Reports


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.

highlights 2017The 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.

By 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.

 

 

 

Increase reforms and support services in Department of Corrections budget

Budget Brief JPG USE THIS ONEpdficonMichigan spends approximately $2 billion each year to house prisoners, with Department of Corrections spending accounting for 19% of the total state General Fund—more money than higher education spending. As the 2017 state budget negotiations heat up this month, sweeping reform is needed to safely reduce the prison population. The League supports evidence-based alternatives to incarceration along with reentry services that keep individuals from reoffending or violating conditions of probation and parole and successfully reintegrate prisoners and reunite families. The League’s priorities for 2017 include increased funding for mental health services, full funding for Hepatitis C drug treatment for infected prisoners, and investment in effective reentry programs that provide opportunities for education and training and connections to future employers.

BB CorrectionsSince the release of the governor’s budget proposal in February, the House and Senate have approved their own versions of the 2017 budget for the Department of Corrections (DOC). The second consensus revenue estimating conference will be held on May 17th, where state economists and budget experts will brief legislators on updated state revenue estimates and set final spending targets. It is expected that joint House/Senate conference committees will meet right after the May 17th conference to negotiate differences between the House and Senate versions and come to agreement on the final budget bill that will be voted on by both houses and ultimately approved by the governor.

This brief compares the Department of Corrections budget bills that were approved by the House and Senate with the governor’s executive budget recommendations made in February, and includes the League’s recommendations for the final budget.

Prisoner Healthcare

Hepatitis C Drug Treatment: The governor recommended $17.3 million for Hepatitis C treatment for Michigan prisoners—$3.4 million for 2017 on top of the $13.9 million already transferred into the 2016 budget to cover Hepatitis costs this year. In 2013, approximately 4,445 prisoners, or 10% of the prison population, tested positive for Hepatitis C. With approximately 1,000 prisoners released from prison each year, many prisoners with Hepatitis C will return to their communities still suffering from—and potentially spreading—the disease if not treated.

  • Senate: The Senate did not increase funding for Hepatitis C treatment.
  • House: The House agreed with the governor to provide funding, however at a lower level of $12.3 million.

The League supports the governor’s recommendation to provide adequate and humane care for prisoners, including medical treatment, along with protecting the general public from infection from untreated prisoners who return to their communities.

Mental Health Services: The governor included $2 million for 17 new employees to address waiting lists for mental health services in prisons. Approximately 1 in 5 prisoners currently receive some form of mental health treatment.

  • Senate: The Senate provided $1 million for nine new mental health employees and related services.
  • House: The House agreed with the governor to provide $2 million for 17 new employees and related services.

The League supports the governor’s funding level, which may bring the state closer to providing needed mental health services to the high proportion of mentally ill inmates. Prisons and jails house more mentally ill people than psychiatric hospitals in Michigan.

Substance Abuse Services for Probation Violators: The governor recommended $750,000 for a new 30-day program to prevent relapse and serve as an alternative to residential treatment for prisoners on probation that violate due to substance use. Approximately 250 probation violators would be treated.

  • Senate: The Senate did not include funding for this initiative.
  • House: The House agreed with the governor and provided the full recommended amount of $750,000.

The League supports the governor’s recommendation to improve rehabilitation programs for parole violators.

 

Flint and beyond: Cities in crisis need more funding from the state

Budget Brief JPG USE THIS ONEpdficonAs the Legislature rushes to finalize the state’s budget, the League continues to prioritize funding for municipalities that are struggling because of a long economic downturn and inadequate state support. The League supports the emergency services provided to Flint, as well as ongoing and long-term state efforts to help identify and treat developmental delays in children and other related health issues for all residents. To prevent future crises, the League also supports full funding of statutory and county revenue sharing, and urges lawmakers to evaluate and reform Michigan’s tax system to ensure that there are adequate resources to keep children and families healthy and safe.

The recent Detroit bankruptcy, the problems facing Detroit Public Schools and the ongoing water crisis in the city of Flint have drawn national attention, but municipal finance problems are not unique to Detroit and Flint and are not even unique to Michigan’s urban centers. Falling property values during the Great Recession resulted in decreased property tax revenue, compounded by state government’s continual cutting and underfunding of statutory revenue sharing. While lawmakers do need to urgently help resolve the Flint water crisis and take care of the kids and people it harmed, they must also think of the state as a whole to ensure that other municipalities do not fall victim to similar problems.

BB Flint and Beyond graphic 1The House and the Senate have both voted out their separate 2017 Treasury budget bills which include revenue sharing, and the Senate has approved a current year budget supplemental to provide $128 million for some additional services to the city of Flint that is awaiting House action. On Tuesday, May 17th, the May Consensus Revenue Estimating Conference will be held to allow state budget experts and economists to reassess expected state revenues. From there, the budget is on a fast track, with legislative and administration leadership setting departmental spending targets and House/Senate conference committees meeting right after the conference to reconcile the differences in their budget bills.
This report outlines the League’s continued support for Flint and our priorities in the 2017 budget to ensure that other municipalities have the funding they need in order to avoid a future financial—and public health—crisis.

Flint Water Crisis

Just before our current budget year began (October 1, 2015), the state was mired in a crisis. High blood lead levels had been found in an increased number of Flint children, caused by high lead levels pouring from the faucets in their houses. The exposure of the residents of an entire city to lead toxins is a disaster that was preventable and compounded by state government’s denial and delayed response. This crisis now calls for an aggressive and long-term state response, and current year and future budget considerations are being made to address it.

Enacted 2016 Supplemental Budget Funding

Enacted Emergency Provisions: After the water crisis became too severe to be ignored, Michigan lawmakers did come to Flint’s aid, enacting a number of emergency funding provisions totaling $67.4 million ($59.8 million state funding). Much of this early aid focused on getting much-needed water-related resources to Flint residents, including bottled water, lead-removing water filters, funding to reconnect to the Detroit Water and Sewerage Department, and a partial credit to residents on bills for the water they are unable to use. Also included in some of these early budget supplementals was funding for additional school nurses, Early On service coordinators, testing for lead in both blood and water, and nutrition services through the WIC (Women, Infants and Children Special Supplemental Nutrition) program.

Proposed 2016 Supplemental Budget Funding Awaiting Action

Educational Services: The governor recommended $25.6 million ($6 million state funding) for half-day child care services for children up to age 3 regardless of income to help mitigate developmental delays; intervention services for children with lead-associated developmental delays; and nutrition programs to ensure access to healthy fruits and vegetables. An additional $9.2 million (all state funds) was recommended by the governor for Early On services to children under 5 years old who did not participate in the Great Start Readiness Program.

  • Senate: The Senate agreed with the governor on both the $25.6 million for child development and nutrition services and $9.2 million for early intervention services through Early On.
  • House: The House only supported the governor’s recommendation of $9.2 million for Early On and has not yet considered $25.6 million for child development and nutrition, indicating that it would consider Flint assistance during its deliberations on the 2017 budget.

Health and Human Services: The governor proposed $8.3 million ($2.2 million state funding) for food bank resources including use of mobile food banks, evidence-based home visitation programs to provide parenting resources and identify developmental delays, and intensive services for children.

  • Senate: The Senate agreed with the governor’s recommendation of $8.3 million for these resources and also provided $321,000 for the increased costs of department-contracted private child welfare agencies providing increased care and supervision of foster care children.
  • House: The House has not yet approved funding for these services, indicating that it would consider Flint assistance during its deliberations on the 2017 budget.

The state has also received approval from the federal government to expand Medicaid services in Flint to children up to 21 years old and pregnant women who were served by the Flint water system since April 2014, and who have income of up to 400% of the federal poverty level ($80,360 for a family of three). The federal waiver was approved May 3, 2016, and enrollment began on May 9, 2016, after the necessary state funding was found within the existing budget.

Infrastructure Updates: The governor proposed $25 million (all state funds) to begin replacing lead service lines in high-risk, high-hazard Flint homes.

  • Senate: The Senate agreed with the governor’s $25 million recommendation for lead service line replacement.
  • House: The House has not yet approved funding for these services, indicating that it would consider Flint assistance during its deliberations on the 2017 budget.

The League has supported the emergency services provided to Flint, but also recognizes the need for ongoing and long-term services to help identify and treat developmental delays in kids and health issues related to the Flint water crisis. The Flint water crisis is a canary in a coal mine, and infrastructure problems like Flint’s exist in municipalities statewide. Michigan must evaluate and reform its tax system to ensure that the state has adequate resources to fix the problems in Flint as well as prevent future crises statewide.

Funding for Michigan Cities and Local Governments in the 2017 State Budget

Constitutional Revenue Sharing: The governor recommended $781.5 million for constitutional revenue sharing, which appears to be a $2.4 million reduction from current year appropriated amounts but is actually a 3.9% increase above the January 2016 Consensus Revenue Estimating Conference (CREC) estimate for the current year. Under Michigan’s Constitution, 15% of the sales tax levied at the rate of 4% is distributed to all Michigan cities, villages and townships (CVTs) on a per capita basis. This is an automatic, mandatory payment and is not subject to annual appropriations. Adjustments are made based on the January and May CREC estimates, and the amounts appropriated are based on these estimates. However, actual payments will be based on the amount of sales tax collected.

  • The House and the Senate agreed with the governor’s recommendation.

Cities, Villages and Townships Revenue Sharing: The governor proposed eliminating $5.8 million in one-time restricted sales tax revenue and removing the per capita distribution component. By doing so, 101 cities, villages and townships (CVTs) that were included in the current year distribution would not receive a payment next year, and CVTs that were eligible for a higher per capita payment would be reduced to the previous appropriation level.

Michigan’s statutory revenue sharing program has a long history. In the late 1990s, the statute was amended to implement a new distribution formula. However, since budget year 2002, actual appropriations have been routinely well below the full funding guideline, and changes in the formula have completely eliminated statutory revenue sharing for 1,033 CVTs. Actual statutory revenue sharing was last used in budget year 2011. Currently, all allocations and distribution formulas are provided for in the annual appropriations bill, and 587 CVTs are eligible for a total of $248.8 million in revenue sharing in the current budget year.

  • The Senate reduced funding by 1.5% but maintains eligibility for all local units that are eligible for a payment in the current year.
  • The House retained current year funding levels to ensure that all CVTs eligible for a payment in the current year will be eligible for 100% of that amount in the next budget year.

County Revenue Sharing and County Incentive Program: The governor proposed increasing county payments by $467,500 in 2017 to accommodate two new counties (Alcona and Charlevoix) returning to state revenue sharing, as well as maintain full funding. In an agreement to balance the budget, county revenue sharing was suspended in the 2005 budget year. Counties created reserve funds with their own revenues from which they were allowed to draw an annual amount. Once their reserve funds were exhausted, the counties would be eligible for state revenue sharing payments equal to their final authorized withdrawal amount. In the current year, about 76 counties receive state revenue sharing payments, and seven counties still draw from their reserve funds.

  • Senate: The Senate provides funding for the newly eligible counties and increases payments to all eligible counties by 2%.
  • House: The House agreed with the governor.

Financially Distressed Cities, Villages and Townships: The governor recommended level funding of $5 million for a program that provides grants of up to $2 million for cities, villages and townships with signs of fiscal distress for projects that move the municipality toward financial stability.

  • The Senate and House agreed with the governor.

The League supports full funding of statutory and county revenue sharing. For too long lawmakers have shortchanged our struggling municipalities and counties, and it should come as no shock that many of them have fallen on financial hard times. The infrastructure and financial problems in Flint and Detroit are due in part to continued state disinvestment. While an immediate influx of state support in statutory revenue sharing is likely impossible, the state should at least maintain what has been provided in the current year and should start making strides to provide the increases that these municipalities require.

Budget funding for adult education, training will help workers and boost economy

Budget Brief JPG USE THIS ONEpdficonWith the 2017 state budget expected to be wrapped up by the end of May, the League continues to push for a strong postsecondary education system that enables lowpaid workers to increase their marketable skills while working and taking care of their families. The League supports financial aid for low-paid workers with families who are trying to acquire occupational skills and have been out of high school for more than 10 years, stronger tuition restraints for public universities coupled with additional funding, and increased investments in adult education (School Aid budget). Inadequate access to adult education negatively affects community colleges, because many students needing remediation will be required to take developmental education at the colleges rather than beginning their occupational training programs college-ready.

BB Budget funding for adult educationVersions of the 2017 Community Colleges and Higher Education budgets have already been passed separately by the House and Senate. At the Consensus Revenue Estimating Conference on May 17th, lawmakers will get an update from state budget experts and economists on state revenues that will inform the final budget spending targets. The Legislature is looking to complete the 2017 budget and send it to the governor by the end of May. Differences between the House and Senate budgets will be negotiated in joint conference committees, which will begin meeting soon after the May 17th conference.

This report examines the differences in postsecondary education and training in the budgets that were approved by the House and Senate and the primary decisions that will need to be made before the budget is finalized.

Financial Aid

Tuition Incentive Program: The governor’s Higher Education budget recommended $2 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 $50.5 million.

  • Both the House and Senate agreed with the governor’s recommendation to add $2 million for the TIP.

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

Part-Time Independent Student Grant: Neither the Community Colleges budget nor the Higher Education budget proposed by the governor for 2017 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.

  • Neither the House nor the Senate added funding for the Part-Time Independent Student Grant.

The League supports funding for the Part-Time Independent Student Grant to help older students in either the Community Colleges or Higher Education budget.

Other Financial Aid Programs: There are two other grant programs in the Higher Education budget, both of which are means-tested based on the amount a family needs to meet tuition levels rather than on the family’s income. The Michigan Tuition Grant helps students attend private not-for-profit institutions and the Student Competitive Scholarship is based on both merit and need. The governor did not recommend increases for either of these grants.

  • Senate: The Senate added $404,000 for the State Competitive Scholarship and $748,800 for the Michigan Tuition Grant.
  • House: The House agreed with the governor’s recommendation to not add funding for the State Competitive Scholarship and adds $1,157,200 for the Michigan Tuition Grant.

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. The governor recommended increasing the cap from 3.2% to 4.8%, enabling universities to increase tuition and fees by a higher percentage than has been allowable in the past several years.

  • Senate: The Senate agreed with the governor’s recommendation to increase the cap from 3.2% to 4.8%, and added language that universities that exceed the cap will also not receive capital outlay funds (for school construction projects) in the 2018 or 2019 budget years.
  • House: The House agreed with the governor’s recommendation to increase the cap from 3.2% to 4.8% and added “or $500, whichever is greater” to the bill language.

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.

 

 

More funding needed for low-income students and families in 2017 School Aid, Education budgets

Budget Brief JPG USE THIS ONEpdficonThe League continues to advocate for a high-quality education—from cradle to career—for all Michigan children and youths as the state budget moves quickly through the Legislature. The League’s priorities for 2017 include ongoing early education and intervention services for children exposed to lead in Flint, funding for lead testing in schools around the state, full funding of the At-Risk School Aid program, and an increase in income eligibility caps for child care services from 121% to 150% of poverty.

Both the House and Senate have approved their versions of the 2017 budget for School Aid and the Department of Education (MDE). State economists and budget experts will get together with legislators on May 17th to reevaluate expected state revenues and set final spending targets. Legislators are planning to send final budgets to the governor by the end of May, and joint House/Senate conference committees are expected to meet right after the May 17th revenue estimating conference to iron out differences between the House and Senate versions.

This report highlights the League’s priorities in the 2017 School Aid and MDE budgets approved by the House and Senate, with a focus on decisions that will need to be made before the budget is finalized.

BB Education Pre ConfK-12 Schools/Education

Flint Emergency Funds: In response to Flint’s lead exposure crisis, the governor recommended $10 million in state funds to cover the half-year costs of programs for the children of Flint, including additional school nurses and social workers, early childhood and nutritional services, an expansion of early intervention services for infants and toddlers through Early On, and preschool programs for all 4-year-olds—regardless of household income. Funding for the remainder of the year would come from a Flint Emergency Reserve Fund.

  • The Senate and House approved the governor’s funding recommendation for Flint.

The League supports the governor’s funding recommendations related to the Flint crisis in multiple state departments, including funds in the School Aid and MDE 2017 budgets. Investments in Flint in the 2017 budget are only a part of the solution to the long-term education, health, infrastructure, housing and economic needs in Flint and other Michigan communities. The state must evaluate and reform its tax system to ensure that adequate resources are available to fix the problems in Flint and prevent similar crises in other areas of the state.

School Lead Testing Statewide: The governor recommended $9 million in the 2017 budget for school districts around the state that voluntarily test their water for lead levels.

  • Senate: The Senate reduced funding for voluntary lead testing to $4 million, placing a cap of $1,000 per school building.
  • House: The House shifted the $9 million for school lead testing to the Department of Environmental Quality budget.

The League supports the investment of $9 million for lead testing in schools across the state. While the crisis in Flint must be a top priority, there are hot spots of lead exposure all over the state that must be addressed to avoid further harm to children.

Per-Pupil Spending: Two of every $3 in the School Aid budget are used to support per-pupil payments, which are the primary source of funding for school operations. For 2017, the governor recommended increases of between $60 and $120 per pupil, with districts receiving the lowest payments per pupil currently receiving the largest increases in the new budget.

  • Both the Senate and the House adopted the governor’s per-pupil increase for 2017.

The League supports increases in school funding that help raise the quality of education and mitigate the impact of inflation and fixed costs on school operating funds. In the last decade, the minimum K-12 per-pupil allowance increased by 6%—less than half the rise in inflation at 14%.

Funding for Students Academically At Risk: The governor recommended that funding for districts with high numbers of students who are at risk academically be continued at the current year level ($379 million). Level funding is also included for adolescent health centers ($5.6 million) and hearing and vision screenings in schools ($5.2 million).

  • Senate: The Senate agreed with the governor on At-Risk School Aid funding, as well as funding for adolescent health centers and hearing and vision screenings.
  • House: The House agreed with the governor on funding for adolescent health centers and hearing and vision screenings. In addition, the House increased funding for the At-Risk program by $18 million to provide payments to a small number of high-risk districts that are currently not eligible under the state funding formula. To be eligible for the expansion, the affected districts must have more than 50% of their students eligible for the free lunch program due to family income below 130% of poverty, or $26,117 for a family of three. Finally, the House included $3.5 million for grants to at-risk districts (at least 50% eligible for free school meals) for year-round instructional programs.

The League supports full funding of the At-Risk School Aid program. The program provides state funds to schools based on the number of very low-income students enrolled. Children living in poverty often require additional services and resources to keep up with their peers, all of which comes at a higher cost to schools. Funds are available to districts based on a formula, but because the program has been underfunded by a total of $1.9 billion since 1995, schools receive less than they are owed and need. Fully funding the At-Risk program in 2017 would cost slightly over $100 million.

Adult Education: The governor recommends flat funding for adult education programs. In 2016, funding for adult education was increased by $3 million, to just under $25 million. While maintaining funding at current year levels, the governor recommended significant changes in eligibility and fund allocation for adult education programs, including the removal of the current cap on the payment amount per participant ($2,850 per full-time equivalent) and expanding adult education eligibility to individuals younger than 20 years of age.

  • The House agreed with the governor’s recommendation to not increase adult education funding and to remove the cap on the payment amount per participant, but did not support the recommendation to expand eligibility to individuals younger than 20 years of age.
  • The Senate agreed with the governor’s recommendation to not increase adult education funding, but did not support removing the participant payment cap or expanding eligibility.

The League supports an increase in adult education funding of at least $10 million, and opposes an expansion of eligibility until there is sufficient additional funding to cover the increased number of students. Low educational achievement is a drag on Michigan’s economy, and despite the ongoing need for adult education, funding has been slashed over the past 20 years—from $185 million in 1996 to below $22 million in 2015.

Child Care and Early Education

Flint Emergency Funds: The governor included $8 million in the upcoming budget year to cover a half-day of child care for children ages birth to 3 in Flint—regardless of income.

  • Both the Senate and House agreed with the governor on child care funding for Flint.

The League supports additional funding for child care in the city of Flint as an emergency measure, and believes that income eligibility caps for child care should be increased statewide so low-income families can afford to work, and children have the benefit of a high-quality early learning experience (see below).

Child Care Subsidies: The governor made no changes in child care eligibility caps or provider payments in his 2017 budget. Child care subsidies are currently provided to families with incomes of 121% of poverty or less, giving Michigan one of the lowest initial eligibility levels in the country. Payments to child care providers also fall far below the federally suggested level of the 75th percentile of market rate, making it difficult for low-income families to find safe, stable and higher-quality child care while they work to support their children.

  • Senate: The Senate followed the governor’s lead, approving no increases in child care eligibility or payments.
  • House: The House included a budget placeholder to ensure discussion in the joint House/Senate conference committee of an increase in the child care eligibility level from 121% to 125% of poverty.

The League supports an increase in the initial child care income eligibility cap from 121% of poverty to 150%. In addition, the League supports higher payments for child care providers, bringing them closer to current market rates and allowing them to open their doors to more children receiving state subsidies. Restricted eligibility and low provider payments have resulted in fewer families receiving state assistance, even though the cost of child care is often outside their budgets. As a result, despite the persistence of low-wage jobs, the number of families receiving child care assistance has fallen by 75% in the last decade.

Great Start Readiness Preschool Program: The governor recommended level funding ($243.6 million) for the Great Start Readiness program (GSRP) for at-risk 4-year-olds. Eligibility would be retained at 250% of poverty (up to 300% if all children below that level who want to participate are already enrolled). Children who are in foster care, homeless or in special education programs are eligible regardless of family income. The governor recommended budget language prioritizing the enrollment of homeless children or children in foster care.

  • Senate: The Senate agreed with the governor on GSRP funding and eligibility. In addition, the Senate included funding for a partnership between a school district or Intermediate School District (ISD) and a local early learning collaborative to pilot early childhood education for 3-year-olds, testing the impact on at-risk children of two years of preschool.
  • House: The House agreed with the governor on continuation funding and eligibility.

The League supports ongoing funding for the GSRP as well as efforts to test the impact of expanding state-funded preschool programs to at-risk 3-year-olds.

Early Literacy: The governor proposed to reduce early literacy programs by 10% in 2017 by eliminating: (1) $1 million for the Parent University pilot program; (2) $1 million for the Michigan Education Corps, and (3) $500,000 for a certification test of teacher literacy. Last year, the budget included $25.4 million for early literacy programs. Over two-thirds of those funds are being used for additional instruction time for students in grades kindergarten through 3rd, using proven models for reading instruction and behavioral supports. Also funded were early literacy coaches through ISDs ($3 million), grants for diagnostic tools to monitor early reading skills, and professional development for teachers.

  • Senate: The Senate agreed with the governor to eliminate the certification test of teacher literacy and the Parent University pilot, but retained $1 million for the Michigan Education Corps.
  • House: The House adopted the governor’s recommendation.

The League supports state investments in early literacy, including expanded instruction time using proven models, literacy coaches and professional development for teachers. The League also believes that learning begins long before a child reaches the schoolhouse doors, and strategies to increase reading proficiency should, too—including, for example, state funding for early intervention through the Early On program, expanded home visitation programs, and a state-funded preschool option for 3-year-olds in high-risk schools and communities.

 

 

Support for struggling families hinges on 2017 Health and Human Services budget

Budget Brief JPG USE THIS ONEpdficonAs the Legislature gets closer to finalizing the 2017 state budget, the League continues to advocate for services for low-income children and families, unemployed adults and persons with disabilities. The League’s priorities for 2017 include a restoration of cuts in food assistance benefits, better access to preventive dental services for children and adults, an expansion of the school clothing allowance for children in families receiving income assistance, and more funding to prevent child abuse and neglect.

DHHS Pre-confBoth the House and Senate have approved their versions of the 2017 budget for the Department of Health and Human Services (DHHS). On May 17th, state economists and budget experts will meet with legislators to reassess expected state revenues and set final spending targets. With legislators on the fast track—determined to send final budgets to the governor by the end of May—joint House/Senate conference committees are expected to meet right after the May 17th Consensus Revenue Estimating Conference to iron out differences between the House and Senate versions.

This report highlights the DHHS budgets that were approved by the House and Senate, with a focus on decisions that will need to be made before the budget is finalized.

Health

Flint Emergency Funds: In response to Flint’s lead exposure crisis, the governor recommended $15.1 million ($9.1 million in state funds) for partial-year funding of public health services. Funds are to be used for food inspections and nutritional services, child and adolescent health centers and school health services, community mental health services for children with elevated lead levels, and lead investigations and abatements. Additional funding could come from a $50 million Flint Emergency Reserve Fund in the Department of Technology, Management and Budget.

  • Senate: The Senate included the governor’s recommended funding for public health services for Flint. The Senate also included a placeholder in the budget to ensure discussion of potential increases for Michigan’s 2-1-1 system during conference committee deliberations.
  • House: The House agreed with the governor on public health funding for Flint. The House also included a $950,000 increase in state funding for Michigan’s 2-1-1 system, with $500,000 as one-time funding for additional support during emergency and disaster events.

The League supports the governor’s funding recommendations related to the Flint crisis in multiple state departments, including public health enhancements in the DHHS 2017 budget. Investments in Flint in the 2017 budget are only a part of the solution to the long-term health, infrastructure, housing and economic needs in Flint and other Michigan communities. The state must evaluate and reform its tax system to ensure that adequate resources are available to fix the problems in Flint and prevent similar crises in other areas of the state.

Healthy Kids Dental: The governor recommended an investment of $25.6 million ($8.9 million in state funds) to complete the expansion of the Healthy Kids Dental program to the estimated 131,000 Medicaid-eligible children in Kent, Oakland and Wayne counties who are not currently eligible for the program.

  • Both the House and Senate agreed with the governor on the Healthy Kids Dental expansion.

The League supports this much-needed expansion that will make the program available to all eligible children statewide. Tooth decay is the most prevalent chronic disease in children, resulting in lost school days as well as the potential for long-term health consequences.

Adult Dental: The governor did not recommend an increase in funding for adult dental services in his 2017 budget proposal.

  • Senate: The Senate included $23 million ($8 million in state funds) for a contract with a managed care organization for the administration of the Medicaid adult dental benefit. The program would begin in July of 2017 and would address the problems adults insured by Medicaid have finding dentists who will provide their care.
  • House: The House followed the governor’s lead and did not provide additional funding for adult dental care.

The League supports the Senate budget expansion of access to dental services for adults. Nationwide, the erosion of private dental insurance, the increased cost of dental care and the limited number of dentists that accept public insurance have resulted in increased emergency room visits related to dental emergencies and barriers to employment.

Healthy Michigan Plan: The governor included the state funds needed to continue the Healthy Michigan Plan when federal funding declines from 100% to 95% on January 1, 2017—approximately $109 million.

  • Senate: The Senate funded the state portion of the Healthy Michigan Plan. In addition, the Senate allocated $1 million to Medicaid health plans to inform residents about Healthy Michigan Plan incentives shown to improve health outcomes, but prohibited the department from using funds to advertise enrollment in the Healthy Michigan Plan.
  • House: The House followed the governor’s lead and included the state’s required contribution to the Healthy Michigan Plan. In addition, the House removed $19.5 million ($5.6 million in state funds) for the Healthy Michigan Plan call center, and reduced marketing and advertising for the program by $1 million ($500,000 in state funding).

The League supports the governor’s recommendation to provide the needed state funds to continue the Healthy Michigan Plan and opposes House and Senate proposals to limit outreach for the program.

Funding for Specialty Drugs for Medicaid Enrollees: The governor added $195 million total ($70 million in state funds) to cover the Medicaid cost of drugs now available to treat Hepatitis C and cystic fibrosis. Total state costs are expected to exceed $394 million next year. The governor also included $86 million in a reserve fund to cover potential costs related to other emerging drugs.

  • Senate: The Senate retained the governor’s recommendation for specialty drugs, for total spending of $394 million in the 2017 budget year. The Senate reduced the reserve fund from the governor’s recommendation of $86 million to approximately $57 million.
  • House: The House added $113 million for specialty drugs (down from the governor’s recommendation of an additional $195 million), with expected total spending in 2017 of $246 million. The House cut the governor’s proposed reserve fund by half to $43 million.

The League supports adequate funding for specialty drugs for Medicaid enrollees, as well as the reserve fund recommended by the governor. These new drugs, while expensive, have the potential to prolong life, and in the case of Hepatitis C, potentially cure.

Proposal to Integrate Physical and Behavioral Health Services: The governor included budget language to transfer funding for all mental health and substance use disorder services for Medicaid and Healthy Michigan Plan beneficiaries, as well as autism services, to Medicaid Health Plans by September 30, 2017. The governor’s proposal required Medicaid health plans to contract with Community Mental Health Services programs for specialty services and supports.

  • Senate: The Senate replaced the governor’s proposal with new budget language that requires a workgroup to develop plans for increasing the integration of behavioral and physical healthcare and related reforms.
  • House: The House also rejected the governor’s budget language and instead established a process for determining the best financing model and policies to integrate behavioral and physical health services for persons with mental illnesses, developmental disabilities and substance use disorders. The House established goals for the process, and recommended pilot projects prior to statewide implementation.

The League supports a thorough and thoughtful planning process to determine the best approach to the integration of behavioral and physical health services that includes all major stakeholders. The League is a member of the current DHHS behavioral health workgroup addressing the issue.

Selected Medicaid Provider Rates: Both the House and Senate included rate increases for some Medicaid providers that were not in the governor’s budget.

  • Senate: The Senate added $21.3 million ($7.4 million in state funds) to increase Medicaid primary care provider rates by 6%. The Senate also increased Medicaid private duty nursing rates by 20% at a cost of $6.6 million ($2.3 million in state funds), restored funding ($2.5 million in state funds) for hospice services, and included a placeholder in the budget to ensure discussion in conference committee of a wage increase for mental health direct care workers.
  • House: The House included $3.3 million ($1.2 million in state funds) for a 10% rate increase for private duty nursing services for Medicaid beneficiaries under the age of 21. The House also includes $1.8 million in state funding to support a 1.5% increase in non-Medicaid mental health services provided by Community Mental Health Services programs. Finally, the House requires the DHHS to commission a study on funding strategies to maximize Medicaid reimbursements for children eligible for early intervention services through Early On.

The League supports the Senate proposal to increase Medicaid primary care provider rates. Access to primary care is a problem in both rural and some urban areas, and addressing Medicaid reimbursement rates for primary care physicians is a critical step toward comprehensive, preventive care for families and individuals.

The League supports state funding for early intervention services through Early On, beginning with a study of the feasibility of maximizing that investment through Medicaid. Michigan’s Early On program has been historically underfunded and serves only one-third of the estimated 53,000 infants and toddlers, birth to age 3, with established developmental delays or conditions.

The League supports Senate increases for private duty nurses for Medicaid beneficiaries as a way to ensure high- quality services and allow children and adults with complex medical needs to remain in the most homelike setting possible, as well as increases in hospice services and payments for mental health direct care workers.

Human Services

Food Assistance: The governor’s budget projected a drop in the number of families receiving food assistance through the Food Assistance Program (FAP), and failed to address policies that have restricted access to food—including an asset test for FAP recipients, and the state’s decision to not participate in the federal “Heat and Eat” program after federal changes increased the state cost slightly.

  • Senate: The Senate concurred with the governor.
  • House: The House included $141 million ($3.2 million in state funds) to restore cuts in FAP benefits for about 150,000 families as a result of the state’s decision in 2014 to not participate in the federal “Heat and Eat” program.

The League supports the House restoration of federally funded food assistance benefits. By investing approximately $3 million in state funds, Michigan will be able to draw down $140 million in federal dollars and restore approximately $76 per month in food assistance for 150,000 low-income households. The League also strongly supports the removal of the state asset test for FAP. Michigan is one of a dwindling number of states that imposes the test for the 100% federally funded program.

Income Assistance: The governor recommended an increase in the school clothing allowance for children living in families receiving benefits from the Family Independence Program (FIP), at an additional cost of $6.1 million. The governor expanded eligibility for the program to an estimated 25,000 school-age children by providing benefits to all children instead of only those living with grandparents or other caretakers not receiving FIP benefits. The governor also increased the annual benefit from $140 per child to $200.

The governor’s budget did not reverse state policies that have resulted in a drop in the number of families receiving FIP assistance from nearly 80,000 in 2011 to an estimated 25,000 next year, including strict lifetime limits on the receipt of assistance, and the sanctioning of an entire family if one child is truant.

  • Senate: The Senate included $3.4 million to expand the FIP clothing allowance to all school-age children, but left the per-child annual benefit at its current level of $140.
  • House: The House agreed with the governor’s proposal to expand the FIP school clothing allowance to all school-age children, but increased the per-child annual benefit from $140 to $170, at a cost of $4.8 million.

The League supports the governor’s proposal to expand the school clothing allowance. The maximum monthly FIP payment for a family of three is $492, or less than one-third of the federal poverty level, making it nearly impossible for families to provide basic school clothing for their children without additional support.

Child Abuse and Neglect: The governor provided $10 million in federal funding for an expansion of family preservation programs, including the Parent Partner Program and Family Reunification. The programs prevent the need for foster care and ensure that children are more quickly reunified with their parents when it is safe to do so.

  • Senate: The Senate included $3.1 million in federal funds for the expansion of family preservation services.
  • House: The House included a $3.4 million increase in federal funding for family preservation programs.

The League supports the governor’s proposal to expand family preservation programs by $10 million. While the number of children in families investigated for child abuse and neglect, as well as the number of victims, rose between 2006 and 2014, funding for prevention services has declined or remained stagnant.

 

 

Willing to Work and Ready to Learn Updated 2016

pdficonMichigan depends on its skilled workers, and much has been written and said about the need to build up our state’s workforce. Yet year after year in the state budget, state policymakers neglect to adequately fund adult education, making it less accessible for low-skilled workers who want to build their skills, become financially self-sufficient and contribute to Michigan’s economy. Adult education is the key to preparing these workers for occupational training and skilled employment, and better funding and an expanded role will enable it to meet the demand more effectively.

In the past, high school graduates could enter the middle class by getting jobs in the manufacturing sector immediately after graduation and moving eventually into skilled, higher-paying positions. Today, however, technological advances and offshore production have greatly decreased the need for unskilled, entry-level labor. A high school diploma by itself has far less value in the job market as a result, and employers increasingly prefer to hire skilled workers with a postsecondary credential such as a degree, certificate or license. With 9% of working age Michigan adults lacking a high school diploma, 1 out of 10 low-income working families having a parent that does not speak English well, and 6 out of 10 community college students needing remediation, it is clear that too many workers have basic skill deficiencies that make it difficult to attain such credentials.

Expanding adult education services to help more low-skilled but highly motivated individuals succeed in postsecondary training will benefit Michigan. Skilled workers help attract and keep businesses in the state, spend more in their local communities, pay more in taxes, and are less likely to become unemployed or need public assistance. On the other hand, continuing to neglect adult education keeps a segment of the population out of the skilled labor pool, which in turns keeps the need for public assistance high, slows the revitalization of struggling communities and wastes an opportunity to increase state revenues.

The Need for More Adult Education Services is Great

Adult education serves the segment of the population that does not have the basic skills necessary to gain secure, family-supporting employment, or to succeed in occupational training that leads to such employment. The term “basic skills” refers to the levels of reading, writing and mathematics that are associated with the attainment of a high school diploma and the ability to speak English proficiently. These skills are the foundation for building career-specific occupational skills that are in demand by the job market. While many adults without a high school diploma have deficiencies in one or more of these skill areas, some high school graduates also lose these skills over time or may not have completely mastered them while in high school. Adult education serves both sets of individuals.

Several indicators show that the number of working age adults needing adult education far surpasses those receiving it:

  • Over 208,500 Michigan adults age 25-44 lack a high school diploma or GED, yet fewer than 7% have enrolled in adult education in any year since 2004.1
  • More than 231,000 Michigan adults speak English less than “very well,” but fewer than 4% enroll in English as a Second Language adult education programs.2
  • Around 60% of community college students per year need to take developmental (remedial) education classes due to having not mastered one or more skill areas needed for postsecondary education or training.3

It is clear that too few students are getting the basic skills education they need to be able to succeed in occupational training and ultimately, to find a pathway out of low-wage, dead-end jobs and into a skilled career that enables them to support their families and prosper. As Michigan’s workforce development efforts attempt to move an increasing number of low-skilled workers into postsecondary credential programs, the demand for adult education will become even greater and so will the need for funding. (For more detailed statewide and county indicators of need, please see Appendices 1-3.)

Adult Education is a Crucial Link to Postsecondary Education and Gainful Employment

Because workers and job seekers without postsecondary occupational skills and credentials will have an increasingly difficult time finding family-supporting employment in coming years, the goal for adult education must not be merely to acquire a GED, but to transition workers into postsecondary training leading to a degree or certificate.

Willing to Work Ready to Work fig_1According to a recent report by the Georgetown University Center on Education and the Workforce, 70% of jobs in Michigan will require some level of postsecondary education by 2020, including 37% requiring a “middle skills” credential such as an associate degree (which typically takes two years) or a vocational certificate (which usually takes less than two years).4 The sector with the highest number of projected middle skills job openings in Michigan is sales and office support, (43,000 openings for workers with an associate degree and 104,000 openings for workers with a credential that takes less than two years). Other sectors with a large number of projected middle skills openings are food and personal services and what the report terms “blue collar” occupations such as agriculture, construction and production.5 (For the complete Michigan employment and education forecast in the Georgetown University report, see Appendix 4.)

Helping low-skilled workers acquire postsecondary credentials that are in demand benefits not only those workers and their families, but also employers and the state as a whole. A skilled workforce will encourage businesses to stay, move to or expand in Michigan. Skilled workers earn and spend more money in their communities, which in turn helps other businesses and increases state revenues from income and sales taxes. Skilled workers are less likely to become unemployed or to need public assistance. Preparing more low-skilled workers for postsecondary training, therefore, needs to be a key component of Michigan’s workforce development strategy.

Willing to Work Ready to Work fig_2As seen in Figure 2, Michigan residents with “some college” or an associate degree have significantly higher earnings ($31,463) than those with only a high school diploma ($26,097) and are less likely to be in poverty. The combined percentage of Michigan residents in the former category (32.7%), however, is barely higher than the percent­age with only a high school diploma (30.2%), and well below the percentage without postsecondary education when those with less than a high school diploma (11%) are factored in. It is clear that many Michigan workers and their families would benefit from training leading to a postsecondary credential, and a significant number of those will need adult education to prepare them for such training. (Note: the “some college” category, in addition to including those who attained a certificate or license, includes those who took at least one postsecondary course but did not complete requirements for a credential. The earnings figures would likely be significantly higher if only credentialed workers are included.)

One population that Michigan should actively target for adult education is its residents with limited English proficiency. A recent Working Poor Families Project report cites data showing that between 2010 and 2030, immigrant workers will account for more than 90% of the nation’s workforce growth and that by 2030, one in five workers will be an immigrant. Despite this, 70% of limited-English adults in the United States do not have education beyond high school and 44% do not have the equivalent of a high school diploma. Of foreign-born workers with a high school diploma but no postsecondary credential, those who are proficient in English earn 39% more than those who are not.6

Willing to Work Ready to Work fig_3In Michigan, 23% of adults 25 years and over who speak a language other than English at home (and 35% who speak Spanish at home) do not have a high school diploma, compared with 10% who speak only English at home (Fig. 3). The poverty level is much higher for those who speak a language other than English (24%), especially for Spanish speakers (28%), than for those who speak only English (16%). With more than 231,000 adults in the state with limited English proficiency, Michigan should ensure that this population is targeted for adult education outreach and that there are adequate English as a Second Language programs—with adequate funding—in the areas of the state with the highest need.

To Be More Effective, Adult Education Must Fit Family and Work Schedules

Adult education is primarily taught in school buildings, literacy centers, Michigan Works! one-stop centers, and public libraries. In some counties, it is provided at county jails, Head Start buildings or Community Action Agencies. Because instruction is usually provided at a central location rather than in the context of family, school and/or work, adult learners often must make child care arrangements or even adjust work schedules in order to attend adult education classes.

Willing to Work Ready to Work fig_4For some adult learners, this “traditional” way of receiving adult education instruction works. For others, however, the time needed to complete an adult education program conflicts with family or work needs and prolongs the time before entering into postsecondary training—increasing the likelihood that some students will drop out before completion. If the student lives or works a long distance from the school building, transportation can be an additional barrier.

Conversely, integrating adult education instruction into other aspects of students’ lives, such as work, occupational training and family, can make their experience more relevant, their coursework easier, and the time to complete a program shorter. All of this will increase the likelihood of student success, and in turn help the adult education system better meet the needs of employers.

There are several ways to contextualize the delivery of adult learning:

  1. Use adult education as a two-generation strategy to improve the lives of both parents and children. A two-generation approach to fighting poverty devises programs and policies that seek to enhance children’s intellectual development in tandem with increasing their parents’ skills and ability to earn higher wages. As seen in Figure 4, roughly 17% to 22% of adult education participants in recent years are public assistance recipients and 6% to 9% report that they are single parents.7 Yet we see from Figure 5 that public assistance recipients and parents of preschool and school age children have very poor program completion rates. Both of these categories have declined since 2013.

Willing to Work Ready to Work fig_5

 

Addressing the needs of these at-risk categories should be a top priority for both local program design and state policy. Examples of two-generation strategies on the program level include:

  • Providing child care and enrichment activities at adult education sites.
  • Offering adult education in programs such as Head Start that serve children (a very small number of counties in Michigan do this).
  • Making sure that individuals who enroll in adult education are made aware of public assistance for which they may be eligible.

On the state level, Michigan can implement two-generation polices that make it easier for parents to access child care or be involved with their children’s education while receiving basic skills instruction, examples of which include:

  • Making low-income adult education students categorically eligible for subsidized child care or raising the income eligibility level. Currently, a single parent with two children can get a subsidy only if her or his annual income is at or below 121% of the federal poverty guidelines ($24,393 in 2016).
  • Raising the child care subsidy level to a higher percentage of the market rate in order to cover more of the actual child care costs, and removing the paperwork barriers that discourage or prevent this population from making use of the subsidy even when eligible.8
  • Making adult education services an integral part of all Pathways to Potential school programs.9

There are also steps Michigan can take to make it easier for parents on cash assistance to complete their GED. Unfortunately, federal rules do not let GED completion count toward recipient work requirements unless the recipient is also working 20 hours per week in another work activity such as paid employment or community service. Because success in GED completion may be hampered by the need to juggle classes, homework, family needs and 20 hours of work, Michigan should consider waiving the 20-hour work requirement. This would enable cash assistance recipients to take adult education classes full-time and attain their GEDs more quickly, or to tend to their children’s needs and intellectual development while completing their GED. Even though Michigan would not be able to count such recipients toward its work participation rate, the state has a high enough percentage (over 60%) of recipients meeting the requirements and so can afford to be flexible in this area.10

Willing to Work Ready to Work fig_6In addition, the Working Poor Families Project recommends two curriculum-based steps for states to consider as part of a two-generation strategy: 1) Expand and contextualize state-approved adult education curriculum to cover family financial literacy and asset-building instruction, and 2) Incentivize local providers of Adult Basic Education Literacy and English as a Second Language services to include opportunities for child-parent learning, such as family literacy and numeracy activities.11 Both of these strategies can be undertaken in Michigan, provided there is additional funding.

2. Provide adult education in the community colleges as an alternative to costly developmental education. Many community college students must take developmental education classes due to having not mastered one or more basic skill areas. Each year, around 60% of community college students in Michigan are required to take at least one developmental education course (Fig. 6). Such classes cost the same as for-credit classes leading to a degree or credential, costing the student money and/or using up some of the student’s financial aid resources. Providing developmental education to large numbers of students also can create difficulty for community colleges due to staff costs.

One way to solve this problem is for Michigan to allow (and provide funding for) community colleges and school districts to enter into cooperative agreements whereby students needing remediation can take adult education courses on the college campus that fulfill developmental education requirements. Because adult education is free, this will save the student money and underscore adult education’s important role as a transition program to postsecondary education.

Willing to Work Ready to Work fig_73. Provide adult education in the workplace as a part of on-the-job training. Until 2004, when adult education received a large funding cut, programs were sometimes offered in automobile and other manufacturing worksites. This enabled employees who were held back from advancing in their jobs by reading, language or mathematics deficiencies to receive basic skills training at the workplace. Following the cuts, many counties and school districts discontinued the practice and there are now fewer than 50 adults who participate in workplace literacy programs in most years (Fig. 7). Providing funding for on-site adult education serving low-skilled workers in their workplace (before or after work) can help workers avoid transportation barriers and save driving time, thus incentivizing them to participate.

4. Develop career pathway systems. Career pathways are ideally the best vehicle to deliver adult education. A career pathway is defined as “a well-articulated sequence of quality education and training offerings and supportive services that enable educationally underprepared youth and adults to advance over time to successively higher levels of education and employment in a given industry sector or occupation.”12 By linking basic skills training, career-specific occupational training, wraparound services (such as child care, transportation and/or financial services) and employment, they combine the three contextualized learning strategies discussed above.

Presently, if a low-skilled adult wants to acquire a credential and a skilled job, the required educational steps are usually sequential and mutually exclusive: first, the individual must participate in adult education to acquire a GED, then he or she must enroll in postsecondary education to acquire an occupational credential, and finally, he or she uses the newly gained credential to look for a job. Services are often provided in isolation, i.e. adult education is not used at community colleges in place of developmental education or integrated into on- the-job training.

By integrating the steps in the training sequence, career pathways enable low-skilled adults to learn basic skills in the context of occupational training leading to a credential; for example, English as a Second Language or high school mathematics is taught in a robotics or electrician training program leading to a certificate or license. Such programs shorten the time needed to obtain a postsecondary credential, because basic skills remediation is taught alongside of (or integrated into) occupational training rather than as a prerequisite. This is very important for adult learners with jobs and families, because the longer the time needed, the greater the likelihood of individuals dropping out prior to completion. Some career pathways programs provide supportive services such as child care, and some are directly connected to employment, with a guarantee of job placement upon successful completion.

Each of these expansions of adult education delivery will help adult learners persist in and complete their programs and will enable a larger number of individuals to participate. However, serving more people and serving them differently will require additional funding.

Michigan’s Shortsighted Neglect of Adult Education

Although the need for adult education is obvious, Michigan has undercut its accessibility in several ways, most notably in its drastic reduction of funding in 2004. This reduction was included in the then-governor’s budget and passed by the Legislature not due to a perceived decrease in need, but to reduce state spending during an especially tight budget period. Neither the current administration nor the Legislature has made an effort to restore the lost funding, even though the state has been in a generally stronger fiscal position for several years.

Following are the three ways Michigan has disinvested in this important workforce development tool:

State Appropriations: Michigan appropriated $80 million per year for adult education in budget years 1997 to 2001, decreased funding slightly in the following years, and then slashed funding to $20 million in budget year 2004. Adult education appropriations remained flat at $22 million for several years before being increased to $23.8 million in 2016—a 70% reduction from 2001. Federal funding has not increased significantly to make up for the loss in state funding, so total funding for adult education in Michigan has dropped 60% since 2001, not accounting for inflation (Fig. 8).

Willing to Work Ready to Work fig_8

 

Administrative Set-Aside: Although the Legislature increased the adult education appropriation from $22 million to $25 million for budget year 2016, it continued the practice begun in budget year 2015 of cutting funds to providers by 5%, bringing the amount to $23.75 million. This is because adult education is now allocated through regional fiduciaries rather than directly to providers, and 5% of the existing base funding for adult education is now set aside for regional administration of the grant dollars. While it may make sense to provide administrative funding to fiduciaries, the state should appropriate additional funds for this purpose rather than take it from adult education providers.

Erosion: When adjusted for inflation, the $23.75 million appropriated for 2016 was equal to only $17.6 million in 2001 dollars.13 In inflation-adjusted dollars, Michigan reduced its state funding by 78% between 2001 and 2016, causing total funding for adult education to drop by 70% (Fig. 9).

Willing to Work Ready to Work fig_9

Consequences of Adult Education Cuts

The funding cuts over the years have caused a drop in the number of students enrolling in, completing and advancing in adult education programs. Following the large funding reduction in the 2004 budget, student enrollment fell from more than 70,000 to less than 50,000, and has been below 30,000 for the past several years. The number completing an academic level dropped from more than 15,000 (and nearly 24,000 in one year) to between 9,000 and 12,000 most years.14 The percentage of enrollees completing a level has been between 30% and 40% most years, so there appears to be a direct correlation between the amount of funding and the number of students enrolling and completing (Fig. 10).

Willing to Work Ready to Work fig_10

 

In addition to serving fewer students than in the past, Michigan does not compare well with other Midwest states on student participation or success measures (Fig. 11). It ranks close to the bottom of states nationwide in the percent of students enrolled in adult education relative to those without a high school diploma or GED. It also ranks in the bottom half of states in the percent of students who improve in beginning literacy skills and who have a goal of postsecondary training, though of the students with that goal, the percentage who successfully transition to postsecondary is somewhat higher relative to other states.

Willing to Work Ready to Work fig_11Michigan needs to expand the number of programs available to adults who have not completed high school, and facilitate student success by providing adult education in contextualized contexts as discussed previously. Likewise, because beginning literacy students are among the least skilled and most economically vulnerable of adult education students, providing literacy instruction in the context of the workplace or as a two-generation strategy can help those participants succeed at higher rates.

How Much Adult Education Funding is Needed?

Dividing the total funding appropriated each fiscal year from FY 2000 through 2016 by the number of students served each of those years shows that the state pays approximately $1,240 per individual adult education student. Because most students attend adult education part time, this works out to roughly the same amount that school districts are supposed to receive per adult education full-time equivalent student ($2,850).15 Unfortunately, because funding levels to districts are based on the previous year’s enrollments, districts that have more registrations than the prior year have to work with much less than $2,850 per FTE. This puts them in the position of having to either turn students away or to be constrained in the type of instruction they can offer or the materials they can use.

From Program Years 2009-10 to 2013-14, when adult education received state and federal funds totaling between $35 million and $38 million per year, the state served an average of 28,275 adult education students per year. Assuming a cost of $1,240 per student, if total funding were to be increased by $10 million, then the state could serve approximately 8,000 more students—a 28% increase to 36,500 students. If the 8,000 additional students were between the ages of 25 and 44, then the percentage of individuals that age without a high school diploma or GED who are enrolled in adult education would go from 6% to 10%.

Willing to Work Ready to Work fig_12Figure 12 shows approximately how many more students the adult education system could serve if funding is increased. (The table does not account for inflation.) While the Michigan League for Public Policy does not necessarily recommend that only adults age 25-44 without a high school diploma be targeted for additional money, the percent of this population that would be served with increased funding serves as a useful benchmark for measuring the degree that adult education meets the need in Michigan.

Recommendations

Increase Adult Education Funding

To ensure an adequate adult education funding base that will enable Michigan to meet the needs of its low-skilled workers and help them transition into postsecondary training, Michigan needs to:

  1. Increase adult education annual appropriations by $10 million to $30 million.
  2. Develop a formula for increasing adult education funding each year to keep up with inflation, rather than maintaining it at a flat level that will erode in value over time.
  3. Monitor developments in federal adult education funding and be prepared for any federal funding cuts in the future.

Provide Adult Education in Contextualized Environments

Low-skilled adults often have barriers that prevent them from participating or successfully completing adult education programs, and Michigan needs to try new ways to facilitate success for these learners. To connect adult education instruction with other aspects of students’ lives, Michigan should:

  1. Encourage and fund local adult education programs to offer classes in nontraditional settings such as community colleges, workplaces and sites in which parents can bring their children.
  2. Provide incentives for community colleges and school districts to enter into cooperative agreements in which adult education classes fulfill students’ developmental (remedial) education requirements, and remove any institutional barriers that prevent such cooperative agreements.
  3. Encourage employers to provide match funding for the provision of adult education instruction in the workplace.
  4. Encourage local adult education programs to become part of occupation-specific career pathway systems and provide funding for additional instructors.

Ensure that Adult Education is Part of the Pathway to Economic Security for Public Assistance Recipients

Public assistance recipients are among those with the greatest need for skill-building, which provides economic benefit to their families and positively affects their children’s skill development. To eliminate barriers that prevent members of this population from participating and successfully completing adult education programs, Michigan should:

  1. Allow adult education to satisfy Family Independence Program work requirements without imposing the federal requirement of 20 hours per week of other work activities. Michigan’s high work participation rate allows for some level of flexibility in this area.
  2. Build on the approach, begun under Governor Granholm with the Jobs, Education and Training (JET) program and expanded under Governor Snyder with the Partnership, Accountability, Training, Hope (PATH) program, of facilitating skill building for cash assistance recipients, while continuing to reject the “work first” philosophy that prioritizes short-term employment goals over long-term skill building and economic self-sufficiency.

Willing to Work Ready to Work graphic_1

See PDF for Appendicies

Endnotes

  1. American Community Survey 1-year estimate, 2014. (The previous version of this paper used the 3-year estimate but that is no longer available.)
  2. Working Poor Families Project data generated by the Population Reference Bureau from the American Community Survey, 2013.
  3. State of Michigan Dashboard using data from the Michigan Community College Association. (https://midashboard.michigan.gov/education, accessed on April 15, 2016.)
  4. Carnevale, Anthony P., Nicole Smith and Jeff Strohl, Recovery: Job Growth and Education Requirements through 2020, Georgetown University Center on Education and the Workforce, June 2013.
  5. Ibid.
  6. Shaffer, Barry, Strengthening State Adult Education Policies for English as a Second Language Populations, Working Poor Families Project, Fall 2014.
  7. A student is counted as receiving public assistance if he or she is receiving financial assistance from federal, state or local government agencies. (Note: Social Security benefits, unemployment insurance, and employment-funded disability are not included under this definition.)
  8. For more information on the subsidy level and on the barriers preventing low-income parents from accessing Michigan’s child care subsidy, see Sorenson, Pat, Failure to Invest in High-Quality Child Care Hurts Children and State’s Economy, Michigan League for Public Policy, September 2014. (http://www.mlpp.org/failure-to-invest-in-high-quality-child-care-hurts-children-and-states-economy)
  9. Pathways to Potential, a Michigan Department of Health and Human Services program started in 2012 at schools in four Michigan cities, uses the school environment to assist parents and children in attendance, education, health, safety and self-sufficiency. The program will go statewide in 2015. For more information on this program, go to http://www.michigan.gov/dhs.
  10. For more information on the federal work requirements in the Temporary Assistance for Needy Families program, see Schott, Liz and Donna Pavetti, Changes in TANF Work Requirements Could Make Them More Effective in Promoting Employment, Center on Budget and Policy Priorities, February 26, 2013. (http://www.cbpp.org/files/2-26-13tanf.pdf)
  11. Bassett, Meegan Dugan, Considering Two-Generation Strategies in the States, Working Poor Families Project, Summer 2014.
  12. Center for Law and Social Policy, The Alliance for Quality Career Pathways Approach: Developing Criteria and Metrics for Quality Career Pathways, February 2013.
  13. Figures are calculated using the Bureau of Labor Statistics’ Consumer Price Index inflation calculator (http://data.bls.gov/cgi-bin/cpicalc.pl, accessed April 13, 2016).
  14. An academic level comprises two school grade levels.
  15. Michigan Workforce Development Agency, 2013-14 Section 107 Individual District Reports. (http://www.michigan.gov/documents/wda/Section_107_Requirements_503134_7.pdf, accessed on April 13,2016)

 

Give Michigan’s prison reentry population the tools to thrive

Budget Brief JPG USE THIS ONEpdficonMichigan must invest more in Department of Corrections reentry programs to help returning individuals as well as reduce recidivism and ultimately the overall prison population. Over the past 30 years, Michigan’s prison population has expanded dramatically, and the state is now spending more than $2 billion annually to lock up and monitor its prison and probation populations. While steps have been taken to safely reduce the prison population and cut state spending, much more can be done to limit the number of people incarcerated and ensure successful reentry once their time is served. Reprioritizing spending will require careful policy deliberation that accounts for economic and safety concerns. However, by investing more in reentry efforts, the end result will be more families remaining together and more funds available for other budget priorities, including education, mental health and infrastructure.

BB prison reentry chart 1The High Cost of Incarceration: More Than Just Money

In 2015, Michigan spent more than $2 billion on corrections and public safety—representing a 735% increase in spending since 1983. Michigan currently spends more General Fund dollars on corrections than it does on higher education.

While the fiscal cost of the high level of incarceration is significant, the human costs are far greater. Incarceration and criminal records result in limited access to employment, credit and housing. Moreover, when people go to prison, they leave behind families and communities. Around the country, almost half of children have a parent with a criminal record. Children with incarcerated parents are more likely to have poor health and educational outcomes.

The impact of mass incarceration on the African-American community has been devastating, with African-Americans constituting half of Michigan’s prison population, while only making up about 15% of the state’s population. The disproportionate impact on this community is caused in part by discriminatory police and sentencing practices both historically and at present. Carefully considered reforms including diversity training and reducing jail detention through bail and fines and fees reform are crucial to reducing this disparity. These financial traps are keeping too many people incarcerated. Once people are in prison, resources must be focused on preparing for successful reentry into the community.

BB prison reentry chart 2

The Importance of Reentry Programs

Reentry programs are crucial to reducing the prison population. Approximately 95% of Michigan’s prison population will return to the community after serving a sentence. Once prisoners have served their sentences, it is imperative that they be given the tools needed to succeed back at home and in their communities. In 2014, probation and parole violators made up 44% of prison entries. Measures to reduce recommitment due to parole violations along with bolstering and enhancing reentry programming are two concrete ways to improve reentry outcomes. In addition to funding reentry efforts in the Corrections budget, the state can also help returning residents and their families by removing restrictions on social safety net programs related to an individual’s criminal record, such as limitations on food and cash assistance for drug offenders.

The 2017 State Budget

Prisoner Reentry Services: The governor proposed $6 million more for prisoner reentry services, with support from the House Appropriations Committee. The funds support programs both inside and outside prison facilities. These include vocational training for prisoners and efforts to connect them directly with potential employers, as well as Transition Action Planning programs that present concrete steps once people are released from prison into the community. The increase in prisoner reentry funding from $39 million for budget year 2016 to $45 million next year is intended primarily to cover inflationary costs from rebidding contracts related to reentry services, which have been in place for at least the last five years. Without greater state investments in reentry than currently proposed, it will be difficult to reduce recidivism substantially.

BB prison reentry chart 3Goodwill “Flip the Script” Program: Goodwill Industries of Greater Detroit developed the “Flip the Script” program to provide education, job training and mentoring to 16-29-year-olds in an effort to keep them out of prison. The governor proposed eliminating the program, but the House Appropriations Subcommittee maintains it at $1.5 million, a $500,000 reduction over current year spending. While controlling costs is important, underfunding reentry programs undercuts justice reinvestment efforts that place emphasis on ensuring the safety of communities once prisoners are released.

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