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State IDA Program Support

Overview

One in seven Americans has zero or negative net worth. Through tax and spending decisions, government can create incentives for people to save and build assets. One policy that helps low- and moderate-income people build assets is a state-supported Individual Development Account (IDA) program. IDAs are special savings accounts that match the deposits of low- and moderate-income savers, provided that they participate in financial education and use the savings for targeted purposes – most commonly postsecondary education, homeownership or capitalizing a small business. Research demonstrates that these accounts make families more financially secure and communities more stable. States should provide funds and support for local IDA programs.

Policy Ratings

To see state-by-state policy data, click here.

Elements of a Strong Policy

Based on direct work with IDA providers, government officials and savers, CFED considers a state’s IDA policy strong if it meets the following criteria:

1. Is the state’s commitment to IDAs sufficient to meet demand? The state’s annual commitment to IDAs should be no less than $200 per low-income resident.¹ This level of funding is sufficient to cover matching funds for savers as well as the administrative and operating expenses of running an IDA program.
2. Is there a strong agency steward for the IDA program? It is important for the state program to have a steward within state government and for the stewarding agency to be committed to all uses for IDA savings. State stewards should provide training and technical assistance for IDA providers, have a system in place for gathering feedback that informs improvements to the program, and ensure that at least 85% of state funding is utilized annually. CFED considers a state to have a strong steward if the responsible agency (or designated nonprofit) meets two out of three of the following criteria:
   
   • Training and TA: The agency provides training and technical assistance for practitioners.
   • Feedback: The agency has a system in place for gathering input on program improvements, e.g., convening a working group, hosting focus groups or providing a place for comments on the agency’s website.
   • Utilization of funds: If funding for IDAs comes through an appropriation, 85% or more of appropriated funds are utilized. If funding comes through the sale of tax credits, 85% or more of credits authorized by the state are sold.
3. Does the state allow at least 15% of state funding to be used for program administration, program services, operating costs, and/or TA to providers? IDA providers currently cobble together federal, private, and – if the state has a state program – state funding. Restrictions on the uses of these monies are numerous and often force IDA providers to subsidize the operating and administrative costs of the program. In addition to matching deposits for IDA program participants, states should allow at least 15% of state funding to be used to cover program administration, program services, operating costs, and/or technical assistance to providers.
4. Is state funding for IDAs stable over time? While state budgets grow and shrink with fluctuations in the economy and annual appropriations negotiations can be protracted, it is important for state funding for IDAs to come from a stable and protected source. To be classified as having stable funding, states must demonstrate funding stability over a three-year period.²

Footnotes

1. This amount assumes $2,000 per IDA and a 10% participation rate among eligible residents. Low income is defined as having adjusted gross income no more than 200% of the federal poverty level, consistent with AFIA eligibility standards. It should be noted, however, that standards based on area median income are often stronger and more meaningful since they take into account differences in cost of living, especially in high-cost areas.
2. In the Assets & Opportunity Scorecard, funding trends are determined by reviewing funding levels for the last three fiscal years. If funding remained the same, increased over time, or if an average of all three years was within 10% of the peak year, funding is considered to be stable.