Reports


Vote yes for regional transit in Southeast Michigan

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September 2016
Mario Gruszczynski, Intern

In November, voters in Wayne, Oakland, Macomb and Washtenaw counties will decide whether to approve a plan that would finally bring regional transit to Southeast Michigan. The plan would include Bus Rapid Transit, a Regional Rail connecting Ann Arbor and Detroit, and Cross-County Connector Buses. For a house with a taxable value of $100,000, a homeowner would pay a millage of about $120 per year. The plan is the most significant attempt at regional cooperation in the last 40 years. This effort recognizes that communities in Southeast Michigan are bound by a shared fate, even as division has characterized area politics for generations. It is a way forward, addressing both the practical challenges the region currently faces as well as the historical inequities that have divided it. Voters must capitalize on this opportunity for regionalism and approve the ballot initiative to move toward a more connected Southeast Michigan.

vote-yes-chart-1The Problems with the Region’s Current Transit System:

  • Southeast Michigan’s current regional transit system, the Suburban Mobility Authority for Regional Transportation (SMART), is underfunded compared to other U.S. metropolitan areas.
  • SMART does not reach much of metro Detroit, as many communities have opted out of service.
  • A lack of regional transit perpetuates economic inequality. According to the national Economic Policy Institute, the region ranks third worst in terms of economic inequality in Michigan. For workers with low incomes who cannot afford a car, a lack of reliable transportation can hinder upward mobility.

Regional Transit Will Help:

Young People: 73% of Detroit millennials want better public transportation. If the region wants to retain young talent, public officials must understand the kinds of communities in which young people want to live. Graduating with significant debt burdens, many college graduates rely on public transportation in the absence of a car.

Senior Citizens: Some seniors may be less able to drive as they age. 83% of older Americans say public transit provides easy access to things in everyday life.

Workers: Southeast Michigan is a regional economy. Michiganians travel across the region every day to work. Currently, 92% of jobs in the region are inaccessible by public transportation. That means that without a car, workers have very few options when it comes to work.

Employers: A connected region will create a new group of potential employees and customers who were previously unable to access these businesses. A well-funded regional transit system will be more reliable in getting workers to their jobs in a predictable and timely manner.

The Region and State: Southeast Michigan continues to lag behind the nation’s other metropolitan areas in terms of investment in public transit. This makes the region less competitive for new businesses and young professionals. In order to compete in the fast-changing economy of today, the region needs a competitive infrastructure. As the largest metropolitan area in the state, Michigan’s people and economy as a whole will benefit from a better connected Southeast Michigan.

vote-yes-chart-2Vote Yes

This November, vote for a better regional transit system that will bring Southeast Michigan and its communities together. To learn more about the Regional Master Transit Plan, check out the Regional Transit Authority’s website. To learn more about the ballot initiative, check out Citizens for Connecting our Communities.

Regional Transit Authority’s Master Plan: http://www.rtamichigan.org/masterplan/

Citizens for Connecting our Communities: http://voteyesforregionaltransit.com

Michigan families continue to struggle

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September 2016
Senior Policy Analyst, Peter Ruark

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Back to school report: Rising tuition and weak state funding and financial aid create more student debt

pdficonSeptember 2016
Senior Policy Analyst, Peter Ruark

Back to school graphic 1As Michigan college students start school, they face increasingly high tuition and an unprecedented level of student loan debt that stands to linger their whole lives. At the same time, Michigan’s state-funded financial aid hasn’t kept up with tuition costs and older students cannot get any state financial aid at all. While Michigan’s economy and job market continue to demand well-educated workers, too many students are unable to afford a college degree altogether and many more are incurring a mountain of debt to pursue one. Current state policies are hurting college access and affordability and the state’s workforce and job market. Michigan policymakers should make changes so that postsecondary education is more affordable.

Public University Tuition in Michigan is Rising Far Faster than Inflation and Pell Grants

Between 2003 and 2015, tuition more than doubled at almost every Michigan university and increased by more than 150% at several schools. This increase far surpassed the rate of inflation; if each university had only raised its costs to students to keep up with inflation, tuition in 2015 would have been only 20.4% higher than in 2003.

Back to school graphic 2University tuition is also rising faster than the national Pell Grant, a subsidy the U.S. federal government provides for students with financial need to pay for college, which as a result covers a far lower percentage of the university tuition “sticker price.” In 2003, the average Pell Grant covered from 40% (University of Michigan-Ann Arbor) to 66% (Saginaw Valley State University) of tuition, but by 2015, it covered less than 40% of tuition at nearly all Michigan universities and less than 30% at three (Fig. 1).

While college costs are rising across the nation, it is particularly bad in Michigan. Michigan universities have raised tuition so much that the state’s average tuition cost was the sixth highest in the nation and second highest in the Midwest during the 2015-16 school year. Michigan’s community colleges, on the other hand, have the lowest tuition in the Midwest and the 16th lowest in the nation (Fig. 2).

Back to school fig 1Back to school fig 2

 

Back to school fig 3

There is a direct correlation, in Michigan and around the country, between state support for public universities and tuition costs. Between 2003 and 2017, Michigan cut university funding by more than $262 million, a 30% decrease in public support after adjusting for inflation (Fig. 3). The cuts have resulted in students and their families being charged higher tuition to make up for universities’ lost state revenue. As shown in Fig. 4, from 1990 to 2002, the share of public college operating costs borne by students (before application of financial aid and scholarships and not counting endowments or donations) ranged from 39% to 44% each year. In 2004, the student’s share of expenses began to exceed the amount the state paid per student, and in the past several years it has remained at or around 70%. One might call this decrease in state funding a “slow privatization” of Michigan’s public university system.

Back to school fig 4

This is a larger problem in Michigan than in the other Midwest states. Michigan students pay a higher share of universities’ college expenses than in any other Midwest state and pay the sixth-highest share in the nation. Michigan universities also rank third in the nation for the amount of tuition money per full-time equivalent (FTE) student that goes toward operating expenses (Fig. 5)Back to school fig 5

Rising Tuition Means Debt

Of Michigan college students who graduated in 2014, 62% graduated with debt. Student debt averaged $29,450, the ninth highest average debt level in the nation and more than $10,000 higher than students in Utah and New Mexico.1 While there is not racial data on student debt at the state level, national studies have shown great racial disparity regarding the amount of debt owed by students of color. The Urban Institute has found that African-American students and their families owe significantly more in student debt ($43,725) than individuals of other races, and that Latino parents and grandparents incur the most student debt on behalf of their children (Fig. 6).2

As might be expected due to the relatively low tuition, community college students nationwide are far more likely than students at other types of institutions to be able to finish and graduate from college without taking out student loans (61%). This is a real contrast to graduates of for-profit colleges, where only 12-14% graduate without borrowing money for tuition.3

Back to school fig 6On the other hand, 88% of graduates of for-profit four-year colleges have taken out student loans, and 62% have student debt of at least $24,300 (Fig. 7).4 These loans often come with exorbitant interest rates, further complicating students’ ability to pay them off. Loan defaults by students at these schools (whether they have graduated or not) are also far higher (22%) than at public (9%) or not-for-profit (8%) four-year colleges.5 While students at private, for-profit colleges (both two- and four-year) make up about 13% of the nation’s college enrollment, they account for nearly half of all student loan defaults.6 In addition to the larger debt burden students at for-profit schools carry, factors in the high default rate might also be the higher likelihood of such students to experience substantial unemployment since leaving school, and the lower earnings they have six years after starting college than their counterparts at public and nonprofit institutions.7Back to school fig 7

State Financial Aid Falls Far Short of Need

As data shows, tuition is rising very rapidly, Pell Grants do not cover a large enough portion of costs by themselves to keep college affordable for low-income students, and student loans with high interest rates are resulting in unprecedented levels of student debt. These factors make it imperative that Michigan maintain a robust need-based financial aid system, yet policymakers have been doing the opposite. The state invests far less in need-based grants proportional to its student population than most other states and has completely eliminated state financial aid for students over age 30 attending a public community college or university.

Back to school fig 8One indicator of whether a state is spending enough on financial aid is the number of dollars spent on such grants per FTE student. The national average of state spending on need-based grants is $533 per FTE undergraduate student, yet Michigan spends only 42% of that amount ($223) and only one-quarter of the $870 that Indiana spends (Fig. 8).

This has not always been the case. In the early 1990s, Michigan was among the top ten states in need-based financial aid spending. Since then, however, the state’s investment has fallen by more than half when adjusted for inflation and Michigan is now in the bottom half of states for need-based grant spending per FTE undergraduate student (Fig. 9).Back to school fig 9

In addition, while Michigan’s three need-based higher education grant programs are available to “traditional” college students who begin attending immediately or soon after high school graduation and are not raising families, 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 their 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.

Another aspect of Michigan’s three grant programs is detrimental to the growing number of students who are working parents even if they are otherwise eligible: 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. 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. But not having financial aid may discourage adult learners from going to school less than half time. For many workers, this pits work and school against each other, with both often suffering.

In 2010, the Michigan Legislature eliminated a number of grant programs that were available to adult learners: the Part-Time Independent Student Grant, the Michigan Educational Opportunity Grant, the Michigan Nursing Scholarship and the state Work-Study program. In 2015, the Michigan Senate included $6 million in state budget funding for the Part-Time Independent Student Grant for the 2015-16 school year, but this was removed from the final appropriations bill.

For more on Michigan’s need-based financial aid funding and awards, please see the appendices.

Policy Recommendations to Reduce College Costs and Student Debt

Michigan legislators should make the following policy changes to make postsecondary education more afford-able for its residents, both traditional college students age 18-24 and the growing number of nontraditional students who often have full-time jobs and families to support.

1. Restore the state funding that has been cut from public universities and community colleges over the past several years, coupling significantly increased budget funding for higher education institutions with stronger tuition restraint or tuition reduction requirements on the schools.

2. Enact legislation to require clear and accurate information in the recruitment materials of for-profit colleges (including online colleges without a physical location in Michigan) regarding student loans, educational quality, job placement and expected earnings. Ensure that the Michigan Attorney General has enforcement powers in this area and that students have the right to seek redress for noncompliance or law violations.

3. Make need-based financial aid grants available to older workers by:

a. Reauthorizing funding for the Part-Time Independent Student Grant and/or the Educational Opportunity Grant, both of which were specifically designed to serve adult learners in a wide variety of circumstances.

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.

4. Ensure that there is financial aid help for students going to college less than half time or who are in short-term programs.

5. Implement a state Work-Study program that subsidizes academically relevant work for low-income adult students while paying a livable wage. Studies have shown 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 with academics.8

6. Support policies that can help alleviate hardship for low-income students, including policies that permit low-income students to receive public assistance such as cash assistance, food assistance or subsidized child care.

Appendices

Endnotes:

  1. The Institute for College Access & Success, Student Debt and the Class of 2014, October 2015.
  2. Braga, Breno, Racial and Ethnic Differences in Family Student Loan Debt, Urban Institute, July 2016.
  3. Smith, Peter & Leslie Parrish, Do Students of Color Profit from For-Profit College? Poor Outcomes and High Debt Hamper Attendees’ Futures, The Center for Responsible Lending, October 2014.
  4. Ibid.
  5. Ibid.
  6. Ibid.
  7. Deming, David J., Claudia Goldin, and Lawrence F. Katz, The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?, Journal of Economic Perspectives—Volume 26, Winter 2012.
  8. For more information, see 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, Spring 2014.

 

Promoting the Healthy Michigan Plan: Budget cuts to outreach jeopardize success

Budget Brief JPG USE THIS ONEpdficonThe Michigan League for Public Policy advocates for adequate healthcare coverage for all Michiganians, with an emphasis on ensuring that all eligible people are aware of the health insurance options and services available to them and their families. The League supports full funding for the state’s Healthy Michigan Plan, and strongly opposed cuts in the 2017 budget that will reduce the state’s ability to reach out to the uninsured by marketing and advertising enrollment opportunities.

Lowering healthcare costs for all consumers, including employers who provide coverage, depends on reducing the ranks of the uninsured. When uninsured individuals need healthcare, especially in emergencies, many are unable to pay the costs out of their pocket. The cost of that uncompensated medical care has to be absorbed, and the solution has been to spread the responsibility for paying it across the healthcare system, increasing costs for everyone who receives care or pays insurance premiums, including employers.

The Healthy Michigan Plan

Michigan took a bold step to address this problem when it created the Healthy Michigan Plan in 2012—expanding access to comprehensive healthcare through the state’s Medicaid program to adults with low incomes.

bb-promoting-the-healthy-michigan-plan-pdfThe successful Healthy Michigan Plan was one of the first of its kind in the country, taking advantage of new flexibility in federal law to create a healthcare system that balances consumer protections, robust health coverage and positive self-care. The program uses incentives to encourage consumers to adopt healthy behaviors that can also contain costs over the long term, like quitting tobacco use and losing weight. Healthy Michigan enrollees pay a share of the cost, too, in the form of contributions to an account that pays a portion of the cost of services they use.

Eligible individuals are childless adults who often work in low-wage jobs without access to employer-sponsored coverage and don’t earn enough to purchase healthcare insurance.

The first round of enrollees included uninsured persons who were aware of the new option and how to enroll—sometimes with assistance. Reaching the remaining eligible population would not only help more Michigan residents with low incomes protect themselves against unexpected and potentially devastating medical bills, it would also lower healthcare costs for all by closing the healthcare insurance coverage gap. But doing so will require targeted outreach efforts and the funds to pay for them, including those cut in the 2017 budget.

Healthy Michigan Plan Funding and Outreach

The final 2017 Michigan budget includes the state funding needed to cover the decline in federal funding for the Healthy Michigan Plan which is scheduled for January 1, 2017. Currently, the federal government pays 100% of the costs of the Healthy Michigan Plan, the highest federal match ever paid out to states for covering eligible populations via the Medicaid program. Every enrollee in the program not only helps reduce Michigan’s uninsured population, but also brings needed federal funds back to the state to pay for it. While the percentage of the federal match decreases from the original 100% Michigan has enjoyed in the first few years of the program, it remains generous, declining slightly over the coming years until bottoming out at a 90% federal match to the state’s 10% share.

Governor Rick Snyder’s proposed budget for next year also called for level funding for the Healthy Michigan Plan call center ($19.5 million) and program marketing ($2 million). Unfortunately, over the opposition of the League and numerous other advocates, the Legislature reduced the Healthy Michigan Plan call center by $8.1 million ($1.6 million in state funds), and cut marketing and advertising funding by $1 million ($500,000 in state funds).

The League has opposed both budget and statutory restrictions on outreach for the Healthy Michigan Plan. Failure to reach out to cover the uninsured increases the hardships faced by many families with low incomes who do not have access to healthcare coverage. But it also ensures that healthcare costs will continue to rise for all residents individually and for the state as a whole due in part to the lack of preventative healthcare, overutilization of emergency rooms and uncompensated care.

The League also urges policymakers to take advantage of all available federal funds. The sooner the state enrolls all eligible individuals, the sooner it receives the match at the highest level of federal contribution. Early savings to the state have already totaled more than $200 million through a combination of drawing down matching funds and shifting formerly state-funded healthcare programs to the Healthy Michigan Plan.

Many eligible individuals will never know about their opportunity to enroll in the Healthy Michigan Plan if it isn’t promoted publicly. By refusing to devote modest funds to reach the maximum number of eligible Michigan residents today, Michigan lawmakers are unnecessarily increasing the future long-term costs for all consumers and the state by turning away badly needed federal matching funds that can serve to fire up the economy while addressing the healthcare needs of low-wage workers.

Devoting resources to increase enrollment in the Healthy Michigan Plan helps close the coverage gap—a fundamental part of controlling healthcare costs for all. Taking explicit steps to ban funding today and in the future results in very modest, short-term savings, but it hurts Michigan residents and increases the state’s liabilities in the future. Instead of intentionally limiting promotion and, in turn, public awareness and use of this program, it’s time to celebrate the success of the Healthy Michigan Plan by investing in outreach and making sure all eligible Michigan residents are enrolled.

Time to end income inequality

pdficonJuly 2016
Legislative Coordinator, Rachel Richards

Michigan’s top 1% makes 22 times more than rest of workers

Time to end income inequality chart 1Michigan’s income inequality is a persistent and increasing problem that has a negative impact on the state’s residents and economy.1 Between 1947 and 1979, incomes at all levels increased at relatively similar rates for Michigan residents as well as nationally. In the late 1970s, there was a significant divergence as most of the income growth started going to the top earners and leaving the rest of Michigan residents behind.

Time to end income inequality chart 2Over the next 30-plus years, Michigan incomes fared worse than most of the rest of the nation. Between 1979 and 2013, overall incomes actually fell in the state. However, income decline in the bottom 99% solely caused this decline. In 1979, the top 1% of Michigan households held about 9% of the total income in the state. By 2013, the share of state income taken home by this group had nearly doubled to 17.9%, while the rest of Michigan residents saw their incomes decline.

Major income disparities exist between different genders and races. In 2014, Michigan women working full time still made only 74.6 cents for every $1 a full-time working male made. This is below the national average and ranks Michigan as one of the worst states in the Midwest region, trailing all of our immediate neighbors. In addition, women of color, and most men of color, continue to have lower median incomes than white, full-time working men.

Time to end income inequality chart 3Why Does This Matter?

Simply put, poverty in Michigan—especially for children—is still too high, and our state’s economic recovery is leaving too many people behind. Many workers have full-time jobs, but are still barely getting by as they struggle to provide for their families. At the same time, Michigan continues to favor policies that benefit the wealthy, such as its regressive tax structure, while reducing, capping and eliminating programs that help the most vulnerable.

Unfortunately, income inequalities do not simply affect what ends up in your bank account. According to the national Economic Policy Institute, increasing inequality might lead to lower income mobility in future generations. Lower-wage earners are less likely to have access to employer-sponsored health insurance coverage and paid sick and family leave, and are more likely to have underfunded retirement accounts. Income gaps affect the ability to pay for healthcare or save for retirement or a child’s college education, and reducing these gaps will have a positive impact on Michigan’s residents, communities and economy.

Time to end income inequality chart 4What Can Policymakers Do to Reduce Income Inequality?

Although income disparities at all levels continue at the national level, Michigan can implement state policies that can help bridge the divide:

  • Improve working conditions: Michigan’s minimum wage is improving, and will rise to $9.25 per hour by 2018. However, more can be done to help Michigan’s lowest-paid workers, such as further raising the minimum wage or eliminating the tipped wage to narrow the gap. Expanding access to high-quality child care would allow more low-wage earners the ability to find more secure and higher-paid employment. Finally, enacting earned paid leave policies would provide workers the necessary flexibility to care for themselves or family members without risking losing money or even their jobs.
  • Improve tax implications: Currently, Michigan’s lowest-income earners pay a higher rate in total state and local taxes than Michigan’s top earners; in fact, they pay nearly double the rate of the top 1%. Restoring Michigan’s Earned Income Tax Credit (EITC) to 20% of the federal credit, expanding the Homestead Property Tax Credit or implementing a fairer income tax, such as a graduated income tax, would let Michigan’s lowest-paid workers keep more of their hard-earned wages.
  • Improve job opportunities: As our economy expands, more jobs will require at least some college education, if not a certification, associate degree or bachelor’s degree. Improving K12 education—especially for children at risk of educational failure, increasing adult education and expanding access to post-secondary education would help retool Michigan’s workers for its new economy.

For almost four decades, Michigan’s income gap has been widening and it’s time to change that. State lawmakers must do more to adopt policies that will strengthen our economy, alleviate poverty and reduce income inequality for Michigan workers.

Time to end income inequality chart 5

 

 

 

 

 

 

 

 

 

 

 

Endnote

  1. Estelle Sommeiller, Mark Price, and Ellis Wazeter. Economic Policy Institute. Income inequality in the U.S. by state, metropolitan area, and county. Economic Analysis Research Network (EARN) Report. June 16, 2016. American Community Survey 1-year estimates, 2014. PolicyLink/PERE, National Equity Atlas, www.nationalequityatlas.org.

 

 

 

Michigan should eliminate its asset limit for food assistance

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July 2016
Senior Policy Analyst, Peter Ruark

What is the food assistance asset limit and why is it a problem?

Families who experience financial difficulty due to unemployment or a medical emergency often seek assistance from the Supplemental Nutrition Assistance Program (SNAP; formerly known as Food Stamps) for purchasing food. This assistance can help keep their household stable, including keeping food on the table for children, until the family can get back on its feet. Many seniors and people with disabilities also depend on SNAP to keep from going hungry.

MI Should Eliminate SNAP Asset TestUnfortunately, in some states including Michigan, there is a limit to how much a family can have in assets in order to be eligible for SNAP. This is commonly referred to as the “asset test.” Assets are resources available to purchase food, such as bank savings. Houses, personal property and retirement savings do not count as assets, although automobiles do. Michigan’s asset limit is $5,000, which means that if a Michigan family has more than $5,000 saved in a bank account or a savings plan, it must spend down its savings to below that level in order to qualify for food assistance. This policy essentially punishes families for saving for emergencies and for their children’s futures.

There is a federal asset limit for SNAP, but in 2002 the federal government gave each state the option to raise its asset limit or eliminate it entirely. Recognizing that the SNAP asset limit is counterproductive, 34 states and the District of Columbia have eliminated it. Michigan was one of the first states to eliminate the asset limit, but reinstated it in 2012, a time when many Michigan families were still struggling to make ends meet.

Is it unfair for Michigan to impose a SNAP asset limit when so many other states have eliminated theirs?

Yes. Michigan suffered more than most other states during the 2000s, including four years when it had the highest unemployment rate in the nation, and although its economy has improved to some degree, many families continue to struggle.

Families who have saved up money to weather future economic storms or to invest in their children’s future should not have to spend down all but $5,000 of their savings if they need to receive temporary help from SNAP. By requiring this, Michigan is punishing prudence and long-term thinking. Because SNAP functions for most households as a temporary stopgap (58% of new recipients leave the program within one year), it makes sense to allow families to retain their savings as they get back on their feet.

Why and how did Michigan reinstate the asset limit?

In 2012, media publicity around a lottery winner continuing to receive food assistance while collecting winnings prompted the Michigan Legislature to pass Public Act 79, which states simply, “For the purposes of determining financial eligibility for the Family Independence Program or the Food Assistance Program administered under this act, the department shall apply an asset test.” That year, Michigan also passed Public Act 78, which requires that the Michigan Lottery inform the Department of Health and Human Services (DHHS) of lottery winnings of over $1,000, and that lottery and other gambling winnings be counted as unearned income (if received in installments) or as assets (if received in a lump sum) for determining continuing eligibility for SNAP benefits. The Department of Human Services (now the Department of Health and Human Services) responded by establishing an asset limit of $5,000.

What can Michigan do to make it easier for struggling families with some savings to receive food assistance?

Current law requires Michigan to have a SNAP asset limit but does not stipulate a specific amount; that is left up to DHHS to determine. The department can raise or lower the limit but cannot eliminate it under current law. Likewise, if the current law requiring an asset limit is eliminated, the department can still choose to impose an asset limit.

Because it would require only a departmental and not a legislative change, the easiest way to allow families to save more money while they are receiving SNAP benefits is to raise the limit rather than eliminate it entirely. Nebraska has an asset limit of $25,000, five times the amount of Michigan’s limit, allowing families to build savings while receiving assistance.

Michigan can also join the 34 states and District of Columbia in eliminating the asset limit entirely. This would require a legislative change to eliminate the requirement to impose an asset test, followed by a departmental action to remove the asset limit itself. If the Legislature wants to keep the restriction on lottery winnings, it would need to modify that wording accordingly.

MI Should Eliminate SNAP Asset Test (Read-Only)

 

Ask your candidates

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Taxes and revenues

1Since 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 Michigan EITC to 6% in 2011.

Would you support fully or partially restoring the state-level EITC to 10% or 20% of the federal tax credit?

2Michigan is one of only seven states that continues to rely on a flat income tax rather than a graduated income tax, like the federal 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?

3Sales 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 sales tax to services with a sales tax credit for filers with low wages?

4While Michigan’s actual tax revenues have grown year after year, when adjusted for inflation, revenues are below 2000 levels by about 18%, and state lawmakers have continually pulled funds away from general state coffers to fund specific programs, such as road funding and the Personal Property Tax repeal reimbursements. At the same time, the costs of providing Michigan residents the most basic services have grown, increasing pressure on our budget. This has meant that programs have had to be funded at the expense of others, furthering Michigan’s disinvestment in its communities, education, infrastructure and other services on which its residents and businesses rely.

Would you support exploring new revenue sources or expanding existing ones, for example by eliminating outdated and unnecessary tax exemptions or credits, to fund vital state services?

Help for struggling people and families

5Out 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 Heat and Eat program going when federal rules changed. That means an average loss of $76 a month in food benefits for 150,000 families, seniors and people with disabilities. It would take only $3.2 million in state dollars to bring in $138 million in extra federal food assistance for these Michigan residents.

Do you favor spending $3.2 million to bring in this additional food assistance?

6Michigan has one of the most stringent income eligibility levels in the country for child care subsidies for families with low wages. Given the high cost of child care, without assistance many parents find themselves in the difficult position of relying on unstable or even unsafe arrangements for their children or placing their jobs in jeopardy.

Would you support the use of state and available federal funds to expand child care subsidies to more families with low incomes?

7Children 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/month for a family of three). Michigan provides a one-time payment of $140 for all school-age children in families receiving Family Independence Program assistance so children can start school with at least a decent set of clothes, but with current prices, this doesn’t carry children very far into the school year.

Would you support an increase in the annual school clothing allowance to ensure that children can purchase the clothes, shoes and overcoats needed for school?

8Food assistance (Supplemental Nutrition Assistance Program) helps families experiencing financial difficulties purchase food, helping parents feed and provide for their children without disrupting their lives. In 2012, Michigan passed a law that required the state to limit the amount of assets a person could have in order to qualify for food assistance. This was implemented just as the state was exiting a decade-long recession and at a time when most states (about two-thirds plus D.C.) were eliminating their own asset tests. This penalizes families that have saved for emergencies, for their retirements or for their children’s futures by requiring them to spend their assets in order to receive food assistance.

Would you support legislation or policy changes that either increase the asset limit on food assistance or completely eliminate the requirement, joining most other states in the nation in doing so?

Addressing child poverty and education

9Nearly half (49.9%) of Michigan third-graders did not demonstrate proficiency in English Language Arts (reading and writing) in 2015. Legislation under consideration would require that third-graders who are not proficient in English Language Arts as measured by the state test would be required to repeat the grade; although, if the student is proficient in other subjects, then instruction for those may be given in a fourth-grade classroom. Alternate tests and portfolios may be used to document reading skills and some good cause exemptions are provided, however, the school superintendent would make the final decision. Critics contend research on retention shows a higher likelihood of dropout for retained students while supporters of retention decry the negative impact of social promotion.

Would you support mandatory retention of Michigan third-graders who are not proficient in English Language Arts ?

10Child poverty in Michigan has escalated by almost 60% over the last 15 years. Almost 1 of every 4 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 reinstating the state Earned Income Tax Credit to 20% of the federal EITC, expanding adult education and other workforce development opportunities, 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?

11Michigan 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, parenting programs and Early On?

12One in 10 children, or 228,000, in Michigan have had a parent in their household incarcerated at some point in their lives—one of the highest rates and largest populations of children impacted in the country. Having a parent incarcerated can lead to increased poverty, stress and unstable environments, affecting kids’ health and academic performance. Additionally, approximately 95% of Michigan’s prison population will return to the community after serving their sentences making reentry and family reunification services critical for the formerly incarcerated, their children and communities.

Would you support a comprehensive, multigeneration approach, including the expansion of support programs, family reunification and reentry services, to ensure that the needs of children and their parents, families and communities are met while a parent is incarcerated and upon their return home?

13With the recent housing bubble burst dropping property taxes, declining enrollment and the inability of the state to fully invest in K-12 education, many Michigan schools have fallen into financial crisis. Recently the state legislatively dissolved two school districts and Detroit Public Schools, our largest public school district, nearly fell into bankruptcy despite years of state control. Two other schools have emergency managers, and two are under a consent agreement, with many more under deficit elimination plans or state review.

Do you believe the state should be doing more and providing more financial help to Detroit Public Schools and other school districts that have fallen into, or are on the verge of falling into, financial crisis?

Jobs and the economy

14Workers 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 was a legislative proposal last year to reinstate the Part-Time Independent Student Grant, which helps older workers (including many with families and full-time jobs) go back to school and get a degree. This grant was discontinued in 2009.

Would you support the reinstatement of the Part-Time Independent Student Grant to help older workers get the skills they need for family-supporting jobs?

15Although Michigan’s economy and unemployment rate have improved, there are many workers still seeking work, and there continue to be businesses that for some reason or another face difficulty and need to lay off workers. Yet, Michigan is one of a few states that allows unemployed workers to receive up to only 20 weeks of Unemployment Insurance (UI) while they look for jobs—nearly all other states have a maximum of 26 allowable weeks of UI which Michigan also provided until cutting back in 2011. While some unemployed workers find another job within 20 weeks of becoming unemployed, it is important that they have additional weeks if they do not to prevent further family disruption.

Would you support reinstating the 26-week maximum for unemployed workers to receive Unemployment Insurance while they look for work?

16More than 1.7 million (44%) Michigan workers cannot take time off with pay when they or one of their children are ill. Becoming sick puts these workers in the difficult position of having to either stay home and lose wages, or go to work and risk becoming sicker and exposing coworkers (and often the public) to illness. Parents feel pressure to forgo needed medical care for themselves and their children, and to send their child to school sick because they cannot miss work to take care of them. An earned sick leave law similar to what several other states and cities have would help Michigan workers by requiring most employers to bank sick time for their workers based on the number of hours they have worked.

Would you support a Michigan earned sick leave law?

Criminal justice reform

17Michigan is one of nine states that automatically charges 17-year-olds as adults in the criminal justice system. In nearly every other aspect of the law, whether it is voting, buying a lottery ticket, serving in the military or signing a contract, 18 years of age is legally required, yet 17-year-old youths must be prosecuted, convicted and sentenced as adults in criminal courts in Michigan. Research on development shows that 17-year-olds are not adults and are better served in juvenile justice systems.

Would you support raising the age of juvenile jurisdiction to age 18?

18Persons of color are arrested, detained and incarcerated at higher rates in Michigan as well as around the country, though national statistics demonstrate that higher crime rates do not account for this disparity. While only comprising 14% of Michigan’s population, African-Americans comprise over half, or 53%, of the state’s prison population, and they are detained at a rate more than six times higher than white people.

Do you support training for police, judges and others in the criminal justice system, along with the use of a race equity policy tool, to expand understanding of the disparate impact of the system and its policies on communities of color?

19An estimated 20-25% of prisoners have been diagnosed with severe mental illness and many more with mental health problems. Nine of every 10 prisoners with severe mental illness also suffer from substance use disorders, and upwards of 65% of those with mental health symptoms do not receive treatment. Michigan has recognized the need for alternatives to incarceration for those suffering from behavioral health issues by implementing mental health courts and substance abuse programs for those serving time and on probation and parole.

Do you support diversion programs and improved mental health and substance abuse treatment programs within prison facilities to improve access for incarcerated people?

Flint water crisis

20In April 2014, Flint switched its drinking water source to the highly corrosive Flint River, and a decision to not properly treat the water caused lead to be leached from the pipes into the water. This resulted in thousands of Flint residents, including children, being poisoned by the water they drink daily. Unfortunately, lead poisoning has no cure, and all Flint residents, especially children, will require lifelong services to help detect and treat developmental and educational delays and health problems caused by lead. Furthermore, lead continues to be a problem in almost all of our communities, either through lead pipes or lead in paint in older homes, and it needs to be remedied statewide.

Would you support continuing to provide long-term funding to help residents affected by the Flint water crisis? Would you also support looking at a statewide solution to abate existing lead, prevent future poisoning and provide services to those already affected?

 

 

 

 

 

 

 

 

 

The 2017 state budget fails to protect all children and families and perpetuates economic disparities

June 2016

Budget Brief JPG USE THIS ONEpdficonThe 2017 state budget approved by the Legislature falls short by failing to address long-term solutions to the public health and educational crises in Flint and Detroit, as well as the infrastructure and public health crises brewing in other areas of the state.

The exposure of Flint residents—and especially infants and toddlers—to toxic lead in their water, and the unsafe conditions and looming insolvency of the Detroit Public Schools (DPS) became national news this year, exposing many governmental failures and a history of inadequate investments.

highlights 2017By not addressing the risks to children and families statewide, reversing disinvestments in basic services or drawing down all available federal dollars, the state budget fails to protect all children and families and perpetuates the economic and racial disparities that plague the state’s economy.

While some quick fixes have been approved, Michigan still lacks a long-term strategy to address the state’s crumbling infrastructure and public services. Across the state, communities are struggling to maintain high-quality schools, provide basic services and protect their residents from threats to health and safety.

  • There are hotspots of lead poisoning all over the state, with 70% of lead exposure associated with paint in older homes.
  • School districts in both urban and rural areas are struggling financially as state funding has failed to keep pace with inflation or reflect rapidly declining enrollment.
  • State policies—including stringent lifetime limits on public assistance, the ending of assistance for an entire family when one child is truant, child care eligibility levels that are among the lowest in the country, and an asset test for food assistance—have pushed more Michigan families into deep poverty and made it harder for them to find and keep jobs.

Long-term fixes to the problems in Flint, Detroit and all areas of the state cannot be achieved by dividing up a shrinking “budget pie,” and state tax policies have created a difficult hill to climb in rebuilding Michigan’s infrastructure and basic services. In recent years, shifts in the way the state taxes businesses, the state’s failure to update its tax system to reflect the new service economy, and continued earmarking of the state’s General Fund all limit the state’s choices and must be part of the ultimate fix.

THE FLINT WATER CRISIS

As part of the final budget, the Legislature approved an additional $114 million ($87 million in state funds) to address the lead exposure crisis in Flint during the current budget year—on top of three smaller funding increases already approved. Funds are to be used in part to:

  • Provide half-day child care services for children ages 0-3 in Flint who live in households earning less than 300% of the federal poverty level ($8 million, with an additional $8 million reserved for future child care services for children in Flint through 2018).
  • Replace lead service lines in high-risk, high-hazard homes in Flint ($25 million).
  • Provide mental health services for children affected by lead exposure ($1.5 million).
  • Expand access to nutrition programs ($1.3 million), and increase resources for food banks ($430,000).
  • Establish a statewide childhood lead poisoning prevention program ($1.3 million).
  • Provide an additional $12.8 million to cover portions of Flint residents’ water bills (in addition to $30 million approved earlier).

THE CRISIS IN DETROIT PUBLIC SCHOOLS

In a contentious late-night session, the Legislature approved a package of bills intended to help Detroit Public Schools (DPS) as it struggles to remain solvent and maintain safe, high-quality schools. The final agreement retains the current school district as a vehicle to pay off the district’s debt (funded by the 18 mill property tax currently used for the school per-pupil foundation allowance), and establishes a new school district to operate the schools, completely funded with state funds.

At issue were: (1) the adequacy of funding for the new school district, which at $617 million falls $88 million short of what is needed; (2) how the funding shortfall would be addressed—resulting in an amendment ensuring that it doesn’t affect other schools by coming from the School Aid Fund; (3) the rejection of the proposed Detroit Education Commission, a body that would have had the authority to help manage the proliferation and location of schools in Detroit which has partly led to DPS’s fiscal crisis; and (4) a range of changes in teacher hiring, pay and accountability systems that apply only to DPS.

THE 2017 STATE BUDGET

The Legislature approved a total of nearly $55 billion for 2017. More than 4 of every 10 dollars spent by the state are federal, with state general funds representing only 18%. The state’s General Fund—the dollars over which the Legislature has the most discretion and control—are 29% below 2000 budget year levels when adjusted for inflation.

Health

Flint Emergency Funds: The Legislature agreed with the governor on $15.1 million ($9.1 million in state funds) for partial-year funding of public health services for persons exposed to lead in Flint. Additional funding could come from a Flint Emergency Reserve Fund.

The League supports investments to address the Flint crisis in multiple state departments, including public health enhancements in 2017.

Healthy Kids Dental: The Legislature approved full funding—as recommended by the governor—of $8.9 million in state funds ($25.6 million in total funds) to expand the Healthy Kids Dental program to an estimated 131,000 Medicaid-eligible youths and young adults (ages 13-20) in Kent, Oakland and Wayne counties. With this expansion, all children and young adults insured by Medicaid are now eligible for dental coverage through the program.

The League supports the expansion of Healthy Kids Dental to all eligible children in Michigan. Tooth decay remains the most prevalent chronic disease in children resulting in lost school days and diminished learning, as well as the potential for long-term negative health consequences.

Adult Dental: The final budget does not include $23 million ($8 million in state funds) that the Senate recommended to increase access to dental services for adults insured by Medicaid through a managed care program. The Legislature did support $1.6 million for local health departments that partner with nonprofit dental providers to expand services for seniors, children, uninsured low-income persons and adults enrolled in Medicaid. Also included was $2.7 million ($950,000 in state funds) to increase reimbursement rates for dental services provided to pregnant women.

The League supports funding to expand access to dental services for adults covered by Medicaid. Nationwide, the erosion of private dental insurance, the increased cost of dental care, and the limited number of dentists accepting public insurance have resulted in increased emergency room visits related to dental emergencies and barriers to employment.

Healthy Michigan Plan: The Legislature provided $110.6 million in state funds for the Healthy Michigan Plan to address the decline in federal match from 100% to 95% effective January 1, 2017. However, the final budget reduces the Healthy Michigan Plan call center by $8.1 million ($1.6 million in state funds), and reduces marketing and advertising for the program by $1 million ($500,000 in state funds).

The League supports funding for the state required contribution to the Healthy Michigan Plan and strongly opposes limits on outreach for the program. By meeting the new state match, the Legislature ensures that the program will continue to cover more than 600,000-plus enrollees. The Healthy Michigan Plan should be available to all who qualify, and the Department of Health and Human Services (DHHS) should be encouraged to reach out to currently uninsured individuals.

Specialty Drugs for Medicaid Enrollees: The Legislature approved an additional $105 million ($30 million in state funds) for new specialty drugs for Hepatitis C and cystic fibrosis treatment—down nearly 50% from the governor’s recommendation. With this added funding, total spending for the two drugs is expected to top $300 million next year, including $110 million in state funds. The Legislature also rejected the governor’s proposal for a specialty drug reserve fund of $86 million to cover costs associated with other specialty drugs in the pipeline.

The League supports adequate funding for specialty drugs for Medicaid enrollees. These new drugs, while expensive, have the potential to prolong life, and in the case of Hepatitis C, potentially provide a cure.

Integration of Physical and Behavioral Health Services: The Legislature rejected budget language proposed by the governor that would have transferred funding for all mental health and substance use disorder services for Medicaid and Healthy Michigan Plan beneficiaries to Medicaid Health Plans by September 30, 2017. New budget language was adopted that establishes a workgroup to make recommendations on how to integrate services. The budget also requires legislative authorization before funds are transferred, and provides for pilot programs.

The League supports the Legislature’s initiative to set up a thoughtful process to determine the best way to integrate physical and behavioral health services, and was a member of the DHHS behavioral health workgroup that addressed the issue.

Selected Medicaid Provider Rates: The final budget does not include the $21.3 million ($7.4 million in state funds) approved by the Senate for a 6% increase in rates for Medicaid primary care physicians. However, an increase of 15% was approved for private duty nursing services for persons under the age of 21 covered by Medicaid.

The League supports increased Medicaid primary care provider rates. Access to primary care is a problem in both rural and some urban areas, and addressing low Medicaid rates for primary care physicians is a critical step toward preventive care for families and individuals. The League also supports increases for private duty nurses for Medicaid beneficiaries as a way to improve the quality of care for children and adults with complex medical needs and allow them to remain in the most homelike setting possible.

Human Services

Food Assistance: The final budget does not include a House proposal—adopted through a bipartisan vote—to draw down approximately $138 million in federal food assistance dollars with an investment of only $3.2 million in state funds. If adopted, Michigan would have been able—at a very small state cost—to restore cuts in food assistance for about 150,000 families, reductions that occurred in 2014 when the state opted to not participate in the federal “Heat and Eat” program.

The League strongly supported state funding for the Heat and Eat program, as well as the elimination of the state asset test for food assistance.

Family Independence Program: The final 2017 budget adopted by the Legislature perpetuates the chronic underfunding of state income assistance programs, including the Family Independence Program: (FIP).

  • The Legislature rejected the governor’s proposal to expand the annual clothing allowance for children in families receiving FIP from $140 per child to $200 at a total cost of $6.1 million in federal funds, although $3.4 million was provided to expand the allowance to all FIP children—not just those living with a relative or others not receiving FIP.
  • The Legislature took no steps to reverse state policies that have resulted in a precipitous drop in the number of families eligible for FIP—including strict lifetime limits and the sanctioning of an entire family if one child is truant.

The League supports an expansion of the school clothing allowance. The League continues to oppose state policies that create deeper poverty and hardship for children, including more stringent FIP lifetime limits and sanctions which have resulted in many families failing to receive needed assistance, with caseloads falling from nearly 80,000 families in 2011 to only 25,000 in 2016.

Child Abuse and Neglect: The final budget includes $6.1 million in one-time federal funding to expand the Parent Partner and Family Reunification Programs—down from the governor’s recommendation of $10 million. The goals of the programs are to prevent the need for foster care, ensure that children are more quickly reunified with their families when it is safe to do so, and assist parents after children are returned home.

The League strongly supports programs to prevent child abuse and neglect and strengthen families. While the number of victims of child maltreatment has been climbing, funding for prevention has largely declined or remained stagnant.

Child Care and Early Education

Child Care: The final budget included $7.7 million in federal funds for a modest increase in the initial eligibility level for subsidized child care. At 121% of poverty, Michigan currently has one of the most restrictive child care eligibility levels in the country, and the 2017 budget will increase eligibility to 125% of poverty. Also included is $8.1 million for half-year funding of child care eligibility for Flint children ages 0 to 3 in families with incomes of 300% of poverty or less—with the possibility that additional funds could be transferred from the Flint Emergency Reserve Fund if needed. The Legislature did not address the reality that Michigan is one of only a handful of states nationwide that is not drawing down all federal child care funds to which it is entitled.

The League supports an increase in child care eligibility to 150% of poverty as well as increases in payment levels and access to high-quality child care. Statewide, the number of low-income families receiving child care subsidies fell by nearly 75% in the last decade—from 63,000 in 2006 to only 17,000 in 2015. Child care funding that communities and businesses need to keep low-wage parents on the job fell from $460 million to $105 million. The decline is partly the result of Michigan’s low child care eligibility and provider payment levels.

Great Start Readiness Program: The Legislature provided continuation funding for the Great Start Readiness preschool program ($243.6 million), allowing for 63,000 half-day slots for low-income 4-year-olds. Children are eligible if their family’s income is below 250% of poverty (300% if all children at 250% are served), with the priority given to children with the greatest needs.

The League strongly supports the state’s continued investment in preschool opportunities for 4-year-old children from low-wage families, as well as an expansion—on a pilot basis—to 3-year-olds.

K-12 Schools/Education

Per-Pupil Spending:

  • The Legislature retained the governor’s per-pupil increase of between $60 and $120, with districts receiving the lowest payment per pupil receiving the largest increases. The minimum per-pupil payment will increase to $7,511, while the maximum will rise to $8,229. This year, the difference between the highest- and lowest-funded districts is $778—down from a gap of $2,300 when Proposal A was first adopted.
  • The final budget includes the $72 million recommended by the governor to pay the additional foundation allowance costs associated with diverting Detroit Public Schools’ property tax revenue to pay off the district’s debt.

The League supports school funding levels that increase the quality of education, mitigate the impact of inflation and fixed costs on school operating budgets, and increase funding equity. Two of every 3 dollars in the School Aid budget are used to support per-pupil payments, which are the primary source of funding for school operations. Part of the challenge facing school districts has been declining enrollment, in part the result of the growth of charter schools.

Funding for At-Risk Students: The final budget approved by the Legislature did not increase funding for high-needs students—rejecting a House increase of $18 million for a small number of districts that are currently not eligible for At-Risk program funding, but have more than 50% of their students eligible for the free lunch program due to family income below 130% of poverty (about $26,000 a year for a family of three). Total funding for the program is maintained at the current year level ($379 million). Ongoing funding of $5.6 million is available for adolescent teen health centers and $5.2 million for hearing and vision screenings in schools.

The League supports full funding of the At-Risk program. In the current year, the Legislature approved an increase of $70 million for at-risk students—the first increase in over a decade. By statute, districts are supposed to receive a set amount of At-Risk dollars based on the number of children receiving free breakfast and lunch (135% of poverty). However, because the At-Risk program has been underfunded by a total of $1.9 billion since 1995, districts receive much less. Fully funding the At-Risk program this year would have cost an estimated $134 million more than was appropriated.

Reading by Third Grade: The final budget reduces funding for this year’s initiative to improve reading by third grade by $2.5 million, from $26.4 million to $23.9 million, through the elimination of pilot projects and one-time funding. The largest component of the initiative—funding for additional instructional time for children who are behind in reading—is retained at $17.5 million. Also included are funds for early literacy screenings, teacher coaches and professional development.

The League supports state investments in early literacy, including expanded instruction time and professional development for teachers. The League also supports early intervention and early childhood education programs that give children a jumpstart before they enter the schoolhouse doors.

Lead Testing in Schools Statewide: The Legislature approved $4.5 million in state funds (in the budget of the Department of Education) to reimburse school districts that choose to test their water for lead levels, with a cap of $950 per school building. The governor’s budget included $9 million in the School Aid budget for lead testing in schools statewide.

The League recognizes that lead exposure—from water, paint, demolition debris or other sources—is a threat in many areas of the state, and supports a statewide approach to lead exposure prevention, abatement and amelioration.

Adult Education:

  • The Legislature expanded eligibility for adult education to adults age 18-19. Currently, adult education is available for persons age 20 and over, and the governor had proposed expanding eligibility to adults age 18-19 and to high school students and out-of-school youths under age 18. While the final budget’s expansion puts less strain on adult education providers’ budgets than the governor’s proposal, it still increases the likelihood that some adult education programs will be strapped for money to the degree that they cannot effectively serve their priority population (individuals 20 years of age and over).
  • The Legislature followed the governor’s lead by continuing to fund adult education at $25 million, the same amount as last year. This is despite the demonstrated need for more funding, as the League and adult education providers have shown that fewer students in Michigan are enrolling in and completing adult education programs and many counties have cut their programs due to a shortage of money.

The League opposes the expansion of adult education eligibility to any new groups without concurrent additional funding to providers to accommodate the increase in students. The League also recommends an increase of at least $10 million in adult education funding. At an estimated cost of $1,240 per student, this would enable 8,000 more students to be served, and would enable adult education to serve the equivalent of 10% of students age 25-44 without a high school diploma.

Postsecondary Education

Financial Aid:

  • The Legislature added $4.5 million in new funding for the Tuition Incentive Program (TIP), which serves students from households that are eligible for Medicaid, bringing the total funding for the program to $53 million.

The League supported the increase in funding for the TIP, as it is specifically targeted to students from low-income households.

  • Neither the governor nor the Legislature included funding for the Part-Time Independent Student Grant, which serves individuals who have been out of high school for more than 10 years and/or are over 30 years of age. This grant had been included in the 2016 Community Colleges budget, but was cut from the final budget in conference committee. The failure to include funding for the grant in 2017 means that the upcoming school year will be the seventh year in a row that there is no state financial aid to help this population attend a community college or public university.

The League supports reinstating and funding the Part-Time Independent Student Grant to help older students, many of whom are low-paid workers raising families.

  • The final budget includes just under $1 million in new funding for the Michigan Tuition Grant, a means-tested grant that helps students attend private not-for-profit institutions. No additional funding was provided for the Student Competitive Scholarship which is based on both merit and need.

The League supports keeping these two financial aid programs strong, as they are accessible to students from low-income families in addition to those from financially secure families.

Tuition Restraint: Tuition restraint is a limit on the amount a university may increase tuition and fees annually and still receive full funding from the state. For 2017, the Legislature increased the cap by a smaller amount than recommended by the governor, 4.2% vs 4.8%, and added language that universities that exceed the cap will not receive capital outlay funds (for school construction projects) in the 2018 or 2019 budget years and that the Legislature may adjust the appropriations for those universities.

The League supports tuition restraint as an attempt to keep tuition from rising too quickly, but prefers that Michigan undertake other strategies to actually bring tuition down and reduce student debt. Because much of the cost burden of supporting public universities has been shifted from the state to students, reducing tuition can only be done if the state restores the university funding that has been cut over the past decade.

Community Revenue Sharing

Statutory Revenue Sharing for Cities, Villages and Townships: The Legislature maintained the funding amount ($248.8 million in restricted funding) and statutory revenue sharing distribution formula used in the current year, which makes all cities, villages and townships (CVTs) eligible for 100% of the payment they received in the current budget year so long as they meet already established accountability and transparency requirements. This does not do enough to reverse the trend of disinvestment, as Michigan currently funds statutory revenue sharing at less than 30% of the statutorily set level.

County Revenue Sharing and Incentive Program: The Legislature approved a total of $217.3 million in restricted funding, expanding county revenue sharing to two newly eligible counties and providing a 1.0% increase to all eligible counties. In the 2017 budget year, 78 counties are eligible for state-paid county revenue sharing, up from 76 in the current year.

The League supports full funding of statutory and county revenue sharing. The increase provided to counties is a step in the right direction to start reversing years of disinvestment in our local communities, but CVT revenue sharing is still woefully underfunded. While holding CVTs harmless is preferable over cuts, more must be done to provide the increases that these municipalities require.

Corrections

Mental Health Services: The Legislature approved approximately $1 million for an additional nine full-time mental health care staff positions—below the governor’s recommendation of 17 new full-time mental health services positions in the 2017 budget year.

The League supports increased funding for prisoner mental health care and substance use disorder treatment. An estimated 20-25% of prisoners have been diagnosed with severe mental illness, and many more with mental health problems. Nine of every 10 prisoners with severe mental illness also suffer from substance use disorders, and upwards of 65% of those with mental health symptoms do not receive treatment.

Reentry Services: The final budget did not include increases for contract rebids to adjust for inflation as proposed by the governor; however, an additional $4.5 million was appropriated as “criminal justice reinvestment” in order to expand current evidenced-based reentry programs along with $500,000 for medication-assisted substance abuse programs, and $2 million for expansion of the Vocational Village pilot program that connects prisoners with employers that provide job training for future employment.

The League supports efforts to adequately fund and improve reentry programming and advocates for further funding geared towards reducing recidivism. Currently over 50% of the prison population is made up of probation and parole violators.

It is time for earned sick leave in Michigan

pdficonJune 2016
Senior Policy Analyst, Peter Ruark

Michigan should enact an earned sick leave law. This would help low-paid workers keep their jobs, increase productivity and reduce employee turnover, and protect the health of other employees and the public.

Many middle- and upper-income workers have the ability to take time off for sickness or family needs. But for many low-paid workers in Michigan, becoming sick can cause loss of money or even a job. It can put a worker in the difficult position of having to decide whether to stay home and lose wages, or to go to work and risk becoming sicker, work less productively and expose coworkers (and in many cases the public) to illness. Parents may feel pressure to forgo needed doctor checkups and medical care for themselves or their children because they cannot afford to lose the wages due to absence from work. They may even send their child to school sick because they cannot afford to stay home to take care of them.

An earned sick leave law in Michigan would require most employers to bank sick time for their workers based on the number of hours they have worked. Several cities and states have already passed sick leave laws and it is time for Michigan to do the same.

Its time for earned sick leave in michiganWho Would Benefit From an Earned Sick Leave Law?

More than 1.7 million (44%) Michigan workers cannot take time off with pay when they or one of their children are ill.1 This is true for 55% of Michigan’s Hispanic workers, 46% of African-American workers, 67% of workers in service occupations and 78% of workers who work less than 35 hours per week.2 (See appendix for more figures on earned sick leave by demographic.)

Missing work due to sickness causes not only a loss of wages for workers without sick leave, but can also lead to a loss of employment. Working mothers are especially at risk. In a 2013 survey commissioned by Oxfam America, 1 out of 7 low-wage workers and 1 out of 5 low-wage mothers reported losing a job in the past four years because they were sick or needed to care for a family member.3 Such job instability and its resulting stress can harm the social and intellectual development of children who already are at risk due to poverty.4

Workers without earned sick leave have reported working while in immense pain, delaying needed treatment, leaving sick children alone at home or in the hospital, spreading germs in the workplace and among the public, and receiving threats of retaliation from their employers for caring for a sick family member rather than going in to work.5 The fact that so many workers in the service industries do not get earned sick days indicates that an earned sick leave law will protect public health in addition to family well-being.

Its time for earned sick leave in michiganWould an Earned Sick Leave Law be Good for Michigan Businesses?

A study of Connecticut’s earned sick leave law shows that while businesses were concerned about a negative impact, for the most part the law imposed minimal burdens.6 Employers indicated that most employees used fewer sick days than available and appeared to save up their sick days for when they were really needed; only two-thirds of workers had used the sick days available to them and workers took an average of four days per year.7 The study also found that only 10% of employers reported increased payroll costs of 3% or more, and that administrative costs of tracking earned sick leave were minimal.8 Although business groups in Connecticut had initially strongly opposed the legislation, 40% of employers were very supportive of it 18 months after the law took effect and 37% were somewhat supportive.9 These figures suggest that although business groups in Michigan oppose enactment of a mandatory earned sick leave law, the effects of such a law would be far less dire (and more beneficial to the state overall) than the warnings of these opponents would suggest.

Michigan Should Enact an Earned Sick Leave Law

The United States is 1 of only 3 out of 22 high-income countries that do not require employers to provide earned sick leave that would cover a five day illness. Most of the countries guarantee at least five days of sick leave per year, while a few have social insurance programs to cover both short-term and long-term leave.10 In the absence of movement by Congress to pass earned sick leave bills that have been introduced, and because Michigan now has a preemption law prohibiting localities from enacting earned sick leave on their own, Michigan should establish earned sick leave statewide.11

Its time for earned sick leave in michiganFive states and Washington, DC have sick leave laws. In 2011, Connecticut became the first state to enact such a law, and California and Massachusetts followed suit with laws that took effect in July 2015. Oregon’s law took effect in January 2016 and Vermont’s law will begin in January 2017.12 Massachusetts’ law was enacted through a ballot initiative, while earned sick leave laws in the other states and Washington, DC were enacted through legislation.13

In Michigan, both legislative chambers have bills pending that would require all employers to provide earned sick leave at a rate of one hour for every 30 hours worked, up to 40 hours per year for employees of a small business (ten employees or less) and up to 70 hours annually for all other workers. The bills have strong public support: A recent poll shows 86% of Michigan voters agree that every worker should be able to earn sick days in order to take time off without losing pay, and 83% would be supportive of the Legislature passing a bill that would allow workers to earn one hour of sick time for every 30 hours worked.

Michigan currently has a preemption law that prohibits localities from enacting their own earned leave laws, underscoring the need to do this on the statewide level. Our state ought to follow the initiative of the five states and Washington, DC that have already passed such laws, and do what is right for Michigan workers and their families, businesses and the public.

Appendix

Endnotes

  1. Institute for Women’s Policy Research analysis of the 2012-2014 National Health Interview Survey and the 2014 American Community Survey.
  2. Ibid.
  3. Oxfam America, Hard Work, Hard Lives: Survey Exposes Harsh Reality Faced by Low-Wage Workers in the US, 2013, as referenced in Ben-Ishai, Liz, Access to Paid Leave: An Overlooked Aspect of Economic & Social Inequality, Center for Law and Social Policy, April 14, 2014. (www.clasp.org/resources-and-publications/publication-1/2014-04-09-Inequities-and-Paid-Leave-Brief_FINAL.pdf.)
  4. For more on this topic, see Babcock, Elizabeth, Using Brain Science to Design New Pathways Out of Poverty, Crittenton Women’s Union, 2014. (www.liveworkthrive.org/research_and_tools/reports_and_publications/EF_Report.)
  5. Family Values at Work, Voices from the Front Lines: Real Stories of American Families Living Without Paid Leave—and Glimpses of a Brighter Future, June 2014.(http://familyvaluesatwork.org/wp-content/uploads/2014/05/FVAW-2014-0005_FINAL_4web_spreads.pdf.)
  6. Appelbaum, E., R. Milkman, L. Elliot and T. Kroeger, Good for Business? Connecticut’s Paid Sick Leave Law, Center for Economic Policy Research, March 2014. (https://cepr.net/documents/good-for-buisness-2014-02-21.pdf.)
  7. Ibid.
  8. Ibid.
  9. Ibid.
  10. Heymann, Jody and Hye Jin Rho, John Schmitt and Alison Earle, Contagion Nation: A Comparison of Paid Sick Day Policies in 22 Countries, Center for Economic Policy Research, May 2009. (www.cepr.net/documents/publications/paid-sick-days-2009-05.pdf.)
  11. One bill in Congress is the Healthy Families Act introduced by Rep. Rosa DeLauro (CT). For more information on this bill, see National Partnership for Women and Families, Fact Sheet: The Healthy Families Act, February 2015. (www.nationalpartnership.org/research-library/work-family/psd/the-healthy-families-act-fact-sheet.pdf.)
  12. A Better Balance, Overview of Paid Sick Time Laws in the United States, updated March 2, 2016. (www.abetterbalance.org/web/images/stories/Documents/sickdays/factsheet/PSDchart.pdf; accessed on March 2, 2016.)
  13. National Partnership for Women and Families, State and Local Action on Paid Sick Days, November 2014. (www.nationalpartnership.org/research-library/campaigns/psd/state-and-local-action-paid-sick-days.pdf.)

 

Review tax expenditures to help fix Michigan’s broken revenue stream

pdficonMichigan has a budget problem, and simply put, there just isn’t enough money to go around. Michigan has experienced crisis after crisis—the Great Recession, nearly record-high unemployment, municipal financial emergencies, the city of Detroit’s bankruptcy, the Flint water crisis and the financial struggles of Detroit Public Schools to name a few. In attempting to fix them, the state has relied on budget cuts, temporary Band-Aids or one-time pots of money. It hasn’t worked. Michigan’s disinvestment in its schools, infrastructure, communities and people needs to be reversed, and it cannot do so without more revenue.

Revenue tax expenditures chart 1Unfortunately, at the same time that the state needs more money, policy trends have continually pulled more out of our state budget. In recent history, we have spent more in state and local tax credits, deductions and exemptions each year than we do in total budget spending from state general and restricted funds—a difference of roughly $4 billion in 2015. On top of this, instead of increasing revenues to cover increasing costs, the Legislature shifts around our revenue streams, leaving potential shortfalls to be resolved with budget cuts. Lawmakers need to have a better idea of how much money we are failing to collect, review existing tax expenditures and earmarks to make sure they are still good policy, and provide accountability for new tax breaks and other policy changes.

Revenue tax expenditures chart 2State Revenues Can’t Keep Up

Michigan’s revenues have not been able to keep up with inflation. In terms of actual dollars, total state General Fund and School Aid Fund revenues anticipated for budget year 2017 have grown about 22.7% since 2010, the trough of Michigan’s recent recession. However, when adjusted for inflation, the state is 17.7% below 2000 levels. What is most interesting though is that in actual dollars, for budget year 2017, state General Fund dollars are anticipated to be 4.4% below 2000 levels despite the fund’s more robust growth since 2010.

Revenue tax expenditures table 1While state revenues continued to be negatively affected by the decade-long recession felt in Michigan, the state became increasingly reliant on federal funds to help balance its budget. In 2001, the state General Fund and federal funds contributed nearly equal amounts to the state budget at 26.4% and 27.1% respectively, but the trends have diverged significantly since. Even after the federal government withdrew the American Recovery and Reinvestment Act (ARRA) funds following 2011, federal revenues still contribute over 40% of the funds necessary for Michigan’s budget, while state General Fund revenues have dropped to below 20%. Over the past 10 years, our total budget has grown by 29.7%, and federal funds appropriated in our state budget have grown by 75.1% in that same time period, while state spending from state resources has only grown by 8.8%.

Revenue tax expenditures chart 3It would be easy to blame Michigan’s revenue problems on the economy, but we are in our sixth year of economic recovery and still struggling. Our situation has been compounded by tax changes that have done little to help and even caused harm, including a tax reform that largely benefited businesses but meant less money for Michigan’s people and the state, and policy shifts that have made more of our revenue streams restricted in use. Michigan needs to take a hard look at the money it foregoes due to preferential tax treatment to ensure that Michigan has a fair and adequate revenue system.

Tax Expenditures: Not Just Loopholes Anymore

Revenue tax expenditures chart 4Tax expenditures, commonly called loopholes, are broadly defined as revenue foregone because of preferential tax treatment in the form of credits, deductions and exemptions, or lower tax rates given to individuals and businesses. The state generally divides them into five main categories: business privilege, consumption (such as sales and use taxes or tobacco taxes), personal income, transportation and local/property. These tax expenditures are often called silent spending because, like appropriations, they allocate resources for public purposes but do so through the tax code rather than through the annual state budget process. They have a significant impact on the annual budget process as they reduce or eliminate revenue that would have otherwise been collected, but are not regularly reviewed and evaluated.

Typically, these tax credits, deductions and exemptions are used for two purposes. First, they redistribute or reduce the impact of taxes on low-income individuals and businesses. For example, the Homestead Property Tax Credit helps lower property taxes and makes living in Michigan more affordable for residents with high property taxes. Additionally, the constitutional sales tax exemption on food helps level the playing field for lower income families as they tend to spend a higher proportion of their incomes on food, and without the exemption, would also spend more of their money on taxes. However, even with this targeted tax relief, Michigan’s lower-income families still pay nearly twice the tax rate of the wealthiest in terms of state and local taxes.

Revenue tax expenditures chart 5The second purpose of tax expenditures is to influence the behavior of individuals or businesses. The federal and state Earned Income Tax Credits are only provided to individuals who have income from a job or self-employment and are intended to encourage work while helping individuals make ends meet. And local property tax abatements encourage either the establishment of or the renovation or replacement of various business facilities (e.g., industrial facilities tax abatements or obsolete property rehabilitation abatements).

While they are commonly called loopholes, most true “loopholes” do not exist. The foregone revenue resulting from these credits, exemptions or deductions is not an unintended consequence of tax changes or unintended tax avoidance methods. Most of these expenditures were purposely written in the tax code. However, other intended policy changes can have tax implications whether intended or not. For example, changes made in 2012 to the Insurance Code resulted in automobile insurance providers being able to claim a tax credit amounting to $60 to $80 million per year. But this unintended consequence was not discovered until 2016. However, once these tax expenditures are written into the tax code, they are difficult to be unwritten, and their effect often grows.

Revenue tax expenditures chart 6Continued Erosion of the General Fund

Another trend in Michigan fiscal policy is to make funds restricted in use. These revenues are restricted by the State Constitution or state statute, or otherwise are only available for specified purposes, and generally remain in the restricted fund if they go unused during a budget. These include most fee revenue, the School Aid Fund and most funds that are used for transportation purposes. Most of the state-sourced revenue in Michigan’s budget is restricted funds.

Revenue tax expenditures table 2Over the past five years, the Legislature has passed two main packages that have continued the trend in making funds restricted: the Personal Property Tax repeal and the roads plan of 2015. The repeal of the Personal Property Tax was originally enacted in 2012, amended in 2014, and made effective by a ballot initiative in August of 2014. Most of the discussion centered on how to reimburse schools and local units of government for the revenue lost due to the repeal, and the mechanism for making them whole was dedicating some of the currently unrestricted Use Tax revenue exclusively for that purpose.

Revenue tax expenditures chart 7Furthermore, in 2015, lawmakers enacted a road funding plan that included some new restricted revenue in tax and fee increases, but also dedicated a significant amount of currently unrestricted income tax revenue to transportation purposes. Ultimately, this will shift $600 million annually away from our General Fund to be used for road repairs and maintenance.
These two changes are anticipated to divert over $800 million away from our state General Fund by budget year 2020, potentially squeezing our budget and jeopardizing other funding priorities. Once changes to the Homestead Property Tax Credit are taken into consideration, the diversion and foregone revenue total around $1 billion. This will have a long-term, lasting and detrimental impact on our state budget.

Where to Go from Here?

Michigan has already endured enough crises—the state’s dissolution of two public school districts, the city of Detroit bankruptcy, the Flint water crisis, the Detroit Public Schools financial crisis, in addition to many other schools and municipalities that are struggling—and is one more crisis away from not being able to fund the basic services Michigan residents rely on. Policymakers are intentionally stifling the state from being able to invest in its infrastructure, schools, people and businesses. Michigan must take a look at its inadequate revenue streams to determine where there is room for improvement.

 

Revenue tax expenditures chart 8Stop the erosion of state funds: Every year, the state nickels and dimes away at state funds without regard to—or sometimes knowledge of—the possible budget implications. These changes include new tax breaks, tax policy changes and shifting funds to pay for different services and programs. The funding that is left is often strained by growing budgetary pressures. Lawmakers should review existing restricted fund streams to ensure that they are sufficient to meet the state’s needs. Legislators must also understand the costs of each tax policy change to make sure that the benefit actually offsets the cost to other important state programs.

Review existing tax expenditures: Michigan lawmakers need to determine whether the benefits of various forms of preferential tax treatment still outweigh the costs to the state. While some of these credits, deductions and exemptions continue to suit the purpose for which they were intended, many go unchecked and simply cost the state money with little return. Michigan does have an annual report on state tax expenditures, but it does not include vital information as to the funds affected, the history of the expenditure, or an analysis as to whether it is serving its purpose. The state should establish a process for reviewing these spending measures to ensure that they are still accomplishing set goals and that the loss of state revenue is justified. As part of this evaluation, expenditures that no longer meet their intended purposes—or are no longer necessary—should be eliminated.

Revenue tax expenditures chart 9Make tax relief strategic, measurable and adjustable: The truth is, no one really likes paying taxes. But we should not cut taxes simply for this reason. Tax benefits should be given for a reason, whether to balance the scales for lower-income individuals through the Homestead Property Tax Credit or to encourage specific behaviors like the Earned Income Tax Credit, and the outcomes should be measurable. New tax expenditures should include measures to allow lawmakers to determine their usefulness, such as expiration sunsets for periodic review, accountability measures, or clawbacks to reclaim money from recipients that do not comply with requirements.

Endnotes:

  1. Patricia Sorenson. Losing Ground: A Call for Meaningful Tax Reform in Michigan. Michigan League for Public Policy. January 2013. Rachel Richards and Alicia Guevara Warren. Enough is Enough: Business Tax Cuts Fail to Grow Michigan’s Economy, Hurt Budget. Michigan League for Public Policy. November 2015.
  2. Both the Personal Property Tax repeal and the 2015 road funding plan took parts of revenue streams currently devoted to the General Fund and made them restricted funding.
  3. State of Michigan, Department of Treasury. Executive Budget Appendix on Tax Credits, Deductions, and Exemptions: Fiscal years 2015 and 2016. 2014. Retrieved from http://www.michigan.gov/documents/treasury/ExecBudgAppenTaxCreditsDedExempts_FY_20152016_476553_7.pdf.
  4. Institute on Taxation and Economic Policy. Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, 5th edition. January 2015. Retrieved from http://www.itep.org/whopays/.
  5. David Eggert. Michigan Budget: Inadvertent Tax Break for Car Insurers Targeted for Repeal. Associated Press. February 20, 2016.
  6. Mary Ann Cleary and Kyle Jen. A Legislator’s Guide to Michigan’s Budget Process. House Fiscal Agency. October 2014.
  7. See House Fiscal Agency analyses for House Bills 6022 and 6024-6026 and Senate Bills 1065-1071 of 2012; Senate Bills 821-830 of 2014, and Ballot Proposal 1 of 2014.
  8. See Senate Fiscal Agency analyses for House Bills 4370, 4376-4378, 4614 and 4616 and Senate Bill 414 of 2015.
  9. Michigan League for Human Services. Silent and Stealthy: Michigan Gives Away $35 Billion a Year. April 2010.

 

 

 

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