Assets: The Key to Family Economic Success

Assets: The Key to Family Economic Success Rourke O Brien Policy Analyst, Asset Building Program New America Foundation obrien@newamerica.net 202-986-2700 National Conference of State Legislatures June 15-17 Denver, CO

What Are Assets? Income: flow of resources (consumption) Assets: stock of wealth (economic stability) Springboard & Safety Net Asset Effects Financial Assets Cash Savings Emergency Retirement/Homeownership/Higher Education Homeownership Small Business Ownership Stocks, Bonds, Funds, CDs New America Foundation Asset Building Program 2

Asset Ownership Wealth gap dwarfs the income gap Top 20 percent have 83 percent of the nation s wealth and top one percent own 38 percent of the national wealth Bottom 60 percent own less than five percent of total wealth and the bottom 40 percent own less than one percent Asset poverty rate reaches well into the middle class Minorities and women disproportionately have few or no assets New America Foundation Asset Building Program 3

Asset Ownership Source: State of Working America 2006-7, EPI New America Foundation Asset Building Program 4

Continuum of Asset Building Policy Debt Reduction Credit Counseling Bank Account Savings Asset Purchase Financial Education Asset Protection Asset Leverage New America Foundation Asset Building Program 5

Asset Building Policies Historical policies Homestead Act GI Bill Current policies $400 billion/yr. in tax subsidies, largest benefits go to those with highest incomes (and largest tax liabilities) 100 Billion on Mortgage Interest Deduction 122 Billion on Retirement Saving Deductions Current Federal Legislation New Saver s Act ASPIRE Act Subprime Crisis New America Foundation Asset Building Program 6

Policy Opportunities at the State Level Financial Education Clearinghouse of Fin Ed Curricula/Information State Seal of Approval Incorporate into K-12 Curriculum Financial Services Corp Promote/Mandate just in time financial education Encourage employer-based Fin Ed. New America Foundation Asset Building Program 7

Policy Opportunities at the State Level Banking Create universal children s savings accounts for education, homeownership, and retirement (can use 529 as platform) Partner with banks and non-profits to create and expand access to basic bank accounts Support banking services in remote or financially distressed areas (banking development districts) Allow tax filers to split refunds into multiple accounts Matched Savings Create Individual Development Account (IDA) programs supported by CDBG and TANF funds New America Foundation Asset Building Program 8

Policy Opportunities at the State Level Homeownership Support pre- and post-homeownership counseling Increase resources available for downpayment, mortgage, and closing cost assistance Promote federal programs that support homeownership opportunities for lower-income households (Federal Self- Sufficiency) Retirement Create a voluntary, state-wide universal 401(k) plan Encourage companies to adopt opt out features in their retirement plans New America Foundation Asset Building Program 9

Policy Opportunities at the State Level Higher Education Ensure the state 529 plan is low-fee Increase marketing/awareness of direct sold plan Match deposits made by low-income families in 529 college savings accounts Make contributions to state 529 plan tax deductible Enhance 529 funds if used in state (good way to prevent brain drain) New America Foundation Asset Building Program 10

Policy Opportunities at the State Level Harness the EITC and CTC (Child Tax Credit) EITC/CTC Awareness Campaign Create a state EITC/CTC EITC Savers Bonus Regulate Predatory Lending Restrict abusive payday lending practices (cap interest rate at 36%) Curb abusive tax preparation practices (require strict licensing, disclosure, interest caps) New America Foundation Asset Building Program 11

Policy Opportunities at the State Level Reform Asset Limits in Public Assistance Programs Temporary Assistance for Needy Families (TANF) Complete Elimination Raise Limit, Exclude all Vehicles, Exclude Specific Assets Food Stamps Categorical Eligibility Those who receive TANF benefit are waived from asset test. Medicaid/SCHIP Eliminate cap for parents of children who qualify for assistance New America Foundation Asset Building Program 12

New America in California Asset Building Legislation 2007-2008 Legislative Session: Senate Bill 752 Creating a California Kids Account for Every Child Assembly Bill 167 The CalWORKs Savings Act Assembly Bill 1502 Establish Banking Development Districts Assembly Bill 1693 The Refund to Savings Act Assembly Bill 2123 The California Financial Literacy Initiative Assembly Bill 2368 The CalWORKs Mobility Initiative Assembly Bill 2940: California Employee Savings Program (CalESP) Assembly Joint Resolution 59: California Subprime Mortgage Foreclosure Resolution 2005-2006 Legislative Session: AB 2466 Reforming the CalWORKs Asset Limit (Signed into Law) AB 2439 Split Refunds/Savings Bill (Signed into Law) New America Foundation Asset Building Program 13

Resources State Asset Building Coalitions CFED Assets and Opportunity Scorecard www.cfed.org/go/scorecard Center for Social Development (Wash U) Institute for Assets and Social Policy (Brandeis assetbuilding.org & newamerica.net New America Foundation Asset Building Program 14