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Comments on the North Dakota ChildComments on the North Dakota Child

Custody & Child Support Initiative and TrendsCustody & Child Support Initiative and Trends

in Child Support Guideline Reformin Child Support Guideline Reform

September 16, 2006

R. Mark Rogers Economic Consulting

Copyright 2006

ACFC National Family Law Reform Conference

Crystal Gateway Marriott

Arlington, VA

22R. Mark Rogers Economic Consulting

Ballot initiative addresses custody and child support reform.

The initiative would require, if approved:

Absent a finding of unfitness, that in custody cases that both parents retain joint legal and joint physical custody of their children.

Divorcing parents shall develop a joint parenting plan or if the parents cannot, the court will facilitate such a plan.

Child support will be based on the parenting plan and the child support obligation will not be greater than the cost of providing for the basic needs of the child or children.

North Dakota’s Custody &Child Support Initiative:Ballot Initiative 14-09-06.7 Can Meet Federal Regulations


State of North Dakota claims the state would lose over $70 million in federal funds allegedly because the initiative would not comply with federal regulations.

Federal requirements are minimal, from 45 CFR 302.56:

The state must have a presumptive and fully rebuttable child support guideline formula .

The guideline formula must be applied presumptively to all child support cases.

The formula must include all of an obligor’s income.

Federal Requirements


North Dakota must have a formula guideline for child support that takes into account the obligor’s income. This does not preclude other features such as including the obligee’s income and parenting time.

The guideline must be fully rebuttable and must apply to all child support cases.

North Dakota must develop a formula or cost table that defines basic needs. Basic needs can be defined narrowly or broadly. It can be as narrowly defined as “foster care” costs or can merely be “standard” costs according to income like most states.

The guideline will need a parenting time adjustment which will be based upon information from parenting plans.

That’s it! Nothing more is needed for federal compliance or initiative compliance.

Basics for Initiative to Conform to Federal Requirements


Some states already have guidelines with the features intended by the ballot initiative. Arizona’s guidelines are an example of how the initiative could be implemented.

Arizona has a child support guideline that has a cost schedule that is a form of basic needs. Most states have a similar cost schedule.

Arizona sets a presumptive ceiling on the award at combined monthly gross income of $20,000, resulting in a presumptive ceiling cost of $1,561 for one child. Other states have lower or higher presumptive ceilings.

For one child, Alabama: $992 per month to be shared by both parents.

For one child, Nevada: $800 is the maximum to be paid by the obligor.

Is North Dakota Breaking New Groundor Just Following Other States?


Arizona’s guidelines have a presumptive parenting time adjustment that is based upon how parenting time is split between the parents. A number of states have presumptive parenting time adjustments.

From AZ’s guidelines: “When parenting time is exercised by the noncustodial parent, a portion of the costs for children normally expended by the custodial parent shifts to the noncustodial parent. Accordingly, unless it is apparent from the circumstances that the noncustodial parent will not incur costs for the children during parenting time, when proof establishes that parenting time is or is expected to be exercised by the noncustodial parent, an adjustment shall be made to that parent's proportionate share of the Total Child Support Obligation.”

Arizona requires a parenting plan and uses them in child support award calculations:

“To adjust for the costs of parenting time, first determine the total annual amount of parenting time indicated in a court order or parenting plan or by the expectation or historical practice of the parents.” Other states also require parenting plans.

Arizona Is An Established Example of Where theNorth Dakota Referendum Is Headed


“The parenting time adjustment is calculated as follows: locate the total number of parenting time days per year in the left column of “Parenting Time Table A" and select the adjustment percentage from the adjacent column. Multiply the Basic Child Support Obligation determined under Section 8 by the appropriate adjustment percentage. The number resulting from this multiplication then is subtracted from the proportionate share of the Total Child Support Obligation of the parent who exercises parenting time.”

Arizona’s Parenting Time Adjustment


“EQUAL CUSTODY

If the time spent with each parent is essentially equal, the expenses for the children are equally shared and adjusted gross incomes of the parents also are essentially equal, no child support shall be paid. If the parents' incomes are not equal, the total child support amount shall be divided equally between the two households and the parent owing the greater amount shall be ordered to pay what is necessary to achieve that equal share in the other parent's household.”

Arizona Addresses Equal Custody inChild Support Guideline Calculations


Will North Dakota Lose Federal MoniesIf the Initiative Passes?

How much—if any—federal child support monies will U.S. Health & Human Services take away from North Dakota if the initiative passes?

The answer is the same as for “how much federal monies has Arizona lost for having its child support guidelines with a version of basic needs?”—none!

The answer is the same as for “how much federal monies has Arizona lost for having its child support guidelines with parenting plans and parenting time adjustments?”—none!

The answer is the same as for “how much federal monies has any state lost for having a presumptive ceiling in its child support guidelines?”—none!

For FY 2002 (latest data), AZ received $53.8 million in federal funds for its child support program and was not penalized for its guidelines.


Trends in Child Support Guideline Reform

Child support guideline reform should focus on key legal principles:

Child support guidelines are a legal presumption—not an arbitrary policy choice.

Guidelines should apply the principle of equal duty of support. When guidelines do not apply this principle, it should be made an issue.

Guidelines should be fully rebuttable. Most guidelines have irrebuttable sections.

Focusing on these facets provides a sound foundation for proposals for guideline reform and puts opposition on defense.


Legal Presumptions

A legal presumption is presumptive evidence—evidence applied to a party in court unless it is rebutted.

A legal presumption cannot be arbitrary—a policy can be.

An example of a policy choice is what level of Food Stamps a welfare recipient might qualify. The level of Food Stamps received is not used as evidence in court upon which a party might lose property or liberty.

Child support guidelines are presumptive evidence and can result in loss of property or liberty. Yet, most if not all guidelines have arbitrary features.

Why should states be allowed to “make up” evidence for child support hearings?


Examples of Arbitrary Features of Guidelines

Use of intact family data when guidelines are applied to families that are not intact.

Requiring a large threshold of parenting time before allowing a parenting time adjustment in a child support award. Is there any economic study that shows an NCP can care for a child for 30 % of a year without incurring any costs?

Just making up the methodology for a parenting time adjustment just to ensure a predetermined outcome. Not having an underlying study for a parenting time adjustment.

Using percentages for guidelines without having a study to back them up.


Examples of Other Shortcomings

Guidelines having underlying facts that do not exist in application—a due process violation. Example: assumption of intact family in typical cost schedule.

Not applying principle of equal duty of support. Examples: no parenting time adjustment (NCP shares CP costs but CP does not share NCP costs); CP gets child-related tax benefits as cost offset while NCP does not.

Having irrebuttable features. Examples: no parenting time adjustment if the CP is low income; no low income adjustment for the obligor if the CP is low income.


Suggested Approaches for Guideline Reform

Systematically review and study the guidelines for arbitrary features, for features that are not applicable to non-intact families, for lack of equal duty of support, and for irributtability.

Develop child cost schedules that reflect less available income due to not being an intact family—either Cost Shares or Income Shares with an adjustment for second household expenses.

Apply equal duty of support according to parenting time—either Arizona or Missouri.

Apply equal duty of support net of child-related tax benefits. Mandate sharing the exemptions (Colorado or Arizona) or adjust the cash award for both parents to share the value of the tax benefits (Kansas or Idaho).


Some Reformers Are Taking These Approaches

Progress starts slowly but these approaches have started in Alabama, Texas, and Pennsylvania.

Alabama is looking at standard Income Shares (intact household data) but also Cost Shares (single parent household data) but also Income Shares with an adjustment to the cost schedule due the loss in available income for the cost of the second household (separate from parenting time).

Reformers in Alabama, Texas, and Pennsylvania have or are developing these more economically appropriate cost tables.

More states are allowing sharing child-related tax benefits.


Alabama One-Child CostsAlternative Methodologies

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Combined Monthly Gross Income

Child Costs, Monthly

Rule 32, Current

PSI 2004 Proposal

PSI 2004 w 2nd HH Adj

Cost Shares


Alabama Two-Children CostsAlternative Methodologies

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Combined Monthly Gross Income

Child Costs, Monthly

Rule 32, Current

PSI 2004 Proposal

PSI 2004 w 2nd HH Adj

Cost Shares


Some Income Shares states acknowledge that tax benefits are not taken into account in Income Shares BCSO schedules by ordering that child dependency exemptions be pro-rated between the parents:

Arizona: “In any case in which the current child support obligation is at least $1,200 per year, there should be an allocation of the federal tax exemptions applicable to the minor children which as closely as possible approximates the percentages of support being provided by each of the parents.”

Colorado: “Unless otherwise agreed upon by the parties, the court shall allocate the right to claim dependent children for income tax purposes between the parties. These rights shall be allocated between the parties in proportion to their contributions to the costs of raising the children.” [Note: Policy Studies, Inc., is in Denver and helped develop Colorado’s guidelines.]

Income Shares and Child-Related Tax Benefits


What are child-related tax benefits?

The child-related tax benefits received by custodial parents can include:

Head of household tax payer status,Child dependency exemptions,Child tax credits, Additional child tax credits,Child care tax credits,Higher earned income credits for low-income working custodial parents, andHigher marginal tax rates starting at higher incomes than for single tax payers.

The value of child-related tax benefits is defined as the difference in after-tax income for a parent with the child-related tax benefits versus without the child-related tax benefits.

Income Shares and Child-Related Tax Benefits


Child-Related Tax Benefits, Full, 2005Alabama and Federal

$0

$200

$400

$600

$800

$1,000

$1,200

$600

$1,0

00

$1,4

00

$1,8

00

$2,2

00

$2,6

00

$3,0

00

$3,4

00

$3,8

00

$4,2

00

$4,6

00

$5,0

00

$5,4

00

$5,8

00

$6,2

00

$6,6

00

$7,0

00

$7,4

00

$7,8

00

$8,2

00

$8,6

00

$9,0

00

$9,4

00

$9,8

00

Monthly Gross Income

Additional Net Income

One ChildTwo ChildrenThree ChildrenFour ChildrenFive ChildrenSix Children

Full child-related tax benefits are typically $250 to $400 in extra after-tax income each month.

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