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House Research Department Updated: August 2010 Minnesota Family Investment Program Grants: Calculation and Exit Points Page 4

The MFIP “exit point,” or income level at which a family becomes ineligible for a grant, is not specified in statute. It is calculated mathematically as the income level at which earnings minus the 37 percent disregard equals the family wage level. In 2010, a family of three will be ineligible for MFIP when its monthly earnings reach $1,754. After applying the 37 percent disregard, this family’s earnings equal $1,106, which is the 2010 family wage level for a family of three. Because the family’s earnings after disregard equal the family wage level amount, the family’s MFIP benefits are $0, and the family becomes ineligible for MFIP. This exit point for a family of three translates to an hourly wage of $10.12, or annual earnings of $21,050.

Comparing the MFIP exit point to the federal poverty guidelines makes it easier to understand how much income a family can earn before becoming ineligible for a grant. During the development of the MFIP legislation in 1997, policymakers often discussed the program’s exit point as a percentage of the poverty guidelines. At that time, 1996 federal poverty levels were the most recent available, and the program’s exit point was at 120 percent of the 1996 federal poverty level for families with two, three, and four members. However, policymakers did not consider that the exit point as a percentage of the poverty guidelines varies with family size and that it was a lower percentage of the poverty guidelines for larger families. Currently, the program’s exit point is 115 percent of the federal poverty guidelines for families with three members. Table 3 shows the exit point in 1997 and 2010 (for families with up to five members) as a percentage of the poverty guidelines and as an hourly wage.

Table 3 MFIP Exit Points Family Size 1997 Exit Point as a Percent of 1996 Poverty Guidelines 2010 Exit Point as a Percent of 2009 Poverty Guidelines 2010 Exit Point as an Hourly Wage 1 94% 83% $7.25 (24 hours/week)6 2 121 110 $7.70 (full-time) 3 121 115 $10.12 (full-time) 4 119 116 $12.31 (full-time) 5 116 114 $14.09 (full-time) House Research Department

Table 3 shows that for families with more than one member, the exit point varies as a percentage of the poverty guidelines based on family size. In 2010, the exit point is 110 percent for families of two members, and 114 percent for a family of five. This is because the poverty guidelines increase by $3,740 with each additional family member, compared to a smaller increase in the MFIP transitional standard as family size increases.

Absent specific intervention by policymakers, the MFIP exit point as a percentage of poverty will decrease from year to year for families of all sizes. Each year, the federal poverty guidelines

6 A one-person family will be ineligible for MFIP when the person works at least 24 hours per week at minimum wage—now $7.25 per hour.