1 Presentation to Georgia Child Support Commission November 30, 2005 Jane C. Venohr, Ph.D. Policy Studies Inc Wynkoop St, Suite 300 Denver, CO

2 Presentation Outline  Purpose: Unveil draft of economic tables  Outline: " Background " Draft Tables " Comparisons of Draft Tables to: current guidelines amounts current order amounts bordering states " Summary & Conclusions

3 Background: HB221  HB221 specifies how FICA is to be considered.  HB221 implies child care, health insurance expenses, uninsured medical expenses, parenting time, and other adjustments made in worksheet, not schedule. All draft tables comply with HB221  HB221 charged the Commission with creating child support obligation table.  HB221 implies table should provide same “economic standard of living enjoyed by children living in intact families consisting of parents with similar financial means.”

4 Background: Commission Sept. 9: Commission heard Dr. Venohr’s presentation that there is a range of credible estimates of child-rearing costs that could be used as economic basis of the schedule Oct. 6: Commission adopted the Economic Study and Obligation Table Subcommittee’s recommendations including a recommendation to draft a table based on the average of the lowest & highest estimates of child-rearing expenditures

5 Background: Estimates of Child-Rearing Costs  Georgia’s current percentages are adapted from Wisconsin, which came from van der Gaag (1981)  DHHS-commissioned report (Lewin/ICF) recommended any amount between these 2 estimators as appropriate for state guidelines " Rothbarth (lower bound) " Engel (upper bound)  Dr. Betson estimated child-rearing costs in 1990 and 2001 " using Rothbarth & Engel estimators " 2001 study used national data from

6 Background: Gap between Betson’s Rothbarth & Engel Estimates ( data) Comparisons are based on net income & include child care, Insurance premiums, and uninsured medical expenses. However, these items are adjusted for in the tables.

7 Background: Other Steps in Developing the Georgia Tables 1.Adjust to current price levels: September 2005 price levels 2.Extend to 4, 5 & 6 children: Formula developed by National Research Council 3.Extrapolate to $30,000/mo Gross: Estimates of child-rearing expenditures available to about $14,000/mo net (about $22,000/mo gross). 4.Apply tax assumptions a.Married couple with dependents being # of children for whom support is determined b.Single individual (norm of Income Shares states)

8 Example: Income Shares Schedule Is Backed into Gross Income Effect of tax assumption is married with children results in higher order amounts because there is more disposable income

9 Draft of Economic Tables

10 Alternative Tables EstimatesTax Filing StatusPrice Levels & Other Assumptions 1.RothbarthSingle2005 price levels & other assumptions are the same 2.RothbarthMarried w/ children 3.Average of Rothbarth & EngelSingle 4.Average of Rothbarth & EngelMarried w/ children 5.EngelSingle 6.EngelMarried w/ children Oct 6 Recommendation Is to draft table based on the average

11 Proposed Table 3: Average with Single Tax Filing Status

12 Example of Income Shares Calculation

13 Comparison of Economic Tables

14 Comparisons: 1 Child: CP Income = $0

15 Comparisons: 1 Child: CP Income = $0

16 Comparisons: 2 Children: CP Income = $0

17 Comparisons: 3 Children: CP Income = $0

18 Observations of Comparisons of Draft Tables 1-6  Small differences in tables  A decreasing percentage of income is assigned to child support because: " Disposable income is a smaller proportion of gross income for higher income families due to progressive tax rates " Higher income families do not spend all of their disposable income " Higher income families devote a smaller proportion of their disposable income to child-rearing expenditures  Schedule starts at $800 gross per month because an insufficient sample of families with lower income " Could extrapolate downward " 2005 poverty level is $798 net per month

19 Comparison to Existing Percentage Guidelines

20 Number of Children in Actual Georgia Orders

21 Income Scenarios from Actual Georgia Case File Data % of Cases One Child Two Children Three ChildrenAll Cases Custodial Parent has no income 16.8%7.4%5.0%29.2% Custodial Parent has significantly less income than Noncustodial Parent 13.7%7.4%0.6%21.7% Custodial Parent income is about half of Noncustodial Parent income 12.4%7.5%2.5%22.4% Custodial Parent and Noncustodial Parent have almost equal incomes 9.3%5.0%2.5%16.8% Custodial Parent has significantly more income than Noncustodial Parent 6.8%2.5%0.6%9.9% All Cases 59.0%29.8%11.2%100% Accounts for 74.5% of orders

22 Income Information from Actual Case Files  274 orders reviewed in 11 counties  NCP income missing in 5% of reviewed orders  About 200 orders have income information for both parties & number of children  In cases with missing information, most missed CP income " Missing may mean CP income = $0

23 NCP Income Information from Actual Case Files

24 Comparisons: 1 Child: CP Income = 50% NCP Income

25 Comparisons: 1 Child: CP Income = NCP Income

26 Comparisons: 1 Child: CP Income = 150% of NCP Income

27 Projection of Cases Eligible for Modification Less than 15% difference Eligible for Downward Modification Eligible for Upward Modification Rothbarth w/ Single Tax Status [Table 1] 82%16% 2% Average w/ Single Tax Status [Table 3] 76%11%13%  Based on Actual Incomes in Georgia Cases  Assumes no deviations, percentage guidelines applied  No additional adjustments

28 Comparison to Actual Order Amounts

29 Application of Current Guidelines (e.g., 17-23% one child)  41% of orders reviewed had a deviation noted " 90% of the deviations were downward " 59% of the deviations were due to support obligations to other children " 9% of the deviations were due to CP income " 9% of the deviations were due to accident/sickness insurance for dependents " The following reasons accounted for 5% or less of the deviations each: Age of the child; uninsured medical expenses; day care costs; shared custody; suppression of income; mortgage payments; NCP extraordinary needs; debt; in- kind contributions; cost of living; historical spending; extraordinary travel expenses  Implication: More orders will be eligible for upper modifications

30 Comparisons to Other States

31 Estimates Underlying State Guidelines Schedules van der Gaag Espenshade/ Engel Betson 1 /Rothbarth Betson 2 /RothbarthUSDA Year of Study Annual Number of States Basing Guideline on Study 5*8*148** MN- adjusted effective 2007 Years of survey data Various years *Estimated and mostly states that have never updated their schedules **AZ, CT, MO, NC, OR, TN, VT, WY

32 Economic Basis of Bordering States AlabamaFlorida North Carolina South CarolinaTennessee Price Levels Estimation Methodology Engel by Dr. Espenshade, but realigned Engel by Dr. Espenshade Rothbarth by Dr. Betson Rothbarth by Dr. Betson, but realigned Rothbarth by Dr. Betson Self Support Reserve in Schedule Yes No Data Collection Years

33 State Comparisons: 1 Child: CP Income = $0

34 State Comparisons: 2 Children

35 Summary & Conclusions

36 Summary and Conclusions  Workgroup recommended draft tables of Rothbarth, Engel & Average " Theoretically sound " Higher than other Income Shares states " Impact on Georgia is difficult to assess because: Almost half of current orders are deviations, not guidelines-determined amounts Insufficient information on additional dependents, child care, health insurance premiums, timesharing arrangements to assess total differences  New guidelines will not be “ONE-size fits all”  New guidelines will be: " More predictable " More uniform " More valid

37 References: Child Rearing Costs (1 of 2)  Jacques van der Gaag, On Measuring the Cost of Children, DP663-81, University of Wisconsin Institute for Research on Poverty, Madison, Wisconsin (1981).  Thomas J. Espenshade, Investing in Children: New Estimates of Parental Expenditures, Urban Institute Press: Washington, D.C. (1984).  David M. Betson, Alternative Estimates of the Cost of Children from the Consumer Expenditure Survey, Report to U.S. Department of Health and Human Services (Office of the Assistant Secretary for Planning and Evaluation), University of Wisconsin Institute for Research on Poverty (September 1990).  Lewin/ICF, Estimates of Expenditures on Children and Child Support Guidelines, Report to U.S. Department of Health and Human Services (Office of the Assistant Secretary for Planning and Evaluation), Lewin/ICF (October 1990).

38 References: Child Rearing Costs (2 of 2) David M. Betson, “Chapter 5: Parental Expenditures on Children,” in Judicial Council of California, Review of Statewide Uniform Child Support Guidelines, San Francisco, California, (2001). Available at: Mark Lino, Expenditures on Children by Families: 2004 Annual Report, U.S. Department of Agriculture, Center for Nutrition and Policy Promotion. Miscellaneous Publication No (2005). Available at: Constance F. Citro and Robert T. Michael, Editors. Measuring Poverty: A New Approach, National Academy Press, Washington, D.C. (1995).