PART 1:SUMMARY OF STATE GUIDELINE REVIEW PROCESSES AND OUTCOMES

In 1994 the U.S. Department of Health and Human Services' (HHS') Office of Child Support Enforcement (OCSE) engaged CSR, Incorporated, and the American Bar Association (ABA) Center on Children and the Law to study the impact and operation of State child support guidelines. These groups analyzed child support guideline formulation and application, deviations from State guidelines, documentation of guideline decisions, and guideline review requirements and procedures. [ Statement of Work for Evaluation of Child Support Guideline Project (undated).]

This report analyzes State reviews of their child support guidelines. [ State data on guideline deviations are fully addressed in a separate report; therefore, the topic is only briefly included here.] While the scope of this report is limited151its findings are based solely on the documents forwarded to the ABA by each State and are supplemented only minimally by the independent knowledge and/or research of the authors151it presents a wealth of information about (1) how State guideline reviews are conducted, (2) the range of substantive issues considered and recommendations made during reviews, and (3) the implementation of review body recommendations.

BACKGROUND

The Family Support Act of 1988 (Public Law 100-485) allows States to receive funding under Title IV-D of the Social Security Act (hereafter referred to as "IV-D"), if they meet certain requirements. One condition is that the State must "establish one set of guidelines by law or by judicial or administrative action for setting and modifying child support award amounts within the State." [ 45 CFR 302.56(a); 42 U.S.C. 667(a).]

Congress took a three-pronged approach to its child support guideline requirement: (1) a single, statewide approach was supposed to result in greater consistency within each State (i.e., cases with similar facts should produce similar orders); (2) with a standard approach to setting orders, Congress expected the entire child support process to become more efficient, and if people could better predict their child support obligations before a hearing, they would have more incentive to enter voluntary settlements151an outcome that would decrease the rate of time-consuming contested cases;and (3) Congress anticipated that because a State's guideline would be based on child-rearing data, child support orders would better reflect the actual costs of raising children. [ Williams, " An Overview of Child Support Guidelines in the United States, " in Child Support Guidelines: The Next Generation (M. Haynes ed. 1994), p. 1.]

Congress gave States a basic framework for their child support guidelines. At a minimum, guidelines were designed to do the following:

183Consider all earnings and income of the noncustodial parent (NCP);

183Be based on specific descriptive and numeric criteria;

183Compute an actual child support amount;

183Be used in both judicial and administrative proceedings;

183Be a rebuttable presumption of the correct level of support for a child under the particular circumstances; and

183Provide for a child's health care needs by means of health insurance coverage or another arrangement. [ 45 CFR 302.56 © and (f).]

Congress also recognized that the world is not static. For instance, orders that were adequate to meet children's needs in 1990 might be too small in 1995 because of cost-of-living changes within a State. Social changes also may affect a State's guidelines. For example, the incidence of multiple families was far greater in 1990 than in 1995. Thus, it is likely that guidelines in effect in 1990 either did not address this issue at all or addressed it in a cursory manner only.

To ensure the continued effectiveness of guidelines, States would have to evaluate them periodically. Congress sought to guarantee guideline review by requiring an evaluation at least once every 4 years. If the guideline review indicated the need for change, the State was to amend its guideline accordingly. [ Id . at 302.56(f).] During these reviews, States were to examine the structure and use of their guideline formulae as well as to "consider economic data on the cost of raising children and analyze case data, gathered through sampling or other methods, on the application of, and deviations from, the guidelines." [ 45 CFR 302.56(h). See generally 45 CFR 302.56(a).]

METHODOLOGY

The first section of this report addresses the ABA process for evaluating State reviews of child support guidelines. It is divided into three subsections: data collection, the responses, and data selection.

Data Collection

In December 1994, Judge David Gray Ross, Deputy Director of OCSE, wrote to the Child Support Director of each State, the District of Columbia, and the U.S. territories (collectively, "the States" or "the jurisdictions") and outlined the Guideline Evaluation Project. [ A copy of Judge Ross' letter appears as Appendix 1.] He asked each State to inform the ABA about their guideline reviews since the effective date of the Family Support Act's guideline review mandate. Specifically, each State was asked to send the following:

183Information concerning the number of guideline reviews undertaken since October 13, 1989;

183A summary of the State's review process (e.g., hearings, advisory committees, case studies, case data compilations, judicial reviews, and child-rearing cost studies);

183All guideline review reports;

183A summary of the action taken as a result of the review(s); and

183Information about upcoming reviews.

Some States responded immediately with some or all of the requested materials. To obtain information from other States, the ABA supplemented Judge Ross' letter with a telephone campaign. ABA callers frequently contacted the State child support director; the State's review team leader, if one had been identified; the State's chief justice; and/or personal contacts within the child support community to renew the request for data. While many responded to these supplemental contacts, some jurisdictions failed to provide any of the requested information in writing. A total of 49 of 55 jurisdictions provided some form of written response. [ A full listing of the jurisdictions, their designated contact people, and the materials submitted to the ABA appears in Appendixes 2, 3, and 4.]

The Responses

The format and content of the State responses varied greatly. States sent formal guideline review reports, committee minutes, consultant reports,summary letters with differing degrees of detail, workshop notes, and/or the guidelines themselves. These materials often provided the information that Judge Ross requested. When there were obvious omissions, ABA staff attempted to reach State contacts for supplemental information. [ The ABA limited its analysis to the materials sent by the State. Staff did not set out to examine each State's materials for accuracy or completeness. However, as stated above, when there was no information, a response that was clearly partial or insufficient, or a package without deviation information, staff attempted to secure additional responses from the state. Staff did not correct or supplement State materials through independent research.] However, supplemental efforts were not always successful. Thus, the uneven quality of State responses yields a report with very different levels of detail by State.

Data Selection

The States varied greatly in how and when they evaluated their child support guidelines. For this reason, ABA staff had to set criteria for selecting what would constitute a review for this report. Two questions were asked:

183Was the process conducted after October 1989, the Family Support Act's effective date?

183Was the evaluation complete? Did it result in recommendations about the State child support guideline? [ It was not necessary at this point to know whether the State actually implemented its reviewers' recommendations. The final outcome was not vital to determining the completeness of the State review.]

ABA staff measured each State's responses against these criteria. Of the 49 responding jurisdictions, 45 had at least one completed review since October 1989. [ A listing of the States and their reported review schedules appears in Appendix 5.] The four remaining States reported that they had either an established review schedule or a review in progress. However, information about partially completed reviews is omitted here.

THE STATE GUIDELINE REVIEW PROCESSES

Before analyzing the substance of the guideline reviews, the ABA examined the many ways in which States performed reviews. The sections that follow discuss this aspect of State guideline reviews.

Reviewing Entities

States officially gave the guideline review task to a variety of people or entities. [ A listing of guideline reviewers by State appears in Appendix 6.] The general pattern involved a responsible review body, such as the State court. That entity, in turn, often contracted with an expert, relegated the review duty to subcommittees, or convened an advisory panel to study the State guideline.

State IV-D agencies and the courts were the most frequent guideline reviewers. Some statutes empowered governors to convene independent guideline review commissions, consisting of representatives from the child support community and the public. A few States left the function to their legislatures. Some State guideline reviewers either did not fit into any of the above categories or could not be identified from the submitted materials.

It is interesting to note that States often limited the authority of their review bodies. Many reviewers could recommend changes, but they could not alter the statutes or court rules to implement their suggestions. For example, when a guideline appears in State law, but the IV-D agency is the designated reviewer, the IV-D agency can suggest changes, but only members of the State's executive branch have the authority to alter the statute.

One type of review body did not perform better than another. An analysis of State materials does not support a performance comparison by team composition. Rather, the success of a State's review depended more on the time and/or resources committed to the effort and the receptivity of the responsible State authority to its reviewers' recommendations.

While performance comparisons do not seem appropriate, the materials demonstrate that review committee composition does have an impact on the issues discussed. For example, groups with parent involvement may be more practical. They frequently provided details on issues of importance to the individual parties in a child support case, such as the sufficiency of awards under the guideline, income identification, enforcement, and the connection between visitation and support. IV-D-based committees often deal with the more mechanical aspects of the guidelines, such as award computation or the use of accompanying worksheets or forms. Similarly, committees dominated by judges and/or attorneys often focus on issues that arise in contested cases, such as deviation factors or income sources, levels, and imputation.

Review Methods

The Federal Government set only two requirements for State guideline reviews. Every 4 years, States must (1) analyze case data related to theapplication of and deviations from the guidelines and (2) consider economic data related to the cost of raising children. [ 45 CFR 302.56(h).] Despite such minimal requirements, roughly one-half of the responding States either did not follow or did not cite these required review methods. [ Appendix 7 regarding State references to cost of child-rearing studies and deviation case data analyses in their materials.]

Even though Federal requirements were not always followed, States used a variety of methods to gather information for their reviews. [ Appendix 7 outlines the most frequently used review methods. Note that this table is prepared only from the materials that States forwarded to the ABA. It may not reflect all methods employed by a State. Furthermore, some States took actions that fit into more than one category. For example, a State may have secured an expert, who then prepared a report on statewide child-rearing costs or who conducted a judicial survey. Whenever an activity crossed categories, it was included in each applicable column.] They considered case studies, child-rearing cost analyses, surveys, public hearings, written comments, special presentations to review committees, and expert research.

Once reviewers gathered information from the field, it was analyzed in light of the relevant statutes, regulations, court rules, administrative procedures, State and local practice, and public perception. This provided reviewers with an understanding of the history, rationale, and structure of the guideline. It also gave them insight about whether and how to alter the guidelines.

STATE GUIDELINE REVIEW TOPICS

State guideline reviewers grappled with a wide range of topics related to the use of guidelines, general appropriateness of the State's guideline model, adequacy of awards generated by the guideline, determination of income available for support purposes, guideline application to special circumstances, and similar matters. This discussion outlines some State deliberations and outcomes.

Child-Rearing Costs

One Federal requirement called for States to consider economic data related to the cost of raising children. [ 45 CFR 302.56(h).] From the documentation submitted to the ABA, the conclusion is that fewer than one-half of the responding jurisdictions complied with this Federal mandate. [ It is not clear how many of the remaining States actually failed to conduct this analysis and how many simply neglected to send or reference the appropriate documents in the packets sent to the ABA.] It is possible to makesome general comments about States that submitted child-rearing information.

First, States generally conducted their child-rearing cost analyses in one of two ways: (1) studies performed by the reviewers themselves, which usually took a national bent, including scholarly studies of national trends and concerns or Federal Government child-rearing cost reports. Several States fit this mold. For example, Alaska's principal resource in 1993 was a report by Maureen A. Pirog-Good, then a visiting professor at the University of Wisconsin-Madison, titled Child Support Guidelines and the Economic Well-Being of Our Nation's Children. [ The Arizona study included the U.S. Poverty Guideline, the U.S. Department of Agriculture's 1987 Consumer Expenditure Survey , and the Espenshade report funded by the National Institutes for Child Health and Human Development.] In 1994 Delaware utilized three primary sources of child-rearing information151the U.S. Census Bureau's report, Poverty in the United States: 1992; the U.S. Department of Agriculture's Expenditures on a Child by Families, 1993; and a recent Policy Studies Incorporated (PSI) economic analysis of the Ohio income shares child support model. Massachusetts' reviewers also cited a Federal source, the U.S. Bureau of Labor Statistics' data on the cost of raising a family in the geographic location encompassing Massachusetts. However, reviewers specifically pinpointed the data relevant to the Boston Metropolitan area to perform the analysis.

Other States hired experts to conduct a more State-specific analysis of the existing reports and data related to the cost of raising children. For example, the Arkansas Institute for Economic Advancement prepared an analysis, titled Child Support and the Cost of Raising Children in Arkansas. The Illinois Department of Public Aid contracted with Andrea Beller from the University of Illinois at Urbana-Champaign to produce "An Analysis of Child Support Guidelines and Costs of Raising Children." PSI performed State-specific child-rearing cost studies for Vermont, and that State's reviewers brought in State experts to help them interpret the report in ways that were relevant to their State.

Second, some State materials identified limitations to the child-rearing cost information supplied to them. For example, some of the expenditure levels represented average amounts spent by intact families and failed to include costs for single-parent households. [ Arkansas Institute for Economic Advancement, Child Support and the Cost of Raising Children in Arkansas (February 1993), p. 3; hereafter referred to as the " Arkansas Report. "] In addition, household expenditures on children were difficult to track at times. While experts could determine certain costs directly related to children (e.g., child care, medical treatment, and education), there were other normal expenditures (e.g., transportationand housing) that were easily apportioned between family members. [See e.g., Arkansas Report, supra, at p. 4; PSI, " Briefing Materials Related to Child Support Guidelines " (prepared for the Tennessee Department of Human Services) (September 1993), p. 2, hereafter referred to as the " Tennessee Briefing. "] Some of the data omitted other major cost categories, such as child care, postsecondary education, and medical insurance. [ Arkansas Report, supra , at p. 4.] In other cases, State- or region-specific expense levels were not available for reviewers. Several review teams only had access to dated expenditure information. [ Id .] Each of these factors made an impact on the weight reviewers accorded these analyses.Finally, the States reported similar goals for their child-rearing cost studies. In addition to performing these studies to meet Federal requirements, reviewers attempted to produce awards that were consistent with average child-rearing costs. To do this, they typically compared the child-rearing information to average child support awards to decide whether use of the guidelines minimizes "the economic impact on the child of a family breakup and [entitles] the child to a standard of living that is equivalent to that of the more affluent parent." [ Massachusetts Department of Revenue, Report on the Child Support Guidelines (September 1993), p. 6, hereafter referred to as the " Massachusetts Report. "] These analyses produced different results. A number of State review teams concluded that their guidelines performed as planned. States such as Maryland, New Hampshire, and New York found that their guidelines generally produced awards that met average child-rearing costs. [ Letter from Department of Human Resources Secretary to Speaker of the Maryland House of Delegates (December 11, 1992), p. 2; New Hampshire Department of Health and Human Services, Report on the Impact of Child Support Guidelines in New Hampshire (March 1992), p. 4, hereafter referred to as the " New Hampshire Report " ; State University of New York at Albany, New York State Child Support Standards Act: Evaluation Project Report 1993 , p. xvii, hereafter referred to as the " New York Report. "] In New York, however, this finding was contingent upon the exclusion of child care costs151a large cost for many parents. [ New York Report, supra , at p. xvii.] Cost-of-care studies caused several other States to reevaluate their child support guideline structures because they found that children's needs were not being met. For example, in 1994 North Carolina reviewers recommended a guideline change to reflect new economic data on child-rearing expenses, and the State legislature enacted the recommendation. [ PSI, Economic Basis for Updated Child Support Schedule: State of North Carolina (November 24, 1993), pp. 4 – 5, hereafter referred to as the " North Carolina Report " ); memorandum from Barry G. Burger, North Carolina Child Support Enforcement, to Margaret Campbell Haynes, ABA (December 19, 1994).] The Utah committee also encouraged a child support schedule increase of between 10 and 15 percent to more adequately meet child-rearing costs; however, there is no indication that this team's recommendation was instituted. [ Child Support Guideline Advisory Committee 1993 Report to the Utah Legislature , p. 3, hereafter referred to as the " Utah Report. "] Proposed formula increases in South Dakota also were rejected. In 1990 and 1992, experts advocated child support schedule updates that would reflect changes in the Consumer Price Index. The Department of Social Services (the formal review entity) disagreed with this alteration because it was not in the Department's report to the State guideline authority in either year. [ Letter from PSI to South Dakota Child Support Enforcement Program Administrator (June 26, 1990), hereafter referred to as the " 1990 South Dakota Expert Recommendations " ); letter from PSI to South Dakota Child Support Enforcement Program Administrator (December 21, 1992), hereafter referred to as the " 1992 South Dakota Expert Recommendations " ); letter from Terry Walter, Child Support Administrator, to Margaret Campbell Haynes, ABA (December 20, 1994), p. 1.] The 1991 Illinois reviewers had several resources finding that its guideline levels were insufficient to meet costs of care. In fact, the team cited a Women's Legal Defense Fund ranking of States in which Illinois placed 44th for average child support guideline award amounts. [ Improving Child Support Awards: Summary Report of the Guidelines Subcommittee of the Illinois Department of Public Aid's Child Support Advisory Committee (October 1991), p. 11, hereafter referred to as the " Illinois Report. "] While the committee recommended an increase, it realized that its compromise increase still underestimated child-rearing levels because the new figures were based on a study of intact and not dual household expenses. Without rationale, the materials indicate that the legislature rejected the committee's recommended increase. Guideline Models

Only a few State reviews reported consideration of the particular guideline model (i.e., income shares, Melson, or percentage of income). It is unclear exactly how many State committees deliberated about guideline methods, but review reports do not tend to mention this topic.

State review teams generally focused on whether the particular guideline model yields adequate, equitable, and consistent orders. These examinations produced different results. For example, several Statesdecided to keep the existing model. Illinois' committee could not reach agreement about the proper guideline model. The majority favored maintaining the State's percentage of income approach, while others advocated for a change to income shares. Eventually a decision was made to follow the majority opinion because the committee viewed income shares as simple to implement and effective. They found that their model and income shares produced similar awards. [ Illinois Report, supra , at pp. 1 – 3.]

Ohio reviewers also recommended continued use of the income shares model. They concluded that it safeguarded children's right to have comparable standards of living in intact and single-parent families. Further, they felt that income shares ensured that both parents would be obligated to support the child and that they would do so in proportion to their combined income. The legislature agreed with the committee. [ Report of the Ohio Department of Human Services to the General Assembly on Its Review of the Child Support Guidelines (March 1, 1993), p. 6, hereafter referred to as the " Ohio Report " ; letter from Cynthia G. Lucas, Office of Child Support Enforcement, to June Mickens, ABA (May 8, 1995), p. 1.] The Wisconsin percentage-of-income model is the basis for Nevada's guideline. Nevada reviewers studied the guideline model and also rejected a change. They reached this decision after finding that even if the State's children received insufficient support, based on the State's ranking for average child support awards, they were not significantly worse off than children nationally. Therefore, the formula was unchanged. [ Nevada State Bar, Family Law Section, Child Support Guideline Review Committee Report (August 1, 1992), pp. 59 – 60, hereafter referred to as the " Nevada Report. "] Only Montana and North Dakota reported that their committees recommended a change of guideline formula as a result of review processes. [ Staff has independent knowledge that North Carolina changed from a percentage of income to an income shares model during the period included in this report. However, because this information is not reflected in the materials submitted to the ABA, it is not clear whether the model change occurred as a result of a formal guideline review or as a part of some other process.] Montana adopted the Melson formula following its 1991 review. [ Telephone Conversation between Mary Ann Wellbank, Administrator, Department of Social and Rehabilitation Services, Child Support Enforcement Division, and Margaret Campbell Haynes, ABA.] Alternatively, the North Dakota legislative committee, which conducted the first of two State reviews, advocated a change from the percentage of income to the income shares model. However, the legislature as a whole defeated this recommendation, and the State maintained its existing guideline. [ Letter from Barbara Holzer, Child Support Enforcement, to Margaret Campbell Haynes, ABA (December 16, 1994), p. 1.] Who Owes Child Support

When discussing the calculation of support under guidelines, it is important to consider whose income will be measured in the support calculation. Four categories of potential income providers typically appear in State review materials: (1) the NCP, (2) the custodial parent (CP), (3) the parent's new spouse or partner, and (4) the child's grandparents. Discussion of the NCP's obligation to provide support is omitted because none of the review teams questioned NCPs. However, the obligation of the other categories was an issue for many review teams, and a summary of State review comments follows.

Custodial Parents

A few review committees considered whether and how CP income would play a role in child support guidelines. While CP income is directly or indirectly a part of all guideline models, some reviewers felt that the topic still warranted discussion. For example, in New Hampshire151an income shares State151reviewers said that "both parents should share the responsibility for the support of their children. Accordingly, the current guideline formula consider[s] the income of both parents in the calculation of the support award." [ New Hampshire Report, supra, at p. 8.] The reviewers confirmed that in some situations CP resources would have little effect on the obligor's order: "The support award amount for a noncustodial parent earning $25,000 per year, for example, is essentially the same...whether the custodial parent earns nothing, $15,000, or $25,000 per year." [ Id. at p. 14.]

The Tennessee review resulted in the addition of a new provision on CP income. In this percentage-of-income State, there was a guideline amendment after review so that obligee income would be excluded in both the guideline award calculation and deviation. This was the result of a presumption that the obligee would expend "at least an equal percentage of net income as that of the obligor for the support of the children for whom support is sought." [ Rulemaking Hearing Rules of the Tennessee Department of Human Services, Child Support Division, Chapter 1240-2-4 (September 1994 amendments) citing 1240-2-4-.03(2), p. 3, hereafter referred to as the " Tennessee Rulemaking Hearing Rules. "] CP income was viewed differently by reviewers in Colorado, another income shares State. During the 1990 review, the committee noted that the guideline permitted a low-income obligor's child support order to be increased solely because of a rise in the obligee's income. The review committee agreed with commenters that such an outcome was not equitable. To resolve the matter, the committee contemplated a "quick fix" solution toprohibit such increases for obligors whose incomes had remained constant despite a general increase in the combined income figure. Committee members ultimately rejected the proposed solution because it would result in inconsistent orders for families with similar economic circumstances151a result contrary to the original intent of the guidelines. However, because the committee could not agree on an acceptable resolution, it tabled the matter. [ Colorado Child Support Committee Report to the Governor and the General Assembly (December 1, 1990), pp. 16 – 17, hereafter referred to as the " 1990 Colorado Report. "] New Spouses

To frame the issue of new spouse income, consider the characterization of Nevada's reviewers:

This subject area presents an unfortunate collision whereby social policy and community property principles are at odds. Generally speaking, an individual is only liable for the support of his or her own children. On the other hand, Nevada law gives both parties to a marriage a "present, existing, and equal" interest in all income (or other property) acquired after marriage. At its most simple, the question is whether the income of an Obligor's new spouse increases the Obligor's "gross monthly income" against which the statutory formula should be applied, or whether a Recipient's new spouse's income can justify a reduction in support on the basis of a lessening of need, in that "the relative income" of the Recipient is higher when measured against that of the Obligor. [ Nevada Report, supra , at p. 38.]

States reached very different conclusions regarding the inclusion or exclusion of new spouse or partner income as a part of the child support matter. However, the majority of the reports preferred to exclude this income. Reviewers in Illinois generally accepted their expert's recommendation to exclude new spouse income because it can discourage remarriages. In other cases, when an obligor claims that extraordinary expenses prevent the payment of support consistent with his or her income, the trier-of-fact may consider how spousal or partner income defrays the claimed expenses. [ Illinois Report, supra, at p. 9.]

The New Mexico team reached a similar outcome. The review commission established that new spouse resources should not be included as income for the child's parent. Such earnings could be relevant for other purposes, suchas to (1) decide whether a guideline application would be unjust or inappropriate or (2) award court costs and attorneys' fees. [ Definition of Income in Commentary (October 21, 1994), p. 1, cited in 1994 New Mexico Child Support Review Committee Final Report , hereafter referred to as the " New Mexico Income Commentary — 10/21/94. "] Connecticut's committee confirmed the State rule of excluding subsequent spouses' income from child support calculations. Although the public was strongly split on the issue, reviewers held that inclusion of new spouse income unnecessarily complicates the guideline calculation, especially if that new spouse or partner has his or her own child support obligations. The committee also noted that under State law there was no legal authority to impose a support liability upon the new spouse for a child for whom he or she owes no duty of support. [ Child Support and Arrearage Guidelines (June 1, 1994), p. ix, hereafter referred to as the " 1994 Connecticut Guidelines. "] Nevada reviewers debated the treatment of new spouse income in a variety of contexts: 149A majority concluded that new spouse income should not be considered when a parent is voluntarily unemployed or underemployed, even though supported by the spouse. In such cases, the trier-of-fact should impute income to the parent based on his own earning capacity, not that of the spouse. However, the team rejected the addition of explicit language to this effect in the statute. Instead, the committee chose to leave new spouse income to the discretion of the child support decisionmaker. [ Nevada Report, supra, at p. 39.] 149Reviewers discussed whether new spouse income should be a factor in reducing the obligor's living expenses and thus in making additional money available for child support. Because a new spouse could be either a help or a burden on household income, the team took no action on this issue. [ Id . at p. 40.] 149Reviewers pondered imputing the new spouse's or partner's income to the child's parent. The committee reached a consensus that the resources of an obligor's spouse should not be considered in calculating the amount of income available for child support. Furthermore, unless an overview of household income and expenses is specifically needed to understand the obligor's ability to pay, the income of an unmarried cohabitant should not be considered. They also reached consensus regarding new spouse contributions to the obligee's household. Because such income would not decrease the child's need, they felt that it isirrelevant to an obligor's request for a downward modification of the child support award. Reviewers felt that to conclude otherwise "would be to tacitly admit that the new spouse undertook an obligation of support for the children in Recipient's household, without benefit of any right of access to or control over those children." [ Id .]

Reviewers in both Louisiana and Hawaii saw some benefit to the minority view and opted to include this income under certain conditions. Following a guideline review, the Louisiana legislature redefined "income" to include benefits a party derives from expense sharing. However, the legislature specified in determining the benefits of expense sharing that the decisionmaker should not consider the income of the new spouse, except as such income directly reduces the party's actual expenses. [ Letter from Gordon Hood, Department of Social Services, Office of Family Support, to Margaret Campbell Haynes, ABA (January 5, 1995), hereafter referred to as the " Louisiana Letter. "] In Hawaii, if a child's mother remarried, had another child, and either left work or reduced her hours to care for that new child, Hawaii's reviewers would allow the income of her new spouse to become a part of the child support calculation. Under these circumstances, the mother would be attributed with up to 50 percent of the combined gross income of herself and her new spouse. The same rule would be applied to an unmarried parent with children from a new relationship. [ Hawaii Department of the Judiciary, Family Courts, Guidelines in Determining Child Support (November 1989), p. 5, hereafter referred to as the " 1989 Hawaii Report. "] Grandparents

When a minor child has a child who bears the cost? This is an issue not considered by many child support guidelines. Review materials showed that two States151Colorado and Nevada151discussed the propriety of making grandparents' resources a part of the income calculation for child support purposes. The Colorado legislature specifically required its 1990 guideline review committee to examine two aspects of grandparent support: (1) establishing and enforcing support against grandparents until the parent reaches age 18 and (2) recovering public assistance for a dependent child (whose CP also is a minor) until that parent reaches age 18.

As a result of the study, a majority of Nevada reviewers recommended that the support obligation not be extended to grandparents. This recommendation had a three-pronged basis: [ 1990 Colorado Report, supra, at pp. 15 – 16.]

149Reviewers felt that the costs of imposing grandparent support would outweigh the benefits. It would be expensive to collect a small amount of support for a relatively short period between order establishment and the parent reaching age 18.

149The committee foresaw difficulty in drafting a fair statute given the number of components that would have to be included. They felt that at a minimum the statute would have to encompass provisions for the treatment of the following types of cases: (1) couples in which one parent is older than age 18 and the other is not, (2) the father is unknown or paternity has not been established, (3) low-income grandparents, (4) out-of-State grandparents, (5) noncustodial grandparents, and (6) the parent reaches age 18 before the establishment of the order.

149Even if a fair statute could be crafted, the reviewers were skeptical that the inclusion of grandparent income would have a real impact on any worthwhile objective. Several objectives were mentioned, including reducing teen pregnancy, recovering Aid to Families with Dependent Children (AFDC) expenditures, promoting shared grandparent support, increasing communication between parents and teens, educating teens about sexual behavior, and educating teens about family responsibility. However, there were questions, based on Wisconsin's experience, that such a law would produce the desired results.

One of Nevada's reviewers sought to connect grandparent support obligations to a State interest and prompted that team's discussion of the issue. The reviewer suggested that grandparent support could remedy the problem of "too many young people...becoming parents while they are still children themselves, creating a self-perpetuating impoverished class for which the State is forced to take financial responsibility, to the detriment of the people caught in the system and to the public generally." [ Nevada Report, supra, at p. 53.] Even though the review team seemed to have carefully considered the possibility and cited a number of accompanying legal issues, the experience of other States, and technical and policy matters, the consensus was that there was insufficient data to adequately evaluate the proposal; thus, they took no action. [ Id . at pp. 53 – 54.]

How Long Is Child Support Owed?

In practice, child support usually ends with a child's emancipation (i.e., when the child reaches the age of majority [ The age of majority is decided by each State. Often it differs by issue. For instance, the age of majority may be set at 18 for child support purposes but at 21 for the consumption of alcoholic beverages. Generally, however, for child support purposes it ranges from ages 18 to 23.] or achieves some designated circumstance, such as marriage, full-time employment, or enlistment in the military). Guidelines do not always clearly reflect State practice, however, which can cause confusion and inconsistency. Accordingly, a number of State guideline review teams discussed clarifying the term of the support obligation.

Guideline reviews focused on age-related or education-related termination rather than other emancipation events. In Alaska, reviewers recommended the continued termination of support at age 18. The Nevada committee recommended the termination of support after the child's 18th birthday or high school graduation, whichever occurred later. Age 19, however, was imposed as an absolute end of support, even if the child had not yet graduated from high school. A similar recommendation was made by Utah reviewers. In that State, support could extend beyond age 18, but only until the date of a normal, expected high school graduation.

In their 1991 report, Colorado reviewers recommended termination of support at age 18. An extension of support beyond the child's 18th birthday could be granted if the child was mentally ill or physically disabled; the child was still in high school, but only through age 21; or the child was pursuing postsecondary education, but only through age 23. Reviewers recommended in these instances that support also should include medical insurance. The legislature ultimately adopted language allowing termination of child support at age 19, subject to the three extension criteria. With respect to postsecondary education, however, an extension of support was permitted only through age 21 rather than the recommended age of 23. [ For a discussion of how support for postsecondary education is calculated, see pp. 80 – 81, infra .]

Determining the Income Available for Child Support

The determination of available income is an essential step in the process of reaching a child support award amount. Before any guideline formula can be applied, the income sources of one or both parents must be identified. The decisionmaker must decide how much of these amounts are to be used to meet the needs of the particular child or children. [ The particular State guideline formula will designate whether the incomes of both parents are to be considered or whether only obligor income is necessary for the support calculation. Some of the same issues may be considered by States as they determine income and make decisions about deviations from basic support awards. Income determination is an "above-the-line" step and the identification of appropriate deviation criteria is a "below-the-line" step.] State guidelinereviewers devoted a great deal of time to income determination issues. This discussion highlights State deliberations on key income determination issues.

Net Versus Gross Income

The choice between net and gross income, [ Simply stated, gross income is earnings before tax deductions or other adjustments, and net income is earnings after allowable deductions.] as well as the general definition of income, [ See pp. 21 – 24, infra .] are key to the starting points for calculating child support. Although State review teams decided to use gross or net income in the State's child support guideline, as the following discussion demonstrates, there frequently is little practical distinction between the two terms.

Some States opted for a gross income standard. Illinois and Nevada fall into this category. The Nevada review report, issued in August 1992, indicates that many obligors believe that they have unrealistic child support obligations. Their first complaint was that the gross income-based guidelines caused them to pay more in support than they could afford. [ Nevada Report, supra , at p. 43.] To correct the situation, these obligors suggested that the State move to a net income calculation. Reviewers concluded that a change to a net income framework "would not result in any change at all to the actual dollar sum of support orders." [ Id. at p. 44.] They reasoned that the State's child support laws were based on three underlying factors: maintenance of a particular standard of living, income sharing, and the satisfaction of children's needs. Assuming that these factors remain constant, irrespective of the income designation used, the mere change from a gross income-based to a net-based formula would not automatically produce a downward change in support obligations.

Obligors also made a second assertion: Since the State's gross-based formula failed to consider certain relevant facts, which were accounted for by different statutory schemes, it generally yielded higher results for Nevada obligors. However, reviewers again declined to recommend change to a net-based formula. The committee cited the 1990 Women's Legal Defense Fund survey of State child support data. According to that data, awards in Nevada were typically near the national average in the studied categories and were not higher, as obligors contended. Therefore, there wasno evidence of a formula-based imbalance in the support obligations of Nevada NCPs.

Nevada's guideline history also provided reason for retention of the gross income standard. The original guideline commission believed that a net-based system would create inequity between similarly situated individuals by permitting arbitrary choices as to income inclusions and exclusions. Reviewers also restated the original guideline commission's finding that gross income-based formulas are prized for their simplicity:

For every layer of complexity added to the statute that yields guideline support, a certain increased expense is added to the cost of being in the court system and is paid by every litigant in terms of time and attorney's fees. Additionally, the entire public pays for those complexities by paying the salaries of the public servants who must spend more time on each case to calculate support under the more complex guideline. [ Id. at p. 45.]

The 1993 version of Nevada's guideline statute establishes the support obligation according to gross income figures; [ Nev. Rev. Stat. 125B.070(1)(a).] thus, the reviewers' 1992 recommendation appears to have been accepted. However, as outlined further in the next section of this report, the statute modifies the traditional definition of gross income. [ See pp. 21 – 22, infra .]

The Illinois expert also cited equity between similarly situated parents in support of the recommendation that gross income serve as the basis for support awards. [ Illinois Report, supra , at p. 4. From proposed legislation (Amendment to House Bill 1351; this legislation was not passed) based on the committee's recommendations, it appears that a net income basis was being used at the time of the review.] Gross income was found to offer the highest level of equity between parents when establishing support. "Even though the argument has been made that net income better reflects a parent's ability to pay, net income will vary depending upon the tax deductions available to each parent, and these may differ between parents." [ Id .]

Illinois' review committee basically agreed with the expert opinion that the inconsistencies between parents, associated with net income-based formulas, made a gross income standard more desirable. However, like their Nevada counterparts, Illinois reviewers also felt that a strict application of gross income was inappropriate and recommended several adjustments beforearriving at the income figure that would be used to calculate the child support obligation.

Unlike Illinois and Nevada, Connecticut favored a net income-based formula. [ State of Connecticut Child Support Guidelines (January 1991), p. 5, hereafter referred to as the " 1991 Connecticut Guidelines. "] The State's review committee cited three reasons for recommending the retention of this standard: 149The net income approach seemed to be working well in the State.151Even though there were other States using the gross income standard, and there were recognized advantages to that method, the committee did not find that the apparent benefits warranted abandonment of their chosen approach until additional study could be conducted. 149The guideline tables were based on the net income standard.151They rejected a suggestion to alter the tables prior to studying the exact effect of the gross income standard. 149Reviewers perceived a possible problem for low-income obligors with the adoption of a gross income approach.151They seemed concerned, due to mandatory deductions from the disposable income of low-income obligors, that the conversion to a gross income approach would leave these obligors with insufficient money to survive. The State legislature seems to have accepted this recommendation. The Definition of Income

Most State guideline reviews considered how income would be defined. Some review teams set very general income factors. Others analyzed whether money derived from particular sources should be made income for child support purposes. The first part of this discussion focuses on State deliberations of the general meaning of income, and the second part considers State treatment of several of the specific factors affecting income.

General Definition of Income

As noted in the gross versus net income discussion above, reviewers in both Illinois and Nevada opted for a gross-income basis but allowed modifications to be made to the obligor's actual gross income to arrive at what could be best labeled as an "adjusted gross." For example, the Illinois committee recommended adjustments for other child support obligations, the child's health insurance premiums, and professional fees required as a condition of employment. [ Illinois Report, supra , at pp. 4 – 5.] Gross income was defined by Nevada as "the total amount of income from any source of a wage-earning employee or the gross incomefrom any source of a self-employed person, after deduction of all legitimate business expenses, but without deduction for personal income taxes, contributions for retirement benefits, contributions to a pension or for any other personal expenses." [ Nev. Rev. Stat. 125B.070(1)(a).]

In 1991 Connecticut's reviewers recommended a net income standard and arrived at a parent's net income by "subtracting mandatory deductions and special exemptions from the parent's gross income." [ 1991 Connecticut Report, supra, at p. 11. In 1994 regulations were promulgated, which simplified the calculation process by establishing a single list of permissible deductions from income. 1994 Connecticut Report, supra , at p. ix.] Among the State-authorized mandatory deductions were Federal income taxes with all allowable exemptions; [ This deduction was continued in 1994; however, an additional deduction was established for State and local taxes. Since 1991 the State had instituted a State income tax, and the commission suggested an allowance for local taxes paid by persons living in those areas that levied such a tax. 1994 Connecticut Report, supra , at p. ix.] Social Security tax; retirement plan deductions; [ A deduction for Social Security taxes remained in effect, according to the 1994 Connecticut Report. However, to promote the equitable treatment of parents with vastly different pension plans, the separate deduction for mandatory retirement plans was eliminated. Specifically, this action was taken to prevent parents who are subject to Social Security withholding from also claiming a deduction for another retirement contribution. Id .] union dues or fees; group life insurance premiums; medical, hospital, dental, or health insurance premiums for all legal dependents; and legitimate business expenses of the self-employed. Reviewers also permitted special exemptions for costs attributed to unreimbursed child care for an employed parent and other child support orders for which there was verified payment. Gross income was defined as parent's weekly income before deductions, including the following:

183Salary and wages, including overtime;

183Commissions;

183Bonuses;

183Tips and perquisites;

183Rental income;

183Estate or trust income;

183Royalties;

183Interest, dividends, and annuities;

183Social Security or supplemental security income (SSI);

183Veterans' benefits, unemployment compensation, workers' compensation, retirement, pension, and other benefits;

183Proceeds from contractual agreements;

183Self-employment earnings;

183Alimony and other unearned income; and

183In-kind compensation (any basic maintenance or special need such as food, shelter, or transportation provided on a recurrent basis in lieu of salary). [ Id. at p. 10.]

The West Virginia materials indicate that proposed rules regarding the definition of income contained some of the most significant changes to the guidelines recommended by reviewers. [ Johnson, R.J., The Proposed Child Support Guidelines (outline for presentation at a West Virginia University College of Law Continuing Education program, September 3 and 4, 1993), p. 1, hereafter referred to as the " West Virginia Proposed Guidelines. " This material does not provide the prereview definition of income, nor does it note whether the proposed rule was ever promulgated.] Under the proposed rules, to calculate gross income of either parent, one should consider the following:183Wages, salary, commissions, and other income due to the parent from his or her employer;

183Payments made from profit sharing or pension plans, insurance contracts, or annuities;

183Social Security, unemployment compensation, workers' compensation, or supplemental employment benefits;

183State lottery winnings;

183Noncash or fringe benefits or reimbursable expenses;

183Money due from a partnership, association, public or private corporation, agency (Federal, State, or local), or any legal entity indebted to the parent;

183Interest, dividends, distributions from "S" corporations, excess earnings from closely held corporations, or capital gains;

183Rental income; and

183Overtime income. [ The West Virginia materials fail to set out the specific changes to the income definition that resulted from the review. However, reviewers recommended that all income information should be presented at the time of the support calculation hearing. They also concluded that income information should be based on monthly figures, unless the court directed otherwise.]

The Washington State materials did not include the full proposed definition of income; however, comments contained in the Governor's Veto Message on SB 5120-S2 contain interesting rationale for his rejection of that proposal. [ Washington Legislative Digest and History of Bills, Veto Message on SB 5120-S2 (May 21, 1991), pp. 57 – 58, hereafter referred to as the " Washington Veto Message. "] According to the Governor, the new section on income would have eliminated consideration of all overtime, second jobs, contract-related benefits, gifts, prizes, and bonuses, unless specifically included as income by the deciding judge. He felt that the exclusion of these income sources would have resulted in a lowering of the majority of support awarded in the State. According to the Governor, there was no reason to use a definition of income that "arbitrarily excludes as a benefit for children these very real types of resources that are available to parents." [ Id .]

Income From Means-Tested and Other Assistance

One potential source of income is money that a parent receives due to her own or her child's need, status, or disability. For example, a CP may lack sufficient income to meet her child's needs and, thus, receive AFDC benefits in order to meet the needs of any children in her care. In another case, an obligor may have been severely injured on the job and, as a result, he now collects monthly disability payments. Several State review committees dealt with the issue of means-tested or other assistance. Some States decided to include, and others to exclude, such benefits as income for child support purposes.

Arkansas and Delaware reviewers recommended the inclusion on such benefits as income. In Arkansas, prior to the 1993 review, three categories of benefits were considered as income for child support: Social Security disability awards made to the recipient's spouse and/or children, workers' compensation benefits, and unemployment compensation. [ In re Child Support Guidelines (petition to revise guidelines) (filed 10/7/93), p. 2.] The guideline review added a benefit to this list: veterans' disability payments (VA [Veterans Administration] benefits). Citing Belue v. Belue, [ 38 Ark. App. 81, 828 S.W.2d 855 (1993).] the committee reasoned that "the Court of Appeals found that although VA benefits are not taxable income, when appropriate, they should be used to determinesupport. The Committee submits that the Court of Appeals' reasoning is sound, and that provision should be adopted." [ In re Child Support Guidelines, supra at p. 2.]

The report summarizing Delaware's 1990 review references Social Security benefits only. The committee stated without explanation that any such benefits paid to a child's custodian, either due to the status of the parent or the child, are to be considered income for that recipient parent. [ Family Court Judiciary, The Delaware Child Support Formula: Evaluation and Update (January 25, 1990), p. 8, hereafter referred to as the " 1990 Delaware Report. "] By 1994's review, however, the court's committee broadened the types of benefits to be included as income. The decision was to retain Social Security disability benefits and to add "those pension/disability benefits issued by private corporations, paid to a child(ren) on behalf of a disabled parent...[as a part of] the disabled parent's income for use in the child support calculation....When a child receives these benefits on his/her own behalf[,] the amount would be added to the custodial parent's income." [ Family Court Judiciary, The Delaware Child Support Formula: Evaluation and Update (August 1, 1994), p. 6, hereafter referred to as the " 1994 Delaware Report. "] This view can be contrasted with that expressed by reviewers in Connecticut, Pennsylvania, and Tennessee, who recommended against the inclusion of such benefits as income. Without detailed explanation, the Connecticut team discontinued consideration of SSI as a part of the gross income calculation. The stated rationale simply was that SSI is a means-tested Federal assistance grant. [ 1994 Connecticut Report, supra , at p. viii.] Pennsylvania materials, also without explanation, rejected the consideration of certain benefit income. Following the State's review process, AFDC was formally excluded as income to obligees. [ Letter from John F. Stuff, Pennsylvania Bureau of Child Support, to Margaret Campbell Haynes, ABA (May 2, 1995), p. 1, hereafter referred to as the " Pennsylvania Letter. "] Finally, Tennessee's income definition was amended pursuant to recommendations made in a 1993 review. The concept of "gross income" was to exclude: child support payments made to either parent for any other child and all means-tested public assistance programs otherwise excluded by Federal law or regulation, such as AFDC, Food Stamps, and SSI. [ Tennessee Rulemaking Hearing Rules, supra , p. 4.]

As these examples demonstrate, States that reviewed the inclusion of means-tested benefits as income generally recorded what the States did but not really why such action was taken. It may be that States chose toinclude such benefits to support the belief that any financial resource of a parent should be made available for the purposes of calculating her support obligation to the child. On the other hand, a State may have opted to exclude such benefits because they are scaled only to meet the basic needs of the recipient and/or of other specified individuals. Thus, these benefits would be insufficient both to cover the needs of the parent and/or another child and also to serve as a support resource for the child at issue. [ In discussing whether child support money paid on behalf of another child could be income for calculating the support of the child at issue, the Illinois committee stated that " [c]hild support income is `earmarked' for support of children in the obligor's own household. To base a child support obligation on child support income would take away from the needs of one child to meet the obligation to another. This is an undesirable outcome. " Illinois Report, supra, at p. 5.] Income From Self-Employment

Another important area for income determination is the treatment of self-employed parents. There are two basic questions to be answered in this regard: whether the monies made by self-employed parents will be considered for the purpose of calculating child support and, if so, how an appropriate figure is to be reached. State guideline review materials touch on both issues.

Although a number of States appear to have considered the first question, the materials of only one State seem to provide an actual response. New Mexico's reviewers stated specifically that "income and expenses from businesses should be carefully reviewed to determine an appropriate level of gross income available to the parent to satisfy a child support obligation." [ 1994 Child Support Commission, Final Report (October 1994), p. 3, hereafter referred to as the " New Mexico Report. " The commission further noted that the form of the business (e.g., sole proprietorship, general partnership, limited partnership, limited liability company, S-corporation, and C-corporation) should have no bearing on the level of the parent's income for child support purposes.] The question on which the State review material primarily focused concerns how to arrive at a measurable and accurate income amount in such cases.The Alaska review committee provided one alternative: amending the guideline commentary to include not only a listing of the types of proceeds to be included as "self-employment income" but also a process for determining the extent to which that income would be considered for child support purposes. The proposed language, which was approved by the State Supreme Court, provided the following:

Income from self-employment, rent, royalties, or joint ownership of a partnership or closely held corporation includes the gross receipts minus the ordinary and necessary expenses required to produce the income. Ordinary and necessary expenses do not include amounts allowable by the IRS [Internal Revenue Service] for the accelerated component of depreciation expenses, [depreciation of real estate,] investment tax credits, or any otherbusiness expenses determined by the court to be appropriate. Expense reimbursements and in-kind payments such as use of a company car, free housing or reimbursed meals should be included as income if the amount is significant and reduces living expenses. [ Memorandum from Alaska Guidelines Review Committee to the Alaska Supreme Court regarding Recommendations for Amending Alaska's Child Support Guidelines: Civil Rule 90.3 (March 17, 1994), p. 20, hereafter referred to as the " Alaska Memo — 3/17/94. "] Idaho reviewers examined, but decided not to act on, a concern regarding the inclusion of rents and business proceeds as income for parents who work together in a business. Believing that guidelines already adequately covered the matter, the committee noted that salary drawn from the business by either spouse is income for child support calculation purposes. Beyond that, one-half of the business income also would be attributable to the obligor in the computation of child support income. [ Minutes of Annual Meeting, Child Support Guidelines Committee (December 3, 1993), p. 6, hereafter referred to as the " Idaho Minutes. "] The criterion of gross receipts less ordinary and necessary business expenses appeared throughout the discussions of self-employment income. For example, Illinois reviewers reached a conclusion similar to Alaska's but made some interesting distinctions. First, they emphasized that although the IRS' permissible business deductions could serve as a guide, the individual decisionmaker may find these deductions inappropriate in the context of child support. [ Illinois Report, supra ., at p. 6.] Second, the committee specified that self-employment income should exclude extraordinary perks, even though the IRS often would permit them. Unfortunately, they did not give a rationale for this prohibition. [ Id. at p. 7.] New Mexico also distinguished ordinary and necessary expenses for income tax and child support purposes. When child support is at issue, the term would not include amounts claimed for pension contributions, profit sharing, or other retirement plans. [ To treat the parents equitably, however, if the other parent's employer funds a retirement benefit, the self- employed parent may deduct actual retirement contributions up to 10 percent of his gross income. New Mexico Report, supra, at p. 4.] Ohio reviewers also recommended the limited reduction of a self-employed parent's gross income to account for retirement contributions. The State legislature approved this provision, which would permit the self-employed party to reduce gross income by 5.6 percent or the difference between the tax rate paid by the individual and the current FICA (Federal Insurance Contributions Act) rate. [ Ohio Report, supra , at p. 12.] Also omitted from businessexpenses would be "amounts allocated to immediate family members if the parent has a controlling interest in the business" and expenses which significantly reduce personal living expenses. [ Id .]

A small number of States also considered the propriety of making property depreciation an ordinary and necessary expense and hence a deduction from self-employment income. Ohio's legislature followed the committee's recommendation to include only the "depreciation of replacement business equipment as shown on the books of the business" as such an expense. Under the prior version of the guideline, it appears that all depreciation deductions were prohibited because they would have resulted in an unfair portrayal of gross income for the child support calculation. A change in Federal tax laws allowed such depreciation to be calculated in a manner that would be less open to unfair manipulation. Furthermore, since the purchase of equipment often is critical for a business' continued ability to generate income, depreciation of such equipment is appropriate for determining income derived from that business to establish child support. [ Id. at p. 13.] However, reviewers opted against a deduction for real estate depreciation.

According to New Mexico's reviewers, depreciation expenses always should be carefully examined in child support cases, even though they ultimately recommended following tax depreciation standards. Notwithstanding this general rule, the committee recognized that there are certain situations in which the two sets of rules conflict. New Mexico's reviewers prohibited a deduction for depreciation taken on real estate. In addition, they felt that first-year bonus depreciation should be scrutinized for reasonableness. [ New Mexico Report, supra , at p. 4. Reviewers stipulated that if first-year bonus amounts were disallowed, these amounts should be considered in future years under the specific depreciation method available to the taxpayer.]

Income From Second Jobs, Overtime, and/or Bonuses

In determining the amount of income available for child support purposes, often it is necessary to consider compensation derived from overtime, second jobs, and/or bonuses. Several States addressed these issues as a part of their reviews. A summary of State debate appears in this section as well as in the discussion of multiple family situations. [ See pp. 73 – 76, infra .]

Money derived from overtime was treated differently by the States, although it seems that, in some way, each of the jurisdictions that examined this issue included these resources as income. Public concern about the guideline's failure to define overtime prompted review of this issue inColorado. By Federal regulation, child support decisionmakers must consider all of an obligor's earnings and income; accordingly, the commission recommended the inclusion of all required overtime in the gross income figure. However, to sustain some level of judicial discretion, the committee recommended that voluntary overtime and/or secondary employment would constitute reason to deviate from the guideline. [ 1991 Colorado Report, supra , at pp. 26 – 27.]

Nevada reviewers addressed the issue of overtime because of an administrative determination that had provoked a number of complaints in the State. It appears, prior to the 1992 review, that there had been no definitive decision about the inclusion of overtime in the calculation of a parent's income. An administrative decision rendered shortly before the review held that overtime compensation should be regarded as income where it is substantial and can be accurately determined. The guideline committee agreed with this sentiment. "Income is income"; therefore, its source was insignificant. Further, the committee reasoned that, in an income-sharing model, all income is presumed to be included in a child support determination. The committee considered legislation unnecessary to convey their opinion, finding that the administrative ruling offered "sufficient protection against injustice." [ Nevada Report, supra, at p. 42.]

Protection against injustice also provided the basis for the veto of a proposed income definition provision in Washington State. Explaining the veto, the Governor concluded that the proposed definition would have omitted the consideration of all overtime, second jobs, and bonuses for child support purposes. An income definition, without these and other resources, would lower most support awards in the State. The Governor felt that this would arbitrarily prevent children from accessing resources that rightfully are available to their parents. [ Washington Veto Message, supra, at p. 58.]

New Mexico's review committee extensively addressed the ways that resources from overtime, bonuses, and second jobs are to be treated. [ The materials detailed the handling of these matters but failed to address the rationale behind the process choices.] For example, overtime is divided into four categories: required, voluntary, preseparation and postseparation, and irregular. Overtime, which is frequent and which the employer historically has required, is to be included as gross income and averaged over a period of 6 to 12 months. If the overtime is voluntary, but the parent typically undertakes this work, it also should be included as gross income and averaged over a period of 6 to 12 months. Alternatively, irregular overtime, even if it produces significant compensation, should be excluded from the calculation of income; however,if the obligor is the parent at issue, that person should be required to make an additional lump sum child support payment in the month following the receipt of the overtime income. [ New Mexico Report, supra , at pp. 2 – 3. The lump sum payment would be 10 percent of the gross overtime amount for one child, 15 percent for two children, 20 percent for three children, 22 percent for four children, 24 percent for five children, and 26 percent for six or more children.] Commission members also decided that bonuses were to be generally included in the parent's gross income. The same considerations established for overtime payments were to be applied for bonus income. [ Id. at p. 1.]

The treatment of money derived from an additional job depended on the particular circumstances. According to the commission, the money made at an additional job, which the parent had prior to the determination of support, could be considered income in the same way as overtime. If the CP secured an additional job after the determination of support for one of several reasons (e.g., specifically to obtain more income for the support of the children at issue, to help support a subsequent family, or to reduce significant debt associated with the termination of the relationship with the obligee), the proceeds from that job would ordinarily not become income for the purpose of calculating child support. [ Id. at p. 3.]

Military Benefits

States report that it is often difficult to accurately determine the income of a parent who is in the military. For military personnel, salary is one part of a multifaceted benefit package that constitutes income. A small number of State reviews analyzed the way that guidelines compute income for military personnel. Arkansas and Ohio are two examples. In an effort to better explain the income packages of military personnel, Arkansas reviewers recommended the expansion of the current guideline language. Therefore, instead of simply directing child support decisionmakers to "see the latest military pay allocation chart and other benefits" and then add Basic Allowance for Quarters (BAQ), the statute was refined. [ In re Guidelines for Child Support, supra , at Exhibit A, p. 4.] While the formula still focuses on salary and/or BAQ, it requires use of the BAQ rate for which the person is actually eligible, rather than the one for which the parent has opted. In addition, under the proposed guideline, the military's variable allowance only would be considered on a case-by-case basis. There was concern that application of this resource to all cases might be inappropriate because it generally is awarded to offset extraordinary livingexpenses. [ Id .] The State guideline authority found the changes to be appropriate and enacted the recommendations.

Ohio's guideline authority approved the suggestion of the State's reviewers regarding the military pay aspects of the gross income definition. The term was amended to encompass not only base pay, but also BAQ, Basic Allowances for Subsistence, Supplemental Subsistence Allowances, cost-of-living adjustments, specialty pay, Variable Housing Allowances, and National Guard and Reserve drill pay. [ Ohio Report, supra , at pp. 13 – 14.]

Imputed or Attributed Income

A number of State reviews addressed the determination of income for unemployed or underemployed parents. Typically, States have chosen to impute or attribute income to these parents. Delaware's reviewers found the following:

Underlying the Delaware Child Support Formula is the concept that both parents are responsible for the support of their children. One of the linchpins of the formula which has enhanced the perception of its fundamental fairness and which, coincidentally, has been adopted by States as part of other formulas, is the tenet that an individual cannot by voluntary unemployment shift the burden of support to the other parent. [ 1990 Delaware Report, supra , at p. 6; see also Illinois Report, supra, at p. 8.]

Colorado presents the issue differently:

The most crucial step in the calculation of child support is the determination of income. The goals of the guidelines would be frustrated if a parent could evade the support obligation by being voluntarily unemployed or underemployed. The statute deals with this problem by providing for imputation of income to a parent who is voluntarily unemployed or underemployed based on their potential income. [ 1990 Colorado Report, p. 17.]

State review of imputed income seems to have covered three basic areas. The first involves the circumstances under which income should be attributed to a parent. The second is the level at which imputed income should be set. Third are exceptions that would permit a parent to avoid the imputation of income.

When Should Income Be Imputed?

Most State guidelines attributed some level of income to unemployed or underemployed parents. The real issue, then, is what the terms unemployed and underemployed mean for child support purposes. Reviewers in Illinois defined underemployment as any job change that substantially reduces income. [ These reviewers rejected their expert's more hard-line approach to the underemployment concept, finding it far too intrusive into the lives of divorced parents. Instead of approving an attribution of income for any reduction of income, the committee preferred the " substantial reduction " standard noted above.] A finding of underemployment would constitute a rebuttable presumption that the parent's actions were precipitated by an intent to avoid child support. [ Illinois Report, supra , at pp. 8 – 9.] Similarly, North Dakota reviewers defined underemployed parent as one whose gross income from earnings is significantly less than the earnings of people with similar work history and occupational qualifications in the obligor's community. [ Amendments to Chapter 75-02-04.1, North Dakota Child Support Guidelines (undated), p. 19 (proposed 75 - 02-04.1-07(1)(b)), hereafter referred to as the " Proposed North Dakota Guidelines. "] They quantified the term substantial as gross earnings income that is less than 6/10 of the prevailing amount for those with a similar background in the obligor's community. [ Id. (75-02-04.1-07(2)).] The guideline commission in New Mexico based its explanation of unemployment and underemployment on the voluntariness of the action. When the parent has achieved a particular employment status voluntarily, income would be imputed; however, when the status is imposed upon the parent, income generally would not be attributed. [ Definition of Income Statute and Commentary (undated), pp. 1 – 2, cited in New Mexico Report, supra, hereafter referred to as the " New Mexico Commentary — undated. " If income is imputed to a parent, the appropriate portion of any child care expenses also should be attributed to the parent.] The report went on to describe certain examples of voluntary situations. For example, in the case of underemployment due to retirement, reviewers noted that the trier-of-fact would have to consider the age and health of the retiree. Alternatively, a career or job change, made in good faith to improve the parent's potential earning potential for himself and the child, generally would not spark an attribution of income. However, if the improvement is unlikely to occur in time to benefit the child, income should be imputed at the rate of full potential. [ Id .] The West Virginia materials indicate that an attribution of income would be acceptable for parents who are unemployed or underemployed. Underemployment, however, points to parents who work at a job whichdoesn't correspond to their training or education level. In addition, it could be applied to a parent who can but fails to work in full-time employment. [ West Virginia Outline, supra , at pp. 3 – 4.] Are There Reasons Not To Impute Income?Although a parent's situation may constitute unemployment or underemployment, are there situations in which it may by inappropriate to impute income? Reviewers in many States concluded that there indeed are unemployed or underemployed parents for whom income should not be imputed at all. For example, West Virginia materials suggest that an attribution of income is correct unless one of the following has occurred:183The parent must care for a child of the relationship, who is either preschool age or disabled;

183The parent is pursuing self-improvement, which will ultimately result in economic improvement for the child;

183The parent has valid medical reasons for his or her employment status;

183The parent can demonstrate diligent but unsuccessful efforts to find employment; or

183The decisionmaker makes written findings that other reasons exist that would make the attribution of income inequitable. [ Id .]

In Illinois, reviewers believed that parents should be permitted to rebut a presumption of intentional unemployment or underemployment by producing evidence that a physical or mental incapacity justifies the employment reduction. Also acceptable as rebuttal would be an indication that the current income reduction either will result in long-term gain, as in a return to school to improve skills, or was done for some reason not associated with an attempt to avoid the payment of support. [ Illinois Report, supra, at p. 9.]

The Colorado review committee reached a similar outcome in its effort to reconcile conflicting goals: meeting the needs of the child and recognizing some legitimate reasons for a parent to take a lower paying job. Under the proposal, child support decisionmakers would have authority to protect the child's economic well-being by imputing income to "spiteful or irresponsible parent[s]." Parents with decreased income would be shielded from income imputation only if they are employed full-time and if the reduction is expected to be temporary and lead to a subsequent increase in income or a part of a good faith career change, neither intended to deprive a child ofsupport nor to unreasonably reduce the level of support available. [ 1990 Colorado Report, supra , at pp. 17 – 18.] The rationale for this exception to the imputation rule is worthy of note:

[T]here was a belief that in practice the imputation of income had made it nearly impossible for an obligor to take a lower paying job, no matter how laudable the reasons, because he or she could not afford to pay the support level at the imputed income level. By contrast, a custodial parent could choose a lower paying job so long as he or she were willing to accept somewhat reduced child support....A 1990 amendment eliminated this issue by preventing imputation of income for any parent gainfully employed on a full-time basis. This swing of the pendulum has created yet another problem. So long as the full-time employment test is met, an obligor can choose very low-income employment for the purpose of depriving a child of support or without consideration for the child's needs. This gives an angry parent excessive power to reduce needed support. [ Id. at p. 17.]

As stated previously, New Mexico reviewers prefaced income attribution on the voluntariness of the unemployment or underemployment. If the parent's situation was prompted by an involuntary act, income would not be imputed. The report provided examples of involuntary acts that would protect a parent from having income attributed. For example, physical or mental incapacity would generally constitute an exception to the attribution rule. [ New Mexico Income Commentary — undated, supra , at pp. 1 – 2. Although not stated in the report, it would seem appropriate to attribute income to a parent, despite an incapacity, if the parent has assets that could be used for support.] The report also indicated that there may be instances when incapacity would not protect a parent; unfortunately, there is no explanation. A loss of employment, unrelated to the parent's actions, also could cause income to be attributed. [ Id . Reviewers noted that income could be imputed to a parent whose unemployment compensation is less than minimum wage or less than what the parent could earn through employment.]

The 1990 Delaware review specifically dealt with the issue of imputing income to a homemaker parent. Pursuant to the review committee, there would no longer be an assignment of value to a parent's home-based duties. Reviewers felt that attributing income in this manner was rarely used, if ever, and simply represented a diversion from the real issues in the case. [ 1990 Delaware Report, supra, at p. 6.]

How Much Income Should Be Attributed?

Once there is a decision to attribute income to a parent, the next step is to determine the amount of income to be charged. State review bodies offereddiffering recommendations about the appropriate level of income to be imputed to the unemployed or underemployed parent. Some State review teams concluded that the level of attributed income should be set on a case-by-case basis. Others established either specific figures or percentages. Others established a flexible approach guided by the particular situation.

For example, Ohio reviewers suggested that potential income be calculated on a case-by-case basis, not according to any previously set schedule. When imputing income, the trier-of-fact should look at the parent's employment potential and probable earnings level, based on recent work history, occupational qualifications, and the job climate and salary levels in his community. Furthermore, if the parent has nonincome-producing assets, income from those sources also should be considered. The income level should be based on the local passbook savings rate, instead of the previously used and more difficult to obtain long-term treasury bill rate. [ Ohio Report, supra, at p. 7.]

According to New Mexico records, income is attributed after consideration of the last full-time employment of the unemployed or underemployed parent. If this factor is ineffective to reach an amount, the trier-of-fact may use earning levels of people with comparable education, training, or experience. That amount may be reduced if the parent has been out of the workforce for some time or is unlikely to find that type of job. In such a case, the minimum wage for a 40-hour week should be the income attribution basis. [ New Mexico Income Commentary — undated, supra, at pp. 2 – 3.]

North Dakota reviewers proposed an interesting approach for setting the imputed income amount. An obligor's gross monthly income generally would be the greatest of (1) 167 times the hourly Federal minimum wage, (2) 6/10 of the prevailing gross monthly earnings in the community of those with similar backgrounds, or (3) 90 percent of the obligor's greatest average monthly earnings for any 12-month period within 36 months of the child support matter's commencement. This rule would apply for unemployment, underemployment, or a failure to produce reliable income information. The decisionmaker could enter a lesser amount for an obligor who shows one of the following:

183Child care costs of at least 70 percent of the attributed income amount for a natural or adopted child in his physical custody who is under age 14 and who has no other available adult caregiver during the obligor's employment-related absences;

183A disability of sufficient severity to prevent the pursuit of employment that would produce a gross monthly income of at least 167 times the hourly Federal minimum wage;

183The existence of a minor child with emotional or physical needs that prevent gainful employment; or

183A lack of significant income-producing opportunities in the community.

No income is to be attributed if the obligor's average monthly gross earnings are equal to or greater than 167 times the hourly Federal minimum wage and if the obligor is not underemployed. [ Proposed North Dakota Guidelines, supra, at 75-02-04.1-07.]

According to Tennessee materials, the calculation of income to be attributed to a parent who is willfully and voluntarily unemployed or underemployed should be based generally on the parent's education and/or previous work experience. [ Tennessee Rulemaking Hearing Rules, supra, at p. 4, citing 1240-2-4-.03(3)(d).] Reviewers advocated a slightly different standard for the imputation of income to obligors who provide no income evidence at the child support establishment hearing. In such cases, the trier-of-fact should be authorized to use an annual income of $25,761151the 1990 average median State income. For a modification or adjustment case at which the obligor provides no income, the decisionmaker may increase the order by up to 10 percent per year for each year that has elapsed since the order was entered or last modified, whichever occurred last. [ Id . citing 1240-2-4-.03(3)(e) and (f).]

CPs and NCPs in Alaska who fail to present income statements with their initial pleadings also could be charged with a set amount of income151a presumptive income figure of $84,000 per year. This presumption is rebuttable by reasonable, accurate, and complete information, which may be available to the decisionmaker through other means. Reviewers explained that the intent behind the presumption was not only to give parties an incentive to provide the appropriate financial information but also to give trier-of-fact effective recourse when parents did not follow through. Reviewers noted that the use of presumptive income should not be employed automatically. Parties are first entitled to notice of the consequences associated with a failure to file financial information. If reasonably accurate financial information is available from another source (e.g., the other party), the presumed amount should not be used. Finally, the parent, against whom income is attributed, may provide actual income information at a later time. However, because of nonretroactivity provisions in the statute, such later-supplied information may only work to adjust an order prospectively. [ Alaska Memo — 3/17/94, supra , at pp. 11 – 12.]

Other State review teams included more modest attribution amounts among their recommendations. For example, in West Virginia it was recommendedthat income be imputed at the minimum wage rate for a full-time position. At the time of the report, the figure would have been $757 per month. Income levels also were a subject for Delaware's guideline reviewers. In 1990 they approved a basic framework for calculating a parent's appropriate support level. First, the committee gave the trier-of-fact discretion to determine the maximum potential earnings of each parent. However, reviewers established that the minimum income levels for unemployed parents should be comparable to the earnings of an average, able-bodied person, and they set that amount at $5 per hour for a 40-hour week ($607 per month). [ 1990 Delaware Report, supra, at pp. 6 – 7.] During the 1994 review, the committee raised the minimum monthly income amounts to $867 gross or $714 net income. A provision also was added that would allow a parent to overcome this presumed income if the parent's skill level dictated otherwise. Additionally, reviewers suggested that in default cases a parent's income should be imputed in an amount at least equal to that of the appearing parent, absent contrary information available to the trier-of-fact. [ 1994 Delaware Report, supra, at p. 7.]

The Verification of Income

The trier-of fact in a child support case must make certain determinations about income levels presented by the parents. Principally, the decisionmaker must decide whether parents' income representations reflect both correct and current amounts. To achieve this, there must be some method of verifying income. Only New York guideline reviewers appear to have raised this issue. New York's report illustrated the overwhelming inadequacy of the financial disclosures typically made by parents. After examining actual case files for their compliance with the State's requirements regarding statutory proof of income, reviewers concluded that most cases lacked at least some of the mandated income evidence. In the works of the committee, there was "minimal compliance with the...requirements for financial disclosure." Even more important, in 55 percent of obligor files and 67 percent of obligee files, none of the required proof had been supplied. Accordingly, there were real concerns about the financial basis for the support orders entered in the State. Despite such striking outcomes, the committee only offered that the State should make greater efforts to fully and consistently implement the statute. Members reported that by doing so, parties in child support cases could make significant strides toward the statute's underlying purpose of fair and appropriate child support. [ New York Report, supra, at p. 35.]

Adjustments to Income

Once the parent's gross or net income has been determined and, in some cases, verified, the decisionmaker may consider whether there are special circumstances that would warrant an adjustment to this income figure. Income adjustments occur prior to the calculation of the child support obligation; they often are the same factors considered by other States as reasons to deviate from the basic child support award.

States use a number of potential income adjustors, including self-support reserves, Federal and/or State income tax withholdings, child care expenses, alimony or other child support obligations, medical insurance premiums, and extraordinary medical or other expenses. As income adjusters, such factors have an "above-the-line" impact on child support. [ This is differentiated from factors employed after the calculation of a basic support award. This above-the- line category adjusts an already-determined support amount; therefore, they are more appropriately termed award deviation rather than income adjustment criteria.]

Self-Support Reserves

The self-support reserve is incorporated implicitly or explicitly into the guidelines of most States. It permits the low-income obligor to retain some minimal level of income before child support is assessed. The rationale for the self-support reserve concept is stated in materials prepared by South Carolina's expert:

The rationale behind the standard is quite simple. That is, the obligor should have sufficient income available to maintain a minimum standard of living which does not affect negatively the obligor's earning capacity, incentive to continue working, and ability to provide for him or herself. Many States have concluded that it is in the public interest that the obligor continue working as a productive member of society and not be so impoverished by the payment of child support that he/she will require public assistance. [ PSI, Special Factors and Comparative Analysis: South Carolina Child Support Guidelines Revisions (September 17, 1993), p. 21, hereafter referred to as the " South Carolina Expert Report. " See also 1994 Delaware Report, supra, at p. 8; 1994 Connecticut Guidelines, supra, at p. v.] States have adopted different methods of incorporating the self-support reserve into their guidelines. [ South Carolina Expert Report, supra, at pp. 25 – 26.] Some States use the self-support reserve to adjust income; a specific amount is subtracted from an obligor's income before the calculation of child support to account for the parent's own basic needs. The effect of this reserve is to reduce the income available for support purposes.A second way for States to reflect self-support is to build that consideration into the actual child support table. In those States, support is not assessed until an obligor's income exceeds a certain minimum amount. Even after obligor income reaches the threshold, support will be gradually phased in so that obligor income, after assessment of the support award, does not fall below the built-in reserve level.The third approach is the self-support reserve, which is used to adjust the child support order. Here, the reserve amount is subtracted from the calculated child support amount. For this discussion, however, the focus is on guideline review reports that consider use of the self-support reserve as an income adjustment factor. For example, Delaware's guideline instructions set forth that the "Court has established an absolute minimum amount of income that a parent must retain to function at maximum productivity. Subtract each parent's self support allowance from their [sic] net income and calculate the net total income available to support the child(ren)." [ Delaware Instructions for Child Support Guidelines (November 1990), p. 2.] In 1990 reviewers recommended an increase of the self-support allowance from $450 to $550; the increase was endorsed by the State Supreme Court. [ Id .]

Delaware reviewers also sought the elimination of a reduced self-support allowance for two categories of obligors:

183Those who were either remarried or cohabiting "in the relationship of husband and wife with an employed individual" or

183Those who were unemployed but imputed with half of a spouse's or partner's income. [ 1990 Delaware Report, supra, at pp. 4 – 5.]

Materials cited a three-pronged rationale for this action. First, the change acknowledged current State law under which the child support obligation belonged to the parents, not to any third party. Second, reviewers noted the extended litigation prompted by, and the inherent problems with, the guideline provisions; therefore, they opted for a plan that would promote clarity and consistency. Finally, with the high volume of child support cases to be decided on a daily basis, the expected increased caseload due to Federal review and adjustment requirements and impending automation of different self-support levels would be far too complicated to benefit the State. [ Id. at p. 5.]

Self-support reserves (renamed "standard deductions" following a 1994 review) are treated as above-the-line items in West Virginia as well. The reserve amount is deducted from the parent's net income amount to establish the income available for child support. In addition to the new name, reviewers eliminated the previous graduated reserve amounts: $315, $365, and $450. Instead, they recommended a flat $550 per month. [ West Virginia Proposed Guidelines, supra, at p. 5. Note that the standard deduction applies to both the NCP and the CP.]

Hawaii's self-support reserve amounts also were adjusted by guideline reviewers. The intention was to keep pace with Federal poverty levels based on minimum food, clothing, shelter, and other essential needs. In 1989 guideline reviewers increased the net self-support reserve from $454 to $470, in 1991 to $478 net, and in 1994 to $574 net. [ 1989 Hawaii Guidelines, supra , at p. 3; Hawaii Department of the Judiciary, Guidelines in Determining Child Support (November 1988), p. 4, hereafter referred to as the " 1988 Hawaii Guidelines " ; Hawaii Department of the Judiciary, Guidelines in Determining Child Support (March 1991), p. 4, hereafter referred to as the " 1991 Hawaii Guidelines " ; Hawaii Family Courts (First, Second, Third and Fifth Circuits), Guidelines in Determining Child Support (November 1, 1994), pp. 4 – 5, hereafter referred to as the " 1994 Hawaii Guidelines. "] Income Tax Withholding

Some States have determined that the amounts withheld from earnings for Federal, State, and/or local income taxes also should be a basis for adjusting income available for support purposes. Summaries of review committee deliberations from a few of those States follow.

At the conclusion of Connecticut's 1990 review, the committee determined that a parent's net income (the income used to establish the child support award) would be set by subtracting certain mandatory deductions from the parent's gross income. That list included "Federal income taxes based upon all allowable exemptions." [ 1991 Connecticut Guidelines, supra, at p. 11.] In 1994 reviewers agreed to retain the deduction for Federal income tax withholdings. They also added deductions for State and local taxes because a State income tax had been passed since the last review and because local taxes had been raised in various parts of the State. [ 1994 Connecticut Guideline, supra, at p. ix.]

In response to expert recommendations, Ohio reviewers also proposed reducing income by local tax payments or estimates. These taxes were omitted from previous income calculations because local tax rates varied. One suggestion had been to use an average rate, when taxes ranged from zero to several percentage points or when people live in one area but work in another; however, this was rejected as too difficult a scheme. Under thenew proposal, reviewers created a deduction for local taxes, where applicable. The parent wishing to use the deduction would have to offer proof of the tax amount claimed. [ Ohio Report, supra, at p. 12.]

In 1994 Delaware reviewers reaffirmed the use of income tax withholding adjustments; in doing so, they focused strongly on the level of the deduction. The recommendation was that all parents with taxable income are to be accorded a single exemption for the purpose of computing income available for child support. Reviewers felt that this was an appropriate way to treat parents and children equitably for child support purposes. [ 1994 Delaware Report, supra, at pp. 5 – 6.]

Proposed changes to the North Dakota guidelines also reflect concerns about a parent's tax-related income adjustments. While the reviewers advocated the retention of the adjustments for Federal and State taxes, they rejected the continued application of standard tax deductions and the tax tables to determine the appropriate rates. Reviewers took this action because of reported windfalls by obligors, who actually paid substantially less in taxes than the amounts derived from using the standard deduction or the tax tables. [ Proposed North Dakota Guidelines, supra , at pp. 5 – 6.]

Child Care Expenses

At least one State has determined that child care expenditures should be deducted from income prior to the calculation of child support. [ Most often, such expenses were treated as add-ons to the support award. See pp. 76 – 77, infra .] According to Connecticut's 1991 guidelines, "the weekly cost of unreimbursed child day care" is incurred so that the CP maintaining employment would be deemed a special exemption. As such, they were to be deducted from income before support was determined. [ 1991 Connecticut Guidelines, supra , at p. 11.] The State's 1994 guideline continues to allow above-the-line consideration for child care costs but adds clarity. Reviewers recognized the confusion in the treatment of and the distinction between mandatory deductions and special exemptions and sought to ease the situation by developing a single list of allowable deductions that would contain child day care expenses. Furthermore, reviewers applied the deduction to either parent as long as the parent had contributed to unreimbursed work-related child care costs for the child at issue. [ 1994 Connecticut Guidelines, supra , at p. x.]

Health Insurance Premiums

Several State review teams deliberated the inclusion of health insurance premiums as income adjustment factors. For example, the 1993 Massachusetts report cites reviewer displeasure with the treatment accorded health insurance expenses under the guideline in place at the time. Under that scheme, there was an above-the-line deduction for the full cost of family coverage, including the obligor's own insurance:

[Such an approach] dramatically reduces the amount of the order and causes a significant decline in the child's standard of living. In some cases, this leads the custodial parent to forego health insurance coverage for the child in favor of a more adequate child support award. In effect, the Massachusetts Guidelines...can force parents to choose between meeting the child's needs for food, clothing and shelter, or meeting the child's health care needs. The Guidelines review process presents an opportunity to rectify this problem. [ Massachusetts Report, supra , at p. I.]

To correct this situation, the review team recommended that obligors receive an above-the-line adjustment only for the difference between the total cost of family coverage and coverage for the child at issue. By doing so, the obligor would be credited for insuring the children, but the economic effect on children is eased. [ Id .]

Discussion of adjustments for medical insurance also appears in the New Hampshire materials. Although the materials do not indicate the practice prior to the 1992 review, it seems that reviewers advocated the continued limitation of the income adjustment. A parent's income could be adjusted up to 50 percent of the out-of-pocket expenses incurred for the child's medical insurance. According to reviewers, it was important to permit such a credit in order to ease the effects on parents of the increasing costs of medical coverage and the decision of many employers to discontinue such coverage for employees and their families. The committee found that a 50-percent deduction would reduce the financial burden of those parents who must pay the entire insurance costs, while not making their child support payments substantially lower than parents whose employers cover the entire medical insurance expense. [ New Hampshire Report, supra, at pp. 9 – 10.]

Each of the above States carved out above-the-line allowances for costs associated with the child's insurance. In other State reviews, the conclusion was to have a deduction for the total health insurance premium paid by the parent, not just those costs attributable to the child at issue.

For example, Delaware materials show that 1994 reviewers recommended that either parent be able to claim an above-the-line adjustment for health insurance premiums, irrespective of the people covered. The exception would be for cases in which there had been an actual request, accepted by the decisionmaker, to exclude the child at issue from the coverage. In explaining this action, the committee noted that "the prevailing national view [is] that it is in no one's best interest to be uninsured: not the child, either parent, or either parent's subsequent children. Any major medical expenditure, due to lack of insurance coverage, by either parent on behalf of that parent, or his/her child(ren) could interfere with the routine payment of child support." [ 1994 Delaware Report, supra, at p. 6.]

The review undertaken by Florida's legislature yielded a somewhat similar result. That State's guideline was changed, following the review, to allow parents to deduct from gross income all health insurance premiums, except those attributed to the child at issue. [ Laws of Florida 93-208(3)(e) (1993).] Premiums for that child would be an add-on to the support award. [ Id . at 93-208(8).]

In Illinois the State's expert suggested that where a NCP is ordered to provide health insurance for the child, he should be allowed to deduct his prorated share of the premium from the child support obligation151in essence, a below-the-line deviation. The committee rejected this approach; instead, they favored retention of the existing law that made health insurance premiums an adjustment to the gross income figure. Because reviewers were considering a change in the guideline model to income shares, they also proposed an alternative that would be effective under that proposed model. In the event of a move to income shares, the committee seemed to endorse a below-the-line deduction. If the noncustodial parent pays the insurance premium, the parent could reduce the support obligation by a pro rata share of the premium. If the custodial parent were the premium payer, then the noncustodial parent's support obligation should be increased by that parent's share of the insurance cost. [ Illinois Report, supra, at pp. 22 – 23.]

From Hawaii's materials, it appears that reviewers decided to continue to permit income adjustments for health insurance premiums; however, following the 1991 review, the statute required verification of the health insurance amounts paid. [ 1991 Hawaii Guidelines, supra , at p. 4.]

Multiple Families

The issue of multiple families was perhaps the most popular topic for the guideline review committees. In the words of the Nevada team, a "large proportion of child support cases involve multiple families. It is no longer unusual for parents to have one or more former spouses or to be custodians of children from one marriage and noncustodians of children from another." [ Nevada Report, supra, at p. 26.] Hence, there was a significant amount of interest in the way that child support will reflect multiple family situations.

Guidelines tend to approach multiple family scenarios in one of two ways. One approach is to factor existing child support obligations into the actual support calculation. That tactic, along with multiple families as matters for the discretion of the child support decisionmaker, is addressed in the section on guideline application. [ See pp. 75 – 76, infra .] The other approach is to make the obligations to other children an income deduction; the result would be to reduce income prior to the calculation of support for the child at issue. Jurisdictions that follow the latter method are discussed in this section.

Alaska's reviewers recommended a change to the definition of adjusted annual income. Pursuant to the new language, that term would mean the parent's total income minus child support for children of prior relationships who live with the parent. [ Alaska Memo, supra , at pp. 8 – 9. Alaska's treatment of subsequent children is discussed in the section of this report on support deviation. See pp. 75 – 76, infra .] Maryland's review team chose to follow what has become known as the Colorado approach to multiple family support obligations. A parent's legally recognized financial responsibilities to other children usually would be deducted from gross income in a child support establishment or modification case. In modification cases, however, if the adjustment for other children would result in a lower order for the child at issue, the deduction would be prohibited. [ Letter from Carolyn W. Colvin, Maryland Department of Human Resources, to R. Clayton Mitchell, House of Delegates (December 11, 1992), p. 1, hereafter referred to as the " Maryland DHR Letter, " citing Colorado Guideline at p. 2.] The matter was submitted to the legislature in 1995 but had not been decided at the time materials were submitted for inclusion in this report. [ Letter from Kenneth H. Runsey, Child Support Enforcement Administration, to Margaret Campbell Haynes, ABA (January 3, 1995), p. 1, hereafter referred to as the " Maryland Cover Letter. "] Prior to Connecticut's 1994 review, child support orders were treated as special exemptions from income, as long as the payment amounts were verified. Connecticut's review amended this procedure. Court-ordered child support, paid on behalf of persons not involved in the particular supportmatter, would be retitled income deductions. No verification beyond the inclusion of the specific amount on the paying parent's financial affidavit would be required. The review team purposely declined to require the obligated parent to show that these alimony and/or child support amounts were actually paid. There is a presumption that payment is made "in deference to the sanctity of a court order and in recognition that unpaid orders remain subject to enforcement and future collection." The guideline commentary did provide, however, that whenever a trier-of-fact finds that payment is not being made, she has discretion to disallow the income deduction. Reliance on such discretion provides greater assurance that the family at issue would not be deprived of funds which the obligor has chosen to retain. [ 1994 Connecticut Guidelines, supra , at p. 10.]

The review of the North Dakota guidelines included consideration of court-ordered child support awards as well as custodial child support expenses. The conclusion was that such items should be treated as income adjustments. Reviewers agreed that any ordered payment, on behalf of a child other than the one at issue, should be permitted as a deduction. [ Proposed North Dakota Guidelines, supra , at p. 7 (emphasis in original).] North Dakota's proposed changes also would have allowed a deduction of an obligor's expenditures for resident children whose parents are not the obligor and obligee. Again, the stated rationale was that the obligor has a duty to support all of his children. [ Id .]

South Carolina's guideline reviewers also engaged in discussion regarding additional dependents. They noted that when child support decisionmakers consider multiple family cases, they are "often faced with the task of balancing the needs of the NCP's additional dependents with those of the children in the action before the court, while also trying to encourage parental responsibility." [ South Carolina Child Support Guidelines Handbook (May 1994), p. 7, hereafter referred to as the " 1994 South Carolina Guidelines. "] To rectify this problem, reviewers suggested that NCPs receive credits for any additional biological or adoptive children living in the home (i.e., children for whom the obligor owes a legal duty of support). The decisionmaker calculates a basic child support obligation for these additional children. That support figure then would be multiplied by .75 and subtracted from the obligor's gross income. The remaining income would be deemed available for the support of the child at issue. This scheme generally would be used. Reviewers stated that in modification cases this income deduction should not be used, if the result would be lower support for the children who are the subjects of the modification action. Obligors in such cases were encouraged to pursue other means, such as second jobs, to improve their financial status for their other dependants. Reviewers found that such a policy "encourages parental responsibility while protecting children in the homes of both the noncustodial and custodial parent." [ Id .]

The Nevada report offers a detailed description of its review team's deliberations. Among the topics were recent case law, the distinction between a "first mortgage" and "equal treatment" approach to subsequent family obligations, and both Federal and State policy. Under the "first mortgage" approach, the earliest support obligation takes precedence over later assumed obligations. This method would "insulate" children of a first marriage or relationship from subsequent choices made by the obligor parent. [ Nevada Report, supra, at p. 28.] The "equal treatment" approach differs in that it would put all of the obligor parent's children on the same footing for child support purposes; all would have comparable access to the obligor's pool of obligor resources determined to be available for support. [ Id . at p. 29.] First, the committee concluded that child support decisionmakers needed guidance about the handling of multiple family situations. Second, the committee's majority considered the "first mortgage" the more appropriate model for these situations, regardless of whether that later family is intact or divided. Third, in fairness to obligors, in the formal calculation of support for subsequent children, reviewers decided that the decisionmaker should presumptively consider the existing support obligation for the first family and reduce the obligor's available income by that amount. [ Id. at pp. 30 – 31.] Finally, Ohio had an interesting approach to the handling of "children who are the children of either the obligee or obligor but not the children of the parties together." [ Ohio Report, supra , at p. 17.] The team noted that the current guidelines permitted a deduction to either parent for child support amounts ordered and paid on behalf of other children. For other children in the home of either parent (i.e., those for whom the parent lacked an actual support order), the guideline allowed a gross income adjustment equal to the Federal tax exemption for that child. The tax exemption amount would be reduced by any child support received for the child. [ Id . The tax exemption amount was selected as a compromise. It could not be directly related to the cost of raising children but provided relief to parents with obligations to support other children.] After considering the propriety of other approaches, the committee decided to retain both methods. [ Id. at p. 18.]

Application of the Guideline Formula

Once the trier-of-fact arrives at a decision about the income available to one or both parents for child support purposes, the particular State's guideline will be applied to produce a basic child support award figure. This basic figure is the base amount presumed to meet the child's primary needs. Depending on the guideline model, the basic child support obligation may represent the amount assumed to be provided by both parents. Therefore, this obligation would be allocated between the parents, as appropriate in that State. Under other guideline models, application of the formula only results in the obligation of the noncustodial parent. In such cases, the obligee is presumed to match the obligor's contribution or to supplement it in the manner necessary to meet the child's basic needs.

As the States reviewed their guidelines, a number of issues arose that related to the guideline application or the formula phase of the process. Typically, reviewers discussed such matters as the particular income levels to which guidelines apply, whether the guidelines were adequate generally to meet children's basic needs and whether this was true at different ages, how guidelines manage various custody and care schemes, guideline treatment of other family-related situations, and whether certain items should be assumed into the basic child support amount covered by the guidelines or designated as an add-on to the basic award.

Application of Guidelines to Specific Income Levels

Child support guidelines establish presumptive award amounts based on the combined incomes of both parents or that of the obligor alone. Although the States vary as to the applicable income levels, guidelines usually apply to cases in which the relevant income falls between a certain designated floor and ceiling amount. Many of the State guideline reviews considered the handling of cases with low-income obligors, especially those whose financial resources are below the floor, or high-income obligors whose financial resources exceed guideline ceiling amounts. Examples of the State review team treatment of these issues follow.

Low-Income Obligors

State guideline review materials indicate two major focuses regarding low-income obligors: (1) self-support reserves and (2) minimum support obligations.

Self-Support Reserves

Self-support reserves are mechanisms to establish the minimum income amount that obligors are permitted to retain before being charged with a child support obligation. This ensures that support awards do not deprive the obligor of income for basic subsistence. As discussed previously, someStates have instituted above-the-line, explicit, self-support reserves; in these States, a reserve figure is deducted from income to determine how much a parent will have for support purposes. [ See pp. 39 – 41, supra .] In other States, the reserve is implicit; the guideline formula or table in such a State simply would not set support awards for certain incomes. In the alternative, such States would establish minimum amounts at lower percentages or levels than applied to the cases of parents who are more financially able to provide support.

Missouri's reviewers recommended a low-income self-support reserve by offering "a fixed range of modest support for persons with income at or below the Federal poverty level guidelines." [ Missouri Report, supra , at p. 4.] They felt that this action was an appropriate way to protect parents in cases where an application of guidelines, pursuant to the regular schedule, would jeopardize the parent's ability to survive. A second reason was that the development of a mechanism for "implementing a modest child support for persons in the poverty or exceptionally low-income level[s]" would enable the State to fix support in a large number of cases without having to deviate from the chart. [ Id.] Obligors with monthly incomes of $300 or less were charged with $20 of support, while those with incomes between $301 and $700 were responsible for $50 monthly support awards.

Following its review, North Carolina adopted a similar approach to the issue of awards for low-income obligors. The guidelines now have a built-in self-support reserve. For very low-income obligors (defined as those with monthly adjusted gross incomes of less than $700, which was the 1993 poverty level for a single person), a minimum of $50 per month is required as support, unless the trier-of-fact allows a deviation. Even for obligors with monthly incomes above the poverty amount, the guideline incorporates the reserve so that the obligor is assured income of least at the poverty level after the payment of child support. Finally, the amended income shares guideline seeks to protect the self-support reserve and to prevent disproportionate increases in child support when there are only moderate income increases by setting aside certain incomes at which obligor income will be the sole determiner of the support level. [ North Carolina Child Support Guidelines Commentary (October 1, 1994), p. 2, hereafter referred to as the " North Carolina Commentary. " See also 1994 South Carolina Guidelines, supra , at p. 5.] Connecticut also incorporated a self-support reserve into its guidelines. As part of the 1990 review, the self-support figure was set at $135 per week. However, 1994 reviewers concluded that the amount was "unrealisticallylow given the costs an obligor incurs in maintaining a separate household." [ 1994 Connecticut Guidelines, supra, at p. v.] In response, the minimum self-support reserve was raised to $145 per week, which was less than the amount proposed by some but approximately 150 percent of the poverty level for a single person. [ Id .]

A second concern was raised for Connecticut reviewers: a low self-support reserve diminished the incentive of low-income obligors to increase income because everything above the $135 figure would be considered available for use in the child support calculation. To encourage earning among these obligors, reviewers offered and the legislature approved another strategy. Obligors at the transitional levels of income would be spared a dollar-for-dollar increase in support of their additional earnings. Instead, support would be raised based on a percentage of the additional income (70 perce