Asset Limits

Now is the Time to Focus on Combating Growing Poverty

Hosai Ehsan — Thu, 10 Sep 2009 21:50:00 -0400

The much-anticipated official poverty rates for 2008 are out and they are not pleasant. According to the US Census Bureau, the percent of Americans living in poverty increased to 13.2. Nearly nine percent of Whites, 12% of Asians, 23% of Hispanics and 25% of Blacks make up the 40 million people who were living in poverty last year.

Almost one out of every five children living in this country fell into that category. Not only 19% of Americans 18 or younger but 12% of adults aged 18 to 64 and 10% of seniors aged 65 and over were identified as poor. The Brookings Institution expects poverty to rapidly rise through 2011 and 2012.

As depressing as these statistics are, this is not the time to lose hope. They lend timely perspective to current efforts to advance policies that provide low income Americans with the tools and incentives to build their personal savings.

We need to be forward-looking and focus on expanding economic opportunities to combat growing poverty. Asset building proposals at the national level and in California address retirement savings for all workers, college savings for all children, banking the unbanked, reforming TANF/CalWORKs asset limits, EITC awareness and other automatic savings opportunities. These are some of the ways America can ensure that people have the financial tools to be self-sufficient. With appropriate savings and better planning for the future, fewer Americans will suffer from poverty and more will move up the economic ladder.

Expanding Savings Opportunities for California’s Welfare-to-Work Families

Hosai Ehsan — Thu, 25 Jun 2009 17:23:00 -0400

In California's tough economic times, even small savings can go a long way for a low-income family. Assemblymembers Jim Beall and Felipe Fuentes are working hard to make sure that CalWORKs families have the opportunity to set aside savings that can help them cushion financial emergencies and become financially self-sufficient.

On Tuesday, the California Senate Human Services Committee passed Assembly Bill 1058 (Beall & Fuentes). The California Workforce Mobility Initiative (AB 1058) repeals the $4,650 vehicle asset limit for recipients and applicants and eliminates the $2,000 cash asset limit for recipients. Also, it allows applicants to have $2,000 in savings adjusted to the California Necessities Index.

If enacted, AB 1058 would help CalWORKs families build the savings necessary to become financially self-sufficient through work. It will also save the state $3 million dollars in administrative staff time, according to the Assembly Appropriations Committee. This money is otherwise spent conducting quarterly tests to verify that the families are indeed asset poor. States that have eliminated the asset test report a savings and no fraud cases.

The goal of the CalWORKs program is to provide temporary assistance as families transition from government support to work. CalWORKs recipients can achieve this goal by owning a reliable car that helps them get to work, and savings that helps them move ahead.

The California Legislature and many community organizations have recognized the significance of asset building and are working hard to ensure that CalWORKs families who aspire to build their own financial safety-net are encouraged and not penalized.

Microwaves as Luxury, and a Tangled Safety Net: Thoughts from the Weekend NY Times

Leila Seradj — Tue, 12 May 2009 17:43:00 -0400

The recession has undoubtedly shifted a lot of paradigms lately, and I think all would agree that it's gotten Americans to sit up and take notice-- both individually (challenging their own habits of consumption and saving) and societally (coping with cracks in the safety net system). The New York Times has taken notice, as well-- two articles in this weekend's Times merit mention.

The first (Shift From Spending to Saving May Be Downturn's Lasting Impact) highlights the re-emergence of a culture of thrift-- and indicates that, unlike past recessions, it's here to stay for a while:

Consumers have lost a huge chunk of their net worth, in the housing bust and the stock market, and to resuscitate their retirement accounts or children's college funds they will have to channel more of their paychecks toward saving-- unless those asset markets soar again.

But it likewise signals a shift in attitude, one that is increasingly wary of a culture of consumption that has spun out of control. An April Pew Research Center survey, for example, revealed that more Americans were beginning to consider seeming necessities-- like microwave ovens-- as luxury items. (This culture shift was called for by Ray Boshara and Phil Longman in their book The Next Progressive Era, published last month.)

The second (For Victims of Recession, Patchwork State Aid) profiles the devastatingly complex and disconnected welfare system in the U.S. that covers some and neglects others, for reasons of chance or geography, characterizing it as:

...a hit-or-miss system of relief, never designed to grapple with the pain of a recession so sudden and deep. Aid seekers often find the rules opaque and arbitrary. And officials often struggle to make policy through a system so complex and Balkanized.

While untangling the government aid system will take years of work, one step in the right direction would be removing asset limits that penalizes welfare recipients for saving and asset ownership. The Asset Building Program has long encouraged asset limit reform, especially those that discourage benefits recipients from saving and owning assets. (See our 2008 and 2007 Assets Agendas for more on our approach to asset limit reform.)

Wheels versus Welfare

Rourke OBrien — Thu, 19 Jun 2008 17:06:00 -0400

Today the LATimes published an article I wrote on the need to exclude cars from consideration when determining a family's eligibility for public assistance (for Ladder followers this should sound familiar).

sneak peak:

With the relationship between car ownership and employment so clearly documented, California should be working hard to provide low-income families access to a reliable car. And, in some areas, they do get help. Sacramento County, for example, is authorized to purchase 50 vehicles a year for county welfare recipients who lack access to public transit. If we're helping some families buy a car, wouldn't it make sense, then, to let people who have cars keep them?

Check it out. And if you're a California resident, call your state reps and make sure they are supporting AB2368.

An (Almost!) Victory for Asset Limit Reform

Rourke OBrien — Thu, 08 May 2008 22:10:00 -0400

Breaking news -- Asset limits to be reformed in the Food Stamp Program!

The conference committee formed to work out differences in the House and Senate versions of the 2007 Farm Bill has included provisions to reform asset limits in the food stamp program-- an issue championed by Chairman Harkin (D-IA) and Ranking Member Chambliss (R-GA).

The Farm Bill, if passed unchanged by the full House and Senate, will officially exclude savings in IRAs and 529 college savings accounts from consideration in determining eligibility for food stamp assistance.

What's more, the existing asset limit, which is set at 2,000 for most families and has only been increased once since the late 1970's, will be indexed to inflation to prevent further erosion.

This is a tremendous victory for the entire assets community. I'd especially like to recognize the Corporation for Enterprise Development, the Center on Budget and Policy Priorities, and the Retirement Security Project, who we've worked closely with to educate policymakers and push for change.

To learn more about how asset limits negatively influence economic behavior and undermine the economic security of low-income Americans, see my previous articles in The Washington Post and the Christian Science Monitor as well as New America policy papers here and here.

Saving Across America

Ellen Seidman — Thu, 24 Apr 2008 14:44:00 -0400

Last week I had the privilege of discussing asset building for lower income Americans in three very different settings: the annual Opportunity Economics Colloquium of the Hope Street Group, held at the Lansdowne Resort outside of Washington; an Assets Forum sponsored by the New America Foundation in the State Capitol in Sacramento, California; and with a group of financial services, social service and foundation representatives brought together by the City of Seattle. While the settings and audiences varied, the theme was the same: how to empower and encourage all Americans, particularly those who do not have funds either to cushion an economic setback or to invest to achieve economic security, to take sustainable first steps toward saving. Given the current financial crisis, one wishes these discussions had started ten years ago, but that same crisis makes it all the more important that they're happening now.

Our group at Hope Street, which included policy types and investment bankers and other private sector players, young and less young, from both coasts, was assigned the task of recommending policies that would be effective to increase to 50% the percentage of Americans who had savings to cover six months of operating expenses. In other words, unlike the usual Washington policy debate, this was not about pension and retirement savings, important as those are. We settled on a goal of about $10,000-recognizing that it was low, but to give us a target to shoot for-and focused on liquid assets, while recognizing that bankable non-liquid assets, such as a home, can sometimes serve the same purposes. While we didn't stick entirely to the task, in that at least one of our policy recommendations is a bet on the longer term, the policies we chose would all constitute effective steps toward the goal.

After four hours of robust discussion and debate, we settled on five top policy recommendations. These are: build a new generation of savers by seeding a savings account for every child-to become available at age 18-with $500 and, as in the United Kingdom, use the new account to enhance the financial literacy of the entire family; encourage greater competition in the consumer financial services sector-while recognizing the need for effective consumer protection-to increase innovation in products and services that serve the bottom half of the wealth distribution; encourage greater efforts in the workplace to provide easy, automatic paths to saving beyond retirement saving, and financial education about how to manage and grow those savings; revitalize the US Savings Bond program, which provides a totally safe, small denomination, non-account-based, modestly liquid vehicle for saving in small amounts; and stop punishing savings by substantially modifying the asset limits that discourage everyone from TANF recipients to applicants for Pell grants for higher education from saving. The Hope Street colloquium ended with presentation of these ideas to representatives of the three Presidential candidates.

In Sacramento, the focus was on financial literacy, both to build on and to build up momentum for the California Financial Literacy Initiative (AB 2123), introduced by Rules Committee Chair Ted Lieu and sponsored by California Controller John Chiang. We discussed the increased need for financial literacy in a world of enhanced individual responsibility for financial health, a younger and older population, and ever more complex financial products from a widening array of providers. The Financial Literacy Initiative is a platform on which the state and its partners can build both financial literacy resources and outreach. Already the California Library Literacy Services has indicated interest in adding financial literacy to its broader literacy initiative, potentially bringing this type of education into a trusted resource for adults in over 600 communities. A particularly innovative element of AB 2123 would start the process of establishing a Financial Literacy Corps to mobilize financial professionals and others to provide unbiased financial advice to low- and middle-income families who are now without this resource. New America Foundation is working on this concept on a national scale and it is exciting to see it begin to take shape in California.

Seattle and King County have been working on a series of asset-building initiatives, including a Bank on Seattle program. The participants in the asset-building coalition-city and county officials; social service agencies; banks, thrifts and credit unions; and the philanthropic sector-are focused on building pathways to enable people to better meet their financial needs. We spent our time discussing what was needed, the roles of all parties, examples of success and best practices, and what the literature tells us. Specific areas of concern were bringing people into bank accounts and linking those accounts to saving; effectively coordinating financial education with the opportunity to use what was being taught; small dollar loans; and the challenges of banking immigrants in both urban and rural settings. Participants were very interested in the Federal Deposit Insurance Corporation's small dollar loan pilot program, both for what the 30 bank participants in that program (none of them, unfortunately, in Washington State) will be trying and demonstrating and because the FDIC will be disseminating the learnings widely.

It is enormously exciting that the importance of building savings and assets-of establishing the underpinnings of financial stability-has gained such interest in such a variety of venues. It is even more exciting that people across the country, from all sectors, are working together to develop and implement long-term, sustainable strategies to make financial stability attainable for everyone.

Three Buses and a Two-Mile Walk to the Welfare Office...

Rourke OBrien — Fri, 18 Apr 2008 13:30:00 -0400

Imagine you are an unemployed single mother of two. In an effort to feed your kids-and keep a roof over your heads-you drive your ten year old beat-up Honda accord down to the local department of social services to apply for welfare.

After filling out a mountain of paperwork, the caseworker gives directions to some local employers that may be hiring. One catch though - you want the check to feed your family, you're gonna have to sell that car. Ya know, that car that you use to go to the grocery store, transport your kids, and....i dunno....get to work?!

Well that's the rule in California. California currently has the most restrictive vehicle allowance for welfare recipients - a distinction it shares with Texas and Idaho. Nationally, twelve states exclude all vehicles owned by a household when determining eligibility; another fifteen exclude at least one vehicle. In California, the total, fair market value of all vehicles owned by the household cannot exceed $4,650; a number that hasn't changed in more than a decade. In real terms that means even a 10 year old Honda civic with 100,000 miles could be worth enough to disqualify you from public assistance.

And California is certainly a driving state. According to the census bureau, only 5% of California residents commute to work using public transit, compared with 37% in New York State. And that's not surprising in a large diverse state, where even the cities are spread out (see: Los Angeles).

The connection between car ownership and employment is clear. A recent report by the County of Los Angeles found that an impressive 64% of welfare-to-work job seekers who had unlimited access to a car were gainfully employed, compared with only 44% of those who relied on public transit or sharing rides.

Yes, it doesnt make any sense. Thankfully a bill has been introduced in the state legislature that seeks to eliminate all vehicles from consideration in the CaWORKS/Welfare program.

There's potential for this bill to draw some real bipartisan support. Despite being championed by Assemblyman Fuentes, a democrat, the conservative Howard Jarvis Taxpayers Association just recently signed on in support. Just yesterday the bill was voted out of the initial committee - lets hope the legislature pushes this one along, and that the governor signs this long overdue rule change into law.