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Sep 30, 2010

State of the Field Address by Andrea Levere

CFED President Andrea Levere’s 2010 State of the Field address, delievered at CFED's 2010 Asset Learning Conference on September 22, 2010 in Washington, DC.

I. Opening

The last time we met together at the 2008 Assets Learning Conference, held on September 11-13, we were in a different world. It is no exaggeration that the change in world view that occurred pre- and post- 9/1/2001 in terms of homeland security is on the scale of the change that happened just two days after the conference ended, September 15,2008,  when Lehman Brothers failed. This failure set in motion a spiral of events that have permanently changed our ideas about market regulation (or the fact of "self-regulating" markets) and the realities of economic security. Consumer spending and business investment fell and access to credit became constrained. Stocks dived. And 5 million jobs were lost by June 2009. To quote Robert Samuelson: "Until then, deteriorating housing and mortgage markets had triggered what seemed a serious—but not unprecedented—recession. Once Lehman failed, the economy went into a frenzied free fall."

Six weeks after this event, Barack Obama was elected President with majorities in the House and the Senate. Everything changed again in ways we could barely imagine. Cabinet secretaries and White House staff who not only knew the word asset building, but had even practiced or advocated on its behalf, assumed positions of power and influence. For the first time in eight years, we had the possibility of aligning federal policy with state policy and even with municipal policy.

And on April 2009, President Obama made the following statement:
"We cannot rebuild this economy on the same pile of sand.  We must build our house upon a rock.  We must lay a new foundation for growth and prosperity – a foundation that will move us from an era of borrow and spend to one where we save and invest."

It was that quotation—and the policies and commitments and experiences that stood behind it—that inspired the title of this conference: The Assets Movement at its Moment: Creating the Save and Invest Economy.

II. The Assets Movement

The first part of this title—the Assets Movement--comes from you. I see a movement in this room that spans geography, race, ethnicity, disability, industry, sector, citizenship, gender, religion, age, class, and culture.

Recently, a wonderful article by Robin Katcher titled: Unstill Waters: The Fluid Role of Networks in Social Movements, appeared in the Nonprofit Quarterly just in time for us to invite her to address the pre-conference session for state and local assets coalitions. Her article describes the essential role and inherent flexibility of "movement networks" in supporting and contributing to social movements and strongly affirms that diversity must be an essential organizing principle: "Networks not only bring diverse constituencies together but also center analysis on the lived experiences of those most affected by the problem the movement seeks to solve."

She ends the article by issuing a challenge to us to think differently about how we structure our roles and engagement in our movement activities from those that take place within our organizations: "The highly adaptive nature of networks that seek to contribute to and support social movements challenges the past 30 years of traditional thinking on what it takes to build and develop nonprofit organizations…We must understand what it takes for them to come together in strong, fluid, adaptive and effective networks. This requires us to embrace the often messy process of creating and growing networks and to better understand what supports movement networks’ learning and adaptation so that they can answer the call at each critical moment."

40 people met yesterday to form a new network called the Global Asset Action Network. Over 300 of you are storming Capitol Hill tomorrow and making over 700 visits to your Congressional representatives. Over 60 national organizations and companies have signed on as part of the Child Savings Account Coalition. Over 180 people spent the past day and half discussing, evaluating, strategizing and brainstorming about the role of local and state asset coalitions in advancing policy change throughout the country. While our data shows that 50% of the asset coalitions that attended the session have been working together for more than 3 years, the rest of you have been at it for less than that, suggesting a recent explosion in interest in the state and local coalition approach.

We are collectively building a "movement-oriented network" that has the goal of bringing assets to the economic justice movement. After 5-10 years of organizing ourselves, we are also mainstreaming our work in recognition of our accomplishments to date and how we far we have to go bring the assets approach to scale. It is exactly because we have reached a new moment in the assets field that the growth of this movement is so important.

III. How is it our moment, and how do we leverage it?

• We see the real problem.

We understand that we must pair data on income poverty with data on asset poverty to understand the true economic insecurity of households. We understand through research of scholars such as Melvin Oliver and Thomas Shapiro the breadth and depth of the racial wealth gap, and how it is neither accident nor merit that has produced the inequalities of wealth, ownership and economic participation of people of color, women and low income communities in the US; rather, it has largely been a matter and result of policy.

• We take an integrated approach to solving the problem: Household Financial Security Framework.

Reducing poverty and achieving financial security and empowerment is a dynamic process in which households iteratively gain skills, increase income, begin to save, leverage saving into assets and protect gains made along the way. CFED’s Household Financial Security Framework’s focus on the household provides a universal lens that makes it possible for any organization – government, non-profit, philanthropic or private sector – to identify the specific ways their work contributes to the financial betterment of families.  The five perspectives—learn, earn, save, invest and protect—illustrate the cycle of asset building and the critical importance of delivering essential services to households and how those services, such as public benefits, child care, affordable housing or matched savings, contribute to the overall financial well-being of the household. Equally crucial are the larger systems and infrastructures, both policy- and market-based, that both enable and incent families to build economic security. There is no silver bullet for ending poverty.

• We practice "Wealth Creation Done Right’: Almost two decades of real-world practice and implementation, paired with the high quality research and evaluation, has documented that if the right structures and opportunities are available, low-income families can and will dramatically shift their economic trajectories through savings and asset accumulation for themselves and their children.  New research conducted by CFED and the Urban Institute substantiates the claim that if affordable home ownership is done right – that is, with savings, financial education and appropriate mortgage products – low-income individuals can be successful homeowners.  The study tracked 831 homebuyers in 17 states who purchased homes using IDAs between 1999 and 2007.  Relative to comparable low-income homebuyers who purchased homes in the same communities and over the same time period, IDA homebuyers obtained significantly preferable mortgage loan terms, with only 1.5 percent having high-interest mortgage rates, compared to 20 percent of the broader, control sample, and were two to three times less likely to lose their homes to foreclosure. This lesson can be applied any asset purchase—that savings and/or equity, appropriate financial education, and high quality debt—are the elements of wealth creation done right.

• We are seizing the policy opportunity: Twenty years of practice, policy and market innovation has shown us how to use tax and asset policy to invest in ways that not only offer to make us more prosperous, but more equal too.

• At the federal level, asset-building policies designed to create a comprehensive savings infrastructure or build assets have passed or are gaining new momentum. President Obama has included an expanded Saver’s Credit, asset limit reform and Auto IRA in both of his budgets, and recommended $50 million to underwrite the new "Bank On USA" program in his most recent budget. The ASPIRE bill to create universal child savings accounts has been reintroduced into Congress. Beginning next year, we will have an important new federal wealth building policy:  anyone in America will be able to use part of their federal tax refund to order the quintessential safe savings product, inflation-protected US Savings Bonds.  This policy has characteristics we’ve long sought: It’s universal, scalable, permanent, can be used to save for children and to encourage first time savers and builds upon the ability to split tax refunds. The recent passage of the Consumer Financial Protection Bureau (CFPB) builds a policy infrastructure to secure a new level of financial protections that are increasingly essential to the financial security of families. For those of you who are part of the growing network of advocates and practitioners of affordable housing, we are looking at a game changing policy win with $600 million in financial incentives to replace aging, terribly inefficient MHs with Energy Star units delivered through nonprofit housing developers. And these are just a few of the opportunities ahead of us.

• CFED’s recently released Assets & Opportunity Special Report documenting state policy progress since June 2009 identified a net gain of 70 policy improvements over the past year, resulting in a stronger state asset policy infrastructure compared to the prior year. Not surprisingly, the policies that saw the most success tended to be those that were low- or non-cost—such as 18 states eliminating asset tests in public benefit programs, others streamlining enrollment in the Children’s Health Insurance Program and regulating consumer lending. Results were more mixed for policies that required new or significant funding—such as housing trust funds, microenterprise development and matched savings accounts.  But given the fiscal crisis affecting virtually all the states, this progress is a testament not only to the power of strong advocacy, but also to the inherent logic and value of an "assets" approach.

• If states were at the forefront of policy innovation for the past decade, municipalities are catching up quickly with some of the newest approaches to increase financial empowerment. Asset building policies and programs have been embraced by a growing number of cities as an essential part of their efforts to help families with low incomes stabilize their economic lives. Cities have played a leadership role in launching over 70  "Bank On" campaigns to improve low-income households’ access to mainstream financial products and promote overall financial literacy—an innovation soon to be supported at the federal level through the "Bank on USA" program. San Francisco is slated to be the first publically funded, universal, matched savings program for children when it launches Kindergarten to College this fall. Local leaders are also pioneering new ways to innovate and leverage the regulatory power of municipalities to increase consumer protections from predatory financial products.

• We are learning how to leverage the power of markets.

• We won’t reach scale through philanthropy. We even won’t get the scale that we need by relying on government funding. True scale in building assets and expanding economic security lies in making the business case that brings private sector partners into the game. This usually means crafting financial incentives directed to those who we care about that change the profitability equation for financial institutions. It means aiming less for "boutique products" and more for standardized, low cost yet accessible and fair products that are easy to use and market. In the end, this is the only route to achieving sustainability and meaningful scale and it requires us to think in terms of market penetration as much as social impact—since by increasing our market share we will have greater impact.

IV. How do we create the Save and Invest economy?

1. Expose and reallocate the Federal Asset-Building Budget.
   Today, CFED is releasing Upside Down: The $400 Billion Federal Asset-Building Budget. This study documents that in 2009, the Federal government spent $384 billion to encourage individuals and families to save for retirement, own homes, start businesses and pursue higher education. While there are programs in the Federal budget to encourage homeownership, savings, entrepreneurship by individuals and families, they pale in comparison to their tax counterparts: for each $1 in program expenditures in those areas, we spend more than $300 in tax expenditures. Tax expenditures tend to accrue to the benefit of those with higher incomes, higher tax liabilities and a greater ability to itemize; moreover, the reliance on tax deductions, exclusions and deferrals over refundable tax credits further skews tax benefits toward the wealthy.

   The outcome of this approach is unwise and regressive. In 2009, 53% of the Federal Asset-Building Budget accrued to the top 5% of taxpayers (those making on average over $167,000 a year) while fully 45% accrued to the top 1% and 84% accrued to the top quintile. Less than 4% of the Asset Budget benefitted the bottom 60% of taxpayers. The top 1% received an average tax benefit of more than $96,000 while taxpayers in the lowest 20% received less than $5. Of course, higher income people pay more taxes, but they get back even more than they pay: In 2009, the top 1% of taxpayers paid 27.7% of all taxes, but collected 45% of asset tax benefits. Finally, it should be noted that state tax structures tend to mirror the Federal tax structure and add their own layer of regressive asset tax benefits.

   We have a monumental opportunity not only to save by curbing existing ineffective asset tax incentives, but to increase net savings significantly by extending effective incentives to the asset-poor majority. In a world where politics are increasingly shaped by growing budget deficits, we suggest a strategy where we cut inefficient subsidies to both lower the deficit and pay for higher return investments. We would suggest cutting the overall Federal asset budget by 25% -- from $400 to $300 billion annually-- which would reduce the ten-year deficit by more than a trillion dollars. At the same time, we would reallocate about $10 billion a year (2.5% of current expenditures) to expand incentives to low and middle-income families to save.

   At the end of 2010, the Bush administration’s tax cuts are set to expire, which means that Congress will need to either extend or eliminate these tax cuts. The inevitable legislation will provide a policy vehicle on which to carry a major investment in wealth-building incentives targeted to lower-income families. Last month, the CBO estimated that it would cost $814 billion over the next ten years to extend the 2001 tax cuts to households earning more than $250,000. Compare that to the $30 billion it would cost to extend the Saver’s Credit to 50 million low-and moderate income households for ten years, the $4 billion required to implement the IDA tax credit, the $10 billion for the Auto IRA, or the $35 billion it would cost to provide a Child’s Savings Accounts to every child at birth for 10 years. Where is the better return on investment? For all four of these initiatives, it would cost about $8 billion per year—meaning we can enact a comprehensive wealth building system for children and families for 2% of the federal asset building budget.

2. Make tax time the on ramp to savings, tax credits and increased economic security. Where we have policy victories, we have to be sure they succeed and reach people as is the case with savings bonds at tax time.  Please take a personal pledge to buy some US Savings Bonds with your own 2010 federal tax refund, and tell your clients, colleagues, friends and family to do the same – they’ll get a high value savings product and we’ll demonstrate to the public and policymakers that Americans want to build their financial security.  Stop by D2D’s table in the Innovation Marketplace to learn more. Let’s also work together to advocate to increase the funding for the nation’s VITA sites. The 2010 Volunteer Income Tax Assistance (VITA) network of over 600 coalitions and 100,000 volunteers nationwide provided free tax assistance to over 3 million seniors, workers, veterans and people with disabilities across ethnic groups at over 12,000 free tax assistance sites. In 2010 e-files represented $3.5 billion in refunds (IRS E-file Data as of July 31,2010) and $557 million in preparer fees. And through CFED’s Self-Employment Tax Initiative, we are reaching millions of Self-Employed tax payers and bringing them into the economic mainstream.
3. Integrate asset building into the great revenue streams of our time. (Also known as learn new acronyms!)
   An approach that has gained significant momentum over the past several years at the local, state and federal levels focuses on integrating asset building into mainstream anti-poverty initiatives ranging from Head Start programs and early childhood education to homeless prevention programs to foreclosure mitigation counseling and prevention strategies. The federal Department of Health and Human Services (HHS) has committed publically in its "Assets Initiative" to integrate asset-building strategies ranging from financial education to access to banking services to matched savings into virtually every program funded through its Administration for Children and Families. The NYC Department of Consumer Affairs, home of the Office of Financial Empowerment, is pursuing the same approach as it aims to achieve new levels of scale and financial sustainability for its work.
4. Promote children’s savings as the route to economic transformation.
   Great change can start small—in the actual amounts that we spend, and in the size of the people that it benefits. Children’s savings accounts represent a transformative policy that we have already shown can build assets and aspirations for children and families. When they are structured to be universal, lifelong and progressive, they advance economic equity and opportunity simultaneously. This fall, the city of San Francisco will launch the first publically funded, universal matched savings program for children with Kindergarten to College. CFED, UNCF and the KIPP Schools are jointly launching the Partnership for College Completion this fall to design and implement a new route to college success that connects matched savings, financial education, scholarships and academic counseling. Tomorrow morning you were hear the personal stories of youth savers and how their experiences have changed their lives, and I promise you that if you aren’t passionate about this issue now, you will be by the time you finish your breakfast!
5. Build a national online marketplace to sell and match savings.
   To date, the US matched savings field operates locally. Most programs are charged with running all aspects of their programs independently—from raising their match funds, to recruiting and educating account holders, to managing and reporting savings, and to documenting impact. It is time that we created a national infrastructure to support the field, and lower the costs of marketing, fundraising and fund management. Early next year, CFED will launch the 1:1 Fund—an online portal that leverages technology, state-of-the-art marketing and data management to share our story with individual and corporate donors who we know just need to learn about the power of matched savings to want to invest. We have piloted this initiative in the Bay Area with several of the nation’s leading matched savings programs—EARN, the Opportunity Fund and JUMA Ventures and Save Together—and know that it can work. If we can do this for microfinance, we can do it for matched savings!
6. Claim the social innovation banner on behalf of the assets field.
   We are pleased that we will be offering sessions on social enterprise and social innovation for the first time at the ALC this year. While we know that our entire field qualifies as a social innovation, we have been slow to raise up our work to stand beside the education and other groups who are viewed at the forefront of this strategy. But now is the time to claim our place. CFED’s I’M HOME initiative—our work to transform the manufactured housing marketplace—is working with two of the nation’s leading social entrepreneurs. Paul Bradley, the President of ROC USA, has built a networked social enterprise that is taking a successful model from NH national to assist manufactured homeowners living in parks to buy their communities, convert them to resident owned cooperatives, and build financial security, civic engagement and assets. Stacey Epperson, President of Frontier National, is working with the nation’s largest manufacturer of MH, Clayton Homes, to design and distribute energy efficient homes to replace aging units through a network of nonprofit housing developers. Her venture will not only transform the balance sheets of low income homeowners, but reduce energy costs by up to 70%. And these are just two examples of social enterprises designed for sustainability and scale; our task is to inventory and create a common market awareness of the power and potential of social innovation in our field.
7. Create a global learning community.
   Asset building is global. Yesterday, 40 leaders from around the world met to create a global assets action network. Tomorrow, our luncheon plenary will share "Asset Innovations without Borders" and our program includes 6 workshops focused on international policy and practice. If our work is global, our learning must be as well. Let’s work together to explore how best to share which elements of our work transcends national boundaries, and how we can exchange our practices to benefit all of us.

Conclusion

Let me close by recognizing all of you for the extraordinary work and commitment that has brought us so far in a relatively short time. As you participate in the conference over the next two days, please consider how we might build a movement that leverages and creates new moments for building the save and invest economy.

Thank you, and have a wonderful day!