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. . . .
FAP
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 17^th, 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 WLNS.com.
  
• 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 http://www.mfia.state.mi.us/olmweb/ex/html/, 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.