LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
March 10, 1997
TO: Honorable Rodney Ellis, Chair IN RE: Senate Bill No. 416
Committee on Jurisprudence By: Harris
Senate
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on SB416 ( Relating
to the private enforcement and collection of child support payments
under the Child Support Collection Privatization Council.) this
office has detemined the following:
Biennial Net Impact to General Revenue Funds by SB416-As Introduced
Implementing the provisions of the bill would result in a
net positive impact of $503,380 to General Revenue Related Funds
through the biennium ending August 31, 1999.
The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.
This bill would create a Child Support Privatization
Council. This new Council would divide the state into six to
ten regions and award collection contracts to a selected attorney
in each region to enforce and collect child support on IV-D
cases that are not in compliance within 120 days from the date
an order or agreement is entered.
The bill would require
that those eligible to bid on the private contracts be attorneys
with not less than 5 years of experience in the legal enforcement
of large-scale collections. The term of the collections contracts
would be required to be for at least 4 years. The bill would
provide that a fee of 15% of the total collections would be
paid to the private contractor. The fee would be collectable
for 5 years or during the time an obligor remains in material
compliance with the order, whichever is shorter.
Fiscal Analysis
Federal standards for procuring private support enforcement
services provide that "all procurement transactions shall be
conducted in a manner to provide, to the maximum extent possible,
open and free competition" (45 Code of Federal Regulations 74.43).
The Office of the Attorney General (OAG) states in their assessment
of fiscal implications that "Section 233.006 of this bill likely
violates federal regulations relating to competitive procurement
and therefore jeopardizes federal financial participation in
any payments going to the private contractors."
Private
contractors handling IV-D cases are required to adhere to federal
regulations that are imposed upon the OAG as Texas's IV-D agency,
including case-processing time frames and automation requirements.
To comply with federal regulations, private collection contractors
would have to use the new child support computer system, and
an automated two-way case transfer process would need to be
developed. Legal actions filed by the private contractor must
be recorded on the child support automated system and distinguished
from other legal actions of the OAG.
Methodolgy
In order to estimate a potential impact to state Retained Collections
(based on the fee structure outlined in the legislation), the
following assumptions were made:
* the OAG states that
"it is likely that" several provisions of this bill (e.g., length
of contract, contractor eligibility, a flat 15 percent fee)
do not meet federal competitive procurement regulations and,
therefore, federal matching funds for payments to private contractors
would not be available. However, this estimate assumes that
such funds would be available at the current 66 percent to 34
percent federal-to-state match rate;
* 75 percent of referrals
would be non-TANF (not receiving public assistance) based on
IV-D cases with court orders, i.e., for every 50,000 cases referred,
37,500 would be non-TANF and 12,500 would be TANF;
* 50
percent of all cases would average paying $200 a month for total
collections of $60,000,000 per year;
* fees to private
collectors, at 15 percent, would be $9,000,000 per year with
the state paying 34 percent of that total (except in FY 1998,
where a six-month start-up time was assumed);
* state Retained
Collections would be 37.7 percent of total TANF collections;
* as collections increase on TANF referrals, recipients would
move off public assistance, decreasing TANF collections (and
state Retained Collections) each year;
* the rate of recipients
moving off public assistance would increase approximately 10
percent per year (with a six-month start-up time in FY 1998),
and reach a 40 percent total "move-off" rate by fiscal year
2000, at which point the rate would remain unchanged in following
years;
* payments to private contractors would be made from
child support retained collections;
* the OAG estimates
that additional programming to implement the two-way case transfer
process would be $539,000 for fiscal year 1998 only.
The probable fiscal implications of implementing the provisions
of the bill during each of the first five years following passage
are estimated as follows:
Five Year Impact:
Fiscal Year Probable Revenue Probable
Gain/(Loss) from Savings/(Cost)
General Revenue from General
Fund--Child Revenue
Support Retained Fund--Child
Collections Support Retained
Collections
0001 0001
1998 $1,956,630 ($2,069,000)
1998 3,675,750 (3,060,000)
2000 3,393,000 (3,060,000)
2001 3,393,000 (3,060,000)
2002 3,393,000 (3,060,000)
Net Impact on General Revenue Related Funds:
The probable fiscal implication to General Revenue related funds
during each of the first five years is estimated as follows:
Fiscal Year Probable Net Postive/(Negative)
General Revenue Related Funds
Funds
1998 ($112,370)
1999 615,750
2000 333,000
2001 333,000
2002 333,000
Similar annual fiscal implications would continue as long as
the provisions of the bill are in effect.
No significant fiscal implication to units of local government
is anticipated.
Source: Agencies: 304 Comptroller of Public Accounts
302 Office of the Attorney General
LBB Staff: JK ,BB ,JC