A Closer Look at the FY 2015 Budget: Department of Human Services

Full report in PDF

After years of declining investments, the governor’s Fiscal Year 2015 budget reduces total funding for DHS by 6.6% from the current year appropriation, from $6 billion to $5.6 billion. Reductions in spending reflect in part policy decisions that have made fewer families and children eligible for public assistance benefits, including lifetime limits on income assistance, and new asset tests for food assistance.

The Michigan Legislature is now working on its version of the Fiscal Year 2015 DHS budget, which affects nearly 2.4 million Michigan residents—including over 1 million children—who receive some form of public assistance to help them hold low-wage jobs, feed and shelter their children, access healthcare, or survive when faced with serious illnesses or disabilities.1

The governor’s recommendation, if adopted, would result in a total funding loss to the DHS of $1.5 billion or 21% in just five fiscal years. Total appropriations for DHS increased by an average of 9.4% annually between Fiscal Years 2007 and 2011, largely because of the increased need for federally funded food assistance.

Since 2011, appropriations have declined an average of 5.1% annually, as caseloads for Michigan’s income assistance program, the Family Independence Program, dropped precipitously.2

 

 

 

 

 

 

 

In the current fiscal year, the DHS budget is the state’s third largest, accounting for 12.3% of total spending from federal and state resources.3 The DHS administers a range of services, including the Family Independence Program; the Food Assistance Program; State Disability Assistance; State Emergency Relief; and child protective, foster care, adoption and juvenile justice services.

Federal funds now account for more than 80% of DHS funding, up from 70% in Fiscal Year 2004. Other sources of revenue for the DHS are state General Funds (17%); and state restricted, local and private funds.4

Income Assistance

Michigan’s income assistance program for families with children, the Family Independence Program, provides a maximum monthly benefit of $492 per month for a family of three. To be eligible, a family of three must have income below $9,780 annually, and financial assets of less than $3,000. The state’s youngest children are most likely to be in families receiving FIP benefits, and are most hurt by budget cuts that limit income assistance. In January 2014, 67,851 children received FIP assistance, with 43.9% of those children being under the age of 6.

The governor’s budget for Fiscal Year 2015 includes:

  • Another deep reduction in funding for income assistance for families with children. The governor’s budget for Fiscal Year 2015 includes $151.6 million for the FIP program, a reduction of 29% from the amount appropriated in the current fiscal year ($214.3 million). The governor assumes that FIP caseloads will fall from 44,400 this year to 33,200 in 2015, a reduction of 25% in a single fiscal year.5

Beginning in 2011, changes to state and federal lifetime limits for FIP resulted in unprecedented caseload declines.6 Assuming the governor’s budget is adopted, FIP caseloads will fall by 58% in just five fiscal years, while funding will fall by 64%.

These declines have occurred despite continued high unemployment in Michigan and rising child poverty. Between 2001 and 2012, child poverty nearly doubled, with one of every four children now living in poverty. During that same time, the percentage of the state’s children receiving FIP assistance fell by 40%. In January 2014, 68,000 children received FIP, down from 145,000 in January of 2009.7

  • Continuation of the Pathways to Potential program, with a new investment of $20.1 million in largely federal funds. The Pathways to Potential program currently locates DHS staff in 159 public schools around the state to make it easier for them to address families’ needs. With the new funding, DHS will also locate workers in hospitals, long-term care facilities, community mental health agencies, with private employers, and in corrections facilities to help with prisoner re-entry.
  • Continuation of the current Extended-FIP policy, which gives households leaving FIP due to earnings $10 per month in FIP assistance for six months. In 2011, when the state tightened its 48-month lifetime limit on FIP, those six months of very minimal assistance began to count against a family’s lifetime limit. The governor’s budget also removes language requiring DHS to notify persons eligible for Extended-FIP that receiving it will count toward federal and state lifetime limits. In Fiscal Year 2007, the monthly average Extended-FIP caseload was 3,534, with 10,901 recipients.8 For Fiscal Year 2014 (monthly average through February 2014), there were only 1,229 Extended-FIP cases, with 3,286 recipients.9 The governor’s budget assumes that the Extended-FIP caseload will drop to 1,105 in Fiscal Year 2015.
  • Continuation of the current FIP children’s clothing allowance. The governor’s budget includes $2.88 million for the annual clothing allowance for children. The allowance was originally designed to make sure that school-age children have the opportunity to at least start the school year with a decent set of clothes. The program was restricted in 2011 to only those children in FIP cases that do not include an adult—e.g., children living with ineligible grandparents or other caregivers.

Food Assistance

Food Assistance benefits (formerly called Food Stamps) are completely federally funded, with an average monthly benefit for a two-person household of $245. To be eligible, families must have incomes under approximately 200% of poverty or $38,180 for a family of three. More than 70% of FAP recipients receive no other state cash assistance.10

Between 2011 and 2013, the number of children receiving FAP dropped from 968,000 to 910,000, while child poverty remained high at 25%.

The governor’s budget for Fiscal Year 2015 includes:

  • A reduction of $444.5 million in FAP funding, to a total of $2.4 billion. The cut reflects a projected drop in FAP households, from 894,750 this year to 890,000 in Fiscal Year 2015.11 Nearly 1.7 million Michigan residents received FAP benefits in January 2014, including over 700,000 children. Of those children, 242,408, more than one-third, were under the age of 6.12
  • Continuation of the optional state asset test for FAP benefits. Beginning in October 2011, the Department of Human Services adopted an asset test for FAP eligibility that is not required under federal law. FAP households/groups must now have less than $5,000 in assets, including the value of vehicles after certain exemptions.
  • No resolution of the “Heat and Eat” provisions of the federal Farm Bill. The governor’s budget was released right before the Farm Bill was passed by Congress and therefore does not address federal cuts related to the “Heat and Eat” provisions of the bill. The Heat and Eat option, which has been utilized by 16 states including Michigan, allows states to use a standard utility allowance in determining food assistance benefits, including situations where eligible households receive a nominal $1 per year in energy assistance through the Low Income Health and Energy Assistance Program (LIHEAP). As a result, Michigan has been able to enhance the very modest Food Assistance benefits for some households, particularly important on the heels of a cut in benefits for all FAP recipients in November of 2013 due to the loss of funds from the American Recovery and Reinvestment Act.

Under the new Farm Bill, the nominal LIHEAP payment was increased to a minimum of $20 per years. Eight states, including New York, Pennsylvania, Connecticut, Rhode Island, Oregon, Montana, Massachusetts and Vermont have already announced that they will meet the new $20 minimum and continue current benefits for low income families, while three additional states are considering the change.

The House Fiscal Agency estimates—based on Fiscal Year 2010 data—that continuing the Heat and Eat option in Fiscal Year 2015 will require an additional $8.4 million in LIHEAP spending, but will prevent the loss of approximately $250 million in federal food assistance. Failure to raise the LIHEAP payment to $20 will result in the loss of $88 per month in food assistance for more than 235,000 low income families.

State Disability Assistance

The SDA, a totally state funded program, provides cash assistance to disabled adults who are permanently or temporarily unable to work, and have annual incomes of less than $5,400, and assets of less than $3,000.13 The average monthly payment for a single person is $225 per month, and the average length of time on SDA is approximately one year.

Beginning Oct., 2011, new SDA cases in independent living arrangements can receive at most $200, rather than the $269 available under previous policy.14 With fair market rent for a one-bedroom home of $530 in 2013, the typical SDA recipient has no income left to cover other basic needs such as transportation, personal items, clothing, utilities and other shelter costs.

Adjusted for inflation, SDA payments decreased (in 2005 dollars) from $264 in Fiscal Year 2005 to $169 in Fiscal Year 2013—a decline of 36%. SDA payments have fallen from 31% of the federal poverty line in 2006 to 20% of poverty in 2013. Even with the addition of food assistance benefits, new SDA recipients subsisted at 40% of the federal poverty line in 2013.16

The governor’s budget for Fiscal Year 2015 includes:

  • A reduction in funding for the SDA of 14%. The governor’s budget includes $17.9 million for the SDA, down from the $20.8 million appropriated in the current fiscal year. SDA caseloads have been decreasing since Fiscal Year 2010, in part because of efforts to ensure that SDA recipients who are eligible for SSI are transferred to that program.17
  • A continued reduction in SDA cases. The governor assumes that the SDA caseload will also fall by 14% from the level budgeted in the current fiscal year, with total cases of 6,693 next year.

State Emergency Services

Michigan provides a range of services to low-income families facing emergency situations, including State Emergency Relief (SER), and energy assistance programs. In the current fiscal year, $38.4 million was allocated for SER to be used for local office emergency payments for rent, moving expenses, housing payments and repairs, and non-energy utility assistance; homeless programs; burial costs for indigents; the Food Bank Council; and multicultural contracts.

A total of $197.4 million is available in the current fiscal year for energy assistance, including $164 million in federal block grant funding for the Low Income Home Energy Assistance Program (LIHEAP). In the past, Michigan also received grants from the state’s Public Service Commission for energy assistance, but the courts ruled that the PSC did not have authority to collect restricted fee revenue. The revenue lost from that court decision—nearly $60 million annually—was replaced in Fiscal Year 2013 by nearly $60 million in one-time state General Funds, while the Legislature worked out a new funding mechanism. For Fiscal Year 2014, the Michigan Legislature approved a new surcharge on electric meters to fund the Michigan Energy Assistance Program (MEAP).18

The governor’s budget for Fiscal Year 2015 includes:

  • No change in energy assistance appropriations. The governor recommends restoring $25 million to LIHEAP that was transferred in the current fiscal year to an energy self-sufficiency program. The federal LIHEAP block grant is determined each year through the federal appropriations process.
  • Continuation funding of $60 million for the Michigan Energy Assistance Program (MEAP). The MEAP was created in response to a state law (P.A. 615 of 2012) requiring DHS to establish a new consolidated program with a single, simplified application.
  • Continuation funding of $38.4 for State Emergency Relief services, including $13.6 million for local DHS office emergency services, $15.8 million for homeless services through the Salvation Army, $4.3 million for indigent burial services, $1.8 million for the Food Bank Council, and $3 million for multicultural services. The governor removes budget boilerplate language that specified certain multicultural services grants, adding new language that appropriates the funding based on as competitive grant process that includes performance-related metrics.

Child Welfare Services

Michigan’s child welfare system, including protective services, foster care, adoption and family preservation and prevention services account for approximately 28% of all state General Funds in the DHS budget. Funding for child welfare staffing has increased in recent years as the state has been required to comply with a settlement agreement resulting from a lawsuit related to its failure to protect children.

The governor’s budget for Fiscal Year 2015 includes:

  • A slight increase in funding for foster care services. The governor recommends $190.3 million for foster care payments, up slightly from the $187.7 million appropriated for this year. Included are a reduction of $2.4 million ($1 million state General Funds) to reflect a projected decline in foster care cases from 6,250 this year to 6,075 in Fiscal Year 2015, as well as a $5 million increase in funding to pay 100% of the private child placing agency administrative rate for new cases entering care.

Foster care cases have been falling, and with the governor’s projections will be down 43% between Fiscal Years 2005 and 2015.19

  • An increase of 4% in the County Child Care Fund. The governor includes $178 million for the Child Care Fund, an increase of 4% over the current year appropriation. The Child Care Fund provides for the care and treatment of delinquent or maltreated children that are court wards and not eligible for federal payments through Title IV-E. The primary sources of funding for the Child Care Fund are state General Funds (49.8%) and federal TANF (48.5%).

 

  • A small decrease in funding for adoption subsidies. The governor includes $241 million for adoption subsidies, a small decrease from the current year appropriation of $244 million. Subsidies are provided to families adopting children with special needs, and include both cash and medical subsidies for preexisting medical or mental health conditions. Adoption subsidy average monthly caseloads increased by 11% between Fiscal years 2005 and 2010, and have since stabilized at approximately 27,000. The major sources of funding for adoption subsidies are Title IV-E (46%), State General Funds (33%), and federal TANF (21%).
  • No reinvestment in prevention and family preservation services. The governor provides continuation funding for Strong Families/Safe Children ($12.35 million), Family Reunification ($3.98 million), and family preservation and prevention services programs ($2.5 million). Small cuts were made in the Families First program (from $17.2 million to $16.9 million), and the Child Protection and Permanency program ($13.2 million to $12.9 million).

Funding for major child abuse and neglect prevention programs has been stagnant or cut—in the face of increased reports of maltreatment and growing victimization. Total funding for family preservation and prevention programs fell from $60.6 million in Fiscal Year 2005 to $49.3 million in the current fiscal year—a reduction of nearly 19%.20 The number of substantiated victims of child abuse and neglect grew by more than 20% between Fiscal Years 2005 and 2013, with 37% of those victims under the age of 4.21

Endnotes

1. Green Book Report of Key Program Statistics, Michigan Department of Human Services (January 2014). Includes FIP, SDA, FAP, CDC and Medicaid recipients.
2. Koorstra, K., Human Services Background Briefing, House Fiscal Agency (December 2013).
3. Jeffries, E., State Budget Overview, Senate Fiscal Agency (January 13, 2014).
4. Koorstra, K., Human Services Background Briefing, op. cit.
5. Review and Analysis of FY 2014-15 and FY 2015-16 Executive Recommendation, House Fiscal Agency (February 2014).
6. Koorstra, K., Human Services Background Briefing, op. cit.
7. Trend Report of Key Programs Statistics, January 2014; and Key Statistics for FY 2007, FY 2008 and FY 2009, Michigan Department of Human Services.
8. Extended Family Independence Program (EFIP) Cases, Recipients and Payments—Fiscal Years 2005, 2006, and 2007, Michigan Department of Human Services.
9. Trend Report of Key Program Statistics, Department of Human Services (February 2014).
10. Koorstra, K., Summary: Executive Budget Recommendation for Fiscal Years 2014-15 and 2015-16, Department of Human Services, House Fiscal Agency (February 19, 2014).
11. Ibid.
12. Green Book Report of Key Program Statistics, op. cit.
13. Koorstra, K., Human Services Background Briefing, op. cit.
14. Koorstra, K., and Burris, T., Line Item and Boilerplate Summary for Human Services, House Fiscal Agency (September 2013).
15. Michigan Department of Human Services Information Packet, DHS Budget and Grant Management Division (June 2013).
16. Ibid.
17. Ibid.
18. Koorstra, K., Human Services Background Briefing, op. cit.
19. Koorstra, K., Human Services Background Briefing, House Fiscal Agency (December 2013), and FY 2014-15 and FY 2015-16 Budget Detail for Health and Human Services, House Fiscal Agency (February 2014).
20. Information from K. Koorstra, House Fiscal Agency.
21. Letter to Senator Bruce Caswell, Chair, Senate Appropriations Subcommittee on the Department of Human Services, and Representative Peter MacGregor, Chair, House Appropriations Subcommittee on the Department of Human Services, from Susan Kangas, Chief Financial Officer, Michigan Department of Human Services (January 1, 2014).