Thursday, October 20, 2011

Michigan’s Roads Crisis: What Will It Cost to Maintain Our Roads?

This is the Executive Summary summarizing the final report entitled “Michigan’s Roads Crisis: What Will It Cost to Maintain Our Roads?” completed by a Work Group from within the House Transportation Committee, comprised of Representative Roy Schmidt and myself. A complete copy of the report is available at the website (link at the bottom of the page).

Executive Summary.

Many of Michigan’s roads and bridges are in bad shape, with crumbling bridges and potholed roads all too familiar to most Michigan’s motorists. The simple truth is, unless additional funding is available to maintain our roads, they are projected to get much worse. Part of the problem is that transportation revenues have been declining due to the heavy reliance on the gas tax.

The Transportation Funding Task Force (TF2) reported in 2008 that Michigan needed $3 billion more revenue per year to achieve a “good” condition. This report contains the results of a rigorous attempt to disprove or verify the TF2 report’s findings regarding the maintenance of the state’s roads and bridges, i.e., pavement preservation. This report does not include any additional money for new or widened roads to improve capacity, relieve congestion or to improve safety, all of which were included in the TF2 recommendation. The report also does not consider any transit issues.

Of the key questions developed by a work group appointed from among the House Transportation Committee members, this report focuses only on the question of “How much money do we need?”

A technical analysis team tackled the question using computerized models, made possible by road condition data recently gathered by the Asset Management Council. The models used an asset management strategy of applying the right fix at the right place at the right time (among the choices of capital preventive maintenance, rehabilitation or reconstruction) which minimizes the cost of maintaining the asset value of the road system by performing the lower cost preventive maintenance rather than allowing the roads to deteriorate to the point of needing a higher cost fix.

We divided the state’s paved roads into four categories and set the following quality goals:

· State trunkline freeways: 95% good or fair

· Remainder of the state trunkline highways: 85%

· Remainder of the federal-aid roads: 85%

· Non-federal aid roads that are paved: 85%

The amount of work that the model assumed could be done in some road segments and in some years was limited by the maximum percentage of roads that could be worked on without causing excessive congestion caused by road construction.

The model projected that almost $1.4 billion dollars more revenue per year would be needed in 2012-2015 and rising to almost $2.6 billion per year by 2023 to achieve the goals set. This result is consistent with the TF2 findings regarding pavement preservation. The graphs included in the report show that this would not result in a “gold plated” road system, as many of the roads in fair condition would be just that - fair- and not good.

The conclusion reached was that if the investments projected by these models are not done, either the deferred costs of maintaining our roads will be much higher OR we choose to accept lower quality roads. From a business perspective, the set of investments recommended is the lowest long-term costs of maintaining our roads.

Wednesday, October 19, 2011

The Choice is Yours: How Will We Pay for Quality Roads?

(or choose to endure poorer quality roads)?

A simulation: Our study concerning the amount of additional money needed to maintain our roads at reasonable levels (95% rated good or fair for freeways, 85% for all other paved roads) is about $1.4 billion in the early years and rising due to inflation.

Using the options below, indicate how you would come up with the $1.4 billion. Excluded are options that would require 2/3 vote of both houses and a vote of the people (i.e., constitutional amendments for changes to the sales tax) and items that would generate less than $10 million per year.

Revenue Increases:

$_________ $43.5 million per 1 cent increase in gas tax from 19 cents per gallon.

$_________ $7.7 million per 1cent increase in diesel fuel tax from 15 cents per gallon. E.g, $30.8 million if brought up to parity at 19 cents per gallon.

$_________ $86.5 million per 10% increase in vehicle registration fees. E.g., it would take a 162% increase to achieve $1.4 billion additional revenue.

$_________ $150 million via eliminating the registration discounts immediately for all vehicles (not just new).

$_________ $24 million by charging new registration fee at time of plate transfer and not at plate expiration.

$_________ $12.6 million by abolishing 1.5 cent gasoline cost of collection exemption.

$_________ $100 million per 1/10 of a cent per vehicle mile traveled, based on a third party verified, self-reporting system established in conjunction with vehicle registration (vs. devices in vehicles measuring or reporting mileage). E.g., $1 billion if 1 cent per mile. During start up phase, increase vehicle registration fees.

$_________ House Bill 4521 (H-1) would redirect to state and local road programs an amount of sales tax revenue related to gasoline sales in a range from $83.1 million (at $3.00 per gallon) to $112.7 million (at $4.00 per gallon). This is revenue that would otherwise be credited to the state General Fund and would somehow need to be replaced or appropriations reduced (per House Fiscal Agency).

$_________ $826 million per year at 6.7% sales tax on fuel at the wholesale level, equivalent to the amount of gasoline tax collected at 19 cents per gallon.

Lower Quality Level Targets:

$_________ $105 million if set target percentage of freeways that are rated "good" or "fair at 90%, instead of 95%.

$_________ $146 million if set target percentage of non-freeways state trunkline highways that are rated "good" or "fair at 80%, instead of 85%.

$_________ $70 million if set target percentage of federal aid, non-trunkline highways that are rated "good" or "fair at 80%, instead of 85%.

$_________ $58 million if set target percentage of freeways that are rated "good" or "fair at 80%, instead of 85%.

$_________ Other: ____________________

======= Total ($1.4 billion - items selected must total this amount)

Olson Swings His Support in Favor of NITC - With Conditions

Representative Rick Olson (R-Saline) announces his support for the controversial New International Trade Crossing (NITC, formerly known as DRIC) with a few conditions, including a constitutional amendment prohibiting state funds to either pay for the project or bail out any bridge authority. Establishing a freeway-to-freeway connection would enhance trade through the Montreal, Toronto, Windsor, Detroit and Chicago trade corridor and improve motorist convenience. These objectives are too important to be compromised by an individual company's profit motive.

"As a strong supporter of private enterprise, it has taken me months of study and review of the facts to finally decide that the Governor's proposal should be supported. There has been a lot of rhetoric and misinformation spread in this whole debate, and much personal investigation has been necessary to sort out fact from fiction."

I started with the premise that the essence of private enterprise is competition, and therefore I could not protect the Detroit International Bridge company (the owner of the Ambassador Bridge, with the primary owners being Matty Maroun) from competition. But, that competition needed to be fair competition to receive my support. It could not be government supported and/or subsidized competition against a private company providing jobs for Michigan residents and paying Michigan taxes to be fair.

The NITC project can be broken down into four basic components:

  • The bridge itself - to be paid for from private funds through a public private partnership (P3) and ultimately repaid through toll fees
  • The Canadian side freeway extension and approaches to the proposed bridge - to be paid by the Canadian governments
  • The American side approaches to the proposed bridge - to be done with Canadian dollars loaned to the project and repaid through tolls from the proposed bridge
  • The customs stations on each side of the bridge - to be paid for by the respective countries, and does not involve Michigan dollars

The existing Ambassador Bridge has had all of the last three of those components paid for by the respective federal or state governments in the past. Therefore, to be "fair competition", only the bridge itself need be paid for, financed, maintained and operated by a private company. That is what is proposed in the NITC proposal via a P3. Therefore, I don't judge the NITC proposal as being anti-private business. A private business might be adversely affected by the new bridge, but any business faces the potential of a competitor setting up shop and competing with it.

The Ambassador Bridge owners claim they have an exclusive right to have the bridge serve Windsor - Detroit, but my review of the documents reveals that they do have a "perpetual" right to operate, maintain and even replace the existing bridge, but it is not "exclusive".

Opponents to the NITC proposal cite statistics saying the traffic over the Ambassador Bridge is down, and therefore another bridge is not needed. To the extent that future traffic may or may not be sufficient to repay the costs of construction and maintenance of the new proposed bridge is a factor the P3 bidders would need to consider. If the projections are either too low or too uncertain, there may not be any bidder willing to take the risk of investing in the project. If they do, they will bear the risk.

Now there is one of the issues opponents see as most problematic - if a P3 and a "bridge authority" is set up and fails economically, will the state be on the hook? The bill makes it clear that revenue bonds created under this act shall not be deemed to constitute a debt of this state or any political subdivision of this state and are not a pledge of the full faith and credit of this state. Nonetheless, opponents fear that if the bridge authority were to fail economically, the state could by another statute later deem the authority "too big to fail", as its failure might adversely affect the state's bond rating. After all, this year we did not want even the city of Pontiac to declare bankruptcy because of its expected effect on the rest of the state.

Richard McLellan, a former adviser to Gov. John Engler and highly respected Michigan constitutional lawyer, has testified to a Michigan Senate panel that NITC will not endanger taxpayer dollars and that the Michigan Constitution is very clear that unless the Legislature asks for a vote of the people, Michigan can't pledge the state's full faith and credit. Nonetheless, the fear that the legislature may later change its mind remains.

My support for the NITC proposal is subject to three conditions:

  1. A Constitutional amendment placed on the ballot that no public money should be spent on the bridge itself, or approaches to the bridge, other than MDOT planning and coordinating the project work for the approaches.
  2. That any "community benefits" which might be negotiated be not only very limited, if any, but that they be completely paid out of funds loaned by Canada and thus need to be repaid through bridge tolls. I.e., Michigan taxpayer money cannot be used for these benefits. Allowable community benefits would be those mitigation measures required by the federal environmental impact process. To the extent that these add to the cost of the project that need to be paid for through toll fees, these make the bridge less economically viable and thus less likely to be built at all.
  3. The language authoring a P3 to be set up must be thoroughly analyzed to make sure the Michigan taxpayer is protected.

What is most important in this debate is that we ultimately accomplish the freeway-to-freeway connection between our two countries between Windsor and Detroit. Equally important is better administration of the customs stations, particular the customs station for returning to the U.S. The bottleneck in the crossing is not the bridge, but the 17 stoplights on Huron Church Road in Windsor and the customs. The Ambassador Bridge has operated for months with only three of its four lanes open as it has been redecking the bridge, all without the bridge itself being the problem.

What finally won my support was seeing the gas station and duty free store still sitting where it was not supposed to be according to the agreement between the Ambassador Bridge and MDOT. Because of its location, MDOT has refused to open the ramps off I-75 onto the bridge as the gas stations are too close to the off ramps from the freeway and have the potential to cause backups onto the freeway. A judge has reviewed the case and ordered the Ambassador Bridge months ago to move the facilities. But, they have not been moved. I suspect that they have not been moved because every day they remain, Matty Maroun is making a lot of money selling gas at slightly lower prices than competitor but at a huge profit per gallon due to the duty (tax) free status of the location. Meanwhile, traffic onto the bridge is routed through a convoluted and confusing approach rather than via the direct routes possible with the new ramps. Our international traffic and motorist convenience is too important to be left as of secondary importance to the profit motives of a single company, no matter if it is a private business currently employing Michigan residents and paying Michigan taxes.

Sunday, October 16, 2011

Michigan, Are We Ready for This? A Real Economic Development Opportunity.

Last week I had the opportunity to attend a meeting held by the Great Lakes Global Freight Gateway Project. That is a non-profit strategic planning group exploring steps to develop a global trade route connecting Southeastern Michigan to Asia through Halifax, Nova Scotia.

More than thirty major companies participated in a meeting held October 15 at Detroit Metro, including representatives from autos and auto suppliers, express shippers, and durable and consumer goods manufacturers, and freight integrators, as well as representatives from government in the region, including Canada.

According to their news release:

“The project envisions transforming southeast Michigan into an inland port, much like Chicago. The Gateway is projected to create $11 billion in new economic activity and 150,000 new jobs.

The Gateway's goal is to increase the number of international cargo containers now moving into Detroit by rail by 1,000% in the next four years.

Shipping through the Gateway's route will be less expensive, faster and cleaner, reduce shipping costs will by $250 to $930 less per container, and take three days to two weeks less in travel time, depending on point of origin.

The Global Gateway estimates that a company moving 1,000 containers a year would save a million dollars annually or more by using the new trade route.

The project will launch to coincide with the arrival on the high seas of new Super Post-Panamax ships carrying 15,000 to 18,000 containers per ship. Most North American ports aren't deep enough to handle them. The Port of Halifax is one of only two on the East Coast that can handle such big ships, CN Railway has additional ports on the west coast of Canada that also have that capacity, along with on-dock rail for quick transfer of containers from ship to rail for delivery to Midwest destinations.

For most of its history, from the fur and lumber trade days of the 1600s through the great auto era in the 1900s, Detroit was considered the ideal location in North America for trans-shipping because of its central location on land and water locations for sailing cargo vessels, as well as the short river crossings into Canada. Today, it is seen once again as the ideal inland port for the new global trade route because of the proximity of available land, existing rail and interstate highways and truck access in all directions.

"We see a rare opportunity here," said Roger Lane, one of the project leaders and a former Detroit Edison executive. "If we do not take advantage of this now, we may not have another chance to put Southeastern Michigan back at the center of the global economy for many years."

The Global Gateway project builds on Translinked, a concept initiated by the Detroit Regional Chamber's retired leader, Dick Blouse. In its current form it is the work of its leader and CEO, Dr. Michael Belzer, an economist and planner who teaches at Wayne State University.

"The beauty of this plan is that so much infrastructure is already in place," Belzer said. "It doesn't need a study. It doesn't need a massive plan. It doesn't need much in the way legislative or government approval. The elements need to be linked and coordinated and then managed smoothly. It's really ready to implement and execute."

Lane and Belzer stressed that The Global Gateway and its partners are not in the business of building bridges or tunnels, and do not intend to be.

"It's up to others to decide who builds what, and whether it is a bridge or a tunnel," Lane said. "We've got the means and ability to move the goods, make more jobs, and help build the economy into something vastly bigger than at any time since the auto industry began to decline. And Detroit is the natural place to put this."”

What is exciting about this strategic effort is how it ties into the vision of Michigan capitalizing on its geographical advantage of being in the direct path of the Montreal, Toronto, Windsor, Detroit and Chicago trade corridor. In contrast to the typical perception of Michiganders that Michigan is a peninsula state, this vision of the trade corridor opens great, new opportunities for economic development.

This Gateway effort ties in beautifully with

  • the efforts of Aerotropolis,
  • a freeway to freeway connection for trucks between Windsor and Detroit (whether it be NITC or the Ambassador Bridge),
  • a new train tunnel (or bridge) between Windsor and Detroit that will accommodate double stacked container cars (the current tunnel does not, and the containers need to be unstacked to go through),
  • improved train track between Detroit and Chicago recently funded,
  • areas within Detroit available for redevelopment as multimodal freight hubs and
  • efforts to maintain our state’s existing road and bridges

The Gateway’s information goes on to say:

“A coordinated sea, rail, air and truck trade route between Southeast Asia and the heart of the North American continent that will move Southeast Michigan to the center of the global trade network and spur a vast economic revitalization of the region. Using Halifax as its port and Southeast Michigan as a distribution hub, linked by Canadian rail, the project expects to create $11 billion in new economic activity and 210,000 new jobs over ten years. The Gateway is a strategic plan, ready for implementation and execution that cuts travel time, saves costs, and is sustainable and earth-friendly for shippers and customers.

The Great Lakes Global Freight Gateway facilitates the expansion of freight volumes and logistics development in Southeast Michigan by working directly with Canadian railroads, the State of Michigan and shipping customers. The project builds upon existing infrastructure, is initially focused on increasing rail freight volumes and will take advantage of any new infrastructure assets such as a second crossing from Windsor to Detroit or further expansion of the Aerotropolis.

Southeast Michigan is the closest International crossing with Canada, has land available for development and Canadian rail lines are already located exactly where they need to be for success. One key opportunity lies with the Super Post-Panamax ships currently on order by Maersk, the largest the world has ever seen, each able to carry 18,000 containers per trip. These ships are so massive; they can only land at two Eastern ports, Halifax and Norfolk. Halifax has the capacity to handle these ships and combined with the rail capacity of CN to move goods across Canada directly to Southeast Michigan makes for a winning combination for our region. Our existing highway system, our productive workforce and the Aerotropolis development offer great opportunities for our region to add value to this freight and move it quickly on to other parts of the country. Michigan is also a large Agricultural player and the Great Lakes Global Freight Gateway opens up more channels for export of our agricultural assets to the world market through the same CN/Halifax connection.”

Now this opportunity is something to get excited about! Are we ready for this? You bet!

There will always be other states or countries that will be able to outcompete with us based on lower wages. Despite our significant brainpower centered around our three great research universities and world class companies, there are very smart people in many other places. What no one can take away is our strategic advantage based on our geographical location. We would be fools if we did not do everything we can to capitalize on this.

To BMI or Not to BMI, That is the Question: Update on the Governor's Health Initiative

(This updates the discussion regarding the Governor’s Health Initiative and collecting Body Mass Index (BMI) data, begun in my September 18 post at First Impressions on Governor Snyder’s Message re Health and Wellness; BMI Reporting?)

The Joint Committee on Administrative Rules (JCAR) met on Oct. 6 to discuss a significant portion of the governor's new health initiative.

As the chair of JCAR, I convened this meeting to hear testimony on the proposal by the Department of Community Health (DCH) to ask physicians to submit the Body Mass Index (BMI) of children into the Michigan Care Improvement Registry.

The main testimony was provided by Olga Dazzo, director of DCH. The primary concerns I have heard from the public over this new rule: whether the gathering of the information will be voluntary and how confidential is the data. In other words, people are very worried about their privacy.

Director Dazzo told JCAR that the reason for collecting this data is threefold: to put greater attention on the epidemic of obesity, to provide a body of research data, and to provide tools to physicians they can use in counseling their patients. Gov. Snyder's administration is all about measurement of goals - and the BMI tool gives physicians and the state health agencies a benchmark from which to measure progress.

What I learned at the hearing is that this is a voluntary program on the part of both the physician and the parent, but in slightly different ways. It is an opt-in system by the physician. They can participate in this program or not at their discretion. On the other hand, for a parent to have their children's information excluded, they have to affirmatively opt-out. The reason stated for the difference is DCH doesn't believe enough parents will opt-in to the program.

The BMI data will be more confidentially protected than the immunization data that's already in the Michigan Care Improvement Registry. The proposed rule provides that only physicians may access it under very tightly controlled circumstances. Immunization data may currently be accessed by a wider range of users. The data available to researchers would only be available in de-identified aggregate form - which means it will be anonymous.

A major question that stood out at the hearing is whether this is a cost-effective thing to do. There is some cost at the state level, but it is modest. The benefits are uncertain - because no program of this kind has been implemented to date. Until the BMI reporting begins, there is no way to tell whether or not it will reduce obesity.

The great hope of the governor's office and DCH is that Michigan will see the same success for the BMI reporting program as our state currently has with the immunization program. When the care improvement registry began collecting vaccine data, there were significant increases in immunizations. Whether the immunization data and BMI data is comparable has yet to be determined, but I am skeptical that the same positive impact will occur with BMI data collection. Every parent must submit their child's immunization records to the schools to be admitted, or affirmatively opt-out. People's views about immunization are different from those about obesity - after all, no one's child can catch obesity from another child. Obesity is not contagious.

The second question on whether this will do much good is whether we will learn more from the information in the registry than we do from a general population survey. If physicians are not opting-in to the program and parents are opting-out, any data collected will be incomplete. The data may even be skewed, because certain segments of our population have greater access to medical care than others.

The bottom line is this: there is resistance to the BMI reporting rule. Based on what I've heard from both sides, this is far from a clear-cut decision. The hearing was very worthwhile in terms of public exposure to the details of the proposal.

Overall, the BMI rule is in test drive mode. If it collects valuable data, it's likely that DCH will work to make the program permanent so that we can work toward a healthier Michigan. If no one wants to participate, it'll likely go the way of other unpopular data collection programs, never to be heard of again.

Demagoguery About 48 Month Cut Off for Income Assistance is Off Base

Much publicity has been heard about how awful the Republicans in Lansing have been to institute a hard cap on the number of months a recipient can receive income assistance under the Family Independence Program (FIP) administered by the Department of Human Services (DHS). It is easy to over-simplify a new policy in an attack ad or press release, while it is more difficult to explain the reasons for a complex policy change.

The truth is that of the total of 13,789 cases closed on October 1, 2011, some of which were closed due to factors other than the time limits, 12,868 cases were closed because of the 60 month federal Temporary Assistance to Needy Families (TANF) limit and only 1,194 cases due to the more stringent state 48 month limit. The Family Independence Program (FIP): 48-Month and 60-Month Time Limits, Senate Fiscal Agency, Fall, 2011.

(Note, however, that Judi Lincoln, Policy Analyst with the Center for Civil Justice has said, “They are being cut because of DHS policy (in BEM 234) that creates a 60 month lifetime limit with no clockstoppers or exemptions that counts months from 1996 instead of 2007.  We do not believe that state or federal law supports the DHS policy.” Stay tuned on this contention, as I am not sure this issue was addressed when the judge ordered the DHS to supply new notices to those affected before the benefits could be terminated.) Personal e-mail message, October 14, 2011.

Background on the Family Independence Program

· The Department of Human Services describes FIP as temporary cash assistance for low-income families with minor children. As of August 2011, the average monthly caseload was 80,024 households, or 216,946 individuals.

· Funding for FIP primarily comes from the Federal TANF block grant and the State General Fund/General Purpose (GF/GP) budget, depending on the type of case. As of August 2011, the average monthly costs for both TANF- and GF/GP-funded cases were $33,404,089. The average cost per case per month was $417.

· Pursuant to Federal eligibility requirements, a household must comply with work requirements (or qualify for work exemptions) in order to receive cash assistance.

· A majority of the cases – 83.0% in FY 2010-11 – are funded with Federal rather than State dollars. This means that up to 13,300 of the 66,500 federally funded cases could have fallen under the hardship exemption. . . .

Policy Change: TANF Hardship Exemption

Federal regulations impose a 60-month time limit on the receipt of TANF-funded cash assistance. The Federal government, however, allows states to exempt up to 20.0% of TANF-funded cases from this time limit due to hardship. The Department of Human Services recently decided to eliminate this hardship category, which will result in the closure of more cases in FY 2011-12. These hardship cases have received assistance anywhere from five to 15 years.

. . .

Cases that previously fell under the hardship exemption could have included individuals who might have qualified for a work exemption.

. . .

Federal TANF Work Participation Requirement

The Department of Human Services has indicated that the primary driving force behind the decision to eliminate the 20.0% hardship category is the State's difficulty in meeting the TANF work participation rate.

The State did not achieve its actual target work participation rate in three years: 2007, 2008, and 2010. For example, Michigan's revised target rate in 2007 was 44.3% (and the State actually achieved a rate of just 28.0% that year). As a result, the DHS has already received notification that the State could possibly face both a $24.0 million and a $22.0 million fine for noncompliance in 2007 and 2008. The 2010 penalty could be as high as $25.0 million. By eliminating the hardship work exemption under TANF, the DHS expects to achieve greater success in meeting the target work participation rate in upcoming years.” The Family Independence Program (FIP): 48-Month and 60-Month Time Limits, Senate Fiscal Agency, Fall, 2011.

Thus, it is clear that not only was the state not responsible for the majority of the cases closed, but also the policy change was necessary to avoid huge fines that would have affected the state’s General Fund/General Purpose budget. If being fiscally prudent is a crime, I suspect Governor Snyder will gladly join me in pleading guilty.

Of course, it is easier to attack a policy with one-liners and pithy phrases than provide good policy arguments against the changes.

It is interesting to note that after the DHS notices were sent to the about 11,000 people whose monthly assistance checks would be affected, only about 1,200 requested assistance to participate in “specified job preparation activity” which would meet the “seeking work” exemption. Pundits have concluded that the remainder of the recipients being cut off are only interested in assistance if they don’t have to do anything to get it. DHS is making extensive outreach efforts to assist people to meet the exemption, but only time will tell whether people are really interested in a “hand up”, rather than a “handout”.

Saturday, October 15, 2011

Is the DHS Implementing an Asset Test for Food Assistance Applicants a Good Public Policy? Was it Developed and Announced Via a Good Procedure?

The Department of Human Services announcing the application of an asset test for food assistance for low income people effective October 1 is being questioned by many parties. I will divide the issue into two questions:

  • Is this good public policy?
  • Is this appropriate procedure to enact a rule which significantly affects the people of Michigan?

The most prominent of the objectors is the trio of former State Budget Directors Emerson, Gilmer and Lannoye in Commentary: Asset test for food aid is bad policy, The Detroit News, October 14, 2011. Their main objection is the inclusion of vehicles in the asset test and note that the asset test particularly hurts the newly unemployed.

Simply owning a car (or more than one) with a fair market value over $15,000 would disqualifiy the applicant. To qualify, you would need to sell the car, take your equity (if any) and buy a junker. While this may make sense for the chronically poor, it does not make as much sense for a temporarily unemployed person.

Their argument is that, while the asset test would prevent some obnoxious abuse, the cost of implementing the policy would likely exceed the savings. Add the fact that the savings would be federal dollars, not state dollars, and they question whether this is makes sense.

The Michigan League for Human Services and partners held a press conference Sept. 28 protesting the new food assistance asset test saying it is the wrong time to limit food assistance. Their October 4, 2011 e-mail newsletter says that 48 states and the District of Columbia exempt at least one vehicle (Michigan does not) and 33 states do not count any vehicles in the assets. A majority of states -- 29 -- apply no asset tests on food assistance. But see their report, Bucking the Trend: Michigan to add an Asset Test for Food Assistance which says that 39 states exempt all vehicles, 13 states exempt one vehicle and 2 states just had the standard exemption, as of 2009.

The new asset test includes an asset maximum of $5,000 for households in the food assistance program. That includes liquid assets like checking, savings and draft accounts. The test also includes a $15,000 vehicle asset limit on all vehicles in a household.

“A vehicle is a device used to transport people or goods. Vehicle includes passenger cars, trucks, motorcycles, motorbikes, trailers, campers, motor homes, boats and all-terrain vehicles. . . .

SSI-Related MA
The value of a vehicle is its equity value. Equity value is the fair market value minus the amount legally owed in a written lien provision. Liens must be on record with the Secretary of State or other appropriate agency. . . .
There is a $15,000 limit on countable vehicles owned by the FAP group.

Enter the fair market value of all licensed and unlicensed vehicles and the mileage. Do not allow for options such as low mileage, automatic transmission, power windows and power locks.

Bridges adds together the fair market value of all licensed and unlicensed vehicles which are not excluded and subtracts $15,000 to determine the countable value; see FAP Vehicle Exclusions. If the countable value exceeds $15,000 the excess is applied towards the $5,000 asset limit. For instance, the value of the client’s countable vehicles equals $17,000. The remaining amount of $2,000 is counted towards the $5,000 asset limit.

Exception 1: A licensed vehicle is excluded if the sale of the vehicle would net an estimated return of $1,500 or less. . . .

Exclude vehicles which are leased because the individual has no equity value, cannot sell the vehicle and generally does not have title to the vehicle.” BEM 400 Assets, BPB 2011-017, 10-1-2011, pages 28-29.

Note that the equity value applies for the SSI-MA group, while the total fair market value is used for the FAP group unless the equity value of a vehicle is less than $1500, in which case it is excluded altogether. There are other exclusions which would apply to relatively few claimants.

“There is a $15,000 limit on countable vehicles owned by the FAP group. Enter the fair market value of all licensed and unlicensed vehicles. Do not allow for options such as low mileage, automatic transmission, power windows and power locks. Bridges will subtract $15,000 from the total fair market value(s) of all vehicles which are not excluded. The remainder is then counted toward the asset limit of $5,000.

Example: Client has two vehicles. One has a countable fair market value of $8,000 and the other has a countable fair market value of $10,000. They also have $1,000 in their savings account. Bridges adds the total fair market value of the vehicles together ($18,000) and sub­tracts $15,000. The amount in excess of $15,000 ($3,000) is added to their savings account balance of $1,000 resulting in total countable assets of $4,000.” Bridges October Policy Bulletin. BPB 2011-017 10-1-2011.

Whether the appropriate levels of assets are set in the asset test or whether there should be any asset test are under scrutiny in the House Committee on Family, Children and Seniors. I agree with the trio of former State Budget Directors in opposing implementing an asset test more stringent than the federal government requires.

What is of equal importance with the appropriateness of the policy itself is the process by which the new policy was developed.

Apparently, I was not the only one surprised by the new regulation.

  • Gilda Jacobs, President and CEO of the Michigan League for Human Services, heard on Monday, September 17th, about the DHS's plan to put in place an asset test for the thousands of people in our state on food assistance. Then, DHS To Implement Asset Test For Food Assistance Applicants, was posted on September 19, 2011 at 5:40 PM EDT on
  • Judi Lincoln, Policy Analyst, with the Center for Civil Justice, reported attempts to obtain copies of the new rules prior to the October 1, 2011 effective date, but says she was told by Brian Rooney with DHS that the rules would not be posted until they became effective. She believes that they were sent out to DHS field personnel sometime within 10 days of the October 1, 2011 effective date.
  • Talking Points were sent out to an indeterminate number of recipients on September 29, 2011 by Karyn Ferrick, Director of Legislative Services, Michigan Department of Human Services.
  • The pertinent bulletins dated October 1, 2011 published by DHS that notify interested parties of policy changes were obtained from the DHS at, where all of the policies for all DHS program can be found.

For such an important policy change to have occurred with such little notice and opportunity for interested parties to be heard is troubling. Legislation had been introduced to implement an asset test this year after it was discovered that a winner of an $850,000 payout for winning a $2 million state lottery jackpot continued to legally use a Michigan Bridge Card. The administration chose to adopt the asset test in advance of legislative action.

The department was apparently within its power to do so, without notice and without any affected or interested person having the opportunity to be heard under MCL 24.207, which states that a rule does not include any of the following:

“(n) A policy developed by the family independence agency under section 6(3) of the social welfare act, 1939 PA 280, MCL 400.6, setting income and asset limits, types of income and assets to be considered for eligibility, and payment standards for administration of assistance programs under that act.

(o) A policy developed by the family independence agency under section 6(4) of the social welfare act, 1939 PA 280, MCL 400.6, to implement requirements that are mandated by federal statute or regulations as a condition of receipt of federal funds.”

Note that MCL 400.6 says:

“(4) The family independence agency may develop policies to implement requirements that are mandated by federal statute or regulations as a condition of receipt of federal funds. Policies developed under this subsection are effective and binding on all those affected by the programs. Policies described in this subsection are exempt from the rule promulgation requirements of Act No. 306 of the Public Acts of 1969.

(5) All rules, regulations, and policies established by the family independence agency shall be in writing, shall be provided to the legislature, and shall be made available for inspection by any member of the public at all offices of the family independence agency during regular business hours.”

As stated above, because such policies are not “rules”, they are not subject to the prior notice and hearing provisions of the Administrative Procedures Act. This begs the question, “Should they?” Shouldn’t there be some due process for policies that have the potential of adversely affecting thousands of Michigan residents. MCL 400.6 (5) provides for notice, but only after the fact.

The apparent reason for exempting DHS from the APA process is that DHS would simply be mirroring the federal requirements for the federally funded programs. Thus, the following words were used: “policies to implement requirements that are mandated by federal statute or regulations as a condition of receipt of federal funds”. In the case of the asset test developed by DHS, the more stringent requirements were neither “mandated by federal stature” nor were they needed as “a condition of receipt of federal funds”. Thus, it might be argued that these new requirements should not have been exempt from the APA process and therefore should have been subject to the APA requirements of notice and an opportunity to be heard. Even if not required, it would have been better, under the theory of “transparency” that such notice and opportunity be granted.

Revenues for FY 2010-11 Exceed Forecasts

The House Fiscal Agency announced this week that state revenues exceeded the forecasts from the May Revenue Estimating Conference by $285 million for the fiscal year that ended September 30. HFA said the General Fund was up $140 million, and the School Aid Fund was up $145 million. Meanwhile, The Senate Fiscal Agency, on the other hand, announced that state revenues exceeded forecasts by $431.2 million, with $158.3 million coming from the General Fund and $272.9 million coming from the School Aid Fund. The differences between the two agencies will be ironed out when the final numbers are determined in early November.

As good news as this is, now is not the time to simply go out and spend it.

We were fiscally responsible when finances were down, and we'll be fiscally responsible when they're up. This is onetime funding. We remain committed to doing the right thing and using the funding where it will have the most effect in improving the lives of Michigan residents. Just like for Michigan families, being fiscally responsible means putting money away into savings, paying off long‐term debts and putting money toward priorities, such as getting dollars directly into the classroom.

This funding should be used to pay down the long‐term debts hanging over our children and grandchildren. We owe it to them to give them a brighter future and a state that is better off than when we inherited it. Paying down our debts allows us to make the most of the surprise funding while making no unsustainable commitments to future spending. This money is only temporary and making permanent spending decisions with it is asking for trouble.

We should not, however, simply pay out the funds to schools on a per pupil basis, for example. We can best help schools by helping them pay off the large retirement fund debt that is weighing them down. Doing so puts the impact of the spending squarely on the people who deserve it most ‐‐ Michigan's children. We are making an investment in our future and helping schools now. Any funding for schools must go directly into the classroom for the students. We will make smart, responsible decisions that put our state's future first.

Neither should we simply spend the money on other important programs. It is important that we continue to make sound decisions that move this state forward. Paying down our long‐term debts and preparing for future fiscal emergencies is the right choice. The decisions we made this spring improved Michigan's economic climate and stabilized the government after years of financial band‐aids and other reckless spending. We will continue to lead Michigan back to prosperity with responsible decision‐making and sound investments in our future.

Rebuilding the state's exhausted rainy day fund is also a responsible choice. Hard times are a fact of life in Michigan and in this economy, but we are not as prepared as we could be for the next downturn. Our state has seen many economic ups and downs, and none of us know for sure what next year will bring. Spending the money unwisely will only cause problems for the next generation of leaders in Michigan. Fitch Ratings specifically cited our commitment to keeping debts low and rebuilding our rainy day fund when they improved our credit rating outlook. These fiscally responsible actions have a direct effect on our improving economy.

Making the many cuts earlier this year was not easy, but it would not be wise to simply reverse those cuts now. We remain just as committed to reforming state government and spending practices now as we did when we finished the budget. We are doing the right thing for a long‐term success, not just balancing the budget this year or next. We will continue to emphasize fiscal responsibility by saving what money we can and paying down our debts, because our work is not yet finished and Michigan's future is not yet guaranteed.