State Policies to Promote Economic Self-Sufficiency through Asset Development

1. 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

2. 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 people’s stomachs, but assets change their heads.” (Michael Sherraden, Wash Univ. in St. Louis)

3. Why Asset Development?2. Unequal asset distribution

4. 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 2:1, accumulated $700 per year in IDAs. • 300 IDA programs; at least 15,000 savers.

5. 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

6. 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.

7. 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.

8. 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

9. 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.

10. State Grades

11. State Policy Ratings

12. A look at Michigan Overall grade on asset performance: C Overall policy rating: Substandard

13. 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

14. 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

15. 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

16. www.cfed.org/go/scorecard • All data available for download • State summary of data • List of advocacy organizations by location and issue area expertise • CFED’s center for policy advocacy • Media samples • Guide to create state scorecard

17. A New Idea: Children’s 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

18. Children’s Savings Policy • International precedent: • Child Trust Fund • Federal proposal: • ASPIRE Act • State precedents: • Oregon’s Children’s Development Accounts • 529 College Savings Plans

19. Children’s Savings: SEED Initiative • Multi-year, multi-site experiment with SEED (children’s 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

20. Contact: Carl Rist CFED 123 W. Main St., Suite 210 Durham, NC 27701 919.688.6444 919.688.6580 (fax) carl@cfed.org www.cfed.org www.cfed.org/go/scorecard