RAISE Texas College Savings Contest Worth Smiling About
By Stephanie Halligan on 11/03/2011 @ 03:30 PM
Saving for college can be a daunting task; so much so that, sadly, many families forgo it altogether. Yet, recent reports show that children "with a savings account in their name are approximately six times more likely to attend college than those without an account."
And that got our friends at RAISE Texas thinking about how they could help make creating post-secondary education savings accounts easier. For the first time, starting this December 5, RAISE Texas will kick off their statewide 2011-2012 Save ‘n SMILE Family Video Contest. Winners will receive actual tuition startup dollars --- in their own names --- an innovative idea we here at CFED are pretty excited about!
For one grand prize winner, RAISE Texas will create a Texas Tuition Promise Fund award of $2,000 on behalf of the child. That means $2,000 to kickstart his or her Texas state 529 plan, which can be used towards prepayment of undergraduate resident tuition and required fees at any Texas public college or university. Just think... for some Texas state community colleges, that could be an entire year of tuition covered! Two runners-up will also receive Texas Tuition Promise Fund awards in the amount of $250.
"It's all about helping our fellow Texans to get started... by taking the intimidation of college savings out of the picture, families will learn that they can do it. And we can help," said RAISE Texas Executive Director, Woody Widrow.
Our partners at RAISE Texas are asking: What would winning $2,000 towards college savings mean to YOU?
If you’re a practitioner serving clients that could benefit from this opportunity, please feel free to pass this contest information along:
1. Create a video, three minutes or less, that shares what a RAISE Texas $2,000 college savings account deposit would mean to your family. What does your child want to be when he or she grows up and how can a college degree help achieve his or her dreams?
2. Upload your video to your YouTube account. Don’t have one? Creating an account is easy and free, online at www.youtube.com.
3. E-mail email@example.com your video’s URL, your full name, address, phone number, e-mail address, and the age of your child who’d benefit from winning, by January 20, 2012. One submission per family, please.
4. Vote on your favorite videos starting January 30, 2012.
5. Winners will be announced February 20, 2012.
6. View the complete contest rules and eligibility requirements online at www.raisetexas.org/savensmilefamilyvideocontest. Submissions must meet eligibility requirements to qualify for contest entry.
Photo credits: Texans Care for Children & Any Baby Can
CFED’s Levere to Speak at Opportunity Nation
By Sean Luechtefeld on 11/02/2011 @ 01:30 PM
Tomorrow, the Opportunity Nation Summit will convene in New York City at the Apollo Theater, bringing together thousands of professionals from hundreds of organizations working to promote opportunity and social mobility.
We’re excited to announce that CFED President Andrea Levere will be among a star-studded lineup of presenters. Andrea will moderate a panel on the second day of the event, Friday, called ‘Achieving Economic Independence: Savings and Growth for Small Businesses and Households.’ The panel will take place from 11:15 am to 12:30 pm local time.
If you won’t be able to make it to the Opportunity Nation Summit, don’t worry – the event will be live-streamed and you can sign up here to watch in real time. Then, be sure to share your feedback using the comments section below!
New Data on the Strength of State Policies
By Ethan Geiling on 11/02/2011 @ 10:30 AM
CFED releases new data on the strength of state policies, case studies from the field
Last week we released new data on the strength of state policies that help families build and protect assets. This updated Scorecard policy data and accompanying Resource Guides are now available online.
For each of 12 policies, CFED created a Resource Guide that equips advocates and policymakers with background information on:
- Why the policy matters
- What states have authority to influence
- Elements of a strong policy
- Impact and results of policy change to date
- Examples of successful policy change strategies
- State precedents
- Advice on policy campaigns, as well as where to find additional resources
CFED worked with experts in the field and on the ground to capture detailed stories of some of the most exciting recent policy changes. We wrote up these stories into short case studies. Below are snippets from some of these case studies:
Case Study: A Successful Vote Ballot Initiative to Cap Predatory Lending in Montana
”…After another unsuccessful legislative session in 2009, the Cap the Rate Coalition decided to pursue a completely different strategy – a voter ballot initiative to cap interest rates on payday and car-title loans…Because the opposition understood that I-164 would probably be approved by the voters if it made it to a vote, opponents spent more energy filing complaints against the I-164 campaign than campaigning to deliver a message to the voters. These complaints took two main forms: campaign finance complaints and legal complaints. The Cap the Rate Coalition was able to weather these storms, though the opponents were successful in draining time and resources during a critical time in the campaign...”
Read the full case study in the Protections from Predatory Short-Term Loans Resource Guide.
Case Study: Eliminating the TANF Asset Test in Louisiana
“Agency leadership was instrumental in eliminating the TANF asset test in Louisiana…TANF administrators were particularly influenced by a cost-benefit analysis conducted by an outside contractor earlier that year. The analysis pointed out that the state’s successful TANF-funded Individual Development Account (IDA) program was in direct conflict with the asset test. On the one hand, the state was encouraging families to save and accumulate assets through the IDA program; while on the other hand, families were being penalized for owning assets through the TANF asset test. After a number of design sessions, TANF administrators were convinced that eliminating the asset test would benefit families and streamline program rules...”
Read the full case study in the Lifting Asset Limits in Public Benefit Programs Resource Guide.
Case Study: New York State Banking Department Adopts Groundbreaking Mortgage Services Regulations
“The need for regulation and accountability of mortgage servicers was dramatically illustrated by the ‘robosigning’ scandal in October 2010 and resulting lawsuit from the 50 state attorneys general. That scandal also catalyzed the New York State Banking Department to adopt what is widely regarded as the strongest set of regulations of mortgage servicers in the country…Effective October 1, 2010, these regulations apply to all entities servicing mortgage loans in New York. The extension of these regulations to all servicers in the state was groundbreaking, particularly because servicers from nationally chartered banks typically can dodge regulations that apply to their state servicer counterparts and because most mortgage servicers are from national banks…”
Read the full case study in the Foreclosure Prevention and Protections Resource Guide,
Case Study: A Decade of Advocacy Pays Dividends for Connecticut EITC
“...Realizing that the governor’s resistance to a state EITC was unlikely to change, advocates relaxed legislative efforts until a new, more receptive administration took office. In February 2011, a new Democratic governor included a fully refundable EITC, calculated as 30% of the federal credit, in his budget proposal for a tax system overhaul. While celebrating a positive first step, advocates did not take the governor’s proposal as a done deal, and braced for a debate pitting the new potential $100-million tax expenditure against the state’s $5 billion budget deficit…”
Read the full case study in the Tax Credits for Working Families Resource Guide.
Asset-Building Panels at APPAM 2011
By Sean Luechtefeld on 11/01/2011 @ 04:30 PM
Later this week, the Association of Public Policy Analysis & Management (APPAM) will convene its 2011 fall research conference in Washington, DC. The event will take place Thursday – Saturday, November 3-5 at the Washington Marriott and the Westin Georgetown Hotels.
Of particular interest to our readers might be a series of panels on asset building for low-income Americans. For example, ‘Savings at Tax Time: Field Experiments and Policy Implications’ will take place on Thursday from noon until 1:30 pm, while ‘Measuring and Building Financial Capability among Vulnerable Populations’ will take place on Saturday from 10:15 – 11:45 am. There will also be a pre-conference reception hosted at the New America Foundation tomorrow evening which may be of interest to folks in our field. A full searchable program of conference activities can be found here.
If you’re planning on attending the APPAM conference, be sure to use the comments below to share your highlights!
CFED, Partners Launch New JoinBankOn.org
By Sean Luechtefeld on 11/01/2011 @ 11:00 AM
This morning, CFED, with support from the U.S. Department of the Treasury and in partnership with the San Francisco Office of Financial Empowerment, the National League of Cities and the New America Foundation, launched a new-and-improved Bank On website, which we invite you to visit at JoinBankOn.org.
The new site includes many new and exciting features, including the ‘Research Your Community’ tool, an online application that allows users to create customized data reports about the un- and underbanked populations in thousands of communities across the country. In addition to the new features, JoinBankOn.org also features improved versions of some of the old site’s features, re-vamped based on intensive user feedback. These include tools that help users find programs in their communities, in-depth instructions about how to start a Bank On program, comprehensive resources provided by a diverse network of Bank On professionals and much more.
The new JoinBankOn.org was redesigned with the goal of helping communities strengthen the financial well-being of local residents through the adoption of the Bank On model. Since its successful inception in 2006 in the city of San Francisco, the Bank On model has gained support from state and local officials across the U.S. as a way of bringing the 30 million unbanked and underbanked households into the financial mainstream. These households, which are usually comprised of low-income workers, are hard-pressed to build savings and assets, find it difficult to respond to emergencies, and are more likely to have their money lost, stolen or eaten away by predatory lending and check-cashing outlets. In addition to connecting unbanked individuals to low-cost accounts, Bank On initiatives involve efforts to raise public awareness, provide targeted outreach and expand access to financial education. Bank On promotes collaboration among financial institutions, nonprofit organizations, educational institutions and government entities to deliver beneficial services to people who need them most in a responsive, low-cost and sustainable manner. There are currently dozens of communities that have implemented Bank On initiatives across the United States, and many more are planned.
The JoinBankOn.org website was developed by the Treasurer of the City and County of San Francisco to widely share the lessons learned from their innovative Bank On San Francisco initiative launched in 2006. According to San Francisco Treasurer José Cisneros, “JoinBankOn.org is the online home of our nationwide movement to ensure everyone has access to the financial mainstream. It provides communities with easy access to information and resources for starting or enhancing local Bank On programs.”
To stay informed on the latest news in the Bank On community and the larger financial access field, sign up to receive email updates. Or become a JoinBankOn.org member to participate in discussion forums and upload resources and news and events. Registration for JoinBankOn.org is free and simple. Click here to become a JoinBankOn.org member.
On behalf of all of our partners who made the new website possible, we are excited to introduce you to this new-and-improved digital resource. We also invite your feedback, as this website is premised on the idea that collaboration and community are the keys successfully expanding financial services for underbanked Americans everywhere. If you have questions or suggestions about the site, send us an email at firstname.lastname@example.org.
By Bill Schweke on 10/28/2011 @ 12:15 PM
Many Americans believe that the poor could escape from poverty if they truly tried. Let’s call this argument the Horatio Alger narrative (the individual ascension story), or, the premises underlying Herman Cain’s 9-9-9 plan. These comparisons say much for this argument. After all, economic opportunity is not something that can be given to you or bought off the shelf at Target. Of course, your ability to choose economic opportunity is much improved if you are born as a member of the super-rich.
But there is another better, more complimentary view – the Poverty Trap perspective. Proponents argue that cumbersome institutions, crazy incentives, and mega-trends (e.g., globalization, increased skills) can make the playing field much less even. Plus, there are otherwise benign community and kinship values and attitudes that can hold the poor back from achieving economic growth, such as inheritance norms, Potlatch rituals, etc.
Poverty Traps (2006), edited by Samuel Bowles, Karla Huff and Steven Durlauf, is a good introduction to this literature and these arguments.
The book reflects the multi-disciplinary research, model building, and historical and anthropological investigations underway. The authors see markets as embedded institutions which can operate productively and equitably, or not.
Public policy and even economics are not physics. History matters and place does as well. In some countries, such as Somalia (to take an extreme example), area “entrepreneurs” are pirates and warlords, which is a hell of a situation if you want to strengthen property rights, trust, deal making, modern and sufficient public goods, trade, and other preconditions of a healthy climate for development. Weakening poverty traps may entail reaching certain thresholds in quality, composition and distribution of human capital in a given area.
Opportunities for gain, exchange and entrepreneurship will need to exist at certain scale if a good product idea and education are not to go to waste. In a market economy one can choose to buy a good or service or to pursue an occupation, but you are hard-pressed to purchase a different culture or a different colonial history. Indeed, the past can hinder the options for today. The “resource curse” (e.g., diamonds in Africa) can perpetuate crime and corruption.
The concentration of the poor in a specific neighborhood can intensify the possibilities for inappropriate role models, as well as the strength of the vicious circles that characterize poverty traps.
A former CFED staffer, Alan Okagaki, captured these points wonderfully in a CFED study, “Windows on the World,” way back in 1988. Consider the following quotes; they are all about poverty traps:
“Poor communities are islands isolated from the mainstream. The isolation is geographic, social and economic.” These disadvantaged communities can become “engines of doom,” with no hope, no future, perpetuating their poverty and under-development.
Yet, “economic achievement is not a commodity. It cannot be given to people. Economic advancement is fundamentally about initiative and confidence.” We need to “integrate poor places into the economic mainstream or rebuild its indigenous capacity.
“Middle class parents are the best job developers. They can make the connections and vouch for their children…”
“In order to remain out of poverty in our economic culture, people must pursue opportunities . . . “
At the risk of sounding ‘too cute,’ there are six key prerequisite elements for expanding the opportunity to produce:
6. Conversation (between low-income communities
and the mainstream economy)
Poverty Traps and CFED’s own study underscore how isolated poor places are and how limited their vision. They offer a window into the world of economic disadvantage and persisting poverty.
Yet, to succeed, as CFED Founder Bob Friedman once put the matter, we need to “create windows out to the outside world.”
Pew Releases New Research on the Unbanked and Underbanked
By Ethan Geiling on 10/27/2011 @ 01:30 PM
A few days ago, the Pew Health Group released a new report on the unbanked and underbanked: Slipping Behind: Low-Income Los Angeles Households Drift Further from the Financial Mainstream. This is the second report of a two-part series, building on Pew’s 2010 report: Unbanked by Choice.
This is by far one of the most comprehensive research studies of the unbanked and underbanked conducted to date, and many of us at CFED have been looking forward to seeing the results of the study for some time.
The study analyzed 2,000 households in eight low-income neighborhoods around Los Angeles; 1,000 households had at least one bank account and 1,000 households had no bank accounts.
The report had three key findings:
1. Between 2009 and 2010, the ranks of the
unbanked increased, with more families leaving
banking than opening bank accounts.
This is discouraging, especially given that many large banks, including Bank of America, are planning on introducing new fees on previously free banking products, like checking accounts and debit cards. These new fees will likely further discourage the unbanked and underbanked from opening accounts – which is the exact opposite of what we should be doing.
Interestingly, Pew’s study noted that significantly less people in neighborhoods targeted by Bank On LA left the banking world. This suggests that Bank On programs are successful at encouraging people to open accounts.
2. Opening an account is only the beginning of a
beneficial banking relationship.
Pew’s study found that many people believe banks have more convenient locations, lower prices and better customer service than alternative financial service (AFS) providers (e.g. check cashers, payday lenders, etc.). However, many people use AFS providers anyway. Location, price and customer service are not always the most important considerations for underbanked consumers. Rather, it’s often more important to be able to access cash quickly and during convenient hours, and to use multiple services at once, like money orders and remittances. Financial institutions need to think more about the priorities of the un- and underbanked if they want them to keep them as customers.
3. Among the working poor, banking is associated
This confirms what other studies have shown and one of the key tenets of financial access initiatives. People with a bank account are much more likely to save. Pew’s study found that 88% of banked households had at least one savings account and 67% of banked households are saving. However, only 9% of unbanked households reported being able to save. This suggests that climbing the economic ladder often begins with a bank account.
Overall, Pew’s report suggests that there is still a lot of work that needs to happen to meet the needs of the unbanked and underbanked.
In the next few weeks, CFED and a group of partners will launch the revamped www.joinbankon.org website, which will feature a new unbanked data tool. The tool will estimate the number of unbanked and underbanked households at every census tract, city/town, county and metro area in the United States. We hope this tool will help communities across the country better understand the financial needs of their communities, so they can design effective and well-targeted strategies to meet these needs. Stay tuned!
Town Hall on Financial Capability
By Sean Luechtefeld on 10/26/2011 @ 11:30 AM
On October 7, CFED Vice President for Assets & Opportunity Programs Carl Rist presented at a Town Hall on Financial Capability at the Emory University Goizueta Business School. The hosts of the event have provided video from the forum at their website, and we encourage our readers to check out the lively discussion here.
The 120-minute video explores a variety of topics relating to financial capability, including financial access, entrepreneurship, access to affordable higher education, job creation and more. In addition to Carl, panelists included Dennis Lockhart, President and CEO of the Federal Reserve Bank of Atlanta, and Mark Kantrowitz, Publisher of Fastweb and Finaid.org.
If you get the chance to watch this video, use the comments section below to share your reactions!
I’M HOME Retreat Takeaways
By Lauren Williams on 10/25/2011 @ 05:00 PM
On October 5 & 6, CFED staff convened about 75 nonprofit and industry leaders from the manufactured housing field in Knoxville, Tenn., for the 2011 I’M HOME retreat. The two-day event was full of engaging conversations about tackling the challenges facing the manufactured housing field, and I can say with confidence that each of my colleagues left Tennessee feeling excited and energized about taking the next steps in advancing our goal of enabling owners of manufactured homes to take advantage of their homes’ affordability while building wealth.
Here are just a few of our top takeaways from the event. If you attended, I hope you’ll consider sharing your takeaways in the comments section below.
- Innovation is critical to success. CFED’s two social ventures, Next Step™ and ROC USA™ demonstrated a very important point at the Knoxville retreat: that innovation is central to the success of affordable housing initiatives. The Next Step™ Network was well-represented and highlighted their work with Clayton Homes, the largest manufacturer of homes in America, while ROC USA™ presented creative ways to promote energy efficiency in resident-owned communities and highlighted new opportunities for financing homes in communities that help lower- and moderate-income families protect their homes as assets..
- Single-family finance is a major priority for I’M HOME. Throughout the day, we heard repeated reminders of the significance and need for high-quality, safe and secure single-family financing options for owners and buyers of manufactured homes. The availability of better products is critical for the asset-building potential of manufactured homes. During the finance panel, speakers emphasized the importance of protecting and improving federal financing alternatives like USDA’s Rural Development 502 program; improving the way appraisals of manufactured homes work; supporting new partnerships like ROC USA®’s with San Antonio Credit Union; and shared new opportunities that have come to the forefront as a result of I’M HOME’s Single-Family Finance initiative.
- Partnership matters. On Thursday, CEO and President of Clayton Homes, Kevin Clayton, delivered the keynote address and emphasized his willingness to work more closely with the nonprofit manufactured housing sector to provide affordable, high-quality, energy efficient manufactured homes. It became clear throughout the retreat that industry alone and manufactured housing nonprofits alone cannot make affordable homeownership for all Americans possible. Instead, synergies between the nonprofit manufactured housing field, the manufactured housing industry and the mainstream affordable housing field are key to the future of the field.
As you can imagine, we’re busy at work building on the momentum from the I’M HOME retreat. If you have questions about the retreat or would like to request more information, send us an email!As you can imagine, we’re busy at work building on the momentum from the I’M HOME retreat. If you have questions about the retreat or would like to request more information, send us an email!
In Case You Missed It - October 24 Edition
By Sean Luechtefeld on 10/24/2011 @ 12:00 PM
Here’s your roundup of last week’s top links from around the assets & opportunity blogosphere.
Stimulating Job Creation
I was hoping for a clever pun that drew on coffee and job creation, but ‘stimulating’ was the best I could do. In a New York Times Opinion piece, Joe Nocera writes about the next big job creation idea coming from Starbucks CEO Howard Schultz. His plan: partner with CDFIs and have his 7,000-or-so bean bars serve as a place where anyone can make donations to small businesses. The plan will be rolled out on November 1, and you can read more about it here.
Numbers to #Occupy Your Mind
See what I did there? Yeah…at least I tried. The folks at Economic Populist shared yesterday some fodder to fuel the #OccupyWallStreet fire. It turns out that those pesky protestors have a legitimate claim: not only are there fewer jobs, but the size of the median paycheck decreased 1.2% in 2010 over the previous year. Likewise, data shows that the 1% really are getting richer (by a lot), while the rest of us…well, we’re here. Read the full article here.
A Graph Nine Miles Long
The folks at the Campaign for America’s Future shared a graph from Jared Bernstein that illustrates how much more the 99% would pay compared to how much less the 1% would pay under Herman Cain’s proposed 9-9-9 plan. NOTE: If you have a family history of arthritis, do not click this link…you might be scrolling for days.
Have a link you want to share? Use the comments section below.
Big Ideas for Job Creation
By Sean Luechtefeld on 10/21/2011 @ 10:30 AM
On Tuesday, November 8, CFED Founder Bob Friedman will speak at “Big Ideas for Job Creation,” a policy forum to be held from 10 am to noon (EST) at the Washington Center at the University of California Auditorium in Washington, DC.
In addition to Bob’s presentation, the forum will feature speakers from around the country, including experts in the nonprofit, academic and policymaking fields. These dynamic presenters will explore a series of innovative approaches to creating jobs and will offer the opportunity for participants to interact with panelists about these ideas. The event is being sponsored by the Annie E. Casey Foundation, the W. K. Kellogg Foundation, the California Institute for Research on Labor and Employment, and the Berkeley Institute of Urban and Regional Development.
The event is free, but space is limited, so you must RSVP. You can do so by sending an email. If you get the opportunity to go, stop by and say ‘hi’ to Bob!
Innovations in Self-Employment Tax Assistance
By Carl Rist on 10/20/2011 @ 12:30 PM
Basic microeconomic theory teaches that – all things equal – as the price of a good or service goes up, the quantity demanded goes down. However, a new and innovative self-employment tax service provided by Brooklyn Cooperative Federal Credit Union demonstrates that many small business owners actually prefer to pay a fee for tax assistance, rather than using a free tax assistance provider. Moreover, by charging a nominal fee for its services, Brooklyn Cooperative is creating a sustainable model that will allow it to reach even more small businesses in the future.
Brooklyn Cooperative is a community development credit union that supports the economic development of the Bushwick and Bedford-Stuyvesant neighborhoods through services that include consumer, business and home loans, as well as core financial services. In February 2010, Brooklyn Cooperative began an effort to provide low-cost tax preparation for small business owners as a strategy for helping these businesses to formalize and grow, create jobs, and access tax-based asset-building supports. With a grant from CFED, made possible by generous support from Morgan Stanley, Brooklyn Cooperative became one of three Self-Employment Tax Initiative (SETI) “innovation sites” for the 2010 tax season (calendar year 2011), each demonstrating a different service delivery method. Rather than providing free tax assistance with rigid income restrictions, Brooklyn Cooperative’s innovation was to charge a below-market fee and make their services available to any independent contractor or small business owner needing help with taxes.
The results were impressive. In its second year of operations, Brooklyn Cooperative’s Business Tax Counseling program served 121 small business owners, a six-fold increase in volume compared to the previous tax season. What’s more, unlike other self-employment tax assistance providers, for whom many clients use self-employment primarily for “income patching,” making use of a fee-for-service model may have actually attracted more intentional small business tax filers to Brooklyn Cooperative. Such clients tend to be more interested in growing their businesses and are more prepared to do so.
For more information about Brooklyn Cooperative’s fee-for-service innovation, download the bulletin here.
The Neglected Self-Starter
By Bob Friedman on 10/19/2011 @ 12:00 PM
This is a re-post of my opinion piece that appeared in the Democracy Journal online this morning. You can read the full text here. As always, comments are welcome using the form below.
Among the very good provisions of the American Jobs Act (AJA) are some that recognize the real job creators of the American economy: the self-employed, and even the unemployed, who often realize the only way they‘ll become employed is to create jobs for themselves. AJA includes pathbreaking provisions for a Self Employment Tax Credit, extends the Self Employment Assistance program to unemployed people in all 50 states, and adds self-employment training and support to re-employment programs. The likely result if passed: hundreds of thousands of new jobs, targeted to those who need them most.
The bill would be a first step towards addressing one of the great ironies of public economic policy in the United States—that at this time when the need for jobs and enterprise tops the national agenda, we not only ignore one of the major sources of new jobs and businesses in the economy, but we actually penalize their creation.
As the National Bureau of Economic Research and the Kauffman Foundation have recently reported, businesses under one-year old—startups—have created an average of three million new jobs each year for 30 years, more than the net job creation of the whole economy. A big proportion of those jobs are by self-employed entrepreneurs who don’t have any employees. Each year some 22 million Americans file Schedule C to report self-employment income, two million of them for the first time. Half of these filers report family adjusted gross income of less than $50,000
And yet, despite contributing millions of jobs to the U.S. economy, such businesses are all but ignored by policy-makers. They have no associations or lobbies. They are largely left out of the agenda of the President’s Start-up program, which focuses only on rapidly growing, often older firms, which can take venture capital investment and pay handsome returns. Small business groups focus on the agendas of small firms while the Chamber of Commerce and others focus largely on the perceived needs of big businesses. States still focus on luring large, established firms.
This neglect is a problem. The self-employed already face numerous obstacles; not receiving any attention from policy elites only hampers the small-scale entrepreneur’s ability to get off the ground. One hurdle is the lack of access to capital for low-income entrepreneurs. Granted, some actors have tried to fill the void. The U.S. microenterprise industry, composed of hundreds of local microenterprise development initiatives, a growing number of state microenterprise development associations, and national organizations, has worked to provide recognition, assistance, and supportive policy to low-income entrepreneurs. Our best estimates show that microcredit provides assistance to 250,000 low-income entrepreneurs annually, and loans to fewer than 10 percent of them. This is a significant—and growing—contribution. But the fact remains that this is a small percentage of both the 11 to 15 million small businesses operated by low-income entrepreneurs and the million plus new firms started each year.
Even worse than neglect, however, is outright harm. The fact is that public policy imposes substantial burdens and penalties on these vital entrepreneurs. Self-employed entrepreneurs are required to file Schedule C and pay employer and employee shares of FICA taxes equaling 15.3 percent of revenues, as well as back taxes and penalties, even though it is extremely difficult to project profits and tax liability a year ahead of time. New entrepreneurs are required to file Schedule C and pay payroll taxes even if they make only $400, often less than the cost of tax preparation (at that level they will not even receive Social Security benefits). Meanwhile, the IRS has traditionally prohibited most nonprofit tax preparers from assisting these entrepreneurs with their Schedule Cs. No wonder some four to six million businesses remain outside the formal economy and the reach of the tax system, unable to benefit from the tax benefits, credits, and deductions available to formally registered businesses, and denying the public coffers an estimated $15.9 billion in annual tax receipts.
Clearly, reform needs to happen to grease the gears of the entrepreneurial economy and help millions of the self-employed—and millions more who aspire to be. In recent years, CFED—the national nonprofit I started to insure that every American has a realistic opportunity to start a business, go to college, buy (and keep) a home, and provide a future for themselves and their families— the National Community Tax Coalition, and other local and state partners have begun to draw the curtain for these start-up businesses, providing tax and Schedule C prep assistance as a doorway to the mainstream economy. Last year the Self Employment Tax Initiative helped more than 33,285 entrepreneurs claim more than $30 million in refundable tax credits and save more than $11 million in tax preparation fees. Twenty-one percent of these entrepreneurs were first time filers; more than half survived solely on their self-employment income. Thirty-three percent were Latino, 27 percent African-American, 27 percent white, 5 percent Asian and 1 percent Native American. As a result of associated policy advocacy efforts, the IRS has begun to allow Volunteers In Tax Assistance—an IRS tax assistance program—to prepare Schedule Cs.
But much more needs to be done. Policy-makers need to refocus their efforts on the millions of Americans who are or would be self-employed and who don’t have the resources to deal with the demands of our regulatory bureaucracy. The American Jobs Act would be an important first step toward eliminating barriers to new business creation. But we should not stop there. As Congress considers the bill’s different provisions, they should consider the following proposals:
- Create a “Self Employment Tax Credit” that permanently expands the payroll tax cut for new businesses, providing a one-year payroll tax holiday followed by one year at the lower 6.2 percent rate provided in the Jobs Act.
- Enable and encourage would-be entrepreneurs to save for their ventures by making the Saver’s Credit refundable and available for business creation. Most new businesses are financed out of personal savings and the savings of family, friends and associates. Lack of savings is one of the most likely causes for depressed new business formation rates.
- Allowing beneficiaries of all public support programs, from welfare to unemployment compensation to Social Security, to pursue self-employment without abruptly losing benefits.
The American economy performs best when it releases and supports the energy, vision and talents of all of our people. Indeed, if you look at our history, the policies that have created widely shared, long-term, sustainable economic growth have been policies like universal education, the Homestead Acts, the creation of the 30-year fixed rate mortgage (by the federal government), and the G.I. Bill, which invested in the common genius of the American people. Our economy is faltering now because we have locked out the mainstream. Let’s re-open the doors to the economy.
CFED Research Release Highlights Twin Cities' Financial Insecurity
By Sean Luechtefeld on 10/18/2011 @ 11:30 AM
New data released today by CFED's Research Team reveals enormous disparities along racial lines in how people are faring in the Twin Cities during the economic downturn, particularly in the areas of homeownership, savings and overall income.
CFED’s Asset & Opportunity profiles for the Twin Cities were released at a St. Paul forum featuring state and local elected officials and national experts, including Mayor Chris Coleman, State Rep. Morrie Lanning, St. Paul City Council Member Melvin Carter, Minneapolis City Council Member John Quincy and Commerce Commissioner Michael Rothman. Our very own Jennifer Brooks, Director of State & Local Policy, was on-hand to speak at the event as well.
“We hope these profiles and the forum today fuel an ongoing conversation about income and asset poverty in the Twin Cities and statewide, “ said Brooks. “It is clear that many families are suffering. But we have found ample evidence that local leaders, working in partnership with non‐profits, have the power to create highly effective programs that help families build wealth and save for the future.”
CFED's Asset & Opportunity profiles provide a comprehensive look at the financial stability and economic resiliency of families in general, and those released today take a close look at Minneapolis and Hennepin County and at St. Paul and Ramsey County. They offer the most comprehensive data available on the economic challenges facing households in the metro area in comparison with state and national figures. Among the key findings in Minneapolis & St. Paul:
- While more than 63 percent of whites own homes in the Twin Cities, just 23 percent of blacks in Minneapolis and 26.4 percent in St. Paul are home owners. This is attributed, in part, to high home costs. The average national home cost is 3.7 times greater than median income, but is 5 times greater in Minneapolis and 4.5 times greater in St. Paul.
- Low incomes and lack of assets are having a profound effect on the ability of Twin City residents to save for the future and build financial security. Fully 63 percent of black Twin City residents, compared with approximately 25 percent of whites, are living in “asset poverty,” meaning they do not have enough assets to live at the poverty level ($22,314 for a family of four) for three months if they lose their main source of income. The overall rate for people of color living in asset poverty was also quite high (57 percent in Minneapolis and 52 percent in St. Paul).
- While median income for whites was nearly identical to the national rate of $52,175, the medium income for black households was just $21,747 in Minneapolis and $26,031 in St. Paul.
“These data paint a troubling portrait of the recession’s impact on the Twin City’s most vulnerable families. Our region’s economy cannot prosper with so many residents lacking the income and assets to achieve financial security,” said Ron Elwood, supervising attorney for the Legal Services Advocacy Project, which hosted the forum along with CFED and Greater Twin Cities United Way.
At the forum, policy makers presented their reactions to the data and discussed current programs and future plans aimed at expanding financial security and opportunity. A panel of local experts also provided information about efforts currently underway that are helping struggling Twin City residents build wealth by connecting them to safe and affordable financial products and services, and increasing their access to income‐boosting benefits and tax credits.
“These innovative programs are making a significant difference for families in our area. But they need to reach more people. Local, state and national leaders working with those of us in the non‐profit sector have an opportunity to identify and support strategies that can help people achieve greater financial security,” said Andrea Ferstan, director of income strategies for Greater Twin Cities United Way.
CFED has been working with cities across the country to expand access to mainstream banking, financial education and income and asset‐building opportunities, as well as help families protect the assets they have so they can become more financially stable. The organization is assisting Twin City officials to help bring about similar changes in the metropolitan area and throughout the state. To read the Minneapolis Asset & Opportunity Profile click here; to read the St. Paul Asset & Opportunity Profile, click here.
The Asset & Opportunity Profiles were made possible with support from Northwest Area Foundation.
In Case You Missed It - October 17 Edition
By Sean Luechtefeld on 10/17/2011 @ 12:15 PM
We really like to use ‘In Case You Missed It’ to point your attention toward interesting reads throughout the assets blogosphere. Lately, we’ve had so much content from CFEDers and a slew of partners that we just couldn’t get this list together. Luckily, it’s back – your weekly links from around the asset-building cyberworld. Enjoy!
Bill Scher at the Campaign for America’s Future includes in his blog this morning a number of helpful links for those of you following the Occupy movement. Question for our readers: what can we make of the Occupy movement? Is it working? What’s next? Use the comments section below to get the conversation started.
Gearing Up for Children’s Savings
According to the New America Foundation’s Ladder blog, the DOE announced on September 30 that 42 of the 66 new GEAR UP grants include within them children’s savings and financial education programs. That’s great news, more about which you can read here.
Not New, But Still Gets My Blood Boiling
I’m clearly not the only one outraged by the Heritage Center’s report that poverty in America is a myth (evidence for which Heritage finds in the fact that “poor people” have "luxuries" like a refrigerator). Thankfully, Mercedes Diane Griffin Forbes of the DC Examiner shuts it down with her eloquent commentary on what poverty really means in the US. Check out her response here.
Have something to share that we missed? Leave a comment below!
CSAs Featured on TV’s Entourage
By Sean Luechtefeld on 10/14/2011 @ 09:45 AM
Last month, Bhagwan Chowdhry, Professor at UCLA’s Anderson School of Management, was featured in an episode of the popular HBO series, Entourage. In the episode, Professor Chowdhry is being interviewed by a journalist on his real-life children’s savings initiative, called Financial Access at Birth (FAB).
According to the episode, a clip from which you can watch here, FAB would open a $100 savings account for every child at birth. Of course, as Chowdhry notes in the episode, getting funders on board is no easy task. Still, FAB is a FAB-ulous idea, given that recent research shows that children who have a savings account at seven times more likely to complete college.
As the engineer and mastermind behind FAB, Chowdhry was also featured in a Fox Business interview on the initiative, explaining how financial access is critical to bringing all Americans into the economic mainstream and how saving from birth can be a necessary step to achieving that goal. You can watch the Fox Business interview here.
You can imagine how excited we were when we saw children’s savings initiatives featured in popular media, and if you caught the episode of Entourage, we’re sure you were excited, too. Can you think of any other instances when financial access was highlighted in popular media? If so, use the comments section below to send them our way!
Nonprofit Loan Fund Launches Product for Photo Voltaic Systems on Homes
By Kim Pate on 10/13/2011 @ 12:15 PM
EDITOR'S NOTE: The following is a press release that was issued by the Council for Native Hawaiian Advancement.
Honolulu, Hawaii – The Council for Native Hawaiian Advancement (CNHA) Board of Directors took action this summer to approve the expansion of its solar water loan product to install photo voltaic (PV) systems on Hawaiian homes.
“Over the last 2 years, we’ve assisted close to 200 families to install solar water systems to cut utility costs,” said Rosalee Puaoi, CNHA Loan Fund Manager. “It’s a natural next step to help families go to the next level of further reducing monthly costs by installing PV on their homes.”
Solar water panels strictly heat water, which represents between 25% and 40% of a household utility bill. PV solar panels go further, by converting solar energy to electricity, reducing household energy costs even more.
CNHA’s solar water program provides capital of up to $6,500 and, with the expansion of the product, will provide up to $15,000 to install photo voltaic solar panels.
“It’s really one of the best investments a homeowner can make,” said Lilia Kapuniai, CNHA Vice President. “The savings each month gives families a relief and an increase in disposable income.”
The PV product is structured to have $172 monthly payments, either entirely or mostly covered by the utility cost savings generated by the panels. On top of that, homeowners are able to claim up to 65% of the cost of the system, worth thousands of dollars.
“Back in 2008 and 2009, community leaders consistently told us families were struggling in the recession and identified solar as a meaningful way to increase their monthly disposable income immediately,” Kapuniai continued. “It’s just one tool that we can give families to weather the down economy – it’s not a question of 'if' families can afford to make this type of home improvement, the data is clear, our community cannot afford to not make these improvements.”
CNHA hopes that families take advantage of not only the obvious cost saving that is generated from installing photovoltaic systems, but also the long term impacts of not relying on fossil fuels to power Hawaii. CNHA is a national network of Native Hawaiian organizations, providing a strong voice on public policy, operating a community loan fund, delivering capacity building and leadership development services, and promoting philanthropy to cultural practitioners through its Hawaiian Way Fund.
For more information visit www.hawaiiancouncil.org or www.hawaiianwayfund.org.
Prize-Linked Savings Report and Event
By Sean Luechtefeld on 10/12/2011 @ 01:00 PM
Here’s the latest announcement from our friends at D2D Fund about their new prize-linked savings report and upcoming prize-linked savings Summit on November 18.
Please take a look at our newest prize-linked savings (PLS) publication, "Prize-Linked Savings And Financially Vulnerable Americans: Insights from a Five-State Study," which details the results of the first-ever panel survey of 1,300 low-to-moderate income American households’ demand and preferences for PLS.
“In my prior work, I focused on the question of how we get money into the hands of low-income individuals and households. At D2D, I was able to think instead about how to help low-income households actually save more of that income,” said the report’s lead author, Heidi Boyd. “A prize-linked savings product can motivate individuals to increase their participation in the formal banking sector and therefore enable them to save more of their income.”
This report is part of a series of papers written and published by D2D that delve deeper into the cutting-edge PLS innovation. Look for the next paper in a few weeks which focuses on the continued success and ongoing innovation around Save to Win in Michigan.
Don't forget that on November 18, 2011, D2D will be hosting a PLS Summit – participants will join an engaging discussion of implementers, academics, entrepreneurs, funders, and policy makers while hearing about the latest research, innovation, and scale models for PLS. To register, click here.
New Kauffman Foundation Publication on the Untapped Potential of Women Entrepreneurs
By Lauren Stebbins on 10/11/2011 @ 12:30 PM
EDITOR'S NOTE: The following was an eblast sent by the Ewing Marion Kauffman Foundation publicizing their new publication "Overcoming the Gender Gap: Women Entrepreneurs as Economic Drivers."
Women who are capable of starting growth companies that serve global markets may be the nation's secret weapon for achieving sustained economic growth.
Research shows that startup companies -- particularly high-growth startups -- are the most fruitful source of new U.S. jobs and offer the economy's best hope for recovery. However, despite the fact that about 46 percent of the workforce and more than 50 percent of college students are female, and that women have risen to top positions in corporate and university hierarchies, they represent only about 35 percent of startup business owners. Their firms also tend to experience less growth and prosperity than do firms started by men.
"Overcoming the Gender Gap: Women Entrepreneurs as Economic Drivers," a new paper released today from the Kauffman Foundation, explores the reasons behind lower business startup rates among women and proposes actions that would help to realize the promise of female entrepreneurs in escalating the economy.
For more information and to view the entrepreneurship gender gap infographic, click here.
CFED’s Pate to Keynote Oregon Microenterprise Network Conference
By Sean Luechtefeld on 10/10/2011 @ 12:15 PM
On Thursday, CFED Vice President for External Relations Kim Pate will deliver the keynote address to the Oregon Microenterprise Network (OMEN) Summit on Entrepreneurship in Portland. To learn more about the Conference or to register, click here.
Kim’s keynote will focus on the federal policy landscape facing the asset-building field, especially in 2012 leading up to the presidential election. Kim will also share the innovative work being done by local SETI partners, discuss CFED’s Assets & Opportunity Scorecard, and explore how states are doing in terms of asset building, particularly in Oregon and in neighboring states.
Will you be attending OMEN’s Summit on Entrepreneurship? Be sure to drop by and say ‘hi’ to Kim when you’re there!
Currently reading page 29 of 53.