2003 IDA State Policy Conference November 10-12, 2003 St. Louis, MO

1. Plugging the Leaky Bucket: Exploring Asset Protection Policies as a Tool for Asset DevelopmentCarl RistCorporation for Enterprise Development 2003 IDA State Policy Conference November 10-12, 2003St. Louis, MO

2. How Should State Policymakers Think About Asset-Building forWorking Families? • From Governor’s Task Force for Financial Independence in Delaware: • Asset facilitation – policies that provide financial education, direct access to basic financial services or other institutional mechanisms to save, such as employer-provided benefits. • Asset incentives – policies that incent wealth creation in the form of homes, businesses, etc. • Asset protection – policies that safeguard assets when adverse events could deplete them.

3. Asset Protection • Policies to protect assets from depletion during adverse events such as: • Involuntary unemployment, • Illness, • Accident, and • Early death. • Provided by both public and private sectors. • From State Asset Development Report Card, key policy clusters at the state level that help to protect assets • wage protection, • health insurance, and • property protection.

4. Why Should Asset Building Advocates Care About Asset Protection? • Important factor in building enduring assets, • Asset protection advocates can become key allies in supporting asset building policy, and • Often not well understood by asset building experts.

5. 1. Wage Protection • What are wage protection policies? • Policies that supplement or replace wages when a worker leaves employment due to: • Job loss, • Workplace injury, or • Care of sick dependent (child or parent). • Why is this important for asset development? • Allow households to manage work changes or sudden events with depleting assets or increasing debt. • Nearly 1 in 10 workers who take unpaid family leave end up on public assistance (Commission on Family Leave).

6. Key Wage Protection Policies Unemployment Insurance • National/state partnership (based on federal law, executed by states). • Created to provide adequate benefits to protect workers during temporary periods of job loss. • Payable as a matter of right to workers who: • Have enough wages and work experience to meet minimum conditions, • Free from disqualification on the basis of separation from last place of employment, and • Ready, willing and able to work. • Consensus that UI should replace 50% of lost weekly earnings over a six-month period.

7. Key Wage Protection Policies Workers’ Compensation • Oldest social insurance institution in U.S. • Created to provide benefits to workers injured on the job. • “No-fault” insurance approach to work-related accidents: • Workers give up some rights, esp. to sue for full damages, • In return receive (supposedly) swift and sure payment for: • Medical costs and partial income replacement during rehab, or • Partial damages in the case of permanent injury.

8. Key Wage Protection Policies Family Leave Benefits • Federal Family and Medical Leave Act (FMLA) guarantees leave from work without pay for: • Birth or adoption, • Care of a close relative who is seriously ill, or • Care of the worker’s own serious illness. • Many who qualify for leave under FMLA do not take leave because they can’t afford to. • A number of states now provide limited forms of family leave benefits: • Temporary disability insurance, • Subsidies for infant care for low-income families, • Allowing public employees to use sick leave to care for sick family, and • Requiring the same of private employers.

9. 2. Health Insurance • What are health insurance policies? • Policies that expand or increase health coverage. • Why is this important for asset development? • Health care expenses can be some of the largest expenses faced by a household and often occur without warning. • Medical bills and other financial effects of illness accounted for half of the more than 1 million personal bankruptcy filing in U.S. in 2000 (Norton Bankruptcy Law Advisor ). • Families without insurance: • More than one-third of working families with incomes below 200% of poverty, and • Almost half of working families with incomes below 100% of poverty.

10. Key Health Insurance Policies State Children’s Health Insurance Program (SCHIP) • As part of Balanced Budget Act of 1997, states began to expand health coverage for children as part of SCHIP. • State may use federal allotment to: • Expand existing Medicaid programs, or • Create new programs that fit specified guidelines. • Doesn’t cover parents.

11. Key Health Insurance Policies Transitional Medical Assistance (TMA) • Congress established guidelines for TMA in 1988. • Recognized that losing health benefits was a barrier in moving from welfare to work. • Mandated that states provide health coverage to families with children for six months when higher earnings cause family to exceed income thresholds for Medicaid. • Through various mechanisms, a number of states have extended coverage beyond 12 months.

12. Key Health Insurance Policies State Subsidies for Small Business Health Care Coverage • Only 55% of firms with 3-10 workers offered health coverage in 1999 (compared to 90% of firms with 50+ workers). • Small firms face particular barriers to providing coverage. • A number of states have experimented with new ways to encourage small firms to offer health coverage to their employees: • Direct subsidies using state or federal funds other than Medicaid or SCHIP, • Tax credits for employers newly offering coverage, and • Schemes to maintain affordability (e.g. reinsuring plans against high losses, loosening state mandated benefits).

13. 3. Property Protection • What are property protection policies? • Policies that protect homeowners against the loss of home equity due to unscrupulous lending practices or an inability to acquire homeowners’ insurance. • Why is this important for asset development? • Home equity accounts for the largest share of net worth in U.S. households (44.4% of total measured net worth). • Homeownership is especially important for populations with historically low levels of wealth: • 57% of the net worth of African-American households, • 71% of the net worth of Hispanic households.

14. Key Property Protection Policies Anti-Predatory Lending Legislation • Refers to a number of abuses in the “subprime” mortgage industry: • Excessive fees, either – • Collected up front and financed into loan, or • Charged at the back end (e.g. prepayment penalties. • “Risk-rate” disparities, and • Excess foreclosures. • Often targeted to poor, elderly or minority homeowners. • Coalition for Responsible Lending estimates these practices cost consumers as much as $9.1 billion annually. • A number of states have passed legislation to curb predatory lending.

15. Key Property Protection Policies Anti-Insurance Redlining Policies • Certain neighborhoods and populations do not have access to adequate property insurance (so called “redlining”), but data is lacking. • HMDA as disclosure model. • Has generated over $1 trillion in new lending commitments to older areas and underserved neighborhoods (according to National Community Reinvestment Coalition). • To combat insurance redlining, several states: • Require property insurers to provide geo-coded data, and • Make this data available to the public.

16. Assets Policy — Grades

17. Honor Roll States

18. More Information State Assets Development Report Card funded by the Ford, Annie E. Casey, Charles Stewart Mott, and Rockefeller Foundations, and the Center for Study of Social Policy Online at http://sadrc.cfed.org Carl Rist Corporation for Enterprise Development 123 W. Main St., 3rd Floor, Durham, NC 27701 Phone: 919.688.6444 E-mail: rist@cfed.org Wesbite: www.cfed.org