BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Noreen Evans, Chair 2011-2012 Regular Session AB 2393 (Davis) As Amended March 29, 2012 Hearing Date: June 12, 2012 Fiscal: Yes Urgency: No NR SUBJECT Family Law: Child Support Formula DESCRIPTION Existing law establishes statewide uniform guidelines for calculating court-ordered child support. These guidelines provide that if an obligor's net disposable monthly income is less than $1,000, there is a rebuttable presumption that the obligor is entitled to a low-income adjustment that reduces the child support amount. This bill would increase the net disposable income threshold to $1,500 per month. This bill would require the Judicial Council, on March 1, 2013, and annually thereafter, to determine the adjustment amount based on the change in the annual California Consumer Price Index, as specified. BACKGROUND Existing law provides that parents of a minor child are responsible for supporting the child. The statewide uniform guidelines for calculating child support provide that if an obligor's net disposable monthly income is less than $1,000, there is a rebuttable presumption that the obligor is entitled to an adjustment that would reduce the child support to be paid thereby increasing the obligor's ability to remain compliant with the order. Federal and state laws require the Judicial Council to review the statewide uniform guidelines at least every four years and issue a report (hereinafter "Report") with its recommendations (more) AB 2393 (Davis) Page 2 of ? to the Legislature. (Judicial Council, Review of Statewide Uniform Child Support Guideline, Nov. 2010, < http://www.courts.ca.gov/documents /20110429iteme.pdf> Ưas of June 6, 2012].) The primary purpose of the Report is to ensure that the guideline and resulting child support amounts are appropriate. The findings of the 2010 Report indicate that the low-income adjustment (LIA) may be a barrier to compliance with child support orders. The Report indicates that the cost of living has increased nearly 50 percent since 1994, the year the low income adjustment was established, yet the adjustment threshold has not changed. In April of 2011, the Department of Child Support Services and the Administrative Office of the Courts convened a workgroup to discuss and evaluate the Report, and confirmed that the low-income adjustment under the California guideline is inadequate. This bill would adopt recommendations from the Judicial Council's Report and increase the low income adjustment from $1,000 net disposable income per month to $1,500 and make the adjustment subject to an annual adjustment based on inflation. CHANGES TO EXISTING LAW Existing law establishes a uniform statewide guideline for calculating child support. This mathematical formula is based on the income of both parents and the amount of time they each spend with the child. (Fam. Code Sec. 4055.) Existing law creates a rebuttable presumption that an obligor with net disposable income of less than $1,000 a month is entitled to a low-income adjustment to his or her child support obligation. This presumption may be rebutted by evidence showing that application of the adjustment would be unjust or inappropriate in the particular case. (Fam. Code Sec. 4055(b)(7).) Existing law requires the Judicial Council to periodically review the guideline to report to the Legislature appropriate revisions, as specified. (Fam. Code Sec. 4054.) This bill would increase the low-income adjustment in the child support guideline from less than $1,000 net disposable income per month to less than $1,500 net disposable income per month. This bill would require the Judicial Council, on March 1, 2013 and annually thereafter, to update the low-income adjustment AB 2393 (Davis) Page 3 of ? based on the California Consumer Price Index, as specified. COMMENT 1.Stated need for the bill In support of this bill the author writes: The current formula used by the California Department of Child Support Services that determines child support orders is outdated. In an effort to improve compliance for low-income parents that are obligated to pay child support, a work group including the DCSS and the Judicial Council of California's Administrative Office of the Courts, concluded that a revision to the low-income adjustment threshold of $1,000 needed to be increased to $1,500. The sponsor of this bill, the Western Center on Law & Poverty writes: According the California Department of Child Support Services, consistent payment of support by low-income obligors is better met if the order is "right-sized." A right-sized order would enable obligors to successfully meet their obligations and provide more consistent child support payments, improving the income stream for families, promoting family self-sufficiency and improving overall wellbeing of children living in single-parent households. 2.The Legislature is responsible for revising the uniform child support guideline Existing law authorizes the Legislature to adjust the uniform child support guideline. The Judicial Council is required to periodically review the guideline and report to the Legislature appropriate revisions. This bill, in addition to raising the low-income adjustment threshold (LIA) from $1,000 to $1,500, would have the Judicial Council annually determine the appropriate adjustment to the LIA based on the annual California Consumer Price Index (CPI). Thus, this bill represents a departure from the typical procedure in which only the Legislature is authorized to revise the state support guidelines. Regarding the annual LIA adjustment, the Judicial Council writes: The current $1,000 amount dates to 1993. If updated for inflation, it would be $1,576 today, so an increase to $1,500 AB 2393 (Davis) Page 4 of ? is an appropriate way to bring the level up to current dollars. In addition, the requirement that the adjustment be revised each year based on the California CPI will prevent it from becoming out of date in the future. Making the adjustment more accurately reflect the cost of living in California will ensure that low-income child support obligors have orders that will not leave them unable to sustain their basic needs and will therefore be more likely to continue working and complying with the court's orders. Although it would allow increases without the full consideration of the Legislature, an annual adjustment based on the cost of living and inflation could keep the LIA current and arguably result in more reasonable support obligations for low-income obligors. Research indicates that reasonable obligations promote consistent support payments to custodial parents. (See Comment 3.) In addition, authorizing the Judicial Council to make this determination maybe appropriate considering that it is the entity entrusted with reporting on support guidelines, and therefore familiar with the subject area. However, because the Legislature is responsible for adjusting the support guidelines, the committee should consider whether it is appropriate to delegate this authority or allow automatic adjustments. Inevitably, an upward adjustment of the LIA will result in lower support obligations for many families. That lower support obligations will result in more consistent payments has yet to be proven on a state-wide basis. Therefore, until the benefits of an annual LIA adjustment are shown, the Legislature may wish to maintain control over support guideline revisions. Amending this bill to include a five-year sunset would allow the Legislature to consider the Judicial Council's next Review of Statewide Uniform Child Support Guideline in 2015 and an additional three years of state-wide data in in evaluating the effectiveness of the provisions of the bill. Suggested amendment: Add a five-year sunset date to the proposed increase to the LIA and the annual adjustment to the LIA based on the CPI. 3.Updating the low-income adjustment The Judicial Council reports that the California guideline amounts for low-income obligors are high compared to other states, and that California's income presumption policy (which AB 2393 (Davis) Page 5 of ? presumes that all obligors who do not provide employment information are employed for 40 hours per week at minimum wage), exacerbates the guideline problems for low-income parents because the obligor's income is often presumed to be more than it actually is. Relative to other states, the Judicial Council and advocates for low-income families agree that California's low-income adjustment is inadequate. (Judicial Council, Review of Statewide Uniform Child Support Guideline, Nov. 2010, < http://www.courts.ca.gov /documents/20110429iteme.pdf> Ưas of June 6, 2012].) Most state guidelines consider a variety of factors in their income attribution provision. For example, the Alabama Rules of Judicial Administration provide: If the court finds that either parent is voluntarily unemployed or underemployed, it shall estimate the income that parent would otherwise have and shall impute to that parent that income; the court shall calculate child support based on that parent's imputed income. In determining the amount of income to be imputed to a parent who is unemployed or underemployed, the court should determine the employment potential and probable earning level of that parent, based on that parent's recent work history, education, and occupational qualifications, and on the prevailing job opportunities and earning levels in the community. The court may take into account the presence of a young or physically or mentally disabled child necessitating the parent's need to stay in the home and therefore the inability to work. (Ala. Rules Jud. Admin., Rule 32(B)(5).) According to the Report the "California guideline does not specifically mention any of these considerations, a pattern replicated in few other states." (Judicial Council Report at p. 77.) Failing to consider a variety of factors may result in support orders which are unrealistic for obligors. For example, in California, an obligor earning minimum wage for 35 hours per week would not qualify for the current low-income adjustment. After payment of child support at the unadjusted income amount, the obligor would likely be left with insufficient funds on which to live. Research further indicates that if support obligations are too high for low-income obligors, severe consequences may result. Obligors unable to meet support responsibilities may have a reduced incentive to work, or cease working in the mainstream economy. They may also be unable to make child support payments and have higher arrearages balances. These consequences may also lead to strained parent-child relationships. AB 2393 (Davis) Page 6 of ? Raising the low-income adjustment in the statewide guideline will arguably enable low-income obligors to make more consistent child support payments, thereby allowing custodial parents to better care for children. The Judicial Council, in support, writes that AB 2393 "will lead to more appropriate and enforceable child support orders." Support : Coalition of California Welfare Rights Organizations, Inc.; The Executive Committee of the Family Law Section of the State Bar (FLEXCOM); Feeding America San Diego; Judicial Council of California Opposition : None Known HISTORY Source : Western Center on Law & Poverty Related Pending Legislation : None Known Prior Legislation : SB 541 (Hart, Chapter 1156 Statutes of 1993) adjusted the statewide uniform guideline in high-income cases. AB 923 (Speier, Chapter 906 Statutes of 1994) gave courts discretion to lower the amount of child support to be paid in all cases where the net disposable income per month of the obligor is less than $1000 and the court finds that a low income adjustment should be made. Prior Vote : Assembly Floor (Ayes 73, Noes 0) Assembly Appropriations Committee (Ayes 17, Noes 0) Assembly Judiciary Committee (Ayes 10, Noes 0) **************