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Michigan’s Cash Assistance Program is Failing to Reach Families in Need

The Family Independence Program (FIP) is Michigan’s cash assistance program, funded through the federal Temporary Assistance for Needy Families (TANF) funding stream. In Fiscal Year 2022, fewer than 12,000 families per month received cash assistance through the Family Independence Program (including approximately 22,100 children and just over 6,100 parents), a sharp drop from nearly 80,000 per month in 2011.[1] After years of neglect of the payment standard and of harmful policies enacted by the Legislature, far too few Michigan families can access cash assistance, and those who meet the stringent qualifications receive benefits that are far lower than necessary to meet basic needs.

Background: Brief History and Structure of TANF

In 1996, Congress passed and then-President Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA, informally called ‘welfare reform’) that changed the structure of federally funded cash assistance in the United States. Michigan had served as a model for this federal legislation, as then-Gov. John Engler had received a federal waiver to establish a pilot program for reform beginning in 1993.

The cash assistance program that had been in place, Aid to Families with Dependent Children (AFDC), was an “entitlement” program, meaning any applicant who met the federal requirements would receive cash benefits directly from the federal government via the state social services agency. PRWORA replaced AFDC with the Temporary Assistance for Needy Families (TANF) block grant to states, through which each state would receive funding to set up its own program within broad guidelines. States in turn would contribute their own maintenance of effort (MOE) funds equal to 75% of their historic spending on public assistance programs (or 80%, if the state is not meeting the required federal work participation rate). Michigan calls its TANF-funded cash assistance program the Family Independence Program (FIP).

To put it bluntly, FIP has been a failure because Michigan has prioritized pushing families off the assistance they need before they are financially stable. It is a failure because Michigan has made it difficult for families to qualify, limiting assistance to only the most destitute of households. It is a failure because even the families who do qualify do not receive a monthly benefit can meet their needs.

 

Ultimately, it is a failure because state policymakers have not prioritized the federal TANF dollars toward helping families with basic assistance, but have instead kept caseloads down in order to free up dollars for other purposes.

 

But FIP does not need radical redesign in order to more effectively meet its mission; it needs thoughtful policy changes that are focused on truly helping families become more economically self-sufficient.

While federal AFDC money to states was based on each state’s number of cases, going up or down with respective caseload increases and decreases, TANF set each state’s annual block grant according to the state’s 1994 AFDC spending levels. Twenty-six years after TANF’s enactment, Congress has still not raised the amount of the block grant to each state. Michigan’s allocation continues to be $775 million per year, the same amount as in 1997.[2]

Along with its structure as a block grant rather than a program, TANF marked a major change from AFDC by establishing a 60-month lifetime limit and stricter federal work requirements, both of which remain in place today. States may not use TANF funds for families that include an adult who has received federal cash assistance through TANF for more than 60 months (consecutive or nonconsecutive) since 1996, but are permitted to set their own time limits that are longer or shorter than the federal limit—or have no limit at all.

The federal limit provides states with a hardship exemption whereby a state may exempt up to 20% of its TANF-funded cases from the 60-month limit for reasons of hardship as defined by the state, and also permits states to use their own funds to continue benefits to families exceeding the federal limit. Despite this flexibility to lengthen the time limit, many states have set cash assistance time limits that are shorter than the federal 60-month limit. While Michigan had been one of only three states without a time limit during the first 10 years of TANF, it established a 48-month time limit in 2006 and made it stricter in 2011.

The federal work requirement established in 1996 requires a single parent with at least one child under 6 years old to participate in approved work activities for 20 hours per week. A single parent whose children are all between the ages of 6 and 17 must participate in 30 hours per week of work activities. For two-parent families, the combined work hours must total at least 35 hours per week, or 55 hours per week if a family receives a federally funded child care subsidy.[3] Michigan adhered to the federal work requirement until 2002, when the Legislature passed a much stricter work requirement of 40 hours per week for all families, allowing for some discretion by the caseworker (the bill used the wording “as determined by the department”).[4]

A significant change from AFDC was that TANF permits states to use their block grant money for purposes other than direct cash assistance to families, as long as the expenditures fit under one of the four general purposes as stated in the law:

  • Provide assistance to needy families so that children can be cared for in their own homes or in the homes of relatives
  • End the dependence of needy parents on government benefits by promoting job preparation, work and marriage
  • Prevent and reduce the incidence of out-of-wedlock pregnancies
  • Encourage the formation and maintenance of two-parent families[5]

These four purposes are very broadly defined. At best, they give Michigan and other states the flexibility to develop programs that can adequately meet the needs of residents with the lowest incomes, making cash assistance one important component of an overall poverty-fighting strategy that includes work supports, wraparound services and skill-building opportunities. At worst, they are so overly broad as to create a perverse incentive for states to reduce cash assistance cases to free up TANF dollars, which are then used to fund long-standing programs that have traditionally been funded from the General Fund. This is what has happened in Michigan.

In 2021, Michigan spent just under 13% of its TANF allocation and state maintenance-of-effort funds on basic assistance, which is generally in line with recent previous years. When excluding relative care FIP payments (i.e. for custodial grandparents) and adoption and guardianship subsidies, the share of TANF and MOE used for cash assistance is 6%.[6] Other uses for TANF and MOE include such categories as administration and systems (the largest expenditure), child welfare and work supports. [7] It also includes a category called “services for children and youth” that, for Budget Year 2023, included $125.2 million spent on college financial aid, of which $71.3 million went to a grant for Medicaid-eligible students and just under $54 million went to grants targeting primarily middle-class students.[8]

How Income Eligibility and the Cash Assistance Basic Grant are Determined for FIP

In Michigan, the Department of Health and Human Services establishes a payment standard, a monetary level on which determinations for cash assistance eligibility and benefit level are based. The payment standard for a family with one parent and two children has been $492 since 2008.

Eligibility: If a family has earnings from employment, it may or may not be eligible depending on their income. To determine its eligibility, a portion of the earnings is disregarded. The earned income disregard is $200 plus 20% of the remainder of earnings for initial eligibility and, since 2011, $200 plus 50% of the remainder for ongoing eligibility. The amount of earnings left after applying the disregard is deducted from the payment standard, and if there is no amount remaining, that family is not eligible for FIP.

When the earned income disregard is applied to the payment standard of $492, it establishes a maximum eligible income (earnings + cash assistance grant) of $814 for initial eligibility and $1,184 for ongoing eligibility, above which families are ineligible for cash assistance. Because the payment standard has not changed since 2008, the maximum income level of $814 for initial eligibility has also not changed since that year. Because the Legislature enacted a separate and more generous earned income disregard for ongoing eligibility in 2011, families for the past 12 years have been able to continue receiving cash assistance until their combined earnings and benefits exceed $1,184.

Benefit level: The payment standard is also the basis for establishing how much a family receives as a monthly assistance payment. If a family has no earned income, it receives the full amount. If the family has earnings, the amount remaining after application of the earned income disregard is what the family will receive as a monthly cash assistance benefit. Because the monthly welfare benefit does not decrease dollar for dollar as earnings increase, the earned income disregard incentivizes recipients to earn more money each month through employment; a household will not benefit financially by declining to work in favor of receiving cash assistance.

The payment standard was determined by county of residence until 2006. During that year, the Legislature voted to merge all counties into one payment standard ($489 for a family of three), resulting in a raise for most, but not all, counties. Wayne County, where roughly one-third of recipients resided, saw its payment standard raised from $459 to $489. The Granholm administration raised the payment standard again in 2008 by $3 per month, to the $492 maximum grant for a family of three that remains today. (In this report, all payment standard figures prior to 2006 are represented by the Wayne County payment standard.)

The Erosion of the Cash Assistance Benefit and Eligibility Level

The fact that the payment standard has been increased in a meaningful way only once in nearly 30 years means that recipients are able to purchase much less than they could in previous years, due to inflation. In 1993, a single parent with two children would be initially eligible for some level of benefits as long as those benefits and whatever earnings the parent had did not exceed $774 per month. In 2008, that amount was equal in 1993 dollars to only $555 per month, and in 2022 to only $424 per month—a 45% loss in purchasing power. Had the payment standard kept up with inflation, a similar family in 2022 would be initially eligible for some level of cash assistance as long as benefit and earnings did not exceed $1,487 per month, and the maximum benefit would be $882 per month rather than $492.[9]

Perhaps the erosion of the FIP grant is most stark when viewed in the context of housing costs. In the 1980s the monthly AFDC grant for a single parent with two children equaled 110% of the Fair Market Rent for a two-bedroom dwelling in Wayne County, allowing the parent to pay rent out of the monthly benefit check and have money left for other needs. In 2008, when the FIP grant was last raised, the maximum benefit for a similar family covered 61% of Fair Market Rent, but covers only 41% in 2023.[10] Parents with extremely low earnings, or none at all, are unlikely to be able to find the money for the remainder of the rent and may need to put off paying other expenses or rely on charity in order to do so.

As more families rise above the stagnant maximum eligible income level, earning too much to be eligible for cash assistance yet not enough to meet their basic needs, FIP becomes less accessible each year. Many families whose incomes would have qualified them for FIP assistance in 1993 or even in 2008 would be denied such assistance now. Moreover, employment providing an income that is barely over the eligibility limit will not necessarily be stable and long-term. The earnings of cash assistance recipients often come from jobs that are vulnerable to economic downturns, causing employers to make short-term layoffs or to temporarily reduce work hours. Families whose income fluctuates around the eligibility cutoff point often must reapply for assistance or suffer sporadic reductions in their weekly income.

Viewed in the context of poverty, the neglect of the FIP grant has also meant that many more families below the poverty line are ineligible for cash assistance, as the income limit for eligibility falls further and further below the poverty line each year. In 1993, when Michigan first began its cash assistance pilot program under Gov. John Engler, a family’s total household income (earnings plus FIP grant) had to be below 80% of the poverty line for that year. By the time President Clinton signed PRWORA into law establishing TANF in 1996, Michigan’s household income limit for cash assistance had already dropped to 73% of the poverty line. Since 2017 a family has had to be in “deep poverty” (below 50% of the poverty line) to be eligible for any amount of cash assistance; in 2023, the income limit is at 39%.

The annual clothing allowance and the new young child supplement provide additional benefits to families already receiving FIP cash assistance. The clothing allowance level is determined in the budget each year; in 2022, families received $267 per year to spend on clothing and that will be continued in the 2023 budget year. Additionally, the governor and Legislature took a positive step by establishing a $600 young child supplement for families receiving cash assistance in Budget Year 2023, although it is uncertain whether it will continue in future years and at what level.

While the clothing allowance and young child supplement are helpful to the families receiving them and should be preserved, such benefit enhancements are not a sufficient substitute for an increase in the payment standard. In addition to not being consistent and predictable year to year, the supplements do not expand FIP eligibility beyond the fewer than 12,000 families received FIP in 2022. This is apparent from the fact that the Legislature budgeted under $4.2 million for the young child supplement, enough to help only 6,900 children in the entire state.

The Michigan Department of Health and Human Services, not the Legislature, sets the payment standard and is thus responsible for its neglect since 2008.[11] While the department is to be commended for increasing the cash assistance asset limit from $3,000 to $15,000 in 2019, it must act to increase the payment standard, which has played a far greater role than the asset limit in preventing families experiencing economic hardship from accessing cash assistance.

Legislative and Departmental Policies That Have Made Cash Assistance Less Accessible

In addition to the neglect of the payment standard, there are several policies that have been put in place in Michigan that have made it more difficult for families who are financially struggling to receive cash assistance and have significantly pushed down the state’s FIP caseload. The most damaging of these were the establishment in 2007 of permanent and full-family sanctions (as opposed to sanctions against only the adult) for not meeting work requirements and, in particular, the 2011 tightening of the state’s 48-month lifetime limit for receiving cash assistance.[12] (See text box for a list of significant policy changes both good and bad that have been enacted since PRWORA.)

Federal TANF law has a lifetime limit of 60 months, countable back to 1996 when the block grant was established. States are free to set their own time limits, but may not use TANF funds to pay cash assistance to families who have exceeded the federal limit. For the first ten years that TANF was in effect, Michigan was one of only three states without a time limit, but in 2006, the state instituted a 48-month time limit. Initially, the new time limit did not force a significant number of families off assistance because under Gov. Jennifer Granholm, the Department of Human Services had put in “clockstoppers,” the most significant of which was that the months in which a family met the federal work requirements were not counted against the time limit. At the time, a large share of families had been meeting the federal work requirement and hence were not affected.

In 2011, however, the Legislature made the 48-month lifetime limit much more stringent by removing all the clockstoppers, counting each month that a family received cash assistance against its time limit regardless of how small their monthly benefit had been. This included counting the months that some families received a $10 benefit through Extended FIP (E-FIP), a program to reduce the “benefits cliff” for people moving off cash assistance due to earning too much to remain eligible. When a family no longer received benefits for this reason, the department would send them $10 per month for the first six months they were off assistance in order to help them maintain eligibility for Medicaid and child care subsidies (for which all FIP recipients are categorically eligible) for that period. By counting these E-FIP recipients toward the state’s required work participation rate (states were required to have at least 50% of recipients meeting federal work requirements), Michigan ensured that its maintenance-of-effort requirement would remain at 75% of spending instead of 80%.

From when the program began in 2007 to the end of 2015 when it ended, an average of 2,800 families per month received E-FIP. While it was a well-intended program, the $10 monthly benefits that families automatically received did not have any kind of opt-in or opt-out process and hence was involuntary. This was of little consequence until the Legislature removed the clockstoppers and the DHHS under Gov. Rick Snyder began counting those months against those families’ 48-month time limit, in effect making it a 42-month time limit. Families who moved off cash assistance would have six fewer months of eligibility if they encountered difficult financial circumstances in the future, and as such were actually penalized by the Snyder administration for having met their work requirements while they collected cash benefits.

The consequences of the 2011 tightening of the time limits were swift and severe. In 2011, there had been an average of just under 80,000 families per month receiving FIP, but just one year later, that number had fallen to 58,641 and in 2013 had fallen further to just over 49,000. With the exception of 2020, when there was a slight bump up in cases due to COVID-19, the average monthly caseload has consistently decreased each year since 2011. Michigan had its lowest caseload ever in 2022, with just under 12,000 families a month having received FIP.

Other policies prevent families from receiving cash assistance even if they would otherwise be eligible. One is Michigan’s policy banning individuals with more than one drug felony from receiving cash assistance. PRWORA had a provision that individuals with a drug-related felony are ineligible for either food or cash assistance, but allowed states to request and receive either a full or partial waiver from that rule. Michigan was one of the first states to request and receive a partial waiver, allowing individuals with one drug felony to receive food or cash assistance if they were otherwise eligible, but not those with two or more drug felonies arising out of separate incidents. Although Michigan sought and received a full waiver from the ban for those receiving food assistance and amended the Social Welfare Act to remove it from statute in 2019, the partial ban remains in place for cash assistance recipients. This is detrimental to returning citizens, who often need financial help to reintegrate into society after finishing their sentences.

Even the pandemic did not substantially slow the steady decrease in cash assistance cases. After the onset of the pandemic in March 2020 and the enactment of state and federal emergency programs in response (including enhanced Supplemental Nutrition Assistance Program [SNAP] and Unemployment Insurance benefits), FIP cases briefly spiked by more than 12,000 families. However, 18 months later in September 2021, only 10,600 families in the entire state were receiving FIP—the lowest cash assistance caseload Michigan has ever had.

FIP Has Failed its Primary Purpose: Providing Adequate Cash Assistance for Families in Need

In contrast to the federal Supplemental Nutrition Assistance Program, in which food assistance cases generally rise and fall in accordance with such indicators of need as the poverty and unemployment rates, FIP cases track independently of such indicators. A vivid example is the startling drop in cases during the first two years of the Great Recession: between 2007 and 2008, the average FIP monthly caseload dropped by more than 10,000 families, and in 2009 it dropped further, by 2,000 families. During that same period, SNAP food assistance cases increased by nearly 140,000 households.[13]

SNAP succeeds in its mission because, as a federal entitlement program, all applicants who are eligible according to established federal and state standards receive benefits, and the state has no compelling financial incentive to reduce cases. FIP fails in its mission because TANF, as a block grant with overly broad purposes, incentivizes Michigan to keep cash assistance cases as low as possible in order to free up its federal TANF dollars for other purposes.

While Michigan uses TANF to fund some programs that target families and individuals with low incomes, such the state Earned Income Tax Credit and the Tuition Incentive Program (a college financial aid program for students from Medicaid-eligible households), it also uses the TANF allocation to supplant state General Fund dollars for programs that are not targeted to the TANF population. A good example of this is Michigan’s use of TANF to provide 75% of the funding (approximately $54 million) of two need-based college financial aid programs that go largely to students from middle-class and even affluent families and which until fairly recently were funded entirely from the General Fund.[14] Michigan’s ability to shift TANF funds in this way directly depends on its ability to keep cash assistance cases low.

To put it bluntly, FIP has been a failure because Michigan has prioritized pushing families off the assistance they need before they are financially stable, even during the worst recession Michigan has experienced in decades. It is a failure because Michigan has made it difficult for families to qualify, limiting assistance to only the most destitute of households. It is a failure because even the families who do qualify do not receive a monthly benefit that is adequate to meet their needs. Ultimately, it is a failure because state policymakers have not prioritized the federal TANF dollars toward helping families with basic assistance, but have instead kept caseloads down in order to free up dollars for other purposes.

For FIP to succeed in its mission, Michigan will need to redirect its budgeting priorities toward providing basic assistance to all families who need it. FIP does not need radical redesign in order to more effectively meet its mission; it needs thoughtful policy changes that are focused on truly helping families become more economically self-sufficient. 

Recommendations

To restore the Family Independence Program’s effectiveness in meeting its intended purpose, which is to provide an adequate safety net while helping families become financially independent, the Michigan League for Public Policy makes the following recommendations.

Revise the payment standard so that the maximum household income for initial eligibility (payment standard minus [$200 + 20% of remainder]) is pegged to a percentage of the federal HHS poverty guidelines each year. This will both raise the grant amount and make FIP available to a much larger population of Michigan residents who are struggling financially. In 2023, the maximum income eligibility for a family of three would be:

  • If pegged at 75% of the poverty guidelines: $1,554 per month (requiring a payment standard of $1,084)
  • If pegged at 80% of the poverty guidelines: $1,658 per month (requiring a payment standard of $1,167)
  • If pegged at 90% of the poverty guidelines: $1,865 per month (requiring a payment standard of $1,333)
  • If pegged at 100% of the poverty guidelines: $2,072 per month (requiring a payment standard of $1,499)

Reinstate the time limit clockstoppers that were in place prior to 2011. This is important to preserve the safety net for vulnerable families, but it is also important as a fairness issue. Working families who received involuntary $10 E-FIP payments as they transitioned off cash assistance have had those six months counted against their time limits, as have other families with very small benefit payments. Because the earned income disregard provides a built-in incentive to work, those who were meeting their work requirements received only a modest benefit and ought to be able to seek and receive cash assistance if they fall on difficult times in the future.

Remove the drug felony ban for receiving cash assistance. There is growing awareness that society benefits when returning citizens are able to become economically stable, because they are less likely to offend again, will pay taxes, and will contribute to their communities in other ways. Cash assistance can play an important role in that stabilization.

Remove the asset test. Michigan’s Social Security Act requires that the department set an asset test, but does not specify its level. The department made a positive change in 2019 by raising the cash assistance asset limit from $3,000 to $15,000 and allowing applicants and recertifying recipients to self-attest. However, removing the asset test entirely (through legislation) would save time and paperwork for both caseworkers and applicants, and applicants would still need to verify their income to demonstrate eligibility.

Target TANF spending only to populations with low incomes or who are economically vulnerable. Michigan currently uses federal TANF dollars and/or state MOE funds to support two college financial aid grants (the Michigan Tuition Grant and the Michigan Competitive Scholarship) that serve primarily affluent and middle-class students. While these grants are important and should be preserved, their support should come from the state General Fund rather than TANF. The savings in TANF dollars from shifting the funding source of these grants back to the General Fund should be used to strengthen public assistance programs such as FIP.

End Notes

1 Michigan Department of Health and Human Services, Trend Report of Key Program Statistics, December 2022

2 Azevedo-McCaffrey, Diana & Ali Safawi, To Promote Equity, States Should Invest More TANF Dollars in Basic Assistance, Center on Budget and Policy Priorities, January 12, 2022 (https://www.cbpp.org/sites/default/files/atoms/files/1-5-17tanf.pdf, accessed June 8, 2022)

3 Website of the U.S. Department of Health and Human Services Office of Family Assistance: Laws and Regulations (https://www.acf.hhs.gov/ofa/programs/tanf/laws-regulations, accessed on July 5, 2022)

4 Senate Bill 817 of 2001 (http://legislature.mi.gov/doc.aspx?2001-SB-0817, accessed on July 5, 2022)

5 Website of the U.S. Department of Health and Human Services Office of Family Assistance (https://www.acf.hhs.gov/ofa/programs/tanf/about, accessed on June 8, 2022)

6 U.S. Department of Health and Human Services Office of Family Assistance, TANF and MOE Spending and Transfers by Activity, FY 2021: Michigan, Updated December 13, 2022 (https://www.acf.hhs.gov/sites/default/files/documents/ofa/fy2020_tanf_moe_state_piechart_michigan.pdf, accessed January 23, 2023)

7 Center on Budget and Policy Priorities, State Fact Sheets: How States Spend Funds Under the TANF Block Grant, January 12, 2022 (https://www.cbpp.org/research/family-income-support/state-fact-sheets-how-states-spend-funds-under-the-tanf-block-grant, accessed August 1, 2022)

8 Michigan League for Public Policy, Investments in New Postsecondary Programs Show That Michigan Supports Non-Traditional Learners: FINAL 2023 BUDGET ANALYSIS, June 2022 (https://mlpp.org/investments-in-new-postsecondary-programs-show-that-michigan-supports-non-traditional-learners-2023-budget-analysis/)

9 Calculations by Michigan League for Public Policy using the Bureau of Labor Statistics CPI-U Inflation Calculator for Detroit-Warren-Dearborn, MI (https://data.bls.gov/pdq/SurveyOutputServlet?data_tool=dropmap&series_id=CUURS23BSA0,CUUSS23BSA0, accessed June 6, 2022)

10 U.S. Department of Housing and Urban Development Fair Market Rents (https://www.huduser.gov/portal/datasets/fmr.html#history, accessed June 1, 2022)

11 Section 400.57a (3) of the Social Welfare Act reads: “The department shall establish income and asset levels for eligibility, types of income and assets to be considered in making eligibility determinations, payment standards, composition of the program group and the family independence program assistance group, program budgeting and accounting methods, and client reporting requirements to meet the following goals:

(a) Efficient, fair, cost-effective administration of the family independence program.

(b) Provision of family independence program assistance to families willing to work toward eventual self-sufficiency.”

(http://legislature.mi.gov/doc.aspx?mcl-400-57a, accessed on June 1, 2022)

12 Social Welfare Act (Act 280 of 1939, Section 400.57g) (http://legislature.mi.gov/doc.aspx?mcl-400-57g, accessed on August 31, 2022)

13 Michigan Department of Health and Human Services, Monthly Trend of Key Statistics, 2007-2009.

14 Website of Michigan League for Public Policy, Final 2023 Budget Analysis (https://mlpp.org/investments-in-new-postsecondary-programs-show-that-michigan-supports-non-traditional-learners-2023-budget-analysis, accessed on August 1, 2022)

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