Did one man’s luck turn into a financial catastrophe for Michigan’s poor?
Mention the name Leroy Fick in a room of social service agency directors, and the temperature drops. Heads shake. Shoulders slump. Curses are mumbled.
Fick won the lottery -- and 15,000 people will lose their food assistance, as of Oct. 1. That’s the too-simple, but easily digestible, story of Michigan’s welfare reform.
The Auburn man, who continued to receive food stamps after winning about $850,000 in a Michigan Lottery game show in 2010, was held up as an example of abuses of Michigan’s welfare system. Come October, an estimated 15,000 families will lose food stamps when the Department of Human Services changes its eligibility guidelines to exclude Fick -- and anyone else with assets greater than $5,000.
Thousands more will lose cash assistance the same week as a result of a new 48-month lifetime limit on aid -- and heat assistance after a state-run program lost its source of cash this summer.
Rightly or wrongly, Fisk was cast as the catalyst for the impending catastrophe for the poor. How much is he actually to blame? It depends on who you talk to, but the most likely answer is very little. Yet Fick has become the unlikely villain for both the political right and the left -- held up as the symbol of welfare excess by fiscal conservatives and used as a scapegoat for changes to the system by social liberals.
Fick may be the most notorious lucky man in Michigan. After the 59-year-old Auburn resident won $2 million in the lottery game show “Make Me Rich” in June 2010, he continued to collect food stamps, which are financed with federal dollars. He didn’t cheat. He didn’t lie. In fact, he called his Department of Human Services caseworker within a week to say he’d won the lottery and that he figured he needed to turn in his Bridge Card, a state-issued debit card for food and cash assistance.
But Fick still qualified for food stamps, the DHS worker told the lottery winner. Food assistance is based only on income; because Fick had chosen to take a lump-sum payment of about $850,000, instead of monthly payments spread over 20 years, his winnings were considered an asset, not income.
Feeling that luck was continuing to shine on him, Fick kept using food assistance for the next 10 months, driving his newly purchased 2008 Audi TT sports car to and from the grocery store.
The food stamps hit the fan in May, though, when a disgruntled neighbor tattled to a local TV station. Fick didn’t help his cause with his first TV interview. “If you’re going to try to make me feel bad” about using food stamps after winning the lottery, Fick said defiantly, “you’re not going to do it.”
Within days, the story of the food stamp millionaire had spanned the globe. Michigan legislators jumped into action, introducing bills to force lottery winners’ names to be cross-checked with DHS assistance recipients.
“I am not going to sit and debate the ethics of this,” Fick’s attorney, John Wilson, said earlier this year, “but from his standpoint, he did what he was supposed to do. The problem is with the state.”
State officials jumped to fix the Fick problem, and, in the process, they are knocking another estimated 15,000 families off food stamps.
Fresh off serving on a task force examining the underground cash economy in Michigan, DHS Director Maura Corrigan believed some Michiganians were gaming the system, collecting food stamps on a low level of reported income, while figuratively stuffing their mattresses with cash.
Gilda Jacobs, president of the Michigan League of Human Services, scoffs at the notion of a state filled with undocumented cash. “Maybe people are in an underground economy because they can’t make enough money because they can’t find a regular job,” Jacobs said. “They’re not reporting their baby-sitting dollars? Come on! There’s this myth that everyone is out there trying to defraud the system.”
While food stamps are a federal program, each state has some leeway in setting guidelines. Corrigan changed the state’s eligibility guidelines to take into account not only a person’s income, but their assets as well.
A person with $5,000 in assets no longer would receive food stamps. Here’s how it will work:
*A person’s home doesn’t count toward the asset limit, as long as the person lives there; a second house, such as an Up North cottage or rental home, does count.
* The total value of all family vehicles, including cars, trucks, boats, all-terrain vehicles and recreational vehicles, cannot exceed $15,000. Every dollar over $15,000 counts against the $5,000 limit.
For example, a family that owned a beat-up 2001 Chrysler Town & Country minivan ($3,500), a decent 2004 GMC Sierra truck ($14,000) and a 15-year-old snowmobile ($950), could have a total vehicle value of $18,400, according to Kelly Blue Book, the same vehicle valuation system the state plans to use (snowmobile value was taken from eBay). The $3,400 in excess of the $15,000 vehicle limit would count against the family’s asset limit – meaning they could have only $1,600 in non-vehicle assets and still qualify for public assistance.
* Certificates of deposit, money market accounts, bank account balances and cash on hand count as assets; retirement accounts are excluded.
“The director wanted to go back to the integrity of the program,” said Colleen Rosso, DHS director of communications. “These are federal dollars, but I’m a federal taxpayer and so are you. We need to keep those dollars for people who really need it.”
DHS sent out about 5,000 letters this month to food stamp recipients telling them they were being removed from the program because their assets were believed to be higher than $5,000; Another 80,000 letters were sent to food stamp recipients who the state isn’t sure about; those recipients must provide proof of assets by Sept. 30 (letters were sent Sept. 20) or be cut off, too.
The state estimates 15,000 families will lose benefits immediately, with more families cut off as recipients undergo their annual case reviews over the next 12 months.
Brian Rooney, director of policy and compliance for DHS, said Michigan crafted its asset-based guidelines off of those of Texas. The Lone Star State has a lower unemployment rate than Michigan, but also has a higher poverty rate. Michigan has the third-highest unemployment rate in the nation, 11.2 percent, and has a poverty rate of 17 percent.
Currently, 33 states do not have an asset test for food assistance, and 15 of the remaining states exclude one family vehicle from assets, according to the Michigan League of Human Services.
MLHS' Jacobs said she expects the recently unemployed will be impacted the most by the asset test, because they may still have a fairly new car and other niceties of a middle-class life.
Forcing the unemployed to trade in newer cars for older ones in order to get food stamps is counterproductive, Jacobs argues, because older, less reliable cars add another hurdle to finding work.
“It’s going to be a couple of months until we see the real impact,” Jacobs said. “We are going to have a lot of hungry people in this state. We already know a lot of food banks are experiencing way higher usage than they used to ..."
Meanwhile, another 11,000 families are expected to lose their cash assistance beginning next week, because of the state’s new 48-month lifetime limit on cash assistance. Social service agencies have been gearing up for an expected flood of phone calls next week from people who don’t understand why their Bridge Cards are empty.
At the same time, a program that helps pay heating bills for 95,000 needy families is on the blink.
In July, the Michigan Court of Appeals struck down the financing system used by Michigan’s Low Income and Energy Efficiency Fund. The Legislature hasn’t created a new funding mechanism.
“The timing (of assistance cuts) couldn’t be worse,” Jacobs said. “You have to look at layer after layer of erosion.
“DHS is operating under these crazy expectations that there is going to be a safety net out there for a soft landing for these people,” Jacobs said, “and it doesn’t exist.”