As a condition of receiving federal Temporary Assistance for Needy Families (TANF) funds, states are required to operate Child Support Enforcement (CSE) programs. Families receiving TANF are required to participate in the CSE program; families not receiving TANF may also request CSE services. However, since 1994, an increasing number of states have begun to pay out more to operate their CSE programs than they receive back in reduced welfare caseloads. At the request of the U.S. House subcommittee on Human Resources, the Government Accounting Office sought to determine how CSE welfare collections had changed since 1994, and how declines in CSE welfare collections have affected CSE program funding. Annual report data from the Office of Child Support Enforcement were analyzed, and interviews were conducted with CSE officials in seven states experiencing declines in their retained collections. The study found that despite significant declines in TANF caseloads and CSE welfare caseloads, total state CSE welfare collections nationwide increased 11 percent between 1994 and 1997. While declines in CSE welfare cases might have been expected to lower CSE welfare collections for the states and federal government, the program's ability to intercept more money from delinquent noncustodial parents' income tax refunds more than offset the effects of the caseload declines. Although declining caseloads have resulted in lower retained collections in seven states, CSE officials in those states said the decline did not negatively affect their CSE program funding; the way a state chooses to finance its CSE program determines its sensitivity to fluctuations in CSE welfare collections. It was recommended that Congress require states to charge a minimum percentage service fee for each successful non-welfare CSE collection to offset cost shifts caused by declining caseloads. (Contains 5 appendixes of data.) (HTH)