Senate and House Approve DHS FY 2015 Budget

Full report in PDF

Both the Michigan Senate and House of Representatives have approved their versions of the Department of Human Services budget for Fiscal Year 2015, which begins on Oct. 1, 2014, and ends Sept. 30, 2015. Differences between the Senate and House versions will now be reconciled in a joint House/Senate conference committee.

After years of declining investments, the DHS budgets approved by the House and Senate further reduce total funding for DHS. The governor’s budget cuts DHS by $427 million or 7.1% from current year-to-date spending. The Senate cuts DHS by 7.4% or $448 million, while the House reduces funding by $466 million or 7.7%.

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

In the current fiscal year, the DHS budget is the state’s third largest, accounting for 12.3% of total spending from federal and state resources. Federal funds now account for more than 80% of DHS funding, up from 70% in Fiscal Year 2004. Other sources of revenue for DHS are state General Funds (17%); and state restricted, local and private funds.

DHS administers a range of services, including the Family Independence Program; the Food Assistance Program; State Disability Assistance; State Emergency Relief; and child protective, foster care, adoption and juvenile justice services. Decisions made by the Legislature will affect nearly 2.4 million Michigan residents—including over 1 million children—who receive some form of public assistance to help them hold low-wage jobs, feed and shelter their children, access healthcare, or survive when faced with serious illnesses or disabilities.

Income Assistance

GOVERNOR’S BUDGET:

  • Another deep reduction in funding for income assistance for families with children. The gover­nor’s budget for Fiscal Year 2015 includes $152 million for the FIP program, a reduction of 29% from the current level of $214.3 million. The governor assumes that FIP caseloads will fall from 44,400 this year to 33,200 in 2015, a reduction of 25% in a single fiscal year.
  • Expansion of funds for out-stationed DHS workers. The governor recommends $19.3 million in federal, private and local funds to expand the number of outstationed DHS workers by 150. With this funding, DHS would be able to expand the number of workers in hospitals, long-term care facilities, school-based centers or businesses that agree to pay a portion of the cost, using their contributions to draw down federal funding.
  • Continuation of the current Extended-FIP policy, which gives households leaving FIP due to earnings $10 per month in FIP assistance for six months. In 2011, when the state tightened its 48-month lifetime limit on FIP, those six months of very minimal assistance began to count against a family’s lifetime limit. The governor’s budget also removes language requiring DHS to notify persons eligible for Extended-FIP that receiving it will count toward federal and state lifetime limits. The governor projects monthly Extended-FIP caseloads of 1,105 next year, down by 155 cases.
  • Continuation of the current FIP children’s clothing allowance. The governor’s budget includes $2.9 mil­lion for the annual clothing allowance for children. The allowance was originally designed to make sure that school-age children have the opportunity to at least start the school year with a set of clothes. The program was restricted in 2011 to only those children in FIP cases that do not include an adult—e.g., children living with ineligible grandparents or other caregivers.
  • New contract to verify eligibility for public assistance. The governor includes $5 million for a contract to verify assets and other financial information for public assistance applicants and recipients.

HOUSE:

  • The House agrees with the gover­nor’s recommended FIP caseload of 33,200, and total funding of $152 million.
  • The House also allocates $2.9 million for the annual FIP children’s clothing allowance, but expands eligibility to all FIP children ages 4 through 18.
  • The House continues current policy of counting minimal Extended-FIP benefits against lifetime limits, but expands budget language requiring DHS to notify families of the effect on lifetime benefits on both the FIP application and the form that notifies families of their eligibility.
  • The House agrees with the governor’s expansion of out-stationed workers, but reduces the number of non-child welfare DHS staff by 150 ($19.3 million) to offset the expected increase in donated funds positions.
  • The House concurs with the governor and includes $5 million for a contract to verify assets and other financial information of public assistance applicants and recipients.

SENATE:

  • The Senate agrees with the gover­nor’s projected FIP caseload of 33,200, a reduction of 11,200 cases monthly, reducing FIP funding by $62.3 million.
  • The Senate adds budget language requiring DHS to report quarterly on: (1) the num­ber and percentage of nonexempt FIP recipients who are employed; (2) the average and range of wages of employed FIP recipients; and (3) the number and percentage of employed FIP recipients who remain employed for 6 months or more.
  • The Senate agrees with the gover­nor’s expansion of out-stationed workers by $19.3 million and 150 full-time positions.
  • The Senate agrees with the governor by continuing to count minimal Extended-FIP benefits against families’ lifetime limits. The Senate retains the current requirement to notify families that Extended-FIP will count toward federal and state lifetime limits.
  • The Senate includes new budget language requiring DHS to create a workgroup to determine how Michigan Works! job training programs can be revised to reflect declining FIP caseloads, including possible reductions in the amount of federal Temporary Assistance for Needy Families (TANF) funding that is provided to Michigan Works!
  • The Senate concurs with the governor and the House by including $5 million for a contract to verify assets and other financial information of public assistance applicants and recipients.

Food Assistance

GOVERNOR’S BUDGET:

  • A reduction of $444.5 million in FAP funding, to a total of $2.4 billion. The cut reflects the loss of federal ARRA funding as well as a projected drop in FAP households, from 894,750 this year to 890,000 in Fiscal Year 2015. Nearly 1.7 million Michigan residents received FAP benefits in January 2014, including over 700,000 children. Of those children, 242,408, or more than one-third, were under the age of 6.
  • Continuation of the optional state asset test for FAP benefits. Beginning in October 2011, DHS adopted an asset test for FAP eligibility that is not required under federal law. FAP households/groups must now have less than $5,000 in assets, including the value of vehicles after certain exemptions.
  • No resolution of the “Heat and Eat” provisions of the federal Farm Bill. The governor’s budget was released right before the Farm Bill was passed by Congress and therefore does not address federal cuts related to the “Heat and Eat” provisions of the bill. The Heat and Eat option, which has been util­ized by 16 states including Michigan, allows states to use a standard utility allowance in determining food assistance benefits, including situations where eligible households receive a nominal $1 per year in energy assistance through the Low Income Health and Energy Assistance Program (LIHEAP). As a result, Michigan has been able to enhance the very modest Food Assistance benefits for some house­holds, particularly important on the heels of a cut in benefits for all FAP recipients in November of 2013 due to the loss of funds from the American Recovery and Reinvestment Act.

Under the new Farm Bill, the nominal LIHEAP payment was increased to a minimum of $20 per years. Eight states, including New York, Pennsylvania, Connecticut, Rhode Island, Oregon, Montana, Massachusetts and Vermont have already announced that they will meet the new $20 minimum and continue current benefits for low income families, while two additional states and the District of Columbia are considering the change.

The House Fiscal Agency estimates—based on Fiscal Year 2010 data—that continuing the Heat and Eat option in Fiscal Year 2015 will require an additional $8.4 million in LIHEAP spending, but will prevent the loss of approximately $250 million in federal food assistance. Failure to raise the LIHEAP payment to $20 will result in the loss of $88 per month in food assis­tance for more than 235,000 low income families.

HOUSE:

  • The House agrees with the governor on the projected FAP caseload of 890,000, as well as the loss of ARRA funding, resulting in a total cut in FAP funding of $445.5 million.
  • The House also retains the FAP asset test.
  • The House budget bill does not address the “Heat and Eat” provisions of the federal Farm Bill.

SENATE:

  • The Senate concurred with the governor and the House on FAP caseloads and related funding.
  • The Senate also retained the FAP asset test.
  • The Senate did not address the “Heat and Eat” provisions of the federal Farm Bill.

State Disability Assistance and Services

GOVERNOR’S BUDGET:

  • A reduction in funding for State Disability Assis­tance of 14%. The governor’s budget includes $17.9 million for the SDA, down from the $20.8 million appropriated in the current fiscal year. SDA case­loads have been decreasing since Fiscal Year 2010, in part because of efforts to ensure that SDA recipients who are eligible for federal Supplemental Security Income are transferred to that program.
  • A continued reduction in SDA cases. The governor assumes that the SDA caseload will also fall by 14% from the level budgeted in the current fiscal year, with total cases of 6,693 next year.
  • An increase in funding for Michigan Rehabilitative Services. The governor includes $4.4 million ($2.4 million in one-time funding), allowing DHS to draw down an additional $14.8 million in federal matching funds for rehabilitative services and avoid waiting lists.
  • Additional disability determination staff. The governor’s budget includes an additional $20.6 million in available federal funding, allowing the state to add 80 staff positions to determine eligibility for disability services.

HOUSE:

  • The House agrees with the governor on a caseload of 6,693 for SDA, a reduction in funding of $2.9 million in state General Funds, and total funding for SDA payments of $17.9 million.
  • The House includes only $2 million for Michigan Rehabilitative Services (down from the governor’s recommendation of $4.4 million), along with a $100 “placeholder” to ensure later budget discussions about the remaining $2.4 million that the governor designated as “one-time” funding.
  • The House appropriates an additional $1 million for the Centers for Independent Living for accessible, comprehensive and coordinated services for persons with disabilities—with the goal of improving financial self-sufficiency.
  • The House concurs with the governor on the expansion of federal disability determination workers.

SENATE:

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

State Emergency Services

GOVERNOR’S BUDGET:

  • Continuation of current energy assistance poli­cies and appropriations. In addition to federal funding from the Low Income Home Energy Assis­tance Program (LIHEAP), in the past, Michigan received funds through the state’s Public Service Commission for energy assistance. After the courts ruled that the PSC did not have authority to collect restricted fee revenues, a decision that reduced funding by $60 million annually, the Legislature approved a new surcharge on electric meters to fund the Michigan Energy Assistance Program (MEAP). The MEAP was created in state law (P.A. 615 of 2012), and required DHS to establish a consolidated energy assistance pro­gram with a single, simplified application. For Fiscal Year 2015, the governor includes nearly $175 million in LIHEAP funding, as well as $60 million for the MEAP.
  • Continuation funding for State Emergency Relief services, including $13.6 million for local DHS office emergency services, $15.7 million for homeless services through the Salvation Army, $4.3 million for indigent burial services, $1.8 million for the Food Bank Council, and $3 million for multicultural services.

HOUSE:

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

SENATE:

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

Child Welfare and Family Services

GOVERNOR’S BUDGET:

Foster Care and Protective Services

  • A slight increase in funding for foster care services. The governor recommends $190.3 million for foster care payments, up slightly from the $187.7 million appropriated for this year.
  • A small reduction in projected foster care cases. The governor cuts $2.4 million ($1 million state General Funds) to reflect a projected decline in foster care cases from 6,250 this year to 6,075 in Fiscal Year 2015. Foster care cases have been falling and, with the governor’s projections, will be down 43% between Fiscal Years 2005 and 2015.
  • Funding to pay 100% of private agency administrative rates. The governor includes a $5 million increase in funding to pay 100% of the private child placing agency administrative rate for new cases entering care. Those costs are currently split between the state and counties.
  • An increase of 4% in the County Child Care Fund. The governor includes $178 million for the Child Care Fund, an increase of 4% over the current year appropriation. The Child Care Fund provides for the care and treatment of delinquent or maltreated children who are court wards and not eligible for federal payments through Title IV-E. The primary sources of funding for the Child Care Fund are state General Funds (49.8%) and federal TANF (48.5%).
  • Increased funding for medical and psychiatric evaluations of abused and neglected children. The governor includes an additional $2.1 million for medical and psychiatric evaluations for children in the child welfare system, increasing total funding from $6.6 million to $8.7 million.
  • Funding to launch a new performance-based contracting model for child welfare services. The governor includes $1.4 million, including $1 million in state General Fund) for the first phase of a new financing model for child welfare services.

Adoption Services

  • A small decrease in funding for adoption subsidies. The governor includes $241 million for adoption subsidies, a small decrease from the current year appropriation of $244 million. Subsidies are provided to families adopting children with special needs, and include both cash and medical subsidies for pre-existing medical or mental health conditions. Adoption subsidy average monthly caseloads increased by 11% between Fiscal Years 2005 and 2010, and have since stabilized at approximately 27,000. The major sources of funding for adoption subsidies are Title IV-E (46%), state General Funds (33%), and federal TANF (21%).
  • An increase in incentive payments for private agen­cies finalizing adoptions. The governor includes a total of $3.2 million—an increase of 5%—for private agencies that are placing children for adoption, including incentive payments to encourage more timely adoption turnaround times.

Family Preservation and Prevention

  • No reinvestment in prevention and family preser­vation services. The governor provides continuation funding for Strong Families/Safe Children ($12.35 million), Family Reunification ($3.98 million), and family preservation and prevention services pro­grams ($2.5 million). Small cuts were made in the Families First program (from $17.2 million to $16.9 million), and the Child Protection and Permanency program ($13.2 million to $12.9 million). Total funding for family preservation and prevention programs fell from $60.6 million in Fiscal Year 2005 to $49.3 million in the current fiscal year—a reduc­tion of nearly 19%, in the face of a 20% increase in the number of substantiated victims of child abuse and neglect.

Other Child and Family Services

  • An increase in funding for domestic violence prevention. The governor includes $514,200 for domestic violence prevention and treatment programs, increasing total funding from $15.2 million to $15.7 million.
  • Small increase in funding for juvenile justice reentry services. The governor recommends $800,000 for services for youths in the juvenile justice system to ease their re-entry into the community.
  • Funding for the Healthy Michigan Plan call center. The governor recommends $20.3 million for a call center for Healthy Michigan Plan/Medicaid applicants and recipients.

HOUSE:

Foster Care and Protective Services

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

Adoption Services

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

Family Preservation and Prevention

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

Other Child and Family Services

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

SENATE:

Foster Care and Protective Services

  • The Senate agrees with the governor on foster care caseloads and costs, projecting a decline in foster care cases to 6,075 next year, and a total reduction in related foster care costs of $2.4 million.
  • The Senate agrees with the governor on a nearly $7 million increase (4%) in the County Child Care Fund, with total funding of $178 million.
  • The Senate agrees with the governor’s recommendation to allocate $1.4 million for the new performance-based contracting model for child welfare services.
  • The Senate increases funding for medical and psychiatric evaluations of children in the protective services and foster care systems by $2 million over the governor’s recommendation, for a total increase of $4.1 million. Total funding would rise to $10.7 million—up nearly 63% from the current fiscal year.
  • The Senate agrees with the governor in approving a $5 million increase in funding to pay 100% of the private child placing agency administra­tive rate for new cases entering care.
  • The Senate includes $300,000 to cover the costs foster parents incur in transporting their foster children to parent-child visitations.
  • The Senate revises budget language to change the goal of limiting the number of children in foster care for longer than 24 months from 31% to 30%.
  • The Senate adds new budget language requiring DHS to set clear policies for parent-child visitations, including written plans with a minimum of three hours per child per week.

Adoption Services

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

Family Preservation and Prevention

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

Other Child and Family Services

  • The Senate agrees with the governor’s recommended increase in funding for domestic violence prevention and treatment.
  • The Senate includes $125,000 in state funds to match federal funding for the Michigan Reading Corps—for the purpose of literacy and tutoring services for children in kindergarten through third grade—as well as $300,000 to expand the School Success Partnerships program to four new counties through the Northeast Michigan Community Services Agency.
  • The Senate includes $2.9 million for a database to track youths in the juvenile justice system, funding not included in the governor’s budget or the House budget.
  • The Senate includes $500,000 to expand grants to rural communities to fund new and expanded in-home juvenile justice programs, bringing total funding to $1.5 million.
  • The Senate includes the governor’s proposed increase in funding for juvenile justice re-entry services of $800,000.
  • The Senate includes $20.3 million for the Healthy Michigan Plan call center.
  • The Senate includes budget language requiring the DHS to work with the Department of Community Health and the Michigan State Housing Development Authority to establish a lead abatement task force with recommendations by March 1, 2015. Senate language also requires the DHS and Community Action Agencies to give first priority for weatherization services to families with children with elevated blood lead levels.

80-mile walk

On this cool, windy spring morning I joined other advocates to show support for the youth who walked the 80 miles from Detroit to the Capitol steps in Lansing to express their concerns with Michigan’s zero tolerance policies and the impact on their lives.

Michael Reynolds, an organizer of the 80- mile event, said zero tolerance policies are "kicking good kids out of school.''

For the uninitiated, “zero tolerance” in this context refers to those education policies that mandate automatic suspension or expulsion for offenses deemed a threat to the safety of other students or school staff. The big problem in Michigan is that the list of such offenses now includes relatively minor infractions such as not having a school ID badge or wearing clothing that doesn’t adhere to the uniform code, according to the students who spoke this morning.

“I hope that legislators understand that youth around Michigan want to modify zero tolerance, and we’re willing to walk 80 miles to show it,” said Michael Reynolds, co-president of Youth First and an organizer of the march.

In 1995, Michigan enacted a series of laws in response to the federal Gun Free Schools Act of 1994 that required expulsion for at least one year any student who brought a weapon onto school property. Unfortunately Michigan legislators enacted some of the most stringent policies in the country by expanding the list of “expulsion” offenses to include assault whether or not a weapon was involved, verbal “assaults,” vandalism, disobedience and an expansive definition of “weapon” that included toys and plastic knives. (more…)

Walking the walk with infant mortality

Factors that may drive Michigan’s tragically high infant mortality rate include stress, unemployment, poverty and neighborhood safety in addition to what might be thought of as the more traditional reasons, such as lack of healthcare or poor safe sleep practices, according to a new report from the Michigan Department of Community Health. The report takes a broad look at why Michigan’s rate is so high and in particular why an African American infant in Michigan is 2.6 more times likely to die before reaching the child’s first birthday than a white infant. (more…)

Ten steps to boost Michigan’s economy

new report by the League outlines 10 steps Michigan must take to improve its economy, refuting the myth that tax cuts are a shortcut to economic prosperity. Included in the report are strategies for investing in the services and infrastructure needed to create jobs and fuel economic growth, as well as tax changes that modernize and strengthen the state’s revenue system.

It is an agenda for long-term economic prosperity that includes investments in education from early childhood through higher education, access to the health and mental health services needed for a healthy workforce, basic income security for those who cannot work or find jobs, and support for the community services businesses and consumers rely on. (more…)

Low-income Michiganians face food assistance cut in November

 Full report in PDF

In Michigan, 1.8 million low-income people will see their food assistance cut when a temporary boost to the Supplemental Nutrition Assistance Program (or SNAP, formerly known as food stamps) expires Nov. 1, new data from the U.S. Department of Agriculture show.1 SNAP benefits will average less than $1.40 per person per meal after the cut.

The cut will affect more than 47 million Americans, including 22 million children, who receive SNAP, known as the Food Assistance Program in Michigan. For a family of three, that cut will amount to $29 a month. That’s a serious loss given SNAP’s already low benefit levels and the very low incomes of SNAP participants — more than 80% of SNAP households live in poverty.

In Michigan, the benefit cut through October 2014 will total $183 million, slowing economic growth by reducing overall consumption. Nationally, the cut will total roughly $5 billion in federal fiscal year 2014 and an additional $6 billion across fiscal years 2015 and 2016.

Despite continuing high poverty and unemployment, Michigan has cut programs aimed at helping families through hard times. Lifetime limits on cash assistance and an asset test on food assistance have resulted in lower caseloads while a reduction in the Michigan Earned Income Tax Credit means working families are having a more difficult time making ends meet. Michigan also shortened its traditional period of unemployment from 26 weeks to 20 weeks yet the state’s June unemployment rate of 8.7% remains above the national rate of 7.6%. Michigan’s poverty rate of 17.5% is also above the national average.

Benefit Increase Designed to Boost Economy and Ease Hardship

Congress enacted the benefit increase as part of the 2009 Recovery Act to deliver high “bang-for-the-buck” economic stimulus and ease hardship. The Recovery Act boosted SNAP’s maximum monthly benefits by 13.6% beginning in April 2009. It provided that SNAP benefit levels would continue at the new, higher amount until SNAP’s regular annual inflation adjustments to the maximum benefit exceeded the Recovery Act amount. But Congress has since voted to accelerate the sunset of the benefit increase to Oct. 31 of this year.

The scheduled benefit cuts are especially painful in light of the inadequacy of existing benefit levels. In a report issued by the Institute of Medicine and the National Research Council, nutrition experts identified several shortcomings with the current SNAP benefit allotment and recommended evaluating ways of changing the benefit calculation to better ensure that households have enough resources to purchase an adequate diet.2

Benefit Cuts Will Increase Hardship

These cuts will likely cause hardship for many SNAP participants, who will include 22 million children in 2014 (10 million of whom live in “deep poverty,” with family incomes below half the poverty line) and 9 million people who are elderly or have a serious disability. In Michigan, 1.8 million participate in the program — that’s one in six residents.

USDA has found that the Recovery Act’s benefit boost reduced the number of households in which one or more persons had to skip meals or otherwise eat less because they lacked money — what USDA calls “very low food security” — by about 500,000 households in 2009.3 More recent research finds that boosting SNAP benefits during the summer for households with school-aged children who don’t have access to USDA’s summer food program cut very low food security among these households by nearly 20%.4

Given this research and the inadequacy of current benefit levels, we can reasonably assume that a reduction in SNAP benefit levels of this size will significantly increase the number of poor households that have difficulty affording adequate food this fall.

Evidence Doesn’t Support Argument for Cutting SNAP

The Obama Administration and some members of Congress have proposed delaying or cancelling the Nov. 1 cut, but Congress has taken no action on these proposals. Moreover, some in Congress have called for deep cuts in SNAP on top of the scheduled cut. The House of Representatives, which recently defeated legislation that would have cut $20 billion from SNAP — eliminating food assistance for nearly 2 million people — could reconsider these or even deeper cuts in the coming weeks.

Supporters of large SNAP cuts claim that because SNAP enrollment hasn’t declined in tandem with the unemployment rate over the past few years, the program’s enrollment growth in recent years is largely unrelated to the poor economy. In reality, however, the recent reductions in the unemployment rate overstate the improvements in the labor market, as Federal Reserve chair Ben Bernanke has observed.5 The proportion of the adult population with a job — the employment rate — has barely improved since the recession bottomed out.

In addition, the number of unemployed workers not receiving unemployment benefits — the group of the unemployed most likely to qualify for SNAP because they have neither wages nor UI benefits — has continued to grow and is higher now than at the bottom of the recession. Also, the historical record shows that declines in poverty and SNAP enrollment typically lag behind declines in the unemployment rate following recessions.

Endnotes

1 For more detail on the scheduled cut, see Stacy Dean and Dorothy Rosenbaum, “SNAP Benefits Will Be Cut for All Participants in November 2013, Center on Budget and Policy Priorities, Aug. 1, 2013, http://www.cbpp.org/cms/index.cfm?fa=view&id=3899.

2 Institute of Medicine and National Research Council, Supplemental Nutrition Assistance Program: Examining the Evidence to Define Benefit Adequacy, The National Academy Press, 2013, http://www.iom.edu/Reports/2013/Supplemental-Nutrition-Assistance-Program-Examining-the-Evidence-to-Define-Benefit-Adequacy.aspx.

3 Mark Nord and Mark Prell, “Food Security of SNAP Recipients Improved Following the 2009 Stimulus Package,” Amber Waves, 9(2), June 2011, p. 6, http://www.ers.usda.gov/media/227714/foodsecuritysnap_1_.pdf

4 Evaluation of the Impact of Enhancement Demonstrations on Participation in the Summer Food Service Program (SFSP): FY 2011; FNS, USDA, November 2012, http://www.fns.usda.gov/ora/menu/Published/CNP/FILES/SEBTC_Year1Findings.pdf.

5 “Bernanke Talks: A Conversation at the NBER,” Real Time Economics, Wall Street Journal, July 11, 2013, http://blogs.wsj.com/economics/2013/07/11/bernanke-talks-a-conversation-at-the-nber/.

Turning the heat down on funding

A potentially permanent solution to the dissolution of Michigan’s Low Income and Energy Efficiency Fund, or LIEEF, has passed the House and is awaiting concurrence from the Senate, likely next week.

Senate Bill 284 creates a replacement program called the Low-Income Energy Assistance Fund that would operate with funding from a surcharge on residential utility customers’ bills. The surcharge could not exceed $1/month per customer and the amount of monies raised annually under the fund would be capped at $50 million. (more…)

The 2014 State Budget: Some Opportunities Missed

 Full report in PDF

THE BIG PICTURE

The 2014 state budget, as passed recently by the Michigan Legislature, includes some positive investments in Michigan’s future, but also misses the opportunity to improve economic security and health for many Michigan residents. The Legislature completed its work on the $48.7 billion budget in record time, meeting a self-imposed deadline of early June.

The final budget consists of two omnibus budgets, including: (1) the Education Omnibus Budget ($15.4 billion), which funds School Aid ($13.4 billion), community colleges ($336 million), and higher education ($1.4 billion); and (2) the General Omnibus Budget ($33.3 billion), that funds all other state departments and services, including Community Health ($15.4 billion), Human Services ($6 billion), and Transportation ($3.6 billion). Both budgets have been presented to the governor for his signature. In Michigan, the governor also has the power to make line item vetoes.

Sadly, in formulating the state budget for next year, state lawmakers turned their backs on more than $1.5 billion in 100% federal funding available to expand Medicaid eligibility to very low-income parents and childless adults up to 133% of the federal poverty level.

This expansion would reduce the number of uninsured adults by 46%, and result in savings in the state’s General Fund of $206 million in Fiscal Year 2014 alone by allowing the state to use federal funds to provide comprehensive services to a population that is currently eligible for very limited state funded health benefits. Cumulative savings to the state’s General Fund would grow to $1.2 billion through 2020.

It is not too late, however, to accept the federal funds available to Michigan to expand Medicaid eligibility, and legislative discussions continue. House Republicans proposed legislation, H.B. 4714, that initially would have partially expanded Medicaid eligibility to nondisabled adults (ages 21-65) and imposed a 48-month time limit.

Now redrafted, the bill modifies the 48-month time limit, and instead requires those with incomes between 100% and 133% of poverty who are eligible under the expansion to purchase private insurance through the healthcare marketplace, or increase cost sharing or out-of-pocket expenses after 48 months. Some relief may be available if enrollees adopt healthy behaviors or assist the state in detecting medical fraud and abuse.

The final Fiscal Year 2014 budget also included unexpected funds based on more favorable revenue projections adopted at the May 15th Revenue Estimating Conference. The new revenue consensus by state fiscal experts assumes that Michigan will have an additional $702 million in fiscal years 2013 and 2014, including $579 million in state General Funds, and $123 million in the School Aid Fund.

With these unexpected revenues, along with the potential infusion of federal Medicaid funds, the Michigan Legislature had the opportunity to build a 2014 budget that begins to reverse some of the damaging policy decisions made during the worst of the Great Recession to balance the budget and provide business tax cuts. With this budget, lawmakers had the opportunity to reinvest in the educational and human services that have been shown to improve economic competitiveness.

While some progress was made, including a significant expansion in funding for Michigan’s state-funded preschool program, an expansion of dental care to low-income children, and a small restoration of K-12 per-pupil allocations, the opportunity was largely missed to reverse tax and policy changes that disproportionately hurt low- and moderate-income working families, children and seniors.

THE FY 2014 BUDGET: HOW IT AFFECTS LOW-INCOME MICHIGAN RESIDENTS

Michigan tax policies hurt working families and thwart economic growth: Because Michigan’s Constitution requires that the state budget be balanced each year, tax policy decisions drive budget decision-making. In the long run, Michigan will not be able to consistently make the types of investments needed to create a competitive workforce and build the community infrastructure, services and amenities needed to attract and retain businesses until it updates its outdated tax system to ensure sufficient revenues in good economic times and bad.

The tax changes adopted in the last several years have unfortunately moved Michigan in the wrong direction by making the state’s tax system more regressive and creating additional barriers to employment for low-wage workers. More significantly, by relieving businesses of the obligation to pay their fair share for the community services they rely on, recent tax changes further jeopardized the basic public services needed to grow Michigan’s economy, including basic human services, K-12 education, access to higher education and vital community services.

In 2011, the Michigan Legislature adopted an unprecedented tax shift that reduced taxes on businesses by 83%, while increasing taxes on individuals by 23%. As part of that shift:

Tax credits for many low- or moderate-income workers and families were cut or eliminated.

  • Michigan’s Earned Income Tax Credit, an effective anti-poverty tool that helps hard-working families whose incomes put them and their children below or moderately above the federal poverty line was cut by 70%.
  • The Homestead Property Tax Credit was restricted for some low-income families and reduced for others.
  • The child deduction of $600 per child for children ages 18 and under was eliminated.
  • Credits for city income taxes and college tuition and fees were eliminated.

Tax credits for many charitable contributions were eliminated, including contributions to:

  • Michigan college foundations, universities, public broadcast stations, and public libraries and state museums.
  • Homeless shelters, food banks and community foundation.
  • Medical savings accounts.
  • Individual or Family Development Accounts.

Taxes on pensioners were increased.

  • The full impact of the 2011 tax changes on individual taxpayers and low-income workers and their families is just being felt this year, as taxes for 2012 are completed.
  • EITC payments, which totaled $353.5 million statewide before the Great Tax Shift, are expected to fall to $106 million for the 2012 tax year. As a result, an additional 9,000 children are expected to fall into poverty, as their parents lose the struggle to cover work-related costs and make ends meet.
  • Donations to community foundations are down 28% statewide, with the Community Foundation for Southeast Michigan experiencing a 40% drop in donations to endowments for the 185 nonprofits they partner with.
  • In the face of rising poverty and restricted access to basic public income and food assistance, donations to homeless shelters and food banks are falling. For example, the Food Bank Council of Michigan reports that donations of $200 to food banks have dropped by 29%, while $400 donations have fallen by 47%.

During the debates over the Fiscal Year 2014 budget, lawmakers had an opportunity to reverse some of the 2011 tax changes that hurt low- and moderate-income workers, seniors and charitable organizations. Despite unexpected revenues of more than $700 million, and a transfer of funds into the state’s “rainy day” fund, the Legislature failed to do so.

The Fiscal Year 2014 budget fails to compensate for years of disinvestment in basic public services. While the Fiscal Year 2014 budget includes some increases for state programs and services, it fails to compensate for more than a decade of cuts and the erosion of purchasing power. Michigan’s economic problems began before the national Great Recession, and deepened dramatically during that period. Recent projections show that Michigan’s economy is inching forward, but it would be an exaggeration to say it is rebounding, and many Michigan families are grappling with higher taxes, fewer services, and lower incomes.

The rationale for the Great Tax Shift of 2011 was that the combination of reducing business taxes and increasing individual income taxes—with a net loss of revenue—would improve the state’s economy and spur job growth. The evidence doesn’t support that policy goal. Research shows that corporate income tax cuts are unlikely to have a strong positive effect on a state’s rate of economic growth or create many new jobs.

In fact, raising taxes on the working poor creates a clear drag on the state’s economy, in part because lower-income people spend nearly all the money they make, mainly on necessities, so for every dollar they lose due to a tax increase, total spending drops by around a dollar. Further, tax changes and cuts in public services that reduce available income and supports for working families and increase poverty have a negative effect on children’s health, school achievement, and ultimately their success in the workforce.

Over the last decade, Michigan’s outdated tax structure failed to produce the revenues needed to maintain basic services and invest in the human and other capital needed to grow the state’s economy. While total state spending (state General Fund and state restricted funds) rose by 7% between 2003 and 2013, with the exception of the Departments of Community Health and Corrections, every other major state department and service suffered cuts—even before calculating the impact of a 21% increase in the Detroit Consumer Price Index over that decade.

Instead of fixing the state’s revenue problems, lawmakers chose to make deep cuts in programs for low-income and working families, public schools, institutions of higher learning, and vital community services. To ensure Michigan’s competitive advantage, it is critical that the state begin to reverse those failing policies and reinvest in its most precious resource, its human capital. While much has been said about Michigan as a “comeback” state, the truth is that tax and budget decisions have forced hard-working, low-income families in Michigan to make sacrifices, and closed them off from the benefits of the “comeback.”

THE FY 2014 BUDGET: SEVERAL STEPS FORWARD, BUT MORE SLIDING BACK 

Economic Security and Work:

More very poor children will be denied access to basic income assistance. The Fiscal Year 2014 budget reduces funding for Family Independence Program by $41 million to a total of $214.3 million to reflect continued reduction in caseloads—projecting caseloads will fall from 53,298 in the current year (appropriated) to 45,710 in Fiscal Year 2014—a 14% reduction.

  • 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. Between 2010 and the projections for 2014, caseloads will have fallen from 79,233 to 45,710—a drop of 42% in just five fiscal years.
  • Approximately seven of every 10 FIP recipients are children, and 60% of those children are under the age of 9.
  • To be eligible for FIP, the average family of three must have an annual income of less than $9,800, and the maximum benefit is $492 per month, representing less than one-third of the poverty line. 

Approximately  30,000 very poor children will have their fall clothing allowance restored. The Michigan Legislature included $2.9 million in the Fiscal Year 2014 budget to restore the clothing allowance provided to children in child-only FIP families in the 2013-14 school year. The Snyder Administration chose to eliminate the clothing allowance this fall—the only direct client benefit cut as a result of federal sequestration.

  • 30,000 children will have their clothing allowance restored in school year 2013-14, but because of earlier policy changes limiting the benefit to FIP cases that do not include adults, 120,000 children who had previously received a fall clothing allowance will still be left behind.
  • The fall clothing allowance is an important support for low-income children, particularly in light of the failure to raise FIP grants.

The number of Michigan residents with access to basic food assistance will continue to decline: The final budget reduces funding for the Food Assistance program (formerly called the Food Stamp program) by $683.7 million in recognition of the loss of temporary federal funds, as well as caseload reductions—largely based on changes in FAP eligibility, including the adoption of an asset test. The Legislature assumes that caseloads will fall from 1.1 million cases appropriated this year, to 876,650 in 2014—a 19.4% reduction. The actual average monthly FAP caseload through April of this year was much lower than appropriated at 912,339.

  • Between 2004 and 2011, FAP caseloads grew by 135%. In 2011, Michigan adopted an asset limit for FAP, limiting access to food assistance and creating an unreasonable hardship for some families, as well as turning away federal funds available to assist low-income families. Since that time, FAP caseloads have been declining.
  • Over 70% of FAP recipients receive no other state cash assistance, and the average monthly benefit for a two-person household is $267.

Low-income working families will continue to struggle after losing significant income with the 70% cut in the state’s Earned Income Tax Credit: In 2011,the Michigan Legislature slashed the state Earned Income Tax Credit from 20% of the federal EITC to just 6%. The state EITC is a refundable tax credit for working families, designed to promote and reward work and offset other taxes paid by low wage workers that consume a higher percentage of their total income. Despite unexpected new state revenues, the Legislature did not recommend EITC restorations.

  • The EITC is a proven tool in the fight against poverty. Last year, at 20% of the federal credit, the state EITC kept 14,000 children from falling into poverty. This year, at just 6%, only 5,000 children will escape poverty, leaving another 9,000 behind.
  • The EITC serves as a temporary income supplement for most families—three out of five use the credit for just 1 or 2 years while they get back on their feet.
  • The credit has been shown to increase employment, reduce the need for public assistance, boost local economies, and benefit businesses by helping low-wage workers cover work-related costs such as transportation and child care.  

Healthy Workers, Families and Children:

Thousands of currently uninsured Michigan residents may not have access to healthcare that is fully federally funded: The Legislature rejected, as part of the budget process, the governor’s recommendation to accept Michigan’s share of federal funds to expand healthcare coverage to 320,000 low-income parents and individuals through the Medicaid programs. A separate bill to expand eligibility for Medicaid is currently under discussion.

  • More than 1.9 million Michigan residents (19.4%) now rely on Medicaid for their basic health services.
  • Because Medicaid expansion would be 100% federally funded, it would result in savings to the state of more than $200 million in Fiscal Year 2014 alone, allowing the state to use federal funds to provide comprehensive services to a very low-income population that is currently eligible for very limited state funded health benefits.
  • The Legislature’s decision to date denies coverage for uninsured Michigan residents for both Medicaid health and mental health services. Michigan’s mental health system is underfunded, and without this expansion more people will be forced to go without needed services, be added to waiting lists for services, or receive services through the corrections system. Funding for community mental health services for persons not eligible for Medicaid was reduced by nearly $54 million between fiscal years 2010 and 2012.
  • By giving more women access to healthcare before and between pregnancies, Medicaid expansion would improve both the preconception health of mothers and birth outcomes, including a reduction in infant deaths. Approximately 60% of women eligible for Medicaid deliveries report that their pregnancies are unintended, compared with 27% of privately insured women.
  • Medicaid expansion could increase economic activity and decrease the state’s long-term healthcare liabilities—with federal funds covering 100% of the costs through 2016, phasing down to 90% in 2020 and beyond.
  • The Department of Community Health estimates that Medicaid expansion would cut Michigan’s uncompensated care costs—caused by those who must turn to emergency rooms for their care — by $320 million through 2022.

Approximately  70,500 more low-income Michigan children will have access to dental care: The Legislature ultimately approved the governor’s proposal to add $11.6 million to expand the Healthy Kids Dental program to cover an additional 70,500 children in three Michigan counties—part of a multi-year plan to cover all children in the state.

  • Approximately 70,500 children in Ingham, Ottawa and Washtenaw counties will have access to preventive oral health care.
  • Currently, more than 440,000 children are covered by the program in 75 of Michigan’s 83 counties. Many of the state’s most populated areas are not yet covered, including Oakland, Macomb, and Wayne counties—with a disproportionate impact on children of color.
  • Access to preventive dental care reduces dental emergencies and related costs. Children enrolled in Healthy Kids Dental are 60% more likely to receive preventive dental care by age 3, and 25% less likely to have dental emergencies.

Michigan infants, and particularly infants of color, will continue to die unnecessarily: While the Michigan Legislature adopted—at a reduced level of $2 million—the governor’s recommendation for new funding to begin to implement Michigan’s infant mortality reduction plan, this increase is more than offset by lawmakers’ current decision to reject Medicaid expansion to uninsured Michigan residents, including women whose infants would be born healthier if adequate preconception care was available.

  • Despite being a key indicator on the governor’s dashboard, Michigan’s infant mortality rates continue to be higher than most states. Michigan ranks 37th among the states in infant mortality, with death rates for African American infants that are more than two-and-one-half times higher than white babies.
  • Michigan’s efforts to reduce infant mortality remain underfunded. The plan includes regional perinatal care, initiatives to reduce medically unnecessary deliveries before 39 weeks, the promotion of safe sleep practices for infants, and expanded home visiting programs.

Additional funding will be available to prevent toxic lead poisoning: The final budget includes $1.25 million in state General Funds to remove lead hazards from homes in areas with high incidences of lead-poisoned children—funding that was not included in the governor’s budget. Last year, the Michigan Legislature approved an additional $2 million for Michigan’s lead abatement program, known as Healthy Homes, for total funding of $4.9 million. The governor vetoed the expansion, and the program is funded at $2.9 million this year.

  • Lead has a particularly devastating effect on young children when it can compromise the developing central nervous system and cause irreversible damage to cognitive capacity and behavior.
  • Of the nearly 69,000 children targeted for lead poisoning testing (who are insured by Medicaid or live in one of 14 targeted communities), 57% were tested in 2012. Testing for lead poisoning peaked in 2010, and has decreased slightly since. Nearly 150,000 children under the age of 6 were tested in 2012.
  • Prevention works. While, the number of children with confirmed elevated lead blood levels has declined dramatically, some areas of the state still have very high rates of lead poisoning. The city of Detroit had over half the state’s lead poisoning cases in 2012; the second highest total was in Grand Rapids.

A Top-Notch Cradle to Career Education:

More low-income 4-year-olds will benefit from early childhood education: The final Fiscal Year 2014 budget includes the governor’s proposal to increase funding for Michigan’s Great Start Readiness Program by $65 million, but reserved $25 million of the increase in a newly created GSRP reserve fund which could only be tapped through legislative action if there is sufficient need for the preschool slots. Total funding for the state-funded preschool program is increased from $109.3 million in the current year to $174.3 million in Fiscal Year 2014, opening up approximately 16,000 new half-day slots for 4-year-olds.

The Legislature made several changes to GSRP policy, including: (1) raising the payment for a half-day slot from $3,400 to $3,625; (2) eliminating the current competitive GSRP program that provides funds to private sector providers, instead requiring Intermediate School Districts to establish a local process to contract out at least 30% of their slots to public or nonprofit community organizations or for profit businesses; (3) targeting GSRP funds to the lowest income children by lowering the income cap, requiring that at least 90% of children served are from families with incomes below 250% of poverty and the lowest income children are served first; (4) requiring GSRP providers to have quality ratings of at least three out of five start through Great Start to Quality, Michigan’s quality rating system; and (5) requiring GSRP providers to use a sliding fee tuition scale for children who do not meet the income eligibility requirements.

  • Evaluations of the GSRP show that participants are more likely to be ready when they enter kindergarten and pass 4th grade MEAP tests. In addition, fewer GSRP participants were retained in grade and more graduated on time from high school.
  • A growing number of economists and business leaders, including heads of Fortune 500 companies, the Federal Reserve Bank, and Nobel Prize-winning economists agree that early childhood programs can generate government savings and produce returns that exceed public investments, with savings accruing from lower costs related to such public services as special and remedial education, high school graduation rates, lower unemployment, higher earnings, and reductions in the need for public assistance.

Michigan public schools will continue to struggle to balance their budgets: Although the Legislature, in contrast to the governor, included a partial restoration of the per-pupil foundation allowance for public schools, the increase was not enough to make up for the cuts already suffered by school districts. The Legislature increased the maximum (basic) foundation allowance by $30 to $8,049, and the minimum foundation by $60 to $7,026. The final budget also includes $6 million to ensure that all districts receive a minimum increase of $5 per pupil.

The Legislature also approved $36 million (up from the governor’s recommendation of $24 million) for equity payments to districts with foundation allowances of less than $7,076. The payment would be the lesser of $50 per pupil or the difference between the district’s Fiscal Year 2014 foundation allowance and $7,076.

The final budget retains funding for best practices grants at the current year level of $80 million, with districts eligible for $52 per pupil if they meet seven out of eight best practices. The governor recommended that best practices grants be reduced by 70% to $25 million. Lawmakers also increased performance funding for districts from $30 million to $46.4 million, to reflect the number of districts that are expected to be eligible next year.

  • In 2011 and 2012, Michigan public schools suffered total cuts of $470 per pupil in their foundation allowances, and this budget fails to offset those cuts.
  • In the decade between fiscal years 2004 and 2014, total state spending through the School Aid Fund increased approximately 4%, while the Detroit Consumer Price Index increased nearly 21%.
  • Lawmakers once again chose to transfer funds from the School Aid Fund, which has traditionally been used to fund K-12 education, to universities and community colleges. A total of approximately $400 million will be transferred in Fiscal Year 2014. Transferred School Aid Fund dollars now account for almost 60% of total funding for Michigan’s communities colleges, and 15% of university funding.

Many low-income youths and adults will not be able to afford a college education—the ticket to long-term economic security: Lawmakers included an increase of 7% (from $43.8 million to $47 million) in the Fiscal Year 2014 budget for the state’s Tuition Incentive Program, which provides financial aid to students who are Medicaid-eligible. While sorely needed, this relatively small increase is unlikely to substantially change Michigan’s ranking of 40th in the country in needs-based grants, or its placement last in the Midwest.

  • Over the last 10 years, states across the country increased investments in need-based grants by an average of 84%. Michigan, running counter to the national trend, decreased state funding by 20%—one of only two Midwest states to cut needs-based grant funding during that period.
  • In 2010-11, Michigan invested the least in grant dollars per student of all Midwestern states. The state spent 4.5% of its higher education budget on state grants in that year, while Pennsylvania, Indiana and Illinois all spent higher than the national average of 12.5%.
  • In 2010-11, only 14% of Michigan’s full-time students received some kind of grant aid, ranking the state second to lowest in the Midwest and 40th in the nation in the number of students receiving aid.

Without incentives for universities and community colleges to focus on the success of low-income and nontraditional students, many will continue to find barriers to the completion of postsecondary education: For Fiscal Year 2014, the Michigan Legislature again failed to incorporate performance standards that reward universities and community colleges for helping at-risk students. The final budget includes a 2% increase for both universities ($24.9 million) and community colleges ($5.8 million), with funding allocated based on performance metrics. In the current year budget, lawmakers included additional funding for universities and community colleges that meet specific performance standards, however only one of those performance standards—tuition restraint—addresses the unique needs of low-income and nontraditional students, including those needing remediation.

For Fiscal Year 2014, the performance measures for universities will remain largely the same, including tuition restraint; degree completions overall, as well as in key areas such as science, technology, engineering, mathematics and health; six-year graduation rates; research and development expenditures; and institutional support as a percentage of core expenditures. In the final budget however, the Legislature strengthened incentives for tuition restraint by making it a condition for receiving any performance funding and by lowering the tuition increase limit from 4% to 3.75%.

For community colleges, the metrics are also largely unchanged, and include degree completions, student contact hours, and administrative costs as a portion of total spending. For Fiscal Year 2014, lawmakers rejected a new metric proposed by the governor for job placements in the skilled trades.

  • Michigan’s economic growth depends on a skilled workforce, and the performance funding system put in place this year for public universities and community colleges does not adequately focus on the success of low-income students or those needing remediation.
  • The most recent data available show that 36.5% of community college students and 13% of university students in Michigan were enrolled in at least one developmental education course—at a cost to both the students and the institution.
  • Michigan’s decision to appropriate a portion of its higher education and community college funding using performance metrics provides an opportunity to address student success in the budget process and reward institutions that are successful in helping low-income and nontraditional students.

Low-income students or those needing remediation face more barriers to educational access and success, are more expensive to serve, and more likely to drop out. If there are no financial incentives for institutions to devote additional resources to this population, they could be viewed as a liability in terms of the other standards, including graduation rates.

Fast track but off course

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Before leaving town for the annual Mackinac Policy Conference and fudge fest last week, state lawmakers finished their work on the FY 2014 state budget, making decisions on the allocation of approximately $48 billion in state and federal revenues at nearly breakneck speed.

So how did low- and moderate-income families and children, the unemployed, seniors and other vulnerable residents of Michigan fare in this fast-track budget? On the positive side, the Michigan Legislature adopted several of the governor’s initiatives that serve to improve children’s health and school readiness. (more…)

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 twoperson 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.

The 2014 State Budget: What’s at Stake for Low-Income Michigan Residents?

 Report in PDF

THE BIG PICTURE

List of child and family issues at stake in budgetThe Fiscal Year 2014 state budget has been moving quickly through the Legislature, with both the governor and the Legislature expressing a desire to complete work by the beginning of June.

The House of Representatives has passed all of its budgets for Fiscal Year 2014 through two omnibus budgets, including: (1) the Education Omnibus Budget ($15 billion), which funds School Aid ($13.2 billion), community colleges ($334.9 million), and higher education ($1.4 billion); and (2) the General Omnibus Budget ($33.9 billion), that funds all other state departments and services, including community health ($15.3 billion), human services ($5.9 billion), and transportation ($3.4 billion).

The Senate has also approved most of its budget bills in preparation for the joint House/Senate conference committees that will iron out differences between the two versions–utilizing the budget targets adopted based on projected revenues from the May Revenue Estimating Conference.

This aggressive timetable is being challenged by a number of major budget issues driving the debate, including:

Medicaid Expansion: The governor’s budget included 100% federal funds—available through the Affordable Care Act–to support the expansion of Medicaid coverage to very low-income parents and childless adults up to 133% of the federal poverty level.  This expansion would increase the number of Michigan residents covered by Medicaid from approximately 1.8 million to 2.2 million, reducing the number of uninsured adults by 46%. 

Medicaid expansion would result in savings in the state’s General Fund of $206 million in Fiscal Year 2014 alone by allowing the state to use federal funds to provide comprehensive services to a population that is currently eligible for very limited state-funded health benefits. Savings to the state’s General Fund would grow to $1.2 billion through 2020.

How the uninsured in Michigan could be helped by Medicaid expansionThe governor recommended that half of the savings in state funding be deposited in a newly created healthcare savings fund to offset any future costs related to Medicaid expansion. The remaining funds were to be used to fund vital services, or expansions, including the Healthy Kids Dental program.

To date, the Legislature has not endorsed the expansion of Medicaid, resulting in pressures throughout the state budget, and threatening the opportunity for healthcare coverage for hundreds of thousands of very low-income Michigan residents. House Republicans recently released HB 4714, a bill to expand Medicaid to 133% of poverty, but under onerous conditions, most notably a 48-month limit on Medicaid benefits for nondisabled adults (ages 21-65), as well as a requirement that recipients contribute up to 5% of annual income on copays, premiums and deductibles. The bill could not be implemented without a federal waiver that provides 100% federal funding for current and newly eligible nondisabled adults, as well as administrative costs. The bill also ends the Medicaid expansion when it is no longer 100% covered by federal dollars, which under the Affordable Care Act is scheduled to occur in 2017. 

Transportation Funding: The Fiscal Year 2014 budget debates are also being shaped by the governor’s proposal to increase funding for Michigan roads and transportation infrastructure by $1.2 billion. The governor proposed to fund the road improvements by taxing gasoline at the wholesale level, increasing vehicle registration fees, and local taxing options.

While there is general agreement that Michigan’s roads and bridges are in serious disrepair and new investments are needed, consensus on how to pay the bill has yet to be achieved. Legislative options have included increases in the general sales tax—an option that could affect other vital state services, including human services and schools.

Michigan Tax Changes and Expected Revenues:  In 2011, the Michigan Legislature adopted a major “tax shift” that reduced taxes on businesses by 83%, while increasing taxes on individuals by 23%.  As part of that shift, Michigan’s Earned Income Tax Credit, an effective anti-poverty tool that helps hardworking families whose incomes put them and their children below or moderately above the federal poverty line, was cut by 70%. EITC payments in 2011 statewide were $353.5 million; for the 2012 tax year, they are expected to fall to $106 million.

The new revenue consensus by state fiscal experts is that Michigan will have an additional $702 million in combined revenues above earlier estimates for fiscal years 2013 and 2014—including a total of $579 million in state General Funds, and $123 million in the School Aid Fund.  While encouraging, these increases follow years of steep revenue declines and related budget cuts, many of which disproportionately hurt low- and moderate-income working families, children and seniors.

In Fiscal Year 2014, the Legislature has an opportunity to use the potential infusion of federal Medicaid funds and unexpected state revenues to begin to reverse some of the policy decisions made to balance the budget and provide business tax cuts, as well as to invest in the educational and human services that have been shown to improve economic competitiveness. 

FISCAL YEAR 2014 BUDGET ISSUES AFFECTING LOW-INCOME RESIDENTS

Among the major issues affecting low-income Michigan residents in the proposed Fiscal Year 2014 budgets being considered by the Legislature are the following:

Access to health and mental health care:  As a result of the failure to date to expand Medicaid, both the House and Senate budgets restrict access to vital health and mental health services. 

Hundreds of thousands of currently uninsured Michigan residents will not have access to medical and mental healthcare that is fully federally funded. In addition to the budget hole of more than $200 million created by the Legislature’s failure to accept federal funds to expand Medicaid, the decision affects the state’s residents and communities in a number of ways:

  • At least 320,000 currently uninsured Michigan residents would be unable to receive coverage for both Medicaid healthcare and mental health services.  More than 1.8 million Michigan residents (19.4%) now rely on Medicaid for their basic health services. Further, the share of Michigan births covered by Medicaid has been growing—from 35% in 2003 to 51% in 2010.
  • By giving more women access to healthcare before and between pregnancies, Medicaid expansion would improve the preconception health of mothers and birth outcomes, including a reduction in infant deaths.
  • Expanded access to Medicaid family planning services could also mean significant cost savings for the state.  Approximately 60% of women eligible for Medicaid deliveries report that their pregnancies are unintended, compared with 27% of privately insured women.
  • Medicaid expansion could reduce employer healthcare costs, increase economic activity, and decrease the state’s long-term healthcare liabilities—with federal funds covering 100% of the costs through 2016, phasing down to 90% in 2020 and beyond.
  • The Department of Community Health estimates that Medicaid expansion would cut Michigan’s uncompensated care costs–caused by those who must turn to emergency rooms for their care—by a total of $320 million through 2022.

More than 70,500 children will not have access to dental care. The governor proposed to add $11.6 million in state General Funds to expand the Healthy Kids Dental program to cover an additional 70,500 children in three Michigan counties—part of a multi-year plan to cover all children in the state. The House rejected the governor’s plan.  The Senate agreed with the governor, but did not specify which counties would become part of the program in the upcoming fiscal year. A failure to move forward with the governor’s plan to expand the Healthy Kids Dental program statewide could have the following consequences:

  • Approximately 70,500 children in Ingham, Ottawa and Washtenaw counties would not have access to preventive oral health care. 
  • The governor’s plan to expand the Healthy Kids Dental program to the estimated 720,000 children not currently covered would be derailed. Currently, more than 440,000 children are covered by the program in 75 of Michigan’s 83 counties.  Many of the state’s most urban areas are not yet covered, including Oakland, Macomb, Washtenaw and Wayne counties—with a disproportionate impact on children of color.
  • Continued dental emergencies and related costs are likely.  Children enrolled in Healthy Kids Dental are 60% more likely to receive preventive dental care by age 3, and 25% less likely to have dental emergencies.  Trends in infant mortality chart

Michigan infants, and particularly infants of color, will continue to die unnecessarily. For Fiscal Year 2014, the governor recommended $2.5 million to begin to implement Michigan’s infant mortality reduction plan. The House rejected the governor’s proposal, while the Senate included a placeholder for further discussion in conference committee. Without additional funding:

  • Michigan will be less able to move ahead with its plan to reduce infant mortality, particularly for African American infants who are much more likely to die in the first year of life, including regional perinatal care, initiatives to reduce medically unnecessary deliveries before 39 weeks, the promotion of safe sleep practices for infants, and expanded home visiting programs.
  • Michigan’s infant mortality rates will continue to be higher than most states.  Michigan ranks 37th among the states in infant mortality, with rates for African American infants that are more than two-and-one-half times higher than white babies.Map of lead poisoning case rate

Many children will continue to be exposed to toxic lead poisoning. Last year, the Michigan Legislature approved an additional $2 million for Michigan’s lead abatement program, known as Healthy Homes, for total funding of $4.9 million.  The governor vetoed the expansion, and the program is funded at $2.9 million this year.  For Fiscal Year 2014, the governor maintains funding at $2.9 million.  The House added $1 million for total funding of $3.9 million next year, while the Senate included a placeholder to ensure discussion at the joint House/Senate Conference Committee.

  • Lead has a particularly devastating effect on young children when it can compromise the developing central nervous system and cause irreversible damage to cognitive capacity and behavior.
  • Of the nearly 69,000 children targeted for lead poisoning testing (who are insured by Medicaid or live in one of 14 targeted communities), 57% were tested in 2012.  Testing for lead poisoning peaked in 2010, and has  decreased slightly since.  Nearly 150,000 children under the age of six were tested in 2012.
  • Prevention works.  While, the number of children with confirmed elevated lead blood levels has declined dramatically, some areas of the state still have very high rates of lead poisoning.   The city of Detroit had over half the state’s lead poisoning cases in 2012.  The second highest total was in Grand Rapids.

Public assistance for low-income families, children and adults: The governor, House and Senate have recommended cuts in funding for the Department of Social Services of approximately 10-11% in Fiscal Year 2014, with most of the decline coming from continued steep drops in caseloads for basic assistance programs such as the Family Independence Program, FIP, and the Food Assistance Program , known as FAP. These caseload declines reflect policy changes over the last several years that have restricted eligibility for basic assistance programs. 

More very poor children will be denied access to basic income assistance The governor reduced funding for FIP by $15.8 million to a total of $239.4 million to reflect continued reduction in caseloads—projecting caseloads will fall from 53,298 in the current year to 49,226 in Fiscal Year 2014—a 7.6% reduction.  Both the House and the Senate agreed with the governor’s caseload projections.

  • 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. Between 2010 and the projections for 2014, caseloads will have fallen from 79,233 to 49,226—a drop of 38% in just five fiscal years. 
  • Approximately seven of every 10 FIP recipients are children, and 60% of those children are under the age of 9.
  • To be eligible for FIP, the average family of three must have an annual income of less than $9,800, and the maximum benefit is $492 per month.Chart shows drop in FIP caseloads

The number of Michigan residents with access to basic food assistance will continue to decline. The governor reduced funding for the Food Assistance program (formerly called the Food Stamp program) by $683.7 million in recognition of the loss of temporary federal funds, as well as caseload reductions—largely based on changes in FAP eligibility, including the adoption of an asset test.  The governor assumes that caseloads will fall from 1.1 million cases appropriated this year, to 876,650 in 2014—a 19.4% reduction.  The actual average monthly FAP caseload through March of this year was much lower than appropriated at 912,755. The House and Senate agreed with the governor’s caseload recommendations.

  • Between 2004 and 2011, FAP caseloads grew by 135%.  In 2011, Michigan adopted an asset limit for families receiving assistance, limiting access to food assistance for families, and turning away federal funds available to assist low-income families. Since that time, FAP caseloads have declined slightly.
  • Over 70% of FAP recipients receive no other state cash assistance, and the average monthly benefit for a two-person household is $267.

Low-income working families will continue to struggle after losing significant income with the 70% cut in the state’s Earned Income Tax Credit.  In 2011, the Michigan Legislature slashed the state Earned Income Tax Credit from 20% of the federal EITC to just 6%. The state EITC is a refundable tax credit for working families, designed to promote and reward work and offset other taxes paid by low wage workers that consume a higher percentage of their total income. The governor, House and Senate have not recommended EITC restorations.

  • The EITC is a proven tool in the fight against poverty.  Last year, at 20% of the federal credit, the state EITC kept 14,000 children from falling into poverty.  This year, at just 6%, only 5,000 children will escape poverty, leaving another 9,000 behind.
  • The EITC serves as a temporary income supplement for most families—three out of five use the credit for just 1 or 2 years while they get back on their feet.
  • The credit has been shown to increase employment, reduce the need for public assistance, boost local economies, and benefit businesses by helping low-wage workers cover work-related costs such as transportation and child care. 

Adequate funding for a top-notch cradle to career educational system:

More low-income 4-year-olds will benefit from early childhood education.  The governor increased funding for the Great Start Readiness Program by $65 million, from $109.3 million in the current year to $174.3 million in Fiscal Year 2014, while indicating his intention to expand the program by another $65 million in Fiscal Year 2015.  The governor’s proposal would open up approximately 16,000 new half-day slots for 4-year-olds, requiring that at least 90% of the children live in families with incomes below 300% of poverty (up from 75% this year).  The governor also increased the preschool slot payment from $3,400 to $3,624. 

The House provided only $38 million for the GSRP, increasing the per-slot amount to $3,500. The House requires that at least 80% of children served by GSRP live in families with incomes at 200% of poverty or less.  The Senate agreed with the governor on the funding increase ($65 million), but maintained the per-slot amount at $3,400. The Senate would require that all children served live in families with incomes at or below 300% of poverty, with the poorest children being enrolled first.

  • Evaluations of the GSRP show that participants are more likely to be ready when they enter kindergarten and pass 4th grade MEAP tests.  In addition, fewer GSRP participants are retained in grade and more graduate on time from high school.
  • A growing number of economists and business leaders, including heads of Fortune 500 companies, the Federal Reserve Bank, and Nobel Prize-winning economists agree that early childhood programs can generate government savings and produce returns that exceed public investments, with savings accruing from lower costs related to such public services as special and remedial education, high school graduation rates, lower unemployment, higher earnings and reductions in the need for public assistance.
  • An increase in the per-slot payment for GSRP is a priority.  The GSRP per-slot payment has not been increased since 2007, when it was raised by only $100. As a result, districts have been forced to subsidize their preschool programs even as overall district funds become increasingly tight. GSRP per-student funding has steadily lost ground to inflation over the past 10 years, and even the governor’s proposed increase to $3,625 per half-day slot only makes up for a small part of this decline in real funding. The result is less access to services and challenges in maintaining program quality, which is the key to school readiness. 

Michigan public schools will continue to struggle to balance their budgets.  The governor’s budget did not include an across-the-board increase in the per-pupil allowance received by public schools.  The governor instead recommended $24 million for equity payments of up to $34 per pupil to further close the foundation funding gap between districts by raising the per-pupil payments for the lowest funded districts receiving the minimum grant from $6,966 to $7,000 per-pupil. However, the governor reduced funding for “best practices” grants by 70% (from $80 million to $25 million), and kept performance funding for districts at the current year level of $30 million.

The House also did not fund an across-the-board increase in the per-pupil allotment for schools, but provided total funding of $36 million to bring the equity payment up to $50 per pupil for districts with foundation allowances below $7,016. The House did not fund best practices grants, but included a placeholder to further discuss them in conference committee.

The Senate included $24 million for a $9 increase in the basic foundation allowance for schools, as well as an $18 per pupil in the minimum foundation allowance.  The Senate did not include the equity payments, and eliminated funding ($80 million) for `best practices payments.    

  • In school year 2012-13, Michigan public schools suffered a cut of $470 per pupil in their foundation allowances, and this budget fails to offset those cuts. 
  • School districts not eligible for the equity payments could actually suffer additional cuts in their overall per-pupil allotments if they are affected by cuts in best practices grants.

As tuition skyrockets at public four-year universities, fewer people will be able to afford a college education. The governor’s budget provided $1.24 billion for university operations, including $24.9 million in new funding (a 2% increase) that would be allocated based on six performance metrics:  undergraduate completions in critical skills (science, technology, engineering, mathematics and health); research expenditures; six-year graduation rates; total completions; administrative costs as a percentage of core expenditures; and tuition restraint.

The House and Senate appropriated the same level of overall funding as the governor, but the House made tuition restraint a prerequisite for receiving performance funding, lowering the tuition threshold from 4% to 3%. The Senate also made tuition restraint a prerequisite for receiving performance funding, but retained the governor’s 4% tuition restraint threshold.

  • At most Michigan public universities, tuition for four years of college has more than doubled in the past 10 years; students graduating in 2013 will pay more than twice the amount paid by students who graduated in 2003.
  • The 2% increase for performance funding is below the current year increase of 3%.

Low-income adults will struggle most, as needs-based financial aid becomes more scarce. In 2009, the Michigan Legislature eliminated five needs-based grants for students, and the governor, House and Senate again failed to restore those grants in their Fiscal Year 2014 budgets.  The governor provided continuation funding for two of the remaining grant programs, including: (1) $31.7 million in federal TANF funding for the Michigan Tuition Grant, a needs-based grant; and (2) $18.4 million in TANF for the Michigan Competitive Scholarship, a merit-based scholarship with eligibility based on ACT scores. Under the governor’s budget, private colleges with students receiving Michigan Tuition grants would be required to participate in the state’s P-20 longitudinal data system, and report on the number of Tuition and Pell Grant students graduating, as well as the number taking remedial education classes.

In his Fiscal Year 2014 budget proposal, the governor increased funding for the Tuition Incentive Program by $3.2 million (7%) in state General Funds, adding to current spending of $43.8 million in federal TANF to bring total funding to $47 million. The TIP is available to students who are eligible for Medicaid, and the governor’s budget limits reimbursements to universities under the TIP to 300% of the average community college tuition rate.

The House agreed with the governor on funding levels, as well as the governor’s TIP policy changes, but did not require private colleges to participate in the P-20 data system.

The Senate also agreed with the governor on funding levels, but did not include the governor’s TIP policy changes or the Michigan Tuition Grant language requiring P-20 data system participation for private colleges.

  • Student loans often make up a large part of a student’s financial aid package, but the rising costs of tuition and high interest rates make it imperative that grant aid be available as well. Federal aid programs such as Pell Grants do not cover a large enough portion of costs by themselves to keep postsecondary education a?ordable for low-income students, so all states have state-funded programs that allocate some grants on the basis of income as opposed to merit or other factors.
  • Over the last 10 years, states across the country increased investments in need-based grants by an average of 84%.  Michigan, running counter to the national trend, decreased state funding by 20%–one of only two Midwest states to cut needs-based grant funding during that period.
  • In 2010-11, Michigan invested the least in grant dollars per student of all Midwestern states. Michigan spent 4.6% of its higher education budget on state grants in that year, while Pennsylvania, Indiana and Illinois all spent higher than the national average of 12.5%.
  • In 2010-2011, only 14% of Michigan’s full-time students received some kind of grant aid, ranking the state second to lowest in the Midwest, and 40th in the nation.

 

 

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