$1B of Michigan’s welfare money went to college students who weren't poor

For more than a quarter century, policy makers have tinkered with Michigan’s social safety net. Whether reforms have improved the state’s welfare system remains a matter of ongoing debate.

Safety net and welfare reform issues are frequently in the spotlight – and likely to remain there in 2018 – for two reasons. Michigan has a large low-income population. And the social safety net costs taxpayers billions of dollars per year.  

Sixteen percent of Michigan households and 22 percent of Michigan children currently live in poverty. Another 25 percent of Michigan households live above the poverty line, and have jobs, but live paycheck to paycheck with no savings, according to the Michigan Association of United Ways.

Related: How more affluent families get welfare for pricey private colleges

Meantime, health care and other social safety net programs total more than $25 billion dollars in the state budget. That’s 45 percent of the overall state budget, including pass-through federal revenues.

Reform Debates Through the Years

In 1991, Gov. John Engler signed a law ending general assistance, cutting off welfare payments of about $144 a month to 80,000 able-bodied adults without children.  Critics said it would harm vulnerable recipients, while officials said the state could no longer could afford the program.

Then, in 1996, Congress approved sweeping reform that converted federal welfare aid to states to block grants – giving them wide discretion on how to spend the funds. Backers said this would allow states to more nimbly help recipients off welfare and into work.

Welfare for Middle Class College Students

On average, half of all U.S. welfare money controlled by states goes to programs aimed at getting recipients back to work. They include cash assistance, child-care and work-related initiatives. In Michigan, it’s less than 25 percent - one of the lowest rates in the country.

Under federal welfare reform, state welfare spending must meet one of four goals: Helping needy families, getting recipients into jobs, reducing out-of-wedlock pregnancies and encouraging two-parent families.

Related health and welfare coverage from our 2018 Michigan Issue Guide

• Michigan's adverse health trends track along racal, poverty lines
• Health care in rural Michigan communities suffering, despite Obamacare

Since 2007, Michigan has spent more than a billion dollars from the welfare program on college scholarships, with some funds going to middle- and upper-income students attending private Michigan colleges. That includes students from families earning more than $100,000 a year.

Advocates for the poor argue those funds could be better used to help the truly needy. State officials maintain that students who attend college are less likely to have children out of wedlock.

New Limits on Cash Assistance

On paper, welfare spending in Michigan has remained level. But the number of Michigan families getting cash assistance fell by half from 2007 to 2013, even as tens of thousands of families still struggled with poverty and unemployment coming out of the Great Recession.

Concerned that some on welfare were abusing the system, state lawmakers in 2011 approved a measure to limit recipients to four years of cash assistance. Those who were on welfare for more than four years dating back to 2007 were kicked off the program.

Twelve months later, the state was spending $18 million less a month on cash assistance, likely the result of both welfare reform and an improving economy. While reform advocates said stiffer time limits would force recipients to find work, it is unclear how many found jobs since the state does not track recipients after they leave the system.

Drug Tests Come Up Negative

In 2013, legislators responded to allegations recipients were abusing cash benefits when they banned use of Bridge Cards at ATMs in casinos and strip clubs. Low-income residents can use cards to buy food and other items at the store. The measure was approved following revelations welfare recipients used benefits to get nearly $90,000 from a Detroit casino.

The following year Gov. Rick Snyder signed a law to create a one-year pilot program to screen some welfare recipients and test those suspected of drug use. In a 2016 report to legislators, the Michigan Department of Health and Human Services said the pilot program did not catch any recipients using illegal drugs.

Massive Computer Error

Michigan’s unemployment insurance fund is another piece of the safety net, giving workers a financial cushion when they lose jobs.

But a state calculation that it could streamline claims processing by turning fraud determinations over to a computer backfired, resulting in thousands of false findings of fraud.

In August, the state agreed to refund nearly $21 million to residents after reviewing cases in which the Unemployment Insurance Agency falsely accused tens of thousands of people of benefit fraud. The state found that more than 44,000 cases out of 62,784 with fraud findings did not involve fraud.

The UIA said it is committed to improve its system through enhanced training, policy changes and changes to the computer system.

KEEP DIGGING: MORE INFORMATION ON MICHIGAN’S SAFETY NET

• United Ways of Michigan: The ALICE Project
• Michigan League for Public Policy: “Failure to Invest in High Quality Child Care Hurts Children and State Economy”
• Citizens Research Council and Public Sector Consultants: “Policy Options to Support Children from Birth to Age Three”
• Bridge Magazine: “Fewer homeless veterans. More homeless children in state.”
• Bridge Magazine: “Broken – the Human Toll of Michigan’s Unemployment Frau