House reports healthier budget

On Tuesday the House Appropriations Committee reported its recommended budget for the Department of Community Health to the full House. While the recommendation isn’t great, it is far superior to that passed by the Senate.

The House budget is about $103 million in general fund more than the Senate and avoids many of the most onerous cuts in the Senate-passed budget including: a cut of $57.5 million to non-Medicaid mental health funding (House reduction is $3.8 million); the elimination of some caretaker relatives and 19- and 20-year-olds from Medicaid; a 4 percent additional rate reduction to some physicians; and more cuts to the Healthy Michigan Fund, to name a few.

It will be a major challenge to maintain the House level of funding in view of the Revenue Estimating Conference that identified a $244 million revenue shortfall for the current year and about a $1 billion shortfall for FY2011.

Will policymakers find the courage to step forward and recommend revenue solutions to these problems rather than continuing their “cuts-only” approach?

I keep wondering: Do the facts really matter? A recent report by the Senate Fiscal Agency once again documents that Michigan is not a high-tax state. Will that fact matter to the Senate leadership? Or, will leaders continue to balance the budget on the backs of Michigan’s low-income families, children, elderly and disabled?

The cuts in Medicaid eligibility recommended by the Senate will not be possible under federal health reform maintenance of effort provisions, and with this knowledge, the House rejected the Senate proposal. This is good news for the “optional groups” whose Medicaid coverage was recommended for elimination. A report recently released by the League documents that the state has made little, if any, progress in adequately funding the Medicaid program over the last six years.

Without the federal recovery funds, and the corresponding maintenance of effort on eligibility over the last three years, it is difficult to say what the Medicaid program would look like today.

As it is, the state has enrolled about 420,000 more Medicaid-only recipients (those not receiving any cash assistance) since FY2005 and now, fortunately, can’t reduce eligibility without the loss of federal funds.

It is stunning to note the growth in the number of individuals who qualify only for Medicaid – – they receive no cash assistance. From fiscal years 2000 to 2009, that number nearly doubled, increasing from 652,000 to 1.2 million, as unemployment grew relentlessly and employer-sponsored coverage declined or became unaffordable. The number of Medicaid-only enrollees as of April 2010 is 1.4 million.

It is good news that both the Senate and House restored dental and podiatric services for adult Medicaid recipients; however, they could become targets to balance the budget given the new revenue projections.  Elimination of these services makes no fiscal or public policy sense particularly with the high incidence of diabetes in this state and the importance of these services in managing this disease.  Will that fact matter?

There is nothing wrong with raising the revenues to pay for the services Michigan residents want and need.  It does, however, take leadership and courage.

— Jan Hudson

Adult ed — more important than ever

We’ve all heard about how bad Michigan’s economy is, and how we have to attract more employers to the state and create an environment that is conducive to entrepreneurism in order to create more jobs. All true!

But what is often left out of this discussion is that businesses can’t thrive in Michigan without skilled workers, and that any investment in Michigan jobs must include an investment in workforce development.

Gone are the days when young adults could plan on getting a job in the automobile industry right after high school graduation. Today, it is nearly impossible for someone with no postsecondary education or skilled work experience to obtain an entry-level job that provides decent pay and opportunities for promotion.

Not only should high school students have postsecondary plans in place, but dislocated workers should be thinking about upskilling in order to make themselves more marketable in today’s work environment.

So far, so good. There are plenty of trade schools and community colleges in the state for those who plan to enter or further a career in the trades, and financial aid programs and No Worker Left Behind are in place to help them afford it.

The problem is: What about the many workers whose math, reading, or literacy skills are too low to be able to enter into and succeed in a postsecondary vocational skills program?

That, of course, is where adult education comes in. A strong adult education system will prepare students for the rigorous skills training they will need to undergo in order to get jobs that are in demand in today’s job market.

Even jobs in traditional sectors such as automobile repair, manufacturing, and building construction require a higher mastery of technological skills than they did two decades ago.

Yet Michigan has actually decreased the amount of money it is investing in adult education. Michigan spends 28 percent of what it did in 2001 and only 11 percent of what it did in 1996! And accordingly, program enrollment is 63 percent lower and program completion is 53 percent lower than in the 2001-2002 school year. (See this new League analysis to find out more.)

Obviously, less investment means less workers helped. Michigan’s Department of Energy, Labor and Economic Growth, the state’s community colleges, representatives from the K-12 system, advocacy organizations (including Michigan League for Human Services), and other key players have been meeting for several years to improve Michigan’s delivery of adult education through the formation of innovative programs and regional partnerships.

The state adopted the recommendations put forward by the group. However, it needs to back up the new ideas with funding. Keeping adult education allocations at barely over a quarter of what they were several years ago is not the right direction for Michigan to be going. Let’s dedicate more state funding for adult education.

— Peter Ruark

New budget gap of $244 million

The state Treasurer and the heads of the Senate and House fiscal agencies gathered today to hear economists talk about Michigan’s future. At the end of this meeting, known as the Revenue Estimating Conference, the three of them reached consensus on projected revenues available to the state.

While the Conference did bring some encouraging news about Michigan’s economy, it is clear that the state continues to have a serious General Fund revenue problem.  Revenue estimates from today show a new budget gap of $244 million for the 2010 budget.

A sharp decline in business tax collections is the cause for the recent fall in revenue. This unexpected news means that more revenue must be found or more programs and services must be cut. The Legislature, which has been working to address an anticipated $1.8 billion budget gap for the 2011 budget, must now also turn its attention to this new budget shortfall.

As state Treasurer Bob Kleine said today, this is a revenue problem, not a spending problem. Michigan has been in a budget-cutting mode for much of the last decade. Most recently, deep cuts have been made to health care, public safety and education.

On the heels of years of cutting, a balanced approach to this shortage of state revenues must include the evaluation and closing of some tax expenditures, which cost the state about $35 billion a year. As state revenue has plunged, tax loopholes have increased every year.

Michigan also needs to modernize its tax structure to provide for stable revenue.  In the short-term this can be done through extending the sales tax to most services.  And in the long-term, Michigan should adopt a graduated income tax which would produce more revenue and would provide a tax cut for 90 percent of tax filers.

Without structural changes, the state will continue to face budget gaps and programs and services will be in jeopardy each year. Earlier this week, Senate Fiscal Agency Director Gary Olson indicated that without revisions to the tax structure and even with an assumed 3 percent increase in revenues, the state faces continuing budget shortfalls.  His projections were that the gaps would range from $1.2 billion to $1.8 billion a year over the next several years.

Economist George Fulton, one of the presenters at the Conference, described Michigan’s economy and budget situation as “despair followed by hope.”  Part of that hope rests on lawmakers taking action now to close tax loopholes and to modernize the state’s tax structure.

— Karen Holcomb-Merrill

Can health care reform cure my headache?

Every time I participate in a discussion on the aspects of health care reform, my head hurts more.  I continue to be awed by the intricacy, complexity, and breadth of this new legislation. But at the same time, I am inspired by the great opportunity to make positive changes to public programs, insurance products, and the health care delivery system, to name just a few.

There was a dizzying array of information provided at the Public Policy Forum co-sponsored by the Michigan League for Human Services and the Michigan Health Insurance Access Advisory Council on April 23, followed by a forum sponsored by the Detroit Regional Chamber and the Federal Reserve Bank of Chicago – Detroit Branch on April 26 and 27.

Public Sector Consultants brought a diverse group together May 12 to hear presentations by Department of Community Health Director Janet Olszewski and Insurance Commissioner Ken Ross, and to provide feedback on what next steps make sense. State staff are working diligently to identify all the facets that must be addressed to develop a strong foundation for ongoing implementation efforts.

The complexity of the federal health reform legislation will make it an ongoing challenge to implement. Thank goodness every component is not scheduled to be implemented immediately, and hopefully there is enough time to get it right.

The health care reform legislation will touch all of us. A few of the benefits follow:

  • 32 million people are expected to gain health care coverage by 2019.
  • Medicaid will be expanded (2014) to all families or individuals with incomes below 133 percent of the federal poverty level (about $14,400 for an individual).  A federally designated category or group will no longer be required to be eligible; the federal government will cover the cost of the new enrollees for the first three years.
  • Young adults can remain on their parents’ health care plans up to age 26, without being an IRS-defined dependent or being in school.
  • When the Insurance Exchange is implemented in 2014, subsidies will be available to assist families with incomes up to 400 percent of the poverty level (about $88,000 for family of four) be able to afford coverage. In addition, cost-sharing caps, on a sliding income scale, will also be implemented.
  • Insurers will be prohibited from denying coverage for pre-existing conditions or cancelling coverage when an insured person gets sick. Insurers will also have to use a high percentage (80 percent to 85 percent) of  premiums for patient care, and will no longer be able to establish annual or lifetime limits on benefits.
  • Small businesses will receive subsidies (up to 35 percent) to help them afford coverage for their employees.
  • The Medicare Part D “donut hole” (the period when costs have reached a high level, but no assistance with drug costs is available) will gradually be reduced.
  • Programs to promote wellness and prevent chronic disease will become a major focus.

These are only a small sampling of the extensive provisions included in this historic legislation. Many organizations are putting information on their websites. The key thing to remember in reviewing these documents is that they are works in progress, and may be updated frequently as more clarification or regulations are issued by the various federal offices involved in implementation.

Families USA, the Kaiser Family Foundation, The Commonwealth Fund, and the Robert Wood Johnson Foundation include extensive materials on the health care reform legislation and its implementation.

I think Atul Gawande in The New Yorker in December articulately summed up where we are and what we need to do to make this work:

“At this point, we can’t afford any illusions: the system won’t fix itself, and there’s no piece of legislation that will have all the answers, either… But if we’re willing to accept an arduous, messy, and continuous process we can come to grips with a problem even of this immensity. We’ve done it before.”

— Jan Hudson

Reading before fourth grade matters

Children who cannot read by the end of third grade cannot succeed. As they get older, they tend to drop out of school, pushing good-paying jobs beyond their reach. We’re writing the scripts of their lives by the age of 9 and they don’t have happy endings.

The Annie E. Casey Foundation’s new national KIDS COUNT report, Early Warning! Why Reading by the End of Third Grade Matters is out today, and it’s a must-read reminder about the importance of reading by the end of third grade.

The report’s major message is that children are learning to read until the ages of 8 and 9. After that they read to learn. Children without that essential skill quickly fall behind.

Michigan does not look good in this report. We rank 34th among the states on reading proficiency among fourth-graders as measured by the National Assessment of Educational Progress. That’s a rigorous test given in each state to a sample of students.

In Michigan, 70 percent of fourth-graders tested were not considered proficient. That compares with 68 percent nationally. In addition to average scores, we have large huge gaps by race and income.

Michigan, Wisconsin and Louisiana had the worst ranking in the country among African American students with 91 percent not considered proficient in reading. In Michigan 64 percent of white students are not proficient.

Another large gap is the difference based on income. Among low-income fourth-graders, 85 percent were not proficient. Among higher-income peers, only 60 percent were not proficient.

Early childhood opportunities, good health, safe communities, good schools and teachers, quality child care, parents and grandparents reading aloud often to young children, early intervention for children with delays and good school attendance all play a role. For advocates interested in rewriting the story of the cycle of poverty, these early years offer the place to do that.

— Judy Putnam

Taxes — We’re No. 30 and 39

A recent report by the Senate Fiscal Agency confirms what some have been saying for a while, but may surprise others — Michigan’s tax burden fell significantly between 1999 and 2009. In 1999, Michigan had the 16th highest state and local tax burden. By 2009, it had fallen to 30th.

There are some who continue to argue that Michigan is a high tax state and that taxes should be reduced. Well, the facts seem to indicate otherwise, especially when it comes to taxes paid by businesses in our state.

According to the report, Michigan’s corporate tax burden fell from 12th in 1989 to 39th in 2007.  This was the largest drop in tax burden among all of the states.  These numbers make Michigan look like a pretty low-tax state for those doing business here.

Michigan taxpayers are paying a slightly higher percentage of their income toward the state education tax, but less toward the income, sales and use taxes. But however you look at it, their tax burden has fallen significantly overall.

Understanding tax burden is important as debate continues about how to address the short-term $1.8 billion budget gap for the 2011 budget and the long-term budget deficit.  There are those who refuse to consider any change to the outdated tax structure in our state, often citing that taxes are already too high.  Perhaps after considering the facts they will reconsider their position.

The League and A Better Michigan Future see the new fiscal agency report as further evidence that the time is right to modernize the tax system. Extending the sales tax to most services and instituting a graduated income tax will generate more revenue for the state and will help the state keep pace with the changing economy.  That’s a win-win.

— Karen Holcomb-Merrill

Updating an outdated poverty measure

The U.S. Commerce Department recently announced the Census Bureau is developing a new, unofficial poverty measure to go alongside the current poverty measure.

This is a change advocates have been waiting to see for years as the current measure is far out of date.

The new measure will not replace the official measure calculated each year by the U.S. Census Bureau or the official poverty guidelines published each year by the U.S. Department of Health and Human Services, but it will be published annually along with the official measure.

The current poverty measure does not take into account the things it takes for a family to live. It only considers pre-tax cash income and is adjusted each year for inflation using the Consumer Price Index.

The current measure was developed in the 1960s and is based on the U.S. Department of Agriculture’s economy food plan. This food plan was the lowest estimate of what a family needed to feed themselves, but was not necessarily sufficient for long-term nutrition. At the time, it was estimated that the average family would spend approximately one-third of their total net income on buying food using this plan.

The supplemental measure, due to come out in the fall of 2011, is based roughly on a measure the National Academy of Sciences developed in 1995. This measure takes a lot more into account, such as:

  • Assistance received from food assistance programs, housing vouchers, energy assistance and tax credits;
  • foster children (the official measure only includes relatives by birth, marriage, or adoption);
  • living expenses; and
  • geographic differences in the cost of living.

Since this new measure looks at a lot more things, it is thought it will cause the percentage of people in poverty to go up since the amount a family must earn to not be below the poverty level will go up.

The new measure will not, however, impact program eligibility. This means, a family with income higher than the current poverty level may be in poverty by the supplemental measure, but still not qualify for assistance programs since a family will have to be even poorer to get help.

This overhaul is long overdue. While the current measure will remain the official poverty measure, it will be put in perspective by the supplemental measure. The current measure is severely outdated and fails to take into account the things that a family or individual needs to sustain a basic standard of living besides food–such as housing, utilities, clothes, and transportation.

So while the poverty rate will probably go up, this measure will give a clearer picture of what poverty really looks like in America.

-Jacqui Broughton