Reports


Road Funding Proposals: Let’s Not Make it Harder for People to Get to Work!

 

Improving the state’s roads is critical to economic growth in Michigan. Not only do people depend on the roads and public transportation to get to work, but businesses—and potential businesses—rely on safe roads to transport goods. It is imperative, however, to ensure that people can still afford to get to work if taxes are increased.

Michigan’s roads desperately need repair. Every year Michigan drivers spend an average of $357 on unnecessary repairs to their vehicles due to damage from deteriorated roads.1 Gov. Snyder has indicated that to address the problem, the state needs to dedicate approximately $1.4 billion, and failing to do so will increase the cost to $2.6 billion annually by 2023.

A number of revenue raising proposals have been suggested. Each of these will impact those earning low wages the most. Increasing the wholesale gas tax, however, would be the least harmful. Increasing the sales tax to generate revenue for roads would further increase the negative effect on struggling people in the state. Restoring the Earned Income Tax Credit (EITC), and ensuring that part of the solution is to increase investments in public transportation, would lessen the negative impact on low- and moderate-income working people, making it easier for them to get to work and support their families.

Increasing the Sales Tax Harms People

One proposal would increase the general sales tax and earmark a portion of those revenues for roads. That raises two concerns:

  1. Increasing the sales tax would have a harmful effect on low-income working families.
  2. Dedicating a portion of sales tax revenues to transportation limits the Legislature’s ability to use those funds for other programs and services that might be needed in the future.

The general sales tax is already considered to be the most regressive state tax, consuming nearly 3% of family income for the poorest 20% of families (incomes under $16,000) while only 0.5% for the top 1% on the income scale (income over $331,000). For the average household in the bottom 20%, the annual cost would be about $261.2

The sales tax is a broad-based tax that is used to generate revenue for a wide range of public services. Almost three-quarters of sales tax revenue in fiscal year 2013 went to fund education while a small portion (less than 1%) supported public transportation. With historically low levels of General Fund revenue and following a decade of cuts, dedicating a portion of sales tax revenues for roads would further limit the Legislature’s ability to use those revenues for other critical programs and services, including public schools and public safety.

Replacing the Flat Gas Tax With A Wholesale Tax on Gas

Another proposal to raise funds for roads would replace the current flat gas and diesel taxes with an adjustable rate based on the 12-month average of the wholesale price of gas. Because the flat gas tax rate (19 cents per gallon) has not increased since 1997, it has lost its purchasing power. The wholesale gas tax would rise over time as the price of gas increased, providing a more stable source of revenue for transportation.

While any increase in taxes will have a negative impact on low-income individuals and working families, replacing the gas and diesel flat taxes with a tax based on the wholesale price of gas would likely have the least harmful effect, especially if coupled with other policies to offset the financial burden faced by those working for lower wages. General sales taxes are based on a percentage of the price of a large range of taxable items whereas excise taxes are imposed on a small number of goods and are determined by volume rather than price, like per gallon on gasoline. Recent estimates reveal that while the bottom 20% of earners pay 3% of their income in general sales taxes, they pay less (2.3%) in other sales and excise taxes (i.e., gas, cigarettes, and beer). For the next 20% in income, the difference is even more significant.

Offsetting Recent and Potential Tax Increases

The tax shift of 2011 increased taxes on individuals by 23%, or $1.4 billion, mostly through the elimination of various tax credits and exemptions that were meant to help households earning the least. The reduction in the Earned Income Tax Credit alone increased taxes on low-income workers by approximately $247 million in 2012.3

According to a recent report, over 40% of Michigan households earn too little to provide for basic needs.4 These households include those who are working and still struggle to make ends meet.5 A single parent can spend up to 11% of their income on transportation, whereas a two-parent household with one adult worker can spend up to 18% of their household income.6 Any additional tax increase is likely to increase the number of struggling families in Michigan, which is why it is important to offset any new tax.

Other states with gas taxes that adjust to the cost of transportation have recognized the need to make their gas tax less regressive by combining various tax credits. In Michigan, the EITC is one of the most effective ways to support working families and lift them from poverty. It is already in place and could be expanded, making it the best vehicle for protecting low-income working families from rising taxes. In addition, there are many low-income families that could benefit from improved public transportation systems. Therefore, investing in public transportation as a part of the road funding solution mitigates the impact on low-income working families.

Road funding proposals should make it easier, not harder, for workers to get to their jobs.

 Endnotes

  1. “Michigan Transportation by the Numbers: Meeting the State’s Need for Safe and Efficient Mobility,” TRIP, January 2014.
  2. Calculation is based on an average income of $8,700 for this group as reported by the Institute on Taxation and Economic Policy, “Who Pays? A Distributional analysis of the Tax Systems in all 50 States, 4th Edition.
  3. Jason Escareno, “Cuts to Michigan EITC Raise Taxes on Working Families,” Michigan League for Public Policy, April 2014.
  4. “ALICE, Asset Limited, Income Constrained, Employed, Michigan: A Study of Financial Hardship,” United Ways of Michigan, September 2014.
  5. These households that are working, often more than one job, but still struggle to meet basic needs have been termed ALICE (Asset Limited, Income Constrained, Employed).
  6. “Making Ends Meet in Michigan: A Basic Needs Income Level for Family Well-Being,” Michigan League for Public Policy, March 2014.

Ask Your Candidates

To address our crumbling roads, lawmakers are offering proposals ranging from increasing the sales tax, creating a wholesale tax on gas, raising vehicle registration fees, or diverting current sales tax revenue to road maintenance. Any type of tax increase, especially to the sales tax, will have a disproportionate effect on individuals earning low wages.

Do you support increased or new revenue to address Michigan’s crumbling road and infrastructure? Would you support increasing the Earned Income Tax Credit or other tax credit to help offset the burden on people earning low wages?

Since the 1970s, the federal Earned Income Tax Credit (EITC) has been considered a significant poverty reduction tool that encourages individuals to work. In 2006, Michigan created its own state-level EITC based on 20% of the federal tax credit. The governor and state lawmakers scaled back the EITC to 6% in 2011.

Would you support restoring the state-level EITC to 20% of the federal tax credit?

3 Michigan is one of only seven states that continue to rely on a flat income tax rather than a graduated income tax. States with graduated income tax structures tax at higher rates as income rises making it a more modern and equitable system.

Would you support reforming Michigan’s income tax structure from a flat income tax rate to a graduated one?

Sales taxes are typically considered to be the most regressive type of tax costing individuals earning low wages a larger proportion of their income compared to wealthier individuals. Expanding the sales tax to apply to services can serve to both increase revenue and make the sales tax less regressive. Even still, the sales tax will remain regressive, which is the reason some states offer sales tax credits to provide relief for individuals who earn the least.

Would you support extending the state’s sale tax to services with a sales tax credit for filers with low wages?

The Michigan Homestead Property Tax Credit (HPTC) is a refundable credit available to eligible Michigan residents who pay high property taxes or rent in relation to their income. In 2011, it was eliminated for many middle-class families, veterans, and seniors whose total household resources were over $50,000 or the taxable value on their homes was over $135,000.

Would you support restoring the HPTC to provide relief to moderate-income taxpayers?

6 Out of 16 states offering families additional heating assistance to qualify for additional food benefits, Michigan was one of four that declined to add dollars to keep the program going when the rules changed. That means an average loss of $76 a month in food benefits for 150,000 families. It will take only $3.1 million to pull down $137 million in extra federal food assistance for these Michigan families.

Do you favor spending $3 million in the ‘heat and eat’ option to draw additional food assistance?

Michigan hasn’t adjusted its child care subsidy eligibility since 2003 even though spending has fallen dramatically. As a result, only working families in poverty or living just above poverty qualify.

Should Michigan expand its child care program back to 150 percent (just under $30,000 for a family of three) of poverty?

8 Two recent federal audits found that Michigan child care centers and homes visited without prior notification were not complying with all state licensing requirements related to the health and safety of children, including required criminal record and protective services checks of caregivers. The auditors concluded that the state has too few child care inspectors (known as child care licensing consultants) to ensure adequate oversight of child care homes and centers, with caseload ratios more than three times the recommended ratio of 1:50.

Would you support the appropriation of state funds to increase the number of child care inspectors and improve the state’s ability to oversee compliance with basic health and safety requirements in state law and policy?

9 Children living in families that must rely temporarily on state income assistance live in increasingly deep poverty as a result of the very low payments provided by the state (a maximum of $492 per month for a family of three through the Family Independence Program). Michigan used to provide a one-time payment to all school-age children from families receiving FIP to ensure that children could at least start the school year with a decent set of clothes. Since 2011, the school clothing allowance has been restricted to only those children living with grandparents or other caretakers who do not receive cash assistance.

Would you support the restoration of a school clothing allowance for all school-age children living in families receiving FIP benefits?

10 Over one-third or 35,000 Michigan third- graders did not demonstrate proficiency in reading in 2013. A House bill would require that third-graders who are not proficient in reading as measured by the state test would be required to repeat the grade at least once and no more than twice. Alternate tests and portfolios may be used to document reading skills but the school superintendent would make the final decision. Critics contend research on retention documents a higher likelihood of drop-out for retained students while supporters of retention decry the negative impact of social promotion.

Would you support the retention of Michigan third-graders who are not reading at grade level?

11 Child poverty in Michigan has escalated by almost 40% over the last 25 years. Almost one of every four children in the state lives in a family with income below the poverty level: $19,000 for a family of three and $24,000 for a family of four. Several policy initiatives to alleviate child poverty have been suggested, such as raising the minimum wage to $10.10—closer to its value in the 1960s and indexing it to inflation, reinstating the state Earned Income Tax Credit to 20% of the federal EITC and raising the child care subsidy and eligibility so parents earning low wages can have access to child care.

Would you support any of these initiatives?

12 Dental cavities remain the No.1 chronic disease in children, despite being preventable with proper dental care. In Michigan, 27% of third-graders have untreated disease; in the Detroit area, the percentage increases to 42%. The Healthy Kids Dental program, a partnership between Delta Dental and the state for Medicaid-eligible children, has greatly increased access to dental care for those covered. The program is available in all counties except Kent, Oakland and Wayne.  All Michigan children should have access to this program. The estimated state investment required is about $22 million.

Would you support statewide expansion of Healthy Kids Dental as a priority?

13 Michigan has been a leader in investments in preschool programs for 4-year-olds, but funding for families with infants and toddlers living in poverty or near poverty has declined—despite scientific evidence that the first three years of life are when children’s brains are growing most rapidly, affecting their lifelong development, learning and achievement.

Would you support additional state funds for proven programs for parents of very young children, including home visiting and parenting programs?

14 Michigan currently has nine coal-fired electricity generating units, with health-related costs associated with emissions from these facilities totaling $1.5 billion annually. These health issues range from asthma to cancer, and heart and lung disease, with people of color and those who are economically vulnerable being the most likely to suffer from these health complications.

Would you support transitioning from coal to clean energy sources, such as wind and solar power to reduce pollution and improve the health of Michiganians?

15 Workers who are laid off, or who work in low-paying jobs, can often improve their financial situation by building skills at a community college or university. However, Michigan’s financial aid grants are not available to workers who have been out of high school more than 10 years. There is discussion in the Legislature of reinstating two financial aid grants that were discontinued several years ago that would help older workers go back to school and get a degree (the Adult Part Time Grant and the Educational Opportunity Grant).

Would you support the reinstatement of the Adult Part Time Grant and the Educational Opportunity Grant to help older workers get the skills they need for jobs that will support their families?

 

 

 

 

 

 

 

Failure to Invest in High-Quality Child Care Hurts Children and State’s Economy

Child care is a necessity for working parents and a key ingredient in the state’s recipe for economic growth. Access to safe, stable and high-quality child care reduces employee absenteeism and turnover and improves businesses’ bottom line. And, because learning begins at birth, it is in child care that many children are developing the basic language, cognitive and emotional skills needed to succeed in school and beyond.

For low-wage workers, child care has become increasingly unaffordable, often rivaling or exceeding housing costs. The state’s child care subsidy program has not adequately met the need, and since 2005, the number of low-income Michigan parents receiving publicly subsidized care has dropped by two-thirds, from nearly 65,000 to only 22,000. Total child care spending fell from $479 million in 2005 to just $136 million in 2014—a reduction of over 70%.

While changes in the economy, including high unemployment, undoubtedly had some impact, policy decisions—including Michigan’s continuing low child care subsidy eligibility levels and provider payments—have been major contributors to Michigan’s inadequate child care system.

Very Young Children Are Most At Risk

The underfunding of Michigan’s child care system is particularly troubling because of the high numbers of very young, low-income children in care while their parents work. In June 2014, 40% of all the children in state-subsidized child care were under the age of 4, and over 60% were under age 6.1

Michigan has too few licensing inspectors to ensure that even basic health and safety standards are met. Placing very young children in care of unknown or questionable safety and quality is a risk Michigan can’t afford to take given the scientifically documented importance of the first years of life in terms of lifelong learning and development. It is during the earliest years that the very architecture of the brain is constructed—a window of opportunity to prime children for success in school and life.

Communities Have Lost State Funding That is Needed to Keep Families Working

The reduction in state child care payments to local communities has economic repercussions. Parents find it increasingly difficult to secure reliable, consistent child care, making it more difficult for them to keep their jobs and provide for their children. Child care providers—an important sector of the state’s workforce—continue to struggle to bridge the gap between their costs and what parents can afford to pay. And, children who spend large portions of their first 2,000 days of life in low-quality child care can face greater hurdles as they transition to school and ultimately into the workforce.

The impact of reduced spending is felt acutely in Michigan’s most populous counties, where more than two-thirds (67%) of the children in state-subsidized child care reside. For example, between January 2007 and January 2014, the average monthly number of children in state-subsidized child care fell nearly 76% in Wayne County, from 38,910 to 9,408, while state funding fell from $16.4 million to $2.5 million. In Kent County, the number of children fell 69%, from 7,314 to 2,283, while payments fell from approximately $3 million to $567,000.

While the impact of child care subsidy caseload reductions and funding losses affects counties and regions of the state somewhat differently, all counties have experienced steep declines. For example, in Southeast Michigan, the decline in average monthly child care spending between January 2007 and January 2014 ranged from 63% in Livingston County to 84% in Wayne.

An Overview of Michigan’s Child Development and Care Program

Michigan’s Child Development and Care program provides child care subsidies to: (1) public assistance recipients; (2) low-income working families with incomes below 121% of poverty ($22,448 for a family of three); (3) licensed foster parents caring for foster children; and (4) families with open child protective services or preventive services cases.2 Most children eligible for subsidized care (65%) in fall 2013 lived in low-income working families; roughly another quarter (23%) lived in families receiving public assistance while working or participating in another approved activity.

Child care subsidies are available for eligible children under the age of 13, as well as children between the ages of 13 and 18 in cases where there are health or disability reasons or a court order. According to state policy, there are four valid reasons for care: (1) family preservation; (2) high school completion; (3) participation in an activity approved by the state; and (4) employment.

Between 2012 and July 2014, Michigan covered only 80 hours of child care in a two-week period—down from a high of 140 hours. The Legislature approved the governor’s recommendation to increase reimbursable care to 90 hours biweekly beginning July 27, 2014. Thirty-two states do not impose caps on the hours of care, and of the states that do, Michigan’s is the lowest, with the average cap being 120 hours biweekly.3

Under federal law, parents are allowed to choose the type of child care settings that best meet their family’s needs, with the following options in Michigan:

  • Child care centers – Facilities, other than private homes, licensed to care for groups of children.
  • Group child care homes – Private homes, licensed to care for up to twelve children.
  • Family child care homes – Private homes registered to care for up to six children.
  • Unlicensed child care providers – Care provided by relatives either in the provider’s or child’s home; or care provided by an unrelated adult in the child’s own home.

In 2011, Michigan’s child care subsidy program was transferred to the new Office of Great Start in the Michigan Department of Education, where the goal is to make child care a part of the early learning continuum—rather than solely a work support resulting in children spending long days in child care settings of unknown quality while their parents work at low-wage jobs. While the Child Development and Care program is housed in the Michigan Department of Education, eligibility is currently determined by local Department of Human Services workers.

In 2012, Michigan spent $23 million on child care quality improvements, or nearly 15% of total federal Child Care Development funds—above the 4% required by federal law.4 Michigan spends those funds on its child care quality improvement and rating system (Great Start to Quality); child care licensing; local Great Start to Quality Resource Centers; tuition scholarships and supports for early childhood educators; the Great Start CONNECT database that helps parents secure better quality care, and serves as a resource for providers; and local Great Start Collaboratives and Great Start Parent Coalitions.

A Note on Michigan’s Other Major Early Learning Programs

Great Start Readiness Program: While Michigan’s child care system is underfunded, the state has made great strides in early education for at-risk 4-year-olds through a $130 million expansion in the Great Start Readiness Program over a two-year period, bringing total funding to $239 million. Michigan’s rise in state funding for preschool was the largest dollar and service expansion in the country, and helped to draw down another $52 million in federal Race to the Top – Early Learning Challenge funding to focus on quality improvements. Michigan expects to serve a total of 63,000 children in the GSRP during this upcoming school year, up from approximately 32,000 in the 2012-2013 school year—nearly doubling the number of children who benefit.5

Currently, 90% of each GSRP grantee’s enrollment of 4year-olds must live in families with annual income at or below 250% of poverty ($46,380 for family of three). Beginning Oct. 1, 2014, children from families with incomes of up to 300% of poverty ($55,656 for family of three) can be enrolled if Intermediate School Districts can demonstrate that all children at or below 250% of poverty are being served and there is no waiting list. The highest need children must be enrolled first; and homeless children, children in foster care and those in special education inclusive preschool programs are eligible regardless of family income.

GSRP is a half-day program for approximately 50% of the children who participate. Providers can combine funding for two GSRP “slots” to create a school-day program, and more have done so with the recently expanded funding. Michigan has not elected, as many states have, to open its state preschool program to 3-year-olds. This is a critical gap, since research shows that two years of intensive preschool provides the best results, particularly for low-income children.

Despite the large increase in overall funding for preschool for 4-year-olds, there have been only small increases in per-slot funding for the GSRP in recent years. The Legislature rejected the governor’s recommended increase of $100 per slot for the 2014-15 school year, leaving total per slot grants at $3,625. Low payments make it difficult to ensure the uniform level of quality needed across the state, as well as build more high-quality programs in the private, community-based sector. In the upcoming school year, Intermediate Schools Districts may lose preschool slots if they fail to submit evidence that they attempted to contract 30% of their total slots to community-based organizations.

Head Start and Early Head Start: In 2013, Michigan received $266 million in federal Head Start funding.6 Federal funds are provided directly to local Head Start providers, and are not subject to state appropriations. Michigan does not invest significant state funds in Head Start. Supplemental state spending on Early Head Start and Head Start is limited to less than $700,000, and includes federal Maternal, Infant and Early Childhood Home Visiting program funds used to expand Early Head Start in three Michigan counties.7

In 2013, there 43,921 Michigan children enrolled in Head Start programs, including 37,571 in regular Head Start (86%), 6,259 (14%) in Early Head Start, and 91 in migrant/seasonal Head Start. Of the funded options for regular Head Start, 89% were in center-based programs, 9% in home-based programs, and 2% in combination programs. For younger children and pregnant women (Early Head Start), 75% were in home-based programs.8

Michigan’s Child Care System is Failing Many Low-Income Working Families

High-Quality Child Care is Unaffordable for Many Families. Child care is one of the biggest items in many working families’ budgets. The average annual cost of full-time infant care in a child care center in Michigan is over $10,000, which is nearly half of the state median income for a single mother, and 13% of the median income of a married couple, placing Michigan as the 12th least affordable state in the U.S. for infant care. Full-time centerbased care for a 4-year-old in Michigan is nearly $8,000, with care for school-age children averaging over $4,500.9

Single parents hoping to place their children in high-quality child care centers—where costs are likely higher than the average—would owe more in child care than rent, with average annual rent payments in the state at nearly $9,000. Certainly they would not be able to afford to buy a home, with average mortgage payments of over $16,000 annually.10

Low Eligibility Levels and Provider Payments Have Limited Access and Quality of Care.

Michigan’s child care eligibility levels are among the lowest in the country. Michigan has one of the lowest child care subsidy eligibility levels in the country, limiting low-income parents’ access to the child care assistance they need to work and support their children. The state’s child care income eligibility threshold (39% of state median income) has not been changed since 2003, and without adjustments for inflation has fallen from 155% of poverty to 121%, or gross monthly income of under $1,990.11

Low child care provider payments have forced families to seek out unlicensed care of unknown quality. Michigan’s low subsidy rates have limited access to licensed or higher quality child care. Historically, child care provider rates have varied depending on the type of child care setting (centers, family and group homes, relatives and aides), the age of the child (under or over 2½ years of age), and the region of the state where care was provided.

In 2010, child care provider rates were restructured and are now the same statewide, varying only by the age of the child and the type of child care setting. Michigan continues to reimburse child care providers on an hourly basis, depending on a child’s actual attendance, making it difficult for providers to run their businesses and project income. Most states pay child care providers on a daily, weekly or monthly basis.

In 2012, Michigan’s reimbursement rates for state subsidized child care were well below the federally recommended level—the 75th percentile of current market rates, which is the level designed to give families access to 75 percent of local providers.12 The state subsidy for a 4-year-old in center care was $433 per month, less than half the $974 monthly subsidy that would represent the 75th percentile of market rate in that year. Center care for a 1-year-old was $650 per month, which is 35% below the 75th percentile of market rate.13

In July of 2014, Michigan increased rates for higher quality providers, based on the state’s new child care quality rating system that ranks licensed child care centers and homes based on a star system, with five stars representing the highest quality programs.

While this rate adjustment is long overdue and much needed, state rates still do not reflect the true and growing cost of care, and under state policy, low-income families are required to pay the difference between what the state will pay for child care and providers’ actual rates. More importantly, there are still relatively few providers in the state eligible for higher payments as a result of quality improvements.

Michigan launched its child care rating system, known as Great Start to Quality, in 2011, but there is still much work to be done to increase the number of child care centers and homes that have high ratings and are thus eligible for higher payment rates. As of Aug. 1, 2014, of the 9,963 programs/providers eligible to participate in Great Start to Quality statewide, 8,164 (82%) had met only basic licensing requirements.

 

Inadequate state child care rates have forced many low-income families to seek out lower cost unlicensed care of unknown or poor quality. In response, state policymakers—using both a carrot and stick approach—have sought to encourage greater parental reliance on licensed care, as well as improve the quality of unlicensed care. Payment rates for unlicensed child care providers were reduced as part of state budget cuts, but also as a reflection of the intention to focus state subsidy dollars on licensed care. Then, beginning in 2009, all unlicensed home providers were required to participate in a seven-hour orientation training before being able to receive a subsidy. When the training requirement was adopted, 65% of subsidized children were in the care of unlicensed providers; by 2012, only 38% were placed in unlicensed care.14

Unfortunately, there are no data showing whether the parents of children no longer in unsubsidized care were able to find higher quality child care in licensed homes or centers, and it is possible that grandparents or other relatives caring for young children simply dropped out of the subsidy system because they were unable to participate in the training, or chose not to because they anticipated only caring for children for a short period of time to help out a family member.

Between 2009 and 2012, overall licensed child care capacity in Michigan fell by nearly 5%, from 366,000 to 349,000. Child care center capacity remained flat, while the capacity of family and group child care homes fell by over 22%.

Michigan Has Been Unable to Adequately Supervise Licensed Care to Ensure Children’s Basic Health and Safety

One area of consistent underfunding has been child care licensing. Michigan has a history of insufficient child care licensing inspectors to monitor child care providers’ compliance with baseline health and safety guidelines. In May 2014, the state employed 68 child care licensing inspectors who were responsible for 10,397 child care facilities, resulting in a 1:153 caseload ratio—more than three times the recommended ration of 1:50.15

As a result, a recent unannounced site visit and audit of 20 licensed family and group child care homes that received CCDF funding in Michigan found that all 20 providers did not comply with one or more state licensing requirements related to health and safety of children, and half did not do required criminal record and protective services checks.16

Subsequent site visits to three child care centers found that the state failed to ensure compliance with health and safety requirements, with all three not completing required criminal record or protective services checks on employees. Included in the audit findings were a blocked fire exit, hazardous substances within the reach of children, a recalled safety crib, unsupervised toddlers, and one caregiver for eleven children in a mixed group including 3-year-olds—all violations of state licensing rules.

One of the primary recommendations of the federal auditors was that Michigan must ensure adequate oversight of child care homes by reducing licensing inspectors’ caseloads, something the state responded was unlikely given current budget constraints.

Investments in Child Care Boost the Economy and Create the Next Generation of Workers

While access to affordable child care has become more limited in Michigan, the state has begun to address the quality of child care, and those efforts were recently bolstered with the new federal Race to the Top – Early Learning Challenge grant. Current initiatives to improve quality are critical, but face an uphill battle because the child care system is so grossly underfunded that it is difficult to attract and retain skilled providers, and high-quality care is financially out of the reach of so many working families.

To ensure that children have the right start in life, and to give lower wage workers the opportunity to work and support their families, Michigan must increase its investments in child care—particularly for its youngest children. While significant investments are needed throughout the child care system, the following is an initial agenda for the state:

  • Increase child care payment rates with the goal of reaching the 75th percentile of market rate. Michigan’s efforts to improve child care quality and get Michigan working will be inhibited if parents cannot afford safe, reliable and high-quality child care, and it is impossible to develop and retain a qualified child care workforce.
  • Increase funding for child care licensing consultants, with the goal of a 1:50 ratio, to ensure that children’s basic health and safety are protected when in state subsidized child care. Failing to invest in the basic safety and health of children who are in child care so their parents can work to support them is incomprehensible and unacceptable.
  • Provide child care payments on a daily or weekly basis, rather than hourly. To ensure an adequate supply of stable child care, it is important to streamline the system and ensure that providers can project their income and stay in business.
  • Further increase the hours of care so that child care can be reimbursed while low-income parents work or participate in approved education and training. While the increase in the upcoming year from 80 hours of reimbursable child care every two weeks to 90 is welcome, it is still too low. If a cap is continued, it should not fall below 100 hours biweekly because it is a disincentive for lowincome parents trying to juggle child care with full-time jobs or training activities, and doesn’t recognize both a 40-hour work week and the time required to travel to a child care setting and work, particularly for parents who are working multiple jobs to make ends meet.
  • Expand eligibility for the Great Start Readiness Program to provide a high-quality early learning experience for the state’s low-income 3-year-olds, beginning on a pilot basis. There is evidence that the lowest income children with the most risk factors do best when they have two years of early childhood education that is adapted to their developmental levels. Of the 40 states that have state-funded preschool programs, only 14, including Michigan, do not enroll 3-year-olds.
  • Strengthen Michigan’s tax system to support the work efforts of families earning lower wages and increase the quality of child care. In 2011, Michigan increased taxes on working families as a way to fund reductions in business taxes. Included was a 70% cut in the Michigan Earned Income Tax Credit which reduced the tax credit for a single mom raising two children and working full-time at minimum wage ($7.40/hour) from $1,074 to only $322—funds that could be used to purchase higher quality child care or transportation to and from work. The EITC is a proven tool for supporting working families, and has been shown to have longlasting positive effects on children, including success in school.

Michigan should also adopt child care tax credits that could help increase access to care and improve quality. One model is the Louisiana School Readiness Tax Credit, which was adopted in 2007, and provides refundable tax credits to: (1) low-income parents who purchase higher quality care for their children while they work to support their families; (2) child care providers based on their level of quality and the number of state-subsidized children they serve; (3) child care teachers and directors in programs that participate in the state’s child care rating system; and (4) businesses that invest in high quality child care.

Endnotes

1. Green Book Report of Key Program Statistics, Michigan Department of Human Services (June 2014).
2. Child Development and Care, presentation to the House Appropriations Subcommittee on Education by Lisa Brewer-Walraven, Michigan Department of Education (March 5, 2013).
3. Ibid.
4. Michigan Race to the Top – Early Learning Challenge Application for Initial Funding, Michigan Department of Education Office of Great Start (Oct. 11, 2013).
5. History of GSRP Funding, Michigan Department of Education at http://www.michigan.gov/documents/mde/Funding_History_317203_7.pdf?20140818143632
6. Michigan Race to the Top – Early Learning Challenge Application for Initial Funding, op. cit.
7. Ibid.
8. Center for Law and Social Policy DataFinder.
9. Parents and the High Cost of Child Care, 2013 Report, Child Care Aware of America (2013).
10. Ibid.
11. Communication from Lisa Brewer-Walraven, Director, Child Development and Care, Office of Great Start, Michigan Department of Education (March 14, 2013).
12. State Child Care Assistance Policies: Michigan, National Women’s Law Center (October 2012).
13. Karen Schulman and Helen Blank, Downward Slide: State Child Care Assistance Policies 2012, National Women’s Law Center.
14. Michigan Race to the Top – Early Learning Challenge Application for Initial Funding, op. cit.
15. Letter from Michael P. Flanagan, State Superintendent, Michigan Department of Education, and Maura D. Corrigan, Director, Michigan Department of Human Services to Sheri L. Fulcher, Regional Inspector General for Audit Services, Office of Inspector General, Office of Audit Services, Region V (May 28, 2014).
16. G. L. Jarmon, Some Michigan Child Care Home Providers Did Not Always Comply With State Health and Safety Licensing Requirements, Office of the Inspector General, Department of Health and Human Services (July 2014).

Pay Falls for Men Earning Low Wages, Yet Women Far Behind

Over the past 35 years, wages for Michigan’s lowest-paid workers have plummeted (men) or stagnated (women), while wages for the highest-paid workers have increased substantially. Disparity in wage growth – with increases for a relatively small sector of the workforce and declines or stagnation for the vast majority – is one of the most important factors influencing the shrinking of the middle class and the faltering of living standards in the country.

Michigan women have higher rates of postsecondary degrees than their male counterparts, and their wages have increased over the years (particularly for higher-earning women). Yet, Michigan’s gender wage gap is the seventh highest in the country. Women of color and high-earning women are particularly affected.

While in Michigan, men’s earnings fared poorly for the most part and the earnings of women increased only modestly, wage trends in Minnesota tell a different story. Since 1979, median wages decreased only slightly for Minnesota men, and increased substantially for women.

The dramatic differences in wage trends seen in Michigan and Minnesota are in part the result of deindustrialization, which hurt Michigan more than Minnesota. However, these are also the result of different tax and spending strategies: While Michigan has a low flat personal income tax rate and has struggled to adequately fund its public schools, Minnesota is a “tax and spend” state that taxes its wealthy residents at a higher rate and spends more in the education of its workforce. This strategy has helped Minnesota grow its share of the knowledgebased job sector, which pays middle-class wages, much more substantially than Michigan.

 

Support Clean Energy in Michigan

 

Reducing air pollution will make Michigan cleaner and healthier

Michigan gets more than half of its electricity from burning coal. The dangerous pollution from coal-fired power plants is associated with asthma, cancer, and heart and lung disease. According to a 2011 study by the Michigan Environmental Council, 180 premature deaths, 680,000 cases of asthma exacerbations and 140 asthma emergency room visits are attributed to pollution from burning coal in Michigan every year.

Clean energy will help Michigan’s most vulnerable populations

People of color and those who are economically vulnerable are most likely to suffer these health complications. This is because the coal-fired power plants tend to be in neighborhoods of low- to moderateincome people, affecting those populations disproportionately. By transitioning from coal to clean energy, we can reduce pollution and improve the health of Michiganians across the state.

Asthma hospitalization rates are significantly higher for African Americans

Labor Day in Michigan Report: Pay Falls for Low-Wage Men yet Women Still Far Behind

 

Raising the minimum wage, strengthening workplace policies, restoring the Earned Income Tax Credit, increasing funding for education and encouraging unionization would help correct dramatic wage losses in Michigan since 1979. Wages in the state have dropped over the past 35 years, particularly for low- and middle-wage men. Over this same period of time, women’s wages, participation in the labor force and educational attainment have increased somewhat. Yet, gender-based wage disparities persist. The labor and economic policies suggested above would boost the pay of Michigan workers of all genders, and help close the gender wage gap.

Wage Trends and the Gender Wage Gap

For a number of years in the mid-twentieth century, wages rose in tandem with productivity. Between 1949 and 1979, productivity (a measure of the value of goods and services that is produced, on average, per each hour of work) increased 108.1% nationwide, while wages for non-supervisory workers increased 93.4%.1 This suggests that economic prosperity was widely shared by businesses and employees, alike. After 1979, however, the link between productivity and wages began to break. Productivity continued to rise, though at a slower pace, while wages lagged substantially behind. Between 1979 and 2013, productivity grew 64.9%, but hourly wages rose just 8.2%.2

In Michigan, compensation for low- and mid-wage workers of prime working age3 fell substantially between 1979 and 2013.4 Real hourly wages dropped 13.4% for low-wage workers and 12.7% for mid-wage workers (see Appendix A.1). With the exception of the years 1998 to 2010, relatively high levels of educational attainment did little to curb this trend. The median hourly wages of prime age workers with bachelor’s degrees fell 4.3%, while wages for workers with master’s degrees or higher increased only 10.7%. Workers without a postsecondary education saw the steepest decreases: The wages of workers without a high school diploma dove 46.3%, while workers with only a high school education saw their wages decrease by 32.1% (See Figure 1 and Appendix A.2).

 Men’s Wages in Michigan

The wages of many Michigan male workers fared worse than the state average. Low-wage men’s hourly earnings plummeted 31.2%, while mid-wage male workers’ wages fell 16.0%. The decline in male wages in Michigan continued even during the nationwide labor market strength of the late 1990s.5 The sharp wage decline abated just a bit during this time, but did not result in wage increases for male workers earning at or under the middle of the wage distribution (see Figure 2).

Michigan Women’s Wages

From 1979 to the late 1990s, wages for low- and mid-wage women declined or saw only modest improvements. However, beginning in the late 1990s, wages for these workers improved the most, averaging 14.6% between 1999 and 2010 for mid-wage women, and 11.3% for low-wage women, before dropping substantially after 2010. Overall, real hourly earnings for low-wage women increased only 4.2% in 2013 relative to 1979, and 10.1% for mid-wage women (see Figure 3).

While the rest of the Michigan workforce saw a decline or stagnation in their hourly earnings, the wages of the highest paid workers of any gender grew consistently – particularly of those earning at the top 10% of the wage distribution. Their wages increased between 8.3% and 39.7% from 1979 to 2013 (see Appendix A.1). Disparity in wage growth – with increases for a relatively small sector of the workforce and declines for the vast majority – is one of the most important factors influencing the shrinking of the middle class and the faltering of living standards in the country.6

 

Gender Wage Gap

As will be shown in the next two sections of this report, over the past three decades, women have increased their labor force participation and have obtained educational credentials at greater proportions than their male counterparts. These improvements help explain the rise in women’s wages7 – particularly for women earning in the top 20% of the wage distribution (see Figure 3 and Appendix A.1) – and the narrowing of the gender wage gap.

The gender wage gap – the difference between the earnings of women relative to men’s – began to improve nationwide in the late 1970s. According to one calculation, the nationwide gender wage gap decreased from 37.3% in 1979 to 17.2% in 2012. However, more than one-quarter of this improvement can be traced to the erosion of men’s wages, rather than to gains in women’s wages.8 As we saw above, the wages of Michigan men of prime working age, earning at or under the middle of the wage distribution, declined sharply – by as much as 31.2% between 1979 and 2013.

Economists caution that a narrowing of the wage gap based on decreases in men’s wages is problematic, as it hurts not only men, but also women. The same factors that harm men’s wages are also exerting a negative influence on women’s wages. If, for a time, protections against discrimination, higher levels of educational attainment and increased labor force participation helped curb the downward pressure on women’s wages, policy choices – such as monetary policy focusing on inflation rather than full-employment, the deregulation of industries, the weakening of labor standards, the erosion in the real value of the minimum wage, and decreased unionization – threaten to reverse these positive wage gains in women’s wages.9

Despite wage gains for women (and wage losses for men), Michigan women experience the seventh-widest gender wage gaps (26.3%) in the nation.11 On average, Michigan women working full-time year-round earned just $0.74 for every $1 a similarly employed man earned.12 The state’s gender wage gap has been stuck in the 70-cent range since 2005, despite nominal increases in the state’s wage floor13 (see Table 1). The wage gap for women of color is much wider: In 2012, an African American woman made just two-thirds what a man made ($0.67 for every $1), and a Hispanic woman earned a little over one-half ($0.54).14

The persistence of a gender wage gap is influenced in part by women’s continued over-representation in the low-wage workforce (see Table 2 and appendices C and D). Although women 16 years and over composed around half (49%) of Michigan’s overall workforce between 2008 and 2012, they represented well over two-thirds (69%) of the low-wage workforce.15 The share of women of prime working age who are employed in low-wage occupations was 20.8% in 2012, while for men this share was just 8.9%. This makes women in the state more than twice as likely as men to be low-wage workers.16

However, the over-representation of women in low-wage occupations does not, alone, explain the gender wage gap. High-earning women have not been spared the pernicious effects of wage disparity. In fact, they experience the highest wage gap among all groups in the wage distribution (see Appendix A.3). While low-wage women earn $1.53 less than men in the same wage group (a 12.91% difference) and have a wage gap of $0.13, women in the highest-wage group earn $9.67 less than their male counterparts (a 23.6% difference) and have a wage gap of $0.21.

Various research has found that a significant proportion of the wage gap (between 7% and 12%) cannot be explained away by women’s choices in occupation.19 This “unexplained” wage gap hurts even college-educated women many of whom, 10 years after graduation, earn just 69% of what men earn. One possible explanation is that when women become mothers, they experience a “motherhood penalty” that extends well beyond the time they are out of the workforce. Research suggests that employers are less likely to hire mothers compared with childless women, and that when they do hire mothers, they tend to offer these women lower salaries than their childless counterparts. Fathers, on the other hand, do not suffer a similar parental penalty.20 Differences in the treatment of men and women – and mothers and fathers – likely account for a significant portion of the unexplained wage gap, and the overall wage gap.

Women’s Contribution to the Economy

While the gender wage gap persists and the wages for the majority of women have stagnated, the contribution of female workers to the nation’s economy has increased over the past 35 years. If women had abstained from working outside the home from 1979 to 2012, the economy would be significantly smaller than it is now.21 Nationwide, the share of women working full-time year-round increased significantly, from 28.6% in 1979, to a peak of 44.2% in 2000, before decreasing slightly to 40.7% in 201222 in the wake of the Great Recession and the jobless recovery that followed.23 The increase in the share of mothers working full-time year-round was even more dramatic, rising from 27.3% in 1979 to 46.0% in 2007 and 44.1% in 2012.24 Women’s work hours nearly doubled between 1979 and 2007 – from 925 annual hours to 1,820 – and increased 80% from 1979-2012 (a figure that accounts for the effects of the recession).25 Employment trends for Michigan women are likely similar.

During this period, women’s contribution to their total household incomes also increased substantially, particularly for low-income families. While in 1979, low-income women contributed just over one-third (33.5%) of their total household earnings, by 2012 their contribution rose to nearly half (45.8%). For middle-income households, women’s contribution rose from 25.0% to 38.6%, and for wealthier households, from 23.8% to 33.5%.26

Through their increased participation in the labor market and the greater number of hours worked, women helped expand the nation’s economy by $1.7 billion (11%) from 1979 to 2012. This increase in the economy is equivalent to almost twice the combined contribution of the information, communications and technology industries in 2012.27

Demographic Portrait of Michigan Women

Women are the backbone of Michigan’s economy. In 2012, women made up over half (51.7%) of the state’s population of prime working age and a slightly smaller but highly significant share (48.9%) of the total employed population in this age group.28

Michigan women have relatively high levels of education. With the exception of professional and doctorate-level degrees, they hold higher shares of various postsecondary degrees compared to men, including 58.1% of bachelors and 57.1% of masters degrees (see Table 3).

When looking at the state’s female population, alone, we can observe that nearly half (45.3%) of Michigan women of prime working age hold postsecondary degrees of any type, including 20.6% with bachelor’s, 13.5% with an associate, and 9.4% with master’s degrees. Another 20.7% attended college but did not earn a degree (see Figure 4 and Appendix B).

Michigan men of this age group, in comparison, have significantly lower levels of postsecondary educational attainment. Only 37.6% of men in the state hold a postsecondary degree of any type, including 15.9% with a bachelor’s, 10.2% with an associate and 7.5% with a master’s degree. However, a higher percentage of men have doctorates or professional degrees (4.0%), than do women (1.8%).Total postsecondary educational attain-ment at the national level is 46.4% for women and 41.3% for men.

Over the past three decades, women’s participation in the labor force increased significantly, while men’s and the state’s average for all genders decreased. From 1979 to 2013, the labor force participation rate29 for women 16 years and older increased 4 percentage points from 50.7% to 54.9%, while men’s participation fell 13 percentage points from 79.0% to 66.5% (see Table 4). In 2012, women of prime working age had a much higher labor force participation rate (70.3%), making their contribution to the state’s economy vital. (Men’s labor force participation rate for this age group was 80.7%).

Michigan women are more likely than their male counterparts to live in poverty, despite increases in educational attainment and labor force participation. Of the state’s population of prime working age who are living in poverty, over half (54.7%) are women.30 In fact, the state’s poverty rate for women of this age group is 24.8% – nearly 6 percentage points higher than the rate for men.31

 

 Female-Headed Households

The poverty rate of Michigan’s female-headed households in the prime working age group is higher than for women of this age group as a whole. Although these households had an employment rate of 70.8% in 2012, over one-quarter (27.7%) lived in poverty. Their median household income was just $35,030.32

Of the almost 315,300 low-income working families in Michigan, more than two in five (41.9%) are headed by women.33 Although mothers of very young children make up just 4.6% of the state’s workforce, they represent a higher share (6.9%) of the low-wage workforce.34 One in five (22.0%) of these mothers were employed in a low-wage occupation.

In 2012, significant shares of Michigan working households (whether headed by women or men, or both equally) received food assistance (formerly known as food stamps and now called the Supplemental Nutrition Assistance Program, or SNAP). Almost half (48.8%) of working families with household incomes below 200% of the federal poverty threshold received food assistance. The SNAP participation rate for families below 100% of poverty was even higher – close to three-quarters (70.3%).35

Median Wages in the Midwest: A Comparison

As we saw in the first section of this report, median wages dropped 12.7% in Michigan between 1979 and 2013. The drop was larger for low-wage workers (13.4%), while high-wage workers saw their wages increase by 8.3% or more (see Appendix A.1). Men’s wages declined more than women’s.

Much of the Midwest also experienced wage declines or stagnation. Illinois and Indiana both had negative real median wage growth, while wages stagnated in Wisconsin, Iowa and Missouri, which experienced growth between 0% and 2.3%. Minnesota, on the other hand, bucked the trend. The state saw real median wage growth of 11%, much of it occurring after 1997, around the time when the nation’s workers enjoyed the employment and wage benefits of a tight labor market. The difference in wage growth between Minnesota’s and Michigan’s wage trends between 1979 and 2013 is a whopping 23.7 percentage points (see Table 5 and Figure 5).

Men’s median wages throughout the Midwest also declined significantly – nearly all of it in the double-digit range. Michigan led the pack, with the steepest decline of 16.0%, while Minnesota, though unable to avoid negative growth, saw the smallest decline in the region: 4.9% (see Table 5 and Figure 6). Once again, the turning point seems to be the late 1990s, when men’s wage decline in Minnesota began to lose steam (and in fact, turned positive between 1999 and 2005) while in Michigan it continued on a downward trend that accelerated after 2009.

Although all Midwestern states experienced positive wage growth for women, Minnesota and Michigan stand out once again. Women in Minnesota saw the most cumulative wage growth in the region (40.1%), while Michigan women saw the least (10.1%). In 1979, women in Minnesota were paid 8.8% less than women in Michigan. But by 2013, the former’s wages had surpassed the latter’s. Minnesota women now earn 17.0% more than their Michigan counterparts. Unlike male wages, the diverging trends in female wages in Minnesota and Michigan began much earlier than the late 1990s. By 1982, women’s wages in Michigan had turned negative (2.5%), while in Minnesota they had turned positive (2.0%). This trend picked up steam in the late 1990s, resulting in the 30 percentage point gap that exists today.

What explains the dramatic differences seen in Minnesota and Michigan? One part of the answer points to deindustrialization. Over the past two decades, Michigan has struggled with a declining manufacturing sector, much of it concentrated around the auto industry. This industry, which throughout much of the twentieth century had expanded the middle class in Michigan – and especially in Detroit – began to falter with the global decline in manufacturing, foreign competition in the auto industry, and the increased automation of many assembly-line jobs.36 From 1990 to 2011, manufacturing employment in Michigan declined by 37% and employment earnings in this sector declined by a similar figure (35%). Deindustrialization and the near collapse of the auto industry led to a decade-long recession in the state, from which Michigan is still recovering. Minnesota was not as reliant on the manufacturing sector, and certainly not on the auto industry. During this same period of time, manufacturing employment in the state fell by a relatively smaller rate (11%), while related employment earnings fell 6%.37

While manufacturing was declining, the knowledge-based sector of the economy was expanding, and Minnesota was able to take advantage of it. The knowledge-based economy, in which today’s high-wage jobs are concentrated, can be defined as production and services based on knowledge-intensive activities – such as information technology, finance, insurance and private health care and social services.38 Between 1990 and 2011, Minnesota grew its employment in the knowledge-based economy by 60%, twice Michigan’s rate of 30%. Minnesota’s employment earnings in this sector expanded even more: 74%, more than twice Michigan’s 32% growth.39

While deindustrialization and the near collapse of the domestic auto industry were, to some extent, unavoidable and greatly impacted Michigan’s economy – something that Minnesota was mostly spared – that alone did not set these two states is such diverging economic paths. Policy choices have played an important role in their differing outcomes.

Minnesota is a high-tax state, which enables it to invest more in its residents. Since the early 1970s, Minnesota lawmakers have made the conscious choice to implement and protect various tax and fiscal reforms – collectively known as the “Minnesota Miracle” – that succeeded in curbing disparities in the quality of public education, and shifted more of the burden of financing local governments from property taxes to state income and sales taxes.40 Minnesota has a progressive state income tax rate that varies between 5.35% and 9.85%, with the higher tax rate reserved for wealthier Minnesotans. In contrast, Michigan has a flat income tax rate of 4.25%, which applies to everyone – rich or poor. In combination with other state and local taxes, Minnesota’s tax structure allowed it to collect $5,016 in taxes, per capita, in 2011. In contrast, Michigan’s combined state and local taxes, per capita in 2011, was just $3,655. Minnesota’s enhanced ability to collect revenue also allows it to spend more on services for its residents compared to Michigan: $4,443 per capita in Minnesota vs. $2,813 in Michigan.41

Minnesota’s spending priorities include early childhood education, K-12 education, higher education, the state’s social safety net, infrastructure and public transit – all of which are funded much more generously than in Michigan,42 and all of which help prepare its workforce for the demands of the modern global economy and give Minnesotans a chance to succeed – even in bad times.

The stark differences in wages seen in Minnesota and Michigan, therefore, should not come as a surprise. Minnesota’s wage gains are in great part the result of the state’s resolve to invest in the public good, while Michigan’s wage declines are the result of both a shift in the global economy and, most importantly, of policy choices that have hurt its working men and women.

Policy Recommendations

Raise the Minimum Wage and Eliminate the Tipped Wage. Raising the wage floor to $10.10 per hour would reduce poverty in the state (including child poverty), boost the state’s economy, and create thousands of jobs.43 Increasing the minimum wage, and in particular eliminating the tipped wage would also help reduce the gender wage gap. As discussed above, women are more likely than men to work in low-wage occupations, including jobs as servers in the restaurant industry where they make up 70% of the workforce.44 The Michigan Legislature recently passed a law that would increase the state’s minimum wage to $9.25 by 2018 and index it to inflation. This law also pegged the tipped wage to 38% of the regular minimum wage. While a step in the right direction, the increases would still leave many families in poverty, including thousands of Michigan children whose parents struggle to make ends meet on these wages.45 Increasing the wage floor to $10.10 or above and bringing the tipped wage to parity with the regular minimum wage would boost many families above poverty and narrow the gender wage gap.

Encourage Collective Bargaining. As discussed above, since the 1970s, wages have been eroding or stagnating for men and women earning at or under the middle of the wage distribution. Wages for higher-paid workers, on the other hand, have increased, resulting in an increase in wage inequality. These trends coincide with a decline in unionization rates – which fell to 13.1% in 2011 – and has resulted in the loss of worker’s bargaining power. Studies suggest that deunionization explains about a third of the growth of wage inequality among men and a fifth of the growth among women. Higher rates of union membership could curb wage erosion. Unionization enhances worker’s ability to bargain for better wages and usually results in higher wages for those who are covered by a collective bargaining contract. This “union wage premium” (as the phenomenon is known) is 17.3% higher wages for men, 9.1% for women, and 13.6% overall.46

Strengthen Workplace Policies. As discussed above, women’s contributions to the national economy have steadily increased since 1979. More women and mothers have entered the labor force and increased their work hours. Through their work, they have substantially expanded the nation’s economy. Women’s higher participation rate in the labor force means that workplace policies need to change to accommodate the needs of dual-income and single-parent families, especially for those who are in low-wage jobs. Michigan should enact legislation requiring paid family and medical leave and standards for scheduling, to help workers plan for and meet their family needs. Michigan should also increase its child care subsidy to be more in line with market rates, improving both the quality and affordability of child care options for low-paid workers. Evidence suggests that access to stable, high-quality child care increases labor force participation, reduces employee absenteeism and turnover, and helps workers maintain their employment.

Restore the State Earned Income Tax Credit (EITC). The EITC is a refundable tax credit that promotes work and offsets the tax burden of many low- and middle-income working families. In tax year 2012, the Legislature reduced the Michigan EITC from 20% to 6% of the federal credit. This change increased the taxes paid by many working families by 70%, with low-income households most affected. The EITC is a tool that has been proven to reduce poverty and boost the work efforts of many families, particularly for single-parent households with low educational attainment.47 Restoring the credit to 20% would encourage more of these households to join the workforce and increase their work hours. This, in turn, would increase the state’s labor force participation rate and over time increase those workers’ hourly earnings.

Increase Education Funding, Including Higher Education. As discussed in the section, “Median Wages in the Midwest: A Comparison,” wage trends in Michigan and Minnesota could not be more different. While wages dropped dramatically in Michigan (particularly for men), in Minnesota wages increased for the overall population and for women, and decreased only slightly for men. Although there are a number of factors that led to the different outcomes for these two states, Minnesota spends substantially more on the education of its residents, from pre-kindergarten to university. Minnesota’s higher rates of investment on education – and in particular, in higher education – not only produces a highly educated workforce and an attractive business climate for high-paying knowledge-based jobs, but it also curbs tuition increases at state colleges and universities. Lower tuition increases results in lower amounts of student loan debt, a type of debt that can reduce the discretionary income of student debtors and reduces their ability to fully participate in the consumer economy. From 2013 to 2014, tuition at public colleges and universities in Minnesota decreased 0.4%, which in Michigan it increased 2.1%.48

Acknowledgments:

I would like to extend a very special thank you to David Cooper (Economic Policy Institute) and Katherine Gallagher Robbins (National Women’s Law Center) for their assistance gathering and processing data. I am also grateful to Luke Reidenbach (California Budget Project), for his perceptive insights on wage trends.

Endnotes

  1. Josh Bivens, Elise Gould, Lawrence Mishel and Heidi Shierholz, Raising America’s Pay: Why It’s Our Central Economic Policy Challenge, Economic Policy Institute, June 2014.
  2. Ibid.
  3. Although more commonly referring to individuals between the ages of 25 and 54, in this report “population of prime working age” refers to persons 25 to 64 years of age. This expanded definition allows us to capture data for workers who are midway between the minimum age (62) for the receipt of partial Social Security benefits, and the age (66) for the receipt of full benefits and therefore near full-retirement. Unless otherwise noted, data in sections “Wage Trends and the Gender Wage Gap” and “Demographic Portrait of Michigan Women” will refer to this age group only.
  4. Low-wage workers are those with hourly earnings in the 20th percentile of the wage distribution. Mid-wage workers are those with earnings exactly in the middle. High-wage workers are those with earnings in the 80th percentile, and top 10% are workers with earnings in the 90th percentile.
  5. During the late 1990s, the nation as a whole experienced low levels of inflation and unemployment, a productivity surge that was mostly led by computer-based information technology, and an increase in the federal minimum wage. These events led to a short-lived but positive increase in hourly wages for workers of all gender at the national level. Michigan bucked this wage trend, however. For more information of the dynamics of the U.S. labor market during this period, see Lawrence F. Katz and Alan B. Krueger, “The High Pressure U.S. Labor Market of the 1990s,” Brookings Papers on Economic Activity, 1999; and Gavin Wright, “Productivity Growth and the American Labor Market: The 1990s in Historical Perspective,” Understanding the 1990s, in Paul Rhode and Gianni Toniolo (eds.), Cambridge University Press, 2006.
  6. Josh Bivens et al. Op. Cit.
  7. Heidi Shierholz, Commentary: The Wrong Route to Equality – Men’s Declining Wages, Economic Policy Institute, June 12, 2013.
  8. Ibid.
  9. Ibid.
  10. Data refers to workers 16 years and older, working full time year-round.
  11. Julie Vogtman and Katherine Gallagher Robbins, Higher State Minimum Wages Promote Fair Pay for Women, National Women’s Law Center, Mach 2014. Gender wage gap data refers to population 16 years and older.
  12. Ibid. The wage gap comparison is to earnings of non-Hispanic white males, who generally have the highest earnings among all men and whose earnings are, therefore, the benchmark on which the gender wage gap measurements (including those for minority women) are based.
  13. Increases in the minimum wage could potentially affect women more than men, because women are more likely than men to be employed in low-wage occupations. See discussion of the over-representation of women in low-wage jobs, below.
  14. National Women’s Law Center, The Wage Gap by State for Women Overall, November 2013.
  15. National Women’s Law Center, Underpaid and Overloaded: Women in Low-Wage Jobs, July 2014. Here, the low-wage workforce is defined as those in occupations with median hourly wages of $10.10 or less.
  16. Ibid.
  17. Joan Entmacher, Katherine Gallagher Robbins and Lauren Frohlich, Women are 76 Percent of Workers in the 10 Largest Low-Wage Jobs and Suffer a 10 Percent Wage Gap, National Women’s Law Center, April 2014.
  18. Estimates on total number employed, and median hourly and annual wages refer to workers (both genders combined) between the ages of 25 to 64 years.
  19. American Association of University Women, The Simple Truth About the Gender Wage Gap, Fall 2013.
  20. Ibid.
  21. Eileen Appelbaum, Heather Boushey and John Schmitt. The Economic Importance of Women’s Rising Hour of Work: Time to Update Employment Standards, Center for American Progress and Center for Economic and Policy Research, April 2014.
  22. Ibid. Data in this section refers to women ages 16 to 64 years old.
  23. The Great Recession officially lasted from December 2007 to June 2009. However, high levels of unemployment remain a problem in several states, including Michigan, which in June 2014 had an unemployment rate of 7.5%, the fourth highest in the nation and significantly above the national rate of 6.1%.
  24. Op. Cit. Data refers to mothers in households with children under the age of 18.
  25. Ibid.
  26. Ibid. These figures are based on a “middle three quintiles” definition of middle-class. See Appelbaum et al. for other definitions of middle class and their respective data. See also Craig K. Elwell, The Distribution of Household Income and the Middle Class (Congressional Research Service, March 2014) for expanded definitions of middle class.
  27. Ibid.
  28. Current Population Survey, Annual Social and Economic Supplements, 2013. U.S. Census Bureau, CPS Table Creator.
  29. The labor force participation rate is the share of the civilian population who are either working or looking for work relative to the total civilian non-institutional population, and should not be confused with the unemployment or the employment-to-population rates, which are difference measures. The labor force participation rate can be influenced by individuals’ decisions to pursue education or to drop out of the labor market altogether, particularly during economic downturns.
  30. Current Population Survey, Annual Social and Economic Supplements, 2013, op. cit.
  31. 2012 American Community Survey, 1-Year Estimates.
  32. Op. Cit.
  33. Deborah Povich, Brandon Roberts and Mark Mather, Low-Income Working Families and State Policy: Investing for a Better Economic Future, Working Poor Families Project, Winter 2013-2014. This data refers to households of any age group headed by women without a spouse present, with children under the age of 18.
  34. Helen Blank, Karen Schulman and Lauren Frohlich, Nearly One in Five Working Mothers to Very Young Children Work in Low-Wage Jobs, National Women’s Law Center, April 2014. The term “mothers of very young children” is defined as women raising at least one child under the age of 3; the data refers to employed workers only. “Low-wage occupations” is defined as occupations with median hourly wages of $10.10 or less.
  35. Working Poor Families Project analysis of the 2012 American Community Survey microdata. Data does not specify age groups.
  36. Lou Glazer and Don Grimes, The New Path to Prosperity: Lessons for Michigan from Two Decades of Economic Change, Michigan Future, October 2013; and Thomas J Sugrue, Motor City: The Story of Detroit, The Gilder Lehrman Institute of American History, accessed August 13, 2014.
  37. Glazer and Grimes, ibid.
  38. Ibid.
  39. Ibid.
  40. Ibid.
  41. Ibid.
  42. Ibid.
  43. Yannet Lathrop, Raising the Minimum Wage: Good for Working Families, Good for Michigan’s Economy, Michigan League for Public Policy, February 2014.
  44. Yannet Lathrop, Raising the Minimum Wage Helps Women, Promotes Pay Equity, Michigan League for Public Policy, April 2014.
  45. Gilda Z. Jacobs, Michigan League for Public Policy, Testimony on Senate Bill 934, House Government Operations Committee, May 21, 2014.
  46. Lawrence Mishel, Unions, Inequality, and Faltering Middle-Class Wages, Economic Policy Institute, August 29, 2012.
  47. Yannet Lathrop, The Michigan EITC: A Small Investment that Makes a Big Difference, Michigan League for Public Policy, June 2013.
  48. Michael Mitchell, Vincent Palacios and Michael Leachman, States Are Still Funding Higher Education Below Pre-Recession Levels, Center on Budget and Policy Priorities, May 1, 2014.

 

State Financial Aid Leaves Adult Learners Behind

 

Michigan needs to revamp its financial aid system to ensure that adult learners can build their skills, get a job and become economically secure.

Michigan’s job market is changing. For decades, many individuals became employed in the manufacturing sector immediately after graduating from high school at age 18, built up their skills on the job, and attained a livable wage with which they could support their families and retire with a pension.

Today, rather than teaching needed occupational skills on the job from “square one,” most employers who pay a livable wage expect their new hires to already possess those skills at some level. Sometimes prior experience is sufficient, but for many workers the attainment of required skills must be signified by a recognized credential such as a degree, license or certificate. These credentials are most often attained through completion of a postsecondary program at a community college, technical school or university.

Many workers find themselves needing to acquire new marketable skills with the expectation that doing so will lead to re-employment, higher pay or more job security. Some such workers may have been laid off, others may be trapped in low-wage jobs, and still others may be re-entering the workforce after an extended time as full-time homemakers. Many such individuals do not possess a postsecondary credential and will have a difficult time in the labor market (see Appendix 1).

 

Unfortunately, tuition has increased at community colleges by 31%, though it still compares favorably to other states. Universities increased by 49% since 2005, and Michigan’s public university tuition is the sixth-highest in the nation (Fig. 1). Due to the rising costs, these older workers often need financial aid to help pay for their training. Each year, more than 100,000 (and sometimes more than 150,000) individuals over age 30 in Michigan fill out the Free Application for Federal Student Aid, or FAFSA, which is also used to determine eligibility for state as well as federal aid. (Fig. 2).

 

 

 

 

 

 

The Problem

The decision to get trained in new skills is often made more than 10 years after graduation from high school. While state financial aid helps many students of traditional college age, there are no state financial aid programs to help students attend public community colleges or universities if they have been out of high school for more than 10 years. Two of the three existing grant programs explicitly exclude such individuals from eligibility, and the third is available only to those attending a private, not-for-profit institution:

Tuition Incentive Program: Eligibility rules require applicants to apply prior to high school or GED completion and before the 20th birthday, and the award must be used within 10 years of high school or GED completion—effectively preventing anyone older than age 28-30 from using the award.

Michigan Competitive Scholarship: Workers are ineligible if they are out of high school for more than 10 years, preventing students who graduated “on time” at age 18 from using the award once they pass age 28.

Michigan Tuition Grant: Workers and parents of any age are eligible, but their postsecondary education must be at a private not-for-profit institution. It is not available for use at community colleges, which offer programs specifically designed for students who are working or raising families (Fig. 3).

 

 

 

 

 

 

 

 

 

 

In addition, none of the three current grant programs are available to students enrolled less than half time or who are in short-term occupational programs. Students who are juggling employment, family and school must often go less than half time or enroll in a short-term program due to having to work and care for family members. As discussed in a recent paper by the Working Poor Families Project, while low-income adult students are likely to need employment to support their families and finance their education, working more than a few hours at a job can often result in lower grades and even dropping out. Not having financial aid may discourage adult learners from going to school less than half-time.1

In 2010, the Legislature eliminated a number of grant programs that were available to adult learners: the Adult Part-Time Grant, the Michigan Educational Opportunity Grant, the Michigan Nursing Scholarship and Work-Study. This may have been a factor in the 31% decline in FAFSA applicants age 30 and over for school year 2013-14. (See Appendicies 2 and 3).

It should be pointed out that there are employer-sponsored training programs in some areas of the state that are of low cost or no cost at all to the student. Michigan supports such programs through its Skilled Trades Training Fund and there are other programs available in some areas as well. However, for older working students who are in non-employer-based programs at community colleges and universities, there is no state financial aid available.

Policy Recommendations

Michigan should do the following to make it easier for adult learners to receive financial aid:

1.  Make need-based grants available to older workers by

a) reauthorizing funding for either the Adult Part-Time Grant or the Educational Opportunity Grant, both of which were specifically designed to serve adult learners in a wide variety of circumstances, or

b) modifying the eligibility rules of the Michigan Competitive Scholarship and/or the Tuition Incentive Program to allow older workers to qualify and to allow the money to be used for less than half time enrollment or for short-term occupational programs.

2. Implement a Work-Study program that subsidizes academically relevant work for low-income adult students while paying a livable wage. Studies show that working students are less likely to drop out or suffer academic setbacks if their work is related to their courses of study. Although the traditional Work-Study program was ended in 2010, Michigan could replace it with a carefully targeted program that connects employment to academics. (For more information, see the Working Poor Families Project paper Earn to Learn: How States Can Reimagine and Reinvest in Work-Study to Help Low-Income Adults Pay for College, Enhance Their Academic Studies.)2 

Conclusion

Helping older workers attain new skills leading to in-demand jobs will help grow Michigan’s economy. With the layoffs in manufacturing and other sectors, many workers with families are unemployed, under­employed or earning less than what they used to. This results in less tax revenue for the state and less economic stability for the families. Michigan should provide grants that enable working parents to get skilled jobs. It is good workforce development.

Endnotes

  1. Alstadt, D., Earn to Learn: How States Can Reimagine And Reinvest In Work-Study To Help Low-Income Adults Pay For College, Enhance Their Academic Studies, And Prepare For Post-College Careers, The Working Poor Families Project. Washington, DC: 2014. (http://www.workingpoorfamilies.org/wp-content/uploads/2012/03/WPFP-Spring-2014-Brief.pdf, accessed April 18, 2014)
  2. Ibid.

 

 

 

Education Funding Lags in Michigan

 

Final Corrections Budget Invests in Prevention, Reflects Health Care Savings

The Department of Corrections budget for the budget year that begins Oct. 1 includes new efforts to prevent individuals from entering the justice system, helps inmates transition back into their communities and improves other re-entry programs. The Corrections final budget also reflects expected savings from the implementation of the Healthy Michigan Plan, which would allow the Department to claim federal reimbursement for some healthcare costs for inmates, probationers and parolees.

The final DOC budget approved is $2.04 billion in total funding, including $1.98 billion in state General Fund. This is a 0.4% ($8.1 million) increase in total funding, and a 1.2% ($22.8 million) increase in state General Fund dollars, compared with this year’s funding.

The DOC budget is the fifth largest, accounting for approximately 4% of total appropriations from all fund sources in the current fiscal year. When state General Fund monies are considered alone, the DOC budget is the state’s second largest, accounting for 21.3% of the General Fund. General Funds made up over 96% of the Corrections budget in Fiscal Year 2014.

The final budget is lower than the governor’s recommendation by $9.4 million in GF and total funding. Included in the DOC budgets are the following changes:

Healthy Michigan Plan

Governor:

  • Recognizes full-year savings of $19.1 million in state General Fund in Fiscal Year 2015 as a result of the implementation of the Healthy Michigan Plan. Under this plan, low-income individuals ages 19-64 – who are not eligible for or enrolled in Medicaid or Medicare, are not pregnant, and have incomes up to 133% of the federal poverty level – qualify for comprehensive healthcare. The current-year budget assumed that most prisoner inpatient hospitalizations, certain services for mentally ill and medically fragile inmates, and some re-entry services would be covered. However, it was subsequently determined that certain treatments for sex offenders and substance abuse are not eligible for Medicaid reimbursement. The executive budget acknowledges that these services are not covered by federal funds, and reinstates $5.1 million in state funds to cover the costs.

House:

  • Concurs with the governor.

Senate:

  • Concurs with the governor.

Final Budget:

  • Concurs with the governor.

New Hepatitis C Treatment Protocol

Governor:

  • Includes $4.9 million in new funding to implement a treatment protocol for Hepatitis C, as recommended by the Centers for Disease Control and Prevention. Current treatment duration can take up to one year; includes side effects such as depression, anxiety and anemia; and is not guaranteed to cure the disease. The drugs recently approved by the Federal Drug Administration shorten the treatment period to 12 weeks, have fewer side effects, and a success rate of approximately 95%.

House:

  • Does not concur with the governor.

Senate:

  • Includes a $100 placeholder to ensure discussion of the issue in conference committee, expressing concerns about the higher cost of the new treatment protocol.

Final Budget:

  • Includes $4.4 million in General Funds.

Mental Health Diversion Council

Governor:

  • Includes $1 million in state funding for a pilot project that will connect inmates in one local jail with comprehensive mental health treatment as they transition back into the community. This funding is part of the implementation of the recommendations of the Mental Health Diversion Council created by the governor in 2013. This council is tasked with developing methods to divert individuals with mental illness or substance abuse problems out of the criminal justice system and into appropriate treatment.

House:

  • Concurs with the governor.

Senate:

  • Concurs with the governor.

Final Budget:

  • Concurs with the governor.

Prisoner Education Enhancement

Governor:

  • Includes $4.3 million General Fund (of which $1.1 million is one-time funding) to expand prisoner vocational education and prepare parolees for entry into the workforce. The added funding will be used to hire 15 additional employment counselors and five instructors. This initiative will focus on helping inmates acquire skillsets that are in demand by employers and connect inmates with employers prior to their release.

House:

  • Concurs with the governor.

Senate:

  • Does not include this funding.

Final Budget:

  • Concurs with the governor.

Michigan State Industries

Governor:

  • Includes $12.3 million in restricted funds to cover the administrative costs of Michigan State Industries. MSI is a DOC program that employs inmates while imprisoned. MSI’s stated goal is to give inmates an opportunity to acquire job skills and experience in preparation for their release.

House:

  • Concurs with the governor.

Senate:

  • Reduces funding for this program by $6.2 million (50%) in restricted funds, and calls for a study of the program by December 2014.

Final Budget:

  • Concurs with the governor.

Goodwill Flip the Script

Flip the Script is a program of Goodwill Industries of Greater Detroit, which provides education, job training and mentoring for young males, 16-30 years old, to encourage their self-sufficiency and prevent their entry into the justice system.

Governor:

  • Does not include funding for the program, which is a new line item in the Senate budget.

House:

  • Does not include new funding.

Senate:

  • Includes $4.5 million in state funds for Flip the Script.

Final Budget:

  • Includes $2.5 million in state funds.

Swift and Sure

The Swift and Sure Sanctions Probation Program is a joint project with Michigan Rehabilitation Services in the Department of Human Services, and is designed to assist mentally and physically disabled probationers find employment.

Governor:

  • Does not include new funding, which is a new line item in the Senate budget.

House:

  • Does not include new funding.

Senate:

  • Includes $3 million in additional state funding. These funds would be transferred to the Department of Human Services to expand The Swift and Sure Sanctions Probation Program.

Final Budget:

  • Includes $1 million in additional state funds.

Prisoner Re-Entry Legal Services

Re-entry legal services is a pilot program that would assist ex-offenders with employment, housing, child support and other related matters by providing outreach, education and legal representation.

Governor:

  • Does not include funding for the program, which is a new line item in the House budget.

House:

  • Adds $449,000 in state General Fund for two pilot programs to be established in Kent and Oakland counties (the latter also serving Wayne County).

Senate:

  • Does not include new funding.

Final Budget:

  • Includes $149,000 in state funds.

Re-Entry, Parole, Probation and Community Programs

Governor:

  • The governor recommends $311.7 million in total funding for re-entry, parole, probation and community programs, a decrease of 4.9% ($15.9 million) compared with year-to-date funding. This decrease reflects expected savings from the implementation of the Healthy Michigan Plan, expected reductions in federal grants, and a transfer of funds to the Correctional Facilities Unit for the newly re-opened Detroit Detention Center.

House:

  • Includes $312.1 million, a decrease of 4.7% ($15.5 million) compared with year-to-date funding.

Senate:

  • Approves $315.5 million, a decrease of 4.3% ($14.1 million) compared with year-to-date funding.

Final Budget:

  • Includes $313.6 million, a decrease of 4.3% ($14.0 million) compared with year-to-date funding.

Human Services Budget Reflects Continuing Steep Caseload Declines

 

After years of declining investments, the Department of Human Services budget signed by the governor for the year beginning Oct. 1 further reduces total funding by 4.8%, from $6.05 billion to $5.76 billion.1 Driving the reductions has been an unprecedented drop in the number of families with children able to access income assistance through the state’s Family Independence Program. FIP cases are expected to fall from their recent peak of 85,389 in 2007 to 32,800 next year—a drop of 62% in less than a decade.2

Reductions in caseloads and spending partly reflect policy decisions that have made fewer families and children eligible for public assistance benefits, including lifetime limits on income assistance, and a new asset test for food assistance.

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

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. Decisions made by the Legislature will affect 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.

Income Assistance

Governor’s Budget:

  • Cuts funding for income assistance for families with children. The governor’s budget for Fiscal Year 2015 includes $152 million for the FIP program, a reduction of 29% from the current level of $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.
  • Expands funding for outstationed DHS workers. The governor recommends $19.3 million in federal, private and local funds to expand the number of outstationed DHS workers by 150. With this funding, DHS would be able to expand the number of workers in hospitals, long-term care facilities, school based centers or businesses that agree to pay a portion of the cost, using their contributions to draw down federal funding.
  • Continues 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. The governor projects monthly Extended-FIP caseloads of 1,105 next year, down by 155 cases.
  • Continues the current FIP children’s clothing allowance. The governor’s budget includes $2.9 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 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.

House:

  • Agrees with the governor’s recommended FIP caseload of 33,200, and total funding of $152 million.
  • Allocates $2.9 million for the annual FIP children’s clothing allowance, but expands eligibility to all FIP children ages 4 through 18.
  • Continues current policy of counting minimal Extended-FIP benefits against lifetime limits, but expands budget language requiring DHS to notify families of the effect on lifetime benefits on both the FIP application and the form that notifies families of their eligibility.
  • Agrees with the governor’s expansion of outstationed workers, but transfers non-child welfare DHS staff to offset the expected increase in donated funds positions, rather than increase the number of authorized positions.

Senate:

  • Agrees with the governor’s projected FIP caseload of 33,200, a reduction of 11,200 cases monthly, reducing FIP funding by $62.3 million.
  • Adds budget language requiring DHS to report quarterly on: (1) the number and percentage of nonexempt FIP recipients who are employed; (2) the average and range of wages of employed FIP recipients; and (3) the number and percentage of employed FIP recipients who remain employed for 6 months or more.
  • Agrees with the governor’s expansion of outstationed workers by $19.3 million and 150 full-time positions.
  • Agrees with the governor by continuing to count minimal Extended-FIP benefits against families’ lifetime limits.
  • Includes new budget language requiring DHS to create a workgroup to determine how Michigan Works! job training programs can be revised to reflect declining FIP caseloads, including possible reductions in the amount of federal Temporary Assistance for Needy Families (TANF) funding that is provided to Michigan Works!

Final Budget:

  • Cuts funding for income assistance for families with children below the governor’s recommendation. The final budget includes $147 million for the FIP program, a reduction of 31% from the current year level of $214 million. The governor had originally assumed that FIP caseloads would fall from 44,400 this year to 33,200 in 2015, a reduction of 25% in a single fiscal year. With the May revenue estimating conference, the current year caseload is now expected to be only 36,100, falling to 32,800 in Fiscal Year 2015.
  • Includes $25.7 million to expand the number of outstationed DHS workers by 200—above the governor’s recommendation of $19.3 million—but rejects a House proposal to transfer 150 non-child welfare DHS staff to offset the expected increase in donated funds positions.
  • Continues the current Extended-FIP policy, which gives households leaving FIP due to earnings $10 per month in FIP assistance for six months, which counts against a family’s lifetime limit. The budget assumes that an average of 1,000 families monthly will receive Extended-FIP benefits.
  • Continues the current FIP children’s clothing allowance, limiting it to children in FIP cases that do not include an adult—e.g., children living with ineligible grandparents or other caregivers—and rejecting the House proposal to expand eligibility to all FIP children ages 4 through 18.
  • Includes new language requiring specific outcome and performance reporting from the Michigan Strategic Fund for TANF funded job readiness and welfare-to-work programs, including the number and percent of persons who obtained employment through Michigan Works!; those that fulfilled their work requirements through other job readiness programs; average TANF spending per client; and the number and percent of clients who were referred to Michigan Works! but did not receive a job or placement, and the reasons why.

Food Assistance

Governor’s Budget:

  • Reduces FAP funding by $444.5 million, to a total of $2.4 billion. The cut reflects the loss of federal American Recovery and Reinvestment Act funding as well as a projected drop in FAP households, from 894,750 this year to 890,000 in Fiscal Year 2015. Nearly 1.7 million Michigan residents received FAP benefits in January 2014, including over 700,000 children. Of those children, 242,408, or more than one-third, were under the age of 6.
  • Continues the optional state assets test for FAP benefits. Beginning in October 2011, DHS 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.
  • Provides 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 did not address federal cuts related to the “Heat and Eat” provisions of the bill. The Heat and Eat option, which was utilized by 16 states including Michigan, allowed 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). Under the new Farm Bill, the nominal LIHEAP payment was increased to a minimum of $20 per year.

The House Fiscal Agency estimates—based on Fiscal Year 2010 data—that continuing the Heat and Eat option in Fiscal Year 2015 would have required an additional $8.4 million in LIHEAP spending, while preventing the loss of approximately $250 million in federal food assistance. The 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.

House:

  • Agrees with the governor on the projected FAP caseload of 890,000, as well as the loss of ARRA funding, resulting in a total cut in FAP funding of $445.5 million.
  • Retains the FAP asset test.
  • Does not address the “Heat and Eat” provisions of the federal Farm Bill.

Senate:

  • Concurs with the governor and the House on FAP caseloads and related funding.
  • Retains the FAP assets test.
  • Does not address the “Heat and Eat” provisions of the federal Farm Bill.

Final Budget:

  • Reduces FAP funding by $286.6 million, to a total of $2.55 billion. The cut reflects the loss of federal ARRA funding as well as a projected drop in the number of FAP households, from 894,750 this year to 860,000 in Fiscal Year 2015, at an average monthly cost per case of $247.
  • Continues the optional state assets test for FAP benefits.
  • Provides no resolution of the “Heat and Eat” provisions of the federal Farm Bill.

State Disability Assistance and Services

Governor’s Budget:

  • Reduces funding for State Disability Assistance by 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 federal Supplemental Security Income are transferred to that program.
  • Projects continued reductions 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.
  • Increases funding for Michigan Rehabilitative Services. The governor includes $4.4 million ($2.4 million in one-time funding), allowing DHS to draw down an additional $14.8 million in federal matching funds for rehabilitative services and avoid waiting lists.
  • Expands disability determination staff. The governor’s budget includes an additional $20.6 million in available federal funding, allowing the state to add 80 staff positions to determine eligibility for disability services.

House:

  • Agrees with the governor on a caseload of 6,693 for SDA, a reduction in funding of $2.9 million in state General Funds, and total funding for SDA payments of $17.9 million.
  • Includes only $2 million for Michigan Rehabilitative Services (down from the governor’s recommendation of $4.4 million).
  • Appropriates an additional $1 million for the Centers for Independent Living for accessible, comprehensive and coordinated services for persons with disabilities—with the goal of improving financial self-sufficiency.
  • Concurs with the governor on the expansion of federal disability determination workers.

Senate:

  • Agrees with the governor’s overall reduction in funding for SDA payments from $20.8 million this year to $17.9 million in Fiscal Year 2015, as well as the projected SDA caseload of 6,693.
  • Agrees with the governor and expands funding for Michigan Rehabilitative Services by $4.4 million, drawing down an additional $14.8 million in federal funds. In addition, the Senate adds $3 million to match $11.1 million in funding in the Department of Corrections to provide vocational and other services to persons with histories of probation and parole violations (not currently incarcerated), as well as those with severe mental health needs.
  • Concurs with the governor on the expansion of federal disability determination workers, and takes savings of $2.2 million in the budget, assuming that additional staff support would reduce the average number of months individuals would receive state disability assistance from 12 months to 9 months (for half the caseload).
  • Agrees with the House and appropriates $1 million to continue and expand the Center for Independent Living project.

Final Budget:

  • Reduces funding for State Disability Assistance by 20%. The budget includes $16.6 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, and the budget assumes that the SDA caseload will fall to 6,500 next year.
  • Increases funding for Michigan Rehabilitative Services by $3.4 million, allowing DHS to draw down additional federal matching funds to expand rehabilitative services and avoid waiting lists.
  • Includes an additional $20.6 million in available federal funding to allow the state to add 80 staff positions to determine eligibility for disability services. The final budget also cuts $2.2 million to reflect the Senate’s assumed reduction in the average number of months individuals would receive State assistance before moving to federal assistance from 12 to 9 months.
  • Agrees with the Senate to add $3 million through an interdepartmental grant with the Department of Corrections to draw down additional federal dollars to provide vocational and other services to persons with histories of probation and parole violations, as well as those with severe mental health needs, who are not currently incarcerated (the Swift and Sure Sanctions Probation Program).
  • Appropriates an additional $500,000 (down from $1 million in the House and Senate budgets) for the Centers for Independent Living for accessible, comprehensive and coordinated services for persons with disabilities—with the goal of improving financial self-sufficiency.
  • Adds new language requiring DHS to set up a workgroup to look at licensing standards and performance measure for adult assisted living facilities to ensure greater safety and supervision.

State Emergency Services

Governor’s Budget:

  • Continues current energy assistance policies and appropriations. In addition to federal funding from the Low Income Home Energy Assistance Program (LIHEAP), Michigan used to receive funds through the state’s Public Service Commission for energy assistance. After the courts ruled that the PSC did not have authority to collect restricted fee revenues, a decision that reduced funding by $60 million annually, the Legislature approved a new surcharge on electric meters to fund the Michigan Energy Assistance Program (MEAP). The MEAP was created in state law (P.A. 615 of 2012), and required DHS to establish a consolidated energy assistance program with a single, simplified application. For Fiscal Year 2015, the governor includes nearly $175 million in LIHEAP funding, as well as $60 million for the MEAP.
  • Provides continuation funding for State Emergency Relief services, including $13.6 million for local DHS office emergency services, $15.7 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.

House:

  • Includes $165 million for LIHEAP—$10 million less than the governor—including approximately $85 million for home heating credits and $80 million for energy crisis assistance. The House uses $10 million in federal LIHEAP to fund the MEAP, reflecting a statutory cap on the new surcharge of $50 million in collections, and bringing total spending for the MEAP in the House budget to $60 million.
  • Concurs with the governor and provides $13.6 million for local office emergency services, $15.7 million for homeless programs, $4.3 million for indigent burials, $1.8 for food banks, and $3 million for multicultural integration funding and the Chaldean Community Foundation.

Senate:

  • Concurs with the governor, providing $175 million for LIHEAP, and $60 million for the MEAP.
  • Includes a $200,000 increase in funding for food banks, bringing total funding to nearly $2 million.

Final Budget:

  • Agrees with the governor and continues current energy assistance policies, with $175 million for LIEAP, and $50 million for the MEAP.
  • Provides $11.5 million for local DHS office emergency services, $15.7 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.

Child Welfare and Family Services

Governor’s Budget:

Foster Care and Protective Services

  • Provides 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.
  • Projects a small reduction in projected foster care cases. The governor cuts $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. Foster care cases have been falling and, with the governor’s projections, will be down 43% between Fiscal Years 2005 and 2015.
  • Provides funding to pay 100% of private agency administrative rates. The governor includes a $5 million increase in funding to pay 100% of the private child placing agency administrative rate for new cases entering care. Those costs are currently split between the state and counties.
  • Increases funding for the County Child Care Fund by 4%. 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 who 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%).
  • Increases funding for medical and psychiatric evaluations of abused and neglected children. The governor includes an additional $2.1 million for medical and psychiatric evaluations for children in the child welfare system, increasing total funding from $6.6 million to $8.7 million.
  • Provides funding to launch a new performance-based contracting model for child welfare services. The governor includes $1.4 million, including $1 million in state General Fund for the first phase of a new financing model for child welfare services.

Adoption Services

  • Includes 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 pre-existing 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%).
  • Increases incentive payments for private agencies finalizing adoptions. The governor includes a total of $3.2 million—an increase of 5%—for private agencies that are placing children for adoption, including incentive payments to encourage more timely adoption turnaround times.

Family Preservation and Prevention

  • Fails to reinvest 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). 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%, in the face of a 20% increase in the number of substantiated victims of child abuse and neglect.

Other Child and Family Services

  • Provides a small increase in funding for juvenile justice reentry services. The governor recommends $800,000 for services for youths in the juvenile justice system to ease their re-entry into the community.
  • Provides funding for the Healthy Michigan Plan call center. The governor recommends $20.3 million for a call center for Healthy Michigan Plan/Medicaid applicants and recipients.

House:

Foster Care and Protective Services

  • Recommends total funding for foster care payments of $188.4 million, slightly below the governor’s budget, but accepts the governor’s estimated foster care caseload of 6,075, at a projected cost of $28,061 per case for the year.
  • Increases the Child Care Fund to $185.2 million. The House agrees with the governor to pay 100% of the private agency administrative rate for new cases next year (rather than splitting costs with the counties), but appropriated those funds to the Child Care Fund, rather than to the foster care portion of the budget.
  • Includes the governor’s recommended increase in funding for incentive payments for private agencies that finalize adoptions in a timely manner ($3.2 million).
  • Revises the goal limiting the number of children in foster care for longer than 24 months from 31% to 25%.
  • Appropriates an additional $3.7 million (including $3.3 million in state funds) to increase rates paid to private agency residential care providers by slightly over 2%—provided the county match rate is eliminated for the increase.
  • Agrees with the governor to fund the launching of a new performance-based contracting model for child welfare services. The House shifts $100,000 of state funds (from the total $1.4 million recommended by the governor) for a technical assistance contract for Kent County—the first county to pilot the new financing approach. Under the House bill, Kent County would privatize all foster care and adoption services (not child protective services) by Oct. 31, 2014, with performance-based funding in place at that time.
  • Expands the governor’s proposed increase in funding for medical and psychiatric evaluations of abused and neglected children by $100,000 to a total of $2.2 million.

Adoption Services

  • Agrees with the governor on the projected adoption subsidy caseload of 26,800 at an estimated cost of $732 per month per case, as well as total spending for the program of $241.1 million.
  • Concurs with the governor and adds $3.2 million in state funds for incentives for private agency adoptions.
  • Adds budget language prohibiting DHS from using the income of the adoptive parent in determining eligibility for adoption support subsidies.
  • Adds $1 million for a “Parent to Parent” peer mentoring program to provide support for adoptive parents.

Family Preservation and Prevention

  • Concurs with the governor’s recommendation on funding for family preservation and prevention programs, with continuation funding for Strong Families/Safe Children, Family Reunification, and family preservation and prevention services programs, as well as small cuts in the Families First and Child Protection and Permanency programs.

Other Child and Family Services

  • Allocates $3 million for before- and after-school programs, as well as $500,000 for a school success partnership program through the Northeast Michigan Community Services Agency.
  • Approves the governor’s recommendation of $800,000 for services for youths in the juvenile justice system to ease their re-entry into the community.
  • Cuts $8.1 million ($3 million in state General Fund) by closing the Maxey Training School for delinquent youths, transferring those youths to other facilities.
  • Approves $20.3 million for the Healthy Michigan Plan call center.
  • Approves $350,000 for the Michigan Reading Corps to provide literacy services and tutors for students in kindergarten through third grade who are identified as being at risk of reading failure.

Senate:

Foster Care and Protective Services

  • Agrees with the governor on foster care caseloads and costs, projecting a decline in foster care cases to 6,075 next year, and a total reduction in related foster care costs of $2.4 million.
  • Agrees with the governor on a nearly $7 million increase (4%) in the County Child Care Fund, with total funding of $178 million.
  • Agrees with the governor’s recommendation to allocate $1.4 million for the new performance-based contracting model for child welfare services.
  • Increases funding for medical and psychiatric evaluations of children in the protective services and foster care systems by $2 million over the governor’s recommendation, for a total increase of $4.1 million. Total funding would rise to $10.7 million—up nearly 63% from the current fiscal year.
  • Agrees with the governor in approving a $5 million increase in funding to pay 100% of the private child placing agency administrative rate for new cases entering care.
  • Includes $300,000 to cover the costs foster parents incur in transporting their foster children to parent-child visitations.
  • Adds new budget language requiring DHS to set clear policies for parent-child visitations, including written plans with a minimum of 3 hours per child per week.

Adoption Services

  • Concurs with the governor and includes $241 million for adoption subsidies, a decrease of $2.9 million from the current year based on a projected drop in the caseload of 350 cases to 26,800.
  • Increases funding for incentive payments for private agency adoptions by only 3.3% (compared to the 5% recommended by the governor and approved by the House), for a total increase of $2.2 million.
  • Includes $18.8 million to allow adoptive parents to claim enhanced payment rates for children who had special needs that existed at the time of adoption, but were not identified until later. Adoptive parents would be allowed to receive the enhanced rate one time for any eligible child from birth to age 18. This recommended change is in response to complaints filed by adoptive parents that they were not notified that their adopted children had special needs, and includes physically disabled children needing greater supervision and care, as well as children with special mental health needs, requiring special diets, or with antisocial behaviors.
  • Includes budget language prohibiting DHS from negotiating adoption subsidies that are below the standard payment for foster care.

Family Preservation and Prevention

  • Concurs with the governor’s recommendation on funding for family preservation and prevention programs, with continuation funding for Strong Families/Safe Children, Family Reunification, and family preser¬vation and prevention services programs; and small cuts in the Families First and Child Protection and Permanency programs.

Other Child and Family Services

  • Includes $125,000 in state funds to match federal funding for the Michigan Reading Corps—for the purpose of literacy and tutoring services for children in kindergarten through third grade—as well as $300,000 to expand the School Success Partnerships program to four new counties through the Northeast Michigan Community Services Agency.
  • Includes $2.9 million for a database to track youths in the juvenile justice system, funding not included in the governor’s budget or the House budget.
  • Includes $500,000 to expand grants to rural communities to fund new and expanded in-home juvenile justice programs, bringing total funding to $1.5 million.
  • Includes the governor’s proposed increase in funding for juvenile justice reentry services of $800,000.
  • Includes $20.3 million for the Healthy Michigan Plan call center.

Final Budget:

Foster Care and Protective Services

  • Includes $190.8 million for foster care payments, up approximately $3 million from year-to-date 2014 estimated spending. The final budget projects that there will be 6,500 foster care cases in Fiscal Year 2015 at an average cost of $27,085 per year. While recently leveling out, foster care cases have fallen 39% since Fiscal Year 2005.
  • Agrees with the governor to pay 100% of the private agency administrative rate for new cases next year rather than splitting costs with the counties.
  • Increases the Child Care Fund to $175 million, based on new estimates from the May consensus revenue conference.
  • Includes the governor’s recommendation to increase funding for medical and psychiatric evaluations of abused and neglected children by $2.1 million, expanding total funding from $6.6 million to $8.7 million.
  • Agrees with the governor to provide $1.4 million for the launching of a new performance-based contracting model for child welfare services. Also accepts the House decision to shift $100,000 of state funds (from the total $1.4 million recommended by the governor) for a technical assistance contract for Kent County—the first county to pilot the new financing approach.
  • Appropriates an additional $3.7 million as recommended by the House to increase rates paid to private agency residential care providers by slightly over 2%.
  • Includes budget language requiring the DHS to reimburse foster parents who transport foster children to parent-child visitations, as well as clear DHS policies, goals and written plans for visitations, and training for court personnel on the importance of parent-child visitations in foster care cases. Does not include the $300,000 added by the Senate to cover travel reimbursements for foster parents.

Adoption Services

  • Includes $239.8 million for adoption subsidies, a reduction of $4.3 million based on an anticipated caseload of 26,725.
  • Increases incentive payments for private agencies to finalize adoptions in a timely way by 3.3% for a total increase of $2.2 million—down from the governor’s recommended increase of $3.2 million or 5%.
  • Revises Senate budget language prohibiting DHS from negotiating adoption subsidies that are less than 95% of the standard payment for foster care.
  • Includes $7.9 million (down from the Senate recommendation of $18.8 million) to allow adoptive parents to claim enhanced payment rates for children who had special needs that existed at the time of adoption, but were not identified until later.
  • Adds $700,000 (down from the $1 million approved by the House) for the adoptive family support network to operate and expand into additional regions.

Family Preservation and Prevention

  • Provides continuation funding for most prevention and family preser¬vation services, after a reduction of nearly 19% in programs to prevent child abuse and neglect between fiscal years 2005 and 2014.

Other Child and Family Services

  • Rejects the House proposal to spend $3 million for before- and after-school programs.
  • Includes the House proposal to provide $350,000 for the Michigan Reading Corps to provide literacy services and tutors for students in kindergarten through third grade who are identified as being at risk of reading failure.
  • Includes $300,000 to expand the School Success Partnerships program to four new counties through the Northeast Michigan Community Services Agency.
  • Rejects the House plan to cut $8.1 million by closing the Maxey Training School for delinquent youths.
  • Includes $800,000 recommended by the governor for services for youths in the juvenile justice system to ease their re-entry into the community.
  • Includes $1 million (down from the $2.9 million approved by the Senate) for a database to track youths in the juvenile justice system.
  • Includes $250,000 (down from the $500,000 adopted by the Senate) to expand grants to rural communities to fund new and expanded in-home juvenile justice programs.
  • Provides slightly less funding ($19.5 million) for the Healthy Michigan Plan call center.

Endnotes:

1 Based on Senate Fiscal Agency estimates of year-to-date Fiscal Year 2014 spending, from F. Carley, Human Services S.B. 769 Decision Document, Senate Fiscal Agency (June 12, 2014).
2 K. Koorstra, Human Services Background Briefing, House Fiscal Agency (December 2013), and memorandum from K. Koorstra regarding FIP and FAP caseloads (June 12, 2014).

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