Colorado Legislative Council Staff

STATE

REVISED FISCAL NOTE

(replaces Fiscal Note dated February 18, 1998)

TABOR Refund Impact

General Fund Expenditure Impact

Cash Funds Revenue and Expenditure Impact

Cash Funds Exempt Revenue and Expenditure Impact

Federal Funds Expenditure Impact

TITLE:            CONCERNING SUPPORT OBLIGATIONS.

Summary of Legislation

*     The revenues identified in this bill are not new revenues. They are interest earnings previously accounted for outside the budget process. They are being shown now at the recommendation of the State Controller.

NOTE: As amended, Section 26-13-114 (5) provides that on and after July 1, 1998, the Family Support Registry shall be implemented with respect to court orders in which payments are directed to be paid through the Family Support Registry. The current Family Support Registry will not have the capacity to receive orders and process non-IV-D payments effective July 1, 1998. This fiscal note assumes implementation will be phased in with DHS assuming full authority in FY 1999-00.

            The bill makes changes to the “Uniform Interstate Family Support Act” in addition to other changes related to child support payments and collections. This fiscal note is limited to a discussion of those provisions of the bill which have a fiscal impact. Although amended in Senate Judiciary, the fiscal note is revised to reflect additional information. The Senate Judiciary amendments do not impact the fiscal impact of sections 10 and 11 of the bill.

Section 10. 26-13-114. Family support registry.

            •   Authorizes the Department of Human Services and the Judicial Department to expand the Family Support Registry to process all non-IV-D case payments.

Section 11. 26-13-115.5. Family support registry fund created.

            •   Requires that investment earnings on moneys deposited in the Family Support Registry Fund, accruing from collections for child support received by the Family Support Registry, or accruing from miscellaneous sources such as undeliverable child support payments, shall be used to reimburse the Family Support Registry for unfunded payments by noncustodial parents or other incidental expenditures of the Family Support Registry.

            The bill includes an effective date of July 1, 1998; except that section 11 of the act shall take effect upon passage.

State Revenues

            Background. The revenues identified in this fiscal note are not new revenues, rather they are interest earnings which have been received and paid out off budget. The State Controller, as a result of a recent federal audit, has determined that the Department of Human Services (DHS) must have spending authority to expend these revenues. These interest earnings are realized on the “float” on child support payments. The “float” is the excess balance of moneys deposited with the Colorado National Bank from the Family Support Registry (FSR). This excess balance occurs when FSR disbursements to custodial parents are not cashed (for a variety of reasons), and the funds remain on deposit in the FSR account at Colorado National Bank. To maximize interest earnings and assure that sufficient funds are available to cover unfunded disbursements (bounced checks), DHS, in agreement with the State Treasurer, has deposited the “float” on these child support moneys in the State Treasury, thereby increasing interest earnings. Historically, interest earnings/revenue have been expended to:

            1.   Pay the federal government its 66 percent share of the interest earnings. [Although the federal government requires that child support payments from noncustodial parents be disbursed to custodial parents within two days, it is not responsible for payment of its normal federal financial participation rate of 66 percent in the event that checks bounce.]

            2.   Repay the FSR for unfunded disbursements (bounced checks) with the remaining 34 percent of the total earnings.

            Section 11 of the bill authorizes the Family Support Registry Fund (FSRF) to receive the interest earnings and other miscellaneous revenue. The $250,000 in revenue to the FSRF for both FY 1998-99 and FY 1999-00 is based on actual interest earnings for the past two fiscal years. Of the total amount, 66 percent will be paid to the federal government as cash funds exempt ($165,000), and 34 percent ($85,000) will be paid out as cash funds to the FSR.

TABOR Refund Impact

            Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage increase in state fiscal year spending. Once total state revenue from all sources that are not specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state constitution requires that the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Based on the current Legislative Council economic forecast, it is projected that the state will be in a TABOR refund position during each of the next five fiscal years. Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue sources will affect the amount of the state revenue to be refunded.

State Expenditures

            The federal “Personal Responsibility and Work Opportunity Reconciliation Act of 1996”, PL 104-193, requires states to process all non-IV-D case payments through a central state disbursement unit by October 1, 1999. Currently, DHS processes all IV-D case payments through the Family Support Registry, and Judicial processes all non-IV-D cases through the courts. Under federal law and SB 98-139, DHS intends to begin operations for both IV-D and non-IV-D cases on July 1, 1999. Title IV-D of the Social Security Act is child support enforcement.

            Department of Human Services — DHS will require a total of $723,024 and 1.5 FTE in FY 1998-99 to implement the bill’s provisions. Design and development will occur in FY 1998-99 and actual operations will begin in FY 1999-00. The department will require a total of 12,500 hours of computer programming to its Automated Child Support Enforcement System at a rate of $60 per hour. The system must be expanded to accommodate approximately 35,000 non-IV-D cases. Computer programming will take place over two fiscal years, with 6,250 hours of programming being done in each fiscal year at a cost of $375,000. Additionally, DHS will need 1.0 FTE administrative program specialist II and 0.5 FTE programmer analyst I for expanded contract administration and monitoring, quality control, and systems support at a cost of $98,024 (including $24,000 in GGCC costs).

            FY 1999-00 — Costs for FY 1999-00 are estimated at $1,764,590 and 3.6 FTE. This will be the first year for DHS to assume authority for processing non-IV-D child support payments. A total of $1,336,420 in contract costs will be required in addition to 3.6 FTE (and increase of 2.1 FTE over FY 1998-99). DHS will require 1.6 FTE administrative program specialist I (non-IV program specialist) for daily and monthly reconciliation, payment exceptions, state investigations, and providing general information and policy, and 0.5 FTE administrative program specialist II. DHS indicates that county staff, which support IV-D cases, will not be supporting non-IV-D cases. Personal services, operating expenses, and GGCC costs are estimated at $178,170.

            Table 1 on page 5 identifies the noncontract and contract cost components that will be incurred in DHS to process the non-IV-D case payments.

            Family Support Registry Fund — As noted in the Revenue section of this fiscal note, $250,000 in interest earnings will be realized in both FY 1998-99 and FY 1999-00, and is based on actual interest earnings for the past two fiscal years. Of the total amount, 66 percent will be paid to the federal government as cash funds exempt ($165,000), and 34 percent ($85,000) will be paid out as cash funds to the FSR.

            Judicial Department — The FY 1997-98 Long Bill included an appropriation of $269,872 in the Alimony and Support line item to process non-IV-D case payments. Of this amount, $80,000 was General Fund and $189,872 was from fees. The FY 1998-99 Long Bill includes an appropriation for $100,000 from fees; no General Fund. Pursuant to Section 13-32-101, C.R.S., Judicial assesses a $30 account set-up fee and a $2 per payment processing fee for non-IV-D child support cases. Judicial has a contract with Norwest Bank for the ten largest front range courts, wherein non-IV-D child support cases are in a Judicial data base at GGCC and Norwest Bank communicates with this data base. Child support obligors make payments to a lock box at Norwest Bank, and once the payment is cleared, Norwest issues a payment to the obligee. Interest earnings on the balance maintained at Norwest Bank are used to offset bank service fees, and these transactions/functions are off budget. For all other courts in the state, trial court staff manually record payments received and forward the funds on to the custodial parent.

            Because FY 1998-99 will be the development and implementation phase for DHS assuming responsibility for the non-IV-D cases, Judicial will continue to process non-IV-D cases. In FY 1999-00 as actual operations are phased in, Judicial’s responsibilities will be phased out resulting in reduced expenditures. As this workload is phased out, new workload is added pursuant to HB 97-1205, Concerning Child Support Responsibilities Affected By The Federal “Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Effective October 1, 1998, Judicial is required to electronically transmit to DHS, on a weekly basis, information on all child support orders entered or modified on or after that date. This will require trial court staff to input data, not all of which is currently captured, on all child support orders.

            FY 1999-00 — The level of reduced expenditures cannot be quantified until the time frames for transferring this authority are met and DHS assumes full authority. At the very least, anywhere from $100,000 to $250,000 in cash funds will no longer be collected under the Norwest Bank contract for the ten largest front range courts. This fiscal note assumes that reductions in trial court staff associated with the transfer of non-IV-D case payments to DHS will be addressed in the annual budget process. Court personnel costs associated with support payment processing are generally absorbed within each judicial district’s personal services allocation. The Judicial Department conducted a review of annual processing costs to determine the number of clerical hours spent and associated personnel costs. Employee labor costs were estimated at $300,000.

Spending Authority

            The fiscal note indicates that for FY 1998-99 the Department of Human Services should receive an appropriation of $723,024 and 1.5 FTE. Of the total amount, the following funding sources are identified below:

            General Fund — $160,828

            Federal Funds — $312,196

            Family Support Registry Fund - Cash Funds Exempt — $165,000

            Family Support Registry Fund - Cash Funds — $85,000

Departments Contacted

            Human Services

            Judicial

            Revenue

Summary of Costs Under SB 98-139

Table 1: Total Costs Under SB 98-139