Introduction: Calls for Change in Michigan's Foster Youth Benefits Policy

Michigan’s longstanding practice of using federal benefits owed to foster youth as reimbursement for the cost of care has come under increasing scrutiny from advocates, policymakers, and the federal government. Critics refer to this policy as the "orphan tax." While recent state legislation has introduced reforms, advocates say Michigan still has a long way to go in ensuring foster youth retain the full federal benefits to which they are entitled.

Background: The Impact of Federal Benefits on Foster Youth

Justin Kasieta, who entered foster care at age 13 after losing his father, experienced firsthand the effect of Michigan’s previous policy. While his family initially received Social Security survivor benefits following his father’s death, those funds, totaling around $18,000, were redirected to the state after Kasieta entered the foster care system. “After prodding my caseworker for a few months I realized that I was effectively going to be forced to pay for my own foster care,” Kasieta recalled.

Policy Reform: New Legislation and Its Limits

As of October 1, a new law prevents the state from using these benefits solely for reimbursement of care and mandates that at least 50% of federal benefits for foster youth aged 14–17 be conserved for their use after they age out. The remainder—and all benefits for those 13 or under—can be used for needs not otherwise provided by the Department of Health and Human Services, including financial literacy training. This legislation, sponsored by Rep. Kathy Schmaltz (R-Jackson) and Sen. Jeff Irwin (D-Ann Arbor), was signed by Gov. Gretchen Whitmer and marks a step toward benefits conservation for foster youth in Michigan.

Ongoing Advocacy: Push to End the 'Orphan Tax'

Despite this progress, advocates like Kasieta maintain that all federal benefits should be fully conserved for foster youth. Kasieta describes the new law as a “5% or 10% fix,” emphasizing the need for complete reform. The federal government, through the Administration for Children and Families, echoes this position, urging Michigan and other states to eliminate the diversion of these benefits. As a result, the number of jurisdictions capturing all such benefits nationwide has dropped from 39 to 13 over the past year.

Michigan Compared to Other States

According to the Children’s Advocacy Institute at the University of San Diego, twelve states and Washington, D.C., have laws fully protecting federal benefits for foster youth. Michigan is among six states that only conserve a percentage or do so for certain age groups. In the last year, Michigan captured $3.2 million from such benefits, with fiscal analyses projecting the new law could increase state program expenditures by $3.5 million without significant impact on local governments.

Looking Ahead: Federal Incentives and Youth Outcomes

The federal Administration for Children and Families has introduced the “A Home for Every Child Innovation Challenge,” rewarding states that improve the ratio of foster homes to children. In case of a tie among states, those that do not divert Social Security survivor benefits from foster youth will be favored for prize funding ranging from $1 million to $3 million. Kasieta continues to advocate for a complete end to Michigan’s “orphan tax,” highlighting the high rates of homelessness among former foster youth—between 18% and 32% nationally for ages 17 to 21, with Michigan’s rates above the national average.

Conclusion: The Push for Complete Policy Reform

Advocates argue that securing all federal benefits for foster youth is a crucial step toward providing a safety net as they transition to independence. As Michigan weighs further reforms, the debate underscores the broader conversation about child welfare and the role of benefits conservation in supporting the state’s most vulnerable young people.

Source: bridgemi.com.