Michigan currently has three need-based financial aid programs: the Tuition Incentive Program, which serves students from Medicaid-eligible households and is the only program in which need is based on income rather than estimated family contribution; the Michigan Tuition Grant, which is available only to students attending a private, not-for-profit institution; and the Michigan Competitive Scholarship, for which eligibility is based on both need and merit.
An ongoing issue with Michigan’s financial aid programs is to what degree the state should be using Temporary Assistance for Needy Families (TANF) dollars to pay for them rather than General Fund dollars. Because the Tuition Incentive Program serves students from families with low incomes, it makes sense to fund it partially or wholly with TANF dollars because a postsecondary credential is an effective way to help a young adult leave poverty or economic hardship. However, Michigan also uses TANF dollars to fund a large part of the other two aid programs, which serve middle-class and affluent students in addition to students from households with lower incomes.
In the 2020 budget year, for the first time in years, older students may finally get state financial aid to build their skills. Michigan has not provided financial aid to students out of high school for more than 10 years since 2009, when it discontinued the Part-Time Independent Student Grant, and 2011, when No Worker Left Behind ended .
- Governor: For budget year 2020, the governor has created the Michigan Reconnect program to provide debt-free tuition (as a last-dollar aid program) for up to two years for students over the age of 25 with a high school diploma, but not a two- or four-year degree. Programs at community colleges, technical training centers and community-based organizations would be eligible, with aid available to students beginning in the summer of 2019. Michigan Reconnect is expected to cost $50 million annually. Funding for 2019-2020 will not come from appropriations, but from carryover funds controlled by the Workforce Development Agency.
For Michigan’s three need-based financial aid programs, the Michigan Tuition Grant and Michigan Competitive Scholarship continue funding levels from the current year, while the Tuition Incentive Program gets a reduction. The governor reduces funding for the Tuition Incentive Program, which is paid for entirely with TANF dollars, from $64.3 million to $59.8 million to reflect savings from capping awards. The governor’s budget maintains the current funding levels for the Tuition Grant ($38 million) and the Competitive Scholarship ($32.4 million), but shifts $4.5 million in additional TANF money to replace General Fund dollars for these two programs, totaling $60.5 million in TANF for financial aid programs that serve affluent and middle-class students, in addition to those from households with low incomes.
The governor has proposed the Michigan Opportunity Initiative, which would provide two years of tuition-free community college or two years of tuition assistance at a public university or a four-year private not-for-profit college. This proposal is not funded in the current budget.
- Senate: The Senate rejects the governor’s cut to the Tuition Incentive Program, funding it at the current level of $64.3 million. The Senate agrees with the governor in continuing to fund the Competitive Scholarship and Tuition Grant at current levels and to shift an additional $4.5 million in TANF to these programs to replace General Fund dollars.
- House: The House rejects the governor’s cut to the Tuition Incentive Program and continues the current level of funding. The House agrees with the governor to maintain current funding levels for the Competitive Scholarship and Tuition Grant, but rejects the governor’s replacement of $4.5 million in General Fund dollars with TANF dollars.
Use of K-12 Funds for Postsecondary Education
From Budget Year 2012 through the current budget year, the governor and Legislature have pulled 15-34% of university operations funding, totaling nearly $2 billion, from the School Aid Fund (SAF) in order to free up General Fund dollars for other uses or for tax cuts. During the past two budgets, community college operations were 100% funded with SAF dollars.
- Governor: The governor’s 2020 budget discontinues the use of School Aid Fund dollars to fund state universities, replacing all SAF dollars with General Fund dollars. However, the governor’s budget continues the current year’s appropriation of $408.2 million in SAF dollars for community colleges, but the increase of $9.7 million comes from the General Fund.
- Senate: In the use of the School Aid Fund for universities, the Senate goes in the opposite direction of the governor by increasing SAF funding for universities by $449,000 over the current year, to $500.5 million. The Senate also increases SAF funding for community colleges by $3.3 million to $411.5 million, for a total of $912 million in SAF dollars diverted from K-12 to postsecondary education.
- House: The House concurs with the governor in discontinuing the use of School Aid Fund dollars for universities and replacing the current SAF funding with dollars from the General Fund. However, unlike the governor, who continued the current level of SAF going to community colleges while using General Fund dollars for additional funding, the House increases SAF funding for community colleges by $6.5 million, to $414.7 million.
In recent years, the Legislature has helped keep tuition increases down through the use of “tuition restraint.” Universities and community colleges set their own tuition rates, but because university tuition has increased dramatically over the past 15 years (due in part to decreasing state support), funding increases to each university are contingent on whether the university plans to keep the upcoming year’s tuition increase below a specific threshold. The League supports this intervention by the Legislature to temper tuition increases, but urges the Legislature to go further and replace a greater share of the funding cut from universities over the years in exchange for tuition reduction rather than just tuition restraint.
- Governor: For the current year, the tuition increase cap for universities was set at 3.8% or $490, whichever is greater. For budget year 2020, the governor reduces the cap to 3.2% or $427, whichever is greater. The governor has introduced a similar tuition restraint for community colleges to limit tuition and fee increases to 3.2% or $128, whichever is higher.
- Senate: The Senate moves in the opposite direction of the governor, increasing the tuition cap for universities to 4.4% or $587, whichever is greater. The Senate does not include the governor’s tuition restraint provision for community colleges.
- House: The House includes the governor’s tuition restraint provisions for community colleges and for universities.