Bill 5440 (as passed by the Senate)
Sponsor: Rep. Tom Pearce

House Bill 5441 (as passed by the Senate)
Sponsor: Rep. David Farhat


House Bill 5442 (as passed by the Senate)
Sponsor: Rep. Richard Ball

Senate Bill 892 (as passed by the House)
Sponsor: Sen. Bill Hardiman

Senate Bill 893 (as passed by the House)
Sponsor: Sen. Alan Cropsey

Senate Bill 894 (as passed by the House)
Sponsor: Sen. Irma Clark-Coleman
First Analysis (12-12-05)

[Note: This analysis covers HB 5438 through HB 5442 as they passed the Senate on 12-8-05 and
SB 892 through SB 894 as they passed the House on 12-8-05.]

BRIEF SUMMARY: The proposed legislation amends the Social Welfare Act to revise the
eligibility policies and work requirements related to the Department of Human Services
Family Independence Program. The eight bills that make up the package are each tie-barred
to the rest of the package.

INTRODUCTION:

The Family Independence Program is the state's cash assistance program for low-income
families with children. Currently, the program serves around 78,000 recipient groups, or
about 212,000 individual recipients. These groups receive an average benefit of $415 per
month to assist them in meeting basic needs. Except for those groups deferred from work
requirements for example, groups where the adult is disabled or caring for a disabled child
or spouse - FIP recipients are expected to participate in up to 40 hours per week of work-
related activities (e.g. actual employment, job search, GED preparation).

The FIP program is funded using a combination of federal Temporary Assistance for Needy
Families (TANF) block grant funding and state general fund/general purpose revenue.
However, the GF/GP revenue is currently used to meet federal maintenance of effort (MOE)
requirements. In short, this makes it more difficult to achieve GF/GP savings in this
program. To avoid future federal penalties for failing to meet MOE, any savings achieved
through the bills would lead to savings in either:

Federal TANF funding, in which case TANF funds could be redirected to other
eligible program areas serving low-income families with children; or Analysis available at http://www.michiganlegislature.org
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State GF/GP revenue, but only if other current MOE-eligible spending can be
identified to replace the GF/GP taken from the FIP program. HFA has estimated that
around $30 million in new MOE spending could be identified if needed.

OVERALL FISCAL IMPLICATIONS

Cost reductions from the bill's provisions to implement the 48-month time limit on
assistance, restructure FIP payment standards, and increase the duration of FIP program
sanctions would gradually increase over the following three fiscal years. Assuming a
January 2006 implementation of the legislation, FY 2006 cost savings would be roughly $25
million. This assumes immediate implementation of payment standard restructuring and
sanctions in January and a minimal impact from the time limit proposal. During FY 2006,
only those cases not meeting the qualifications for the one-year extension would be time
limited and time limits would not take effect until at least April.

Cost reductions from current levels would increase to around $55 million in FY 2007 as the
one year time limit extension would expire for around 8,100 cases at mid-year. Beyond FY
2007, full-year implementation of the time limit proposal would increase cost reductions to
around $80 million from current spending levels. Since the percentage of the FIP caseload
at or above 48 months has been growing over time, cost reductions would grow slowly in
subsequent years.

These cost reductions would be offset by any new costs incurred to implement the
enhancements to Work First as well as the new Work First programming mandated for
certain populations within the bills.

BILL ANALYSES:

HB 5438 (as passed by the Senate)
The bill establishes a cumulative 48-month limit lifetime limit on the receipt of cash
assistance within the Family Independence Program (FIP). The time limit would apply only
to those groups that are referred to the Work First program. Groups deferred from Work
First (for example, because the adult in the home is incapacitated, is caring for an
incapacitated child or spouse, or is dealing with a domestic violence situation) would not be
subject to the requirement. The number of months counted toward the time limit would also
not include: a) any months during which the group's county unemployment rate exceeded
10%; and b) previous months during which the group was temporarily deferred from Work
First.

Recipient groups that are meeting all requirements in their family self-sufficiency plan, have
never received a sanction for noncompliance and face employment barriers or labor market
conditions which prevent an employment placement may apply to the Department of Human
Services (DHS) for an extension of benefits for up to an additional 12 months beyond the
48-month limit.

Within 90 days after the effective date of the legislation, the DHS is to determine the
number of months each FIP recipient not exempt from Work First participation has received Analysis available at http://www.michiganlegislature.org
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assistance. Those with 36 or more cumulative months would be required to develop a new
family self-sufficiency plan with both DHS and Work First caseworkers. These groups
would also be eligible for the 12-month extension if they meet the conditions described in
the previous paragraph.
The bill also requires collaboration between DHS, the Work First program and adult family
members in developing a family self-sufficiency plan. The bill requires both DHS and
Work First to complete a thorough client assessment to facilitate the development of a
family self-sufficiency plan. Current law requires DHS only to work with clients on a
"social contract". New language specifically requires consideration of referral to life skills
programs. Recipient groups deferred from Work First would also have to be evaluated for
eligibility to participate in other activities such as work, volunteerism, or community
service.

Lastly, the bill would extend the current December 31, 2005 sunset date for portions of
section 57f and 57g of the Social Welfare Act until December 31, 2010. These sections
cover sanction policy and exemptions from Work First.

Fiscal Impact
It is estimated around 8,100 FIP cases are currently exceeding the 48 month cumulative limit
set by the bill. This equates to roughly 28,000 recipients. The DHS would be required to
determine within 90 days of the bill's effective date the number of applicable months for
each FIP case. Cases already at or above 48 months would be allowed to receive FIP
benefits for an additional one calendar year. Following this calendar year, these cases would
be closed along with any new cases that reach 48 months of cumulative assistance. The
provision would reduce FIP costs by roughly $40.3 million for the first full year of
implementation following the expiration of the one-year extension period. More immediate
savings could also be realized if some cases fail to meet the requirements for the 12-month
extension. Since the number of cases with over 48 cumulative months of assistance has
been increasing, cost reductions would likely increase over time.

Currently, Michigan has no time limit for cash assistance. While federal law sets a 60-
month lifetime limit on cash assistance paid using federal funding, states are allowed to
exempt up to 20% of their caseloads from the limit. States are also allowed to use state-
funded maintenance of effort payments to make cash assistance payments to groups that
move beyond the federal limit. Effectively, this has given states discretion to set their own
time limit policies.

HB 5439 (as passed by the Senate)
The bill revises the structure of FIP payment standards that are used to establish actual FIP
payments for eligible recipient groups. A payment standard represents the maximum
monthly FIP benefit available to a family. It would amount to the actual FIP payment when
the family has little or no earned income. The majority of a family's income (except for a
portion "disregarded" under current policies) is subtracted from this payment standard to
determine the actual monthly FIP benefit. Under current policies, there are three factors that
are used to determine an individual recipient group's payment standard. These factors are
discussed below: Analysis available at http://www.michiganlegislature.org
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Group size Larger recipient groups have a higher payment standard than smaller
groups of the same category. The additional varies depending upon other factors, but
an extra family member can amount to around $100 per month increase in the
payment standard in typical situations.
County of residence Each Michigan county is placed within one of six "shelter
areas" used by the DHS. These shelter areas were established to take into
consideration housing/rental cost discrepancies across counties. The payment
standard for a group in Shelter Area I (made up of rural, less populated counties) is
typically between $50 to $65 per month lower than the payment standard for the
same family in Shelter Area V