The original intent of the Vermont demonstration was to develop an automated process that would approximate a full modification of an obligation based on an income shares guideline, using data (i.e., tax records and quarterly wages) that are available electronically. The complexity of Vermont’s income shares guidelines provided a significant challenge to an automated process. Vermont calculates the support obligation through the following process:

The automated process proposed through the Vermont demonstration was more ambitious than the COLA-based approaches enacted in Minnesota and New York. The Vermont automated process, as originally envisioned, would have resulted in sizable upward or downward modifications, depending on changes in both parents’ income. By contrast, the COLA processes in New York and Minnesota generate modest upward adjustments and do not rely on income information from either parent.

Based on the simulation results, Vermont’s IV-D director has concluded that a fully automated modification of an order—that would generate upward and downward changes—is infeasible given the complexity of Vermont’s guidelines. The challenges encountered through the demonstration have called into question the structure of the underlying guidelines. The IV-D director believes that the existing guidelines are fair but are too cumbersome to implement administratively. Moreover, the agency and courts have difficulty explaining the existing guidelines to clients. In response, Vermont has redirected the focus of the demonstration to consider the development of a simplified income shares guideline or a percent-of-obligor-income model. Specifically, the state is testing a variety of formulas in an attempt to replicate the order amounts produced by the existing guidelines. Through their early work, officials have yet to identify a simple alternative that generates the obligations similar to those produced by the existing guidelines.

Once an alternative is identified for the guidelines, the IV-D agency will advance a proposal that packages the suggested guideline with a streamlined review and adjustment process. The objectives of the new process are to:

At the time of publication, the proposed process incorporated a COLA similar in structure to New York’s. Exhibit IV.4 illustrates the candidate-case-processing flow.^[39]

As in New York, the automated review and adjustment process would start with identification of orders that would be subject to a COLA. The proposed process would apply a COLA to all support orders that meet the following criteria:

The initial calculation of the new support amount would be based on the COLA. As in New York, the rate of inflation would determine when the 10% threshold is crossed, and therefore, how frequently the state would modify orders through the automated process. If current inflation trends continued, a case would be COLA-eligible about once every five years. Once calculated, the IV-D agency would serve the non-custodial parent and custodial parent with notice of the proposed, COLA-adjusted order. The notice would contain the following information:

If neither party contests the proposed COLA within 20 days, the IV-D agency would file the COLA order with the court, and the new order would go into effect on a specified date.

If either party contests the action, the case would become COLA ineligible. An administrative case manager would attempt to resolve the parties’ differences without a court hearing and would calculate a modification based on a simplified income shares model. If the case manager resolves the differences, the order would be filed with the court. If differences persist, the case would be set for a court hearing at which the court would apply the simplified income shares model to arrive at the modified support amount.

At the time of publication, the IV-D agency was preparing a bill for the 2001 legislative session that would implement a simplified guideline and streamlined review and adjustment process. With the policy still under development, the agency—as part of the OCSE demonstration project—was seeking input from court magistrates, parents, and advocates through a formal survey. The IV-D agency had yet to identify a legislative sponsor for its proposal and was uncertain how the package would be received by the legislature.

Guidelines and data availability hinder automated review and adjustment process . Vermont embarked on a demonstration project to automate the traditional review and adjustment process. Unlike the Minnesota and New York COLA policies, the process was intended to produce both upward and downward modifications that would be consistent with the state’s guidelines. The complexity of the state’s income shares guidelines and difficulty in obtaining wage data rendered the approach infeasible.

COLAs serve a different purpose than reviews and adjustments . As an alternative to an automatic review process, the state is currently exploring the possibility of implementing a COLA similar to New York’s. Vermont’s computer simulations underscore that COLAs serve a different purpose than traditional review and modifications. Comparing actual upward modifications to simulated COLAs for the same cases, Vermont found that COLAs under-adjusted orders by almost 40%. Additionally, COLAs do not address instances where the non-custodial parent’s income has decreased or not kept pace with inflation.