National Financial Capability Challenge
By Stephanie Halligan on 03/08/2012 @ 12:00 PM
It’s March, which means it’s time for the annual National Financial Capability Challenge, sponsored by our colleagues at the U.S. Department of the Treasury and the U.S. Department of Education. The Challenge, which runs March 12 through April 13, 2012, is a free, voluntary, online series of financial questions for high school students to check their knowledge of earning, spending, saving, borrowing, risk protection, and more. The Challenge covers everything from understanding taxes and deductions on your paycheck to analyzing the long-term effects of leasing versus owning an asset.
High school educators are encouraged to sign up for free at challenge.treas.gov to administer the Challenge to their students, and to help spread the word to other high school educators across the nation.
More about the challenge:
- It's quick. It takes only about 30 minutes to administer the Challenge online, but the lessons students will learn in preparing will last a lifetime.
- It's easy. Comprehensive lesson plans and sample questions are available in the online Educator Toolkit to help prepare students for the Challenge.
- It's rewarding. Educators and top-scoring students in each school will earn personalized award certificates and states with the highest participation will also be recognized.
- Any high school educator can do it. All high school educators, not just math and personal finance educators, from all types of school systems – public, private, parochial, and home schooling – are encouraged to register their students to participate. Youth group leaders who have a role in educating high school students are also welcome to participate. The website also provides tools you can use to easily spread the word about the Challenge.
The National Financial Capability Challenge is not only about recognition and a little friendly competition among the states; it’s about empowering young people with the skills and knowledge they need to succeed in an increasingly complicated global financial economy.
Financial security begins with knowledge, and sound financial habits are built at an early age. And what better place to start teaching these basic financial concepts than in the classroom?
For more information about the National Financial Capability Challenge, please visit the Challenge website.
Financial Literacy: Strengthening Partnerships in Challenging Times
By Sean Luechtefeld on 03/07/2012 @ 10:30 AM
EDITOR'S NOTE: Last month, the General Accountability Office published the highlights from a financial capability forum held in October. Special thanks to Kevin Thompson at the Department of Labor for sending the report and the highlights below our way!
Forum participants discussed (1) needs and priorities in improving financial literacy; (2) roles and responsibilities of, and collaboration among, the government, nonprofit, and private sectors; (3) lessons learned from federal public health and nutrition literacy initiatives; and (4) GAO’s potential role in addressing financial literacy issues.
Forum participants included representatives of federal, state, and local government organizations; academic experts; nonprofit practitioners; and representatives from the private sector. Comments expressed during the proceedings do not necessarily represent the views of all participants, the organizations they represent, or GAO. Participants were given the opportunity to comment on a draft of this summary.
- Focus on key populations. Participants discussed a number of areas that should be the most sustained focus of the nation’s financial literacy efforts in the coming years. Among other areas, efforts should target kindergarten through 12th grade education; the workplace; the preretirement years; and special populations that may be particularly vulnerable, including low-income communities, the Hispanic community, and older Americans. Materials should be tailored as appropriate to meet these populations’ characteristics and circumstances.
- Identify the most effective approaches and target efforts accordingly. More research is needed to identify the most effective approaches to improving financial knowledge and behavior. Targeting products appropriately, improving delivery mechanisms, and leveraging technology are also important.
- Enhance the role of employers in improving their employees’ financial literacy. Employers have a key role to play in improving the financial literacy of their employees—for example, by encouraging them to save for emergencies and retirement. Further, financial literacy stakeholders need to do more to persuade employers of the business benefits of supporting healthy financial behaviors by employees.
- Leverage the unique role of the federal government. The federal government has a unique role to play in promoting greater financial literacy. For example, the government can use its convening power and other tools to draw attention to the topic, take advantage of existing connections with certain populations, and make certain legal and regulatory changes to support greater financial literacy.
- Increase coordination and partnerships within and across levels of government and different sectors. Opportunities exist to further increase coordination and partnerships among entities involved in financial literacy. Such efforts could help federal, state, and local government agencies; private sector entities; and nonprofits conserve scarce resources and reduce any duplication of effort.
- Identify lessons from other initiatives designed to improve consumer behaviors. Financial literacy practitioners can learn from efforts in other fields, such as health and nutrition, that have sought to educate consumers and influence their behavior. Participants discussed similar challenges, such as the difficulty of influencing people to change their behaviors and the possibility of developing a financial literacy equivalent of the Department of Agriculture’s “MyPlate” nutrition graphic.
Participants also discussed ideas for GAO and the Comptroller General to support or raise awareness about financial literacy or partner with others to do so. Among other ideas, they said that GAO could help in efforts to identify the best programs and methods for improving financial literacy, develop a financial literacy initiative for GAO employees that could serve as a potential model for other government agencies, and identify opportunities for federal agencies to leverage existing distribution channels to provide additional financial education.
Upcoming Event: Strategic Partnerships for IDA Programs
By Johanna Barrero on 03/05/2012 @ 11:00 AM
Wednesday, March 7, 2012, 12:30 – 1:30 p.m. PST / 3:30 – 4:30 p.m. EST
Would you like to learn how potential partnerships can help improve your program outcomes? Want to know what kind of organizations and programs are considered natural partners for IDA programs? Join us to hear from IDA practitioners that have leveraged existing resources in their communities to improve their clients’ outcomes.
This hour-long webinar will include:
- Effective partnerships that can improve your program outcomes and your participants’ success rate
- Accountability systems that promote effective partnerships
- Statewide initiatives and programs that are considered natural partners for IDA programs
- Leveraging volunteers and other resources for your IDA program
- Sharon Henderson, Vice-President of Strategic Initiatives, Prosperity Works
- Rebekah Barger, IDA Program Manager, NeighborWorks® Umpqua
- Johanna Barrero, AFI Resource Center (moderator)
Visit https://www1.gotomeeting.com/register/601767705 to register now!
The webinar is free to all interested participants. In advance of the webinar, please send any questions you would like our panelists to address during the session to Johanna Barrero at firstname.lastname@example.org, or call 202-207-0117.
Founder’s View: The Myth of the 1%
By Bob Friedman on 03/05/2012 @ 09:30 AM
Republican leaders like Speaker Boehner have suggested that increasing tax rates on the wealthiest one percent of Americans would be a mistake, alleging that the top one percent are the preeminent job creators and entrepreneurs in our economy. In fact, it turns out that the top one percent create only about one percent of businesses and that the lion's share of new businesses are started by the remaining 99%, including middle- and low-income Americans, trying to create jobs for themselves.
What’s more, the primary source of investment in the 2-2½ million new businesses started each year (which are responsible for almost all net new jobs created each year) is personal savings and the savings of friends, family and associates – not the resources of the wealthiest one percent. There may be other reasons not to increase tax rates on the top one percent, but impact on job and business creation and investment are not among them. Let us look instead to the opportunities open to all our people, especially those who may have entrepreneurial capability and interest, but not the ability to invest in themselves and their families.
When one examines the best available data, it becomes clear that the wealthiest one percent are not particularly more likely to be active entrepreneurs deriving a substantial portion of their income from their ventures than the other 99 percentiles. In fact, according to the Office of Tax Analysis of the Treasury Department, millionaires make up only .5% to 1.4% of small business owners. Ninety-nine percent of small – and new – businesses are founded by the rest of us; we represent all income brackets, races and education levels and we come from all over the country.
New jobs, in fact, do not come primarily from small or large businesses, but instead, from new businesses under one year old. According to the Kauffman Foundation, over the last thirty years, it is these youngest firms that have created all net new jobs, adding an average of three million per year.
Over the last thirty years, the job contribution of new and young businesses has varied from highs of 3.6 million to lows of 2.2 million. For the last couple years, we have been at one of those lows in new business job creation, at a time when we can least afford it. No wonder the nation is asking how to create jobs and only beginning to look in the right direction for how to stimulate the formation and growth of new and young business.
When one looks at the nature of new business job creation, the first finding is that most startups are small indeed, often employing only the entrepreneur herself/himself in the first few years. Some two million Americans create jobs for themselves each year, many part-time. Some of these businesses are pioneering new edges of the economy (green burials for the aging, soon-to-be-dying baby boomers; indigenous beans; new digital domains and new services) while others offer more prosaic goods and services. In both cases, entrepreneurship is often driven by necessity. Nevertheless, it remains the difference between some income and employment and unemployment and poverty.
Twenty to thirty percent of the self-employed add employees, sooner or later. Three percent or so of business starts grow to some size, creating tens or hundreds or thousands of jobs, and in some cases, they build whole new industries. It is on these high-growth firms that the Kauffman Foundation, the President’s Start-Up Initiative and many business leaders are now focused. Indeed, the cultivation of seed and venture capital firms, incubators, expanded H-1 Visas and lower tax rates for new businesses are all worth pursuing.
But what of the other 97%? Should we ignore them? More to the point, if you had met Steve Jobs when he was a college drop-out from a blue-collar home with an interest in calligraphy and acid, would you have recognized him as the stand-out entrepreneur of our generation? Unlikely. So, if we really want to increase the yield of our economic garden, perhaps we should water all the plants.
How do we do that? For starters, the un- or underemployed American considering whether to start a business and create a job for herself should be encouraged through tax deferrals that could temporarily reduce business costs (for example, not having to pay both employer and employee shares of FICA). Likewise, would-be entrepreneurs should have greater access to the personal savings and savings of families, friends and associates from whence the overwhelming majority of all investment in new business starts comes. To facilitate this, we should make the existing Saver’s Credit refundable and available for new business creation as well as homeownership, college and retirement. We should also think critically about a two percent reduction in the Self-Employment Payroll Tax, which looks like it may be the beginning of a true Self-Employment Tax Credit. Finally, we should remove the penalties poor and unemployed families depending on some form of public assistance face when trying to create their own jobs. This includes asset limits in welfare, Social Security, Food Stamps, health insurance and more.
In short, it’s new and young, not small or large. It’s savings and equity, not debt. It’s tomorrow’s economy, not yesterday’s. It’s powered by all of us, not just the top 1%. And, perhaps most importantly, it’s with tax incentives for saving and entrepreneurship for all, not just for our wealthiest neighbors.
FY13 Budget Neglects Education Savings and Financial Education
By Inemesit Imoh on 03/01/2012 @ 09:30 AM
“Education and lifelong learning will be critical for anyone trying to compete for the jobs of the future. That is why I will continue to make education a national mission. What one learns will have a big impact on what he or she earns: the unemployment rate for Americans with a college degree or more is only about half the national average, and the incomes of college graduates are twice as high as those without a high school diploma.” –President Barack Obama, February 13, 2012
President Obama’s recent education proposals, expressed in both the State of the Union address and the Fiscal Year 2013 Budget Request, emphasize the importance of producing more college graduates who are prepared to contribute to the high-wage, high-skill jobs of the future. As the administration has recognized, producing more college graduates begins with increasing the number of students attending college. Thus, the President is focusing on improving the quality of K-12 education and addressing the most significant hurdle that students face: Money.
According to the U.S. Census, the average total cost of attendance for undergraduate colleges and universities was $14,006 in 2007-2008. While many students are able to use federal, state and institutional grants and scholarships to cover some of their education costs, most students rely on loans. Among 2007-2008 bachelor’s degree recipients, about two-thirds graduated with student debt. Among these, 25% had borrowed $30,500 or more. What’s worse? The price tag for a college education continues to rise at rates that outpace inflation.
Students shouldn’t have to choose between tens of thousands of dollars in debt undermining their economic security and the long-term economic immobility they risk by not attending college due to insufficient funds. Lower-income students face this choice every time a tuition bill is due. Their college attendance and completion rates suffer significantly when their families lack savings and assets. Only 10% of students from low-income households graduate from college by their mid-twenties.
The President’s budget includes several proposals to improve college affordability, including making the American Opportunity Tax Credit permanent, sustaining the maximum Pell Grant award of $5,635 and a new Race to the Top initiative that would provide incentives for colleges to keep prices under control, double the number of work-study jobs and increase Perkins Loans by $7.5 billion. While it’s great the Administration is addressing some of the financial burdens that students face, this conversation is incomplete without addressing college savings and financial education for low-income students.
Many of these policies are helpful, but none of them are the silver bullet to college affordability. For instance, the Pell Grant—the need-based grant that low-income students receive from the federal government—has not kept pace with the growing cost of higher education. In 1988 the maximum Federal Pell grant covered 50% of public higher education costs but by 2009, it only covered 32%.
Promoting college savings is a critical missing element of the President’s education agenda. Studies demonstrate that youth savings is a consistent, significant and powerful predictor of college attendance. Young people that have a savings account are three to seven times more likely to attend college than children without an account. If the Administration and Congress want to increase college attendance rates, they should improve existing policies that help families save for education.
CFED recommends that policymakers advance three particular solutions that do just that; these policies expand, improve and integrate existing savings policies and account types to make them more accessible to low-income families:
- Expand the Saver’s Credit to match contributions to College Savings Accounts:
The Saver’s Credit currently rewards low-income workers who contribute to retirement accounts with a nonrefundable tax credit capped at $250. Eligibility for Saver’s Credit should be expanded to those who contribute to 529 College Savings Accounts and Coverdell Education Savings Accounts. Currently, legislation has been introduced in the House of Representatives to extend the Saver’s Credit to 529 accounts only. CFED also recommends making the Saver’s Credit refundable so that it can actually benefit low-income households with children, many of whom do not have income tax liability.
- Exclusion of Education Savings Accounts from asset tests in public benefit programs:
Asset limits, or caps on the maximum value of savings a household may have to be eligible for certain benefits programs, hurts many students who receive benefits or have family that receive benefits. CFED supports the asset limit reform because it would help low-income families save for a college education or other important assets like homeownership or simply having a strong liquid savings.
- Embedding basic bank accounts in school-based financial education:
When provided in combination with a savings account, financial education gives both students and their families a tangible way to develop and test financial decisions and opportunities, like paying for college. According to our 2012 Scorecard, 44 states now include personal finance in their curriculum standards. Programs like the Partnership for College Completion (PCC), led by UNCF, KIPP and CFED, are innovative approaches to promoting college readiness though matched college savings accounts and financial education as a part of a rigorous K-12 education.
Protecting the Public Safety Net and Helping Families Build a Personal One
By Jennifer Brooks on 02/29/2012 @ 02:00 PM
At CFED, we weren’t surprised when we saw the New York Times map and related article about “the geography of public benefits”—not surprised that the percentage of people who rely on the social safety net is higher than many people think, nor that reliance on government help varies across the country.
In January, CFED released the 2012 Assets & Opportunity Scorecard, which found that 43% American households—equivalent to 127.5 million people—are “liquid asset poor.” These families do not have even a minimal financial cushion to protect them in the event of a job loss or other financial crisis. Without a “personal safety net,” it’s no wonder families are turning to a public one.
What are the programs and policies that make up our social safety net? The New York Times analysis includes Medicare, Medicaid, Social Security and Unemployment, the Earned Income Tax Credit, Supplemental Nutrition Assistance Program, and Temporary Assistance for Needy Families.
The sad fact is that as states have faced ongoing budget shortfalls, they have taken an axe to many of these programs or made it more difficult to access help. In this economy, policymakers should be making it easier—not harder—for families to get help bridging the gap, putting a meal on the table, or getting medical care.
And as essential as protecting the public safety net is, policymakers also need to be helping families build a personal safety net of their own. They can do this by supporting access to mainstream financial products, encouraging savings, and helping first-time homeowners, startup businesses and college students. In addition, policymakers cannot forget their duty to protect consumers in the financial marketplace from unscrupulous actors who would undermine financial security.
The point to remember is that even in tough budget times, policymakers' hands are not tied. CFED identified two dozen examples of low-cost, politically-viable policy ideas that can be adopted in this budget context and that lay the groundwork for future economic prosperity.
Ever mindful of the next election, policymakers should keep in mind who their constituents really are: as likely as not, they are among the “liquid asset poor” and counting on the social safety net for help. Adopting policies that help these constituents will be political winners.
CFED Joins Opportunity Nation Steering Committee
By Sean Luechtefeld on 02/29/2012 @ 10:15 AM
Earlier this month, CFED formally accepted an invitation from Opportunity Nation to join their national Steering Committee. We are both honored and excited about this opportunity to work with the leadership of Opportunity Nation and with other members of the Steering Committee to help shape the direction and impact of the campaign.
Opportunity Nation is “a national campaign to promote opportunity, social mobility and access to the American Dream,” premised on the idea that the ZIP code people are born into shouldn’t determine their destiny. The Opportunity Nation Coalition, which is comprised of a diverse network of over 200 partners in the public, private and nonprofit sectors, brings together a range of perspectives to develop a shared, cross-partisan plan to advance federal policy changes to improve the lives of millions of Americans.
I think I can speak for all of my colleagues when I say that we are very excited for the opportunity to engage Opportunity Nation in a formal capacity as a member of the Steering Committee. For more information about this innovative endeavor, please visit www.opportunitynation.org.
Live Town Hall Webcast: Reclaiming the Vision of Homeownership
By Lauren Stebbins on 02/28/2012 @ 03:00 PM
Wednesday, February 29, 2012, 1-3 p.m. PST/4-6 p.m. EST
Tomorrow NeighborWorks America will host "Reclaiming the Vision of Homeownership: Challenges and Solutions," an interactive town hall meeting to discuss the future and sustainability of affordable housing. The town hall will be broadcast nationally from Los Angeles, CA via live webcast and viewers across the nation can tune in to participate in the discussion and ask questions. This town hall is part of NeighborWorks Training Institute Homeownership Symposium.
Featured participants will include:
- George McCarthy, Ford Foundation (moderator)
- Paul Bishop, National Association of Realtors®
- Ketayoun Darvich-Kodjouri, Spitfire Strategies
- Gregory Hancock, Wyoming Housing Network
- Gregory Schiefelbein, Opportunity Finance Network
Make sure to tune in here to join the webcast tomorrow, February 29 at 1 p.m. PST/4 p.m. EST!
Retirement Security Reform for the Future
By Inemesit Imoh on 02/28/2012 @ 09:45 AM
On Thursday, February 16, CFED’s founder and Chairman Bob Friedman participated in a congressional briefing hosted by the Aspen Institute’s Initiative on Financial Security. The briefing, titled “Fiscal Reform and the Future of Lifelong Savings,” explored policy measures to reduce the deficit while improving our national savings infrastructure. The briefing highlighted the potential of new retirement savings incentives, including Automatic IRAs and Aspen’s newly proposed Freedom Savings Credit, and expansion of the current Saver’s Credit, to transform working families’ ability to achieve a prosperous future and secure retirement.
The briefing began with remarks from two Congresspeople, reaching across the aisle to promote the importance of retirement savings. Representative Richard Neal (D-MA) announced the introduction of his Automatic IRA bill (H.R. 4049), legislation that would make employer-sponsored retirement savings accounts available to many of the 78 million employees who currently do not have access.
Following Representative Neal, Representative Jim Gerlach (R-PA) announced his introduction of a House Concurrent Resolution on Retirement (H.Con.Res. 101), expressing the sense of Congress that tax incentives for retirement savings provide important benefits to Americans to help plan for a financially secure retirement. The resolution had more than 100 cosponsors, including Congressman Neal, from both the Democratic and Republican parties.
Following the opening remarks from the Representatives, a panel of speakers engaged in a dynamic discussion of alternative ways to revise and improve current incentives and policies that promote retirement savings. The panel was moderated by Lisa Mensah, Executive Director of the Aspen Institute’s Initiative on Financial Security. Speakers included Robert Reynolds, CEO of Putnam Investments; Bob Friedman, CFED Founder and Chair; Brian Graff, CEO of the American Society of Pension Professionals and Actuaries; and Bill Gale, Senior Fellow of Economic Studies at the Brookings Institution.
Despite the panelists’ different views on how to amend the retirement savings infrastructure, everyone agreed that all Americans, regardless of income, should be have access to appropriate retirement savings options, because it enhances their economic mobility and contributes to financial security. Bob’s remarks critiqued the idea that assets such as a college education, a home, retirement savings and small business ownership are the “exclusive preserve of the rich and upper middle class.” Given CFED’s long history with demonstrations on the ground, the American Dream Demonstration (ADD) and the Saving for Education, Enterprise and Downpayment (SEED) Demonstration to name a few, we know that low-income households can and will save for things like retirement, starting a businesses, buying and retaining their homes, and pursuing higher education. Bob explained that in order to improve the savings infrastructure in the United States, we must reform the federal tax code to “install a truly universal savings and investment infrastructure and incentives.”
Current policies, especially the Saver’s Credit, do help lower-income families save, but they do not do enough. Making the Saver’s Credit refundable and instituting Automatic IRAs would do much more to help policymakers achieve that goal.
The briefing was one of those rare but great moments where individuals from different backgrounds, industries and political affiliations came together to promote sound and creative policies that will help millions of Americans save and invest. Kudos to Aspen IFS for producing and facilitating this important event! We’re excited that CFED was at the table helping to frame and shape the policy direction of these issues.
2012 KIDS COUNT Data Snapshot Now Available
By Sean Luechtefeld on 02/27/2012 @ 03:45 PM
CFED is pleased to join the Annie E. Casey Foundation as a 2012 KIDS COUNT outreach partner. In its first data snapshot of the year, the Foundation explores the increased number of children living in America's high-poverty communities. The new snapshot includes the latest data for states and for the 50 largest cities. This information also is on the KIDS COUNT Data Center, a source for the most recent national, state and local data on hundreds of indicators of child well-being.
For more information about the 2012 KIDS COUNT release or the data contained within, visit the Annie E. Casey Foundation's Data Center.
Upcoming Event: Behavioral Strategies for IDA Programs
By Johanna Barrero on 02/27/2012 @ 09:30 AM
Behavioral Strategies for IDA Program Recruitment, Enrollment and Retention: An Upcoming Webinar from the Assets for Independence (AFI) Resource Center
Are you having trouble recruiting savers? Are your program participants not saving consistently? Do you struggle to support clients who do not follow through with their intentions?
Join us to learn about easy, cost-effective strategies for promoting positive program behaviors and tactics to encourage enrollment, increase savings and create a more efficient and effective IDA program.
In this hour-long webinar you will learn about:
- Findings from the field of behavioral economics and how they can apply to your IDA program
- Examples of behavioral strategies that are helping asset-building programs improve their outcomes
- Simple IDA program “tweaks” to promote recruitment and better program participation
- Mindy Hernandez, Founder and Principal Researcher at One Decision
- Stephanie Halligan, AFI Resource Center (moderator)
Visit https://www1.gotomeeting.com/register/416826369 to register now!
The webinar is free to all interested participants. In advance of the webinar, please send any questions you would like our panelists to address during the session to Johanna Barrero at email@example.com, or call 202-207-0117.
Financial Access at Birth
By Carl Rist on 02/24/2012 @ 11:30 AM
In the SEED (Saving for Education, Entrepreneurship and Downpayment) Initiative, CFED and its national partners asked a simple question – what would it look like if every child in the U.S. started his or her life with an endowed account for use in saving for college, a home or business startup? Now, Professor Bhagwan Chowdhry has gone us one better with his proposed Financial Access at Birth (FAB) initiative (see Stanford Social Innovation Review, Spring 2012). FAB asks an even bigger question – can financial citizenship begin at birth for every child born in the world?
Professor Chowdhry’s answer is “yes,” by placing $100 in an electronic savings account for every child born on the earth. While the estimated $10 billion annual cost might seem a big lift at a time when the operative phrase in world financial markets is “bail out,” not “investment,” this price tag would only be 1/50 of one percent of world GDP. Moreover, the benefits could be substantial and go far beyond financial inclusion. At a minimum, FAB would begin to make a dent in the 50% of the world’s adult population that lacks access to basic financial services. But more than that, the idea is to integrate the FAB account with a birth certificate and universal ID (where those forms of ID exist), so as to motivate parents to register their child’s birth. With legal identity comes full citizenship, which in turn makes it easier to obtain essential services, such as banking. What’s more, in the face of natural disasters or international conflicts, the FAB model could even become of more effective form of development assistance by helping governments, multilateral agencies and international NGOs to more efficiently identify recipients and deliver assistance to them.
The FAB model is timely and well-conceived, and it could address not only financial inclusion, but also financial citizenship. It is worthy of an investment by the world community.
Hot Off the Press: Empowering Entrepreneurs at Tax Time
By Lauren Williams on 02/23/2012 @ 09:00 AM
Understanding the Value of Microenterprise & Lifting Up Innovative Models for Serving their Needs through Tax Assistance
Take a look at SETI’s first-ever report on "Empowering Entrepreneurs at Tax Time." This reseasrch brief, sponsored by the Northwest Area Foundation, provides a look at the value that entrepreneurs contribute to the American economy, describes the impetus for the SETI program and lifts up successful, creative models of service delivery that SETI has supported over the years.
The brief includes research about:
- The role of self-employment in job creation and community wealth building. We delved into the academic literature on startups and their capacity for job creation, which makes a compelling case for their value not only for the individual entrepreneurs, but also for the nation’s economy as a whole.
- The vital connection between tax preparation and microenterprise development services. We explored one of the many challenges facing startup businesses—filing taxes—and highlighted the importance of making sure that the tax moment is leveraged as an opportunity to both educate and empower low- and moderate-income entrepreneurs.
- Key lessons gained through four years of the SETI Demonstration and other SETI partnerships. We laid out the history of the SETI program, which demonstrates the potential held in the tax moment to connect startup entrepreneurs to services that will help them grow into stronger business. We also gathered data, stories and lessons learned from some of our most creative, successful local partners and grantees—including programs operating in rural regions and/or serving minority entrepreneurs— that illustrate the outcomes of the SETI model in a tangible way.
In December 2011, we also hosted a webinar highlighting some of the key findings from our research and two of the programs featured as particularly creative in the report. Practitioners from AccountAbility Minnesota and Brooklyn Cooperative Federal Credit Union, who have designed, implemented and run their own very different self-employment tax programs outlined the techniques they’ve used and shared real world procedures, challenges, successes and lessons from their experiences. Click here to view the archived webinar materials.
Self-Employment Assistance Program Sees Major Expansion
By Katherine Lucas McKay on 02/22/2012 @ 11:45 AM
Program receives boost; grants available
For the past two years, CFED has kept you up-to-date on an innovative proposal to expand access to entrepreneurship training through the Department of Labor’s (DOL) Self Employment Assistance (SEA) Program. Today, we have great news: Senator Ron Wyden (D-OR) included a major expansion of SEA in the recently signed legislation to extend Unemployment Insurance (UI)! As a result, thousands more unemployed workers will be able to unleash their entrepreneurial talents while they receive unemployment benefits and training to help their businesses succeed.
The nation has been struggling with an unemployment rate higher than eight percent for more than three years and nearly half of all unemployed workers have been out of work for more than six months. For some job seekers, starting a business provides a way to create their own jobs. For more than 20 years, SEA has allowed UI recipients in seven states to work full-time on starting a business while receiving unemployment benefits. SEA has been evaluated and found effective but has had limited reach because it was difficult for states to participate.
Senator Wyden’s SEA reform legislation is based on a bill he introduced in the Senate last year, with support from Senators Carper (D-DE) and Casey (D-PA). It allows a state to opt in easily, through a formal agreement between the Governor’s administration and the U.S. Department of Labor (DOL). A critical feature of the legislation is that it authorizes and appropriates $35 million in one-time funding for states; the grants are to be used to set up new SEA programs or improve existing ones, including through the development and implementation of entrepreneurship training resources for UI recipients.
Specific provisions include:
- States can extend a maximum of 26 weeks of SEA benefits to unemployed workers interested in entrepreneurship
- Limits participation to one percent of a state’s total pool of UI recipients. This will prevent the program from adding to the budget and is based on average take-up rates in the states that currently offer SEA
- Establishes reporting and evaluation requirements to track total jobs created, participants’ business income over time, and tax revenues associated with SEA
- States can provide training and resources to SEA participants through partnerships with nonprofit organizations that have expertise in business development services
We anticipate that microenterprise development organizations across the nation will have opportunities to expand their services through partnerships with state workforce agencies. CFED will keep you informed as DOL rolls out the new rules and requirements for the state grant funding. Meanwhile, if you hope to see a new or improved SEA program in your state, now is the time to contact your state workforce agency!
CFED Celebrates America Saves Week (February 19-26)
By Stephanie Halligan on 02/21/2012 @ 10:00 AM
It’s officially America Saves Week! From February 19 - 26, the America Saves campaign is calling on educators, nonprofits and financial institutions to promote good savings behavior and for consumer to assess their own personal saving status.
So how are American’s financial habits faring during America Saves week? The Bureau of Economic Analysis (BEA) reported last month that the national personal savings rate is up to 4 percent (up from 3.5 percent in November); this means, on average, Americans are saving 4 cents for every dollar of disposable incomes. While that’s more encouraging than the negative rate that Americans were saving at a few years back, it’s far from ideal. Since the BEA began measuring this statistic in 1959, the savings rate has fluctuated from 8.3 percent in the early 60’s to 14.6 percent during the recession in the mid-70s (ironically, a recession usually increases the average savings rate, and a bad economy can scare folks into saving more money.
Even though our current savings rate as a country sits comfortably above a negative percentage, it certainly doesn’t mean that everyone is doing it, and it doesn’t mean that saving money has gotten any easier – after all, if savings were easy, we’d all be doing it! Using this year’s America Saves theme of “Set a Goal, Make a Plan and Save Automatically,” how can we help the average American consumer (that’s all of us!) set aside some of the money we have today for something in the future?
Set a Goal. Saving for the sake of saving is boring. Most people need inspiration or a compelling reason to set aside their hard-earned money for any period of time. First, decide on something that has personal value or meaning that may require some financial foresight and savings – a vacation, a first home, or even a rainy day. Secondly, consider opening a targeted savings account or naming an existing savings account something that will motivate you to save and remind you of your goal. What’s more compelling: setting aside $25 every month in your ABC Bank savings account or putting that money into your “My Dream Vacation with the Family” fund? Better yet, eligible individuals can open up an Individual Development Account (IDA) that helps participants save for their first home, continuing education or small business development. Visit the IDA Program Directory to find an IDA program in your area.
Make a Plan. Online savings tools like SmartyPig can help make your savings goal into a reality by helping you keep track of your savings goals and offering suggestions for how often you should be depositing money. Need more personal help in creating a plan and sticking to it? Eligible individuals can take advantage of financial services and education provided by local nonprofits. Local Initiatives Support Collaboration (LISC) Financial Opportunity Centers, for example, take a multi-faceted approach to providing individuals with one-on-one career and personal finance services and coaching. Other providers in your area may offer programs to help you create a savings plan.
Save Automatically. Let’s face it – we’re all human. If you have to consistently and consciously take money out of your paycheck or bank account every month and then put it away toward your savings goal, you are fighting an uphill battle. Creating an automatic transfer or deposit into your savings account is a critical step to achieving your savings goal. Behavioral economics theory and studies suggest that “setting and forgetting” with automatic transfers or direct deposit can have a hugely positive impact on a person’s savings rate and habits. And don’t forget to take advantage of the Earned Income Tax Credit (EITC) at tax time, where you can automatically deposit a portion of your tax refund into a savings account or U.S. Savings Bond.
Savings takes commitment, practice and the appropriate tools to make it happen. And while everybody has a different amount of disposable income to work with, everybody has the ability to save something – even a penny is a good place to begin. So why not start this week?
To find an America Saves Week organization or to join the campaign, visit http://www.americasavesweek.org/.
Policy Alert: Support Automatic IRA Legislation
By Inemesit Imoh on 02/17/2012 @ 02:00 PM
Automatic IRA legislation will improve financial security for millions of workers who are facing retirement with little savings.
Inadequate savings for retirement present a serious threat to the future of American prosperity. Even before the recession, half of all households headed by someone aged 55-59 had less than $13,000 in retirement savings. This anemic level of savings threatens to leave retirees struggling with financial insecurity throughout their elder years. Social Security benefits, of course, fill part of the gap, but in 2011, the average benefit paid to retired workers was a meager $1,177 a month (just over $14,000 per year). Despite a difficult legislative environment, the case for addressing retirement security is gaining steam.
Congressman Richard Neal of Massachusetts, following the lead of New Mexico’s Jeff Bingaman in the Senate (S. 1557) and the Obama Administration’s proposal in the FY 2013 Budget Request, has introduced legislation to address this problem: the Automatic IRA Act (H.R. 4049) will make employer-sponsored retirement savings accounts available to many of the 78 million employees who currently do not have access.
Today, households rely heavily on personal assets, pensions and 401(k) accounts to help them make ends meet, even before both spouses retire. However, according to the 2012 Assets & Opportunity Scorecard, only 44.9% of Americans participate in their employer-sponsored retirement plan and almost 50% of the American workforce currently does not have access to a work-based plan at all.
Why is that so critical? Because employer-sponsored retirement plans are one of the main ways Americans are able to save for retirement. However, many small businesses and lower wage industries do not offer retirement plans to their employees. For those that do have the option to enroll, many are discouraged from ever doing so due to complex rules and investment options.
To make financial security for older Americans a reality, policymakers need to make sure that families have the tools they need to save for their later years today. Congressman Neal (D-MA) recognizes this fact and has reintroduced the Automatic IRA Act (H.R. 4049), which he says “provide common-sense reforms that will help Americans prepare for a financially secure retirement.”
The bill would enable nearly all employees who work for a private business with more than 10 workers to contribute to retirement savings through payroll deductions into an IRA. In addition, the bill provides employers with a tax credit to cover the administrative costs of setting up the IRA. Automatic IRA is a low-cost and effective way to reach millions of Americans struggling to build a nest egg for themselves.
This legislation is one of the few proposals that could break the gridlock in Congress. Despite the strong partisan differences between the parties, proposals for Automatic IRA have had bipartisan support in the past. Nods from the AARP, Brookings Institute, Aspen Institute for Financial Security and Heritage Foundation all support Automatic IRA policies similar to what is included in H.R. 4049.
CFED will track this bill and similar legislation as it moves through Congress. Despite the challenging political environment and the upcoming elections, we hope that this sensible and employer-friendly legislation will find broad support among lawmakers.
Assets & Opportunity Profile Release: Dallas
By Sean Luechtefeld on 02/17/2012 @ 10:45 AM
Yesterday, CFED’s Vice President for Policy & Research, Ida Rademacher, joined Communities Foundation of Texas (CFT) in Dallas for the release of the city’s Assets & Opportunity profile, published by CFED and commissioned by CFT and the Thomson Family Foundation.
The report, which you can read about here, reveals that two out of every five households (39%) in Dallas live in asset poverty, or roughly twice the number of families (19%) who live in income poverty. To find out how Dallas compares with the rest of Texas and with the nation, visit the 2012 Assets & Opportunity Scorecard.
Yesterday’s release event featured a press conference and legislative briefing which were attended by a full slate of city officials and nearly 300 nonprofit leaders from the Dallas region, including Assets & Opportunity Network lead local organization YWCA of Metropolitan Dallas and lead state organization RAISE Texas. Here at CFED, we’re especially excited about how the data has been received; the Assets & Opportunity profile and its release have been covered in, among other venues, the Dallas Morning News and the Dallas Observer. This high-profile coverage illustrates the potential asset poverty has to become part of a robust dialogue, not only in Dallas, but nationally as well.
We hope you’ll take the time to view the report for Dallas and join us in thanking CFT for coordinating this important event.
Register Today! Fundraising Strategies for IDA Programs
By Johanna Barrero on 02/16/2012 @ 10:30 AM
An Upcoming Webinar from the Assets for Independence (AFI) Resource Center
Tuesday, February 21, 2012
12:30 – 1:30 p.m. PST / 3:30 – 4:30 p.m. EST
Is your program struggling to raise the non-federal match funds for your AFI grant? Are you well into your grant period and haven’t met your fundraising goals? Join us and hear from organizations that have successfully raised their non-federal match funds. Learn from seasoned practitioners about strategies they’ve used to approach funders and secure financial resources for their IDA programs.
In this hour-long webinar you will learn about:
- Developing relationships with funders and donors
- Exploring the range of funding options – public, private, and philanthropic
- Creative strategies for a down economy
- Considerations for working with individual donors
- Tad Oyler, Grants Coordinator, EARN
- Devin J. Thompson, Development Director, Capital Area Asset Builders (CAAB)
- Leigh Tivol, AFI Resource Center (moderator)
Visit https://www1.gotomeeting.com/register/610029281 to register now!
The webinar is free to all interested participants. In advance of the webinar, please send any questions you would like our panelists to address during the session to Johanna Barrero at firstname.lastname@example.org, or call 202-207-0117.
Aspen Institute Names Levere Ascend Fellow
By Sean Luechtefeld on 02/15/2012 @ 01:00 PM
Below is the Press Release sent by The Aspen Institute this morning announcing that CFED President Andrea Levere has been named an Ascend Fellow. Please join me in congratulating Andrea on this important accomplishment!
The Aspen Institute today announced that Andrea Levere of Washington, D.C., will be in the inaugural class of its Ascend Fellowship program, one of a select group of 20 leaders from across the country who are pioneering two-generation approaches to move families beyond poverty.
Levere is the president of the Corporation for Enterprise Development (CFED), a Washington D.C.-based national nonprofit. As the president of CFED, one of the leading asset-building organizations in the country, Andrea has pioneered research, policies and products that promote expanding economic opportunity for families with low incomes. She has been on the forefront of efforts to expand matched savings for children and adults to help them save towards the purchase of a lifelong asset, such as a home, a business or tuition for college.
Ascend was launched in 2011 with support from national foundations and women philanthropists, and is a hub for breakthrough ideas and proven strategies that move parents and children—two generations—toward economic security together. Educational success is central to its work.
“Ascend Fellows are exceptional leaders from government, philanthropy, research, nonprofits, the media and private sector,” said Anne Mosle, Ascend executive director. “Each one will pursue cutting-edge work that illustrates two-generation strategies in their various fields.”
“Andrea Levere’s work on the Partnership for College Completion and child savings accounts are great examples of breakthrough thinking,” Mosle continued. “I am honored that Andrea will be a part of the Ascend network of leaders in two-generation strategies to build a legacy of educational success and economic security.”
The Ascend Fellows will work to break the cycle of intergenerational poverty through public, private, and nonprofit sector innovation and collaboration; state-of-the-art research; public engagement; and different market-based and philanthropic models.
Fellows will receive scholarships to support participation and execute action plans to pursue two-generation approaches. They will be eligible to apply for grants from an Innovation Fund that Ascend is developing to support such work.
The announcement of the fellowship program coincides with the release of an Aspen Institute report, “Two Generations, One Future.” The report makes the case for focusing on educational success for parents and their children together as a promising way to move families out of poverty.
“A two-generation approach can be a game-changer for families with low incomes,” Mosle said. “We are seeing promising results from programs and policies around the country that promote education and skills for parents and provide quality early-learning opportunities for their children. We believe a focus on education, economic supports and social capital, the core components of the two-generation approach, can lead to economic security for families.”
The full list of Ascend Fellows:
Ms. Katie Albright
San Francisco Child Abuse Prevention Center, Executive Director
Ms. Cara Aley
American MoJo, President and COO
Mr. Reggie Bicha
Colorado Department of Human Services, Executive Director
Ms. Mia Birdsong
Family Independence Initiative, Vice President
Dr. Lindsay Chase-Lansdale
Northwestern University, School of Education, Institute for Policy Research, Professor of Human Development & Social Policy and Social Policy Faculty Fellow
Ms. Karla Davis
Tennessee Department of Labor and Workforce Development, Commissioner
Mr. Steven Dow
Community Action Project, Executive Director
Dr. Chris King
University of Texas at Austin, Lyndon B. Johnson School of Public Affairs, Ray Marshall Center, Director
Ms. Andrea Levere
Mr. Steve Liss
Dr. Meera Mani
The David and Lucile Packard Foundation, Children, Families and Communities Program, Director
Dr. C. Nicole Mason
NYU Wagner Women of Color Policy Network, Executive Director, Assistant Research Professor
Ms. Margaret McKenna
Lesley University, President Emeritus and Professor of Leadership
Mr. Wes Moore
Reverend Vivian Nixon
College & Community Fellowship, Executive Director
Dr. Eduardo Padrón
Miami Dade College, President
Ms. Gloria Perez
Jeremiah Program, President and CEO
Dr. Mario Small
University of Chicago, Chair and Professor of Sociology
Mr. Henry Wilde
Acelero Learning, Senior Vice President of Operations
Dr. Richard Wylie
Endicott College, President
The Aspen Institute’s Ascend program is a hub for breakthrough ideas and proven strategies that more parents, especially women, and their children beyond poverty towards educational success and economic security. For more information, please visit www.aspeninstitute.org/policy-work/ascend.
The Aspen Institute mission is twofold: to foster values-based leadership, encouraging individuals to reflect on the ideals and ideas that define a good society, and to provide a neutral and balanced venue for discussing and acting on critical issues. The Aspen Institute does this primarily in four ways: seminars, young-leader fellowships around the globe, policy programs, and public conferences and events. The Institute is based in Washington, D.C.; Aspen, Colorado; and on the Wye River on Maryland's Eastern Shore. It also has offices in New York City and an international network of partners. For more information, please visit www.aspeninstitute.org.
President’s 2013 Budget Supports Investments in Working Families’ Financial Security and Asset-Building Opportunities
Proposal is a strong start but reduces support for some critical programs
Yesterday, the Administration rolled out its budget proposal for Fiscal Year (FY) 2013 (October 1, 2012 to September 30, 2013). The President delivered this budget request to Congress, which must now decide on and vote to approve funding levels for each agency. His accompanying letter to Congress portrays a relentlessly-squeezed American middle class which faces a tipping point: “For many Americans, the basic bargain at the heart of the American Dream has eroded.”
In response, the President’s FY 2013 budget proposal aims to ensure that America will continue to be “a country where working people can earn enough to raise a family, build modest savings, own a home and secure their retirement.” In essence, the Administration sees this budget as a blueprint for advancing financial security and asset-building opportunities for American households. But to what extent does it achieve this objective?
One major limiting factor is that billions of dollars in budget cuts are, under laws passed in 2011, set to take effect in FY 2013. Under deals struck between House Republicans and the Obama Administration, the cuts will focus on discretionary domestic programs—specifically, the 18% of the federal budget that remains after accounting for national security spending and entitlement programs such as Medicare, Medicaid and Social Security. For FY 2012, the President proposed a total of $458 billion in discretionary domestic spending; this year’s request is just $410 billion. This means that nearly every agency faces some reduction in total funding, including cuts to many programs that support low-income families who are working hard to make ends meet, save and invest in their futures. On the other hand, the budget proposal emphasizes investments in infrastructure and education, support for the housing sector and incentives to spur job creation—including entrepreneurship. In short, it’s a mixed bag for asset builders and the families we serve.
Tax Policy: The President asks Congress to take several concrete steps on tax policy and establishes principles to guide future work on comprehensive tax reform. He rejects today’s upside down policies that benefit “the people who have done fantastically well over the last few decades” but neglected “the middle class [and] those fighting to get into the middle class.” The budget includes several tax incentives that would provide significant support to low- and moderate-income families that are making tough choices today to build wealth and invest in their futures.
Specifically the budget:
- Makes permanent the American Opportunity Tax Credit, a partially refundable credit that helps families pay for their students’ higher education.
- Extends tax preferences that reward small businesses for hiring new workers and spur those businesses to make capital investments.
It compensates for the cost of these measures by curtailing some tax preferences that only benefit the affluent:
- Institutes new taxes on the largest financial institutions and households earning more than $1 million per year.
- Eliminates several corporate tax loopholes and the Bush tax cuts for families earning more than $250,000.
Retirement Security: The budget once again supports Automatic Individual Retirement Accounts (Auto IRA), a policy that would require businesses with more than 10 employees who do not currently sponsor retirement plans to enable their employees contribute to IRAs through payroll direct-deposit. The vast majority of these employers already use payroll systems that support direct deposit into IRAs, and the Administration’s proposal includes a tax credit to offset the cost of upgrading for those businesses that need to. This will make retirement savings accounts available to as many as 40 million of the 78 million American workers who currently do not have access to a retirement plan at work. Employees would be automatically enrolled at a low contribution rate but could opt out at any time. They would also retain the right to change their savings levels, and reallocate their investment portfolios. The Administration proposal echoes legislation introduced by Senator Bingaman (D-NM).
Assets for Independence (AFI): AFI, the primary source of federal funding for Individual Development Accounts, provides savings opportunities and incentives for low-income families who are saving to purchase homes, go to college and start businesses. The FY 2013 request of $19.9 million increases funds for program evaluation; it would also fund an estimated 47 AFI grantees and strengthen ongoing program administration and support. The Administration requests that HHS be granted authority to recapture funds that grantees have not used after three years, and that they be able to reallocate those funds to new grantees in order to expand the program’s reach with its existing budget.
Furthermore, the AFI funding request indicates the Administration’s support for program reauthorization and improvements, similar to those that have been proposed by Congressman John Lewis (D-GA) in the Stephanie Tubbs Jones AFI Reauthorization Act.
Funding Levels for Specific Agency and Department Programs
Of course, the devil is in the details. While the big-picture view of the budget is largely positive, some specific programs that support asset-building opportunities for low-income families are targeted for cuts. Funding levels for a variety of these programs are below:
Department of Agriculture:
- RD 502 Direct Loans (Rural Housing): $653 million, down from $900 million in funding for FY 2012.
- Rural Business Enterprise Grants: $30 million, an increase of $6 million from last year’s enacted level.
Department of Education:
- Race to the Top: $850 million, up from the FY 2012 funding level of $550 million.
- Promise Neighborhoods: $100 million, a $40 million increase above FY 2012 funding.
Health and Human Services:
- Assets for Independence: $19.9 million, level with the funding authorized for FY 2012.
- Community Services Block Grant maintains funding levels of $350 million from the FY 2012 Budget request, but is a cut of more than 50% of the $714 million that was enacted for FY 2012.
- Low Income Home Energy Assistance Program (LIHEAP): $3.02 billion, down $450 million from FY 2012.
Department of Housing and Urban Development:
- Family Self-Sufficiency program: $60 million, equal to FY 2012 funding.
- Housing Counseling: $55 million, $10 million above FY 2012.
- Community Development Block Grants maintained funding at $3 billion.
- Resident Opportunities for Self-Sufficiency maintained its FY 2012 funding at $50 million.
Small Business Administration:
- Microloan loans: $18 million, a 28% reduction from the FY 2012 level of $25 million.
- Microloan technical assistance: $19.8 million, slightly below the FY 2012 enacted level of $20 million.
- The Administration again targeted the Program for Investment in Micro-Entrepreneurs (PRIME) was again targeted for elimination. In FY 2012 PRIME is funded at $3.5 million.
- The Administration proposes a new training and technical assistance program for disadvantaged entrepreneurs, focused exclusively on veterans, to be funded at $7 million.
- Community Development Financial Institutions (CDFI) Fund: $221 million, level with FY 2012 funding.
- Bank On USA would be funded through the CDFI Fund, authorized at up to $20 million.
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