California Asset Building: Policy Papers

To promote local economic development, California policymakers should create Banking Development Districts, a proven way to connect lower-income unbanked Californians with the financial products and services they need to enter the financial mainstream and begin to build savings and assets. It is modeled after New York State's successful Banking Development District program.

For the full text of the issue brief, please see the PDF attached below.

The California Employee Savings Program creates a voluntary, universal, portable retirement account for California workers who do not have access to a workplace retirement savings plan. It would give six million California workers and their families an opportunity to have their own workplace retirement savings plans to supplement their basic Social Security benefits. The California Employee Savings Program would also give hundreds of thousands of California small businesses an easy, low-cost, voluntary way to offer a retirement savings plan to their

The CA Workforce Mobility and Savings Initiative, reforms the asset limit in the California Work Opportunity and Responsibility to Kids (CalWORKs) program, to encourage low-income families to build the savings they need to permanently exit welfare. The measure repeals the $2,000 asset limit in CalWORKs for current recipients and raises it for new applicants from $2,000 to $7,000 while also eliminating the $4,650 vehicle limit. By reforming the asset limit, this measure restores the stated goal of the CalWORKs program by assisting families in achieving

The current economic downturn, triggered in part by excessive household debt and deflating housing prices, underscores the central role asset ownership plays in the economic security of California families and the broader economy.  Yet, half of all Americans currently have few or no assets, in part due to policies that encourage savings and wealth accumulation that benefit the upper half of earners.  The purpose of New America's Asset Building Program, is to significantly broaden savings and assets ownership in America,

In Califonia's current legislative session, the Asset Building Program is advancing a comprehensive legislative package of state policy intiatives to broaden savings and ownership opportunities for Californians. … more

Although the State of California currently offers its residents a 529 college savings plan through the ScholarShare program, the investment vehicle lacks incentives that encourage low- and middle-income individuals to participate in the program. Other U.S. states offer a variety of attractive incentives, such as matching contributions and state tax deductions. Californians are ready to adopt a stronger and more incentive oriented 529 plan that will encourage families to build savings for their children's college education. Postsecondary

The purpose of New America's Asset Building Program is to significantly broaden savings and assets ownership in America, thereby providing all Americans both with the means to get ahead and with a direct stake in the overall success of our economy. While pursuing an ambitious policy agenda at the federal level, we recognize that it is at the state level, in our nation's ‘laboratories of democracy', where the most innovative policies are often enacted.

As the percentage of workers covered by traditional employer pension plans has plummeted in recent years, saving has become the only path to secure retirement income beyond social security. Although a significant proportion of employers now offer their workers a tax advantaged retirement savings product like the 401(k), tens of millions of workers nationwide simply do not have access to an employer sponsored retirement savings plan. In addition, individual retirement accounts (IRAs) and other retirement products offered by private… more

In support of state-wide efforts to bring more Californians into the financial mainstream, the State of California could deliver a pre-paid account through the state’s tax filing process. The Assets and Transaction Account, or ATA, would expedite tax filers’ access to their tax refunds and serve as a safe, affordable, and convenient financial tool for lower-income Californians to conduct routine financial transactions and build saving throughout the year.

The state tax filing process presents a unique opportunity… more

For families making the difficult transition from welfare to work, developing assets is critical to achieving true economic independence. In order to prevent a complete backslide to public assistance, low income working families must begin to develop their own safety nets through personal saving for use in the event of an unexpected income shock due to illness or temporary unemployment. As personal saving is essential to achieving self-sufficiency – the stated goal of the CalWORKs program – saving should… more

California ranks second to last (ahead of New York) among US states in the percent of households who own their own homes (2005 ACS). Only 57% of Californian households are homeowners, compared to over 70% nationally. As Figure 1 illustrates, this current gap is representative of a persistent growing trend; as homeownership rates have risen nationally, California has failed to keep pace.

California should amend its state income tax forms to allow filers to purchase savings bonds -- for themselves or their children—with a portion of their refunds. By making it easier for Californians to save part of their hard-earned refunds, policymakers can help families build the personal safety nets they need to thrive in today’s economy. With this change, California would lead the nation in harnessing tax time savings to build families’ economic security.

What difference would it make if every Californian grew up knowing that she or he had a nest egg to go to college or buy a home? What benefits would accrue to individuals, families, and California as a whole? California can find out by creating California KIDS accounts.

To help un-banked Californians to open bank accounts and enter the financial mainstream, California policy makers should consider creating Banking Development Districts. New York State created these special districts to provide incentives to encourage banks to locate in communities that lack conventional financial institutions and offer enhanced products and services

To encourage savings, California state income tax forms should be amended to allow households to split their tax refund and direct portions to up to three accounts. The income tax forms would need to be changed to include three "boxes," where tax filers could input account numbers to which they could direct parts of their refunds. Currently, there is only one "box," on the form, allowing tax filers to direct their refund to only one account. New research indicates this… more

In a recent speech, Federal Reserve Chair Alan Greenspan noted, “Today’s financial world is highly complex when compared with that of a generation ago. Forty years ago, a simple understanding of how to maintain a checking and savings account, at local banks and savings institutions may have been sufficient. Now, consumers must be able to differentiate between a wide range of financial products and services, and providers of those products and services.” While the population as a whole generally lacks… more

California has the opportunity to make 529 accounts more attractive to low- and moderate-income families by providing a match for savings they put towards a college education.

One of the most common myths in economic and poverty policy is that low and moderate-income people can’t or won’t develop financial assets. However, evidence from a wide variety of successful pilot projects from around the U.S. shows that, like wealthy families, low-income families can and do save when appropriate incentives and savings products are in place. Tactics like integrating savings tools into social support programs, providing financial education, matching savings, and even simple changes like allowing a savings check-off… more

To qualify for major public assistance programs like CalWorks, Food Stamps, and Medicaid, families must be both low-income and asset-poor. “Asset limits” make sense at first glance. The public pocketbook is not limitless and public aid should be directed to those who are truly desperate. However, asset limits can also put low-income families in a precarious position, causing them to deplete – and keep depleted – the part of a family’s financial portfolio that is critical for promoting independence and… more

In California, 28 percent of adults don’t have a checking or savings account, according to the US Census. Nationally, the estimate is that 10 percent of all households don’t have accounts. In San Francisco, the Brookings Institution estimates that one in five San Francisco adults---and half of its Blacks and Latinos—don’t have accounts. The un-banked are most likely to be people of color, less educated, and have lower incomes. For example, a Harvard poll of Hurricane Katrina evacuees in the… more