How we got here

How Michigan came to redirect welfare money, known officially as Temporary Assistance for Needy Families, or TANF, to help pay the tuition at expensive, private schools has its roots in two seismic events of the recent past. First, welfare reform, passed during the Clinton Administration 20 years ago, which gave states broad discretion in distributing anti-poverty funds. Second, the great recession of 2008, which led Lansing to divert tens of millions of dollars in anti-poverty money to student aid.

But after a decade in which Michigan has slashed cash assistance to the poor, some question the state’s generous approach to funding student aid with welfare money.

“We shouldn’t be paying for financial aid for upper-income students with money that should be going toward making a more robust safety net for poor people,” said Peter Ruark, senior policy analyst for the Michigan League for Public Policy, a nonpartisan Lansing-based group that advocates for the poor, which gathered income data on families obtaining welfare aid.

All told, Michigan has spent a billion dollars in federal welfare money since 2007 on scholarship programs for college students, many at private colleges where annual tuition can exceed $40,000. About 60 percent of students who get the aid come from families with incomes above $50,000.

At the same time, the state has cut TANF spending that goes directly to cash assistance for the poor by over $500 million.

Under the Clinton-era welfare reform, intended to get families off government assistance and into jobs, states were given broad leeway in allocating federal money for the poor, but it is not unrestricted. States must show they are directing the money to programs that fulfill one of four aims:

Helping needy families

Getting recipients into jobs

Reducing out-of-wedlock pregnancies

Encouraging two-parent families.

And if you were to guess which category Michigan cited to redirect welfare money to college aid, you might well guess wrong.

The state justified the switch by saying that college aid helps prevent out-of-wedlock pregnancies. The rationale: If students are in college, they’re less likely to experience an unplanned pregnancy.

Breakdown of welfare spending Here's how Michigan budgeted its $820.4 million in federal welfare money, called Temporary Aid to Needy Families, or TANF, in the 2013-14 fiscal year.

Many in Lansing acknowledge that the optics of using welfare money for middle-class students at more expensive colleges is striking, and advocate uncoupling the two. But to do so now, some say, will require more money -- money that may be hard to find in Lansing as education advocates push for even more funding – on top of the $100 million that includes TANF money – for college student aid.

“To my knowledge there’s not a spare $250 million sitting around to make a significant increase in student financial aid,” said Robert Lefevre, president of the Michigan Independent Colleges and Universities, a 25-school group whose members include Albion College.

Kurt Weiss, spokesman for Gov. Rick Snyder’s State Budget Office, said there are no current plans to revisit how Michigan distributes anti-poverty funds to students from more affluent families attending expensive private schools.

But Weiss added in an email that the administration is “certainly open to discussing this issue and looking at the best ways to meet the needs of Michigan’s children and families. As you know, there are many demands on General Fund spending, and the General Fund pie is only so big.”

Middle-class benefits

Students of middle and upper-income families are able to qualify in part because the aid programs consider family need in the context of the price tag of the school their children wish to attend. And many of the state’s private colleges are more expensive than public schools.

More than 50,000 Michigan students annually are getting scholarships backed by TANF. At Olivet College in Olivet, nearly 85 percent of students received a welfare-backed scholarship or grant; at Hope College in Holland, where the median family income of students getting financial aid was over $86,000 in 2013, more than half of its in-state students got TANF-backed aid, even though only 20 percent of Hope students were awarded a Pell Grant.

The situation is markedly different at Michigan’s public universities, where the award of TANF-based aid is more aligned with student poverty levels.

In-state students attending Michigan’s 15 public universities are only eligible for the Michigan Competitive Scholarship, which has required a student to have scored at least a 23 on the ACT college admission test. (For graduates in 2017 and beyond, the ACT score will not be considered; students will have to have at least a 1200 on the SAT).

At nearly every public university, the proportion of students awarded a Pell Grant exceeded that of students earning a Michigan Competitive Scholarship.

At Michigan State, for instance, just under 20 percent of in-state students got MCS aid, while 23 percent of students were awarded a Pell Grant. At Western Michigan, just 7 percent of in-state students got an MCS while nearly 40 percent were awarded a Pell Grant.

The 2007 dilemma

Welfare money on campus Michigan will spend nearly $99 million in federal anti-poverty money on scholarships and grants for college students this year, more than 10 percent of all of its federal Temporary Aid for Needy Families money. It goes toward three programs. Michigan Tuition Grant The MTG is for Michigan residents who attend one of the state’s private non-profit schools. Maximum award is $1,830. It got $31.6 million in TANF funding. Last year, 21,893 students got a MTG. Michigan Competitive Scholarship The MCS is for Michigan residents who attend an approved Michigan post-secondary school. They must get a score of at least 1200 on the SAT (previous recipients had to get a 23 on the ACT). Maximum award is $636 for students at public colleges and universities and $1,830 at private ones. It got $18.4 million in TANF funding. Last year, 29,527 students got a MCS. Tuition Incentive Program The TIP is for Michigan residents whose family income qualifies them for Medicaid. Maximum award is $2,000. It got $48.3 million in TANF funding. Last year, 18,189 got a TIP award.

What prompted the funneling of welfare money into college aid? The strangling economics of the Great Recession, which the administration of then-Gov. Jennifer Granholm determined needed a creative fix.

Back in 2007, as the state was scrambling to make up huge deficits, budget officials realized the state could lose tens of millions dollars in TANF funds because of how Michigan was spending the federal money. The feds didn’t want Michigan, or any state, to use federal welfare money to replace each state’s own obligations to the poor. So states had to show they too were putting in a certain amount of funds annually for needy families.

So budget officials had an idea: Take general fund money that was already going to scholarships and put it in the Department of Health and Human Services budget, where TANF lived, to “maintain” state funding levels as required by the feds. Then use TANF money that was already in the DHHS budget to plug the now-gaping hole in financial aid and call it “pregnancy prevention.”

It would look like state funding in DHHS has actually increased, with TANF money now shifted to another approved category for needy families – pregnancy prevention. It was a classic bureaucratic shell game -- neither fund lost a penny and the budget crisis was averted.

And the feds were fine with the switch, in part because welfare reform encouraged states to think more creatively. Indeed, other states also found inventive ways to spend that money.

But what started as a quick-fix became a permanent fixture of the state budget. In the upcoming fiscal year, more than $98 million in federal welfare money will be spent on college scholarships.

Lefevre, of the independent colleges organization, acknowledged that the budget fix that put TANF money in students’ aid packages was a “bad fit.”

“Ten years later, should we still be doing it? I think the answer is no. But we still have the (funding) problems.”

Welfare money aids college students across Michigan More than 51,000 Michigan residents got college financial aid in the 2013-14 school year that was backed with federal anti-poverty money. Some of it went to students of middle or higher incomes at private schools with far higher tuition costs than public institutions, through the Michigan Competitive Scholarship or Michigan Tuition Grant. School In-state students Awarded MCS or MTG aid % getting MCS, MTG % getting

Pell Grant Annual tuition Michigan State University 27,153 5,187 19.1% 22.7% $12,862 Davenport University 6,952 4,044 58.2% 52.6% $14,096 Grand Valley State University 19,450 3,456 17.8% 36.2% $10,716 University of Michigan-Ann Arbor 15,687 3,074 19.6% 15.7% $13,142 Baker College 4,451 2,511 56.4% 68.3% $8,100 Central Michigan University 18,823 2,099 11.2% 36.3% $11,220 University of Detroit Mercy 2,605 1,745 67.0% 28.3% $35,920 Spring Arbor University 2,564 1,627 63.5% 45.4% $23,400 Siena Heights University 2,051 1,432 69.8% 41.1% $21,890 Madonna University 3,063 1,373 44.8% 31.9% $16,340 Cornerstone University 1,778 1,349 75.9% 42.2% $24,168 Calvin College 1,927 1,287 66.8% 22.9% $28,250 Northwood University 2,310 1,276 55.2% 33.7% $22,130 Western Michigan University 16,770 1,227 7.3% 38.6% $10,355 Oakland University 15,978 1,205 7.5% 32.1% $10,613 Hope College 2,168 1,200 55.4% 20.9% $28,720 Ferris State University 12,284 1,118 9.1% 41.2% $10,466 Aquinas College 1,747 1,110 63.5% 32.7% $26,460 Michigan Technological University 4,127 1,040 25.2% 25.6% $13,728 Eastern Michigan University 16,318 1,004 6.2% 43.9% $9,364 Adrian College 1,261 954 75.6% 41.4% $30,758 Wayne State University 17,678 950 5.4% 47.9% $11,094 Saginaw Valley State University 8,888 898 10.1% 38.2% $8,423 Lawrence Technological University 2,538 886 34.9% 16.9% $28,948 Olivet College 1,031 871 84.5% 51.1% $23,021 Kettering University 1,379 831 60.3% 26.1% $35,600 Alma College 1,268 826 65.2% 28.8% $32,660 Marygrove College 969 741 76.5% 72.2% $19,850 Albion College 1,168 732 62.7% 25.0% $36,051 College for Creative Studies 1,113 719 64.6% 34.5% $35,710 Northern Michigan University 6,494 610 9.4% 38.8% $9,037 University of Michigan-Dearborn 6,693 504 7.5% 43.0% $10,614 Rochester College 924 475 51.4% 42.2% $19,920 Kalamazoo College 849 444 52.3% 20.3% $39,450 University of Michigan-Flint 6,776 384 5.7% 41.9% $9,356 Finlandia University 391 323 82.6% 55.8% $20,480 Lake Superior State University 2,129 310 14.6% 38.9% $9,960 Cleary University 427 295 69.1% 48.2% $18,720 Grand Rapids Community College 16,521 275 1.7% 41.5% $2,898 Concordia University 432 229 53.0% 37.3% $23,563 Grace Bible College 425 215 50.6% 64.6% $12,235 Kuyper College 246 187 76.0% 50.7% $18,454 Lansing Community College 17,406 185 1.1% 41.0% $2,720 Andrews University 495 180 36.3% 29.3% $25,470 Delta College 10,265 180 1.8% 44.7% $3,095 Macomb Community College 23,428 140 0.6% 22.8% $2,859 Northwestern Michigan College 4,562 133 2.9% 40.1% $2,724 Great Lakes Christian College 179 117 65.3% 72.2% $14,500 Oakland Community College 26,358 117 0.4% 36.5% $2,397 Schoolcraft College 12,223 95 0.8% 36.9% $3,140 Jackson College 5,356 95 1.8% 53.4% $3,504 Mott Community College 9,677 95 1.0% 53.9% $3,209 Kalamazoo Valley Community College 9,817 88 0.9% 44.7% $2,758 Muskegon Community College 4,863 80 1.6% 43.7% $3,265 Kellogg Community College 6,111 78 1.3% 37.0% $3,054 St. Clair County Community College 4,324 74 1.7% 37.3% $3,437 Henry Ford College 13,754 71 0.5% 51.5% $2,518 Southwestern Michigan College 2,253 61 2.7% 53.2% $4,689 Washtenaw Community College 12,152 58 0.5% 35.8% $2,352 Mid-Michigan Community College 4,473 58 1.3% 48.7% $2,732 Compass College of Cinematic Arts 71 52 73.7% 50.6% $13,915 Lake Michigan College 4,047 47 1.2% 44.7% $3,930 Bay De Noc Community College 2,199 45 2.0% 49.7% $4,243 Alpena Community College 1,674 35 2.1% 51.2% $3,870 North Central Michigan College 2,446 34 1.4% 54.5% $3,083 Gogebic Community College 849 28 3.3% 52.0% $4,114 Montcalm Community College 1,944 26 1.3% 50.9% $3,150 Monroe County Community College 3,653 25 0.7% 35.9% $3,190 West Shore Community College 1,487 20 1.3% 48.8% $2,322 Kirtland Community College 1,797 19 1.1% 57.5% $3,355 Wayne County Community College 17,889 19 0.1% 59.7% $2,716 Glen Oaks Community College 1,196 10 0.8% 40.9% $2,964 Bay Mills Community College 503 - 0.0% 58.0% $3,040 Source: National Center for Education Statistics and Michigan Department of Treasury 2013-14 student aid report.

Marketplace, a national public radio program, analyzed federal data and concluded that Michigan is one of just eight states that spends less than 25 percent of its TANF money on those areas at the core of the “welfare-to-work” reform package of 1996: cash assistance to struggling families, work support and child care. And much of what Michigan spent on pregnancy prevention was for college financial aid.

TANF-based scholarships are now an accepted part of the education landscape, from the least expensive public universities to the most costly of private institutions. And those who push Lansing to boost state higher-education funding contend that Michigan needs more money for scholarships and grants, not less. The state now ranks 30th in need-based funding.

A proposed solution

That puts people like Brandy Johnson, executive director of the Michigan College Access Network, which advocates for making college more accessible and affordable, particularly to low-income students and students of color, in a position of advocating that TANF money stay in the college-aid budget, in part because of the state’s strapped resources.

“There’s no better use of those funds to help needy families” escape the cycle of poverty, Johnson said.

But she offered a caveat: Set the “needs” threshold so that the college money stays with low-and middle-income families, putting a family median-income cap of perhaps $60,000 to $75,000 on TANF-backed grants.

Ruark, of the Michigan League, said he too does not want the state to take steps that would reduce financial aid. He wants the state to help both students and the poor.

“We certainly would not want to see financial aid reduced,” Ruark said. “What we really do want to see is low-income people and families prioritized in the budget.”

He said one of the best ways to help the poor is to increase direct cash assistance to poor families. It helps pay rent for those not eligible for subsidized housing, and it can help with transportation, he said.

Yet the number of Michigan residents receiving cash aid has fallen by more than two-thirds since 2011. In 2015, the most recent year available, an estimated 16 percent of Michigan residents lived below the poverty line.

Welfare recipients can get up to $492 a month in cash aid but the number of state-funded recipients fell to about 13,000 in 2016, down from 45,500 in the 2011 fiscal year, as the state tried to recover from the recession and following a law enacted in 2007 that put a four-year time limit on welfare benefits.

“Right now we have by far the lowest caseload since the Kennedy Administration,” Ruark said. If the TANF money now dedicated to student aid went toward cash assistance, it could help another 16,600 people in the state for a full year.

Ruark and others say the decision to divert welfare funds to college aid needs to be revisited. Weiss, the governor’s spokesman, said Snyder is open to that conversation. Finding the will – and the money--- may be harder.

“We’re now past the recession. We should be using general fund dollars for (financial aid),” said State Rep. Sam Singh, D-East Lansing. “We need to have a conversation how we use TANF dollars and use them effectively.”