Summary

Creates a Texas Asset Development Initiative to encourage the growth of Individual Development Account (IDA) Programs in Texas. This program could facilitate access to IDA funds from the Federal government.

Background

Individual Development Accounts (IDAs) are special matched savings accounts for low to moderate-income families. Many of these families lack access to public policy mechanisms, such as tax-benefited retirement accounts, that subsidize saving.

Each dollar a participant saves is matched by public and/or private sources. The program’s ultimate goal is to provide funds for an asset-building purpose such as purchasing a home, attending post-secondary school, or expanding or starting a business. Other purposes may include buying a car, saving for retirement or making home repairs.

Besides increasing saving incentives for the poor, IDA Programs incorporate extensive financial education as a program requirement.

History

IDAs were introduced by Michael Sherraden, a professor at Washington University in St. Louis, in the early 90's. In 1997 the Center for Social Development at Washington University lead the American Dream Demonstration (ADD) which was a demonstration of IDAs in 14 program sites across the country. The findings of this demonstration have been published in a report, "Saving Performance in the American Dream Demonstration"

Based on a survey of IDA programs in Texas conducted by the Texas Asset Building Coalition in September, 2006 as of June 2006, there were 1,400 IDA active account holders. These active account holders had saved over $750,000.

Over 2,000 individuals have successfully saved and purchased an asset. About 670 became new homeowners, 235 saved for post-secondary education, 130 for small business, and almost 1,000 saved for a car purchase to help them get to work, school or for essential family activities. These successful savers saved over $3.6 million and were matched by over $6.4 million. This $10 million led to asset purchases of over $57 million.

Federal Funding

Assets for Independence (AFI), a Federal grant program, is the largest source of funding for IDA programs. AFI is administered by the Office of Community Services (OCS), within the U.S. Department of Health and Human Services, Administration for Children and Families. AFI funding requires that each federal dollar requested be matched by a non-federal dollar.

Political Commentary

It is anticipated that this bill is supported by a broad coalition of community development groups, including the Texas Asset Building Coalition and The Center for Public Policy Priorities.

This bill is the companion to SB 62. A committee substitute was passed out of Financial Institutions. The bill currently sits in house calendars.

Additional Links

Texas Asset Building Coalition on IDAs
Existing IDA Programs in Texas