World class colleges, sluggish financial aid

It is a point of pride among Michiganians that we have great public universities and private colleges.

We have two Top Ten universities that are friendly rivals, and high-quality regional universities. In addition to providing an excellent education for Michigan residents, our universities attract respected scholars and cream-of-the crop students from all over the world. We have a number of widely respected private colleges as well.

So why does Michigan lag behind most other Midwestern states and much of the country in providing financial aid that makes such great education affordable?

Per capita, Michigan spends $194 on need-based financial aid grants per undergraduate student — lower than every other Midwest state except Ohio, and is only one-quarter what Indiana and Illinois spend.

According to the Project on Student Debt, in 2011-2012, Michigan private 4-year college graduates owed an average of $32,672 in student debt, 74% more than similar graduates owed in 2003-2004. For public university graduates, it was $28,147, a 50% jump during the same period.

Having highly skilled people in our state is great for business and the economy, but when our graduates spend years paying off debt, it takes a little of the blush off the bloom. High college debt limits the upward mobility of those graduates and restricts the money they can spend in their communities. At worst, it can contribute to severe financial difficulty.

Michigan needs to make the affordability of education as high of a priority as the quality and prestige of our institutions:

 

Right Start in Michigan 2014: Maternal and Infant Well-Being in Michigan’s Legacy Cities

 

 

  

As Michigan retools for a post-industrial economy, it must address the needs of its legacy cities. These cities have borne the brunt of the state’s long sustained economic decline and dwindling resources, but they continue to be the home for a substantial share of young children. On a range of indicators of maternal and infant well-being babies born to women living in these cities are much worse off than those born in the out-county areas.

Substantial numbers of children are affected. In 2012 roughly one-quarter of all newborns in the state were born to mothers living in these 15 cities across the southern half of the state.1 On average, one of every three county births was to a legacy city resident. To improve the lives of young children, the well-being of mothers and infants in these cities must be addressed.

Despite their decline, these 15 cities still have the largest number of births among the cities in their counties.2 While Detroit had by far the largest number of births (over 10,000) among the cities, representing slightly less than half of all births in Wayne County, the cities of Lansing (Ingham) and Battle Creek (Calhoun) had the majority of births in their counties. Clearly the fate of these legacy cities not only affects the current and future well-being of many children but also the social and economic fate of the state.

Racial/Ethnic Diversity is Concentrated in Michigan’s Legacy Cities and Their Counties.

The diversity of Michigan’s newborns is concentrated in its 15 legacy cities and their counties. While these cities have only 18% of the total state population, they house one-quarter of all births and half of all infants born to mothers in communities of color. Furthermore, almost all (90%) of the state’s infants born to women of color were located in the 15 counties where Michigan’s legacy cities are situated.

In four of the 15 Michigan legacy cities, the majority of infants were born to women of color, and almost all the legacy cities experienced an increase in minority births between 2006 and 2012. Only Grand Rapids, Holland and Ann Arbor experienced slight decreases over the trend period.3 While the state’s largest city, Detroit, had the largest concentration of infants born to women of color—over 90%, Warren in Macomb County sustained the steepest jump (70%)—minority births rose from 22% to 38% of all births.  

While the percentage of infants being born to women of color increased in the legacy cities, the overall number of births decreased with the largest declines occurring in the cities of Muskegon and Jackson where births dropped by roughly one-third between 2006 and 2012. Warren, with the largest increase in diversity among its infants, experienced the smallest drop in its births—only 4%.

Women Giving Birth in the Legacy Cities Are More Likely to be Uninsured and Low-Income.

The trends in the numbers of births, the racial/ethnic diversity and economic status of mothers of newborns all shape the well-being of the next generation. Women residing in the legacy cities were much less likely to have health insurance and incomes adequate for basic needs. In 2012 just over three of every five women who had a baby while living in one of the legacy cities qualified for Medicaid compared with two of every five in the out-county areas in the 15 counties. While income eligibility for Medicaid extends to almost double the poverty level (185%) for uninsured pregnant women, coverage for the mother at this income level ended six weeks after delivery and for the baby after the first year of life.4

Access to health care for women will significantly improve under the Affordable Care Act that requires comprehensive services, including preventive services at no cost and maternity benefits that have not been generally included in private coverage. The Healthy Michigan Plan will provide comprehensive coverage, including dental and vision, with minimal copays for those with income up to 133% of the federal poverty level.5 For women with income above that level, coverage is available through the market place with sliding scale premiums and cost-sharing subsidies.

Overview of Maternal/Infant Well-Being in Michigan’s Legacy Cities.

Michigan’s legacy cities have many characteristics in common but the ranges on the following eight key measures for maternal and infant risk (see table above) also reflect substantial differences among the cities. For example, Ann Arbor had lower risk on most measures than those in the out-county. In contrast, the cities of Pontiac, Flint and Detroit have some of the highest levels of risk for mothers and infants among the cities and were worse on every measure than their out-county areas.

Overall, the legacy cities had worse outcomes than their out-county areas on the eight key measures of maternal and infant well-being tracked in this report. Three indicators reflected dramatically worse conditions for mothers.6 Compared with infants born to women from out-county areas, those in the legacy cities were:

  • more than twice as likely to be born to women without a high school diploma or GED,
  • roughly twice as likely to be born to a teenager and
  • nearly twice as likely to be born to a single parent.

In contrast, a legacy city infant had only a 20% higher risk than an out-county peer of being born too soon. These inequities in birth circumstances get amplified as children spend their growing up years in communities with sparse resources and intensify over time as fewer state-supported early prevention and intervention programs are available.

Trends in maternal and infant well-being moved in the same direction for the legacy cities and their out-county areas, only the changes are more dramatic in the cities on four of the five measures.7 Only the largest change in the out-county areas—the 25% increase in births to single women—reflected a more substantial change than the cities.

Overall for both groups only two of the five risks—teen births and repeat teen births—have declined while percentages of unhealthy births and those to unmarried women have risen. The most disturbing finding was the dramatic (24%) increase in the percentage of babies born too soon among women in the legacy cities although the 15% average increase in out-county preterm births should also be a cause for concern. The next sections review each indicator in more detail across the 15 legacy cities.

1. Teen births declined in all but one legacy city.

The percentage of teen births averaged 13% of live births across the legacy cities, and the cities with the largest percentages –Saginaw, Detroit and Flint –reflected only slight decreases over the trend period.8 While it is troubling to see the minimal decline in teen childbearing in the cities with the largest percentages of births to this age group, some cities, such as Jackson, Bay City and Lansing experienced substantial progress on this measure between 2006 and 2012. Furthermore, among the legacy cities only Warren experienced an increase in its share of births to teens although it still had the second lowest percentage (9%). Ann Arbor had by far the smallest percentage of births to teenagers—only 2% compared with 9% in Warren (the second smallest percentage).

Large percentages of births to teenagers in a community strain resources as these young women and girls are also more likely to be single and lack a high school diploma or GED. Most will not be able to compete for a job that has a wage that will allow them to support themselves and a child. Low-income women struggle to afford child care. The average cost of infant care from a licensed provider in Michigan, ranging from $529 a month in a family home to $756 in a day care center, would consume nearly half or more of the gross income from a full-time minimum wage job ($7.40 an hour or $15,392 annual). Michigan’s child care subsidy program with its per-hour payments, administrative intricacies and low rates fails to assist most low-income parents.

2. In roughly half the legacy cities one of every four teen births was to a teen already a parent.

While having a baby as a teenager can pose a major hurdle to finishing an education and getting post-secondary training, a second or third baby further intensifies parental responsibilities that can interfere with school or work—critical activities for a successful transition to adulthood. The higher costs of child care for additional children may also present a significant barrier to securing work or going to school.

In seven of Michigan’s legacy cities roughly one of every four teen births was to a teen who was already a parent. The seven cities with the highest percentages of births to teens who were already parents were within a few percentage points. The city of Jackson had the worst rate with 26% of teens giving birth being parents while Bay City and Warren had the lowest percentages, 14% and 15% respectively—still substantially higher than the state average (9%).

Bay City had the largest decrease on this measure— 37% decline over the trend period— while Jackson and Battle Creek saw their rates bump up by 12%.9

3. Non-marital births rose in all but one legacy city

While the condemnation of child-bearing among unmarried women has eased compared with previous generations, children in mother-only families in Michigan face substantial challenges to their well-being. In today’s economy most families require more than one wage earner to meet the cost of basic needs such as housing, transportation and food. Numerous studies have demonstrated that an income of double the poverty level is required (roughly $36,000 for a family of three and $44,000 for a family of four). 10

Fathers who do not acknowledge paternity may not be involved in supporting their offspring financially. Lack of support from absent parents weakens economic security for single mothers and their children since women, especially mothers, earn less than their male counterparts in similar jobs. Furthermore single parents often struggle to combine job and parental responsibilities, particularly in low-wage employment.

Non-marital births are concentrated among younger women and those with a high school degree or less, who are more likely to work in these jobs that rarely offer any flexibility or vacation or sick time. Roughly 60% of Michigan women with a high school diploma/GED who gave birth in 2013 were single compared with only 10% of those with a bachelor’s degree. Half of women with less than a high school education lose their jobs or quit after having a baby.11

Finding or affording child care can be a challenge to sustained employment. The average cost of infant care, which requires a lower ratio per provider, can easily exceed over half the net income from a minimum wage job. Michigan’s child care subsidy payment falls well below the average cost and requires extensive online documentation by the parent and provider.

A growing number of young children live in single parent households, not only in the state but in the legacy cities. Births to single women increased between 2006 and 2012 in all legacy cities except Ann Arbor, with the largest increase (41% higher) occurring in the city of Warren. In the four cities with the highest rates, three or more of every four births were to unmarried women.

 4. On average, roughly one of every five babies in the legacy cities was to a woman with no high school diploma or GED.

The four cities with the largest percentages of births to unmarried women also had the largest percentages of births to women who had no high school diploma or GED: one of every three newborns in Pontiac and Detroit was born to a mother without a secondary education completion credential. Ann Arbor had the lowest rate (3%) by far: The second lowest (15%) in Warren was five times higher.

 Without strong programs to help these mothers continue or complete their education and gain some postsecondary training, they will be hard-pressed to earn enough to support themselves and their children. Their only options will be low-wage jobs with little or no flexibility, vacation or sick time so their ability to engage in the health and education needs of their children will be compromised.

 

 

 5. One of every four babies was born to women who smoked during pregnancy.

Michigan has one of the highest smoking rates in the nation (23% vs. 19% US) yet spends just over $ 1 million on prevention, and well over half of the funding for its prevention programs comes from federal funds. Even more disheartening, none of the $279 million from the tobacco settlement is allocated to staunch tobacco use and its deadly consequences on children and families. The Centers for Disease Control and Prevention recommends investing at least 15% of tobacco settlement funds in a well-sustained multi-media campaign, an approach that has demonstrated success.

Smoking endangers not only the health of the prospective mother by elevating her risk for cancer, heart disease and other health problems, but it also heightens the likelihood her baby may be born too soon, too small or have birth defects. Tobacco’s harmful chemicals such as tar, nicotine and carbon monoxide, reduce oxygen supply to the baby, slowing growth and development.

Secondhand smoke also harms mothers and children. It can precipitate respiratory ailments in infants and young children who live in homes where adults smoke. While roughly 22,000 Michigan women who gave birth in 2013 reported smoking during their pregnancy, in more than half these households someone else smoked as well. An additional 8,000 stated that although they did not smoke during the pregnancy, another adult in the house did. With more restrictions on smoking in public and work spaces secondhand smoke exposure has been drastically reduced for pregnant women and young children.

Bay City had the largest percentage of births to women who reported smoking during their pregnancies—roughly two of every five newborns were affected—while Ann Arbor had the smallest percentage (8%). Port Huron, Saginaw and Jackson also had relatively large percentages of births to women who smoked during pregnancy—with almost two of every five newborns affected. 

6. One of every 20 Michigan mothers in legacy cities received late or no prenatal care.

Pregnant women who start prenatal care in the last three months of their pregnancy or not at all heighten their risk of having babies with health problems and suffering from complications themselves. Women who do not receive prenatal care are more likely to give birth to a low-birthweight baby. Unfortunately the women at highest risk of unhealthy births are often the least likely to have access to timely prenatal care. Multiple barriers such as lack of insurance, unintended pregnancy, limited access to transportation, variable work schedules and traditional clinic hours can stand in the way.

The expansion of eligibility under the Healthy Michigan Plan to all state residents with incomes below 133% of the poverty level will provide low-income women better access to health services before pregnancy to address chronic conditions that can compromise a healthy birth. Similarly, residents with income above 133% of poverty level can access private coverage through the Health Insurance Marketplace with sliding scale federal subsidies and cost-sharing assistance.

Among the legacy cities Detroit has the highest rate of late or no prenatal care with roughly 1 of every 11 mothers of newborns affected. In Bay City the percentage of mothers with late or no prenatal care was one-third (3%) of the Detroit rate.  

7. One of every 10 babies in Michigan’s legacy cities was born too small.

Babies who weigh less than 5 pounds 8 ounces at birth encounter heightened risk for developmental delay, chronic disease and even death. It is the leading cause of infant mortality among African American infants, who are roughly 2.5 times more likely to die before their first birthday compared with white infants. While chronic maternal health issues such as infections, diabetes, heart defects or kidney disease can result in an underweight infant, stress, poor nutrition and lack of social support during the pregnancy have also been identified as critical factors.

Although Ann Arbor had one of the smallest percentages of babies weighing less than 5.5 pounds, the city rate sustained the largest increase (27%) in its rate over the trend period. All but three legacy cities saw larger percentages of babies born too small. Among these three the city of Kalamazoo had the most substantial decline (20%), the Detroit rate improved only slightly (4%) and the Saginaw rate remained the same. 

8. Roughly one of every eight babies in Michigan’s legacy cities was born too soon.

Babies born before 37 weeks in the womb are considered preterm and experience higher risk of intellectual disabilities, cerebral palsy, hearing loss and problems with breathing, vision and digestion than babies born at term. Prevention of premature delivery has become a major focus in efforts to reduce infant mortality. Babies born too soon are often too small as well.

All but two of Michigan’s legacy cities have preterm birth rates in the double digits, and most (11) saw sharply escalating rates over the trend period. In fact, in the two cities—Flint at 19% and Saginaw at 18%—with the highest rates, rates almost doubled between 2006 and 2012. Four of the five cities with the lowest rates experienced the most substantial declines, with Lansing having by far the largest drop (20%). The exception was Ann Arbor where the rate was still the lowest but had jumped up over the trend period.

Summary

As Michigan looks to strengthen its economy and improve education outcomes among the next generation, it must address the challenge of ensuring more infants have the right start to early childhood in its legacy cities. These cities house a significant number of young children, particularly some of the most economically disadvantaged and those in communities of color. Roughly half of the state’s children of color live within these cities.

The number of births in these legacy cities ranges from slightly less than 500 in Bay City and Port Huron to over 10,000 in Detroit, which represents 40% of all births in the legacy cities. On average, roughly one of every three births in the 15 counties is to a mother in the legacy city.

All of the legacy cities except Ann Arbor reflected worse outcomes across most or all indicators for mothers and their babies than for their counterparts in the rest of the county. Ann Arbor with its large public university and highly educated population is well-suited to compete in the emerging post-industrial economy. Overall Ann Arbor was an anomaly among the legacy cities in that on most (6) measures of maternal/infant well-being, the city was better than the rest of Washtenaw County: It matched the out-county rate only for late or no prenatal care and low-birthweight babies. The relative affluence of the city contrasts sharply with the average legacy city: Only 18 percent of the city’s women giving birth were uninsured and low-income, substantially below the legacy city average (63%).

Unfortunately several cities consistently fell on the other end of the range. Flint, Saginaw, Detroit and Pontiac were often those with the worst rates. For example, although Flint had the worst outcomes for babies born too soon or too small, Pontiac and Detroit had rates within 1 or 2 percentage points on both those measures. The cities with majority of births to women of color generally had the worst outcomes. Only the incidence of smoking during pregnancy deviated from this pattern with Bay City having by far the largest percentage of births affected, which was 6 percentage points above the next largest (43% vs. 37%).

Only two of the five indicators where a trend could be calculated showed improvement. The most consistent progress across the legacy cities was on the declining percentage of births to teens. Only Warren in Macomb County experienced a worsening trend. Similarly, only six cities sustained increased births to teens who were already parents. On the other hand, unhealthy births— babies born too soon or too small— increased over the trend period in 11 of the 15 legacy cities.12 These children are at higher risk for developmental delays, chronic health problems and even death as infants than children born at term with All cities except Ann Arbor sustained an increase in the percentage of births to unmarried women between 2006 and 2012.

Recommendations

Provide the funding to fully implement the strategies in the state’s Infant Mortality Reduction Plan. All of the indicators examined in this report reflect a risk to mother and infant, and several are addressed in the state’s Infant Mortality Reduction Plan 2012 that outlined eight strategies to reduce infant mortality in Michigan.13 The strategies include promoting safe sleep practices for infants, expanding home visiting to high-risk women and reducing unintended pregnancies. Unfortunately, in the last two budgets policy makers have allocated only a tenth of the funding required to fully implement the plan.

Coordinate efforts across state departments to address the social/economic determinants of health, especially in the target cities – Pontiac, Saginaw, Flint and Detroit. This recommendation from the Infant Mortality Reduction Plan focuses on the legacy cities that have suffered the highest risk to maternal and infant health in recent years. While several initiatives such as Project LAUNCH (Linking Actions for Unmet Needs in Children’s Health) in Saginaw, Sew up the Safety Net in Detroit, REACH (Racial and Ethnic Approaches to Community Health) in Flint and FIMR (Fetal Infant Mortality Review) teams in Pontiac address health issues, resources from other departments, including Human Services and Education, have key roles to play in improving maternal and infant well-being. Despite increasing focus on the social/economic factors that imperil maternal and infant well-being, policies, such as increasing the Earned Income Tax Credit and the Cash Assistance grant, to reduce poverty have not been widely supported by policy makers.

Strengthen work supports and education/employment opportunities. Many women struggle to find affordable child care, and the state’s child care subsidy rate is so far below the current market rate that it provides limited access to licensed care. Most center-based care does not accept infants and fails to meet the needs of low-income women working erratic schedules during evening and week-end hours. Increasing opportunities for low-income women to complete an education or training program so they can secure better-paying jobs with more flexibility would improve their lives and those of their children. Strengthening supports to family, friend and neighbor care would be a key strategy.

Invest the recommended amount in a smoking prevention campaign. The health of Michigan’s children and their parents is compromised by the prevalence of smoking among pregnant women and the other adults in the households of young children. Tobacco is the leading cause of preventable illness and death in the U.S.: It has been linked to several different cancers as well as chronic lung diseases such as emphysema and bronchitis, and heart disease. Secondhand smoke triggers numerous health problems in infants and children, including more frequent and severe asthma attacks, respiratory and ear infections, and sudden infant death syndrome (SIDS).

Support early interventions to improve maternal and infant health. During the first three years of life roughly 85% of the brain architecture is developed, which provides the foundation for lifelong learning.14 The quality of the interaction between the child and his/her caregivers affects the emotional and social well-being as well as cognitive development. Early interventions such as home visiting have demonstrated an impact on improving maternal and infant well-being and later outcomes such as high school graduation and employment. Michigan has been able to expand its home visiting programs dramatically through its successful applications for federal funds totaling $34 million authorized in the Affordable Care Act. State funding has been erratic for these efforts.

Legacy City Profiles:

Michigan | Ann Arbor | Battle Creek | Bay City | Detroit | Flint | Grand Rapids | Holland | Jackson | Kalamazoo | Lansing | Muskegon | Pontiac | Port Huron | Saginaw | Warren

Endnotes

  1. Only counties with total population over 100,000 and a central city were included in this analysis.
  2. Holland Township, which actually had the largest number of births in Ottawa County and a larger share of minority births than the city (44% vs. 38%), was not included as it is not a city.
  3. In Washtenaw County, Ypsilanti Township rather than Ann Arbor actually had a larger percentage of births to women of color (45%) and to low-income uninsured women (43%).
  4. Numerous cost of living assessments have determined that income below double the poverty level(200%) is insufficient to meet the average basic needs in the modern American economy. (Poverty level income is 100%.)
  5. Those with income between 100% and 133% of poverty must pay 2% of their income for their coverage.
  6. The legacy city average is calculated on the average for each city rather than the total births to counter the disproportionate impact from the large number of births in Detroit.
  7. Only five of the eight measures could be assessed for trends between 2006 and 2012 due to changes in the birth record in 2007 for data on education level of the mother, receipt of prenatal care and smoking during pregnancy. Each reported year in the trend analysis is based on a three-year average to stabilize the estimate.
  8. Please note that the percentage of teen births can be affected by increases or decreases in the number of births to women over the age of 19 as well.
  9. Ann Arbor did not have enough incidences to calculate a rate for this indicator in 2012.
  10. Full-time income from the current minimum wage of $7.40 falls more than $3,000 short of the poverty threshold for a family of three. By the time Michigan’s recent law to increase the minimum wage to $9.25 an hour in 2018 is implemented, its value will still remain below the poverty line, which rises with inflation.
  11. Liz Ben-Ishai. Access to Paid Leave: An Overlooked Aspect of Social and Economic Inequality. Center for Law and Social Policy. April 14, 2014.
  12. Only five of the eight measures could be assessed for trends due to changes in the birth record for data on education level of the mother, receipt of prenatal care and smoking during pregnancy. Each reported year in the trend analysis is based on a three-year average to stabilize the estimate.
  13. The plan is available on-line at http://www.michigan.gov/documents/mdch/MichiganIMReductionPlan_393783_7.pdf.
  14. Jack Shankoff. Center on the Developing Child. Harvard University.

Bad for MI: higher ed less affordable

Those of us moving our college students home for the summer this week probably are not surprised by a new national report showing that Michigan has made deep cuts in funding for colleges and universities, leading to steep increases in tuition.

Compared with other states, I’m afraid Michigan doesn’t look so good. Policymakers in Michigan cut per-student state spending more than 37 other states from 2008 to 2014—a 28% cut in state support. Michigan’s average tuition increase of over $2,000 (a 21% increase) during that time is higher than 34 other states. (more…)

Senate and House Appropriations Committees Approve Higher Education, Community Colleges FY 2015 Budgets

Full report in PDF

Because Michigan does not have a state agency that exercises financing or policy authority over its universities and community colleges, the Legislature makes direct appropriations to those institutions through the Higher Education and Community Colleges budgets. Michigan’s three financial aid grant programs are funded through the Higher Education budget even though community college students may also apply for and receive those grants.

Community Colleges

Governor’s Budget:

  • The governor’s budget appropriates a 3% ($8.9 million) increase in total funding for community college operations, which is distributed among the 28 Michigan community colleges according to the following metrics: proportional increase from FY 2013-14 funding (50%), weighted completions (17.5%), student contact hours (10%), administrative costs (7.5%) and local strategic value (15%). (Colleges receive the local strategic value portion if they meet four out of five listed best practices in each of the following areas: a) economic development and business/industry partnerships, b) educational partnerships, and c) community services.)
  • As in previous recent years, the majority of overall funding for community colleges comes from the School Aid Fund ($197.6 million, an amount equal to the current School Aid Fund appropriation) and the rest comes from the General Fund ($173.9 million, a 26% increase over the current General Fund appropriation).
  • For the first time, the governor’s budget includes a tuition restraint prerequisite (similar to the one for universities) that conditions receipt of metric funding on limiting FY 2014-15 tuition and fee increases for resident students to 3.2%.

Senate Appropriations Committee:

  • Concurs with the governor on the increase in operational and performance funding.
  • Appropriates more money from the General Fund ($323.9 million) than the governor, and less from the School Aid Fund ($47.6 million).
  • Does not include the governor’s recommended tuition restraint provision.

House Appropriations Committee:

  • Concurs with the governor on the increase in operational and performance funding.
  • Concurs with the governor on the amount of funding from the General Fund ($173.9 million) and from the School Aid Fund ($197.6 million).
  • Does not include the governor’s tuition restraint provision.
  • Adds a $100 placeholder to develop a program by which students could obtain a GED at a community college free of charge if committing to enroll in an academic or vocational program. The state would reimburse community colleges for eligible costs associated with providing the GED programs or testing. The League supports this addition to the budget and its boilerplate language, as such a program would help more low-skilled adults enter community college occupational training.

Universities

Governor’s Budget:

  • The governor’s budget increases the total appropriation for university operations by $76.9 million (6.1%) over the current fiscal year. As in previous recent years, this increase is in the form of performance funding, though the formula has been modified so that half of the increase goes proportionally to universities to make up for funding lost in 2012.
  • The governor includes a new performance metric that rewards institutions based on the number of students receiving Pell Grants, a positive change that attempts to encourage universities to become more accessible to low-income students.
  • The governor continues the practice begun two years ago of requiring universities to limit tuition increases to 3.2% or less in order to receive any performance funding. This is the first budget that applies the same requirement to community colleges as well, even though community college tuition increases have been much smaller than those of universities over the past decade. This “tuition restraint” prerequisite for receiving performance funding helps to keep postsecondary education affordable for low-income students.

Senate Appropriations Committee:

  • Concurs with the governor in increasing the total appropria­tion for university operations by $76.9 million (6.1%) over the current fiscal year.
  • Concurs with the governor’s performance funding and tuition restraint changes.

House Appropriations Committee:

  • Increases university operations funding by $70.4 million (5.6%) over the current fiscal year.
  • Concurs with the governor’s performance funding and tuition restraint changes.

Financial Aid

Governor’s Budget:

  • The governor’s budget increases the Tuition Incentive Program by $1.5 million over the current fiscal year, for a total of $48.5 million. The increase is entirely from the General Fund, but $43.8 million (90%) of total funding for TIP is from the state’s TANF funds. The League supports the increase.
  • Total funding for all financial aid grant programs in the governor’s budget is $103.1 million, some of which comes from the federal Temporary Assistance for Needy Families allocation.
  • The governor does not increase the Michigan Tuition Grant program, but adds a requirement that independent colleges submit data, including student performance data (Tuition Grant students enrolled in remedial education and/or completing degrees, Pell Grant students completing degrees), to the P-20 system in order to participate in the Tuition Grant program.

House Appropriations Committee:

  • Increases the Tuition Incentive Program by $1.5 million over current year, and the Michigan Tuition Grant by $1.8 million over the current year.
  • Includes the governor’s P-20 data reporting requirement for participation in the Tuition Grant program.

Senate Appropriations Committee:

  •  Increases the Tuition Incentive Program by $1.5 million over current year.
  • Does not increase the Michigan Tuition Grant or include the governor’s P-20 requirement for participation in the Tuition Grant program.

Tax cuts won’t grow the economy

A new report by the League demonstrates that across-the-board cuts in the state’s personal income tax would not boost Michigan’s economy, but could affect long-term prosperity by locking in cuts in funding for public schools, community colleges, universities, health care and public safety—the very services that fuel economic growth.

Despite the claims of several legislative leaders advocating for a tax cut, there is no evidence that income tax cuts generate good jobs or economic growth. In fact, a study of 65 years of data by the Congressional Research Service found that top income tax rates have had no discernible impact on economic growth, and states that cut taxes the most during the 1990s and 2000s saw their economies fall behind in job creation, as well as production and income growth. (more…)

Moving in the wrong direction

The latest U.S. Census Bureau data confirms what we all suspected. While there have been improvements in the economy, it has not been enough to float all boats, and state poverty rates, especially for children, remain 25% to 30% above pre-recession levels.

Certainly there have been cuts in state and local services in Michigan that affected low-income families with children, thwarting their opportunities to share in the American dream by earning enough through hard work to move into the middle class. Deep cuts in basic income assistance have forced more children into extreme poverty, exposing them to homelessness and hunger, and creating barriers to academic success. A failure to invest in child care for low-income families has resulted in fewer parents having the care they need to secure and retain jobs that support their children. (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.

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.

 

 

Wrong priorities in higher ed appropriations

While a national report was being released Tuesday making the case for more investment in higher education, a House subcommittee in Michigan approved a controversial spending plan that could lead to even more disinvestment in our universities.

The House Appropriations Subcommittee on Higher Education has been deliberating a university funding bill for several weeks. Tuesday morning, however, a last-minute substitute (made available to some members only a couple hours before) contained a new anti-collective bargaining stipulation and several “social issue” stipulations that have nothing to do with the quality or affordability of higher education. These stipulations could lead to reduced funding for some universities. (more…)

Improving college performance funding

The budget hearings are under way for Michigan’s higher education and community colleges.

For this fiscal year, a portion of the appropriations for postsecondary institutions is in the form of performance funding and the proposed budgets for the coming year do the same.

With 36.5% of community college students and 13% of university students in Michigan enrolled in at least one developmental education course, it’s important that the performance funding system rewards institutions that facilitate the success of these students. A new report, Leave No College Student Behind: Rewarding Institutions That Help At-Risk Students, spells out why this is critical. (more…)

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