Investing in the personal and financial growth of individuals to build strong communities throughout Oregon

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1 Individual Development Account Initiative Investing in the personal and financial growth of individuals to build strong communities throughout Oregon National Conference of State Legislatures Denver CO June 22, 2009 Cynthia Winter, Neighborhood Partnerships

2 Oregon IDA Tax Credit In 1999, HB 3600 establishes the use of an income tax credit as an incentive for contributions to the Oregon IDA Initiative Legislation provided 25% tax credit against the taxpayers personal state income tax or corporate income tax liability Target reach $2 million in total resources for program management and match funds Legislature would support small impact on budget (25% credit against $2 million in contributions results in $500,000 in lost revenue to the state)

3 HB 3600 Oregon IDA Initiative Participants must: Be a member of a Lower Income Household 80% MFI Save for: 1. First home 2. Start or expand small business 3. Secondary education Tax Credit Breakout 2% Marketing credit and NP program management 5% FO Administration of program 20% Training and case management for IDA participants 73% Match funds for IDA participants

4 More incentive needed! 25% Tax Credit not enough! Shift focus from marketing credit to amending legislation In 2001, HB 3391 was drafted to allow a 75% tax credit $500,000 hit on revenues would still allow $666,000 to start IDA Initiative Additional amendments Allowed the nine federally recognized tribes in Oregon to participate in IDA Initiative Remainders of IDA account could be rolled over to a 529 College Savings Plan Bill passes passed and signed into law in Fall 2001

5 Additional Changes to Statute In 2007, HB2094 allowed for Youth 12 and older to participate in the IDA Initiative Improvements, repairs or modifications necessary to make or keep the participant s primary dwelling habitable, accessible or visitable The purchase of equipment, technology or specialized training required to become competitive in obtaining or maintaining employment or to start or maintain a business In 2009, HB2258 clarified the definition of median household income

6 Marketing the Tax Credit No limit in statute on number of tax credits or contributions generated per year Agreement made between legislature and Department of Revenue on limit Started at $666,000 in contributions ( )and grows to $10,000,000 ( ) IDA Tax Credit sunsets in 2016

7 Marketing History Year Contrib. Limit Contrib. Received 2003 $ 666,000 $ 666, $ 666,000 $ 666, $1,500,000 $1,340, $4,000,000 $3,584, $6,000,000 $6,000, $8,000,000 $4,544,703

8 Lessons From Marketing Majority of credits are marketed to CPAs, Accountants and Financial Planners Direct mail twice a year Speak at local trainings and conferences Advertise in trade journals IDA Tax Credit listed in local paper as one of its top tax tips three years in a row 2009 we will test social networks and targeted Direct Mail Only very general advice regarding tax implications can be given to donors. Direct them to their tax advisor!

9 Tale of Two Years 2007 Total Contributions $6,000, Contributions Over Limit Returned $375, Number of Contributions 348 Number of Contributors 333 Average Contribution $18, Average Contribution under $100K $14, Number of $100,000 Contributions 13 Number of Contributions less than $ Number of Stock Contributions 98 Stock Value $2,534, $4,544, N/A $14, $11, $1,118,410.43

10 Program Structure All program management transferred to Neighborhood Partnerships in 2008 Neighborhood Partnerships provides: Oversight of Fiduciary Organizations Quarterly trainings Monthly conference calls with FOs Data Collection software and oversight Annual Fiscal and Program Audits Contract with Portland State University for outside evaluation Legislative Liaison Program costs covered by Tax Credit no department expenses

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12 Oregon IDA Initiative Eight Fiduciary Organizations and over 60 partner organizations IDAs are available in 34 of 36 Oregon Counties Initiative has engaged 2546 low income participants in the past seven years 870 are seeking to purchase their first home 656 are starting/expanding a small business 395 are pursuing additional post secondary education 30 are saving to repair their primary dwelling 5 are purchasing assistive technology to help them re enter the workforce

13 Evaluation PSU Regional Research Institute hired to do outside evaluation of Oregon IDA Initiative Three IDA Participant Surveys Survey graduates at exit Brief survey at exit of participants that were not able to complete program Follow up survey one year post exit

14 Exit Survey of Graduates Satisfaction with financial status increased from 46% to 78% very satisfied increased from 7% to 26% 45% reported reduced debt 44% reported increased income Regular deposits to savings grew from 23% to 65% Use of budgeting grew from 32% of participants to 69%

15 Financial Behavior & Wellbeing 12 months later 59% often use a budget to monitor expenses 41% are regularly making deposits to savings 25% saving for an IRA or other long term saving plan 28% saving for family needs 18% for more education 27% saving to purchase or improve home

16 Feedback from Non Completers 23% left within 5 months 56% stayed more than a year 32% said big change in how they handle money

17 Insight from Graduates Darrell Green owner of a small printing company in Roseburg; I believe the most important thing I learned is that I do not need a windfall or inheritance to change my finances. What I need is discipline, training and a goal. Patricia Marx, student; Actually being forced to save money is a habit I will continue for years to come. I really needed this money for school and this program has allowed me to take courses I wouldn t have been able to otherwise. Michelle Garcia, homeowner; I learned how to budget my money by setting goals and paying off debts. After three years in the IDA program I saved enough money to purchase an $85,000 home.

18 What we ve learned IDA Legislation needs a permanent source of funding for program management and participant match in order to go to scale Tax Credit needs to be enough of incentive for donors and businesses Legislation needs to be flexible Needs to be a strong relationship between the State, program management staff and FO staff IDAs change lives and behaviors!

19 Contact Info Cynthia Winter, Program Director Neighborhood Partnerships 1020 SW Taylor, Suite 680 Portland OR x 101 cwinter@neighborhoodpartnerships.org