Gloria Steinem to Keynote Assets Learning Conference, Platforms for Prosperity
By Bob Friedman on 08/28/2014 @ 05:00 PM
Gloria Steinem—feminist leader, author and activist—will keynote CFED’s Assets Learning Conference, Platforms for Prosperity, in the Closing Plenary, addressing the parallels between the assets movement’s radical assertion that the poor can save, start businesses, go to college, buy and keep homes, and be full stakeholders in our economy, and another once-unthinkable idea: that women and men should have equal rights and opportunities. Gloria will remind us of our collective power to push for a more just society where all people are financially secure and have the tools and opportunities to fundamentally improve their economic position.
There are few leaders who have done as much to build liberation movements for all people—the half of our population that are women and girls, and more broadly all people whose opportunities are constrained, whose talents and promise are ignored, undervalued, wasted. She has been pivotal in building the modern women’s movement, but has been just as active in the movements for economic and social justice, civil rights, human rights, disability rights, citizenship rights and more. Gloria is synonymous with movements. Who better to talk about the role and how to build the assets movement?
Gloria has guided and inspired us at CFED throughout our history. Too few people realize that the self-employment/microenterprise field in the United States was an outgrowth of the women’s movement. At a time when the labor market offered women few living-wage job opportunities, the U.S. microenterprise field emerged to recognize and assist low-income women in creating jobs and incomes for themselves. Through her Ms. Foundation and Magazine pulpit in the 1980’s, Gloria helped recognize, shape and propel what is now known as the U.S. microenterprise field.
A staunch supporter of asset building and CFED, Gloria was the emcee of CFED’s 30th Anniversary Gala, adding grace, humor, insight, inspiration and inclusiveness to the celebration. Her role as the keynote of our Closing Plenary is fitting at CFED’s 35th anniversary, as we embark on a new path to expand the assets movement, because she will encourage us to think big and be bold and make new and larger connections. As she often says, “dreaming is a form of planning.”
On November 20, 2013, President Obama presented the Presidential Medal of Freedom—the highest civilian honor in the US—to Gloria. I do not know whether that was a bigger honor for Gloria…or for freedom. In remarks to the National Press Club the night before, she both demonstrated why she so deserved the honor, and mapped the path ahead in her own profoundly inclusive, visionary, grounded and brave approach:
“How do we move forward? It’s not rocket science. We need to worry less about doing what is most important, and more about doing whatever we can. Those of us who are used to power need to learn to listen as much as we talk, and those with less power need to learn to talk as much as we listen. The truth is that we can’t know which act in the present will make the most difference in the future, but we can behave as if everything we do matters."
“Humans are linked, not ranked. Humans and the environment are linked, not ranked.”
“[R]emember, the end doesn’t justify the means; the means are the ends. If we want dancing and laughter and friendship and kindness in the future, we must have dancing and laughter and friendship and kindness along the way…”
“At my age, in this still hierarchical time, people often ask me if I’m ‘passing the torch.’ I explain that I’m keeping my torch, thank you very much – and I’m using it to light the torches of others. Because only if each of us has a torch will there be enough light.”
We hope that if you are able to join us for the Assets Learning Conference, you can stay for the Friday afternoon plenary to experience first-hand the ways in which Gloria can ignite an entire field full of advocates.
Support the ABLE Act as it Nears the Finish Line in Congress!
By Emanuel Nieves on 08/28/2014 @ 11:15 AM
Significant Asset Building Policy Nears the Finish Line; Congress Needs to Hear From You!
Early this month, something rare happened—Republican and Democrats on the House Ways and Means Committee unanimously voted to move forward on a meaningful and generous asset-building bill. For people with disabilities and all in the asset-building field, passage of the Achieving a Better Life Experience (ABLE) Act would be a significant victory. The bill would allow people with disabilities to save without fear of losing public benefits.
The bill has strong support in both chambers of Congress (379 co-sponsors in the House and 74 in the Senate). There is cautious optimism that it could be one of the last bills signed by the President this year. But, it will not become law until it is passed by both House and Senate chambers. Your representatives in Washington, DC, need to hear from you!
Congress returns to Washington in early September and may take up this bill soon after—contact your Representative and Senators and tell them to support the ABLE Act!
- Call 202.224.3121 and ask to be connected to your Senators’ and Representative’s office. If you don't know who your Representative or Senators are, find out here: House, Senate.
- Once you're connected, here's what to say:
My name is [your name] from [your organization or coalition]. I’m calling to ask you to support House Bill H.R.647 / Senate Bill S.313, the ABLE Act of 2013, so that people with disabilities are able to save, expand their economic opportunity and have the chance to gain economic self-sufficiency.
Please do it for the people with disabilities in your communities who want to save for a more secure future!
Background on the ABLE Act:
If enacted, the ABLE Act would create a new tax-free “ABLE” account, treated much like existing 529 college savings plans, allowing people with disabilities and their families to save money to cover qualified disability-related expenses, such as education, housing, transportation, employment support, health and other miscellaneous expenses. The ABLE Act also would exclude the first $100,000 saved in an ABLE account from asset limits for all federally-funded public benefit programs.
For more information about the ABLE Act, the World Institute on Disability has a more detailed overview on their website.
All Good Things
By Alexander Scarlis on 08/27/2014 @ 10:30 AM
My final blog post as CFED’s Government Affairs (GA) Graduate Student Intern will hopefully give you a sense of what I did these last three months and what I’ve learned.
We interns were told early on that we’d have to write this post so I must confess something. To make writing it a little easier, I kept a diary of tasks I performed. Then I color-coded it. Please forgive my OCD. It’s only occasional.
- Blue for blog posts.
- Green for writing projects and related research (e.g., fact files, comment letter on regulations)
- Red for research projects that required no final written product other than a brief memo/email.
- Orange for covering events like think tank panels, conference calls, CFED’s staff summit, webinars; includes cleaning up my notes. Much could be viewed online so I rarely left my desk.
- Brown for coalition work, i.e., engaging with partner organizations.
- Pink for “politicians”: Capitol Hill visits, congressional hearings (all viewed online to facilitate note-taking), conference calls with staffers; includes cleaning up my notes.
- Black for editing others’ publications (all GA team members edit each other’s writing).
Doing this confirmed what I’d felt throughout the internship: advocacy work is rarely boring. There’s just too much variety. Reviewing the diary, I already see three different colors shading my first week, four colors by the second week, and six colors by the fourth.
Of course, this level of diversity didn’t last. Although no week other than the first ever dropped below four colors, only the last week of July brought a rainbow of seven. A list of what I did that week is illustrative of the type of work I’ve been doing:
- Edited a report on tax policy and another report and accompanying blog post on credit history
- Finished my notes covering a Senate hearing on empowering women entrepreneurs
- Covered a Joint Economic Committee hearing on increasing economic opportunity for African Americans, and wrote a blog post and accompanying tweets about a board member’s testimony
- Covered a SunTrust Bank/Operation Hope event launching their partnership on financial literacy
- Updated a database and map I created showing partner sign-on’s to a coalition letter I co-wrote asking members of Congress to oppose a bill Drafted and revised a blog post on the Urban Institute’s report on delinquent debt in the U.S.
- Wrote a one-pager for CFED’s Savings and Financial Capability team on new language relating to financial literacy in the recently reauthorized Workforce Investment and Opportunity Act
- Continued revising my fact file on prize-linked savings
Here’s a rough idea of how much time I spent on each category of tasks:
For those considering a government affairs internship, you may be surprised that not more time was devoted to Congress. Remember:
- You’re an intern, not a registered lobbyist.
- This town is dead in August (congressional recess).
- Government affairs, at least at CFED, is much more than rubbing shoulders with members of Congress and their staffers or covering hearings. Unless you’re a constituent, you’re not getting in the room (and taken seriously) without proof of credibility. These folks have way too much going on to have their time wasted (despite Congress’s negative reputation, it’s important to recall that they’re trying to collectively steer the most powerful country on Earth). For anti-poverty non-profits like CFED, that proof of credibility comes in the form of expertise. That expertise is derived from in-depth research and the on-the-ground experiences of the state and local anti-poverty non-profits that comprise the Assets & Opportunity Network that CFED coordinates.
CFED is blessed to have a crack Communications team that exports the in-house expertise wherever and whenever possible. Yet the government affairs staff must also exhibit excellent communications skills of their own. It’s one thing to know something well; it’s another thing to talk and write about it well enough that people actually pay attention.
As I prepare for another school year, I plan to build my expertise (specific poverty policy TBD) and communication skills. I leave CFED with a stronger understanding of asset policy and federal advocacy (and manufactured housing!). I am grateful to CFED staff, and my GA (and other 2nd floor!) peeps in particular, for their guidance, support and sense of humor!
The Importance of SB 896
By Paul Day on 08/26/2014 @ 04:15 PM
August is a momentous month for the asset-building field. Thanks to the tremendous work of our partners at Mission Asset Fund, SB 896 became law in California, making it the first state to recognize credit-building as an important tool for increasing social mobility.
The bill received unanimous bipartisan support through the legislative process, with zero votes in opposition. This is testament to the strength of the arguments in favor of asset-building with 17 California nonprofits providing letters in support of the legislation.
What does the bill do? Basically, for years the California legislature has been trying to regulate and impose fees on payday lenders to squash the practice, but it hasn’t worked. Low-income people are drawn to these high-interest loans because they have few other options.
SB 896 paves the way for nonprofits to provide more affordable small-dollar loan alternatives with lower interest rates. The legislation establishes a licensing exemption within the California Finance Lenders Law, which will make it easier for nonprofit organizations to expand their lending.
SB 896 will enable people with limited credit histories to finance the capital they need to start microbusinesses. With access to affordable lending products, borrowers can improve their credit histories and become part of the financial mainstream.
CFED celebrates the passage of SB 896—and we applaud the California legislature for this important step toward making asset building a recognized strategy to create opportunities that improve the lives of the underbanked. We look forward to seeing more forward motion on similar legislation in other states. Stay tuned!
IDA Programs Empower the Homeless to Afford Homes
By Ken Brown on 08/26/2014 @ 10:00 AM
This guest blog post was originally published on August 15, 2014 in City Limits. We thank Ken Brown and City Limits for this insightful editorial.
Individual Development Accounts are tools used to accelerate the savings of low-income individuals. Typically they are used for the initial capitalization for a small business, a down payment on a home and post-secondary/vocational education.
Through the tool of matched deposits, clients contribute a contracted amount into a depository institution (i.e.: bank) for a specified length of time. At the termination of the contracted period or when the agreed-to maximum match amount has been reached, the monies are withdrawn using a two-party check. These monies can then be used exclusively for the purpose of moving from shelter to housing in the community. Further, financial literacy classes are a requisite component of the program. Case managers can also make referrals to credit counseling and other pertinent resources. The expectation is that these IDAs are used to help those individuals currently residing in shelters to exit more expeditiously to permanent housing.
RSS IDAs are also politically appealing. This is not a simple hand-out. Participants have to contribute a portion of their money to the account. The match is then provided contingent upon their contribution. This is in line with the "help those who help themselves" ethic. An IDA is also one of the few tools that transfers wealth to low-income people. As banks and depository institutions are an integral part of this program, this is an opportunity for the financial industry to do good for those with less.
The spirit of Franklin Roosevelt’s second inaugural address informs this project. As he was inaugurated for his second term he said, "By using the new materials of social justice we have undertaken to erect on the old foundations a more enduring structure for the better use of future generations."
IDAs not only help the poor to accumulate assets and thereby enable them to make purchases that increase their potential for further ascendance in the economy, but also inculcate beneficial skills and habits. These benefits from IDAs have been known since their beginnings in this country.
Michael Sherraden, arguably the father of the American IDA industry, said in testimony before the President’s Commission on Social Security in 2001, "IDA participants are willing to make consumption sacrifices in order to save….Effects of saving and asset accumulation appear to be multiple and positive in areas such as work behavior, home ownership, confidence and control, and plans for education."
There is, at present, no IDA program operating that helps homeless people leave shelters. If IDAs can be used for the sorts of purchases as listed above, why could they not be used to help those in shelters attain independent housing?
The attempt to wed IDAs to shelters was successfully done in Toronto, Canada. A pilot program was run in Ontario, Canada from 2006 to 2009. If Toronto was able to implement an IDA program for shelter participants, then why should not New York City do likewise? New York would be an excellent place to start such an initiative, considering the great resources here in academia, social science research organizations, media and philanthropy. This concentration of resources bodes well for the popularization and replication of such a program when it is successful. In addition, New York City is the founding member of the Cities for Financial Empowerment Fund, whose mission it is to embrace financial empowerment strategies and replicate successful models that can improve the financial well-being of individuals and families.
In Toronto, Independent Living Accounts were used in shelters. The match rate varied from $1:$2 to $1:$3. Of the sample of 129 participants, 78 percent completed the six-month minimum savings period, and 44 percent met or exceeded the maximum matched amount of $400 per person. Clients deposited a total of $33,139. The total match monies added was $78.937. Thus over a period of 8 months (the maximum time surveyed), a total of $112,076 was accumulated and available for clients. This averages to $1,149.95 per successful participant.
By replicating and modifying the experiences of IDA programs elsewhere, an IDA program can be created in New York City to similarly help move residents from shelters into housing in the community. Not only will it reduce the city's large shelter population, it will foster financial literacy and sound saving habits among a population that's been given little other opportunity to learn or develop them.
Now is an opportune time to launch such a program. In Washington, D.C., CFED will next month host the Assets Learning Conference, among the roundtable plenaries will be, IDAs in Shelters. This affords an opportunity to announce to the nation (and there are typically participants from all over the word), that New York City is, again taking the lead in assisting the poor in moving away from deprivation and towards the Middle Class.
Why are Retirement Tax Programs So Upside Down, and What Can We Do about It?
By Ezra Levin on 08/25/2014 @ 10:00 AM
Over the last few days since the release of CFED’s new paper, Upside Down: Retirement Tax Programs, we’ve learned three things:
- Reasonable people on both sides of the aisle agree: retirement tax programs are just another form of government spending.
- Retirement tax programs totaled $128 billion in spending in 2013. This is bigger than the discretionary budgets of 14 of the 15 U.S. cabinet level agencies. In a word, enormous.
- The less income you have, the less retirement tax programs help you. The top 1% gets more than the bottom 80% combined.
This final post addresses the next natural question: why are these programs so upside down, and what can we do about it?
In short, there are three structural flaws that cripple these programs:
- The higher a household’s tax bracket, the larger the retirement tax benefit. Imagine two families in two different tax brackets: the Henderson and Hiltons. The Hendersons have an annual income of $70,000, which puts them in the 15% tax bracket. The Hiltons have an annual income of over $500,000, which puts them in the 39.6% bracket. Now let’s assume that both families saved $5,000 into a traditional IRA or DC plan. As a result, the Hendersons’ tax refund check next year will be $750 bigger—$5,000 multiplied by their 15% tax rate. But the Hiltons’ benefit will be even bigger at $1,980—$5,000 multiplied by 39.6%. Both families chose to save for retirement. Both saved into the same type of account. Both qualified for a deduction. But the Hiltons received more than 2.5 times the support from the retirement tax program, simply because they had higher income.
- Existing retirement tax programs subsidize very high levels of savings. We know that households at the very top save much more for retirement than most families. And the existing retirement tax programs subsidize this astronomical level of savings. A 2013 article in Forbes Magazine described how a worker with income of $300,000 can combine various tax-preferred plans to shelter nearly $170,000 of income from taxes. The scheme costs a few thousand dollars in accountant fees, but the taxpayer stands to gain tens of thousands of dollars in retirement tax benefits.
- Most workers don’t have access to an adequate retirement savings product. A household can’t benefit from retirement tax programs if they don’t save, and they can’t save without access to an account. While Keoghs, 401(k)s and other tax-supported retirement plans cater to the wealthiest households, millions of workers lack access to a safe, simple and affordable retirement savings account.
Okay, three flaws. So can we do about it? Well, we can—and must—change how retirement tax programs work. The model shouldn’t be tax-supported accounts with large barriers to entry, but rather targeted support for working families who need help the most. Simply providing incentives isn’t enough—workers also need access to simple, safe and affordable retirement accounts in order to save at all. Congress has a lot of options:
- Replace the upside-down system with a refundable credit that helps all workers build retirement savings.
- Expand and reform the Saver’s Credit to help more savers.
- Create reasonable contribution limits for tax-supported accounts, and use the freed-up federal dollars to expand support low- and moderate-income savers.
- Create a universal, simple, safe and affordable retirement savings account for all Americans.
- Ensure automatic enrollment in retirement savings programs to boost participation.
Upside Down: Retirement Tax Programs goes into detail on these concrete reforms. But the bottom line is simple: there is nearly $130 billion on the table to expand retirement for millions of American workers. In other words, Congress can vastly expand retirement security for million of workers without spending an extra dime—they just need to turn our upside-down retirement tax programs right-side up.
Who Receives the $128 Billion Federal Bonanza Spent on Retirement Tax Programs?
By Ezra Levin on 08/22/2014 @ 02:00 PM
Yesterday, with the launch of CFED’s new paper, Upside Down: Retirement Tax Programs, I wrote about the size of federal spending on retirement tax programs. You can read the full post here, but the main takeaway is this: retirement tax programs are widely acknowledged to be just another type of federal spending, and this spending amounted to $128 billion in 2013—an absolutely huge amount by just about any standard. The next natural question is: who’s on the receiving end of all this federal spending?
The short answer is: mostly the highest-income Americans. The long answer is the same, but includes some colorful/infuriating charts, so read on.
…But, actually, hold on a minute first. Think about what you’ve just read. These are government programs. Huge ones, in fact—$128 billion in a single year. And the spending is mainly going to the wealthiest Americans. Let that sink in.
Okay, now let’s get to the colorful graphs.
Think of an American taxpayer in the top 0.1%, Millionaire Mike, with an income of $7.6 million. Now think of an American taxpayer in the bottom 20%, Low-Income Larry, with an average income of $14,000. Who do you think is going to need the most help building up savings for a financially secure retirement?
If you answered Millionaire Mike, you’re right! Or, well, at least the federal government thinks you’re right. Millionaire Mike and his top 0.1% buddies each get an average of $16,115 from federal retirement spending programs. Larry gets $27. Twenty-seven bucks. Two. Seven. You can’t make this up.
All told, the federal retirement tax programs sent more help to the top 1% of tax filers than to the entire bottom 80% combined.
And these programs are upside down to their core. The top 0.1% group gets more help than the top 1% group, which gets more than the top 20% group, which gets more than the group below that—and so on and so forth down to Larry’s measly $27. As your income goes down, your retirement savings support goes down, too.
In short, the federal government is actively diverting retirement security spending away from those who need the most help building retirement security. When we talk about an “upside down” retirement tax program, this is what we mean. If this sounds perverse, inefficient and inequitable, that’s because it is.
If you’re not angry, you’re not paying attention—or you just think tax policy is boring. But hopefully you can overcome the eye-glazing effect of the words “exclusion,” “deduction,” “refundable credit” and the like, because this is blood-boiling stuff. This is economic inequity of the greatest magnitude. This has to be stopped.
There is one bright spot in the unforgiving world of retirement tax programs: the Saver’s Credit. This program helps low-income workers who put money away for retirement. But the Saver’s Credit is flawed by complexity and is minuscule in size—it’s less than 1% of total spending on retirement tax programs. Still, the Saver’s Credit is proof of concept: low- and moderate-income families will take advantage of retirement tax programs if given the chance.
This proof of concept is important for the next post: how can federal reforms fix this bizarre upside down system? Feel free to peruse the full paper for the answer here, or join us next week for the final post in this series.
Asset Building News Round Up: August 22, 2014
By Paul Day on 08/22/2014 @ 11:30 AM
Startup Founder 101
Tuesday, August 26, 2014, 6:30 – 9:30 PM
Intelligent Office (1924 Gallows Rd, Vienna, VA)
Hear candid talks by successful entrepreneurs, sharing best practices, strategies and mistakes to avoid from those who have done it before.
Business of Advocacy
Monday, September 8. 2014, 9:00 am – 12:00 pm
Hall Of States (444 North Capitol Street, NW Washington, DC)
This session provides an in-depth look into management and operational strategies that are vital to an effective and fiscally sound government relations (GR) shop.
Immigrants, like all consumers, need access to high-quality financial services that both facilitate day-to-day transactions and set them up for long-term success. A new report from the Center for Financial Services Innovation (CFSI), “Investing in the American Dream,” examines these unique financial circumstances and identifies seven key strategies that financial institutions can adopt to build long-term relationships with this underserved demographic group.
In the latest Brookings Essay, Economic Studies expert Richard Reeves examines an issue so threatening to the American ethos that President Obama has called it “the defining issue of our time.” Today, children born into the poorest parts of American society have a slim chance of moving upward. Even worse, their chances are often decreased by a number of factors outside their control, such as race or class.
Kids learn important money lessons from watching you earn, spend, save, and borrow. The CFPB and the FDIC are working together to help better prepare America’s young people to make financial decisions to achieve their own goals, throughout the stages of their lives. Check out the new CFPB Parents and Caregivers Resource Page.
New Mexico Community Capital is expanding its Native Entrepreneur in Residence (NEIR) Program, which is designed to assist Native American business owners in growing their enterprise to the next level. This helps create greater economic competitiveness for Native American-owned businesses and accelerates job creation in New Mexico communities.
Assets & Opportunity Network
The passage of SB 896 makes California the first state to regulate and recognize credit-building as a vehicle for good. With this law, credit-building becomes the next frontier for asset-based policy. Click here for more info.
The Unbelievable Size of Federal Retirement Tax Programs
By Ezra Levin on 08/21/2014 @ 05:00 PM
Today CFED released a new analysis the federal investment in retirement tax programs. The paper, Upside Down: Retirement Tax Programs, covers four topics:
- How much the federal government spends on retirement tax benefits
- Who receives the bulk of this spending
- The three flaws that make these programs upside down
- Policy reforms that would turn the programs right side up
Over the next couple of days, I’ll go over each of these sections in some depth on this blog. For today, lets just look at the most basic question: what are these tax programs and how much do we spend on them?
Simply put, tax programs are government spending. In the retirement savings world, these programs take the form of tax deductions, deferrals, exclusions and credits. They’re often referred to as tax expenditures, tax breaks, tax spending or tax loopholes. That last term is way off though—these aren’t accidental loopholes. These are government programs that use federal resources to encourage specific activities—in this case, retirement savings.
No need to take my word for it—this is widely agreed upon. Stanley Surrey, the Assistant Secretary of the Treasury in the 1960s, coined and defined the term “tax expenditures” as “government spending for favored activities or groups, effected through the tax system.” A member of President George W. Bush’s Council of Economic Advisors described tax programs as “spending in disguise.” Two tax experts who served at separate times as President Clinton’s Deputy Assistant Secretary for Tax Analysis took the same view. So does Sen. Coburn, the Republican conservative stalwart (ranked among the top 10 conservative Senators by Heritage Action!). In short, like defense programs, Medicaid, foreign aid, Section 8 and every other type of government program, tax programs are government spending.
Okay, so it’s government spending. With that in mind, five types of retirement tax programs cost the federal government $128 billion last year:
- $50.7 billion for Defined Contribution plans, like 401(k)s
- $37.9 billion for Defined Benefit plans, the traditional pension plans that are slowly fading out of existence
- $19.4 billion for the little-known Keogh plans, which are geared toward high-income small business owners
- $19.3 billion for Individual Retirement Accounts (IRAs), which function similarly to 401(k)s but are usually set up by workers rather than employers
- $1.2 billion for the Saver’s Credit, a small credit aimed at increasing retirement savings for low-income workers.
It can be hard to put big budget numbers in context. How many zeroes make a program substantial? Is $128 billion a lot?
Here’s one way to think about it: let’s imagine that a new cabinet-level Secretary of Retirement Tax Programs is created. Sitting with the President in the Cabinet Room, with the other 15 cabinet-level secretaries, the new Secretary could be confident that her budget would be larger than the discretionary budgets of every other secretary in the room except for the Secretary of Defense. In short: yes, an annual budget of $128 billion is a colossal amount of spending.
Upside Down: Retirement Tax Programs goes into a bit more detail for each of the points above. Tomorrow, I’ll dive into the next question: who receives support from this $128 billion in federal spending? If you’re dying to know and you don’t mind spoilers, feel free to go take a look at the complete paper.
Oregon IDA Initiative Expands Administrative Capacity
By Fran Rosebush, Jessica Junke and Amy Shir on 08/21/2014 @ 02:30 PM
With $10 million in revenue each year and having opened over 3,000 Individual Development Accounts (IDAs), the Oregon IDA Initiative is one of the largest statewide asset-building networks in the country. Yet, while the program has enjoyed success after success, it had concerns about its long-term sustainability and continued scalability due to inefficiencies in systems that were straining programmatic resources of their local IDA network partners.
Realizing that improvements in these systems would be essential to helping more Oregonians build savings and wealth, the Oregon IDA Initiative, an Assets & Opportunity Network Lead State Organization, sought assistance through the Asset & Opportunity Network Technical Assistance Fund. With assistance, they hoped to identify and improve inefficiencies in two systems: data transfer between financial institutions and local partners and match disbursal processes.
Seeking Efficiencies in Data Transfer Systems
Currently, the Oregon IDA network has 23 financial institution partners. Only a handful of them provide automatic Electronic Data Transfers of account information, meaning transaction data must be manually entered by local IDA providers each month, costing time and programmatic resources.
Although many programs use a manual process for getting data into Outcome Tracker, such a process is unsustainable for the Oregon IDA Initiative given their growth. Thus, the Initiative sought to tackle this problem by working with financial institution partners to identify why financial institutions did not transfer data electronically.
In the process, Initiative staff learned that financial institutions are able to provide these data, but that doing so raises concerns about data security. Therefore, building relationships between financial institutions and the Initiative would be essential. In order to ensure that banks and credit unions are willing to provide data electronically, community organizations responsible for administering IDAs must prove themselves as trusted custodians of transaction data.
A key lesson from this project comes from the Oregon IDA Initiative’s realization that in order to achieve the scale they are seeking, it is in their interest to focus on relationships with financial institutions that are willing to share account information through Electronic Data Transfer. Also, the geographic distribution of physical branches across Oregon can be sparse beyond metro area, and limiting the financial institution partners could be a concern for their rural IDA participants. Luckily, ATM coverage is widespread and most necessary participant savings account transactions could occur at ATM branches.
Seeking Efficiencies for Match Disbursal Processes
Another challenge facing the Initiative was the rigidity with which they had to disburse Assets for Independence (AFI) funds into the accounts. With help from the TA Fund, the Oregon IDA Initiative worked with AFI to make the IDA fund disbursement process more flexible and efficient. A lesson gleamed here is that IDA providers can reach out to AFI to discuss possible flexibilities in the match disbursal process—there may be more options available to you.
While these inquiries alone increased the Initiative’s bandwidth to offer IDAs to low- and moderate-income Oregon families, Initiative staff learned in the process that AFI permits lump-sum deposits into IDAs designated for microenterprise development, which is not a feature of accounts designated for other asset purchases. This means that such deposits can be used to capitalize a business, expanding the accountholders’ ability to build wealth in the long-term.
Oregon IDA Initiative continues to seek ways to increase efficiencies of their network by piloting relationships with online financial institutions. CASA of Oregon has launched a pilot with One Pacific Coast Bank, an online financial institution which already hosts IDA saver accounts in California and Washington. One Pacific Coast Bank has an appetite for IDA accounts, so as part of the pilot, CASA hopes to combine participant savings with match funds, disbursing both in one payment to vendors where possible. Although this approach has not yet been tested, the fact that One Pacific Coast Bank is willing to tackle this efficiency leaves us hopeful. What CASA learns from this pilot might guide us in asking other institutions to innovate.
Additional research into ways that networks are seeking efficiencies to support scale is being done by other IDA networks with Outcomes Tracker to create a client portal in their database where clients can access their account information, complete forms and receive automatic reminders to save. This is an example of how leveraging technology tools can allow programs to provide a hybrid of both in-person and virtual interactions with clients to support their goals of increasing their scale.
Insights like these do much to inform the work of staff members at IDA programs throughout the country. This is what makes the JPMorganChase Technical Assistance Fund unique. Beyond simply providing direct TA to organizations facing challenges in their asset-building programs, the TA Fund goes one step further to help extend the lessons gleaned from the delivery of the TA to other organizations in the field. Asset-building organizations that are selected for the JPMorganChase TA Fund can extend what they learn to other organizations, broadening and deepening the knowledge base to the benefit of all of us.
In the coming months, CFED will report on the lessons of the other organizations that have participated in the Technical Assistance Fund. We extend our gratitude to JPMorganChase for supporting the Fund and we look forward to working with them and the selected organizations to curate insights that improve programmatic outcomes.
The Oregon IDA Initiative is led by Neighborhood Partnerships, a Portland-based nonprofit dedicated to creating opportunity for people with low incomes. To learn more about the Oregon IDA Initiative, click here.
Bank of the West: Expanding Homeownership Opportunities
By Chris Bernal on 08/19/2014 @ 05:00 PM
In April, CFED, in partnership with Bank of the West, solicited applications from Individual Development Account (IDA) programs to support homeownership initiatives in key Bank of the West markets in California and Arizona, particularly those serving ethnically diverse individuals and families. Nine outstanding programs were chosen based on specific selection criteria outlined in the initial RFP and each received a $12,450 grant to support their initiatives.
We are excited to introduce these organizations and congratulate them on their excellent work:
- Alliance for African Assistance (AAA): Alliance for African Assistance aims to address the needs of San Diego’s growing refugee population. Through its IDA program, it provides financial literacy assistance, case management, IDA account management, Home Management Education and Credit Counseling. AAA’s current homeownership IDA program, started in 2010, includes homeownership education classes and counseling.
- California Coalition for Rural Housing (CCRH): CCRH supports the production and preservation of decent, safe, and low-cost housing for rural and low-income Californians. Starting in 2006, CCRH has offered multiple IDA programs designed for diverse homeownership models, such as first-time homebuyers, families living in foreclosed homes and self-help housing.
- Community Housing Development Corporation (CHDC): CHDC strives to improve housing opportunities for current and future residents of Contra Coast County, California. CHDC’s IDA Program, started in 2004, is currently coupled with extensive financial fitness education classes, one-on-one counseling sessions and first time homebuyer financial education workshops.
- International Rescue Committee (IRC) of Tucson, Arizona: The IRC provides opportunities for refugees to thrive in America by offering a full range of services and assistance, including assistance towards homeownership for refugees to attain self-sufficiency in their new home. IRC has offered a homeownership IDA track since 2001, and currently offers workshops and classes to complement its savings account program.
- New Economics for Women (NEW): Founded in 1985 as the first Latina-operated nonprofit community economic development organization in the United States, NEW is dedicated to the economic security of women, especially immigrant women, in low-wealth communities throughout the greater Los Angeles area. NEW started its homeownership IDA program in 2004 and has served mono-lingual Spanish-speaking families overcome barriers to homeownership.
- Newtown Community Development Corporation: Newtown has a mission to increase the supply of permanently affordable housing while developing and supporting homebuyers through innovative programs and partnerships in Arizona. Newtown started offering IDAs for homeownership in 2001 and currently offers classes, training and workshops alongside its homeownership savings accounts.
- RISE (Reach. Invest. Succeed. Earn.) Financial Pathways: RISE, formerly Community Financial Resource Center (CFRC) is a Community Development Financial Institution offering comprehensive and innovative ways to build wealth for historically underserved residents in South Los Angeles and across L.A. County. RISE has a long history administering and providing IDA programs, starting in 2003, and currently offers a comprehensive plan to support homeownership. Alongside the savings account, RISE offers homebuyer counseling, credit repair assistance and multiple workshops and trainings.
- Self Help Enterprises (SHE): Founded in 1965, Self Help Enterprises is dedicated to self-help housing, sewer and water development, housing rehabilitation, multifamily housing and homebuyer programs in the San Joaquin Valley of California. Starting in 2009, SHE has offered an IDA program designed for first-time homebuyers in their seven county service areas.
- Women's Achievement Network and Development Alliance (WANDA): WANDA is a privately funded nonprofit that is successfully increasing the economic self-sufficiency of low-income, single mothers in the San Francisco Bay area. Since 2008, WANDA provides an IDA program with extensive workshops on personal and professional development along with networking and coaching opportunities provided by donor volunteers after a period of financial literacy training.
We look forward to hearing more about how they are supporting their IDA participants in becoming homebuyers in the coming months!
CFED would like to thank Bank of the West for sponsoring this opportunity and for its continued support of IDA programs across the country.
Asset Building News Round Up: August 15, 2014
By Paul Day on 08/15/2014 @ 01:15 PM
The Nonprofit Management Institute
September 9-10, 2014
Frances C. Arrillaga Alumni Center, Stanford, CA
According to a new report from the Brookings Institution, the share of people living in neighborhoods with 40 percent or higher poverty grew by 76 percent between 2000 and the 2008-12 period. And that concentration is growing in suburban neighborhoods in particular, as shown in this Vox article.
The FDIC announced the launch of a pilot program to identify and highlight promising approaches to offering financial education tied to the opening of safe, low-cost savings accounts to school-aged children. Read more here.
CFED's Doug Ryan was featured in Shelterforce's blog, arguing that homeownership is still American’s greatest source of wealth and asset appreciation and a key component of CFED’s work. He argues that in order to make it a realistic possibility for more American families, policymakers and practitioners need to focus on tools and strategies to advance homeownership safely and responsibly.
As many as one in 20 older adults in the United States may be financially exploited, a new study suggests. In fact, most older adults have had their money or property stolen or used improperly at some point, the researchers found. What's worse is that this abuse often occurs at the hands of their relatives. Read more here.
At a time when many parents between ages 40 and 60 should be increasing their retirement savings, a recent report by Sallie Mae, “How America Saves for College 2014,” found just 55 percent of American families are saving regularly for college costs, and of that number, 18 percent of parents plan to use their retirement savings for college expenses.
The Brookings Institution released a report on how the Temporary Assistance for Needy Families (TANF) program responded to increased unemployment during the Great Recession. Read more here.
5 Things You Should Know About #ALC2014
By Paul Day on 08/15/2014 @ 09:00 AM
In case you were wondering, here are five things you should know about the Assets Learning Conference (ALC) on September 17–19, 2014.
The ALC is the largest gathering of asset-building professionals in the country. With over 1,200 attendees, the ALC is your best opportunity to learn and share insights about the field from professionals in many different areas including housing, state and federal policy, children’s savings, microbusiness, social services and more!
There are a wide range of new topics covered. From innovative approaches like “Bringing People Closer to Opportunity through Transportation Equity” to looking at what’s next with “Financial Education 2.0: What is the Way Forward,” the Conference brings together five plenary sessions, more than 60 concurrent sessions, a dozen roundtables, five capacity-building intensive workshops and a variety of other special sessions delivering the latest insights from the asset-building field.
Beginners are welcome. New to the field? We have something for you. You can make the ALC your training opportunity with many sessions aimed at professionals just starting in the field. Look out for an overview of the best options for those getting started.
Have your voice heard on Capitol Hill. On Thursday, we’ll be on Capitol Hill making legislative visits and for many attendees this is a tremendous opportunity to educate legislators about the asset-poverty issues in their community.
Pre-registration closes on August 29 (and that’s also the deadline to take advantage of the special hotel rate). The 2014 Assets Learning Conference is just one month away, which means it’s time to register! Join us September 17-19 at the brand-new Marriott Marquis Hotel in Washington, DC, for the largest-ever gathering of asset-building professionals.
Insights from the Assets & Opportunity Network Technical Assistance Fund Pilot
By Fran Rosebush on 08/14/2014 @ 12:00 PM
Nine months ago, the Assets & Opportunity Network kicked off its first experiment with formal peer technical assistance (TA) to Network Lead Organizations. With funding from the JPMorgan Chase Foundation, 11 organizations from the bank’s national footprint received targeted TA to address their specific challenges and needs. Lead Organizations sought assistance on a range of issues, including:
- streamlining an inefficient Individual Development Account data reporting process
- getting an asset-building coalition off the ground
- integrating financial coaching agency-wide
- replicating the peer lending circle model in a new locale
Each of these TA projects provided valuable advice, resources and approaches to the organizations directly involved, but they also offer up some lessons and insights relevant to others in the Assets & Opportunity Network. Next week, we’re kicking off a blog series to share what was learned through each project. Over the next several months, each project will be featured in a separate post and will share lessons learned, plus links to the tools and resources created.
Here’s what’s in store:
- The Oregon IDA Initiativewill discuss inefficiencies they faced with IDA reporting and fund distribution processes and the solutions they are identifying for their network.
- Center for Asset Building Opportunities will share how they are working with Mission Asset Fund to implement peer lending circles into the Los Angeles Financial Coaching Network.
- Connecticut Asset Building Collaborative will share how their steering committee worked with facilitators to identify the vision and goals of their newly formed coalition, as well as the activities, structure and resources needed to get there.
- Women's Opportunity Resource Center will share their goal of identifying a revenue-generating asset-building strategy to expand their portfolio and the strategy ideas sparked from a series of internal and external interviews.
- Minnesota Asset Building Coalition will share their new asset-building resource documents created to share with new stakeholders at regional meetings to provide easy-to-follow overviews of seven key asset-building strategies.
- Maryland CASH Campaign will discuss their challenges with aggregating data from multiple programs with varying data measures and how TA providers helped them create a one-pager to communicate their value as a whole.
- Florida Prosperity Partnership will share their goal of providing resources and tools to their members to help drive effective practices in their state and how a workshop on integrating asset-building strategies at their statewide conference was one way for them to do so.
- Wayne Metro Community Action Agency will share how a series of staff assessments, interviews, and a client focus group informed the creation of a staff training plan to integrate financial empowerment services throughout their community action agency.
- Catalyst Miami will discuss the tools and resources helping them identify answers for their questions around hiring and training financial coaches and developing a referral map for their new financial coaching program.
- Louisville Metro Community Services and Revitalization will share their new interactive client workbook on the importance of credit and credit issues they will implement into their financial capability programs.
- Alameda County Community Asset Network will discuss their work to develop a communications strategy to improve their marketing and communications with stakeholders through their online tools and website.
In addition to the individual TA projects funded by the JPMC Foundation, they also supported three virtual learning projects that responded to common needs across a large number of Lead Organizations:
- A five-part virtual training series on effectively leveraging technology and communications strategies to enhance asset-building work
- A three-part virtual learning series on challenges and solutions with data collection and evaluation
- A virtual coffee with financial coaches to discuss effective techniques, tips and tools
Be on the lookout for blog posts about the top-line lessons and resources from these learning events in the next month or two. Plus, we’ll host a webinar on September 9 at 2:30 pm EDT on building logic models, which emerged from the learning series on data collection and evaluation.
Background on the Assets & Opportunity Network Technical Assistance Fund
The TA Fund is part of the Assets & Opportunity Network Learning Community, which aims to speed up diffusion of innovative financial security and asset-building approaches. The Assets & Opportunity Network includes many of the nation’s leading experts who are grounded in real world practice and policy on financial capability and asset-building issues, as well as others who have the interest, drive and passion to deepen and expand their impact, but who may be newer to the work. The Technical Assistance Fund was designed to leverage expertise within the Network to help organizations address their critical issues, strengthen their work and explore new avenues to increase their impact.
1 in 6 US Students Lack Basic Financial Literacy
By Valerie Marshall on 08/13/2014 @ 01:00 PM
Among 29,000 15 year olds in 18 countries and regions, US students’ financial literacy scores ranked a middling ninth on the PISA, a global assessment administered every three years by the Organisation for Economic Co-operation and Development (OECD).The PISA tests students’ science, math and reading skills and measures their ability to apply them using open-ended and multiple-choice questions designed to mimic ‘real-life’ situations.
Initially administered in 2000, 2012 was the first time that financial literacy skills were tested in the assessment. Other key findings released earlier this month include:
- Students’ math and financial literacy scores were highly correlated—and US students had average scores in both areas
- Financial literacy scores for US students ranked below students in Shanghai-China, Estonia, Poland, Australia, and the Czech Republic
- On average, students’ earned more points on questions that assessed their ability to evaluate financial issues and apply financial knowledge and understanding than they earned on questions measuring their ability to identify financial information and analyze information in a financial context
- More than 1 in 6 US students, or 17.8%, did not reach ‘baseline proficiency’ in financial literacy indicating that their skills were limited to understanding basic concepts, such as recognizing the difference between needs and wants, and knowing the purpose of an ‘everyday’ financial document (e.g., an invoice)
These results not only illustrate US students’ weaker grasp of financial literacy-related topics compared to their international peers, but they also highlight the possibilities for strengthening students’ financial literacy skills by incorporating financial concepts into other subject area curricula. For example, applying math skills to financial topics would likely strengthen skills in both areas.
What can be done to improve students’ performance on the PISA? Recent research, including work published this year by CFED, has uncovered positive impacts on youths’ financial knowledge and behavior from the integration of financial education into elementary school classrooms. Financial habits and norms established during childhood influence our financial behaviors as adults. Therefore, teaching children financial skills at a young age is critical. Financial education matters for everyone - and the more hands-on lessons are tied to real financial decisions, the better.
Key Trends: Integrating Financial Capabilities into Social Services
By Anne Guthrie on 08/11/2014 @ 04:00 PM
CFED has been supporting a series of “Learning Clusters” with organizations that are piloting new ways to integrate financial capability services into social services, such as housing, workforce, emergency assistance and Head Start programs. While CFED could only choose a handful of organizations to participate, the applicant pools contained many high-quality proposals that provided valuable insights into how community-based organizations are helping the low-income families build financial capability.
One of my projects this summer was to review the 182 proposals submitted to two of these learning clusters (the Bank of America Charitable Foundation Integration Learning Cluster and the ASSET Initiative Partnership Head Start Learning Cluster). I identified trends in how organizations are helping low-income families build financial capability. These applicant pools provided a great cross-section of organizations from around the country. Some were new to the work while about half were experienced in delivering multiple financial capability services.
In reading through the proposals again, we are able to highlight key themes concerning current financial capability strategies, leading innovations and opportunities to support this type of work in the future.
Here are the key lessons I drew from analyzing the proposals:
- The majority of organizations provide financial education, access to public benefits and access to free tax preparation services, but are looking to enhance these strategies to broaden their impact. Organizations see improvements in clients’ financial knowledge when they provide these services and are able to stabilize finances through public benefits and tax preparation services. In their proposals, organizations were seeking to capitalize on these strategies by making these services more relevant, timely and actionable (e.g., financial education paired with a financial product) that lead to behavioral changes in money management.
- Many organizations want to incorporate financial coaching or counseling into already existing one-on-one case management services. Organizations are eager to embrace longer-term strategies such as financial counseling and coaching. Most of the Learning Cluster applicants are exploring ways to incorporate personalized financial goal planning for clients by utilizing existing case managers. The field has great potential in helping clients reach financial capability by making conversations about financial topics more structured and intentional within one-on-one interactions with clients. However, many organizations still struggle to differentiate between financial coaching, counseling and education as well as how to train staff to provide these services.
- Most Community Action Agencies and Community Development Corporations have a lot of experience offering financial capability strategies. However, these services tend to be siloed and organizations are seeking ways to integrate these strategies with other programs areas across the organization. These organizations have many program platforms including homeownership and rental housing, enterprise programs, workforce and basic needs. Financial capability services such as Individual Development Accounts (IDAs) or financial counseling tend to be housed within one program that only reaches a few participants out of the many the organization serves. Many proposals discussed the need to break down program silos and integrate financial capability strategies throughout the organization so that more clients can access asset-building services.
- Organizations need innovative solutions for three elements of program design: A) engaging and retaining clients, B) connecting clients to financial products, and C) incentivizing savings. Many applicants expressed frustration with engaging and retaining clients. These organizations could benefit from strategies that can help tailor programs and address client needs that would incentivize participation. Organizations also describe clients as being unbanked with a lack savings and need specific program solutions that can address these barriers.
- Most organizations serve individuals with little or no income, so they need to be able to provide financial capability strategies that specifically address this level of instability. Almost all organizations listed lack of income as the primary barrier to their population achieving financial security. Organizations find it challenging to help clients build financial capability when they do not have income to manage. Guidance is needed on how to help clients stabilize spending, improve credit or alleviate debt while they work to increase income.
- The majority of organizations requested program evaluation assistance, especially with identifying, tracking and measuring financial capability outcomes. Most organizations are tracking financial capability outputs, such as the number of people that complete classes, meet with a coach, complete a budget or set financial goals for themselves. However, to evaluate programs, organizations want to identify what outcomes demonstrate improved financial capability, such as increased net income or net worth or reaching 3 months’ worth of savings and how to measure and track these outcomes overtime. Organizations want assistance in determining what outcomes families should be reaching at different points in their financial lives as they move towards long-term financial stability.
Asset Building News Round Up: August 8, 2014
By Paul Day on 08/08/2014 @ 11:30 AM
Community Action: 50 Years of Moving Forward
The Community Action Partnership
August 19-23, 2014
Marriott Wardman Park Hotel, Washington, DC
The largest gathering of community action professionals in the country.
Click here for more information.
How to Brief Effectively
Saturday, Oct 4, 2014
Hill Center at the Old Naval Hospital, Washington, DC
This course provides professionals with the tricks and tools needed to build confidence and deliver an effective briefing in the policy world. Click here to register.
The Consumer Financial Protection Bureau (CFPB) released “Your Money, Your Goals”, a toolkit that social services organizations can use to help their clients set goals, choose financial products and build skills in managing money, credit and debt.
A new analysis of Americans who graduated college between 1990 and 2014 shows that graduates who took on the highest amounts of student debt, $50,000 or more, are less likely than their fellow graduates who did not borrow for college to be thriving in four of five elements of well-being: purpose, financial, community and physical. Read the results from Gallup.
U.S. income inequality is harming U.S. economic growth by excluding large swaths of the population from its cumulative benefits, Standard & Poor’s Ratings Services says in a new report. Here’s the Wall Street Journal article.
From the Assets & Opportunity Network
From the San Francisco Assets & Opportunity Network:
We are excited to announce that on Monday, August 4, the California Assembly voted unanimously to pass SB 896! The bill is now on its way to the Governor’s desk. We are grateful to have your support of MAF’s credit-building programs. The passage of this bill will give us a historic level of recognition that will create major shifts in the nonprofit credit-building field and allow us to scale our work to more communities across the state. Learn more here.
From the United Way of Greater Houston:
In 2008, compelled by research pointing to the importance of family financial stability and its impact on nearly all other social issues, including education, health and community well-being, United Way of Greater Houston launched United Way THRIVE, a collaborative of 21 nonprofit partners across multiple sectors that work together to support hardworking, lower-income families with children in their efforts to achieve financial stability. Click here for the full report.
Compass Partners with Housing Authorities to Help Low-Income Families Build Wealth
By Alicia Atkinson on 08/07/2014 @ 10:15 AM
Imagine you have a car in the driveway. A car that could help you get where you are trying to go faster and more efficiently. The tires are pumped, the oil is changed, it is ready to take you to where you want to be, but, alas, the car is out of gas. The U.S. Department of Housing and Urban Development’s (HUD) Family Self Sufficiency (FSS) program is a car without gas.
However, Compass Working Capital (Compass) has found a way to give this program new life with relatively small financial investments. They provide the “gas” through targeted marketing towards eligible participants, financial education workshops and access to a financial coach throughout the entire program.
The FSS program provides a powerful opportunity for families to achieve their financial goals and reduce their reliance on public assistance. The FSS program combines three services:
- Stable affordable housing;
- Case management to help families access services needed to pursue employment and achieve other financial goals; and
- A savings account that grows as families’ earnings increase over a five year period.
Despite the FSS program’s well-conceived design and documented success of moving families off public benefits and towards long-term financial stability, it has been historically underutilized by housing authorities around the country. Compass bolsters the FSS program with outreach, financial education and financial coaching to engage participants in building financial skills and savings.
Compass recognizes that increasing financial capability along with savings and assets plays a critical role in breaking the cycle of poverty and has the potential to promote financial well-being across the life span. Compass collaborates with three housing authorities in Massachusetts: Lynn Housing and Neighborhood Development (LHAND), Cambridge Housing Authority (CHA) and Metropolitan Boston Housing Partnership (MBHP). The result of Compass’s outreach, education and coaching has paid off as their housing agency partners have seen significant impact in program enrollment and in participants’ financial stability.
CFED’s newest Federal Policy From the Field, “Compass Working Capital Partners with Housing Authorities to Help Low-Income Families Build Wealth,” highlights this innovative collaboration and chronicles the steps Compass has taken to improve the financial footing of their FSS participants. The outcomes are impressive. For example, 12 months into the LHAND pilot, 68% of the participants have improved their credit score by an average of 43 points. Improved credit scores can lead to home or education loans with lower and more affordable interest rates. Additionally, they give participants more access to the financial mainstream and can decrease the likeliness of using predatory financial services.
Using the FSS program’s promising infrastructure allows Compass to make relatively small financial investments in services in order to see improved outcomes for the participants. Read more about this partnership and Compass participants’ substantial increases in income, savings and credit score here.
In short, Compass Working Capital has gassed up FSS programs in Massachusetts, helping many more households save for their first home, their child’s education or a small business.
The ABLE Act Moves Forward in Congress
By Alexander Scarlis on 08/06/2014 @ 04:00 PM
One day shy of closing its doors for the August recess, the House Ways and Means Committee unanimously voted to report the Achieving a Better Life Experience (ABLE) Act favorably out of committee. This represents a significant and promising step forward for people with disabilities and all in the asset-building field.
The road to this successful (and increasingly rare) moment in the legislative process has been a long one, painstakingly traveled by disability advocates and champions like Rep. Ander Crenshaw (R-FL) who first introduced the ABLE Act seven years ago. Last Thursday’s committee vote clears the way for a potential floor vote in the House and Senate. Barring an election year stumble, this bill very well could make it to President Obama’s desk this year.
The bill’s 379 co-sponsors in the House and 74 co-sponsors in the Senate are proof that two policies embedded in the legislation are bipartisan and bicameral: flexible tax-free savings accounts in which the accumulated funds do not count toward asset limits in social safety net programs.
The ABLE Act would allow people with disabilities and their families to save money in new tax-free “ABLE” accounts for any of the following disability-related expenses:
- Education, from pre-K to college
- Housing, be it for rent or for purchase as long as it’s a primary residence
- Transportation, including moving expenses
- Employment support, like job training
- Health, including insurance premiums and assistive technology like wheelchairs
- Miscellaneous items like financial management and legal fees
The IRS would treat ABLE accounts like existing 529 college savings plans (also known as qualified tuition programs): after-tax contributions would not be tax deductible but earnings would accumulate tax free and qualified withdrawals would also be spared.
The proposed ABLE account offers greater flexibility in the use of its tax-free funds than any other savings account written into the tax code. ABLE accounts should be the rule, not the exception. Their flexibility and tax-exempt status could benefit everyone who is financially vulnerable. This winning combination would give all struggling families the freedom to use their savings for a broad array of asset-development purposes – for example, buying a home for more stability or leaving town for a better job opportunity.
Yet the ABLE account’s flexibility and tax-exempt status would be practically worthless to people with disabilities if the savings counted toward public benefit asset limits, which can restrict personal savings to as little as $1,000. The ABLE Act excludes the first $100,000 in an ABLE account from the asset limit for all federally-funded public benefit programs, including SSI, TANF, SNAP and LIHEAP. This provision will allow people with disabilities significant leeway to build their financial security without fear of losing vital public benefits.
Minimizing the savings disincentives of asset limits helps reduce government dependency and should, again, be the rule, not the exception.
We thank members of the House Ways and Means Committee for so decisively and enthusiastically approving a forward-thinking asset-building policy like the ABLE Act. We look forward to the day Congress grants all low-income and asset-poor families the same opportunity to gain economic self-sufficiency.
Debt in America: It's Worse Than You Thought
By Alexander Scarlis on 08/05/2014 @ 05:15 PM
Last week, the Urban Institute released a report, Delinquent Debt in America, finding that more than one third (35%) of Americans with files at credit reporting agencies carry debt reported to collections. That’s 77 million Americans. This wake-up call is one of many sobering statistics found in the report, which contains a detailed analysis of consumer debt with an in-depth geographic perspective.
Collections debt can result from unpaid medical bills, utility bills, membership fees, parking tickets, credit cards and various loans. As lead author Caroline Ratcliffe told the Associated Press, “Roughly, every third person you pass on the street is going to have debt in collections.” What’s more, this figure has barely budged in a decade: a similar analysis in 2004 by the Federal Reserve found that 36.5% of people with credit reports had collections debt.
Debt, and collections debt in particular, can severely hurt credit scores. CFED has called attention to the importance of credit scores to asset-building, especially given that more than half of American consumers with credit files have subprime credit. This new report from the Urban Institute shines a bright, if harsh, light on the dark statistics behind why so many Americans have such poor credit.
As the report only looks at individuals with credit files, it underrepresents low-income people, who are less likely to have credit files because they lack access to traditional credit like a credit card. Low-income populations also often incur debts via alternative financial service providers (e.g., payday lenders) who don’t generally report delinquencies to the major credit agencies. Therefore, it is likely that even more than 77 million Americans have debt in collections.
The report’s authors analyzed 7 million randomly selected September 2013 records from TransUnion, one of the three major credit reporting agencies. What makes the data particularly illuminating is that it can be analyzed at the U.S. Census Bureau tract level; in fact, the sample is so comprehensive, almost all 74,134 Census tracts are covered.
The findings of the geographic analysis follow in the footsteps of a long parade of troubling statistics, particularly in the South. Southern states have the highest share of adults with credit files reporting both collections debt and non-mortgage debt (e.g., student loans, credit cards, auto loans, etc.) more than 30 days past due.
- Louisiana and Texas are home to nearly 40% of the nation’s Census tracts with high concentrations of people with credit files reporting debt past due (15% or more).
- More than 40% of adults with credit files in 11 Southern states, New Mexico and the District of Columbia have debt in collections.
- Nevada has the greatest proportion of residents with debt in collections, accounting for nearly half of all Nevada adults with credit files.
Those of us in the asset-building field should not be surprised. CFED’s 2013 Scorecard finds that all but one of the 10 states with the worst liquid asset poverty rates are in the South, including Louisiana and Texas. The one non-Southern state? You guessed it: Nevada.
We also shouldn’t be surprised to read the authors’ finding that income is only minimally to moderately correlated with the various debt outcomes. As the report notes, income matters but is by no means the whole story. The lack or loss of assets like emergency savings, home equity or retirement savings can cause both low- and moderate-income households to fall behind on bills, forcing them into high-cost debt and costly defaults. These outcomes in turn can trigger abusive debt collection practices that only serve to aggravate a dangerous financial situation.
We want to commend the report’s authors at the Urban Institute and its partners for bringing into sharp focus just how precarious debt in America really is. We cannot afford to wait to implement well-developed asset-building policies that would go far in extracting the millions of indebted Americans from suffocating asset poverty.
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