HB 41-CHILD SUPPORT ENFORCEMENT/SOC SEC. # Number 1222 CHAIR DYSON announced that the final item of business would be HOUSE BILL NO. 41, "An Act repealing the termination date of changes made by ch. 87, SLA 1997 and ch. 132, SLA 1998 regarding child support enforcement and related programs; repealing the nonseverability provision of ch. 132, SLA 1998; repealing certain requirements for applicants for hunting and sport fishing licenses or tags, and for certain hunting permits, to provide social security numbers for child support enforcement purposes; and providing for an effective date." [In packets but not yet adopted was Version F, 22-GH1002\F, Lauterbach, 2/16/01. As a result of being amended at the previous hearing, Version F rolled CSSB 19(HES), except for the title, into HB 41.] Number 1160 BARBARA MIKLOS, Director, Child Support Enforcement Division (CSED), Department of Revenue, testified via teleconference. She stated that the CS for HB 41, Version F, changes the recent legislation's sunset provision relating to social security numbers as well as provisions that deal with the financial institutional data match program, which is a program CSED has just begun to implement. She said it also adds some provisions from the Senate Health, Education and Social Services (HES) Standing Committee; if an employer did not provide information on new hire reporting, there would not be a separate cause for civil action. She remarked that for the most part, CSED has no trouble with the changes. She noted that the current committee is asking for the legislation to sunset in two years; although CSED supports having it be five years, there would be no objection to the two-year sunset. Number 1110 CHAIR DYSON stated that he has a proposed amendment of his own and asked Randall Lorenz, staff, to explain it. That amendment to Version F, 22-GH1002\F.1, Lauterbach, 2/16/01, read: Page 1, line 3, following "institutions": Insert "; relating to child support payments" Page 5, following line 4: Insert a new bill section to read:  "* Sec. 12. AS 25.27.103 is amended to read:  Sec. 25.27.103. Payments to agency. An obligor shall make child support payments to the agency if the agency is enforcing a duty of child support under AS 25.25 or this chapter. The agency shall disburse that portion of a payment that exceeds the amount of money necessary to satisfy the obligor's immediate duty of support in accordance with state and federal requirements. Unless the obligor indicates in  writing that all or part of the payment should be  credited toward the obligor's arrears, the agency  shall credit a payment received in the last 10 days of  a calendar month against the immediate duty of support  that is due in the next calendar month if the  immediate duty of support for the current month has  been satisfied. The agency shall credit money disbursed under this section [SUBSECTION] toward satisfaction of the obligor's duty of support." Renumber the following bill sections accordingly. Page 6, line 2: Delete "11 and 14" Insert "11, 12, and 15" RANDALL LORENZ, Staff to Representative Fred Dyson, Alaska State Legislature, stated that presently, if an individual makes a payment through the employer - for example, during the first couple of days in February - and then, because of automatic pay cycles, his or her March paycheck falls around the 25th, 26th or 27th of February, then that's considered by CSED an overpayment. It would then go towards any back pay to either the state or federal government, and would not be forwarded to the March payment, which was the intent. As a result, the individual learns, in March, that he or she is in arrears for not paying in March. The problem is that CSED's computers are not forward- looking to make sure that it has been taken care of prior to making the state or federal payments. Mr. Lorenz stated that this amendment, therefore, requires that any payment that comes in the last ten days of the month be placed towards the next month's fiscal requirement, if the current month has been taken care of, unless that individual signs a waiver allowing it to go to the federal or state arrearages. Number 0954 REPRESENTATIVE WILSON remarked that she thinks that this is an excellent idea and asked what Barbara Miklos thinks of it. MS. MIKLOS stated that she doesn't think CSED disagrees with the intent, but she thinks that there are a few cases where this becomes a problem. She explained that if there are no arrearages on the case, then the money is applied to future payments. She added that arrearages on a case are monies owed to the custodial parent, not to the state or federal government. In fact, CSED's new distribution requirements state that the custodial parent must be paid first. The biggest concern, she said, is that this is not consistent with CSED's requirements with the federal government in terms of how it distributes the money collected. She deferred to Mr. Mallonee to speak to that. Number 0960 JOHN MALLONEE, Data Processor Manager, Child Support Enforcement Division (CSED), Department of Revenue, testified via teleconference. He explained that Title 45, CFR (Code of Federal Regulations) 302.51(a)(1), states: For the purpose of distribution in a IV-D case, amounts collected, except as provided under paragraph (a)(3) of this section, shall be treated first as a payment on the required support obligation for the month in which the support was collected and if any amounts are collected which are in excess of such amount, these excess amounts shall be treated as amounts which represent payment on the required support obligation for previous months. MR. MALLONEE said that there is also a (b) to that same section that states: If an amount collected as support represents payment of the required support obligation for future months, the amount shall be applied to such future months. However, no such amounts shall be applied to future months unless amounts have been collected which fully satisfy the support obligation assigned under section 403(a)(8) of the Act for the current month and all past months. MR. MALLONEE stated that this is in contradiction to what the federal distribution requirement has CSED doing. REPRESENTATIVE WILSON asked: Currently, when funds come in and are first applied to the current month, if the individual were two months in arrears, would the money go to that [back pay] before it would go forward? MR. MALLONEE replied that that is correct. REPRESENTATIVE COGHILL said the obligor is asked to write a statement saying that that's the case. He asked if there were cases in which arrearages would be in contest in such a way that this be effective in getting the money to the next forward months. MR. MALLONEE answered that a case where it might arise is if the noncustodial parent were contesting what the arrearages were on the case, and felt that that money was really being paid ongoing and didn't agree with the arrears. REPRESENTATIVE COGHILL asked if having the noncustodial parent sign an affidavit, or some kind of letter affirming that that could happen, is just bringing him or her into the loop. MR. MALLONEE answered that that's all it would do. He added that he doesn't think that would solve the problem with the federal requirement because the individual is just telling what his or her intentions happen to be at that moment, but CSED's distribution is based on when it collects the money and how the case appears at that particular time. REPRESENTATIVE CISSNA stated that it's her understanding from the amendment language that the individual would always be paying forward, so the public money would never get recuperated. Number 0576 CHAIR DYSON stated that the intent is for the money to go to the support of the children. Any money that is intended to pay back obligations would be separate. Chair Dyson asked Mr. Mallonee when checks would be coming from the employer as opposed to directly from the obligor. MR. MALLONEE replied that part of the problem is that the distribution rules are a little more specific for things that come from an employer versus those things that come from an individual. Checks that come from the employer must be distributed by the distribution requirements within two days of CSED receiving them. It is somewhat longer if it is paid individually. He stated that there are times when the employer's checks could be considered for the prior month. Number 0460 CHAIR DYSON asked why the employers are sending checks for the support of children that aren't theirs. MS. MIKLOS answered that in 1994 or 1996 Congress required from all states that child support be automatically carried out through wage withholding. She said she thinks the intent in having the employer withhold the money, which made a dramatic increase in terms of child support, was that it would be more consistent to withholding on federal income tax. CHAIR DYSON asked: If the employer mails the check on the 22nd or 23rd and CSED applies that to the month in which it is received, takes the difference on any overages, and applies it to back debts, would the obligor get a penalty in interest the next month when the person isn't paid up to date?. MS. MIKLOS replied that first of all, this is referring to a person who is already behind in his or her child support payments. The penalties would not increase in future months when the person continues to be behind. If he or she were never behind, then there would be absolutely no penalties because that money would be applied to the future. Number 0305 CHAIR DYSON asked if CSED is using any of the arrearages to reimburse the state for welfare and ATAP (Alaska Temporary Assistance Program) funds that have been given to the custodial parents. MS. MIKLOS answered yes, some of the money may go to the state or federal government and some may go to the custodial parents. Under CSED's new distribution requirement from the federal government, it is required to pay the custodial parent first for the arrearages. If the custodial parent is on public assistance, the state would provide the child support payments. CHAIR DYSON asked if there is any way to craft this so if the obligor is behind on child support payments, any overpayments would go to the custodial parent and the children, and not reimburse the state for welfare or ATAP until the obligor authorized money from his or her paycheck deductions or wrote a check to make up those arrearages that are owed to the state. MS. MIKLOS answered that child support payments that people pay now, unless there's an instance of hardship, do include SS (social security) money to pay back on arrears. Therefore, its not that CSED doesn't collect the monthly support ongoing. If the obligors are continually paying on future months and never paying on the arrears, they will then be gathering more interest as the money moves along. She added that in some ways this would work to their disadvantage. Number 0100 SHARRON O'DELL, Staff to Representative Vic Kohring, Alaska State Legislature, came forth and stated that in 1999 Representative Kohring's office handled two cases like this, which were garnishment cases with ATAP debt. In one case, CSED would not reverse the second payment, stating it couldn't get the money back from the public assistance office. In the second case, CSED backed out the posting, re-receipted it, and reissued a payment to the custodial parent. Because it was a military check, CSED said it could do that. When CSED applies the second payment received in the calendar month, because the first one is received in the beginning of the month and the second is received in the end of the month, the state robs the kids of the very support that is says it gives them. TAPE 01-17, SIDE A MS. O'DELL stated that there must be some type of mechanism in place that lets CSED distinguish money that is received that way. Number 0102 REPRESENTATIVE CISSNA asked Ms. Miklos if there is a way that this could be addressed. Number 0200 MS. MIKLOS clarified that it doesn't matter where CSED gets the money from, it must always be paid to the ongoing monthly support first. Child Safety Enforcement Division's position on whether there's a way to fix the problem has been that the most important thing is to collect money for the children, although CSED does believe people have an obligation to pay back the state. Child Safety Enforcement Division would be interested in trying to figure out a way for payments that happen to come in late to be used for the next month. This [amendment] is not the way, however, because it does not meet federal requirements and it does not consider the money CSED gets from the Permanent Fund Dividend Division or the IRS (Internal Revenue Service), which must be applied to arrears. Number 0327 CHAIR DYSON called an at-ease at 4:47 p.m. The meeting was called back to order at 4:48 p.m. CHAIR DYSON referred to the amendment, 22-GH1002\F.1. Beginning on line 11 of the amendment, he asked Ms. Miklos how it would work to delete the language, "Unless the obligor indicates in writing that all or part of the payment should be credited toward the obligor's arrears", and to have it read as follows, beginning on line 9: The agency shall disburse that portion of a payment that exceeds the amount of money necessary to satisfy the obligor's immediate duty of support in accordance with state and federal [requirements]. The agency shall credit a payment received in the last 10 days of a calendar month against the immediate duty of support that is due in the next calendar month if the immediate duty of support for the current month has been satisfied and the moneys will not be used to satisfy past debts to the state. Number 0429 MS. MIKLOS responded that there would be some real problems with the expectation of the federal government in terms of being able to satisfy not just the debt to the state but also the debt to CSED. She emphasized the complexity of dealing with the IRS and the permanent fund, for example. CHAIR DYSON stressed the intent of keeping the money going to the kids, and not having money arbitrarily siphoned off to pay a back debt to the state. He suggested that there could be a conceptual amendment sent to the drafters, or this could be postponed until the beginning of the next meeting. He asked Ms. Miklos what she would prefer. MS. MIKLOS answered that she would rather wait until the next meeting, to possibly come up with some language. REPRESENTATIVE CISSNA suggested that the amendment state that the amount required for the future month be satisfied first, before back payments. In that way, there would be an opportunity for money to be paid backwards. She asked Ms. Miklos whether that would work. CHAIR DYSON stated that he thinks this is on the right track. Number 0609 MS. MIKLOS remarked that the reason CSED has introduced this legislation is to avoid a federal penalty. Referring to CFR 302.51, she said the federal government has been pretty clear regarding what CSED is expected to do with the money. CHAIR DYSON suggested the language should be crafted to say that the money is part of what happens every month, so that it purposely excludes permanent fund dividends or income tax refunds, for example. He said he is not interested in this amendment precluding CSED's collection of back debts to the custodial parent; rather, his concern is with the back debts to the state that keep money from going to the kids. REPRESENTATIVE KOHRING noted that he wouldn't be present at the next meeting. He commented that normally he'd be reluctant to vote for extending the sunset date of CSED, but he believes that Ms. Miklos and her staff have done a good job. He said he would support this legislation, at least in its current version. He added that he thinks the issue on social security numbers was handled better in this committee than in the Senate House Health, Education and Social Services Standing Committee. [HB 41 was held over.]