October 21, 2019

Michigan Follows the Evidence to Encourage Savings while Reducing Economic Insecurity

October 21, 2019

Last week, Michigan governor Gretchen Whitmer announced plans to raise asset limits and make them consistent across three programs serving low-income families.

Previously (PDF), Michigan families could have savings of no more than $5,000 to qualify for food benefits, $3,000 to qualify for cash benefits, and $500 to qualify for emergency relief benefits. This policy change raises the new asset limit to $15,000 for all three programs. All programs still require applicants to have low incomes.

Urban Institute research, which informed Michigan officials as they debated this decision, found that policy changes like this improved families’ financial security in the following ways:

  1. More savings among low-income households. In states that removed or relaxed asset limits, families were 8 percent more likely to have at least $500 in savings. This level of saving (between $250 and $750) has been found to reduce economic hardship in the face of volatile income.
  2. More participation in the mainstream financial market. Families were 5 percent more likely to have a bank account.
  3. Lower SNAP “churn” and administrative costs. The likelihood that households cycled on and off the Supplemental Nutrition Assistance Program (SNAP) decreased 26 percent. A less burdensome recertification process possibly contributed to this trend.

Misunderstandings about program eligibility rules may lead families to keep assets very low, and paperwork requirements could lead to interruptions in benefit receipt.

Michigan Department of Health and Human Services director Robert Gordon echoed these findings when announcing the new policy. “Michigan is unusual in saying that in addition to having a low income, families also have to establish that they have almost nothing in the bank to receive public assistance,” he said.

He added, “Most states have moved away from stringent asset tests because they are hard to administer, they lead to higher administrative costs as people come on and off programs more frequently, and they discourage low-income families from saving to build a better future.” 

A Trump administration proposal could reverse this step

Michigan and other states can remove or relax SNAP asset limits set at the federal level thanks to a policy known as broad-based categorical eligibility (BBCE).

But a recent proposal from the Trump administration would significantly limit states’ ability to use BBCE. As detailed in three Urban Institute issue briefs, the changes would end SNAP benefits for:

  • 2 million people in working families
  • more than 2 million people in families with children
  • more than 750,000 people in households with seniors

These groups are particularly vulnerable to food insecurity and rely on SNAP for stability in their finances, health, and general well-being. This is especially true in areas with higher costs of living, an issue that BBCE has allowed states to address.

Michigan sets an example for other states—and the nation as a whole—by relying on evidence to inform policies aimed at helping low-income people find economic stability.

Photo of governor Whitmer announcing the new policy courtesy of WWMT-TV Newschannel 3. 

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As an organization, the Urban Institute does not take positions on issues. Experts are independent and empowered to share their evidence-based views and recommendations shaped by research.