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Legislative Analyst's OfficeAnalysis of the 2003-04 Budget Bill |
The Department of Child Support Services (DCSS), created on January 1, 2000, administers California's child support program by overseeing 58 county child support offices. The primary purpose of the program is to collect from absent parents, support payments for custodial parents and their children. Local child support offices provide services such as locating absent parents; establishing paternity; obtaining, enforcing, and modifying child support orders; and collecting and distributing payments.
The 2003-04 Governor's Budget proposes expenditures totaling $1 billion from all funds for support of DCSS in the budget year. This is a decrease of $19 million, or 1.8 percent, from estimated current-year expenditures. The budget proposes $438 million from the General Fund for 2003-04, which is an increase of $3.7 million, or 0.9 percent, compared to 2002-03. Most of the increase is attributable to an estimated increase in the federal penalty, largely offset by a reduction in basic administration costs.
Currently, the Department of Child Support Services (DCSS) budget for county administration is based on estimated collections, rather than estimated county costs and does not display recent initiatives designed to improve program performance. We recommend that DCSS revise its budget to display its initiatives separately, rather than continue to include them in basic county administrative costs.
Background. In an effort to improve the program performance of the child support services program, the Legislature removed the Child Support Services Office from the Department of Social Services and created the DCSS effective 2000. Since that time, DCSS has shifted the focus of child support collection toward a new "customer friendly" approach. Among the components developed over the last few years to improve customer service are the following "initiatives:" (1) an ombudsperson program, (2) informal inquiry and response timeframes, (3) a complaint resolution and state hearing process, (4) customer satisfaction surveys, (5) a statewide outreach program, and (6) quality assurance and program improvements.
Current Budgeting Practice. Under its current budgeting methodology, the administration estimates the amount of child support it anticipates collecting during the year. Once it has determined the total collections, it calculates 13.6 percent of those funds. (The 13.6 percent figure is based on historical incentive payments to counties prior to creation of the new department and is contained in the enabling legislation.) This amount effectively becomes a "placeholder" budget level for local administration of the program. Once the placeholder is established, the administration then decides how much General Fund it is willing to commit to running the child support collection program. This amount becomes the budget for the local child support agencies, and is typically lower than the placeholder.
Initiative Funding Levels Set Through Individual County Allocations. Independent of the budgeting process, DCSS develops the amount of the available administrative funding that it recommends counties spend on their various initiatives. The funding for the initiatives is implemented through individual county allocations. For fiscal years 2001-02 and 2002-03, DCSS allocated $84.9 million for initiatives. The level of funding for initiatives was based upon the amount of unspent funds in 2000-01.
While DCSS allocates the funding for the initiatives separately, it has not established a claiming process to track the amount that counties are actually spending on initiatives. This lack of expenditure information makes it difficult for DCSS to (1) ensure that counties have implemented the initiatives and (2) develop a methodology that allows DCSS to estimate the actual county costs for the initiatives.
The Problem. The budget display provided by the administration does not distinguish between (1) the discretionary administrative funding that counties may use to operate their basic programs and (2) the funding for the initiatives. For example, the costs of the ombudsperson and outreach services are indistinguishable from the estimated costs for county staff and other general operating expenses. Since all administrative costs are included in one basic line, there is no way to determine which aspects of the program, including the various initiatives, are being augmented or reduced in the budgets proposed by the administration for DCSS. As their budget is currently displayed, for example, it is unclear to what degree the Governor's proposed cuts affect the various initiatives that have been established by DCSS.
While the budget display makes legislative oversight of the DCSS budget difficult, of equal concern is the methodology used by the department to set the administrative funding level. Merely establishing a benchmark of 13.6 percent, based on estimated collections, and then funding the program below that level based upon the amount of General Fund the administration is willing to devote to the program, means that the proposed funding level is not built on any assessment of actual program costs. Therefore, the impact of any budget change (reduction or augmentation) to the program cannot be measured because there is no established cost for the core program. Moreover, without separate tracking of expenditures, it becomes impossible for the Legislature to determine (1) the cost of the initiatives and (2) the degree to which counties are implementing the recommended initiative programs.
Building a Better Budget. In order to improve legislative oversight of the DCSS budget, DCSS should develop an administrative budget that separates basic administrative costs from the estimated cost of its initiatives. The basic administrative funding estimate should be based on actual county expenditures and adjusted for an assessment of workload changes or any increase in the cost of doing business. Once the basic administrative funding is established, DCSS should estimate the cost of each initiative and display them separately.
Analyst's Recommendation. We recommend that the Legislature direct DCSS to (1) revise its budget display to separate the funding for basic administration and initiatives; and (2) base the core administrative budget on actual county expenditures, estimated workload changes, and any cost of doing business increases.
Since 1998, California has been subject to penalties for failing to implement a statewide child support automation system. The penalties, estimated to be $188 million in 2002-03 and $207 million in 2003-04, are levied in the form of a reduced federal share of child support administrative expenditures. Effective April 2003, the Governor proposes that counties pay one-quarter of the penalty.
Current Law. The federal government usually pays two-thirds of a state's total child support administrative expenditures. However, pursuant to the Child Support Performance and Incentive Act of 1998 (Public Law 105-200), California has been subject to federal automation penalties, which are levied, in the form of a reduced federal share in these administrative costs. Chapter 479, Statutes of 1999 (AB 150, Aroner), provides that the distribution of penalties between the state and counties be determined through the annual budget process. Through 2001-02, the Legislature has approved about $370 million from the General Fund to hold the counties harmless with respect to the penalty.
Recent Action. For 2002-03, the administration (1) assumed that federal legislation would be passed to provide the state with 50 percent penalty relief and (2) proposed that counties be responsible for half of the remaining cost of the penalty. The Legislature adopted the assumption of 50 percent federal penalty relief, but rejected the administration's proposal to establish a county share of the penalty. To date, there has been no penalty relief from the federal government, so the administration has submitted a deficiency notification letter asking for an additional $98.4 million to cover the cost of the entire penalty.
Governor's Proposal. The 2003-04 Governor's Budget proposes a 25 percent county share of cost for the federal penalty to be implemented prospectively, beginning in April 2003. Under this proposal, counties would be responsible for $6.2 million in 2002-03 and $52 million in 2003-04.