Meeting basic needs during an economic crisis: What stands in our way? Michigan League for Human Services Meeting basic needs during an economic crisis: What stands in our way? March 8, 2009 Interfaith Council for Peace and Justice Annual Meeting Opening remarks Thank group for attending Introduction of the League/yourself 1115 South Pennsylvania Avenue, Suite 202, Lansing, MI 48912-1658  (517) 487-5436 Fax: (517) 371-4546  Web site: http://www.MiLHS.org A United Way Agency

Breadwinners can’t support families in four out of six top Michigan jobs Poverty Threshold $21,027 While Michigan is losing higher-paying manufacturing jobs, it has abundant lower-paying jobs. Simply put, breadwinners can’ support families in four out of the six top Michigan jobs. This chart lists the six occupations with the most employment in May 2007, and the median annual income for those occupations. The four jobs shown here that fall below the dotted line do not pay enough for a full-time worker to lift a family of four out of poverty. The largest occupation, retail sales, had jobs with a median annual income of about $20,000. For a family of four, the poverty threshold was just over $21,000 in 2007. Cashiers’ pay would mean 82 percent of poverty. Office clerks are at 118 percent of poverty…above poverty but considered ‘near poor’ Registered nurses’ pay is the highest, pushing a family of four to 285 percent of poverty That’s followed by food prep and fast food workers. They come in at 75 percent of poverty, and waiters and waitresses are slightly below that at 74 percent of poverty. At the League, we understand that it’s good thing to have a job and it’s good that there are jobs available, but it should be understood that many will not pay wages to support a family. And many bread-winners do hold the lowest-paying jobs. The Economic Policy Institute estimates that 24 percent of those impacted by the July 2008 minimum wage increase were parents. That includes those workers directly affected by the increase or those who were making slightly above minimum wage and also were expected to see a spillover increase One thing this chart is clear about, and that’s the need for training. RNs have either a two-year or a four-year degree and their wages are three times that of retail workers. (sources: MLHS Labor Day report and Economic Policy Institute) Retail Cashiers Office Clerks Registered Food Prep/ Waiters & Salespersons Nurses Fast Food Waitresses Workers Note: Four of six occupations with the highest employment in May 2007 will not lift a family of four out of poverty Source: U.S. Department of Labor, State Occupational Employment and Wage Estimates

Michigan’s income declines This chart show the decline of Michigan’s median household income. The red bars are Michigan’s median household income since 2001. The navy blue line is the national median household income. Michigan has long enjoyed higher-than-average wages. That has changed. By 2007, as you can see here, Michigan’s median household income of $47,950 slipped well below the national median of $50,740 (These nos. are adjusted for inflation to 2007 dollars) Source: Data obtained from the American Community Survey and tabulated by the Coalition for Human Needs Chart by the Michigan League for Human Services

Food Assistance: Record high Food Assistance Caseload Since 2001 Here is another trend that shows what is happening to real people out there. The Food Assistance, formerly called food stamps, has reached historic highs, jumping from 250,000 households in 2001 to 600,000 households. That’s more than 1 million people. That means one in every eight in Michigan rely on Food Assistance. That’s starting to close in on the poorest states. In Louisiana and Mississippi. it’s one in seven. One silver lining here for Michigan is that food stamps are federally funded. With our strained state budget, it’s important that this lifeline continue into our state. Also, Michigan is what’s known as a donor state – we send more money to Washington than we get back, mostly because we have a small military presence. While food assistance is growing, on the next slide you will see a trend we’ve been watching with growing alarm -- the drop in cash assistance. (Sources: Michigan Department of Human Services and Center on Budget and Policy Priorities) Source: Michigan Department of Human Services Prepared by the Michigan League for Human Services

Cash assistance declining FIP Caseload Since 2001 Because you have to be extremely poor to qualify for help (earning less than $814 a month for a family of three) fewer and fewer are qualifying. DHS caseworkers are reporting displaced workers who seek help for their families after the unemployment benefits expire, only to be told that they haven’t fallen far enough yet to get help with cash assistance. Another trend that we believe is influencing this is Michigan’s requirement that applicants prove citizenship for Medicaid and cash assistance. That requirement went into effect in April 2007. Since then, cases have dropped, despite growing need as evidenced by the jump in Food Assistance cases that we saw on the previous slide. In addition, some tougher work sanctions have kicked in, too. Source: Michigan Department of Human Services Prepared by the Michigan League for Human Services

Number Unemployed, Food Assistance Cases and FIP Cases Since 2001 Let’s look at them all together. The bottom line is the FIP caseload. That’s the public assistance grant, what many people know as welfare. It is going down even as the number of unemployed workers climbs and the Food Assistance caseload grows dramatically. Source: U.S. Bureau of Labor Statistics and Michigan Department of Human Services

Why are things so bad? Aggressive tax cuts throughout the 1990s Structural deficit – cost of programs rising faster than revenue Auto industry dislocation National economic crisis Tax increase fix in 2007 is temporary

Michigan's Projected School Aid and General Fund Structural Deficit (FY2008 - FY2018) Prepared by Michigan League for Human Services

Priority shift Percentage Changes in General Fund Spending as a Share of Michigan's Economy (1985 vs. 2009). Over the past two decades, Michigan has seen a dramatic shift in spending priorities. When you compare state spending against our state wealth, you see a big priority placed on corrections and disinvestments in health and human services, higher education and revenue sharing, which pays for municipal services such as police and fire protection. We need to shift back to those things that makes communities and citizens stronger and more productive Calculations by Michigan League for Human Services

What Should We Do? Use the federal stimulus money wisely Do not continue to cut taxes Modernize the revenue structure through comprehensive reform

What Should We Do? Cont’d. Reform Michigan’s income tax; enact a graduated income tax Broaden the sales tax base to include more services Begin to address senior tax preferences Adjust the beer and wine tax for inflation

Michigan’s outdated tax structure misses sales tax on services Michigan taxes only 26 of 164 identified services, ranking it 38th in the country. Other Midwest states tax 51 services on average. Sources: Federation of Tax Administrators and the US. Census Bureau Prepared by Michigan League for Human Services

Michigan leads country in tax breaks for seniors (U.S. median .64%) -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% Data Source: How Much Preference: Effective Personal Income Tax Rates for the Elderly, April 2002, by Barbara Edwards and Sally Wallace, Fiscal Research Center, Georgia State University. Prepared by MLHS. Reduction in effective income tax rate for seniors

What Should We Do? Cont’d. Eliminate tax expenditures by closing tax loopholes (i.e. outdated or unfair credits, exemptions, deductions and exclusions)

The rising cost of tax loopholes Estimated Michigan Tax Revenues & Tax Revenue Loopholes (in Billions) Data Sources: Michigan Department of Treasury Executive Budget Appendix on Tax Credits, Deductions and Exemptions FY2005 - FY2008 and Department of Management and Budget Comprehensive Annual Financial Reports. Calculations by Michigan League for Human Services

What Should We Do? Begin to address corrections policies Cont’d. Begin to address corrections policies Reinvest in programs and services important to our quality of life

Fax: (517) 371-4546  Web site: http://www.MiLHS.org Michigan League for Human Services The Michigan League for Human Services is a state-level policy organization focused on the needs of Michigan’s low-income families and individuals. The League’s activities include research, analysis, public education and advocacy. The League was founded in 1912 and is a private, nonprofit charitable organization. 1115 South Pennsylvania Avenue, Suite 202, Lansing, MI 48912-1658  (517) 487-5436 Fax: (517) 371-4546  Web site: http://www.MiLHS.org A United Way Agency