Program cuts cost state millions in federal aid

By JACOB KANCLERZ
Capital News Service
LANSING – Michigan is leaving millions of federal dollars on the table because of cuts to at least two state programs for poor people, advocates say.
One cut limits the number of people eligible for food assistance, and the other scales back unemployment insurance.
The state is limiting distribution of food stamps by implementing asset tests, cutting off $4.6 million a month in federal funds for up to 90,000 people, according to the Michigan League of Human Services. And Michigan missed an opportunity to receive $138.7 million from Washington toward its unemployment insurance trust fund by not expanding eligibility for the program.
On Oct. 1, the state began considering assets such as vehicles and bank accounts to determine eligibility for food assistance.
The federal government funds the program, so Michigan doesn’t save money from the change, said Karen Holcomb-Merrill, policy director with the Michigan League for Human Services. In fact, the policy could cost the state money.
“It will arguably cost the state more money to have asset tests in, because … caseworkers have to actually determine the assets of people and eligibility,” she said.
More calculations are needed for the asset tests, which could result in a higher error rate for determining benefits, said Judy Putnam, the communications director for the League of Human Services. If the state’s error rate is above the national average, it faces fines paid out of Michigan’s pocket.
“At the same time we’re restricting those federal dollars into Michigan, we’re trying to make the point we’re risking state dollars because if we have high error rates, we’ll be penalized,” she said.
The asset test policy was not a budget-related decision, but a move to make the system more accountable, said Colleen Rosso, the director of communications for the Michigan Department of Human Services.
“We do have a responsibility to administer it responsibly and to ensure we’re utilizing taxpayer dollars, whether they’re federal taxpayers or state taxpayers, prudently,” she said.
The new test will not lead to more errors in calculations of food assistance, she said.
Michigan’s unemployment trust fund took a hit, too, as the state failed to secure $138.7 million offered by Washington that would’ve gone toward that fund’s deficit.
The incentives would have been awarded to the trust fund if the state extended unemployment insurance to unemployed part time workers who were looking for part time work. Michigan would also have to provide extra weeks of benefits to permanently laid-off workers participating in related occupational training.
But Michigan missed an Aug. 22 deadline when the Senate rejected legislation proposing the changes after passing the House, said Peter Ruark, a senior policy analyst with the League of Human Services. The unemployment insurance trust fund has a $3.8 billion deficit.
Republicans in the Senate opposed the bill, saying that the extension of unemployment benefits would result in higher unemployment insurance taxes on businesses.
But Ruark said the deficit will result in higher unemployment insurance taxes on businesses in the long run. Workers will be hurt by a reduction of benefits from 26 weeks to 20. That move was enacted by the Legislature earlier this year as a way to deal with the deficit.
“Some of the responses of the Legislature to the deficit definitely hurt unemployed workers,” Ruark said.
© 2011, Capital News Service, Michigan State University School of Journalism. Nonmembers cannot reproduce CNS articles without written permission.