Directing Child Support Payments to Families, Not Government, Would Help Families Afford Basic Needs and Thrive

The modern child support program is a family support program that aims to get more cash to families; the program put more than $25 billion directly into the pockets of families in 2023.^[2] Children living in custodial families^[3] that participate in the program are significantly more likely to receive child support payments than those that do not.^[4] Receiving child support income is associated with positive benefits for children, including increased income, increased parental involvement, and better child developmental outcomes.^[5]

But child support does not benefit children and help them thrive when it is kept by governments rather than paid to families. Despite the importance of income support for families living in and near poverty, nearly half of the families participating in the child support program do not receive all the child support payments made on their behalf. In 2023, state and federal governments kept $896 million in child support payments, often meant for children in families with the lowest incomes, to reimburse the state for cash assistance it provided to the family through the Temporary Assistance for Needy Families (TANF) program.^[6]

There’s broad consensus among parents, researchers, policy analysts, advocates, and program administrators that Congress should require all child support to be paid to families, instead of used to reimburse the government for cash assistance provided.^[7] While federal legislative improvements are needed to entirely eliminate the cost recovery features of the TANF and child support programs, states do not need to wait for Congress to take action. Using existing policy options, states have considerable flexibility to direct all child support to current and past TANF participants.

This is an opportune time for states to take action. As state TANF caseloads have continued to decline over the last several years, state revenues derived from TANF cost recovery efforts have also declined, and so improving the policy can be done for only a modest cost.^[8] But the gain for families is real — increasing the amount of child support families receive can help families make ends meet and is one part of an equitable strategy for improving economic security, particularly for families of color.

This report highlights the benefits that accrue to children and parents when families receive child support and discusses why states should shift their child support program away from cost recovery and toward family support and well-being. (See Figure 1.) There are several different policy options in federal law that states may adopt, individually or in combination, to increase family payments and reduce or eliminate the cost recovery burden on families. The specific options are outlined in Appendix I. A chart of state-by-state distribution and pass-through policies is provided in Appendix II. An accompanying CBPP report, “Understanding TANF Cost Recovery in the Child Support Program,” describes the basics of TANF cost recovery and the specific rules governing child support assignment and distribution.^[9]

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Nearly Half of Families Receiving Child Support Services Lose out on Child Support Income

Almost two-thirds of all custodial families (62 percent) receive services funded under title IV-D of the Social Security Act — nearly 8 million custodial parents and 13 million children.^[10] That is 16 percent of all children under age 21 in the country. And, importantly, more than 80 percent of custodial parents and their children with incomes below the federal poverty line receive services.^[11]

More than half of the families participating in the child support program never received TANF but instead voluntarily applied for services, and these families receive all of their child support payments.^[12] But the rules are different for the 46 percent of participating families that are current or former recipients of TANF assistance, a group that is disproportionately Black and Latine.^[13] Thirty-eight percent of families participating in the child support program in 2023 previously received cash assistance; another 8 percent were currently receiving it.^[14]

Through a mechanism known as TANF cost recovery, families receiving TANF are required to participate in the child support program and to sign over their legal rights to child support payments to the state to reimburse the state and federal governments for the cost of cash assistance.^[15] The state holds back their child support payments as reimbursement for the assistance the family is receiving — or under some circumstances, received in the past.^[16] The state then keeps a share of the child support it retains as state revenues (“state share”) and provides a share of the retained support to the federal government (“federal share”). Cost recovery means that too often states and the federal government, not children, benefit from child support payments paid on their behalf. By expecting families to repay cash assistance, these policies fail to recognize the difficult economic circumstances that forced them to turn to TANF in the first place.

Cost recovery efforts continue even after families leave TANF. After families leave TANF, they start receiving their current monthly support to pay for the day-to-day needs of the children and most past-due child support payments. However, states keep some support in former assistance cases — less than 10 percent of total collections for these families is retained, primarily from federal tax offsets — to repay arrears owed during the assistance period. Most child support dollars retained by states as revenue to reimburse cash assistance are collected after families leave TANF. This is because more families that formerly received TANF assistance are affected by the cost recovery policies than families currently receiving assistance.^[17]

In 2023, 57 percent of the support kept by states to reimburse cash assistance was collected in former assistance cases, while 43 percent was collected in current assistance cases, even though the majority of support collected on behalf of families that received assistance in the past is not retained. (The data available includes collections from TANF cases and a small amount of IV-E foster care collections.)^[18] The main reason total support retained is higher for former assistance cases than current assistance cases is that there are five times as many child support cases involving families that formerly received assistance as those involving families currently receiving assistance.^[19] Also, states have more success collecting support in former assistance cases.^[20]

Under federal law, when child support is collected for a family receiving TANF, the state generally must split that collected support with the federal government. However, if a state passes through up to $100 for one child or $200 for two or more children to the family, the federal government waives its share of the passed through amount if it is disregarded in determining TANF assistance. Although states have authority to pass through any amount of assigned support to current TANF families, the federal waiver is capped at $100/$200. However, the federal share on support passed through to former TANF families is fully waived, and states may pass through any amount of assigned support without owing a federal share.^[21] No federal share is ever owed on support distributed to families, whether current or former TANF families. This is because the state does not have an assignment on distributed child support payments. (See “Understanding TANF Cost Recovery in the Child Support Program” for more on assignment and child support distribution policies).

States Should Use Flexibility to Send All Child Support Payments to Families

During the past three decades, Congress has acted twice on a bipartisan basis to limit child support cost recovery and increase child support payments to families. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) began the shift away from cost recovery in former assistance cases.^[22] The Deficit Reduction Act of 2005 (DRA) significantly narrowed the scope of child support assignment and gave states several options that can be combined to provide 100 percent of child support to all families (both those currently receiving assistance and those receiving assistance in the past).

Although federal legislation is needed to completely end cost recovery,^[23] states have authority, through a combination of federal options, to pay all collected support, including current support and arrears, to current and former TANF families. States interested in adopting policies that pay more support to families have a number of policy choices to consider and different pathways to expand payments over time. These include adopting “DRA distribution,” which gives custodial families, rather than the state, first priority for child support collected by the Internal Revenue Service (IRS) by intercepting the tax refunds of noncustodial parents; passing through both current monthly support and arrears collected to TANF families currently receiving TANF; passing through collected assigned arrears to former TANF families; and cancelling certain old assignments so support collected goes to families rather than being withheld by the state to offset long-ago received TANF assistance. (Note: “assignment” means the state has a legal claim to the support payments.) See Appendix I for details on the policy options available to states.

Some states are using a phased, multi-year approach to expand payments to families. In this way, states can move toward the goal of 100 percent family payments while reducing the near-term impact on the state budget.^[24] A phased approach allows states to sequence implementation of family distribution and pass-through options to steadily expand child support payments to current and former TANF families. States like California, Illinois, Maryland, New Mexico, Pennsylvania, West Virginia, Wisconsin, and Wyoming have phased in multiple policy options to expand family payments. In addition, states such as Oregon are actively considering ways to further expand family payments.

For states considering a phased approach, a good place to start is to pass through all current monthly support collected for families receiving TANF and then not count (“disregard”) that child support as income so the family’s TANF benefits do not go down (see Appendix I, Option 1 for details). This option would directly help families currently facing significant economic insecurity, has modest costs, simplifies state administration, and is easy for the public and families to understand.

Because many noncustodial parents of children receiving TANF have low incomes and cannot afford to pay large amounts of current child support, states often collect less than $200 in current support for families receiving TANF, which means the federal share of support would be fully waived in many cases. For example, Colorado Department of Human Services researchers determined that the state passed through $167 per month on average under its policy of passing through all current support.^[25]

While there is a cost to states to direct all child support to families — they give up their share of collections they would otherwise retain and, in cases where more than the $100/$200 limits are collected, the state must still pay the federal government a share of the collected support above the limits. But the cost is modest and has declined. State revenues derived from retaining the state share of assigned collections have fallen from $927 million in 2004 to $353 million in 2023,^[26] so it is now less costly for states to adopt policies to redirect child support to families than in the past. Paying all child support to families has some cost savings as well, which are discussed below.^[27]

Paying Child Support Collections to Families Improves Economic Security and Well-Being

Families benefit in multiple ways when they receive their child support payments. The payments provide a valuable source of income, especially for the many custodial families with low incomes. Research, including a University of Wisconsin study using an experimental design, finds that noncustodial parents pay more child support when the child support payments are both passed through to families and disregarded when calculating TANF assistance benefits (so the child support income actually improves the custodial parent’s financial circumstances).^[28] The Wisconsin study also finds that receiving child support payments helps parents meet their children’s basic needs, leading to reduced risk of Child Protective Services (CPS) involvement. In addition, studies link receipt of child support to increased noncustodial parent involvement in their children’s lives and positive developmental outcomes for children. By directing child support payments to families, states can support healthy dynamics and relationships between parents and other family members, which contribute to child and family well-being.

Redirecting Child Support Increases Families’ Financial Stability

Most custodial families that participate in the child support program have incomes below or near the poverty line.^[29] Thirty-three percent of children participating in the child support program in 2017 had family incomes below the federal poverty line, and 61 percent had family incomes below twice the poverty line.^[30]

Especially for families struggling to afford basic necessities, child support can be a significant long-term source of family income. Among custodial families with incomes below the federal poverty line in 2013, child support represented 41 percent of their income when received, on average. Child support represented an even larger share — 65 percent — of income when received by custodial families living below half of the poverty line.^[31]

Regular child support payments can promote financial stability by providing custodial families with a long-term stream of consistent cash payments they can use to meet their child’s needs. In addition, income from child support can free up time and resources for custodial parents to find better jobs and child care arrangements; research shows this increased flexibility has a positive effect on custodial parent employment.^[32]

A consistent stream of child support income also can cushion families from the impact of unexpected expenditures or income losses.^[33] Fluctuations in month-to-month earnings and other income are more common among low-income families with children than among higher-income families.^[34] Unexpected expenses such as car repairs and medical bills can worsen financial instability, especially for households with few assets and savings.^[35]

The reality is that most financial support for children living in custodial families with low incomes is provided by their parents, not the government.^[36] Nearly 80 percent of custodial parents receiving child support services are employed. When families with incomes below the federal poverty line receive child support, custodial and noncustodial parents contribute financially to their children in about equal measure.^[37] Some custodial families also rely on public assistance to make ends meet: 10 percent of families receiving child support services received TANF cash assistance, 36 percent received SNAP, and 15 percent received housing assistance in 2017.^[38]

For families receiving TANF, those benefits provide only limited family support, leaving a family of three at or below 60 percent of the poverty line in every state.^[39] The median state benefit level for one parent and two children is $549, and families often do not receive the full benefit amount when they have earnings or other income, among other reasons.^[40] For TANF families, even modest rental housing is unaffordable based on U.S. Department of Housing and Urban Development Fair Market Rents.^[41]

Custodial parents have more income when states implement pass-through policies that direct child support payments to the children for whom they are intended rather than retaining some or all of that support. ^[42] Not only do families benefit from the money otherwise retained by states, but research demonstrates that pass-through policies change the way noncustodial parents interact with the child support program. Research shows that noncustodial parents pay a higher amount of child support and more noncustodial parents pay support when their support payments are passed through to children and disregarded in determining TANF assistance. Noncustodial parents also establish parentage more readily, the legal prerequisite to a child support order, when they know that the support they pay will benefit their children.^[43] And they are more willing to pay through the formal child support program, which ensures that their payments are credited against their support obligation and can improve payment regularity for families.^[44]

The University of Wisconsin TANF pass-through study referred to earlier compared families in the experimental group that received a pass-through and disregard of all current monthly child support payments with those in the control group that received a partial pass-through and disregard of current support (the greater of $50 or 41 percent). The study found that noncustodial parents with a support order in the experimental group were 10 percent more likely to pay any child support than those in the control group by the third year of the experiment. In addition, noncustodial parents with a support order in the experimental group paid 24 percent more child support.^[45]

Similarly, an Urban Institute study found that noncustodial parents in Washington, D.C. with a support order were 3 percentage points more likely to pay any child support, and paid 11 percent more support in TANF cases by the third year, under a $150 pass-through and disregard policy than under the previous $50 pass-through policy.^[46] Also, in the first year after implementing its policy to pass through and disregard all current monthly support, the Colorado Department of Human Services found that total current collections for TANF families rose 76 percent based on an analysis of its administrative data. ^[47]

Child Support Can Be Reliable Income Source, Leaves Families Better Off

A common misconception is that child support is rarely a reliable source of income. In reality, a large share of current TANF families that receive any child support receive payments fairly consistently, though many other families do not receive regular payments.^[48]

A University of Maryland study of the state’s TANF pass-through policy found that 40 percent of families with a support order received a pass-through payment every month during the eight-month study, while 57 percent received a payment for three or more consecutive months.^[49] Similarly, a University of Wisconsin study found that slightly less than half of mothers in the state who received support during a year consistently receive a regular amount. The Wisconsin study determined that child support payments were as regular as custodial mothers’ earnings, and typically in higher amounts than other income sources, such as cash assistance and SNAP benefits.^[50]

Among families participating in the child support program nationally, 59 percent of families that formerly received assistance had child support collections in 2023, but just 34 percent of families currently receiving assistance.^[51] In part, the share of currently-assisted families with collected child support is relatively low because some noncustodial parents of children receiving TANF do not pay support when they are unemployed, have unstable employment, are incarcerated, or avoid making payments through the formal system. In addition, once a family is referred to the child support program, it takes time to obtain a support order that establishes a payment obligation for the noncustodial parent. This means that a state may not begin to collect payments until the family has already left TANF. Among current TANF participants with an established support order, more than half have collections.^[52]

Research on the amount of child support collected for families receiving TANF is limited, but two analyses of state pass-through data provide insight into how much money is at stake for families.^[53] An unpublished University of Maryland analysis found that over the course of a year, the mean amount of child support collected in the state for families receiving TANF that had an active child support case and collections in 2022 was $323 per month. Collections averaged $170 in current support and $208 in arrears.^[54] About half of total collections in TANF cases were current monthly support payments and half were arrears, and a typical family had a mix of current and arrears collections.^[55] As mentioned earlier, the Colorado analysis determined that current monthly support payments averaged $167 in that state’s analysis of its pass-through data.^[56]

Another misconception is that families are no better off receiving child support because they lose SNAP and other income-based benefits. In SNAP, both cash assistance and child support payments count as unearned income, but they do not cause a dollar-for-dollar decline in SNAP benefits.^[57] Instead, SNAP benefits phase down as income rises, at the rate of roughly 30 cents for each additional dollar of income.^[58]

Research shows that passing through child support increases a family’s overall income (including both cash and SNAP) even when SNAP benefits decrease as a result.^[59] The University of Maryland pass-through study found that families in the state received an average of $132 per month in passed-through child support income, which increased the quarterly household income of most families by up to 20 percent (when counting both families that receive and do not receive child support). In Maryland, child support is counted as income in SNAP when received for three or more consecutive months, and although such families saw their SNAP benefits fall by an average of roughly $70 to $80 per month, the net effect on their income was again positive.^[60]The Colorado Department of Human Services concluded from its data analysis that passing through all current support to families receiving TANF and SNAP in the state caused SNAP benefits to decline by $28 per month, on average, but resulted in a net family budget increase of $134.^[61]

Directing Child Support to Families Reduces Risk of Child Protective Services Involvement

Families experiencing poverty are far more likely to be reported to child protective services than families with more resources.^[62] Economic hardship may interfere with parents’ ability to provide their children with basic necessities like food, shelter, medical care, and supervision — factors that can contribute to a child welfare agency’s determination that a child is being neglected. Unemployment, housing instability, and eviction have all been associated with increased risk of families’ involvement in the child welfare system.

Studies have linked anti-poverty measures that increase family income and help parents provide their children with basic necessities with fewer reports of child neglect to child protective services.^[63] Even relatively small infusions of cash can make a difference by helping families maintain housing and employment or meet other expenses of raising children.

To study whether increased child support income passed through to families reduced reports of child maltreatment or neglect to the child welfare system, researchers used administrative data collected for families that had participated in the Wisconsin pass-through demonstration. Researchers compared families randomly assigned to the experimental group, who received a full pass-through of current support, with families in the control group, who received a partial pass-through. The study produced consistent evidence that increased child support income passed through to families can reduce reports of maltreatment or neglect, estimating that mothers who received a full pass-through were about 10 percent less likely to receive a “screened-in report” (a report to child protective services alleging child neglect or maltreatment that met state criteria for further assessment) than mothers who received a partial pass-through.^[64]

While the research findings are not uniform, a large number of studies have linked experiences of poverty and hardship with immediate and long-term detrimental effects on children across a range of outcomes, not just reports of neglect. For example, researchers have linked stress associated with a scarcity of resources to lasting negative consequences for children’s brain development and physical health.^[65] Conversely, helping families move out of poverty decreases the risks to children and their families. Policies and programs that increase family income can improve children’s academic, health, and economic outcomes, according to a report on reducing child poverty issued by the National Academies of Sciences, Engineering, and Medicine. A study published by the National Bureau of Economic Research estimates that for every $1,000 provided annually to families with children, society reaps $5,603 in benefits, including through increased earnings among adults and better health outcomes among children.^[66]

Receiving Child Support Linked to Increased Noncustodial Parent Involvement, Positive Child Development Outcomes

Extensive research connects receiving child support payments to positive child developmental outcomes, including stronger school performance. Children who receive child support payments are more likely to receive higher grades, to have fewer school problems, to finish high school, and to attend college than their peers who do not receive child support.^[67]

One reason for this connection may be that noncustodial parents who pay child support are more likely to stay engaged in their children’s lives. Parental involvement and payment of child support tend to go hand in hand, with studies finding that payment of child support is associated with noncustodial parental contact.^[68] Parental involvement, in turn, is associated with children’s emotional well-being, social and behavioral adjustment, and academic achievement.^[69] Children who have supportive and nurturing relationships with their noncustodial parents can also have a clearer sense of identity and social belonging.^[70]

In addition, receiving regular child support payments can improve and help stabilize co-parenting relationships,^[71] helping to keep the door open for children to maintain relationships with their noncustodial parents as well as paternal grandparents and relatives.^[72] Children with extended family networks often have more social support and more potential sources of care, advice, and opportunities that help their development and outcomes later in life.^[73]

Like custodial parents, noncustodial parents typically want to provide and care for their children.^[74] Custodial mothers report that two-thirds of noncustodial parents spend time with their youngest child.^[75] And a study from the Centers for Disease Control and Prevention found that Black noncustodial fathers are more engaged in their children’s lives than their white and Hispanic counterparts.^[76]

This evidence suggests that better child support policies — including policies that direct collected child support payments to families — can strengthen noncustodial parents’ engagement with their children and, in turn, their extended family members as well, creating a more positive and nurturing environment for their children. 

Cost Recovery Policies Can Harm Family Dynamics

Child support services are critical for families that seek them. Child support agencies ensure that child support is collected efficiently, so that families can count on receiving support when it is collected. But at the same time, TANF cost recovery policies — both the cooperation requirement, which mandates participation in the child support program, and the assignment requirement, which authorizes a state to retain support payments as reimbursement for assistance — can undermine the goals of providing needed support to families and respecting parents’ decisions about what is best for their families.^[77]

Cost recovery, including mandatory participation in the child support program, can harm family dynamics by disrupting existing co-parenting arrangements and increasing conflict between parents and other family members.^[78] These policies ignore the fact that many parents who live apart have already established co-parenting relationships involving a combination of informal financial support (cash support paid directly to the custodial family and not credited against a legal obligation), in-kind support (non-monetary support contributed to the custodial family), cost-sharing arrangements, and shared caregiving responsibilities.^[79] In fact, many custodial parents decide against obtaining a child support order because they have existing arrangements with the noncustodial parent.^[80] Requiring families receiving TANF to participate in the child support program even if they do not think it is in their best interest can discourage parents from participating in TANF and may contribute to parents’ distrust of the child support program.

Research underscores the value of informal forms of support for children.^[81] Informal support arrangements can be especially important when noncustodial parents are struggling to support themselves and their children. In-kind support and other material contributions to families made by noncustodial parents who lack the means to make regular cash payments can be another way to reduce custodial parents’ financial hardship and increase children’s well-being.^[82]

Recognizing the important role of in-kind support for families, the San Francisco Department of Child Support Services is piloting a voluntary program that allows parents to jointly agree that child support obligations will be met through in-kind contributions such as caregiving, cooking meals and managing other household tasks, and purchasing clothing, food, and other necessities. In addition, several tribal child support programs base some child support orders on in-kind contributions such as fish, wood, and car repairs.^[83] These approaches enable parents to flexibly address their families’ needs when they cannot make regular child support payments.

Turbulent family dynamics are stressful and can be traumatic for children as they grow up. Research shows that experiencing parental loss and high levels of parenting and economic stress create lifelong risks to children’s health, well-being, and economic opportunity. Studies show that these traumatic experiences, known as Adverse Childhood Experiences (ACES),^[84] can affect health outcomes across a child’s lifespan and their future opportunities in areas such as education, employment, and income.^[85] These studies suggest that preventing early adversity may improve health and life outcomes that reverberate across generations, and that healthy family dynamics can play a role in helping children thrive as they grow up.

Directing Child Support to Families Promotes Equity

Cost recovery policies exacerbate pre-existing inequities for both custodial and noncustodial parents of children receiving TANF. Cost recovery establishes a two-tiered policy, with families in the child support caseload that receive or used to receive TANF — families that typically have very low incomes and are disproportionately Black and Latine — losing out on income that other families are able to receive.^[86] In particular, children in families that currently or formerly received TANF do not benefit from the child support provided by their noncustodial parents when that support is withheld to recover past costs associated with TANF. Children who do not receive TANF are unaffected by cost recovery, so they gain the financial, educational, and social benefits of child support paid by their noncustodial parents.

Directing more child support (and ideally all support) to families that receive or used to receive TANF would support more equitable family outcomes by increasing families’ income and providing them with more of a protective buffer against financial precarity. Rather than aggravating conflict between the parents, family distribution can give children receiving TANF the same chance as other children to benefit from their noncustodial parents’ financial contributions and stay connected to both parents. When child support is passed through to families, more noncustodial parents pay support, and noncustodial parents pay more support — increasing family income and decreasing the build-up of child support debt.^[87] Child support debt can lead to harsh penalties on noncustodial parents, including the loss of a driver’s license and even incarceration that, in turn, hurts their employment prospects and future ability to pay support.

Reducing Inequities for Custodial Parents

Cost recovery policies impact custodial parents participating in the TANF program, who are disproportionately Black and Latina women. According to 2022 data from the Office of Family Assistance, 91 percent of TANF households with an adult participant have one parent. Among all adult TANF participants, 84 percent are women, 31 percent are Black, and 33 percent are Hispanic.^[88] (See Figure 2.)

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Women of nearly all races and ethnicities experience higher poverty rates than men, and this is also true for custodial mothers compared to custodial fathers. In 2017, the poverty rate for all custodial mothers was 27 percent, versus 11 percent for custodial fathers.^[89] Overall, women are much more likely to be custodial parents — in 2018, women represented 80 percent of all custodial parents.^[90] In addition, Black and Latina women are likelier to be custodial parents compared to women in other racial and ethnic groups.^[91] Further, Black, Latina, and American Indian or Native Alaskan women experience the highest poverty rates among women.^[92]

Higher poverty rates among women, particularly women of color, are linked to the impacts of sexism and racism across society, including the gender and race pay gap, lack of family-work policies, systemic devaluing of caregiving (whether paid or unpaid), and the economic impacts of domestic violence.^[93] In addition, women are much more likely to raise children alone and therefore bear a disproportionate share of child-rearing expenses and responsibilities.^[94] And, due to occupational segregation, women — especially women of color — are overrepresented in low-paid jobs and part-time work and are less likely to have access to any leave, paid or unpaid.^[95]

Child support income can help custodial families address the economic hardship that many face, but only if that support reaches the family.

Reducing Inequities for Noncustodial Parents

Cost recovery policies also reinforce and create inequities for noncustodial parents. By preventing noncustodial parents from using their resources to support their children, cost recovery can diminish their parenting role and their relationship with their children.^[96] And if noncustodial parents do not pay child support through the formal system (which is more likely if child support payments do not benefit their children but are instead kept by the state), they can be subject to coercive debt collection efforts by the child support program. States can help address these inequities by adopting policies that redirect noncustodial parents’ child support payments to their children and center the program on families’ needs, not state revenue generation.

An estimated 25 percent of noncustodial fathers participating in the child support program have incomes below the federal poverty line.^[97] Most noncustodial parents who fail to pay child support have incomes below poverty and struggle to meet their own basic needs for shelter, food, transportation, and health care.^[98] According to a University of Maryland study, noncustodial parents in the state who made no child support payments earned an average of $7,350 in 2018, compared to $44,000 for noncustodial parents who paid all of their child support.^[99] And a University of Wisconsin study found that 90 percent of noncustodial parents in the state who made no child support payments, and 60 percent making partial payments, were either incarcerated or lacked stable employment.^[100]

Black noncustodial parents are overrepresented among those impacted by TANF cost recovery policies. They face racial barriers to finding and maintaining stable, full-time employment at a living wage, including overrepresentation in low-paid jobs due to occupational segregation and racial discrimination in the job market.^[101] They also face racial disparities in the criminal legal system, including higher rates of arrest and incarceration.^[102]

Because noncustodial parents are less likely to comply with support orders if their children do not benefit from their payments, cost recovery can lead to more debt for noncustodial parents. Child support debt can trigger a range of harsh child support enforcement measures, including driver’s license suspension and even incarceration.^[103] Research suggests that noncustodial parents are more likely to experience harsh measures for failure to pay child support if their children are receiving TANF.^[104]

Unmanageable child support debt, in turn, further undermines noncustodial parents’ ability to work and contribute to their children, financially or otherwise. However, as the Wisconsin and District of Columbia pass-through studies found, when states pass through and disregard support payments to families receiving TANF and do not retain them, significantly more noncustodial parents pay child support, and they pay a larger amount of support. In other words, pass-through policies can remove disincentives to employment and payment of child support through the formal system experienced by noncustodial parents when their payments actually benefit their children.^[105]

When the state retains child support payments to reimburse current or past cash assistance costs, noncustodial parents sometimes decide to pay outside of the child support program. But they can find themselves in an untenable position financially if they do not have sufficient resources to “pay out of both pockets” by providing informal support directly to their children while also paying child support kept by the state.^[106] Also, custodial parents receive informal support but do not report it to the TANF office risk losing TANF assistance.

Conclusion

Rooted in old poor relief laws (see box), cost recovery pervades traditional child support policies and is incompatible with the modern child support program, which is focused on helping families achieve financial stability. Cost recovery policies work at cross-purposes with parents and hurt the families that are most in need of child support payments. They reduce family income, impede parents’ ability to provide for their children, undermine family relationships, and decrease child well-being and development. Policymakers in Congress and in states should adopt family distribution policies that support families and help them thrive.

Appendix I: State Policy Options to Direct All Child Support to Current and Former TANF Families

In many states, families participating in the TANF program do not receive the child support collected on their behalf. This is because families that apply for TANF assistance are required to assign their legal rights to child support to the state to reimburse the cost of assistance paid to the family. When a state retains collected child support under an assignment, some of the retained support goes into state coffers and some is sent to the federal government. The amount sent to the federal government depends upon the state’s Federal Medical Assistance Percentage (FMAP), which is based on the state’s per capita income.

States have several federal policy options to shift away from TANF cost recovery. One set of options impacts families currently receiving TANF, while the other set primarily affects families that no longer receive TANF but remain subject to an assignment of past-due child support owed during the assistance period. These options are described below. States have followed different paths to expand their family distribution and pass-through policies. By combining several options, however, states can direct all support, including both current monthly support and arrears, to current and former participants in TANF cash assistance.

Option 1: Pass Through and Disregard All Monthly Child Support to Current TANF Families

States may pass through any amount of child support collections, whether current monthly support or arrears, to families participating in TANF. Federal law waives the federal share of collections that are passed through to current TANF families and disregarded for TANF benefit determination, up to $100 per month for one child and $200 for two or more children.^[107]

Example (partial pass-through of $100/$200): West Virginia passes through up to $100 or $200 of current monthly support, depending on the number of children. The state has an FMAP of 74 percent in 2024, which means that if it collected $100 in a TANF case and had not adopted a pass-through policy, it would owe $74 to the federal government and keep $26 as the state share. Since West Virginia passes through and disregards the first $100/$200, the state forgoes its $26 share but does not pay the federal government a $74 share.

Example (pass-through of all current support): Colorado passes through all current monthly support. It has a 50 percent FMAP in 2024. Assume that the state collects $350 during a month for a family with two children, reflecting $300 in current support and $50 in arrears. The state would pass through and disregard $300, forgoing its $150 share. The federal share is waived on $200 of that amount, but the state would still have to pay the federal government $50 (50 percent of the remaining $100 passed through as current support). The state would retain the entire $50 in arrears, keeping half as state revenues and paying the other half to the federal government, for a total federal share of $75 on current support and arrears.

What states are doing: To date, 27 states, including the District of Columbia and Puerto Rico, pass through some or all current monthly child support to families. Five states maintain “fill-the-gap” budgeting in their TANF programs (which allows states that used this budgeting method under the prior AFDC program to distribute more support to current TANF families without having to pay the federal share,^[108] and three states pay a supplemental TANF benefit based on child support collections. Several states pass through more than $100/$200 to families receiving TANF:

• Colorado and Michigan pass through all current monthly support to families receiving TANF and also disregard that amount when determining their TANF eligibility and benefit amount.
• Minnesota passes through all current support but limits the monthly amount disregarded to $100 or $200, depending on the number of children.
• Wisconsin passes through and disregards 75 percent of current support and arrears.
• Illinois enacted legislation in 2023 to pass through and disregard all current support and arrears, one component of its 100 percent family distribution policy.
• California, which currently has a $100/$200 pass-through, adopted budget language in 2022 expressing the legislature’s intent to fund a full pass-through and disregard of current support and arrears for current TANF families as part of a broader shift toward a 100 percent family distribution policy. The provision was subject to a fiscal trigger and will not be implemented in 2024 due to budgetary considerations.

The remaining states with pass-through policies pass through and disregard partial amounts, such as up to $50, $75, $100, or $100/$200.

Option 2: Pass Through and Disregard All Child Support Arrears to Current TANF Families

As Option 1 discusses, states also may pass through any amount of child support arrears to families participating in TANF. Federal law waives the federal share of collections passed through to families receiving TANF and disregarded, up to $100 of collections per month for one child and $200 for two or more children.^[109]

Example: As noted above, Wisconsin passes through 75 percent of both current support and arrears to current TANF families. The state has a 61 percent FMAP in 2024. If the state collected $500 in arrears for a family with two children receiving TANF, it would pass through and disregard $375 and retain $125. The federal share is waived for $200 of the passed-through amount. The state would pay a 61 percent federal share on the remaining $300, or $183, and could cover this amount by paying the federal government both the federal and state shares of the retained amount and making an additional outlay of $58 ($183 minus $125).

What states are doing: In addition to Wisconsin’s current policy, Illinois is in the process of implementing a full pass-through and disregard of arrears to current TANF families as part of 100 percent family distribution. As discussed above, the California legislature expressed its intent in 2022 to pass through arrears to current TANF families (subject to a fiscal trigger). Several other states pass through both current support and arrears under a more limited pass-through policy.

Option 3: Elect the DRA Tax Offset Option to Pay Current and Former TANF Families Child Support Payments Deducted From Federal Tax Refunds

As mentioned above, PRWORA created a special rule for collections that the Internal Revenue Service deducts, or offsets, from tax refunds owed to noncustodial parents. Under this rule, those payments are applied to arrears only, not to current support. The DRA gives states the option to eliminate this special rule, which enables them to distribute collections made through federal tax offsets like collections from any other source. Under the DRA, tax offsets and other collections are distributed first to current support and then to arrears. While a family receives TANF, current support is assigned to the state. In addition, arrears assigned to the state are paid off before arrears owed to the family. After a family leaves TANF, family arrears are paid off before state debt. Because amounts distributed to families are not assigned, states do not owe a federal share on them.^[110] States may adopt the DRA option by electing “DRA distribution” (rather than “PRWORA distribution”) in their child support state plan.^[111]

Example (family no longer receives TANF): Assume that Maryland receives $2,000 collected through a noncustodial parent’s federal tax offset. The noncustodial parent owes $7,000 in assigned arrears to the state to repay assistance, owes $5,000 in arrears to the family, and owes $300 in current monthly support. Maryland has elected DRA distribution rules, meaning that the $2,000 would be applied first to paying the $300 in monthly support to the family. The state would then distribute the remaining $1,700 to the family to pay down family arrears. There would be no money left to apply to state arrears, and the state would not owe a federal share on the collection because support distributed to families is not assigned to the state.

Example (family receives TANF): The circumstances are the same as in the previous example, except the family includes two children and receives TANF. Maryland has a $100/$200 pass-through policy. The $2,000 would be applied first to the $300 in current monthly support. Because the family receives TANF, the monthly support is assigned to the state. However, under its pass-through policy, the state would pass through the first $200 to the family, disregarding this income in determining TANF benefits. The state would retain $100. The state then would retain the remaining $1,700 as assigned arrears. There is no money left to apply to family arrears. The state would owe a federal share on the $1,800 retained amount ($100 in retained current support and $1,700 in retained arrears).

What states are doing: Nine states — Alaska, California, Maryland, New Mexico, Pennsylvania, Rhode Island, Vermont, West Virginia, and Wyoming — have elected DRA distribution.

Option 4: Pass Through Assigned Support After Families Leave TANF

States also may pass through any or all assigned collections to former TANF families.^[112] When support is passed through, the federal share is fully waived.^[113] This pass-through option may be used in combination with DRA distribution to pay any remaining assigned collections to former TANF families, or it may be used in lieu of DRA distribution.

Example (PRWORA distribution): Wisconsin elected PRWORA distribution but passes through all assigned collections to former TANF families. Suppose Wisconsin receives $8,000 collected through a federal tax offset. The family no longer receives TANF. The noncustodial parent owes the state $7,000 in assigned arrears to repay assistance, $5,000 in arrears to the family, and $300 in current monthly support. Under PRWORA distribution, support collected through a federal tax offset is not distributed to current support, but only to arrears; $7,000 would be applied to assigned arrears owed to the state, but the state would pass it through to the family and would not keep any amount. The state would not owe a federal share on the passed-through amount because the DRA waives the entire federal share on assigned support passed through to former TANF families. Then the state would distribute the remaining $1,000 to the family to pay down family arrears. The state would not distribute any amount to current support.

Example (DRA distribution): Wyoming elected DRA distribution and implemented a pass-through of remaining collections to former TANF families. Assume Wyoming receives $8,000 collected through a federal tax offset. The family no longer receives TANF. The noncustodial parent owes $7,000 in assigned arrears to the state to repay assistance, $5,000 in arrears to the family, and $300 in current monthly support. The state would first distribute $300 in current support to the family. Next it would distribute $5,000 to the family to pay off family arrears. The state then would pass through the remaining $2,700 in assigned arrears to the family. The state would not owe a federal share on any part of the collection.

What states are doing: California, Illinois, Wisconsin, and Wyoming pass through all arrears to former TANF families. Oregon previously elected PRWORA distribution but introduced legislation in 2023 (and plans to reintroduce the legislation in the 2025 legislative session) to pass through all support to former TANF families.

Option 5: Cancel Certain Pre-2009 Assignments

The DRA ended the longstanding policy of requiring families to sign over their rights to past-due child support payments that accrued before they applied to TANF; this policy was called “pre-assistance” assignment. Under current law, states may only obtain an assignment of support that becomes due while the family is participating in TANF, and may not obtain an assignment of support owed before the assistance period. The DRA also includes two different options to limit assignments. First, states may cancel assignments entered into before 2009 (“pre-assistance assignments”). In addition, states may cancel any type of assignment entered into before 1997, including pre-assistance assignments and assignments for support owed during the assistance period (“pre-PRWORA assignments”).^[114]

Example (pre-assistance assignments): North Dakota elected to cancel pre-assistance assignments entered into before 2009. Suppose a family applied for TANF cash assistance in 2003 and began receiving a $457 monthly benefit for 12 months, for a total of $5,484. At the time of application, the noncustodial parent owed $300 in current monthly support but had not paid in two years. Federal law at that time required the custodial parent to assign this $7,200 in accrued pre-assistance arrears along with the $3,600 owed during the assistance period, though reimbursement was limited to the $5,484 of cash assistance paid out. Assume that over the next six years, the state was unable to make any collections in the case. Following the DRA’s enactment, the state would have cancelled the $7,200 pre-assistance assignment but (as required by federal law) would have retained the assignment to the $3,600 support owed during the assistance period.  

Example (pre-PRWORA assignments): West Virginia elected to cancel all assignments entered into before 1997. Suppose a family applied for cash assistance in 1994 under the AFDC program and received a $253 monthly benefit for 12 months, for a total of $3,036. At the time the family applied for AFDC, the noncustodial parent owed $200 in current monthly support but had not paid in two years. Federal law at that time required the custodial parent to assign this $4,800 in accrued pre-assistance arrears, as well as the $2,400 owed during the assistance period, though reimbursement was limited to the $3,036 in cash assistance paid out. Over the next 15 years, the state was unable to make any collections. After the DRA was enacted, the entire assignment was canceled.

What states are doing: Over half of states have canceled old assignments under one or both options.^[115]

Challenges to Directing More Child Support to Families

States face two main challenges to expanding family distribution and pass-through policies: fiscal impacts and computer reprogramming. In some states, the main sticking point to implementing family distribution options is the revenue loss. This is particularly true in states with higher TANF caseloads and benefits, as well as in states that use child support revenues to help fund their child support programs. If a state decides to direct support to families instead of keeping it, the state loses funds that it would have retained as state revenues. Another fiscal sticking point can be the federal share owed on support passed through to families currently receiving TANF. Although states have authority to pass through any amount of assigned support to current TANF families, the federal share is capped at $100/$200.

This means that a state that decides to pass through 100 percent of current support and arrears payments must use its state funds to pay for the federal share on passed-through amounts above $100/$200.

If a state decides to pass through support to the family instead of retaining it, the state loses funds that it would have kept as state revenues and, in some cases, still has to pay a federal share of the retained support to the federal government. However, states with higher FMAP rates that expand their TANF pass-through policies will experience proportionately lower costs than states with lower FMAP rates. A state’s FMAP rate is based on the share the federal government pays of certain state Medicaid costs. A state with a higher FMAP receives a higher percentage of federal Medicaid funding because it has lower per capita income — but a state with a higher FMAP also sends most of its retained collections to the federal government (sometimes 70 percent or more) to reimburse federal TANF costs. In other words, when a state with a higher FMAP passed through support above the $100/$200 federal waiver cap, the cost is born primarily by the federal government, rather than the state.^[116]

On the other hand, states with lower FMAP rates send back a lower share of assigned support to the federal government and keep more for themselves, so adopting the DRA option costs them somewhat more, but these states also tend to have larger budgets and more capacity to absorb what is still a modest revenue loss.^[117]

The revenue loss is modest for other reasons as well. States with lower TANF caseloads or lower TANF benefits may determine that expanding child support payments to families would result in limited revenue losses and net budgetary savings.^[118] The same is true of states with fill-the-gap budgeting.^[119]Because far fewer families now receive TANF, retained collections have declined substantially over the past two decades. And when benefits are lower, families assign less support to the state. In addition, a reduction in state revenues would be partially offset by savings from reduced state operational costs, better performance resulting in higher federal incentive payments, and better outcomes for families. In addition, states may count the state share of assigned collections passed through to families receiving TANF toward their TANF maintenance-of-effort requirement.^[120]

To address the budgetary impact of eliminating revenues and paying a partial federal share associated with cost recovery, a number of states have used a phased approach to implementing federal options. This phased approach allows states to defer costs to subsequent budget years by sequencing the adoption of family distribution and pass-through options. For example, California and Wyoming adopted DRA distribution and began passing through $100 for one child and $200 for two or more children to families currently receiving TANF, and then implemented a pass-through of all assigned arrears to families that formerly received TANF. Illinois, on the other hand, implemented one piece of legislation to pass through 100 percent of collections to current and former TANF families and implemented it over a relatively short period of time. By combining options, however, all three states have significantly expanded family payments.

In some states, the greatest challenge in implementing family distribution and pass-through options is computer systems reprogramming, especially if the state’s computer systems are outdated and difficult to adjust for changes in policies. For that reason, it can be advantageous for states to adopt family distribution options at the time of systems replacement or other systems enhancement projects. States that move to 100 percent family distribution can reduce costs due to simplified program administration, reduced systems maintenance costs, greater cooperation by parents (which reduces the cost of collecting support), and avoided costs in other programs (because families receive more income).^[121] According to one estimate, computer systems savings attributable to 100 percent family distribution could be as high as 6 to 8 percent of all program expenditures, but up-front investment in systems changes is necessary.^[122] 

Appendix II