State Policies to Promote Economic SelfSufficiency through Asset Development

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State Policies to Promote Economic
Self-Sufficiency through Asset Development

• NGA Center for Best Practices -
• Annual Human Services Policy Retreat
• Miami, FL ? June 18, 2005
• Carl Rist, Director, SEED Initiative
• CFED

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Why Asset Development?1. Assets matter

• Welfare policy too focused on consumption
• Assets change thinking and behavior
• Greater household stability
• Long-term thinking and planning
• Enhance well-being and life chances of kids
• Income may feed peoples stomachs, but assets
  change their heads. (Michael Sherraden, Wash
  Univ. in St. Louis)

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Why Asset Development?2. Unequal asset
distribution
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Why Asset Development?3. It works

• ADD evaluation (large-scale IDA demonstration
  with over 2,000 participants). On average, ADD
  participants
• Had family income at 116 of the
  family-size-adjusted poverty line,
• Saved 19.07 per month in average net deposits
  (1.6 of monthly income),
• Made a deposit in about 6 of every 12 months,
• With an average match rate of 21, accumulated
  700 per year in IDAs.
• 300 IDA programs at least 15,000 savers.

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2005 Assets and Opportunity Scorecard Financial
security across the states

• Most comprehensive tool yet to measure ownership
  and financial security at the state level
• Assessment of states efforts to encourage and
  protect wealth among their residents

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2005 Assets and Opportunity Scorecard

• Emphasize assets as a unifying theme for
  promoting economic opportunity. Data are
  organized into five indexes
• Financial security
• Business development
• Homeownership
• Health care
• Education
• These issue areas show that asset building is
  essential to these elements of economic
  opportunity as well as make the data more
  accessible to advocates.

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2005 Assets and Opportunity Scorecard Data

• Cover performance and policies in the five areas.
• Include both quantitative and qualitative
  measures.
• Describe how well each state and the District of
  Columbia helps its residents to build and protect
  wealth.

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Assets across America the national picture

• Nearly one in five households owes more than it
  owns
• One in four families does not own enough to
  subsist at the poverty level for three months
• One in four female-headed households has zero or
  negative net worth
• One in three minority-headed households has zero
  or negative net worth

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Assets across America Financial
SecurityFindings on Net Worth

• For every one dollar in net worth of a household
  headed by a male, a female-headed household has
  less than 40 cents.
• For every one dollar in net worth of a household
  headed by a white adult, a minority-headed
  household has about 6 cents.
• The median Massachusetts household has four times
  the net worth of the median Texas household.

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State Grades
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State Policy Ratings
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A look at Michigan

• Overall grade on asset performance C
• Overall policy rating Substandard

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Noteworthy numbers for Michigan

• 5 in homeownership rate
• 7 in homeownership by income
• 8 in Head Start coverage, college degrees by
  race
• 44 in foreclosure rate, college degrees by
  income
• 46 in microenterprise ownership
• 48 in small business ownership

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Notable policies in Michigan

• Favorable to asset building and protection
• Match for low-income families saving in MI 529
  plan
• High asset limits on means-tested programs
• Property tax relief for all homeowners
• First-time homebuyers assistance
• High per pupil spending
• Tax expenditure report

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Asset-building policy opportunities in Michigan

• Raise the income tax threshold
• Raise the state minimum wage above the federal
  level
• Expand SBIC financing
• Provide CDBG funds for microenterprises
• Use bond sales for affordable housing
• Raise income limits for public health care
  coverage
• Publish a multitax incidence report

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www.cfed.org/go/scorecard

• All data available for download
• State summary of data
• List of advocacy organizations by location and
  issue area expertise
• CFEDs center for policy advocacy
• Media samples
• Guide to create state scorecard

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A New Idea Childrens Savings

• What difference would it make if every child
  started with an account at birth?
• Vision
• 1,000 at birth for every child,
• Accounts used for asset building,
• Universal system
• Progressive matches
• Appropriate financial education delivered at scale

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Childrens Savings Policy

• International precedent
• Child Trust Fund
• Federal proposal
• ASPIRE Act
• State precedents
• Oregons Childrens Development Accounts
• 529 College Savings Plans

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Childrens Savings SEED Initiative

• Multi-year, multi-site experiment with SEED
  (childrens savings) accounts
• 1,250 accounts with children in 12 sites,
  including 500 in MI.
• State policy partners
• Illinois
• Michigan
• Kentucky
• Oklahoma
• Alaska
• One state Universal Model experiment to be
  chosen

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Contact

• Carl Rist
• CFED
• 123 W. Main St., Suite 210
• Durham, NC 27701
• 919.688.6444
• 919.688.6580 (fax)
• carl_at_cfed.org
• www.cfed.org
• www.cfed.org/go/scorecard