Vol. 76, No. 11, November 2003

New Child Support Guidelines Effective Jan. 1, 2004

by Dan Rossmiller

The long-awaited administrative rule modifying the Department of Workforce Development's (DWD's) child support guidelines, Wis. Admin. Code chapter DWD 40, has been allowed to advance by the legislative committees reviewing the rule. Twice delayed by legislative requests for modifications, the rule now goes forward with no further delays or modifications. The revised guidelines are effective for child support orders established after Jan. 1, 2004.

The rule, known in legislative parlance as Clearinghouse Rule 03-022 (CR 03-022), includes three major components: revisions to the shared placement or "shared-time" formula; new provisions for high-income payers; and new provisions for low-income payers. In addition, the new rule clarifies the definitions of several important terms and makes other changes. The State Bar's Family Law Section supported these changes and pressed for legislative approval of CR 03-022.

The Impetus for Change

Since taking effect in 1987, the child support guidelines have been standards that are to be followed unless the court decides (or the parties agree) otherwise. While the existing guidelines have worked fairly well in many cases, the guidelines have produced problematic results in cases, such as:

• Low income cases, in which many payers have insufficient income to pay current ordered amounts and struggle to meet their obligations. This often results in conflict between the parents that diminishes the payer's financial and emotional involvement with his or her children.
• High income cases, in which the lack of a "cap" or other limitation on income available for child support has created controversy. Some critics have argued that the lack of a cap or other limit means that applying the child support guidelines to high-income payers results in a disguised form of maintenance. This may lead to litigation because high-income payers are likely to have a greater ability to afford the costs of contesting these issues.
• Shared-time payer cases. Currently, child support is reduced if the payer's placement time exceeds 30 percent, and a further reduction is made - taking into account the payee's income - if the placement exceeds 40 percent.

Because these reductions occur at two discrete percentage levels, there are fairly abrupt consequences ("cliff effects") for falling slightly above or slightly below the percentage level. These reductions encourage disputes over placement, which actually are child support battles in disguise. Many litigants feel it is unfair that the current guidelines fail to explicitly count the primary placement parent's income in shared time cases in which the parent with the lesser placement time has placement of less than 40 percent.

Development of Clearinghouse Rule 03-022

Work on CR 03-022 began in March 2001 when the DWD formed an advisory panel to review the percentage of income standard for child support orders in Wisconsin. That panel, the Child Support Guidelines Review Advisory Committee (Advisory Committee), included representatives from the judiciary, public interest groups, the DWD, and the State Bar Family Law Section. The well-rounded panel included advocates for fathers', grandparents', and children's rights; for domestic violence victims; and for clients with low, middle, and high incomes.

To meet federal requirements, states must review their child support guidelines every four years. The Advisory Committee was charged generally with providing input and recommendations to the DWD for consideration as part of the required guidelines review and specifically with making recommendations for modifications to the child support guidelines and Wisconsin statutes. The Advisory Committee was asked to take into consideration the best interests of Wisconsin citizens, and, in particular, the best interests of children affected by divorce or the absence of a parent. The panel was directed to complete its work by spring 2002.

Between April 26, 2001, and Feb. 14, 2002, the Advisory Committee met 11 times for a total of nearly 100 hours to discuss and study child support issues in Wisconsin. Committee members spent innumerable personal hours reading the many reports and analyses submitted by the DWD and other experts. The Advisory Committee issued its final report on Feb. 22, 2002.

Shared Placement Formula

The CR 03-022 revisions approved by the legislature essentially adopted the Advisory Committee's recommendations with respect to shared-placement cases. Consistent with the Advisory Committee's recommendations

CR 03-022:

• Applies the shared time formula when both parents have court-ordered placement periods of 25 percent or more, and each parent is ordered to assume the child(ren)'s costs, in proportion to the time that the parent has placement of the child(ren). Variable costs will be ordered in addition to the basic support amount under the formula.
• Determines the placement periods for each parent by calculating the number of overnights or equivalent care exercised by the parents in a year, and dividing that number by 365 days. The combined placement periods for both parents should equal 100 percent.
• Applies a cross-credit calculation in shared time cases that sets support based on the costs of shared parenting when both parents exercise placement periods of 25 percent or more, as follows:
• Calculate the basic child support amount for each parent using the percentage of income standards.
• Multiply the basic support amounts by 150 percent to account for child-rearing expenditures made by both parents (for example, for the child's bedroom).
• Allocate shared placement amounts by multiplying each parent's obligation by the proportion of the child's time spent with the other parent.
• Offset resulting amounts against each other. The parent with a greater amount of support pays the difference, not to exceed the amount that would be paid under the straight percentage standard.

The result represents the base support amount under the shared-time formula.

• In addition to establishing the base support amount under the formula, the court is to appropriately assess the child's variable costs. "Variable costs" are the reasonable costs incurred by or on behalf of the child(ren), including but not limited to the costs of day care, a child's special needs, tuition, and extracurricular activities.

High-income Payer Provisions

The CR 03-022 revisions approved by the legislature create a three-tiered approach for "high-income" payers. In the first tier the current percentage standard is applied to annual gross income below $84,000. In the second tier the percentages are reduced for annual gross income above $84,000 and are reduced again for annual gross income above $150,000 in the third tier.

Under CR 03-022 the basic support obligation will be calculated as follows:

• First tier: Apply the current standard percentages in chapter DWD 40 to a payer's income up to a threshold "high-income" level of annual gross income, defined as $84,000 a year (or $7,000 per month). The current percentages are:

1 child = 17 percent

2 children = 25 percent

3 children = 29 percent

4 children = 31 percent

5 or more children = 34 percent

• Second tier: Apply the following reduced percentages, which represent roughly 80 percent of the current standard, to the amount of annual gross income between $84,000 and $150,000:

1 child = 14% (rather than 17%)

2 children = 20% (rather than 25%)

3 children = 23% (rather than 29%)

4 children = 25% (rather than 31%)

5 or more children = 27% (rather than 34%)

• Third tier: Apply the following percentages, which represent roughly 60 percent of the current standard, to the amount of annual gross income that exceeds $150,000:

1 child = 10%

2 children = 15%

3 children = 17%

4 children = 19%

5 or more children = 20%

The Advisory Committee had recommended this sort of three-tiered approach, but had recommended that the reduction to roughly 80 percent and 60 percent of the full percentage standards apply at the threshold levels of $150,000 and $200,000, respectively.

Debate centered around what income level would trigger the "high-income" reductions as the proposed rule underwent review. Following the initial public hearing and comment period, the thresholds were reduced to $102,000 and $150,000, respectively, in the version of the rule first submitted to the legislature. The thresholds were reduced again in response to requests from the legislative committee reviewing the rule. As noted above, the version of CR 03-022 approved by the legislature sets the final threshold levels at $84,000 and $150,000, respectively. It is worth noting that the high-income payer provisions do not contain a child support cap on income. (Wisconsin does not adhere to the theory that child support necessarily "maxes out" at some number.)

Consistent with the Advisory Committee's recommendation CR 03-022 provides that the court has the power to create a trust for the child(ren) if the amount of support exceeds the amount necessary to maintain the child's standard of living.

Low-income Payer Changes

What emerged in the final version of CR 03-022, as approved by the legislature, is a three-tiered approach for "low-income" payers as well. CR 03-022 provides a schedule with reduced percentage rates to determine the child support obligation for a payer with an income below approximately 125 percent of the federal poverty level (FPL) guidelines, if the court determines that the payer's total economic circumstances limit his or her ability to pay support at the level determined using the full percentage rates.

• First tier: If a payer's monthly income is below approximately 75 percent of the federal poverty guidelines, the court may set an order at an amount appropriate for the payer's total economic circumstances. This amount may be lower than the lowest support amount in the schedule.
• Second tier: For income between approximately 75 percent and 125 percent of the federal poverty guidelines, the percentage rates in the schedule gradually increase as income increases.
• Third tier: The full percentage rates apply to payers with income greater than or equal to approximately 125 percent of the federal poverty guidelines.

As modified, CR 03-022 provides that when income is imputed based on earning capacity, the court shall consider a parent's history of child care responsibilities as the parent with primary placement, along with the other factors of the parent's education, training and recent work experience, earnings during previous periods, current physical and mental health, and the availability of work in or near the parent's community.

Application of the low-income formula is permissive and courts are permitted to deviate from the presumptive support amount in consideration of the factors in the statute.

Background on the Public Hearings

CR 03-022 incorporated those Advisory Committee recommendations that could be implemented by rule. Three hearings (in Madison, Milwaukee, and Stevens Point) were held on the proposed rules in late March 2003. Family Law Section representatives testified at all three hearings. The DWD made several modifications to the proposed rules as a result of testimony received at those hearings and submitted CR 03-022 to the legislature for review under procedures outlined in Wis. Stat. chapter 227.

Legislative Review of the Rule

During the legislative review process, which began in late June 2003, the Senate Committee on Health, Children, Families, Aging, and Long-term Care requested that the DWD modify CR 03-022 to provide for a realistic payment amount for low-income payers and review the high-income section of the proposed rule to determine if the level of support required is justified.

The DWD agreed to modify the low-income provision and resubmitted the rule. Those modifications resulted in a final rule that provides a schedule with reduced percentage rates to be used to determine the child support obligation for payers with an income between 75 percent and 125 percent of the FPL, if the court determines that the payer's total economic circumstances limit his or her ability to pay support at the level determined using the full percentage rates.

Shortly after the modified proposed rule was resubmitted to the legislative committees for their review, the Assembly Committee on Children and Families requested that the DWD consider, among other things, lowering the threshold at which a payer may be subject to the high-income payer formula. The DWD lowered the initial threshold from $102,000 to $84,000, modified provisions affecting income imputed based on earning capacity, and resubmitted the rule.

Because the legislative committee review period, which ended on Oct. 7, 2003, lapsed without further modifications being requested, DWD will be able to promulgate the revised guidelines without delay.

"These rules affect hundreds of thousands of families in Wisconsin and the department appreciates the contributions of the many affected parties and policy makers to the rule making process," says Connie Chesnik, a DWD legal counsel who helped oversee the development of the rules.

Practice notes. 1) The new rules will apply to orders (both initial orders and pending motions to modify) established after Jan. 1, 2004. 2) The new rules explicitly provide that modification of any provision of chapter DWD 40 shall not be considered a substantial change in circumstances sufficient to justify a revision of a judgment or order under Wis. Stat. section 767.32.

Special Note on Shared Placement Changes

While the high-income and low-income payer provisions generated a great deal of controversy throughout the public hearing and legislative review process, the proposed shared-placement provisions were essentially unaltered from the Advisory Committee's recommendation.

The shared-placement provisions are a centerpiece of the revised guidelines and worthy of special mention. These provisions are based on the premise that when both parents have significant periods of placement, the formula should take into account the duplicated costs of childrearing in both households and both parents' incomes as a more realistic and equitable basis to set child support. The new provisions, approved in CR 03-022, not only lower the threshold for the application of the shared time formula but provide for an offset of each parent's obligation at that new threshold.

Under the revised rules, the court may apply the proposed formula when both parents have a court-ordered period of placement of at least 25 percent of overnights or an equivalent period, and each parent is ordered to assume the child's basic support costs in proportion to the time that the parent has placement of the child. "Basic support costs" are defined under the revised rule as food, shelter, clothing, transportation, personal care, and incidental recreational costs.

Family Law Section Chair John Short welcomes the new, revised shared time rule. "It provides both objective and subjective fairness: objective fairness because the results of applying the formula to specific family situations make sense; subjective fairness because the parties will be more receptive of a rule that looks directly at the incomes of both parents."

Margaret Wrenn Hickey, immediate past chair of the State Bar Family Law Section and a member of the Advisory Committee, noted, "While the new rule reflects a compromise in some areas, it also genuinely reflects the hard work and real life experience of the members of the Advisory Committee, who represented a broad spectrum of groups and individuals who work with families in the legal system. As such, I hope that the rule will not only successfully address the needs of families in divorce or paternity actions, but also be less subject to constant revision in the future. That would provide needed consistency and predictability in family court."

Wisconsin Lawyer