1. ASSET-BUILDING @ IT’S MOMENT: FEDERAL POLICY JIM CASEY YOUTH CONFERENCE Carol Wayman, CFED

2. www.cfed.org 202.408.9788 2 “We cannot rebuild this economy on the same pile of sand. We must build our house upon a rock. We must lay a new foundation for growth and prosperity – a foundation that will move us from an era of borrow and spend to one where we save and invest.” -- President Barack Obama, April 2009

3. www.cfed.org 202.408.9788 About CFED 3  CFED (Corporation for Enterprise Development) has worked for over 30 years to expand economic opportunity by helping people save and invest, own homes, succeed as entrepreneurs, contribute to and benefit from the economy  CFED’s special expertise is to connect public policy, private markets and community practice to bring effective approaches for building wealth and financial security to scale at the local, state and national levels

4. www.cfed.org 202.408.9788  Assets matter economically, socially and psychologically  Asset poverty rates and wealth gaps are worse than income poverty and distribution  Assets help to increase:  Household economic stability  Educational attainment  Economic mobility Why Assets? 4

5. www.cfed.org 202.408.9788  Subsidization of asset accumulation for the non-poor  Homestead Act  GI Bill  Housing deductions – mortgage interest, property tax, imputed income, capital gains exemption  401ks, IRAs, etc.  VA and FHA Loan Programs  Asset denial for the poor – federal welfare policy  Federal budget – Return on Investment? Asset Building: Who Benefits? 5

6. www.cfed.org 202.408.9788  Focus Americans on long-term savings, investment and economic stability  Savings and assets provide a “personal safety net” during tough times  Banks can relend our savings to others for small business loans, mortgages, etc.  We must not rob future financial security to pay for our immediate financial crisis Why Asset Building Now? 6

7. www.cfed.org 202.408.9788 Assets Across America 7  Although household net worth rose to $88,803, median net worth fell for the 40% of U.S. households earning <$37,000 per year  12.3% of Americans have incomes below the poverty threshold  22.5% of Americans live in asset poverty; rate for households with children is 27.2%  >22% of jobs are in occupations that pay a median wage lower than the poverty threshold for a family of 4  For every dollar held by a household in the top 20% by income, households in the bottom 20% had 2 cents  Credit card debt rose to $2,960—up 64% between 2006 and 2008  Student debt for college grads averaged >$20,000 National Overview

8. www.cfed.org 202.408.9788 Assets Across America 8 Significant and enduring racial disparities in asset ownership with minorities being:  Twice as likely to be asset poor (37.2% vs. 16.4%)  Three times as likely to have a high-cost mortgage loan  Much less likely to own a home or have a college degree:  71.5% of white Americans own their homes, only 48% of minorities do so  One in five minority Americans have a four-year college degree compared to one in three white Americans National Overview

9. www.cfed.org 202.408.9788 Financial Assets & Income 9  The highest income households had 45 times the net worth of the lowest ($301,000 vs. $6,697)  22.5% of households are asset poor, 14.3% live in extreme asset poverty  African-American households had 10 cents and Latino households had 15 cents in wealth for every dollar held by white households  Variation across states: In Nevada, minority households had 41 cents for every dollar in white households, while in New York, minorities had only 1 cent per dollar held by whites  Female-headed households had 83 cents for every dollar in a male-headed household National Overview

10. www.cfed.org 202.408.9788 Assets Across America: Scorecard Data 10

11. www.cfed.org 202.408.9788 Policy Window - Open Assets field and advocates growing Congressional support of asset-building policies at a record level Assets champions appointed to key leadership positions Economic situation requires a systemic change Federal Asset- Building Policies Enacted 11

12. www.cfed.org 202.408.9788 Take Action! Any tax bill should include asset-building opportunities for low- income families. 12

13. www.cfed.org 202.408.9788 Asset-building opportunities for 50 million people Matched Savings Expansion  Foster Youth Financial Security Act (HR 6193)  ASPIRE: S. 3577, H.R. 4682  IDA Protection Act: H.R. 6067  Stephanie Tubbs Jones Assets for Independence Reauthorization Act of 2010 (H.R. 6354).  Savings for Working Families Act: S. 985, H.R. 2277  Savings Enhancement for College Education: H.R. 1351  Expanding the Saver’s Credit: S. 3090, H.R. 1961  Infrastructure Improvements  SSI Savers Act: H.R. 4937  Automatic IRA Act: S. 3760, H.R. 6099 = bipartisan support italics = House bill only 13

14. www.cfed.org 202.408.9788 Foster Youth Financial Security Act (H.R. 6193)  Lead sponsor: Congressman Jim Langevin (RI-D) As of 11/10/2010 bill has 4 additional cosponsors:  Fortney Pete Stark (CA-D)  John Conyers (MI-D)  Rosa DeLauro (CT-D)  John Lewis (GA-D)

15. www.cfed.org 202.408.9788 Foster Youth Financial Security Act (H.R. 6193)  $45 million annual appropriation to implement act  No specific requirements of how much must be spent on the IDAs  State Agencies manage the IDAs  Savings match not specified in legislation, likely to conform to other HHS programs (ie: variable)  Broad eligible uses

16. www.cfed.org 202.408.9788 Children’s Accounts  Savings Enhancement for Education in College Act (HR 1351)  Saver’s Credit for 529 College Savings Account contributions and computers are eligible  ASPIRE (HR 4682 & S 3577)  one ‐ time, $500 government contribution at birth  supplemental contribution as much as $500 16

17. www.cfed.org 202.408.9788 Assets for Independence Program Facts  AFI provides the majority of federal funding for IDA matched savings programs across the country.  Many AFI projects offer services targeted to specific groups, including refugees/immigrants, victims of domestic violence, the homeless, and individuals with disabilities.  Tens of thousands of AFI savers have gone on to buy a home, attend college, or start a business.  IDA savers keep their homes and businesses and complete their college education IDA programs: 1,100 sites IDA participants: 82,000 Personal savings: over $46 million Asset purchases: 19,000 Average savings: $889 Savings rate: 1.6% 75% female, 45% African-American, 18% Hispanic and 76% with children AFI Program Success: 17

18. www.cfed.org 202.408.9788 IDA Protection Act, HR 6067  Adds $50 million for AFI IDAs  No match required  Paid for by eliminating a coal tax  Introduced by Congresswoman Linda Sánchez (CA-D) 18

19. www.cfed.org 202.408.9788 AFI Reauthorization  Stephanie Tubbs Jones Assets for Independence Reauthorization Act of 2010 (H.R. 6354)  Waivers included  Ways and Means Committee in House  Health, Labor, Education and Pensions in the Senate 19

20. www.cfed.org 202.408.9788 AFI Reauthorization: Proposed Changes Simplification for Grantees  Lower the federal to non ‐ federal match rate from 1:1 to 3:1  Allow the critical financial education and economic literacy components of the AFI program to be funded as direct program costs instead of being included in the administrative costs  Allow AFI grantees full discretion over 20% of the nonfederal funds (up from 15%)  Remove the requirement that grantees calculate proportional interest earned on match funds in the reserve accounts  Clarify investment rules  Support training costs for grantees 20

21. www.cfed.org 202.408.9788 AFI Reauthorization: Proposed Changes continued Expand Participant Eligibility  Income eligibility standards -- 80% of Adjusted Gross Income not to exceed $20,000 single, $30,000 head of household or $40,000 join tax filer or 80% of Area Median Income  Remove earned income requirement recommended but not included  Raise savings amount to $5,000/individuals and $10,000/families 21

22. www.cfed.org 202.408.9788 AFI Reauthorization: Proposed Changes continued Definitions of Qualified Expenses  Include preparatory courses and professional licensing or certification examinations in education expenses  Grantees verify all post ‐ secondary education payments  Expand eligible education costs to include room, board and transportation, 529 contributions (not coverdells)  Expand the definition of qualified expenses for homeownership to include home repair and replacement of substandard homes including replacement of pre ‐ 1976 mobile homes and those who have not had sole ownership of a home 22

23. www.cfed.org 202.408.9788 AFI Reauthorization: Proposed Changes continued Promote Research and Encourage Innovation:  Allow other entities to apply directly  Allow Indian Community Development Block Grant and the Native American Housing and Self ‐ Determination Act as match  Allow match for any statewide IDA program with an annual state appropriation of at least $250,000  Demonstration projects targeting specific populations including foster youth, returning prisoners and people with disabilities  Raise the evaluation expense limit from $500,000 to $1,500,000 and expand the types of research permitted  Raise the authorization limit from $25 million to $75 million 23

24. www.cfed.org 202.408.9788 IDA Tax Credit (H.R. 2277/S. 985 - Lincoln)  Adds at least 2.7 million IDAs through a federal tax credit to financial institutions that match the savings of adults (ages 18-60)  Financial institutions would be reimbursed for matching funds ($2,000 over 4 years), plus a limited amount for administrative costs incurred ($50 per year per account)  $120 million for financial education  Accounts restricted (1) buying a first home; (2) receiving post-secondary education; or (3) starting or expanding a small business 24

25. www.cfed.org 202.408.9788 The Saver’s Credit - current  The Saver's Credit is a non-refundable tax credit available to eligible taxpayers who make salary-deferral contributions to their employer sponsored retirement plans (401(k), 403(b), SIMPLE, SEP or governmental 457 plan), and/or make contributions to their Traditional/Roth IRAs  The current credit is between 10-50% of the individual's eligible contribution of up to $2,000, which means it cannot be more than $1,000 25

26. www.cfed.org 202.408.9788 The Saver’s Credit - current  Adjusted gross income must not exceed the following limits:  Lower the individual's AGI, the higher the saver's credit eligibility  Vastly underutilized – 50 million individuals eligible, <6 m claim Credit Rate Married and files a joint return Files as head of household Other category of filers 50%Up to $30,000Up to $22,500Up to $15,000 20%$30,001 – $32,500$22,501 – $24,375$15,001 – $16,250 10%$32,501 – $55,500$24,376 – $37,500$16,251 – $27,500 26

27. www.cfed.org 202.408.9788 The Saver’s Credit – Proposed: HR 1961/S. 3090  Expands the credit to additional middle ‐ income working families by raising the income eligibility for families from $55,500 in FY09 to $65,000;  Matches 50% of the first $1,000 of savings for families ($500 for individuals) earning <$65,000;  Automatically deposits matching funds into designated personal retirement accounts by using account information listed on IRS tax filings through IRS Form 8888 (HR 1961 only);  Indexes contribution limits for inflation 27

28. www.cfed.org 202.408.9788 Infrastructure Improvements  SSI Saver’s Act (HR 4937)  Raising the asset limit to $5,000 for a single and $7,500 for joint filers and index these limits for inflation  Excluding retirement savings from inclusion in the asset test (<65 age)  Excluding savings in qualified retirement accounts below a specified ceiling of (indexed for inflation) $10,000 for an individual and $15,000 for a couple or household (indexed for inflation) (>65 age)  Exclude IDAs and Education Savings Accounts as well 28

29. www.cfed.org 202.408.9788 Automatic IRA, (S. 3760/HR 6099)  Automatic IRA Act of 2010 (S. 3760/HR 6099)  Success of automatic enrollment in private sector  > half U.S. workforce (78 million) do not have access to employer ‐ sponsored retirement plan  Obama FY 2011 budget request included requirement: employers w/o retirement plans must offer auto payroll deductions into IRAs 29

30. www.cfed.org 202.408.9788 www.cfed.org www.cfed.org/go/advocacy http://cfed.org/policy/ http:///saverscreditalliance.cfed.org http://www.childsavingscoalition.org/ 30

31. www.cfed.org 202.408.9788 www.cfed.org www.cfed.org/go/advocacy Latest on legislation, track bills, send messages  Michelle Levy-Benítez, consultant, mbenitez@cfed.org  Inemesit Imoh, Policy Associate, 202.207.0135, iimoh@cfed.orgiimoh@cfed.org  Katherine Lucas, Policy Analyst, 202.408.9788, klucas-smith@cfed.org  Jessica Morales, Administrative Assistant, 202.207.0159, jmorales@cfed.org jmorales@cfed.org  Carol Wayman, Federal Policy Director, 202.207.0125, cwayman@cfed.org 31