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2005 Testimony

Testimony Before The Senate Human Services Committee

Judy Lee, Chairman

SB 2301 - State administration of child support enforcement

January 24, 2005

Chairman Lee, members of the Senate Human Services Committee, I am Mike Schwindt, Director of the Child Support Enforcement Division of the Department of Human Services. I am here to present the Department of Human Services’ perspective on the bill.

If the Committee prefers, we would be willing to help with amendments to make the bill “budget neutral” and address some of the peripheral issues associated with the transfer of administration from the counties to the State, as well as develop an appropriation clause to authorize our use of the funds.

We suspect the discussion on this bill is going to fall into two categories – the program side and the financial side.

Programmatically, state administration presents a unique opportunity to reorganize the state child support enforcement program to help our 162,000 customers in 53 states and territories, several foreign countries and on Indian reservations. When the current regional structure was created over twenty-five years ago, no one knew what a “mature” child support enforcement program would be doing. Today, there are many potential benefits in moving to a state administered program. These include improved enforcement in tribal and interstate cases through specialization, targeting cases for criminal prosecutions, improved locating of parents, and better communication throughout the program. Specialization will also continue our improvements in the area of customer service.

Financially, as a result of the 1997 SWAP legislation, much of the cost of administering the child support enforcement program at the local level is funded by the counties, either through mandatory reinvestment of federal incentives or property taxes. Under Section Eleven of the bill, the county responsibility for funding our program would be phased out beginning with the 2007-09 biennium and ending with the 2013-15 biennium. We believe this phaseout is a bit too fast since the significant benefits to be gained will most likely be just starting to accrue during the 2007-09 biennium.

With federal performance measures, potential penalties, greater competition for federal incentive funds, and a growing caseload along with arrearages exceeding $200 million, ours is a program that cannot afford to have its funding reduced before these efficiencies can be achieved. As they occur, these savings can either be reinvested in the program to keep pace with the growing caseload, implement any new federal requirements, or reduce the outlay of state and county funds.

Turning to the bill, Sections One, Two, Five, Six, Seven, Eight, Nine, Twelve, and Thirteen make the technical changes in state law necessary to transfer administration of the child support enforcement program from the counties to the State.

Section Three cleans up the definitions. However, within subsection 2 (page 4, lines 9-13), an added cost is imposed on the Department to share in preparing the annual countywide cost allocation plans. This expense was assumed by the counties under the SWAP legislation in exchange for other costs assumed by the State. This section is unrelated to state administration of child support.

Section Four is also unrelated to state administration, except that it will help tribal counties maintain the level of payments required in Section Eleven of the bill. Unless the committee wishes to add an appropriation to the bill to offset the negative fiscal affect to the State of making the additional expenditure, this section could be removed from the bill. The Department’s appropriation bill, HB 1012, already includes both the 90% Indian county allocation ($2.8 million, including $459,000 for the child support component) plus an additional $630,000 to transfer to the Lake Region Regional Child Support Enforcement Unit.

Section Ten transforms the existing training fund into an improvement fund and increases the funding from one percent to five percent of federal incentives. This fund gives the child support enforcement program authority to spend the money on improvements in operations that may not be anticipated when a biennial budget is prepared. The flexibility in this section is key to testing and developing proposals needed to maximize existing resources in the program and achieve some of the savings needed to offset the future reduction in county funding under the bill.

Section Eleven is the heart of the bill and enacts three new sections to the code.

Subsection one of the first new section sets county expenditures for child support during calendar year 2004 as the baseline maintenance of effort (MOE) for future county funding. For future periods, this MOE, which is net of the incentives received in 2004 and the added payment for the Lake Region Regional Child Support Enforcement Unit, would be reduced by the schedule in subsection two of the new section. This also leaves future budgets underfunded.

Any office space provided by a host county is treated as an expenditure, but the host county and the Department can agree to accept the rent-free use of the same office space as an in-kind payment from the host county.

As mentioned earlier, the Department is concerned with the pace of the reduction in county funding in subsection 2 of the new section, as well as the fact that county contributions are reduced to zero in 2015. This is a fundamental change in the SWAP legislation passed several sessions ago and would provide significant property tax relief to the counties at the expense of the state general fund.

In subsection three of the first new section, all equipment, furnishings, and supplies in the control and custody of a regional unit at January 1, 2006, would be transferred to the Department. This is important for a smooth transition and continued operations.

Since the attorneys now employed locally by the child support enforcement program would be employed by the state rather than the counties, the second new section created in Section Eleven provides that these attorneys would be employed by the Department and appointed by the Attorney General rather than the county state’s attorneys. It is our understanding that Attorney General Stenehjem does not object to this provision.

The third new section provides that all existing employees of the eight regional child support enforcement units would be transferred into the state merit system as employees of the Department at their existing salaries. The Department strongly supports this provision – the key to continued success for our program is to retain these experienced employees. By avoiding a wholesale change in employees, transition to state administration can be less traumatic.

A balance must be struck between consolidation of services and reasonable access to caseworkers at the local level to accommodate the 90,000 parents involved in our program. Therefore, we do not foresee closing any of the existing offices if the program becomes state administered and have no objection to the last sentence in Section Eleven.

Section Fourteen is important because it sets the tone and expectations of the Legislature for the transition. It sets goals for us to offset the reduction in county funding as much as possible, yet recognizes the inevitable replacement of county funding with state general funds. It also calls for a comprehensive review of the classification and compensation of child support employees, which will address salary equity issues that may arise when the county employees are brought into the state merit system.

Finally, Section Sixteen sets January 1, 2006, as the effective day for the transfer of administration. This gives the Department only six to eight months to meet with the regional staffs and develop a long-term plan for managing the program. However, because the bill is written to maintain the status quo through July 1, 2007, any changes can occur with careful planning to ensure that the quality of services we provide to families is not diminished.

Madame Chairman, we believe the North Dakota child support enforcement program is a worthwhile investment of taxpayer dollars. If the timing of reductions in county funding can be more closely matched with savings or additional general funds so our existing operations do not have to be prematurely resized, state administration will make our program even stronger.

This concludes my testimony. I would be happy to answer any questions the committee may have.


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