FY14 DHS Budget: What is at Stake for Low-Income Families?

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The Michigan Legislature is moving quickly to adopt a Fiscal Year 2014 budget for the Department of Human Services that perpetuates or deepens poverty and hardship for many of the more than 2.4 million Michigan residents who receive some form of public assistance to help them hold low-wage jobs, feed or provide healthcare for their children, or survive when faced with serious disabilities. After years of declining investments in human services, the governor proposed a nearly 10% cut in next year’s DHS budget, and the House and Senate are approving budgets with cuts at least that large or larger.

The deep cuts in DHS public assistance programs have largely been the result of recent policy decisions that limit eligibility, including a new asset test for food assistance, and more stringent enforcement of lifetime limits on income assistance—both adopted in 2011.

What is most unacceptable about the cuts in public assistance is that they come at a time when poverty is increasing, and unemployment—while dropping from peak levels—remains high. Further, many of the jobs that are being found are low wage, making it increasingly difficult for workers to support their families.

Exacerbating the problem have been recent tax policy changes that have increased taxes for low-income working families, further whittling away their wages. In 2011, Michigan lawmakers approved a major overhaul of Michigan’s tax system that cut business taxes by $1.8 billion, financed through tax increases on moderate- and low-income workers, as well as pensioners.

As part of that tax shift, lawmakers reduced the state’s Earned Income Tax Credit by 70%—from 20% of the federal credit to just 6%. The EITC is a proven tool for keeping children and families out of poverty and has been shown to increase employment and reduce the need for public assistance. It is estimated that a 20% credit kept 14,000 children out of poverty in Michigan. At 6%, an estimated 5,000 children will be kept out of poverty, leaving another 9,000 children behind.

THE BUDGET PROCESS

The Fiscal Year 2014 budget for the Michigan Department of Human Services has moved quickly through the legislative process this year. In the House, the Fiscal Year 2014 budgets were rolled into HB 4328, an omnibus bill (General Omnibus) that includes funding for all state services for next year, with the exception of education, which was placed in an Education Omnibus bill. Both the General and Education Omnibus bills have been approved by the House.

In the Senate, the DHS budget has been approved by the Senate Appropriations Committee and will now move to the floor of the Senate. Following the Revenue Estimating Conference in May, the bills will be assigned to joint House/Senate Conference committees that will work out differences between the two versions.

BACKGROUND ON THE DHS BUDGET

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

TOTAL FUNDING

Governor: The governor’s proposed DHS budget includes a nearly 10% cut in total spending, largely the result of policy decisions that have made fewer families and children eligible for public assistance benefits. Total DHS funding would be reduced by over $658.3 million. State General Funds would drop by $15.7 million or 1.5%.

House: The House bill cuts total funding for the DHS by $767 million or 11.4% below current year funding. State General Funds would drop by $21.1 million or 2.1%

Senate: The Senate concurs with the governor’s reduction of $658 million or 9.8%.

FOOD ASSISTANCE PROGRAM

FAP (formerly called the Food Stamp program) is completely federally funded, with an average monthly benefit for a two-person household of $267. Over 70% of FAP recipients receive no other state cash assistance. With increasing unemployment and need, between fiscal years 2004 and 2011, caseloads grew by 135%. Since that time, in part due to state policy changes limiting eligibility, caseloads have begun to drop.

Key among those changes was the adoption in 2011 of a limit on FAP assets. Families must now have less than $5,000 in total assets, including the value of vehicles after certain exclusions, in order to receive food assistance. This asset limit resulted in less access to assistance for low-income families and individuals, and caused the state to turn away federal funds available to assist low-income families.

Governor: The governor’s budget reduces funding for FAP by $683.7 million in recognition of the loss of federal funds from the American Reinvestment and Recovery Act as well as caseload reductions. The governor’s budget assumes that FAP caseloads will fall from 1.1 million cases appropriated this year, to 876,650 in Fiscal Year 2014—a 19.4% reduction. The actual average monthly FAP caseload through March of this year is much lower than appropriated at 912,755.

House: The House concurs with the governor on FAP caseloads and costs.

Senate: The Senate concurs with the governor.

FAMILY INDEPENDENCE PROGRAM

FIP provides cash assistance to low-income households with dependent children. To be eligible for FIP, an average family of three must have an annual income of less than $9,800, and financial assets of less than $3,000. The maximum benefit for a family of three is $492 per month. Approximately seven of every 10 FIP recipients are children, and 60% of those children are under the age of 9. FIP caseloads have been declining dramatically in recent years, in large part the result of policy decisions, including the adoption in 2011 of changes in lifetime limits for assistance. Total FIP spending is estimated to be $255.3 million in the current fiscal year.

Governor: The governor’s budget reduces funding for FIP by $15.8 million to a total of $239.4 million to reflect continued reductions in caseloads. The governor projects FIP caseloads will fall from 53,298 in the current year to 49,226 in Fiscal Year 2014—a reduction of 7.6%.

House: Concurs with the governor.

Senate: Concurs with the governor.

STATE DISABILITY ASSISTANCE

The SDA, which is a state-funded program, provides cash assistance to disabled adults who have annual incomes below $5,400. The payment level for a single adult is $269 monthly. With the adoption of the governor’s recommendation for Fiscal Year 2014, funding for SDA will be down 22% since 2010.

Governor: The governor recommended a decrease of $546,600 (all State General Funds) to reflect an anticipated drop in the number of SDA cases from 8,777 this year to 8,600 if 2014—a reduction of 2%.

House: Concurs with the governor.

Senate: Concurs with the governor.

STATE EMERGENCY RELIEF AND LOW-INCOME ENERGY ASSISTANCE

DHS assists low-income individuals and families facing emergencies that threaten health and safety. Through a combination of direct financial assistance and contracts with a network of nonprofit organizations such as the Salvation Army and local Community Action organizations, low-income households can receive assistance with emergency housing, utility shut-offs, home repairs, relocation assistance and burials.

For energy services, families must have incomes below 150% of the federal poverty level; for nonenergy services, a family of three must have an income of $625 per month or less. Families with cash assets over $50 must pay toward the emergency, and the value of noncash assets cannot exceed $3,000 for a family of two or more.

Governor: The governor included a total of $235 million in federal and state restricted funds, including $175 million in federal Low-Income Home Energy Assistance Program funds, and $60 million in new state restricted funds for a Low-income Energy Assistance Fund—in response to a new state law (P.A. 615 of 2012) requiring DHS to establish a new consolidated energy assistance program with a single, simplified application. Revenues for the Low-income Energy Assistance Fund would be collected through the Department of Licensing and Regulatory Affairs and administered by DHS.

House: The House includes $59.9 million for the Energy Assistance Fund, but rejects the use of the new restricted funds proposed by the governor, using other state and federal dollars.

Senate: The Senate agreed with the governor and provided $60 million in restricted funds for energy assistance, but also created a new budget line item for the Energy Self-Sufficiency Program (intended to also follow the model presented in P.A. 615 of 2012), and shifted $15.5 million in LIHEAP funding to that program.

CHILD WELFARE SERVICES

A range of child and family services programs are funded through the DHS, including protective services to investigate charges of child maltreatment; foster care services to supervise and place children who cannot remain safely in their homes because of child abuse and neglect; adoption subsidies, including financial and medical subsidies to families who adopt children with special needs; and family preservation and prevention services. In addition, DHS works in partnership with counties to fund services for delinquent and maltreated children and youths through the Child Care Fund.

While funding for some child welfare services has increased in recent years as a result of litigation against the state for its failures in meeting the needs of abused and neglected children, funding for services to prevent maltreatment, and to strengthen and reunify families, continues to be woefully inadequate.

Foster Care Services:

  • Governor: The governor’s budget projects a cut of $15 million (7.3%) in foster care payments. Michigan currently spends $205.8 million on foster care services, with a caseload of 7,200. Caseloads for Fiscal Year 2014 are projected to be 6,650.
  • House: The House concurs with the governor.
  • Senate: The Senate concurs with the governor.

Adoption Subsidies:

  • Governor: The governor included a total of $215.4 million for adoption subsidies, a small increase from the current fiscal year. Caseloads are expected to increase from 26,850 to 27,100 monthly, an increase of approximately 1%.
  • House: The House concurs with the governor.
  • Senate: The Senate increased funding for the adoption subsidy by $2 million to allow parents to claim an additional subsidy if they discover that their adopted child has additional special needs after the adoption is finalized and the subsidy set.

Child Welfare Staffing Enhancements:

  • Governor: The governor’s budget includes funding for child welfare workers needed to comply with a settlement agreement resulting from a lawsuit by Children’s Rights, Inc., a national advocacy organization. The lawsuit claimed Michigan was unable to move children quickly into safe, stable and permanent homes; provide children with adequate services; provide safe and stable foster homes; or prepare children who “age out” of the child welfare system. To address the settlement, in May of 2012, the governor requested a total of 577 new workers for the current fiscal year (FY 2013). The governor’s Fiscal Year 2014 budget revises the total number of child welfare enhancement staff needed to 496, the majority of which are protective services workers. Overall, the governor’s budget includes funding for a total of 3,940 child welfare workers statewide.
  • House: The House reduced child welfare enhancement staffing by an additional 151 positions below the governor’s recommendation for a total of 345 positions. Overall, the House budget includes funding for a total of 3,758 child welfare workers statewide.
  • Senate: The Senate reduced child welfare enhancement staffing by an additional 223 positions below the governor’s recommendation for a total of 273 positions. Overall, the Senate budget includes funding for a total of 3,717 child welfare workers statewide.

Child Care Fund:

  • Governor: Based on current spending trends, the governor’s budget reduces funding for the Child Care Fund by $11.1 million, down 6% from current year appropriation of $188.7 million. The Child Care Fund provides for the care and treatment of delinquent or maltreated children who are court wards and not eligible for federal payments through Title IV-E. The primary sources of funding for the Child Care Fund are state General Funds or federal TANF.
  • House: Concurs with the governor.
  • Senate: The Senate added budget language requiring audits of Child Care Fund claims made by counties, and reduced funding by $22.1 million, $11 million more than the governor in reaction to perceived waste, fraud and abuse in allowable county claims. The Senate also added $1.5 million for counties to expand their in-home, community-based juvenile justice programs.

Prevention Services:

  • Governor: The governor provides largely continuation funding for Families First ($18.0 million), Strong Families/Safe Children ($12.4 million), Child Protection and Permanency ($16.8 million), and the Family Reunification Program ($4 million). The governor also allocated $2.5 million in one-time funding to expand the Families Together Building Solutions program to Macomb and Muskegon counties, and to expand the Supportive Visitation/Home-Based Parent Education program to additional counties.
  • House: The House rejects the governor’s $2.5 million expansion in one-time family preservation funding, and further reduces funding for family preservation programs by $4.2 million, including cuts in Families First ($16.2 million total spending—a cut of 10% over current year spending), Child Protection and Permanency ($15.2 million or 8.2%), and family reunification ($3.6 million or 10%).
  • Senate: The Senate concurred with the governor (with the exception of a $200,000 cut in Child Protection and Permanency), and accepted the governor’s $2.5 million expansion in family preservation funding.

ENDNOTES

1. The Child Development and Care program is now funded through the Michigan Department of Education budget.
2. The Medicaid program is funded through the Department of Community Health budget.
3. The total unduplicated count takes into account individuals that receive more than one public benefit (e.g. are eligible both for the Family Independence program and Medicaid).