Nov 19, 2007

The Deficit Reduction Act

The Deficit Reduction Act (DRA) of 2005 was signed into law February 8, 2006. The DRA reduces direct federal spending by $39 billion for the five-year period of 2006-2010. The act saves nearly $40 billion over five years. This includes savings related to program changes that are required, as well as optional programs and initiatives that states may pursue.

Within the provisions of the Deficit Reduction Act of 2005 (DRA), Congress has provided several opportunities for states to help enhance the financial support available to low income families that receive child support. While considered a way of recovering money for the state when initially implemented, the child support program is now seen as an important and effective “family-friendly” financial support program. With so many families struggling to meet basic needs on a daily basis, Ohio needs to make the commitment now and enact these optional measures.

The DRA provides several important changes to how child support will be treated when a family is receiving cash public assistance benefits. The DRA requires that pre-assistance child support arrears will no longer be required to be assigned to the state upon application for assistance. Optional provisions contained within the DRA include changes in child support disregard and pass through rules, the ability for the state to release its claim in favor of the family to several types of arrears, and, perhaps most importantly, the ability for payments collected through the federal income tax offset program to be paid to the family first instead of the state.

Currently, as part of the application process for public assistance, the family must assign its right to receive child support payments to the state, as a way of reimbursing the state for the cost of the assistance. This assignment of rights includes assigning away the right to child support arrears that accumulated prior to the family applying for assistance. Under the DRA that assignment of pre-assistance arrears must stop. The option that the DRA provides with regard to pre-assistance arrears is the effective date for implementing the ban. The ban on the assignment of pre-assistance arrears must be enacted in Ohio no later than October 1, 2009, but can be enacted as early as October 1, 2008.

The DRA allows Ohio to disregard child support payments ($100 per month if one child and $200 per month if more than one child) when determining eligibility for cash assistance, as long as that child support is then passed through to the family. This disregard and pass through would allow a family to retain full eligibility for cash assistance and would enhance their monthly income by the child support collected. Currently, child support collected for a family receiving cash assistance goes to the government.

Other family-friendly options include modifying the distribution rules, so that more of the child support collected is paid to the family first, instead of the state. The most important of these options relates to the distribution rules surrounding money collected through the federal income tax refund offset program. Currently, payments received through tax refund offset are paid first toward any arrears owed to the state. Adopting the family-friendly option of paying those collections to the family first will be a tremendous improvement in Ohio’s support for families as the federal tax refund offset program is a significant source of collections on child support arrears.

The options provided by the DRA are significant and the benefits to the affected families are undeniable. The obstacles to enacting the various modifications to current policy have nothing to do with the obvious wisdom of enacting the changes. The obstacles relate to budget considerations surrounding the cost of foregoing the reimbursement provided by the child support collections and the cost of modifying computer systems.

Despite any costs, all of the available options should be enacted and implemented as soon as possible. Families with incomes low enough to qualify for cash assistance are struggling to survive on a daily basis (on less than half of the resources that we know they need to meet their most basic needs). These families need the extra support offered by the DRA now. It must be the highest priority to enact these options as soon as possible. Money must be found in the current budget. The survival of these families depends on Ohio becoming “friendly” now.

Sources/More Information
Dept. of Health and Human Services


[where: Athens, Ohio 45701]

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