More work needed on child care investments

Yesterday morning, a joint House/Senate conference committee approved a final budget for child care services for the 2019 budget year. At issue was how Michigan would allocate $65 million in new federal funds to improve access to high quality child care for families with low wages.

On the positive side, the committee approved a new payment system for child care providers—many of whom are small businesses operating at the margin. Child care providers have struggled with hourly payments for child care—a policy that doesn’t align with how they generally bill parents, which is for half-day or full-day care on at least a weekly basis. In addition to the burden of documenting hours of care, with hourly billing, providers could not count on a steady stream of income, making some less willing to care for children with state subsidies.

The final budget adds $15 million in new federal funding to establish biweekly payments with the following schedule: (1) providers caring for children up to 30 hours every two weeks are paid hourly; (2) those between 31 and 60 hours of care are paid at 60 hours; (3) between 61 to 80 hours receive payments for 80 hours; and (4) for 81 to 90 hours, payments are for 90 hours of care.

child care 350x233While this steadier stream of income is important to ensure a supply of child care for families working at low wage jobs, there is much that wasn’t achieved in the 2019 budget. First, the conference committee rejected a Senate-proposed increase in the rates paid to child care providers. Low rates make it difficult for providers to improve the quality of care, including hiring and retaining qualified staff and maintaining their facilities. In the end, low rates can force child care providers to make business decisions to not take children who are receiving state subsidies, or force families to pick up the difference between what the subsidy provides and what the provider charges other families.

Also not addressed in the final budget was Michigan’s restrictive income eligibility threshold for child care—the second lowest in the nation. In response to new federal requirements, Michigan raised its “exit” eligibility level to 250% of poverty so families could keep their child care even if they get more hours or a small pay increase. This 2015 policy change helped to stem the decline in the number of families receiving child care assistance, and the Legislature is now predicting a caseload increase in 2019 at a cost of nearly $25 million. However, all families entering the child care program must earn less than 130% of poverty, and caseloads remain well below those a decade ago.

Other gaps in Michigan’s child care system that must still be closed are the lack of high-quality care in many underserved communities; shortages of affordable infant care; and the scarcity of care for parents who work evenings, weekends or with uncertain schedules.

Michigan has a long way to go in building a high-quality child care system that meets the needs of working parents. The state is expecting an additional $65 million in federal child care funds in the current budget year and subsequent years, and must ensure that those funds are fully expended in ways that benefit the children and families most in need. Further, to make high-quality child care affordable for all working families, it is time to look at other sources of revenue. Michigan is third from the bottom of states in its use of federal Temporary Assistance for Needy Families (TANF) block grant dollars for child care, and state General Fund commitments are minimal.

Parents are struggling with the high cost of child care, and business leaders understand that the lack of child care affects their bottom line in terms of recruitment and retention. If Michigan lawmakers are serious about growing the state’s economy and encouraging work, they must rethink investments in child care.

— Pat Sorenson

U.S. House GOP health bill would end the Healthy Michigan Plan and leave 660,000 uninsured

For Immediate Release
June 7, 2017

Contact:
Alex Rossman
arossman@mlpp.org
517.487.5436

New reports reaffirm similar approach under consideration in Senate would shift massive costs to Michigan

LANSING—The Healthy Michigan Plan would effectively end and the 660,000 people who depend on it would lose coverage under the health bill passed by the U.S. House to repeal the Affordable Care Act (ACA), according to a new report from the nonpartisan, Washington, DC-based Center on Budget and Policy Priorities. An additional report released by the Center today shows that delaying or phasing in the House bill’s massive cost shifts to states, as the Senate is reportedly considering, would have no effect on the ultimate outcome.

Michigan is one of eight states that have laws that effectively require their Medicaid expansions to end if federal financial support for the expansion falls. In these states, Medicaid expansion—and the Healthy Michigan Plan—would thus end in 2020 under the House Republicans’ American Health Care Act (AHCA).

The House bill would shift $582.5 million in costs to Michigan, which is more than the state spends on child welfare ($445M GF), early childhood programs ($258M SAF) and at-risk programs ($379M SAF) respectively. The $582.5 million strain on the state budget also is approximately more General Fund money than the state spends combined on the departments of Talent and Economic Development, Education, Military and Veterans Affairs, Agriculture and Rural Development, Environmental Quality, Licensing and Regulatory Affairs, Natural Resources, Civil Rights, Transportation and the Attorney General’s office.

Michigan would almost certainly be unable to absorb these additional costs, especially as more state General Fund money starts going to roads in the years ahead. As a result, Michigan would likely be forced to end its expansion and eliminate the Healthy Michigan Plan, leaving 660,000 adults with low incomes who have gained Medicaid coverage under the expansion at severe risk of becoming uninsured.

“Yesterday, I sat alongside the Michigan Department of Health and Human Services Director and Budget Director, representatives from Michigan’s businesses, and doctors and hospital officials to talk about the success of the Healthy Michigan Plan and the importance of protecting it,” said Gilda Z. Jacobs, president and CEO of the Michigan League for Public Policy. “Yet here we are today with a new independent report showing how the U.S. House’s American Health Care Act will decimate the program and leave more than half a million state residents without coverage. Our state budget can’t afford these costs, and Healthy Michigan enrollees can’t afford to lose their coverage.”

As the U.S. Senate considers changes to the House GOP health bill, some have claimed that phasing the repeal out more slowly or delaying it by two years would avoid these harms. But neither of these proposals change the ultimate outcome: a huge cost-shift to states ending the Medicaid expansion and causing millions to lose coverage.

Other proponents of the House bill have suggested that people who would lose expansion coverage could instead purchase private coverage on their own using the House bill’s tax credits. That is false, the new reports show. Adults with low incomes would face unaffordable premiums if the expansion were repealed, even after taking the House bill’s tax credits into account. For example, premiums after tax credits for Michiganians in poverty would equal a whopping 48 percent of income for 60-year-olds at the federal poverty line. And that’s without taking into account provisions in the House bill that would let insurers go back to charging people with pre-existing conditions exorbitant premiums, stop covering critical services like mental health services and substance use treatment and imposing annual and lifetime limits.

“The American Health Care Act is a bad bill that will be disastrous for the Healthy Michigan Plan and the historic gains in health coverage and access to care that we have achieved under Medicaid expansion, and tinkering with it won’t solve its fundamental flaws,” Jacobs said. “Senators Debbie Stabenow and Gary Peters have been champions for Medicaid expansion and the rest of the Senate should follow suit and scrap the House bill and focus on bipartisan efforts to strengthen, not dramatically weaken, our healthcare system.”

The League is part of the Protect MI Care coalition, an organization of consumer, healthcare and insurer groups in the state who are working together to protect the ACA, the Healthy Michigan Plan and the care they provide. More information on the coalition is available at www.protectmicare.com.

To learn more, please visit:

House Republican Health Bill Would Effectively End ACA Medicaid Expansion
http://www.cbpp.org/research/health/house-republican-health-bill-would-effectively-end-aca-medicaid-expansion

People Losing Medicaid Under House Republican Bill Would Face High Barriers to Coverage
http://www.cbpp.org/research/health/people-losing-medicaid-under-house-republican-bill-would-face-high-barriers-to

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The Michigan League for Public Policy, www.mlpp.org, is a nonprofit policy institute focused on economic opportunity for all. It is the only state-level organization that addresses poverty in a comprehensive way.

Now is the time for investing, not cutting taxes

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May 2017
Rachel Richards, Legislative Coordinator

Budget Brief JPG USE THIS ONE

As Michigan legislators continue to debate state spending for the upcoming budget year, the Michigan League for Public Policy advocates for a budget that helps make Michigan the place where businesses, communities and residents thrive, including affordable, high-quality child care; good public schools and access to college; safe communities; and drivable roads.

The Michigan Senate and House have approved separate versions of the 2018 state budget. Differences between the two will now be worked out in joint House/Senate conference committees which will be convening in the coming weeks after expected revenues for the upcoming year were determined at the May gathering of economists and budget experts.

Both the House and Senate budgets fall short in several key areas, and more could be done. The House underspent the governor’s budget by about $270 million, and the Senate underspent the governor by about $540  million. Neither chamber spent all state General Fund dollars available that could be utilized to help enhance many important state programs instead saving them to be later allocated for tax relief, pension reform or “rainy days.”

The League opposes tax cuts that further reduce the state’s General Fund or School Aid Fund because they could derail the state’s long-term economic vitality. The evidence is clear that investments in education and infrastructure are directly connected to economic growth. Yet, when adjusted for inflation, ongoing General Fund revenues in the current year are lower than they were 50 years ago—increasing the state’s reliance on uncertain federal funds.

WHAT ABOUT REVENUES?

The final budget will be based on state revenue amounts, namely General Fund and School Aid Fund revenues, which were determined at the second Consensus Revenue Estimating Conference of the year. Revenue estimating conferences are held in January, which create the basis for the governor’s proposed budget, and May, which provide the basis for the final budget negotiated between the Legislature and the administration.

At the May revenue estimating conference, combined School Aid and General Fund revenues were slightly up as compared to January. While School Aid revenues are coming in above January estimates, General Fund revenues are not as strong as originally anticipated. When combining adjustments for both the current budget year and next year, lawmakers will have $293 million less in General Fund revenues but $340 million more in school aid fund revenues to craft the 2018 budget. While the state is not in a deficit, and we are anticipating revenues to grow year after year, lawmakers will not be able to provide the necessary investments to help Michigan’s businesses, residents and economy.

BB-Now is the time for investing graphic

NO WIGGLE ROOM FOR TAX CUTS

What is clear from the revenue estimating conference is that the state cannot afford a tax cut. Rolling back the state income tax would ultimately eliminate a funding stream worth about $10 billion and put a significant strain on the state’s ability to fund schools, roads, communities, healthcare, safety net programs and public safety. Even a small 0.1 percentage point reduction in the income tax rate—about $250 million—impacts Michigan’s budget, which includes growing costs. In return for increasingly underfunded schools and crumbling roads, Michigan taxpayers would receive a small annual benefit, which for many would be barely noticeable as it is spread over paychecks. A tax cut would benefit the wealthy most, while the rest of the state would have to deal with worsening roads, underfunded schools and fewer services. Lawmakers should avoid the tax cut gimmick.

Michigan has been down the tax-cut road before. General Fund revenues have not kept up with the rate of inflation; between budget year 2000 and anticipated 2019, inflation increased 73% while General Fund revenues are actually down about 1%.1 Tax policy changes, including Personal Property Tax reform and the recent transportation package, will further constrain General Fund revenue growth. These changes, along with the ongoing costs of business tax credits, will cost the state over $2 billion by budget year 2022. At the same time as the state has been cutting taxes, lawmakers have started looking at spending reforms that put the state’s long-term fiscal stability at risk without improving educational or other important state services. The state will be required to spend more as it has been provided with less, which simply leaves fewer and fewer quality services for Michigan residents. Further tax cuts, and greater spending necessities, would only impair the state’s ability to pay for its basic needs.

Instead, what the revenue estimating conference shows is Michigan’s need for adequate and stable revenue streams, and lawmakers should start looking at revenue enhancements:

  • Regularly review existing tax deductions, exemptions and credits and eliminate those no longer meeting their purposes;
  • Improve the fiscal note process so lawmakers have a clear understanding of the costs of future tax changes;
  • Review Michigan’s current business tax structure to ensure everyone who uses state resources pays their fair share;
  • Implement a graduated income tax; or
  • Diversify Michigan’s sales tax base to tax personal services.

WHAT SHOULD BE DONE INSTEAD?

In the light of lacking political will to raise revenue, lawmakers this budget season need to start looking at places to get the biggest impact—especially places where small state investments draw down significant federal funds. By providing a small amount of heating assistance, less than $7 million total, the state will leverage more than $300 million in federal funds, and 338,000 families in Michigan would receive an average of $76 more in food assistance each month. Additionally, expanding eligibility for child care assistance would help us meet state match requirements and ensure that we are not turning back federal dollars. Ultimately, investments above and beyond what have been included in either the House or Senate budgets are necessary to make sure Michigan becomes a state where all businesses, communities and residents succeed.2

ENDNOTES

  1. Elizabeth Pratt and David Zinn, Senate Fiscal Agency, General Fund/General Purpose Revenue Growth, State Notes, Spring 2017.
  2. For ways we can improve the state through the budget process, please see “Budget Briefs” produced by the League.

Crumbling roads, poisoned water and unsafe schools: The effects of a decade of disinvestment

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crubling roads chart 1Cities in crisis logo SNIPThe water we drink. The schools we send our kids to. The roads we drive on. These are public services that we depend on. But for too long, our public servants have been devaluing and disinvesting in them. Our infrastructure is the fabric of our society, and as we’re seeing in Flint and Detroit, it’s unraveling after a decade of budget cuts.

The Flint water crisis and the Detroit Public Schools struggles shouldn’t be unexpected, and should serve as foreshadowing of what may come if our state government doesn’t change its course. Michigan’s history of disinvestment in its infrastructure, communities, education and people, if not reversed, will cause Michigan to become the “come apart” state rather than the comeback state.

A Numbers Game: State Spending is Down, Not Up

Our budget seems to be growing. However, when you factor in inflation, our purchasing power has significantly dropped.

  • School Aid Fund (SAF) revenue for the 2017 budget year, adjusted for inflation, will still be about 6% below the level in budget year 2000.
  • General Fund (GF) revenue for the 2017 budget year, adjusted for inflation, is about 29% below the level in budget year 2000. Future budget pressures, such as road funding, will continue to strain this pot of funding.
  • There’s also room for growth; Michigan revenue collections for the 2017 budget year will be about $9.6 billion below the constitutional revenue limit.
  • Looking back over the past decade, in overall appropriations, most budget areas are doing better. However, a significant portion of our budget growth has resulted from an increase in available federal funds. In terms of state-sourced appropriations, many important areas of our budget have been negatively affected, and others have failed to keep up with inflation.

crubling roads chart_photo 2Disinvestment Leads to Deterioration

crubling roads chart 3Communities: Michigan communities receive most of their revenue from property taxes and state aid through revenue sharing. Property tax revenue has decreased as has state aid. Statutory revenue sharing for cities, villages and townships has fallen from over $600 million in budget year 2001 to less than $250 million in the current year budget. Michigan is currently funding statutory revenue sharing at about 70% below its statutorily-set level. This means there is less money available for important public services, such as local water systems and police and fire protection. Communities like Flint have rapidly deteriorating infrastructure and less money every year to fix it, which contributed in part to the city’s water crisis.

Education: To grow, Michigan’s businesses need access to a highly skilled workforce, which means that our residents need to receive a high quality education—from early childhood to postsecondary. However, annual budget decisions are making that more difficult:

  • Between budget years 2001 and 2014, per-student state aid for state colleges, universities and community colleges has dropped about 40% when adjusted for inflation; and
  • While schools have seen increases in state aid for retirement costs, specific grants and, recently, in at-risk dollars, per-pupil spending through the foundation allowance, which is the largest unrestricted source of state aid for schools, has failed to keep up with inflation. At-risk funding, which provides funding for schools for programs and support of students at risk for educational failure, has been historically underfunded. In the current budget year, $134 million more would be necessary to fully fund it. As we look at the current struggles of Detroit Public Schools students and the likely future struggles of Flint students, this funding is more necessary than ever.

People: The impact of budget decisions on people is not often easy to see, but it is the most severe. A diminishing pot of discretionary funding and recent policy changes have adversely affected our ability to provide for our most important asset, our people. A perfect example is cash assistance; in Michigan the percentage of children living in extreme poverty (a family of four making less than $12,125 per year) has grown while the number of children under 18 receiving cash assistance has shrunk. Policymakers would not be scrambling to provide education, health and nutrition services to people exposed to lead in Flint if they had adequately maintained those support systems to begin with.

crubling roads chart 4Infrastructure: Michigan’s roads and bridges have continually deteriorated over the last several years. Even with the recently-enacted roads plan, Michigan roads will continue to crumble as the plan fails to produce a significant investment in roads until budget year 2021 and, even then, fails to provide enough money to fix the problem. The so-called solution passed in 2015 doesn’t solve Michigan’s roads mess, it perpetuates it, while putting an increasing strain on our General Fund.

Recommendation: Invest in Infrastructure to Protect People

State government has to change its approach if policymakers want to protect all Michiganians and prevent the crises in Flint and Detroit schools from happening elsewhere. If Michigan wants to become a place where people want to stay, live and raise families and where businesses want to invest and grow, it must have the resources to invest in the services our residents want and need. However, we cannot do so with the existing budget. Our recent road funding debate showed that, but we still fail to adequately invest in our state, such as repairing deteriorating school buildings and replacing dangerous lead pipes, increasing the support we provide to keep our communities safe and providing vital services for our residents. Michigan must reverse this history of disinvestment and look at increasing the amount of revenue available to prevent another disaster from harming our communities and our residents.

Michigan revenues still not enough to fix ongoing problems

There’s good news, but there’s also bad news. Michigan’s January Consensus Revenue Estimating Conference (CREC)—the first step in crafting a budget for the next fiscal year—was held in Lansing this week, and it looks like Michigan will have some unexpected one-time money left over from last year. On the other hand, we can’t count on continued robust growth of this nature; in fact, the state is looking at less revenue than was projected last May for this budget year and the next. (more…)

The 2015 roads plan: Helps wealthy and hampers budget

It seems like all we’ve talked about in Michigan for the last four or more years are roads. Despite the annual construction work on seemingly every road we’re taking in the summer, our roads were getting worse. Hitting a pothole had become an understandable excuse for running late to work, a date or family dinner. And we have all heard the one about the pothole so large you could probably swim in it. (more…)

Latest road funding plan offers more problems than solutions

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After years of debate and months of gridlock, the Michigan Senate and House passed a “new” road funding plan yesterday. Unfortunately, this final proposal contains many of the same ill-advised components that have stymied bipartisanship and drawn opposition from business and advocacy groups alike. (more…)