Peter Ruark

There are many things not to rejoice about in the Family Independence Program bills (HB 4409-4410) that passed the Michigan House a couple weeks ago. One change, however, is positive — sort of.

This change is to the amount of earned income that is disregarded when determining whether a family with earned income is eligible for FIP. The earned income disregard functions as a work incentive, since families can increase their earnings without losing a dollar of FIP for every dollar of earnings.

Here is how it works under current rules: A family of three with no earnings gets the maximum monthly benefit of $492 per month. A family with earnings will have $200 of their earnings plus 20 percent of the remainder disregarded, and the rest of their earnings will count dollar-for-dollar against their FIP benefit.  Because the benefit amount decreases as earnings increase, when the family has earnings of more than $814 a month, they can no longer receive a benefit. (A family of three with earnings of $500, for example, will have $240 [$500-$200-$60=$240] of their income disregarded and $260 counted against the maximum benefit of $492, giving them a benefit of $232. When that is added to their $500 in earnings, their total household income is $732.)

The House-passed bill increases the earned income disregard to $200 plus 50 percent of the remainder for families already receiving FIP (the disregard will stay at the current level for determining initial eligibility). The family earning $500 per month would receive $342 in benefits, higher than the $232 under the current disregard. That adds up to total household income of $842, compared with $732 under current law. Instead of losing their benefits when their earnings exceed $814, they would be able to receive a benefit of $185 or less which would grow steadily lower until their earnings reach $1,183.

The League has long advocated making the earned income disregard more generous as a way to make cash assistance more accessible to those who need it, so this is in many ways a positive change. While it will not help more families begin receiving cash assistance (because the disregard for initial eligibility will stay at the current level of $200 + 20 percent), it will help those already receiving it to continue to do so at a higher level of earnings and will raise grant levels for many families who have earnings.

So here’s the rub: The House, in the same legislation, made the 48-month lifetime limit stricter by taking out most exemptions for families with earnings. The families whose earnings increase above $815 per month (but are less than $1,183) will remain eligible for a FIP grant, but each month they receive the grant will count against the 48-month limit. Unless these families voluntarily terminate their cash assistance, they may burn through their remaining months at relatively low benefit levels and find themselves unable to receive cash assistance in the future if it is needed again.

Implementing a more generous earned income disregard of ongoing eligibility is a good change, but much less so when combined with a stricter 48-month time limit.

– Peter Ruark

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Categories: Blog: Factually Speaking, Human Services, State Budget | Tags: cash assistance, children and families