Rule-Making Notices (Hearing Notices)

The proposed rule specifically states that liability for an overpayment extends to any parent, nonmarital coparent, or stepparent during the period that he or she is a member of the household. This provision clarifies that Richland County Department of Social Services v. McHone, 95 Wis.2d 108, 288 N.W.2d 879 (Ct. App. 1980) applies only to recovery of aid when an individual receives a windfall under s. 49.195 (1), Stats. The one sentence note following s. 49.195, Stats., that summarizes the case states that “recovery may be had only from a parent who immediately received aid" or the parent whose name was on the benefit check. A reading of the case shows that this holding was based only on the language in sub. (1) that starts “if any parent at the time of receiving aid." This language does not appear in the overpayment collection sections of s. 49.195, Stats., or the proposed rule. Under the proposed rule, in general a parent whose income must be included in determining financial eligibility is jointly and severally liable for an overpayment.

Effect on small business. The proposed rule will affect small businesses that are a third party in possession of or obligated with respect to property or rights to property of a debtor. Generally, this will be an employer served with a levy to garnish a debtor's wages. Section 49.195 (3n) (t), Stats., provides that a third party is entitled to a levy fee of $5 for each levy in any case where property is secured through the levy.

Except as employers of debtors, private W-2 agencies will not be affected by the rule because the additional warrant and execution and levy and recoupment collection procedures in the rule will be implemented by the Department and not W-2 agencies.

The rule adds clarifying language on collecting overpayments from child care providers but the additional language is based on current policy.

Anticipated costs incurred by private sector. The proposed rule will not have a significant fiscal effect on the private sector.

Fiscal Effect

I. Subsection (3) of s. 49.195 of the Statutes directs DWD to promptly recover all overpayments made under the AFDC and W-2 programs, including child-care subsidies available to low-income working parents as well as W-2 participants. In part, this rule more completely implements the portion of s.49.195 (3) directing DWD to promulgate rules to implement that subsection and to include in the rule, “notification procedures similar to those established for child support collections." It is assumed that any increased cost of these notification procedures provided for by this rule is not significantly different than the costs of procedures currently in effect. No separate fiscal effect on revenues received is attributed solely to portions of the rule relating to the basic direction to recover overpayments under these programs, since DWD is already doing that, pursuant to authority in statute, administrative rule, common law, and the conditions of acceptance of the federal funds used for these programs. Much of this rule merely updates and clarifies existing policies, procedures and administrative rules, particular those portions revising DWD 56.04 (5) pertaining to recovery of child-care assistance overpayments (which is the fastest-growing category of collections) and portions of the repeal and recreation of DWD 12.23 relating to recoveries from current W-2 recipients.

II. Section 49.195 also provides DWD authority to 1) create administrative liens against real and personal property that may be executed at the county level by sheriff's sale and, 2) collect public assistance debts and the expenses of their collection by levy against certain assets of a debtor which are in the possession of a third party, typically an employer in a position to withhold them from wages otherwise payable to the debtor. These statutory provisions are not subject to a specific rulemaking requirement except that s. 49.195 (3s) states that DWD shall specify by rule when requests for reviews, hearings, and appeals under the section may be made and describes points in the processes when hearing or review opportunities must be addressed by the rule. Since these lien and levy provisions of the Statutes have not yet been implemented, the costs associated with such requests are unknown. However, also since the lien and levy provisions have not yet been implemented, the fiscal effect of this rule with respect to overpayments collected is assumed to be identical to the revenues associated with implementing the underlying statutory provisions as projected in DWD's 05-07 biennial budget recommendations.

There are two general collection trends for overpayment receivables: AFDC collections are still the largest program category of receivables, but a declining revenue source. This rule will decrease the rate of decline or temporarily increase collections, after which they will eventually taper off. Alternatively, child-care overpayment recoveries have been growing, reflecting growth in appropriations for the subsidy program. As child care collections become a larger proportion of recoveries, the lien and levy collection processes outlined in this rule will become more important because the majority of child-care subsidy recipients are working but not receiving other department-administered funds that could be offset to recover overpayments.

III. In its 2005-07 biennial budget recommendations, DWD estimated that the “gross" additional collections (for all affected programs) attributable to lien and levy implementation would be $375,000 in 2005-06 and $1,000,000 in 2006-07. However, this would be reduced to $357,273 in 2005-06 and $952,727 in 2006-07 without a statutory change to reduce the need to “write off" the amount of reduced recoveries attributable to a current-law provision allowing 3rd parties to retain $5 from the proceeds of a levy. The fiscal effect estimated for this rule uses the lower amount because, unlike the 2005-07 recommendations, it does not include the effect of the proposed statutory change.

IV. While implementation of the lien and levy provisions is planned for November 2005, the gross revenues assumed for 2005-06 are lower than those assumed for 2006-07 due to the assumption that it may be necessary for staff to gain familiarity with the new procedures before their full impact is seen. Therefore, the $952,727 is taken as the starting point for calculating the annualized impact at full implementation for purposes of this estimate. 61% of gross collections was assumed to be AFDC ($581,163) and the remaining 39% ($371,564) W-2 or child-care related. While the majority of the latter is likely to be child-care related, this difference is not important for purposes of this fiscal note because the state retains 100% of the W-2 and child-care recoveries crediting them to the appropriation for federal block-grant aids for re-expenditure on these programs. AFDC recoveries, on the other hand, are split three ways: The federal government receives a share of these revenues paid directly to it. Counties and tribes are allowed by statute to retain 15% of the AFDC overpayments they recover that were not due to administrative error. Those revenues are paid directly to them from the non-federal share of collections, and the net state share, approximately 26% of gross AFDC recoveries, is credited to the program-revenue appropriation at s.20.445 (3) (L): $581,163 X 26% = $151,100 in additional revenue for this appropriation. Neither the county share of AFDC revenues ($581,163 X 15% = $87,200) nor the federal share is reflected as a state revenue or expenditure; only the net state share is reflected as state revenues.

V. W-2 and child-care recoveries do not truly represent “additional" state revenues since they do not increase the block grants Wisconsin receives for these purposes; however, since they are often attributable to expenditures in a previous biennium, they may represent revenues in addition to the block grant amounts budgeted within a particular fiscal year or biennium. Therefore, this fiscal note portrays the annualized fiscal effect as including additional federal revenues. DWD's 2005-07 budget request proposes to recognize that aspect by creating a new appropriation.

VI. Counties are the only level of local government affected by this rule. Clerks of circuit courts may experience increased costs to the extent DWD increases its use of liens, and county sheriffs may experience increased costs to the extent the department proceeds to execute lien warrants by selling real or personal property located within a county. However, s.49.195 (3m) of the Statutes provides for clerks of courts to submit fee amounts to DWD to be added to the amount of the warrant, which should minimize any net cost to a county. In addition, since counties receive 15% of most AFDC collections, they may receive additional offsetting revenues to the extent that this rule increases AFDC collections.

VII. No increased administrative costs are associated with the portion of this rule that merely updates, or places in rule, existing DWD collections policies and procedures. The department has not prepared estimates of the one-time or ongoing increased costs of lien and levy implementation. Since the would be paid from existing appropriations for administration of TANF programs and program revenue from the state share of AFDC collections, it is assumed for purposes of this estimate that the primary net effect is to increase state and county revenues compared to the revenue trends that would occur absent the provisions of this rule.

Contact Information

The proposed rules are available at the web site http://adminrules.wisconsin.gov by typing “public assistance overpayment" in the search engine. This site allows you to view documents associated with this rule's promulgation, register to receive email notification whenever the Department posts new information about this rulemaking order, and submit comments and view comments by others during the public comment period. You may receive a paper copy of the rule by contacting:

Elaine Pridgen

Office of Legal Counsel

Dept. of Workforce Development

201 E. Washington Avenue

P.O. Box 7946

Madison, WI 53707-7946

[phone]

[e-mail]

Written Comments

Written comments on the proposed rules received at the above address, email, or through the http://adminrules.wisconsin.gov web site no later than December 1, 2004, will be given the same consideration as testimony presented at the hearing.

Small Business Regulatory Coordinator

Jennifer Jirschele

[phone]

[e-mail]