.
EXISTING LAW :
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1)Provides that the satisfaction of a money judgment for support
shall be credited first against the current month's support,
then against the accrued interest that remains unsatisfied,
then against the principal amount of the judgment that remains
unsatisfied. (Code of Civil Procedure section 695.221.)
2)Provides that a noncustodial parent is obligated to the county
in any case of separation or desertion by that parent that
results in a grant of public assistance to the family for the
amount specified in a court order for the support and
maintenance of the family. However, for cases filed on or
after January 1, 2000, the obligation of that parent to the
county is the amount that would have been specified in an
order for the support and maintenance of the family during a
period of separation or desertion up to one year prior to the
filing date. Existing law also provides that the amount may
be reduced by any amount actually paid by the parent to the
custodian of the child. (Family Code section 17402.)
FISCAL EFFECT : This bill as currently in print is keyed
non-fiscal.
COMMENTS : This non-controversial bill, sponsored by the
Department of Child Support Services (DCSS), seeks to implement
some of the principal recommendations made in the so-called
"Collectibility Study" mandated by SB 542 (Burton) of 1999.
According to the author, the bill's reforms will not only
increase support payments to families and the State's General
Fund, they will help improve California's performance on federal
incentive measures which will, in turn, increase the funding
for, and the performance of, California's child support program.
The amount of child support arrears has grown dramatically in
California during the past ten years. In March 2000, California
had $14.4 billion in child support arrears, up from $2.5 billion
in 1992. By September 2003, the amount of arrears had grown to
$18 billion. Due to the large amount of arrears, one of the
major child support reform bills, Senator Burton's SB 542
required DCSS to analyze the amount of uncollected child support
statewide, and determine the amount that is realistically
collectible.
Data from this important Collectibility Study is very
instructive. Amongst other findings, this study reveals that
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almost three quarters of California's child support debt (70%)
is held by very low income obligors who have incomes that fall
below $10,000 a year. The study also notes that even assuming
significant improvement in child support collections brought
about by a combination of the dramatic legislative reforms to
the state's child support system in the year 1999 and the
efforts of a reorganized agency, the state is likely to collect
only 25% of the outstanding child support arrears due to these
stark statistics. The study suggests that the current
staggering arrears accumulation in California is, to a great
extent, a result of orders that were set too high for these low
income obligors to pay, or orders that were not modified
appropriately by the courts based on the actual income of the
obligors, and on interest charged on the unpaid amounts.
This legislation focuses its proposed reforms on just two key
recommendations in the Collectibility Study, the first
pertaining to the order by which support arrearages are credited
when paid, and the method for determining the actual income of
largely low income support obligors. Other minor clarifying
changes are made as well.
The Proposed Reordering of How Arrearage Payments Are Credited .
Though DCSS states that there is some evidence suggesting that
charging interest does not increase compliance with a child
support obligation, it appears clear that charging interest may
nevertheless help focus non-custodial parents on the importance
of paying their child support debt as compared to other debts
they might owe, and interest charges remain unchanged by the
bill. Indeed, well over half of the states (thirty-two) charge
interest on child support arrearages.
However fully half the states apply payments to principal ahead
of interest. This allows a non-custodial parent, especially one
who is also paying current support, to pay down some of the debt
every month, and may prevent non-custodial parents from becoming
discouraged and disappearing from their children's lives
completely because they are unable to maintain their debt
service. Whereas current law requires that any support
arrearages first be credited towards the pay down of interest
owed, this measure, in accord with the results of the
Collectibility Study, applies support payments to principal
ahead of interest. As noted, this change is consistent with
practices in other states.
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The goal of this proposed change is thus greater compliance with
support orders by largely low income child support obligors.
The bill in no way reduces or eliminates debts owed, it simply
reorders the crediting process for those debts to encourage
continuing and improved compliance with these critical
obligations. Moreover, according to DCSS, based on an Urban
Institute analysis of this proposed change, if child support
payments are applied to principal before interest, it is
estimated that California's overdue child support arrears would
be 6 percent lower in 2010 than they will be if payments are
continued to be applied to interest before principal. When
talking about current "on the books" (though of course often not
actually collectible) arrearages in the many billions of
dollars, such a change could indeed be dramatic as well as
helpful.
Proposed Reform Regarding Retroactive Support in Welfare Cases .
As noted above, under current law, California can seek up to one
year of retroactive or back support for welfare families. The
order generally only goes back to the date of filing of the
Summons and Complaint for non-welfare families. Thus,
non-custodial parents of children on welfare may well be in
arrears from the state of a child support order, and, according
to DCSS, the median amount of such arrears today is $3,418, and
interest starts to accrue immediately on that amount
Thus, consistent with the Collectibility Study, this bill
recognizes the fact that charging retroactive support in welfare
situations may well inadvertently deter rather than encourage
non-custodial parents in these cases from paying any support at
all. According to DCSS, a recent study by the Office of
Inspector General for the U.S. Department of Health and Human
Services found that obligors who were charged back support were
less likely to pay any support than obligors who were not
charged back support. This bill therefore eliminates the
ability to charge retroactive arrears before the Summons and
Complaint is filed in welfare cases, and appropriately starts to
treat welfare and non-welfare cases the same in California.
Clarification Regarding Dependent's Benefits . Currently,
non-custodial parents whose children receive Social Security or
Railroad Retirement dependent's benefits on their behalf are
only credited with payments made for particular months without
regard to the amount of the payment. The legislative change in
this part of the bill credits the non-custodial parents for the
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full amount of the dependent's benefits received, regardless of
the time period the benefits represent. This bill therefore
allows dependent's benefits to be treated like any other support
payment.
Prior relevant legislation: AB 891 (Goldberg), Ch. 651, Stats.
of 2001, prohibited the Franchise Tax Board (FTB) from
collecting on delinquent child support payments, by attaching a
disable obligor's income in a way that results in the obligors
receiving less income than he or she receives, or would be
entitled to receive in Social Security Income/State
Supplementary Payments (SSI/SSP).
AB 3032 (Assembly Judiciary Committee), Ch. 927, Stats. of 2002,
was a "technical clean-up."
AB 380 (Wright), Ch. 653, Stats. of 1999, limited the
retroactivity of a child support order and established
procedures for setting aside an order based on fraud, perjury,
or misidentification.
AB 196 (Kuehl), Ch. 478, Stats. of 1999, authorized the creation
of the new department of Child support Services within the
Health and Human Services Agency. The bill transferred the
administration of the child support program at the local level
from the district attorney's office to new local child support
agencies, with the local administrative funding coming from the
state. FTB was given the additional responsibility of
collecting child support delinquencies and a registry of
independent contractors (services providers) was created with
the Employment Development Department.
SB 542 (Burton), Ch. 480, Stats. of 1999, implemented provisions
of the child support reform that were still being negotiated
when AB 196 was enrolled. Established federal and state
performance measures and required reporting to the legislature
of the results.
AB 573 (Kuehl), Ch. 599, Stats. of 1997, expanded the use of the
FTB to collect child support and implemented certain provisions
to bring the state into compliance with the federal welfare
reform bill as it pertained to child support collections.
AB 1058 (Speier), Ch. 957, Stats. of 1996, adopted the
Governor's Child Support Court Task Force Report - providing for
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both substantive and procedural changes in the establishment and
enforcement of child support orders - including presumed income,
set asides and modifications.
REGISTERED SUPPORT / OPPOSITION :
Support
Department of Child Support Services (sponsor)
Family Law Section of the State Bar
Opposition
None on file
Analysis Prepared by : Drew Liebert / JUD. / (916) 319-2334