Rescue funds running out

Michigan’s unfortunate economic situation has translated to billions of federal recovery funds for the state through the Medicaid program.

One of the key components of the American Recovery and Reinvestment Act (ARRA) is the increased federal participation in the Medicaid program.

This was certainly a win-win for the state and the 1.8 million Michiganians who need the health care benefits provided by the Medicaid program.

The state was both mandated to retain eligibility during the period covered by the recovery funds, October 1, 2008 – December 31, 2010, and able to retain most services.  (We continue to advocate strongly for restoration of those services that have been eliminated.)

The League recently published a brief, Billions in Federal Recovery Funds Rescue Medicaid Through Increased Federal Medicaid Participation Rates, detailing the benefits to Michigan of the ARRA provision that increased the state’s Federal Medical Assistance Percentage (FMAP), and highlighting the fact that Michigan received over $2.2 billion of federal recovery funds to help sustain the Medicaid program.

As with many good things, this will come to an end on December 31, 2010, and the state will have a very large hole – $800 million – to fill to maintain critical health care services for low-income children, the elderly and the disabled.

While some complain about the increases in the Medicaid caseload over the last several years, a quick look at job losses in this state (an estimated 278,000 in 2009 alone) certainly helps to explain the caseload increases as thousands of people have lost their jobs and their corresponding health care coverage.

Many of us breathe a sigh of relief that the Medicaid program is there to provide comprehensive health care coverage to low-income (up to 200 percent of the federal poverty level, $36,624 for a family of three, for the combined Medicaid and MIChild programs) children who would likely otherwise be uninsured.  Most parents are not eligible because the program’s eligibility limits for parents are so low – about 48 percent of the federal poverty level (less than $8,800 in annual income for a family of three) and so are left to fend for themselves.

If there is a silver lining in the state’s economic downturn, it is that the federal government will pay a greater share of the state’s Medicaid costs.  While the post-ARRA matching percentage will be significantly below (about 10 percentage points) the ARRA rate, the regular matching percentage will be nearly 10 percentage points above where it was just five years ago.

Medicaid efficiently provides critical health care services and is a good economic engine for the state.  Let’s hope policymakers remember the benefits of this program as they establish their FY2011 spending priorities and not seek to fill the $800 million hole by simply cutting necessary services, eligible people, or provider rates.

Hopefully, new revenue options will be included in the deliberations. Policymakers must understand that budgets are not just numbers on paper to be balanced, they are about real peoples’ lives.

See the League’s Facts Matter, for options to pay for essential services.

— Jan Hudson

What Oregon’s vote means for Michigan

Congratulations to our colleagues at the Oregon Center for Public Policy.  Tuesday, Oregon voters approved two tax increases.  The OCPP fought hard for their passage.

As a result of the vote, Oregon will raise income taxes on the top 3 percent of filers and will boost business taxes.  The idea was to ask people who are doing well, even in this economy, to pay a little more.

Like Michigan, Oregon is facing a budget deficit.  The voters had a choice about how that budget gap would be resolved.  Significant cuts to schools, health and human services and public safety could be made.  Or, on the other hand, additional revenue could be raised to avoid those cuts.

Although Oregon voters had not approved a general tax increase since the 1930s, they voted yesterday to protect important services in their state.  And they provided a model for other states, like Michigan, that face continued budget cuts unless more revenue is available.

There are some that would say it is virtually impossible to raise taxes during these difficult economic times, but the results in Oregon show otherwise.  Voters do support well thought-out and balanced approaches to addressing pending budget gaps, even when those approaches include a change in taxes.

Congratulations to the voters in Oregon who saw through a well-funded opposition campaign in order to preserve Oregon’s quality of life and to create an economy that works for everyone.  A good message for us all.

— Karen Holcomb-Merrill

Money Back in Michigan

This is a challenging time for many low-wage and moderate-income workers right now.

Fortunately, there are some tax credits and deductions provided by both the state and federal government that can put more money into families’ pockets. They are described in the latest edition of the Michigan League for Human Services’ annual Money Back in Michigan packet, released today.

This packet is a useful tool for any organization that serves low-income individuals and families. If you or someone you know works in such an organization, feel free to print out, copy and distribute as many copies of this packet as you like!

The largest tax credit is, of course, the federal Earned Income Tax Credit, which will give workers raising children a tax credit of up to several thousand dollars. There is also the Michigan Earned Income Tax Credit, which gives filers a state tax credit equal to 20 percent of the amount they claim for the federal credit. Several other credits, state and federal, are explained in the packet.

Unfortunately, however, the tax preparation industry lures many tax filers to their offices with refund anticipation loans.  While these loans promise to give the tax credit refunds within a couple of days, the loan fees can take a significant portion of a filer’s refund.

The National Consumer Law Center has found that these loan fees generally range from $34 to $130, and that add-on fees charged by some companies can range from $25 to several hundred dollars.

In other words, public money that is intended to help struggling families and individuals ends up going into the accounts of large national corporations such as H & R Block, Jackson-Hewitt, and Liberty Tax (as well as independent tax preparation businesses). In the 2008 filing season, 461,368 filers (65 percent) claiming the federal earned income credit used a paid preparer.

Fortunately, there are ways that tax filers can get their refunds both quickly and free. One way is to file electronically using the free program I-CAN E-File, available to most tax filers. Those who have lived in Michigan for the entire year can use this program to do their Michigan taxes as well as their federal taxes. For those who need assistance, there are Volunteer Income Tax Assistance (VITA) sites around the state that provide free tax assistance by IRS-trained volunteers. Because most VITA sites prepare the taxes electronically rather than using paper forms, the refund checks or direct deposits usually take less time to come to the filer than if the filer sends a paper form him/herself.

In the past year, stricter disclosure rules for refund anticipation loans and other tax services were signed into law by the governor. Also, thanks to state and local level advocacy and outreach efforts, the number of people who are utilizing free electronic filing and tax services has increased steadily in the past several years. These are good trends.

— Peter Ruark

Dr. King’s words ring true today

More than 40 years after Martin Luther King Jr.’s March on Washington and Poor People’s Campaign, Michigan’s social and economic outlook is troubled.

There’s a growing gap between the haves and have-nots and a deepening divide along racial lines.

Consider these disturbing facts in a recent poverty paper by League researcher Jacqui Broughton:

  • For young Michigan children (under 5), 45 percent of African Americans and 38 percent of Hispanics are growing up in poverty, compared with 15.4 percent of young white children;
  • Michigan’s unemployment rate in the second quarter of 2009 was nearly 23 percent for African Americans, and just under 13 percent for whites; and
  • Between 2001 and 2008, inflation-adjusted median household income dropped 16.3 percent for African Americans, 13.6 percent for Hispanics and 9.3 percent for whites.

The League’s Labor Day report last fall by League researcher Peter Ruark also tracked the unsettling trend of Michigan workers losing ground when it comes to wages, with a far harsher impact on African American workers.

In 1979, the median wage was roughly the same for white and African American workers at about $6.20 an hour. By 2008, the median wage, when adjusted for inflation, dropped for white workers by nearly 6 percent. But African American workers experienced a startling 23 percent decline.

Recessions hit harder those families least able to withstand the economic rollercoaster. Kids in particular are hurt. In Michigan, the recession means more people need help just as falling tax revenues means there are fewer resources to help.

Dr. King’s words are as true today as they were when he wrote them more than four decades ago: “The time has come for us to civilize ourselves by the total, direct and immediate abolition of poverty.’’

Make sure to watch the airing of By the People: Hard Times, Hard Choices at 9 p.m. tonight (Monday) on WKAR and check the listings for other public TV stations. The program uses panels of citizens, brought together in November, to explore solutions to Michigan’s economic woes, racial division and other problems. League President and CEO Sharon Parks participated.

— Judy Putnam

Economic distress threatens children’s futures

A new state law requiring teens to stay in school till age 18 will not help more children succeed in school if their health and well-being have been compromised by pervasive economic duress during their critical growing up years. While this year’s state Kids Count book, released today, shows progress on most key indicators, growing poverty is shadowing more and more children.

Nine of the 15 key indicators encompassing health, education, and economic well-being reflect improving trends. The most dramatic improvements are in the shrinking percentages of public school fourth- and eighth-graders who cannot perform at proficient levels on the math Michigan Educational Assessment Program, and the declines in teen birth rates and child death rates.

On the other hand, in 2007 almost half a million children in Michigan were living in families with income inadequate to provide for their basic needs, and their numbers are growing. Confirmed victims of child abuse and neglect rose by 16 percent between 2000 and 2008. Michigan’s unemployment rate in 2008 averaged 8 percent; by 2009 the average jumped to 14 percent. More and more children are at risk. Yet the state programs to blunt the impact of poverty are being reduced or eliminated.

Children in Michigan’s rural counties, with population less than 20,000, are particularly vulnerable—their poverty rates were 4 percentage points higher than those for children in urban counties with population over 65,000. Their rates of abuse or neglect are 7 percentage points above their urban county counterparts.

Almost half of these rural children depend on Medicaid to access health care, and fewer and fewer providers are willing and able to accept substantially reduced payment rates. Programs to reduce infant mortality, help pregnant and parenting teens complete their education and parent effectively, and provide preschool to vulnerable 4-year olds have all been severely cut or eliminated in recent budgets.

All of us have a vested interest in the well-being of the state’s children who need to be ready to take their places in our communities in the future.  This generation needs our commitment and support to realize their potential as students, citizens, and parents, not an empty decree about school attendance.

— Jane Zehnder-Merrell

Crystal balls yield slightly more hope

State fiscal experts and economists gathered at the Capitol this morning to look into their crystal balls to project what state revenues and the economy will look like in the coming year. These meetings, known officially as Revenue Estimating Conferences, are generally held in January and May, but more often if it seems there has been a dramatic shift in state revenues.

The most recent meetings have been pretty gloomy. But the mood was slightly more hopeful this morning. Cautious, but hopeful, looking down the road.

There were lots of numbers and graphs, but the take-away message seemed to be that the state’s economy, while not great, will not be as bad this year as last year. Estimates were that general state revenue will grow by about 1 percent and the School Aid Fund will see a 0.2 percent increase.

Aside from the bottom-line revenue projection numbers that were released at the end of the meeting, there were several themes running through the presentations.

The federal Recovery Act passed last year by Congress had a positive impact in Michigan. As bad as things were in 2009, they would have been a lot worse without the federal fiscal relief. That was the good news. The bad news is that much of that relief will go away this year without further action by Congress, and it could have a devastating effect on Michigan’s economy and budget.

Despite slightly more upbeat economic projections for this year, state lawmakers and the governor will be facing difficult budget choices yet again. Deep cuts were made in the fiscal year 2010 budget and without changes to the tax structure, there will not be significantly higher revenues to reverse some of those cuts. In some scenarios, revenues will decline again in fiscal year 2011, forcing more tough decisions.

State revenues are down substantially from years past and they are not expected to climb significantly in the near future. When asked how the state could respond to this, Nigel Gault an economist for HIS Global Insight offered a solution. He said the general recipe for addressing declining revenues is a combination of broadening the tax base and reducing special exemptions.

All of this points to the need for a balanced approach. On top of all of the cuts that have been made to the state budget over the years, Michigan needs to modernize its tax structure to increase available revenues. The League highlights some ways to do that in its Facts Matter fact sheets.

— Karen Holcomb-Merrill

A look back at the decade

Gongwer News Service recently asked the League to weigh in on the major changes to social services during the first decade of this century.

Here is what we compiled — 10 years condensed to less than 500 words.

The decade saw many more children, families and individuals in need of help in meeting basic needs – food, shelter, heat and clothing – as Michigan shed hundreds of thousands of jobs. The public safety net has been stretched to the breaking point in some places.

In the area of Medicaid, Michigan received many more federal dollars to pay for health care for low-income children, families and seniors. The portion paid by the federal government jumped from 55 percent in 2000 to 73 percent this fiscal year. There’s also been an incredible increase in recipients from just over 1 million a month in 2000 to 1.8 million in October 2009. Unfortunately, access to doctors is a problem.  Fewer and fewer doctors will accept a patient on Medicaid.

Until July when optional services were cut, Michigan held the line on providing optional Medicaid services (dental services were cut in 2003 but later restored) for adults. These are services that the state isn’t required to provide but are considered health essentials. They include dental, vision, hearing and podiatry.

Food Assistance, a federal program formerly known as food stamps, also has seen a very dramatic rise, nearly tripling over the decade, from 580,000 people a month in 2000 to 1.65 million in October 2009.

While Medicaid and food assistance spending has grown dramatically, caseloads for cash assistance have remained relatively flat over the decade.

In 2004, the Family Independence Agency was renamed the Department of Human Services by Gov. Jennifer Granholm. The Family Independence Program (a holdover FIA name from the administration of Gov. John Engler) served 206,000 people a month in 2000, rising to only 217,000 in October 2009, despite dramatically growing needs.

In this recession, only one third of children living in poverty got help from FIP. In previous recessions, two-thirds of children were helped by cash assistance. (For more on this, click here.)

Michigan has not changed its benefits or eligibility level, even to keep up with inflation, meaning you have to be poorer and poorer to qualify and the monthly grant covers less and less. The grant was increased by just $1 per person a month in 2008, the first increase in nearly two decades. (See League report on the eroding grant.)

If a mom with two kids on cash assistance gets a job, her grant will end once she earns $814 a month, even though that income will keep her at 44 percent below poverty.

Another major change in the decade was a 2006 law that put a lifetime, four-year time limit on cash assistance benefits. And DHS workers have watched caseloads grow dramatically to the point that waiting rooms and parking lots have become dangerous places for recipients and caseworkers alike.

In addition, Michigan hasn’t done what’s needed to help low-income adults acquire skills or gain additional education, though No Worker Left Behind has helped some workers and the Jobs, Education and Training program replaced the Work First program, recognizing the importance of education and training in addition to work experience.

— Michigan League for Human Services staff

New year brings good news for working poor

Welcome to the League’s new blog, Factually Speaking! We hope to keep you informed and listen to your ideas on issues affecting low-income families in Michigan.

The start of the new year brings good news for hundreds of thousands of low- and moderate-income working families as the scheduled increase in Michigan’s Earned Income Tax Credit (EITC) takes effect.

Despite efforts to freeze the credit at the current level of 10 percent of the federal EITC, or reduce the size of the increase, hard-working families can file their 2009 tax returns knowing that the credit they will receive will double over last year’s amount.

In tax year 2008—the first year the credit was in effect—approximately 702,000 filers received the credit. The average credit for a single mom with two children working full time at the minimum wage was $478.

Imagine the impact this year when the credit increases to 20 percent of the federal credit! Most studies show that EITC refunds are spent in local communities, often for large expenditures—the car or washer repair, the first month’s rent and security deposit for a better apartment in a safer neighborhood, and other purchases that have been put off.

Thanks to all who told policymakers that keeping the state EITC on track was critical to helping families on the margin.

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