By Josh Bone

More states should take advantage of a provision in federal law that allows them to distribute more owed child support payments directly to custodial parents.  Such a move could help more low-income families become self sufficient and would provide much-needed income to families in this tough economic climate.

Currently, most states retain child support payments owed to parents receiving Temporary Assistance for Needy Families (TANF) benefits. The federal and state governments then split these child support payments based on the state's Medicaid matching rate.  This policy was put in place to reimburse government spending on TANF. However, one of the changes in the law in early 2006 allows states to pay, or "pass through," a portion of child support revenues directly to TANF recipients without the federal government taking any share of the "passed through" revenue, as long as these payments are not counted or "disregarded" when calculating TANF benefits..

West Virginia, Washington, and Pennsylvania, among others, have taken advantage of this flexibility.  Most notably, West Virginia recently began "passing through" all child support payments to custodial parents.  The approximately 18,000 affected families in West Virginia will receive as much $85 million in currently outstanding child support payments.  In Washington, about 12,400 families received $12.5 million between August 1, 2008 and October 31, 2009.  Pennsylvania has "passed through" an additional $16 million.  Low-income families in all of these states now have more money to spend, a crucial boost in the current economic climate.

The long-term benefits of such policies are also significant.  The Office of Management and Budget projects such policies might save as much as $4.9 billion over 10 years, since families that receive increased child support payments will be less dependent on transfer programs.  Additionally, when payments go directly to families, fathers are more likely to pay child support and work in the legal economy.  While budget problems are making many states skittish about increasing pass-throughs, it is critical that these states keep in mind the potential short- and long-term benefits of West Virginia's approach.