In what is being lauded as a refreshingly bipartisan approach to the state budget, Michigan lawmakers and Gov. Gretchen Whitmer negotiated a 2021 budget that protects basic state-funded services including health, human services and education, and provides several expanded investments in maternal and child health, child care, nutrition, and access to adult and postsecondary education.
Passage of the 2021 budget was made much easier because of unexpectedly strong state revenues—largely the result of the influx of federal COVID-19 relief funds to keep the state’s economy moving. The $3 billion deficit that was originally predicted for 2021 because of declining state revenues resulting from COVID-19 closures, high unemployment and lower sales was reduced to less than $1 billion when revenues were reassessed in August, and unexpended federal Coronavirus Relief Fund (CRF) dollars were used to fill remaining funding gaps by temporarily replacing state funds. The 2021 budget includes budget language that requires that any unexpended CRF dollars—which must be spent by December 30, 2020—will be reallocated to the unemployment compensation fund to support 2020 costs.
The 2021 budget was negotiated privately between legislative leaders, the State Budget Office and the governor’s office, making it one of the least transparent budgets passed in recent years. With the October 1 start of the 2021 budget year looming, lawmakers bypassed the traditional process of debating the budget in appropriations subcommittees, along with public input.
The final 2021 state budget is $62.8 billion, including federal, state and local funds. The total state General Fund budget—funds over which the Legislature has the most control—is at $10.6 billion. Because of the availability of federal CRF dollars in the first quarter of the 2021 budget year, the final 2021 budget is higher than the budget originally proposed by the governor prior to the COVID-19 pandemic ($62.8 billion vs. $60.7 billion), but state General Funds are lower ($10.6 billion vs $11.0 billion).
Overall, state General Funds have remained relatively flat over the last 20 years, and adjusted for inflation, the state’s 2019 General Fund was estimated to be nearly 30% below 2000 levels, with the School Aid Fund declining 2.2%.1 In fact, had the state’s General Fund continued to grow at the rate of inflation since 2000, Michigan would have an additional $5.5 billion to contribute to the core functions of government including public safety, public health, education and state infrastructure.
With the declining value of state revenues, Michigan has increasingly relied on federal funds, particularly during economic recessions. Without any additional federal coronavirus relief on the immediate horizon, and the likelihood that the public health emergency will continue for some time, Michigan’s failure to develop a fair and adequate tax system that is based on the ability to pay will continue to jeopardize the people of Michigan and the state’s economic future.
HIGHLIGHTS OF THE 2021 STATE BUDGET
Healthcare and Coverage
- Medicaid funding is increased to meet demand. The Legislature included nearly $100 million in state dollars to accommodate the growing number of Michiganders now covered by the public insurance program as a result of the COVID-19 pandemic.
- The Healthy Michigan Plan sees growth and the threat of work requirements fades. As with traditional Medicaid, the state’s Medicaid expansion program has seen a growing number of enrollees in the wake of COVID-19. There are now approximately 800,794 Michiganders enrolled in the Healthy Michigan Plan. In response, the Legislature included $122 million in state funding for Healthy Michigan. The Legislature also approved a reduction of $20.7 million ($15.2 million in state dollars) from the administration of Healthy Michigan. This funding would have been used to support the implementation of work requirements, but a federal judge ruled that Medicaid work requirements are unlawful, which halted their implementation.
- Budget includes support for improved healthcare access. The governor recommended expanding the MIDocs medical residency program and boosting payment rates for Medicaid
outpatient hospital care. Both are included in the final budget. The Legislature included $5.4 million ($1.4 million in state dollars) to support the latest MIDocs cohort over the next five years. Medicaid outpatient hospital reimbursements are increased to a 21.37% rate through a gross increase of $352.6 million.
- Property owners will have access to a new mechanism to finance lead hazard remediation. The Legislature included in the 2021 budget $2.0 million of the $10.0 million proposed by the governor to establish a Lead Poisoning Prevention Fund. The Fund will reduce risk to private lenders as an incentive for them to extend low-cost loans to landlords and homeowners for projects that reduce lead exposure.
- Funding for assistance to Flint residents affected by the drinking water emergency continues. The 2021 budget converts $4.6 million from one-time to ongoing funding. This money may be used to provide necessary support to people exposed to lead, such as nutrition programs, lead poisoning treatment, abatement, and transportation to medical appointments.
Maternal and Child Health
- Michigan moms see a hearty investment. The Legislature approved $23.5 million ($12.6 million in state funds) for the Healthy Moms, Healthy Babies initiative that was proposed by the Governor in February. Funds will be used to provide continuous healthcare coverage for 12 months postpartum for women enrolled in Medicaid, sup-port greater access to behavioral healthcare, and increase home visiting opportunities for eligible families.
- Michigan continues to respond to opioid misuse. The final budget includes $23.4 million ($2.5 million in state funds) to expand behavioral health homes, including opioid health homes. Funding will support an estimated 9,245 prospective enrollees.
- State funding supports additional psychiatric care staff. The Governor and Legislature included $5 million in state dollars and nearly 60 new full-time positions to increase the direct care workforce at four of the state’s psychiatric hospitals.
Food Assistance/Access to Healthy Foods
- The number of families receiving food assistance is expected to remain level. Although food assistance caseloads are expected to remain level, nearly $11 million in state funds is provided to address federal penalties for higher than national average error rates in food assistance payments, including underpayments and overpayments.
- The state policy that penalized former drug felons by refusing them access to food assistance was eliminated. Michigan’s long-standing lifetime ban on food assistance for individuals with more than one drug felony occurring after August 1996 was eliminated, a move that will improve food security and racial equity, while reducing recidivism.
Income Assistance/Basic Needs
- More families are turning to public income assistance: With the COVID-19 pandemic and related unemployment, Family Independence Program (FIP) cases are expected to remain high, at an increased cost of $39.4 million in 2021 (including $35.2 million in state General Fund). Prior to the onset of the global pandemic, the number of children receiving FIP had fallen dramatically, dropping 81% between 2009 and the first quarter of the 2020 budget year, from 150,943 to only 28,701.
- Children receiving income assistance through FIP continue to live in deep poverty. The budget once again includes no increase in the FIP grants that are currently the primary source of support for approximately 37,000 children in Michigan. Since the beginning of Michigan’s “welfare reform” in 1993, the FIP monthly benefit has been increased in a meaningful way once in 2006. As a result, both income eligibility and benefit levels have eroded greatly with inflation, and monthly FIP grants now fall more than 70% below the federal poverty line.
- Michigan continues its harsh policy on lifetime limits for public assistance. Federal law establishes a lifetime limit of 60 months for Temporary Assistance for Needy Families (TANF) assistance for recipients, but allows states the option of a hardship exception for up to 20% of the TANF caseload. In addition, states are allowed to use their own funds to exceed federal time limits. In 2007, Michigan reduced its lifetime limit on FIP assistance to 48 months, with some exceptions. In 2011, Michigan ended the policy of allowing any exceptions to the federal 60-month lifetime limit.
- A small expansion of funding is provided for services for the homeless. An increase of nearly $650,000 in state funds was provided to expand emergency shelter and other services for homeless Michiganders. Prior to the COVID-19 emergency, Michigan had budgeted $22.6 million for homeless programs, including $12.9 million in state funding.
- Spending on out-of-home care of children is increasing. Funding for child welfare programs is increased by $27.8 million in the 2021 budget, driven primarily by increases in out-of-home placements and other related costs. Foster care cases are projected to increase from 6,124 cases to 8,152 at a cost of $9.1 million, while the state’s Child Care Fund is increased by a total of $19.8 million. Child welfare costs have increased in Michigan, partly in response to a lawsuit against the state for its failure to assure that children who have been abused or neglected are safe and find permanent homes.
- Funding for child advocacy centers is increased. An increase of nearly $1 million in state funds is provided in the 2021 budget for child advocacy centers, which received $1.4 million in the 2020 budget year.
- Families and children in the child welfare system will get more help negotiating the legal system. The 2021 budget includes $500,000 for court-appointed special advocates who assist children who have been abused or neglected navigate the court system. In addition, $4.3 million is available in federal grant funding for a new program to provide children and parents with legal representation in child protection hearings.
- A small increase in funding was approved for services to prevent foster care and residential care placements of children. The 2021 budget includes $716,300 to fund five community liaisons to help families find services that will prevent their children from entering foster care or a residential placement.
- Funding was provided to begin improving data on children in the child welfare system. The 2021 budget includes $4.4 million to begin the process of replacing the current child welfare information system, which has performed poorly and hampered efforts to end court supervision of Michigan’s child welfare system under a series of settlement agreements following a lawsuit by the national organization Children’s Rights.
Child Care and Early Education
- More families working in low-wage jobs will be able to get help with child care costs. The 2021 budget includes the first significant change in the income eligibility threshold for child care subsidies in many years, with an increase from 130% of poverty to 150% of poverty, effective January 1, 2021. Michigan currently has one of the lowest income thresholds for child care assistance in the country, and the governor’s pre-pandemic budget for 2021 had included this increase. The cost of this expansion from January through September of 2021 is $27.6 million, with an estimated full-year cost of $36.8 million.
- Child care businesses will continue to struggle financially and providers will be expected to survive on very low wages. The 2021 budget does not address low wages for child care teachers and administrators. High quality child care is unaffordable for many families, often rivaling the cost of a mortgage or rent payments. Yet, because of the staff intensity needed to provide high-quality early education and care for infants, toddlers and young children, child care providers often find it difficult to make ends meet, and wages are low. The COVID-19 public health crisis threw the already fragile child care business into a tailspin, as many child care businesses closed and are still struggling to reopen. For businesses that remained open, enrollment is often low because parents are uncomfortable taking the risk of exposing their children and themselves to an unknown and potentially deadly virus. In response, Michigan took several steps to stabilize child care, using newly available federal Child Care Development Block Grant funds, as well as Coronavirus Relief Funds (CRF) to provide emergency grants and rate relief for parents. Approximately $115 million of the CRF funds initially provided by the Legislature for rate relief for parents has not been spent, and the 2021 budget includes a second round of child care rate reductions for parents that are administered by child care providers as tuition credits, as well as provider grants, a one-time increase of up to 60 absence hours for all children receiving the child care subsidy, and reimbursements for care provided to school-age children if they are enrolled in a virtual education program where virtual learning is the only option. Coronavirus Relief Funds must be spent on services provided before the end of the calendar year.
- Funding is provided for federally-required background checks. As part of the reauthorization of the federal Child Care Development Block Grant, child care providers are required to do background checks and fingerprinting of adults who will have contact with children in their care. In recognition of the cost that would be incurred by child care providers, the governor proposed $1.3 million to continue to cover the costs of background checks, and that funding is in the final 2021 budget, covering up to 400 background checks per week
- A new pilot project will test a business model for supporting child care for employees. The budget for the Department of Labor and Economic Opportunity includes $1 million for pilot projects to test a “tri-share” model for child care that includes contributions from businesses, the state and families to cover the cost of care. Pilot projects will be funded in Muskegon County, a rural region of the state and an urban/suburban region.
Great Start Readiness Preschool Program (GSRP)
- No funding increase for the Great Start Readiness Preschool program (GSRP). Funding for the GSRP will remain flat in 2021 at approximately $250 million. In her original 2021 budget, Gov. Whitmer recommended the first per-child payment increase for GSRP since 2014, raising the payment from $7,250 per child to $8,336 at a cost of $35.5 million. In addition, the governor recommended a $42 million increase in funding for the GSRP with funds targeted to districts that are members of a community engagement committee in conjunction with the Department of Treasury (currently only the Benton Harbor Public Schools), or where 75% or more of the students are not proficient readers in third grade, and more than 75% of public school systems would be eligible for the funds, which would serve more than 5,000 additional students. These expansions were not included in the final 2021 budget.
- In response to the COVID-19 crisis, a number of changes were made for the 2021 budget year only in GSRP eligibility, local allocations and program requirements to maintain GSRP programs and ensure that as many 4-year-olds as possible continue to receive a high-quality early education.
- A waiver of previously required hours, days and weeks of GSRP programming is included for 2021 only. Instead, GSRP programs are required to provide their programs, in person or remotely, for the number of hours, days and weeks needed to deliver the content that they would have provided in a non-pandemic year—with guidance from the Michigan Department of Education on age-appropriate remote instruction.
- Household income eligibility thresholds are removed for 2021 only to ensure that as many children as possible are able to access GSRP programs. The requirement that the families with the lowest incomes are served first is maintained (in income quintiles, beginning with children in households with income of 250% of poverty or less), with enrollments made in priority order, and expanding until all slots are filled—with no cap on household income.
- The requirement that Intermediate School Districts (ISDs) charge tuition on a sliding scale for families with income over 250% of poverty is changed for 2021 only, with tuition charged only for families above 400% of poverty.
- To account for COVID-related changes in GSRP enrollments and help support GSRP programs, the hold harmless funding allocation for ISDs for 2021 and 2022 will be based on pre-COVID enrollment counts in February 2020.
- State funding for Early On remains flat. Michigan’s early intervention program for infants and toddlers with developmental delays received its first state funding in 2019. With an additional small increase in 2020, total state funding for Early On is $7.2 million—far short of the estimated need of $68 million, and much lower than many peer states. No new funding is provided in the 2021 state budget.
K-12 School Aid/Education
- Per-pupil spending is increased slightly, but the weighted school funding formula proposed by the governor to increase educational equity was not adopted. Prior to the COVID-19 public health crisis, Gov. Whitmer had again proposed a school funding formula that improves equity for all students by addressing the higher costs of teaching children who are economically disadvantaged, have special needs or are English language learners. The final 2021 budget includes $95 million for a per-pupil increase for districts of $65, based on a blended student count for 2020 and 2021. In addition, $66 million is provided for payments to districts with increasing enrollment.
- Legislation was passed to provide districts with additional flexibility during the 2021 school year. With the closure of schools in March and a rapid transition to remote learning, the governor and the Legislature provided a variety of supports to schools, including access to federal CRF funds, and the passage of a set of “Return to Learn” bills that give school districts more flexible instructional requirements for the 2020-21 school year. The final 2021 budget includes several new investments, including $2 million for an attendance recovery program, and $2 million for virtual learning support grants to ISDs with large numbers of economically disadvantaged students.
- Stipends and grants for teachers were approved. The 2021 budget includes $5 million for a teacher retention stipend. Teachers who complete the 2020-21 school year as a full-time teacher in their district will receive $1,000 if they are in a district where 70% of the students are economically disadvantaged, and $500 in all other districts. School districts are required to provide an additional $500 match per teacher. It is the Legislature’s intent that the payments would continue through the third year of teaching if a teacher remains in the same district full-time. In addition, there is $53 million in the Treasury budget for 2021 for one-time hazard pay of $500 for full-time K-12 teachers.
Healthy and Safe School Environments
- The 10 Cents a Meal program is restored and expanded. The 2019 budget included $575,000 for the program, which provides an incentive for schools to purchase healthy food grown in Michigan, and brought the total number of counties where the program was available to 43. For the 2020 budget year, the Legislature allocated $2.0 million and expanded eligibility to school districts statewide as well as child care centers, but the governor vetoed the funding during tense budget negotiations, resulting in discontinuation of the program. For the 2021 budget, the governor proposed restoring $1.0 million from the School Aid Fund for expansion to school districts in all counties, but did not include child care centers. The Legislature has gone above the governor’s recommendation to provide the full $2.0 million to cover expansion of eligibility to all school districts in the state as well as child care centers.
- Student lunch debt is forgiven. The 2021 budget includes $1.0 million in one-time funding for school districts that forgive all outstanding student meal debt and adopt policies to prevent public identification or shaming of students who cannot pay for a school meal. Nationally, the average school district has $2,000 to $2,500 in student meal debt.
- Funding for school mental health and support services is increased. The final 2021 budget includes an increase of $5.6 million for behavioral health services for K-12 students, bringing total funding to $36.9 million ($1.3 million in state General Funds). Funding for ISD mental health and support services is increased from $23 million to $25.8 million. Funds for behavioral health providers in schools are increased from $6.5 million to $9.3 million, with funding provided through child and adolescent health centers.
- The 2020 expansion of early literacy coaches is maintained. The final budget includes flat funding of $31.5 million for ISD literacy coaches to assist teachers in their reading instruction of students. The number of literacy coaches statewide was tripled in 2020 as the state faced the first year of implementation of it’s Reading by Grade Three Law—a law that was not implemented in the 2020 school year due to the COVID-19 pandemic and school closures.
- Funding for the literacy essentials programs is increased. The final 2021 budget includes an increase of $3 million (to total funding of $4 million) for literacy training, including $2.5 million to support a system of regional lead literacy coaches. This increase was part of the governor’s original 2021 budget proposal.
- Funding for other literacy grants remains flat. The final budget includes $19.9 million for early literacy grants to increase instructional time needed for reading proficiency. Funds are targeted to students from pre-K to grade 3, but for the 2020-21 school year only, may include students in grades pre-K to grade 12 who need additional intervention to read at grade level.
- Funding for the Michigan Education Corps is restored. The final budget restores $2.8 million in funding for the Michigan Education Corps to provide reading support for students from pre-K through grade 2, as well as math assistance.
Flint Water Emergency
- Spending for the Flint water emergency is continued. The 2021 budget includes an $8.1 million investment in responses to the Flint water crisis, but reduces the allocation for early intervention services by $1.6 million (to $2.4 million total), while adding new funding $1.6 million for interventions and supports for students in K-12 affected by the water emergency. Funds are also included for nutritional services ($650,000), and for school nurses, classroom aides, and school social workers ($2.4 million).
- Funding is approved for the Educare program in Flint. The final budget includes $1 million for the Educare program in Flint that provides early childhood services to children affected by the water emergency.
- Adult education funding is continued at the current level. The conference budget includes $30 million for adult education. Because there has for years been a shortage of adult education programs across the state, the League has long advocated for an increase of $10 million, which would enable approximately 8,000 more adults to receive adult education services.
- Career and technical education funding for adult education is continued at the current level. The budget appropriates an additional $4 million for grants (of up to $350,000) to adult education or career technical center programs that connect adult education programs with employers.
- No significant increase in university or community college operations funding. Operations funding in the higher education and community college budgets is normally increased each year to at least the amount needed to keep up with inflation, and sometimes increased further. This year neither budget received a notable increase despite the governor having included a 2.5% increase in each budget. University operations funding received a .1% increase to $1.47 billion, and community college operations funding, which saw a decrease of .01%, is $325.4 million.
- The governor’s Michigan Student Loan Refinance Program is rejected. Because the high interest charged by many federally-guaranteed student loans can prolong the debt owed by students, the governor’s budget included $10 million in one-time General Fund dollars to establish a state revolving fund that would enable qualifying Michigan residents to refinance up to $50,000 in student loans at a lower interest rate. The conference budget rejected this.
- Funding for Michigan’s three need-based financial aid programs is maintained. Funding for need-based financial aid is $29.8 million for the State Competitive Scholarship, $42 million for the Michigan Tuition Grant, and $68.8 million for the Tuition Incentive Program, the same levels as for Budget Year 2020.
- A new financial aid program to help older students is funded. Michigan Reconnect is a new program proposed by Governor Whitmer that provides last-dollar financial aid funding for Michigan residents who are at least 25 years old, do not currently have a college degree, and are seeking an associate degree or certificate at a community college or other eligible institution; it receives $30 million in the 2021 budget. This is the first time in ten years that there has been state-funded financial aid for this population to attend a public postsecondary institution, as the Part-Time Independent student grant was discontinued after 2009 and Gov. Granholm’s No Worker Left Behind program accepted no new students after she left office.
- There is a small reduction in TANF dollars funding need-based financial aid, replacing them with General Fund dollars. The Tuition Incentive Program, which targets students from Medicaid-eligible households, continues to be funded in full from Michigan’s TANF allocation. For the other two needs-based programs, a total of $8 million in source funding has been shifted from TANF to General Fund dollars, bringing the amount of TANF that Michigan uses for financial aid to $122.8 million.
- School Aid Fund dollars are shifted from K-12 schools to universities and community colleges at near-record amounts. Community colleges received $425.7 million in School Aid Fund dollars, a 12% increase. The amount shifted from K-12 to public universities nearly doubled from last year as universities get $356 million from the School Aid Fund. The total amount of School Aid Fund dollars going to postsecondary education in Budget Year 2021 is $781.7 million, the second highest amount ever shifted in the eleven budget years in which this practice has been done.
- Funding for correctional facilities is maintained, while the prisoner population falls. The 2021 budget allocates $1.1 billion (of the Department of Corrections’ total $2.06 billion) to fund 29 correctional facilities across the state. In total, the state houses approximately 34,700 prisoners, a number that has been on the decline. Since September 2019, the total number of offenders (including those on probation and parole) has fallen by 9.3%.
- Additional facility closures and updates produce net savings. The Detroit Reentry Center will close in January 2021 ($12.3 million reduction in the budget) and the Lake County Residential Reentry Program, a short-term, behavior-focused reentry program, closed this year ($4 million reduction). The Department will take over maintenance services at the Green Oaks facility in Whitmore Lake, at the cost of $109,000, including updating the facility so it can be home to the new Corrections Officer Training Academy.
- Language to ensure stakeholders, the legislature and state agencies are informed of facility closures and potential community impacts is included. This language will require the Department to disclose—at least one month prior to the effective date—plans to close, consolidate or relocate any correctional facility. Additional language expresses legislative intent that the Department develop frameworks with the legislature and state agencies regarding (1) investment in communities that see facilities close as well as (2) the use of buildings that were formerly state correctional facilities.
- Payroll for frontline workers, primarily in correctional facilities, is provided through $191 million of federal Coronavirus Relief Funds. In addition, the budget includes language stating that if these federal funds are not used by December 30, 2020, the remaining funds will be removed from the Department’s budget and deposited into the Unemployment Compensation Fund.
- Funding to train and retain new employees, and improve employee wellbeing is increased. The final 2021 budget includes an increase of $4 million to train additional corrections officers (about half of the Governor’s proposed $8.5 million), bringing the total funding for training to $13.5 million. With the addition of existing work project account funding, the Department will be able to train an estimated 700 new officers in 2021. Furthermore, the final budget includes the Governor’s proposal to include $500,000 for employee wellness resources and supports for all departmental employees.
- The Special Alternative Incarceration Program at Camp Cassidy Lake in Chelsea is relocated, reducing the budget by $10 million. Due to declining participation because of eligibility for, and sentencing to, the intensive and behavior-focused program, its funding is reduced to a total of $4.3 million and the program will be moved to the Cooper Street Correctional Facility in Jackson to align capacity and needs.
Education, Skilled Trades and Career Readiness
- Funding for Offender Success programming is increased. The final budget includes a $5 million increase, as proposed by the Governor, for programs that support returning citizens, reducing the likelihood of recidivism and increasing the likelihood of employment.
- Funding for Criminal Justice Reinvestment programming is reduced but Chance for Life is funded. The evidence-based programs that focus on reducing recidivism and incarceration rates among those who have been released from prison but are on parole or probation will be funded at $3.7 million (reduced from $5.5 million). Total funding includes a $250,000 within-department transfer to support Chance for Life programming. Specifically, the Department will use this funding to select a vendor to provide evidence-based mentoring, employment soft skills training and job placement assistance for returning citizens.
- An online high school diploma pilot program is established, similar to previous years’ programs. Budget language authorizes the Department to establish a pilot online high school diploma and career certificate program, which will serve up to 400 inmates. A similar pilot was funded in 2018 and 2019, but was eliminated in the 2020 budget. The previous pilot served prisoners through a regionally accredited public or private school district that offers career-based online high school diplomas; the current pilot will do so through a provider that offers such diplomas and will also focus on transitioning to the workplace.
- Notice of program elimination is required. New language in the budget requires the Department to provide notice of plans to eliminate programming for prisoners at least one month prior to doing so.
- Prepaid Inpatient Health Plans (PIHPSs) are favored over community-based substance use disorder (SUD) treatment for parolees. Funding for the Department’s community-based SUD treatment network is eliminated ($7 million savings), with treatment and services to be provided instead through PIHPs to Medicaid-eligible parolees.
- Hepatitis C funding is reduced. A reduction of $2.2 million results in a total of $8.8 million allocated for Hepatitis C treatment for prisoners.
- Inflationary increases for the Corizon Health Care contract total $3.2 million. The 5-year contract to provide physical and mental health care services, including pharmaceuticals, ends in 2021.
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