PENNSYLVANIA’S TRANSFER OF WEALTH 10 th Annual Northwest PA Nonprofit Day – Erie, PA

1. PENNSYLVANIA’STRANSFER OF WEALTH10th Annual Northwest PANonprofit Day – Erie, PA October 21, 2010

2. 625 Forster St., Suite 902 Harrisburg, PA 171020 (717) 787-9555 (717) 772-3587 fax www.rural.palegislature.us Barry L. Denk, Executive Director denkb@rural.palegislature.us

3. The Center for Rural Pennsylvania A legislative research agency of the Pennsylvania General Assembly (Act 16, 1987) Mandates • Administer grants to conduct research on rural conditions. • Maintain a database on rural conditions and needs.

4. What’s Rural?

5. The Center for Rural Pennsylvania Research Efforts • HPSA/MUA Update and (Re)Designations • Area Health Education Centers (AHECs) • Community/Hi-Ed Councils • Private Well Water Quality • Main Street/Elm Street Programs • Statewide Heritage Tourism • Agritousim • Childhood Asthma

6. Wealth Transfer - Why Pennsylvania? Pennsylvania stands at a “quality of life” crossroads: Aging Population: By 2020, more 60+ year olds than 20 year olds. Demographic Shifts: In 2005 half of Pennsylvania’s counties had more deaths than births. Loss of Farmland: Since 1975, Pennsylvania has lost more than 1.9 million acres, or 20 percent, of farmland. This decline affects economic opportunities and quality of life issues. Missed Educational Opportunities: Pennsylvania is third in U.S. in the number of colleges and universities, yet ranks 27th nationwide in the percent of adults with a bachelor’s degree or higher. Economic Transition: Marcellus Shale potential; continuing manufacturing loss. Expansion of service based economy. Opportunities exist for entrepreneurial development.

7. History of Transfer of Wealth 1999 – Boston College researchers John Havens & Paul Schervish released “Millionaires and the Millennium.” 2001 – Nebraska Community Foundation starts TOW study, based on BC methodology. www.nebcommfound.org/ 2001 to 2007 – Center for Rural Entrepreneurship completes statewide/regional studies for more than 10 states. 2007 – Center for Rural Pennsylvania sponsors TOW study. 2008 – Pennsylvania Wealth Transfer Report released.

8. TOW Studies in the United States State and regions that have completed TOW studies

9. Why TOW? • Visualize the Opportunity • Address Compelling Needs and Maximize Opportunities • Create Clear Goals • Supports Sound Development Process • Understand What is Behind the Numbers

10. TOW Methodology • FED – Current Funds Report • FED – Survey of Consumer Finances • U.S. to State Projection • State to County Projection • Verification Indicators • Key Adjustments • Getting It Right • Scenarios

11. Change in U.S. Wealth Federal Reserve, 2007

12. Variables Affecting Net Worth • Educational Attainment: Net worth increases with education. • Homeownership: Homeowners have higher net worth than renters. • Race: Whites have higher net worth than non-Whites. • Age: Net worth peeks for householders 55 to 64 years old. • Employment: Self-employed have a higher net worth than employed persons.

13. TOW Drivers • Population Change • Economic Growth • Income Growth • Wealth Formation Rates • Wealth Transfer Rates

14. Verification Indicators Property Dividends, Interest & Rent Income Income Structure Age Demographics Other Factors

15. Getting It Right! • Technical Advisory Committee • Instate Experts • Vetting and Review Process

16. Wealth in Pennsylvania • Variations by Regions and Counties • Creative Economy Pockets • Immigrants • Retirees • Former Residents • Vacation Homes

17. $how Me The Money Net Worth for Pennsylvania (2005) was approximately $1.01 trillion ($216K per household) 50-year TOW for Pennsylvania is $1.17 trillion From 2005-2015, TOW is estimated to be $193.38 billion ($42,000 per household) Capturing just 5% of the 10-year TOW into community endowments across PA would net an estimated $9.67 billion fund Assuming a 5% payout rate on the $9.67 billion in endowed funds, an estimated $483.44 million would be available annually for community investments

18. Net Worth, 2005Statewide = $1.01 trillion 10-Year TOWStatewide = $193.38 billion

19. 5% Capture for the 10-Year TOW(in $ Millions)Pennsylvania's 5% capture total is $9.67 billion

20. Erie% of Wealth to be released from 2005-2055

21. Erie County Transfer of Wealth • In 2005, estimates showed a total of $17.50 billion in private wealth in Erie County. • From 2005 to 2015, $3.47 billion is expected to transfer from one generation to the next. • Through 2055, it is estimated that more than $19.13 billion with be transferred from one generation to the next. • Through 2015, if just 5 percent of this transfer could be invested in an endowed community fund, nearly $173.45 million would be gained. • With a 5 percent grant payout, an estimated $8.67 million could be available annually to improve the quality of life in Erie County and secure its future.

22. Crawford% of Wealth to be released from 2005-2055

23. Crawford County Transfer of Wealth • In 2005, estimates showed a total of $5.54 billion in private wealth in Crawford County. • From 2005 to 2015, $1.11 billion is expected to transfer from one generation to the next. • Through 2055, it is estimated that more than $6.23 billion with be transferred from one generation to the next. • Through 2015, if just 5 percent of this transfer could be invested in an endowed community fund, nearly $55.55 million would be gained. • With a 5 percent grant payout, an estimated $2.78 million could be available annually to improve the quality of life in Crawford County and secure its future.

24. How Do We Know the Numbers are Right? We Don’t!! Wealth Transfer is a scenario – not precise prediction. Study used best data available – numbers are conservative estimates. Change at national (recession) and state (Marcellus Shale) levels, affecting these scenarios, will occur. More important to focus on having community conversations about TOW – of any amount – and what that can meanfor a community.

25. Getting the Word Out PA General Assembly Community Foundations Lending Community – banks, credit unions, micro-lenders Regional Grantmakers Non-profits and their associations United Ways Community Organizations – fire companies, civic groups, etc. Accountants /Financial Planners/Lawyers/Estate Planners Penn State Cooperative Extension Agricultural Groups Economic Development Groups Tourism Development Media – print, TV, radio

26. HomeTown Competitiveness • Developed in Nebraska • “Come-Back/Give-Back” approach to rural community building • Mobilizing local leaders • Capturing wealth transfer • Energizing entrepreneurship • Attracting young people • Examples • Providing non-traditional scholarships (plumbing, nurses, etc.) • Creating a community youth foundation • Support affordable, high-quality child care center

27. Four Pillars to Build Community Leadership Youth Charitable Assets Entrepreneurship HomeTown Competitiveness

28. HomeTown Competitiveness (HTC) helps Communities: • Start and Grow Small Businesses • Provide Better Employment Opportunities • Build More and More Diverse Leadership • Provide a Better Reason for Young People to Live and Work in their Hometown • Provide a Better Case to Donors

29. HTC has become a National Model • 2004 Innovative Program Award from the International Community Development Society • 2005 HTC Awarded $2 Million Entrepreneurship Development Systems Grant from the W.K. Kellogg Foundation (one of six selected from 180+ proposals) • 17 HTC Academies completed in 8 states (787 participants) • HTC training/technical assistance now being provided in 12 other states (HTC developing affiliation model)

30. Young AdultsExpected outcomes from HTC • Champions group recruited and involved • Linkages: Leadership and Entrepreneurship • Stronger, sustained connections with alumni • Increased number of young adults returning

31. HTC Success in Valley County, NE • Economic development staff of • three • Ongoing business training & visitation • Youth entrepreneurship fair • 102 graduates of county-wide leadership class • 67 $1,000+ founders of HTC endowment • $7 million+ combined endowment and expectancies • Retail sales +20% (statewide +16%) • Per capita income +22% (statewide 9%) • Population gain of 3% (first increase in 50 years)

32. Success in Elk County, PA

33. Women Who Care • Originated in Feb.’09 with nine women to assist Elk County families, particularly female headed households • Currently has 96 members across country • Oct. ‘10 – awarded $12,000. • Domestic violence shelter renovations • Cancer biopsy equipment • Community Meal Table

34. Final Thought “Scenarios are stories. They are works of art, rather than scientific analyses. The reliability of (their content) is less important than the types of conversations and decisions they spark.” Arie de Geus, The Living Company "Arie de Geus gives leaders of the future an indispensible guidebook in which commitment to values, people, learning and innovation define the 'living company'. It's in my book bag." Frances Hesselbein, President and CEO, The Drucker Foundation. Former CEO, Girl Scouts of America – Johnstown, PA native

35. One More Thought……. “Tell me and I forget, Teach Me and I Remember, Involve Me and I Learn.” Benjamin Franklin Tell, Teach and Involve your Community about Transfer of Wealth and HTC. Thank You!