The Massachusetts Department of Revenue has decided to knock down the interest on overdue child support by 50%. This is a move for which Fathers and Families has long advocated and agitated, both publicly and by Board Chairman Ned Holstein, MD, MS during his service on the Massachusetts Child Support Task Force. While interest rates still remain too high, we commend the DOR for this action.
Fathers and Families has long fought to reform Massachusetts child support, and was successful in lowering noncustodial parents’ child support by an estimated $200 million a year from 2001 to 2007. Holstein and numerous Fathers and Families members testified earlier this year at the DOR hearing considering the issue. Our testimony focused on the benefits lowered interest rates would produce both for people struggling to pay their child support and for the state. Holstein stated:
Interest and penalty charges often work against the interests of states and their citizens. According to a 2007 study by the Urban Institute, eighteen states routinely charge interest, eighteen states and Guam intermittently charge interest, and fourteen states, Puerto Rico, the Virgin Islands and the District of Columbia do not charge interest at all. Massachusetts, like other states, does face significant challenges in collecting interest and penalties. States that routinely charge interest have experienced a much larger increase in arrears than other states.
The Urban Institute study found that from 1987 to 2006, states that charged interest saw a tenfold increase in arrears, going from $5.4 billion in 1987 to $58.7 billion in 2006. Other states saw arrears grow about half as fast. States with no interest saw their arrears grow from $2.8 billion in 1987 to $19.5 billion in 2006.
This data is supported by an earlier study conducted by the Urban Institute in 1999 for California. The Institute compared California with New York because of New York’s large area and large population. The one big difference between California and New York was that New York did not routinely assess interest on child support arrears. In 1992, New York and California’s child support arrears were close – New York’s arrears were $1.8 billion while California’s were $2.5 billion. Nine years later, New York’s child support arrears had only increased to $3.2 billion, while California’s grew to a whopping $17 billion.
Penalties are also wrong for Massachusetts. Penalties on child support arrearages are inappropriate and hurt families. The problem of unpaid arrearages is primarily a problem of poverty. The Institute also found that 70% of all arrearages are owed by obligors who earn less than $10,000, and 96% are owed by obligors who earn less than $40,000. Other factors contributing to arrearages are loss of job, decreased earnings, illness and disability, the difficulty in obtaining modifications when misfortune strikes, pervasive errors by the Office of Child Support Enforcement (as documented in 2000 by the Massachusetts Auditor), incarceration, misidentification of the father, lack of notice of paternity, and unrealistically high support orders.
None of these circumstances is helped by charging either interest or penalties. Neither does stronger enforcement of child support requirements work under such circumstances. Instead, as indigent fathers accumulate child support debts, they feel as if they must evade the child support system and the risk of incarceration. They are driven underground by an unforgiving system. The custodial parents and the Commonwealth then experience the complete termination of payments.
Worst of all, when fathers go underground, their children also lose contact with them. Thus, they lose the most valuable thing the indigent father has to offer his children — his love and guidance, not his money, of which he has very little. Massachusetts needs to find another way to support its indigent children than to pretend that indigent fathers have money that they do not have, and then compounding the problem with interest and penalties.
Every day, we at Fathers & Families hear from non-custodial parents who love their children, but who have recently lost their jobs or experienced a medical emergency that has left them with thousands in unpaid medical bills. They want to keep their obligations to their children, but they find the interest charges and penalties on court-ordered child support to be insurmountable obstacles to doing so.
To read Holstein’s full testimony, click here.
Several Fathers and Families members testified at the DOR hearing. John Natale (pictured) wondered how the interest rate came to be 18% in the first place when he is refinancing his mortgage for 4.65%. The DOR also heard from Sarah Blackford – a mother who depends on child support, but still thinks these interest rates are far too high. She told the story of her friend who is constantly struggling to pay his child support, but is stuck in a $40,000 black hole of interest and penalties that he may never be able to dig himself out of.
Chris Jenson stated simply and clearly why the current interest rate is outrageous. He told the story of falling behind on child support by $375 and reported that he has now paid the $375, but he still owes $1,240 in interest and penalties – almost three times as much as the amount originally owed. F & F members Bill Zamzow, Hector Montalvo, Philip Alvarado, and Franco Marzouki also testified to the importance of lowering the interest rate.