1. Individual Development Accounts: A strategy for fostering social and economic participation Asset Development & Tax Policy 2004 Disability Program Navigator Series October 21, 2004 Tobey Davies, School of Community Economic Development

2. Introduction Asset Building policies Relevant of social & economic theories Strategies, particularly IDAs NH Statewide IDA Collaborative Research

3. Reality “Few people have spent their way out of being poor. Those who do do so by saving and investing for long term goals.” – Michael Sherridan, Assets and the Poor

4. Theory discussion Internal locus of control life satisfaction ability to mobilize resources Role theory Adapting to expectations, rules, circumstances.

5. Policies Assets for Independence Act Tax policy Healthcare Social Security Housing and Urban Development

6. Bipartisan support Conservatives likely to view assets as vehicle for self-reliance Liberals often view as re-distribution of resources

7. Assets for Independence Act Passed with bipartisan support in 1998 Designed to provide funds to states for Individual Development Accounts 1:1 match Eligible: EITC eligible; 200% of poverty; eligible for TANF. Must work or have an eligible working member of the same household.

8. “Making Work Pay” (Center on Budget and Policy Priorities, 2003) Earned Income Tax Credit Work incentive to workers and self employed Available to child & childless singles. Must file for taxes

9. EITC, cont. For workers w/o children between ages of 25-65, credit exceeds $382 Gives back some or all of federal income tax taken out of pay. May get additional cash back from IRS

10. EITC, cont. Even workers whose earnings too small to have paid credit, can still get EITC. - employer-paid disability benefits qualify as earned income - Adult children may qualify as “qualifying child” & also meet Child tax credit.

11. Medicaid Buy In Programs Work incentive: maintaining healthcare coverage Sliding fee scale Income standards for eligibility Changed treatment of savings from earnings

12. Social Security Work Incentives 2 for 1 disregard Impairment related work expenses Plans for Achieving Self Support Unencumbered Business Expenses

13. Other mechanisms for asset building Independence Building Accounts Special Needs Trusts* *Not owned by beneficiaries

14. Social Security Protection Act 2003 For a period of 9 months…. Disregard retroactive checks from SSA or SSI EITC refunds Child Tax Credit refunds

15. SSPA 2003, cont. Effective June 2004, disregarding: All education related income, scholarship, fellowships, and gifts income. Not counting as a resource in SSI for 9 months

16. SSPA, cont. Individual Development Accounts Allowable to individuals Disregard income placed in exempt IDA, reducing countable income Adapting economic policy to create the means for social outcome.

17. Other policies Section 8 Home Ownership Voucher CARE Act, S.476 = 300,000 IDAs Special Needs Trusts*

18. Background NHCLF (CDFI) Mission To serve as a catalyst, leveraging financial, human, and civic resources to enable traditionally under-served people to participate more fully in NH economy.

19. Strategies Provide loans, capital, and technical assistance Complementing and extending the reach of conventional lenders and public institutions; and Bringing people and institutions together to solve problems

20. Program Areas Affordable housing Community facilities Economic opportunity

21. NH Statewide IDA Collaborative AFIA-funded Statewide IDA Collaborative designed to help eligible low income workers of New Hampshire achieve the dream of homeownership, post-secondary education or small business startup/development.

22. Eligibility and Uses Eligibility – 200% Poverty – EITC Eligible – TANF Eligible Savings Categories – Homeownership – Post-Secondary Education – Small Business Startup/Development Pilot Savings Categories – Home Repairs – Vehicle Ownership

23. Match Structure 3:1 match $25/month minimum savings $100/month maximum savings $1,000/year savings cap $2,000 lifetime savings cap $6,000 maximum match per individual

24. Organizational Structure 20 Community Partners – Front End NHCLF- Backroom Operations Financial Institutions – Hold IDA Accounts Other Partners – Provide training and referrals

25. Community Partners: Front-end Serve the eligible population (recruitment) Facilitate IDA Application Process/Paperwork One-on-One Counseling Financial Literacy & Asset Training

26. NHCLF – Backroom Operations Raise Match Funds Provide Technical Assistance and Tracking Savings, Match & Training Match Savings Statements Central Coordinating Agency of all Partners

27. Financial Institutions Specific Features Custodial No Fees & Interest Earning Duplicate Statements (1 to client, 1 to NHCLF) Provide Funding for the IDA Collaborative Training and TA on financial education topics

28. Other Partners Other Partners include: Cooperative Extensions, Homebuyer Education Centers, Higher Education Assistance Centers Provide Financial Fitness and/or Asset Specific Training Work with Community Partners to enhance/develop curriculums

29. NH Statewide IDA Collaborative highlights…. Each Community Partner holds “ownership” over their Program. Program rules/updates are discussed at Quarterly Community Partner Meetings NHCLF Provides no operational dollars to the partners to run the Program

30. MoneyWorks Community Partner An initiative of Project Dollars and Sense Tied eligibility to working people with disabilities eligible for SSI or SSDI Savings for home ownership; college; business

31. Problem Real or perceived financial disincentives Difficulty navigating public benefit system Un-served or under-served by financial institutions Low-wages Lack of support

32. Goals Plan public benefits necessary in order to work and improve economic well- being Use financial services successfully Develop positive financial habits and credit history

33. Methods Integrated counseling (benefits, credit, asset training) Peer Support Financial education workshops Affordable financial services Individual Development Accounts

34. Money Works Infrastructure $ CDFI $ Credit Union Benefit Planners Self Help Groups Certified Credit Counselors Affordable Housing Group

35. Personal Benefits Planning Current situation assessment Income projections and work incentive options Information and referral Follow up as needed

36. Certified Credit Counseling Credit history & recommendations Spending & Savings Plans Credit Use and management Survival skills in the marketplace Preparing for asset goal

37. Asset Based Training Home Ownership Postsecondary education Self employment

38. Peer Support Savings clubs and buying coops Managing illness and financial wellness Organization skills Navigating marketplace Working toward goals

39. Equity building…. IDA $3,600 FHLB $12,000 DMHD $2,500 CPI $20,000 NHHFA $5,000 MNHS $25,000

40. NH Statewide IDA Collaborative highlights…. After 3 years… – 565 Total Enrolled330 Actively Enrolled 281 Home; 21 Education; 22 Business; 6 Other – 78 Graduates of Homeownership (as of 10/21/04) – $532,106 Saved – $1,350,695 Matched – $ 384,940 Match Paid Out

41. Research Asset Accumulation & Tax Policy (NIDRR) LIFE Account Feasibility Study & Implementation Plan (CMS) National Tax Facts Coalition Youth Transition Grants – SSA

42. Resources Corporation for Enterprise Development (CFED): www.cfed.org www.cfed.org World Institute on Disability: www.wid.org/equitywww.wid.org/equity Center for Social Development: www.gwbweb.wustl.edu/csd Center on Budget & Policy Priorities: www.cbpp.orgwww.cbpp.org

43. Contact Information Tobey Davies Center for CED and Disability School of CED/SNHU 2500 No. River Road Manchester, NH 03106-1045 Phone: 603-644-3103 Fax:603-644-3103 t.davies@snhu.edu