Privatizing government functions like the collection of overdue child support isn't the panacea the Legislature thought. After taxpayers shelled out $4.5-million to pay two private companies to find non-custodial parents who defaulted on their child support, the firms were only able to recover a grand total of $162,000.
The state paid Lockheed Martin IMS and Maximus, Inc. about $25 to recover 3 cents. Even with this lopsided payment, both businesses are exercising an option to back out of their contracts with the state. They say the work isn't profitable.
Why did the private companies fail so miserably to make collections? Because the cost of finding deadbeat parents and getting them to pay up was more than what the companies were being paid for their service. So they stopped trying.
Instead, the companies focused their efforts on the most profitable aspect of the contract, cleaning up the computer files they were given. Each company got between $50 and $55 for closing a case by correcting faulty records. The old computer files, dating back before 1994, were rife with errors. People were improperly on the rolls as deadbeats, or on them multiple times under slightly different names. Most of the 84,000 cases the companies successfully closed were a consequence of getting rid of bad data.
The few investigations that were done typically found parents who turned out to be in prison, dead or whose paternity was in doubt. In only 125 cases did the companies locate parents who are now paying their child support.
Larry Fuchs, director of the Department of Revenue, the agency charged with collecting delinquent child support, says he isn't surprised the companies had so much trouble getting results. He told the Associated Press: "They ran into exactly the same problem we ran into. They were able to collect almost next to nothing."
Let this be a lesson to the Legislature that the private sector doesn't always perform government functions better or cheaper. The endemic problem of low child support collection rates by the state is a function of the difficulty of the task, and not an example of wasteful and inefficient government. The paltry results of Lockheed and Maximus are evidence that government departments can run as productively as a business. And government will do the work regardless of profitability.
Fuchs' 2,500 employees already handle more than 900,000 child support enforcement cases. Now, Lockheed and Maximus will be handing them back 106,000 more.
What should be taken from this failed effort at privatization is the understanding that collecting child support arrears is an expensive, time-consuming and sometimes fruitless endeavor. Just the kind of thankless job the government is equipped to do.