Fox Family Lawyers
Cynthia Moseley Fox
Attorney at Law
7751 Carondelet Avenue,
Suite 700
Clayton, Missouri 63105
(St. Louis)
314.727.4880

The State “Chart” Says Child Rearing Costs Have Decreased For The Wealthy. Should Their Child Support Payments Decline As Well?

Last week, I covered the new child support chart issued by Missouri (the “Chart”) that will become effective July 1st and how it indicates that the cost of raising has a child has declined for higher income families by as much as 26% since the prior Chart was issued in 2002. The Chart is used by the Family Court to set the child support payment that one divorced parent pays the other.

 

I recounted my conversations about the Chart with St. Louis City Family Court Judge Thomas Frawley, who chaired the committee that oversaw its creation, and Dr. Jane Venohr, an economist with Policies Studies, Inc in Denver, the firm that provided the actual calculations. As explained last week, the latest Chart and the two priors ones from 2002 and 1998 have all been based upon consumer expenditure data that compared the actual spending of families with children to those without. The 2005 Chart used expenditures from 1996-99, while the 2002 and 1998 Charts used 1980-86 expenditures, with all data adjusted for the price inflation and tax changes that occurred between the measurement period and the year each Chart was issued.

 

This week’s column digs into the economic factors led to latest Chart’s puzzling outcomes and discusses whether the significant declines in child rearing expense it projects (often 20% or more for divorced parents with combined incomes of at least $15,000/month) could be the basis for reducing child support payments that were set using the 2002 or 1998 Charts.

 

The anomalies of the 2005 Chart trace to several factors. First, the underlying expenditure data supporting the 2002 Chart came from an economic period (1980-86) fundamentally different than 1996-99, which is the basis for the 2005 Chart. In the first half of the 1980s, we had double-digit inflation and extraordinarily high mortgage rates. These have greatly moderated since then. As a result, the proportion of incomes being spent by homeowners for housing was significantly lower in the late 1990s than in the early 1980s. With housing costs taking as much as 40% of a family’s budget, according to Dr. Venohr, upper income families benefited much more from the decline in home ownership costs than did lower income families that predominately rent.

 

The earnings of the wealthy also increased at a much stronger rate from the early ‘80s to the late ‘90s than did those of moderate income families. In turn, the wealthy were able to set aside a larger portion of their incomes for investment and retirement in the late ‘90s versus the early ‘80s.

 

The mathematical consequence of these favorable trends is that the more well-to-do spent a lower percentage of their incomes on child rearing during the 1996-99 measurement period than they did in 1980-86. And, when Judge Frawley’s committee moved to the 1996-99 expenditure data for the 2005 Chart, it further amplified into a single “snapshot” the cumulative effect of the year-to-year shifts that were occurring from the first measurement period to the second.

 

The other factor, at least as I see it, that makes the Chart to Chart variations seem so at odds with reality is the extended time lag between the underlying measurement period and when the Chart is issued. By the time the 1998 and 2002 Charts were published they were based on expenditure ratios that were already 12 to 16 years out of date. Said another way, the favorable child rearing cost trends for the wealthy just now surfacing in the 2005 Chart were well underway two Charts ago in 1998.

 

As a domestic relations lawyer, I am often in court seeking an adjustment to the child support being paid by one parent to another. Sometimes, I ask for an increase because the family has experienced higher costs, such as for college, as well as an increase in their wages since the prior support amount was ordered. (Remember, child support is based upon a family’s income and a significant and continuing increase in earnings can be the basis for increasing the support payment.) At other times, I want a reduction because costs or incomes have gone down. In general, though, the court has typically not adjusted the support payment until there is a 20% change in what the Chart indicates the on-going child rearing costs to be.

 

This brings up the question of whether the 2005 Chart can be the basis for reducing support obligations set using the 2002 Chart. For example, in this period of downsizing, it is not unusual for a well-paid executive that has been let go to take a step back in salary in order to get reemployed. As a result, the gross income for that executive’s family might be virtually same in 2005 as it was in 2002, and the new Chart might indicate that his family’s child-rearing costs have declined by at least the required 20%. Would such an individual be entitled to a downward adjustment in what he/she has been paying?

 

I asked Judge Frawley. The good judge demurred slightly but did allow that he was “not sure that a meaningful change in Chart outcomes by itself represents the ‘substantial and continuing change’ in circumstances” that the court requires.

 

With all due respect to His Honor, I am not sure that he’s correct. After all, the changes in Missouri’s Chart seem to be based on well-documented changes in the economic circumstances of higher earning families. The degree of change seems very substantial for families earning $15,000 to $20,000 month and these changes seem to be continuing, since they have already been underway since the mid-1980s. All in all, this is an issue that I think a lot of lawyers will be eager to litigate, myself included.