CSSB 190(JUD): An Act relating to income withholding and other methods of enforcement for orders of support; and providing for an effective date. Mary Gay, Director, Child Support Enforcement Division, Department of Revenue, spoke in support of SB 190. Discussion was held between Co-chairs Frank & Pearce, Senators Sharp, Kelly, Kerttula, and Rieger, regarding child support enforcement issues. Amendments 1 and 2 were ADOPTED. CSSB 190(FIN) was HELD over until Thursday, March 17, 1994. CS FOR SENATE BILL NO. 190(JUD): An Act relating to income withholding and other methods of enforcement for orders of support; and providing for an effective date. Co-chair Pearce announced that CSSB 190(JUD) and CSSB 190(JUD) work draft "E" were before the committee. Also before the committee was a letter from Senator Little noting that the Judiciary Committee had pulled language from SB 190 over her objections which impacted the employer reporting project. Proposed amendment 2 would add that language back into the bill. Amendment 1 was proposed by the Department of Revenue. Senator Kelly asked the difference between version E and the original bill. Co-chair Pearce invited Mary Gay to speak to the differences. MARY GAY, Director, Child Support Enforcement Division, Department of Revenue, said the difference between the previous draft and the Judiciary Committee Substitute was the removal of the sunset provision for employer reporting. She also said that it was the Judiciary Committee's desire to have the bill include all federal requirements in regard to child support enforcement. At this point, Co-chair Pearce asked the committee to consider CSSB 190(JUD) before the committee. CSSB 190(JUD) work draft "E" would not be used. She went on to explain that the employer reporting project had been implemented by the legislature in 1991 which required employers with at least 20 employees to report new or rehired employees to the Child Support Enforcement Division on a monthly basis. This project sunsets on January 1, 1995, and had been extremely successful. Collections have increased by 12 percent in Alaska, even though many still go uncollected. The continuance of the project would be expected to be cost effective. The project would be extended by amendment 2. Ms. Gay went on to explain that amendment 1 had been requested by the Department of Revenue. The change on page 3, line 26, was a technical correction. On page 6, line 20, the words "for a formal hearing" are added. This ensures that the obligator has been through the informal process. Senator Kerttula MOVED amendment 1. No objection being raised, amendment 1 was ADOPTED for incorporation within a Finance Committee Substitute for SB 190. Senator Kerttula MOVED amendment 2. Senator Sharp OBJECTED. Discussion followed by Co-chairs Pearce, Frank, Senator Sharp, and Ms. Gay regarding the sunset of the employee reporting program. Co-chair Pearce and Ms. Gay testified to the success of the program and informed the committee that Congress was considering mandating the employee reporting program for all states. Co-chair Pearce called for a show of hands on the adoption of amendment 2, and the motion carried on a vote of 1 to 5 (Co-chairs Pearce and Frank, Senators Kerttula, Rieger, Kelly were in favor, Senator Sharp was opposed. Senator Jacko was absent from the meeting at the time the vote was taken). Amendment 2 was ADOPTED for incorporation within a Finance Committee Substitute for SB 190. Senator Kelly brought up concerns regarding the $1 fee charged the obligator and the additional paperwork required of employers because of child support withholding. Extensive discussion followed between Co-chairs Pearce, Frank, Senators Sharp and Kelly, regarding fees and who is subject to the child support withholding. Ms. Gay explained that if a parent was under a child support order before 1990, and had never missed a payment, that parent would not be required to be under wage withholding unless one of the parents requested it. If recently divorced, the non- custodial parent/ obligator would be required to have immediate wage withholding. As of January 1, 1994, the courts are to include an immediate wage withholding in the child support order, so the custodial parent could serve the order on the employer her/himself or have an attorney do so. The monies then run through the Child Support Enforcement Division, it is receipted, and mailed to the custodial parent. It would be considered an accounting function for these individuals. The federal government wants this done so there is a better accounting of child support payments in case there are difficulties in the future where amounts may be under dispute. Co-chair Frank asked, if from this time on, all child support payments would go through the Child Support Enforcement Division. Ms. Gay agreed they would, unless the parents had an alternative arrangement through the court, i.e., a trust fund or such. Co-chair Pearce informed the committee that the Alaska Court System had provided a new fiscal note and voiced their objection to not being included in SB 190. She went on to review the fiscal note for the Court and its request for a parttime employee because of unnecessary paperwork caused by requirements for employers to notify the Court of terminated employees. Co-chair Pearce asked why that requirement was included in the bill. Ms. Gay said in referring to non- child enforcement cases the wording "agency, the court, or other entity" was often repeated, and agreed that notice of termination did not need to be sent to the Court. The notice, however, did need to be sent to the obligee. Ms. Gay spoke to wording in Sections 6 and 8 that could be removed. Co-chair Pearce informed the committee that her intention was to hold SB 190 so that she and Senator Sharp could review the Court's responsibilities, and, hopefully, zero out the fiscal note for the Court System. SB 190 would then come back before committee. Co-chair Frank said he supported SB 190 in light of the poor child support payment records of most obligators, but would like to know how the system worked in regard to AFDC. Ms. Gay said that child support received by the Division for children on AFDC was kept by the Division except for $50 which was sent to the obligee or, in a rare case, if the child support was larger than the AFDC payments, any excess was sent to the custodial parent. She also agreed that when a parent was not working, child support was seldom received, but when employed and the employer withheld the child support, compliance was good. The non-traditional wage earner (self-employed or persons working for cash) was one type that was hard to reach. She reported that 25 percent of the caseload paid on a regular basis. She did not know the statistics but said the largest amount of money received by the Division was withheld from wages. Co-chair Frank asked why the Division did not provide a positive fiscal note to that effect. Ms. Gay said that the Division had been collecting child support by withholding since 1990 when the federal regulation was enacted and initiated wage withholding if a person had been delinquent more than 30 days. People that had child support orders before 1990, who were not late on their payments, might begin wage withholding in the future if they become delinquent. Child support cases that came out of the court at present included wage withholding in the child support order. The Division would handle the monies as a bookkeeping process, not enforcement. In answer to Co-chair Frank, Ms. Gay said she did not know what percent of persons not paying, or sporadic paying persons, were wage earners. Co-chair Pearce reiterated that the program had made an increase in collection of child support but still 75 percent of the obligators were not paying. Ms. Gay said that of the caseload, only half had been completed. She went on to explain, that since the federal government already required this program as of 1990, there had not been a significant change, but now the Court was effected because it was required to include wage withholding in child support orders. SB 190 updates the state's statutes in line with federal requirements so funding could be sanctioned. Senator Kerttula suggested that since this program is a administrative burden, all departments should be asked for suggestions or methods to reduce paperwork and still get the job done. He maintained that the inefficiencies that exist must be resolved in order to reduce overhead costs. Senator Rieger asked if the same language (found in page 5, Sec. 10) regarding an appeal paralleled modification of support amounts. Ms. Gay replied that in a modification of support, the person was told there was going to be a modification and was requested to provide income information. (She noted this was not usually provided willingly). If it was an administrative modification, then the person had already provided their income information, and an informal conference was held. They were sent a consent order, but if it was not signed, it would not take effect. Ms. Gay stressed that with every step within the process of child support enforcement there is the opportunity for due process. When the opportunity for due process in statute runs out, the person could always go to court and present his/her case. Senator Rieger said he received complaints from constituents that increases in child support withholding were done without their knowledge. Ms. Gay replied there might be several causes for an increase in withholding such as a cost of living that was included in their child support order, or an amount past due that could be included. She said that a yearly, or every two year cost of living was sometimes written into child support orders and the person may have forgotten about that provision. Senator Rieger asked if support orders were based on a percentage of income. Ms. Gay said a percentage was only used when an arrearage amount was being collected. She agreed that some judges used a percentage to decide on a figure for a child support order. In answer to Senator Rieger, she said that if either parent changed jobs or remarried, it would not automatically trigger a change in the amount withheld from their paycheck for child support. End SFC-94 #41, Side 1 Begin SFC-94 #41, Side 2 In response to Senator Rieger, Ms. Gay said that either parent could go to court and asked for a modification of child support. Co-chair Pearce said that judges sometimes take remarriage or change of jobs into account for modification of support. She reminded him that it was not up to the Division to set child support amounts. The Court sets the amount, the Division administers that amount, and cannot change it. Senator Rieger believed that there were court orders for child support based on percentage of income. Ms. Gay said that previous court orders may have been done on a percentage, but, at present, the court orders a set amount to be withheld for child support. In answer to Senator Kelly, Ms. Gay confirmed that the withholding amount was now determined by 27 percent for one child, and 33 percent for two of the adjusted gross income of the non-custodial parent, with a maximum of $6,000 a month. Senator Kelly said that his constituents complained that the Division was quick to raise amounts withheld but were slow in stopping withholding when appropriate. Ms. Gay said that the Division did not discriminate between cases. In answer to a constituent complaint he mentioned, she said that if a child is 18 and still a student, the child support may continue until the child graduates. In answer to Senator Kelly, Ms. Gay reiterated that all new divorced parents would be placed on the withholding system unless they have agreed on an alternative arrangement with the Court. Ms. Gay felt that Congress decided on this program because, not only was it an effective way to collect child support, it did not discriminate against any parent by saying a parent was bad for not paying. If everyone was under immediate wage withholding, it just meant that they owed child support. Senator Sharp voiced his objection to having all obligations under a mandatory withholding system. If someone was paying on time, they should not be submitted to automatic withdrawal because he feared it would have a negative effect on their credit rating. He also felt it was an unnecessary burden for the employer. Ms. Gay informed him that some obligators did not mind their child support being withheld from their paycheck. Co-chair Pearce remarked that employers deal with many different kinds of withholdings, such as savings bonds, direct deposit to bank accounts, etc., and this was considered just another withholding and would not negatively impact a credit rating unless the obligator was past due. She also reminded Senator Sharp that three out of four obligators were not paying and that was not a very good record. In answer to Senator Sharp, Ms. Gay said that all administrative orders since 1990, established by the Division, included wage withholding unless another arrangement had been made with the Court. As of January 1, 1994, all court child support orders must include wage withholding. However, there were orders previous to 1990, being enforced by the Division, that did not have wage withholding but would in the future if the obligee requested it, or if there was a modification process. In those cases, there had to be a good reason for initiating the wage withholding. Again, in answer to Senator Sharp, Ms. Gay said that if a parent went on AFDC, a case would automatically be established with the Division, and only a small percentage of these cases already had a court ordered divorce. The largest percentage were never married or, if they were married, never went through a divorce. At that point, paternity and a child support order needed to be established. The money was collected and 50 percent was retained by the state, and 50 percent was returned to the federal AFDC program. She agreed that the obligee assigns his/her right to child support over to the state so funds could be recovered. Co-chair Frank pointed out that since 75 percent of obligators were not paying child support, it seemed logical and a more efficient process to have a withholding program and thus, have the child receive the money. Unfortunately, the employers were being inconvenienced. He wished it wasn't necessary but felt it was. His next question was how the state could contact the 75 percent that did not pay. He also asked if an employer with less than 20 employees would still be subject to the withholding program. Ms. Gay said that employer reporting was required of any employer with more than 20 employees, but any employer must withhold child support if an order was received by them. She wanted the committee to remember that employers were taxpayers. Ensuring that families were provided for by child support enforcement alleviated the need for those families to go on ADFC. Employers understood that if families were kept independent and off welfare, it would help keep their taxes from increasing. Ms. Gay said as a result of the Uniform Interstate Families Support Act, there were two changes to interstate child support laws. One would be that the original order would be effective in all states rather than each state having to initiate their own order. The other outcome was that it would allow the Division to send its child support orders directly to the employers instead of through another agency. Senator Kelly reiterated his concern over credit reports when a person had child support withheld from his paycheck. Ms. Gay informed him that credit bureaus look at past due child support over $2,000 the same as any other past due account. She assured him that credit bureaus were not interested in withholdings from a person's paycheck but were concerned with the person's debts. Co-chair Pearce confirmed that if child support was withheld from a person's paycheck, it would not restrict his/her ability to buy a house or car. However, if a person was delinquent, it should show negatively on their credit rating. Senator Sharp voiced his concern regarding the word garnishment and felt it had a negative consequence. Co-chair Frank said that credit bureau's would not receive notification unless the obligator was past due. He did not see a problem with withholding by the employer. Senator Kerttula voiced his concern over individuals who married, divorced, and then remarried, creating two or more families, and chose not to support any of them. He asked if there was any national solution to this welfare abuse. Ms. Gay said there was no solution to her knowledge, and affirmed that in 25 percent of the Division's cases, the obligator had two or more families. She said often the huge amounts of back child support owed by obligators had been caused by this phenomenon. In answer to Co-chair Pearce, Ms. Gay said she did not know what percent of past due cases were multiple family cases. Co-chair Frank asked if the federal government had considered using the IRS to collect back child support. Ms. Gay said that the federal government had considered moving the collection portion to the IRS but the IRS was not that successful in collecting unpaid taxes. Senator Kelly felt there probably was a correlation between unpaid taxes and unpaid child support. Since the object was to support the child, Senator Sharp wanted to know if any collections were being made when the parents were not married. Ms. Gay affirmed that an unwed father was responsible for his child(ren), but paternity must first be proved, and then collections could be attempted to be made. Co-chair Pearce announced that CSSB 190(FIN) would be held in committee until Senator Sharp and Co-chair Pearce's staff could present a new CS that incorporated amendment 1 and 2 ADOPTED, and deleted the Court System's responsibility where possible. She hoped to reschedule it on March 17, 1994.