A Closer Look at the Governor’s FY 2014 DHS Budget

Full Report in PDF

The governor’s proposed Fiscal Year 2014 budget for the Department of Human Services includes a nearly 10% cut in total spending, largely the result of policy decisions that have made fewer families and children eligible for public assistance benefits. Total DHS funding would be reduced by over $658 million. State General Funds would drop by $15.7 million or 1.5%.

THE DHS BUDGET

The DHS budget is the third largest in Michigan, accounting for 13.5% of total spending from federal and state sources this year.1 The DHS administers a range of public assistance, child welfare and adult services at a cost of approximately $6.7 billion in the current fiscal year. Included in the DHS budget are funds for the Family Independence Program; the Food Assistance Program; State Disability Assistance; State Emergency Relief; and child protective, foster care adoption and juvenile justice services.2

Under the governor’s Fiscal Year 2014 budget, food assistance accounts for nearly half (47%) of total DHS spending, followed by children’s services (17%). Other public assistance programs represent only 11% of total spending.

Even as unemployment and underemployment have remained high in Michigan, caseloads for many DHS public assistance programs have fallen as a result of policy changes and limits on eligibility, including the more stringent enforcement of lifetime limits on income assistance. Between 2007 and 2013, FIP caseloads fell by nearly 38%, from 85,389 to only 53,298. During that same time period, caseloads for State Disability Assistance fell by nearly 20%. The major exception was a 65% increase in the Supplemental Food Assistance Program, with over 917,000 Michigan families now receiving food assistance.

DHS SPENDING TRENDS

Largely as a result of rapidly rising food assistance caseloads, total funding (federal and state) for the DHS rose from $4.5 billion in 2007 to $6.7 billion in the current fiscal year—an increase of 49%.3 During that time, federal funding grew by 77.8%, while state General Funds actually fell by 18.8%.4 More than 82% of DHS revenue is now federal.5

GOVERNOR’S FY 2014 RECOMMENDATIONS

The governor’s budget includes a cut of 9.8% or $658.3 million, with total DHS funding falling from $6.70 billion in the current fiscal year to $6.05 billion in fiscal year 2014.6 The funding reductions come almost entirely from the loss of federal funds for food assistance, as well as expected caseload declines.

Included in Gov. Rick Snyder’s budget recommendations for 2014 are the following:

Public assistance: The governor is projecting continued declines in caseloads and funding for major public assistance programs including the Food Assistance Program, the Family Independence Program, and State Disability Assistance.

Food Assistance Program (FAP): The governor’s budget reduces funding for FAP by $684 million in recognition of the loss of federal funds from the American Reinvestment and Recovery Act (ARRA), as well as expected caseload reductions. Beginning in April of 2009, ARRA funds were available to temporarily raise maximum food assistance benefit levels, and this funding will no longer be available in Fiscal Year 2014. Also, the governor’s budget assumes that FAP caseloads will fall from a projected 917,680 this year, to 876,650 in Fiscal Year 2014.7

FAP (formerly called the Food Stamp Program) is completely federally funded. In Michigan, the average monthly benefit for a two person household is $267, and over 70% of FAP recipients receive no other state cash assistance.8 With increasing unemployment and need, caseloads grew by 135% between fiscal years 2004 and 2011, peaking at 968,000 in 2011.9

Since that time, in part due to state policy changes limiting eligibility, caseloads have begun to drop. If the governor’s projections are accurate, FAP caseloads will fall by 9% between fiscal years 2011 and 2014. In 2011, Michigan instituted an asset test for food assistance, requiring families to have less than $5,000 in total assets, including the value of vehicles after certain exclusions. This asset limit resulted in a loss of access to food assistance for low-income families, and caused the state to turn away federal funds available to assist low-income families.

Family Independence Program (FIP): The governor’s budget reduces funding for FIP by $21.8 million to reflect continued reductions in caseloads–based largely on policy changes, including the more stringent enforcement of lifetime limits on assistance adopted in 2011. Between Fiscal Year 2011 and the current fiscal year—a short two-year period—FIP caseloads fell by 33%, from 79,660 to 53,298. During that same two-year period, FIP funding fell from $414.8 million to $255.3 million, or 38%.10 The governor’s proposed budget for Fiscal Year 2014 assumes FIP caseloads will fall again to 49,226. The result would be a 38% drop in caseloads since Fiscal Year 2011, and a nearly 44% decline in FIP funding.

To be eligible for FIP, an average family of three must have an annual income of less than $9,800, and financial assets of less than $3,000. The maximum benefit for a family of three is $492 per month.

Federal law establishes work requirements that Michigan and other states must meet. One issue for FIP recipients is the state’s decision to help meet those work requirements by providing an Extended Family Independence Program (EFIP) grant of $10 a month for six month to families whose cases would have otherwise closed due to earnings. EFIP payments, while minimal, retroactively count against families’ time limits on cash assistance, raising questions of fairness. The governor’s budget assumes that the EFIP caseload in Fiscal Year 2014 will fall slightly from 1,538 to 1,400.

State Disability Assistance (SDA): The governor recommends a decrease of $546,600 to reflect an anticipated drop in the number of SDA cases to 8,600, a reduction of 8% from the current year. Under the governor’s budget, total funding for the program would fall from $33.9 million in Fiscal Year 2010 to $26.6 million in Fiscal Year 2014, a reduction of 21.5% in five years.

The SDA, which is a state-funded program, provides cash assistance to disabled adults who have annual incomes below $5,400. The payment level for a single adult is $269 monthly.11

Energy Assistance: The governor includes a total of $235 million in federal and state restricted funds for heating assistance programs, including $175 million in federal funds for the home heating credit, energy-related crisis payments and weatherization for low-income homeowners. According to the House Fiscal Agency, since 2010, federal Low Income Home Energy Assistance Program funding to Michigan has been reduced from $284.6 million to an estimated $189.6 million.

The governor also creates a permanent Low-income Energy Assistance Fund–in response to a new state law (P.A. 615 of 2012) requiring DHS to establish a new consolidated program with a single, simplified application. Under the governor’s Fiscal Year 2014 budget, the fund would receive $60 million in state restricted revenues to be collected by the Public Service Commission through utility rates.

Child welfare services: The governor recommends total funding of $970 million ($369 million General Fund) for Michigan’s child welfare system, including protective services, foster care, adoption and family preservation and prevention services. Additional funds are provided to comply with the settlement agreement resulting from a lawsuit against the state for failure to protect children, while funds for out-of-home care are reduced.

Settlement Agreement: The governor’s budget includes $26.3 million to fund 577 workers who were approved this year to improve Michigan’s child welfare system. In addition, funds are made available to enhance the training provided to child welfare workers.

In August 2006, Children’s Rights, Inc., a national advocacy organization, filed a class action lawsuit seeking to reform Michigan’s foster care system, claiming Michigan failed to move children quickly into safe, stable, permanent homes; provide children with adequate medical, dental and mental health services; provide safe and stable foster homes; and prepare children who age out of the foster care system. A settlement agreement was signed in 2008 and revised in 2011. Among the improvements since that time are the hiring of new staff to significantly reduce caseloads, the extension of foster care to age 21, and improvements in health insurance coverage and educational services for youths transitioning to adulthood.12

Foster Care Services: The governor’s budget projects a cut of $15 million (7.3%) in foster care payments. Michigan currently spends $205.8 million on foster care services, with a caseload of 7,200. The average cost per case is over $24,000 and is expected to climb to nearly $27,000 in Fiscal Year 2014.13

Child Care Fund: The governor’s budget reduces funding for the Child Care Fund by $11.1 million, down 6% from current year spending of $188.7 million. 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 or federal TANF.

Adoption Subsidies: The governor provides $215.4 million for adoption subsidies, a small increase from the current fiscal year. Subsidies are provided to families adopting children with special needs and include both cash and medical subsidies. Subsidies are expected to be provided to approximately 27,000 families, with an average cost per month of $651.14

Prevention Services: The governor provides continuation funding for Families First ($17.95 million), Strong Families/Safe Children ($12.35 million) and the Family Reunification Program ($3.97 million). The proposed budget allocates $2.5 million in one-time funding for Family Preservation Programs and Child Protection and Permanency for the expansion of Title IV-B family preservation programs.15

ENDNOTES

1. Ellen Jeffries, State Budget Overview, Senate Fiscal Agency (February 14, 2013).
2. Executive Budget, Fiscal Years 2014 and 2015.
3. Kevin Koorstra, Human Services Background Briefing, House Fiscal Agency (December 2012).
4. Department of Human Services Funding History, Senate Fiscal Agency (updated 1/07/2013).
5. Kevin Koorstra, Human Services Background Briefing, House Fiscal Agency (December 2012).
6. Frances Carley, Senate Fiscal Agency analysis of S.B. 192, Human Services (2/25/2013).
7. Kevin Koorstra, Human Services Background Briefing, House Fiscal Agency (December 2012), and Frances Carley, Senate Fiscal Agency analysis of S.B. 192, Human Services (2/25/2013).The original appropriation for Fiscal Year 2013 for food assistance was based on an assumed caseload of 1,088,146, although actual caseloads are now expected to fall below those levels. 
8. Kevin Koorstra, Human Services Background Briefing, House Fiscal Agency (December 2012).
9. Ibid.
10. Ibid.
11. Ibid.
12. Progress of the Michigan Department of Human Services, Monitoring Report for Dwayne B. v. Snyder, Modified Settlement Agreement, Public Catalyst (June 25, 2012).  
13. Frances Carley, Senate Fiscal Agency analysis of S.B. 192, Human Services (2/25/2013).
14. Ibid.
15. Ibid.