Michigan House and Senate Reach Agreement on the FY 2014 Human Services Budget

 Full report in PDF

On Tuesday, May 28, the joint House/Senate Conference Committee for the Department of Human Services approved its Fiscal Year 2014 budget for the DHS. The DHS conference report was subsequently approved by the full House of Representatives as part of HB 4328, an omnibus bill that includes the budgets for all state departments and services except higher education, community colleges and K-12 School Aid. A vote by the full Senate is expected in the coming week. Agreements reached by the joint House/Senate conference committees can be either approved or rejected by the full House and Senate, but cannot be amended on the floor.

After years of declining investments in human services, the final DHS budget agreement cuts spending by 10.2%, or $685.7 million. 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.

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 included a 9.8% cut in total spending, for a reduction of over $658.3 million. State General Funds dropped by $15.7 million or 1.5% in the Governor’s budget.

Conference: The Conference Committee reduced the DHS budget by 10.2%, from $6.7 billion in the current fiscal year to $6.02 billion—a reduction of $685.7 million.

THE 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 reduced 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 assumed that FAP caseloads would 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 April of this year is much lower than appropriated at 912,339.

Conference: The Conference Committee adopted the governor’s caseload projections.

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.

As part of federal sequestration, the Administration chose to eliminate the annual clothing allowance for approximately 30,000 children receiving FIP in cases that do not include an eligible adult—the only direct client grant reduction. Since 1999, Michigan has provided at least some children receiving FIP an annual clothing allowance—in recognition of the reality that the failure to raise public assistance grants has reduced their value to less than one-third of the federal poverty threshold. At its peak, more than 150,000 children were provided a back-to-school clothing allowance. In 2011, the program was restricted to children in FIP cases that do not include an adult, leaving behind more than 120,000 children.

Governor: The governor’s budget reduced 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%.

Conference: The Conference Committee:

  • Reduced expected cases and funding for FIP based on May caseload estimates. The Conference Committee projects that there will be a total of 45,710 FIP cases in FY 2014.4 The DHS reports that the average monthly caseload for the FIP program fell from 83,507 in Fiscal Year 2011 to 55,971 in April of this year.5
  • Provided $2.9 million to restore the clothing allowance in the 2013-2014 school year, retaining the restriction that only children in FIP cases without an eligible adult can receive the assistance.
  • Did not fund a new substance abuse screening and testing pilot for FIP applicants and recipients in at least three counties, as proposed in HB 4118.

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 Conference Committee report, funding for SDA will be down 39% 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%.

Conference: The Conference Committee further reduced expected SDA cases to 7,777 based on the May Revenue Estimating Conference consensus caseloads—a reduction of 11% below the current fiscal year, and 9.6% below the governor’s recommended caseload.

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 non-energy 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 non-cash 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.

Conference: The Conference Committee agreed with the governor and provided $60 million in restricted funds for energy assistance.

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 included $190.8 million for foster care payments, a cut of $15 million (7.3%). The current year budget includes $205.8 million for foster care payments, with a caseload of 7,200. The governor projected that the Fiscal Year 2014 caseload would be 6,650.

Conference: The Conference Committee included $181.1 million for foster care payments, a reduction of 12% over the current year, and 5% below the governor’s recommendation for Fiscal Year 2014. The Conference Committee projects that foster care caseloads will fall to 6,250. The Committee also increased foster care administrative rates for private child placing agencies by $3 to a total of $40 per child per day.

ADOPTION SUBSIDIES

Governor: The governor projected that adoption subsidy caseloads would increase slightly from 26,850 to 27,100 monthly, an increase of approximately 1%.

Conference: The Conference Committee assumes an adoption subsidy caseload of 27,150 in Fiscal Year 2014. The Committee also included $28 million for a $3 per child per day rate increase for all adoption subsidy cases. The current year budget had included funding for a $3 per day increase only for current foster care parents and new adoption subsidy cases. As a result of a legal opinion that DHS could not exclude current adoption subsidy cases from the increase, the higher rate was implemented in October of 2012 for all adoption subsidy cases, resulting in a budget shortfall of approximately $28 million. The Conference Committee rejected $2 million previously added by the Senate to allow adoptive parents to claim an additional subsidy if they discover that their adopted child has additional special needs after the adoption is finalized.

CHILD WELFARE STAFFING ENHANCEMENTS

Governor: The governor’s budget included funding to continue to expand the number of child welfare workers in order to comply with a settlement agreement resulting from a lawsuit by Children’s Rights, Inc., a national advocacy organization. The lawsuit claimed that DHS 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 (a cut of 81 FTEs), 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.

Conference: The Conference Committee cut the number of new child welfare workers by an additional 80 positions, for a total cut of 161. This was substantially less than the cuts previously passed by the House, which cut an additional 151 positions above the governor’s recommendation, and the Senate, which reduced child welfare staffing by an additional 223 positions.

CHILD CARE FUND

Governor: Based on current spending trends, the governor’s budget provided $177.5 million for the county Child Care Fund, a reduction of $11.1 million or 6% from current year expenditures 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 and federal TANF.

Conference: Based on the May 15th consensus agreement, the Conference Committee provided $171 million for the Child Care Fund. Included in the Conference Committee budget is $5.1 million for an increase of $3 per child per day for private child placing agencies, as well as a cut of $11 million as a result of DHS audits of Child Care Fund claims made by counties to identify improper 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 provided 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.

Conference: The Conference Committee:

  • Rejected the governor’s $2.5 million expansion in one-time family preservation funding.
  • Further reduced funding for family preservation programs by $4.2 million, including cuts in Families First, Child Protection and Permanency, and family reunification.
  • Cut funding contracts for runaway youth services by 10% in order to partially offset costs related to the adoption subsidy shortfall.
  • Provided $2.5 million in federal funds for pilot programs in Kalamazoo, Macomb and Muskegon counties to prevent children from birth through age 5 from entering foster care.

 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).
4. Summary of FY 2013, 2014, 2015 Consensus Agreement – May 10, 2013, Department of Human Services – Major Spending and Caseload Programs, Fiscal Year 2014, State Budget Office (total FIP caseloads includes Extended FIP benefits and Short Term Family Support).
5. Total Cases, Recipients and Payments for FIP, FAP, SDA, CDC and SER Benefits Trend Information, Fiscal Years 2011, 2012 and 2013, Green Book Report of Key Program Statistics, Michigan Department of Human Services. Fiscal Year 2013 is an average monthly year-to-date through April of 2013.