High income child support in South Carolina: extrapolation versus the “Three Pony Rule”

Posted Sunday, September 12th, 2010 by Gregory Forman
Filed under Child Support, Jurisprudence, Litigation Strategy, Not South Carolina Specific, Of Interest to Family Court Litigants, Of Interest to Family Law Attorneys

A belief undergirding support guidelines is that children are entitled to enjoy a lifestyle similar to their parents, but if daddy has an entourage does this mean the children deserve one too?

How to determine child support when the parents’ combined income is above the child support guidelines is an issue increasingly litigated but infrequently appealed in South Carolina.  Only one South Carolina case discusses this issue, Widman v. Widman, 348 S.C. 97, 557 S.E.2d 693 (2001). Some states–not South Carolina–note the “Three Pony Rule,” which the oft-cited case of In re Marriage of Patterson, 22 Kan. App.2d 522, 528, 920 P. 2d 450 (1996), defines as “no child, no matter how wealthy the parents, needs to be provided more than three ponies.”

There are two competing views on how child support for high-income individuals should be calculated: The view expressed by the “three pony rule” is that beyond a certain level of income no additional child support obligation should be created by additional income.  A competing view is that there should be no ceiling on a child support obligation and that additional income should always create additional obligation.  No South Carolina reported cases even acknowledges these two competing views, let alone determine whether one is a correct statement of South Carolina law.

The current (2006) South Carolina child support guidelines tables–available here–top-out at a combined income of $20,000 a month. N.B., as of July 1, 2014 new child support guidelines, available here, went into effect and now top-out at a combined monthly income of $30,000.

South Carolina family law attorneys often seek to extrapolate child support from these guidelines.  Such extrapolation proponents come from the “no ceiling” theory of child support obligations.  However, these extrapolation attempts show how few family law attorneys grasp math beyond the level of simple arithmetic.  Many attorneys who try to extrapolate the guidelines do so as though the guidelines are a simple linear function, with a set increase in income leading to a set increase in the support obligation.  For example, with six children and an income of $19,000 a month the current 2006 South Carolina guidelines support level is $2,954 a month, while for an income level of $20,000 a month it is $2,988 a month.  Using a simple linear function, child support is increasing $34 for every $1,000 in additional income.  Thus income of $21,000 a month leads to an extrapolated figure of $3,022 a month and would increase $34 for every $1,000 increase in income thereafter.

Not so fast.  As I hinted above, the child support tables are not a linear function as the amount of additional child support for each additional level of income decreases as one increases in income. An income level of $18,000 per month creates a support level of $2,917 per month.  Thus the rate of change between $18,000 and $19,000 is $37 while the rate of change between $19,000 and $20,000 is $34.  It appears the rate of change is dropping $3 every $1,000 in increased income.  Thus the increase between $20,000 and $21,000 should only be $31 (or $3,019) and the increase between $21,000 and $22,000 should only be $28 (or $3,047).  Somewhere between $31,000 and $32,000 the rate of change would equal $0 and the child support table would max out at $3,064 per month.

Again not so fast.  The rate of the rate of change is actually decreasing as income increases.  At $17,000 in monthly income, the support obligation is $2,835 per month.  There is an $82 increase between $17,000 and $18,000 so the rate of change in the rate of change, which was only $3 when comparing $18,000, $19,000 and $20,000, is $45 when comparing $17,000, $18,000 and $19,000. If we determine that the decrease in the rate of change is a linear function (as I hope my previous examples have shown is a faulty assumption), we should expect no further decrease in the rate of change past $20,000 in income and child support above $20,000 would be a linear function.

There are really two ways of “extrapolating” a curve like the child-support guidelines beyond the data actually in them: to extrapolate the slope of the  last few data points as a straight line (see the blue line below), or to extrapolate the shape of the *whole curve* as a new curve which ultimately flattens out (see red curve below).    A line would keep going up forever, implementing “more income ==> more support.” The red curve would reach a maximum, implementing the “three pony rule.”

So depending upon one’s assumptions regarding whether child support is a linear function (which is clearly isn’t) or a non-linear function, we could end up with child support topping out at $3,064 per month for six children (even if the supporting parent is Warren Buffett or Bill Gates) or a finding that six children are entitled to 3.4% of a non-custodial parent’s additional income above $20,000 per year (in which case children of some divorced hedge fund managers, professional athletes, and entertainers might be entitled to support of over $1 million a year).  If you also find these examples absurd, you understand my problem with extrapolation; if you don’t, extrapolate away.

Extrapolation cannot be justified by South Carolina code.  The guidelines were mandated by Federal law.  In 1988, the United States Congress enacted legislation which mandated the states to formally enact child support guidelines effective October 13, 1989. § 42 U.S.C. § 667(a).  The state guidelines developed pursuant to § 42 U.S.C. § 667(a) were to be made available to judges charged with determining the amount of child support awards and created a rebuttable presumption, in any judicial or administrative proceeding for the award of child support, that the amount of the award which would result from the application of such guidelines is the correct amount of child support to be awarded. § 42 U.S.C. § 667(b).

In compliance with the Federal Law, South Carolina  Code § 43-5-580(b) requires the South Carolina Department of Social Services to:

promulgate regulations which establish guidelines for minimum contributions which must be applied by the courts in determining the amount that an absent parent is expected to pay toward the support of a dependent child.  Copies of the guidelines must be made available to courts, district attorneys, and to the public.  The guidelines formulated pursuant to this section must be applied pursuant to the provisions of Section 63-17-470 [which is the code section on child support proceedings].

South Carolina’s first set of guidelines that complied with this federal statute were enacted in 1990.  Those guidelines, and all subsequent guidelines, have created tables for a maximum income level (with that level increasing with each quadrennial set of guidelines) and mandated that support above this income level be set on a case-by-case basis.  The guidelines support tables are based on data showing what families at particular income levels tend to spend on a particular number of children (up to six).  The 2006 “guidelines provide for calculated amounts of child support for a combined parental gross income of up to $20,000 per month, or $240,000 per year. Where the combined gross income is higher, courts should determine child support awards on a case-by-case basis.” S.C. Regs. §114-4710(3).  It is my understanding that the tables top out at $20,000 a month because there was limited data of what parents who made over $20,000 a month spent on their children.  It is my further understanding that the currently-under-consideration 2010 guidelines [S.C. Code § 63-17-470(D) requires DSS to review the guidelines at least once every four years] top-out at $30,000 a month and will obviously have a different support table than used for my examples in this blog.

Patterson mentions two states, Kansas and Illinois, whose guidelines contain a formula or percentage for child support above the guidelines income thresholds.   The South Carolina guidelines contain no such formula or percentage.   Because South Carolina’s guidelines do not have formulas or percentages for child support above the guideline table thresholds, and because South Carolina’s guidelines indicate such child support is to be set on a case-by-case basis, I do not believe extrapolation comports with South Carolina law.

Patterson further cites a law review article, Kansas Child Support Guidelines: An Elusive Search for Fairness in Support Orders, 27 Washburn L.J. 104 (1987), that captures the tensions between these two competing child support philosophies:

A final question that caused considerable debate was whether there should be a cap on the schedule. The subcommittee felt that judges should follow the general principle that children have a right to share in both parents’ standard of living regardless of income. Does this mean, however, that if the parent earns income of a million dollars, the child is entitled to that much as ‘child support’? The problem with requiring child support in amounts far in excess of the usual expenditures on children is that it effectively transfers most of the discretionary spending on children to the custodial parent. Some states limit application of the schedule to certain income levels, while other states do not.

Id. at 124.

The top item in a September 12, 2010 google search of “three pony rule” picks up a discussion of the New Jersey opinion in the child support appeal of former New York Giants defensive end Michael Strahan, Strahan v. Strahan, 402 N.J. Super. 298, 953 A.2d 1219, 1224 (2008) which contains the following interesting language on whether a child support ceiling should exist (citations omitted):

Even with high income parents, the court still must determine needs of a child in a sensible manner consistent with the best interests of the child.  The law is not offended if there is some incidental benefit to the custodial parent from increased child support payments.  While some incidental benefit is not offensive, overreaching in the name of benefiting a child is.  A custodial parent cannot, through the guise of the incidental benefits of child support, gain a benefit beyond that which is merely incidental to a benefit being conferred on the child. That is especially true where the custodial parent is not entitled to alimony. The award of nonessential additions to child support requires a careful weighing and determination as to who is the primary and who is the incidental beneficiary of such support.

While child support prior to the 1990 guidelines was always set on a case-by-case basis since the 1990 guidelines Widman is the only reported case discussing child support above the guidelines tables.  The family court in Widman set child support at $3,500 a month while noting that extrapolation would lead to an award of $4,400 a month and the support award was affirmed on appeal.  There was no explanation as to whether the family court used a linear or non-linear approach to extrapolate child support and how the court determined $3,500 per month was an appropriate award for Wife to support their three daughters when they had a $6,720,000.00 marital estate and Husband’s annual income was approximately $450,000.00 while Wife’s annual income was around $40,000.00.

So what does this all mean?  It’s surprising that there is only one reported South Carolina case from the past two decades involving child support for income above the guidelines.  One would think that high-income parents would have both greater income and greater motivation to appeal child support awards they found improper.  Perhaps high-income parents have enough sense not to spend their income on child support trials and appeals.

Meanwhile, I don’t believe extrapolation is setting child support on a “case-by-case” basis and therefore don’t believe it is authorized.  Even if it was, as I noted above, a non-linear extrapolation might lead to an inappropriately low child support ceiling.  On the other hand, if extrapolation is linear, does the “three pony rule” apply? Who knows?

What I do know is that high-income child support is supposed to be set on a “case-by-case” basis:  in a high-income child support case, I suggest making the “case” of what a child or children’s “needs” are.