Written By: Lisa Whitley
The idea for this article was conceived in late 2019, well before the COVID-19 crisis. And yet that crisis made apparent to all the vulnerabilities inherent in our economy that, as AFC professionals, we see each day. As we go to the polls in November (or, as the case may be, complete mail-in ballots at home) to elect leaders at all levels of government, more than ever we will have in mind how public policy can be an effective instrument of financial wellness.
What would a vote for financial wellness look like? Setting aside a few of the highest profile issues – health care insurance, student loan debt, minimum wage increase – what are today’s legislative proposals that the 117th Congress and the next state and local legislatures could take up that positively impact financial wellbeing and, not coincidentally, prepare us for the next crisis?
Increasing Household Savings
- The proposed American Opportunity Accounts Act (S.2231/H.R. 3922) establishes savings accounts for all eligible children under the age of 18 with an initial balance of $1000. Then, each year thereafter, as much as $2000 is added to the account. Once the account holder reaches 18, the funds can be used for higher education, a down payment for a home, or “any other investment in financial assets or personal capital that provides long-term gains to wages and wealth…” Eligibility for the account is based on household income.
- The proposed Refund to Rainy Day Savings Act (S. 1018/H.R. 2112) takes advantage of the once-a-year opportunity to jump start savings using tax refunds. Under the proposal, an eligible low or moderate income taxpayer could defer part of their expected tax refund for six months. At the end of that period, they would receive the deferred amount plus a matching amount from the federal government, as well as any accrued interest.
- The Saving for the Future Act (S.1053/H.R. 2120) would establish a minimum employer contribution for workplace retirement plans.
Asset limitations for public assistance programs have the unintended consequence of penalizing low and moderate income households that are trying to build up savings for stability. At the federal level, there are two proposals that address this issue:
- The Allowing Steady Savings by Eliminating Tests (ASSET) Act (S. 3276/H.R. 5848) eliminates the “savings penalty” for three federal programs: SNAP (Supplemental Nutrition Assistance Program), TANF (Temporary Assistance for Needy Families) and LIHEAP (Low Income Home Energy Assistance Program), and increases the limit for Supplemental Security Income (SSI).
- Similarly, the ABLE Adjustment Act (S. 651) would increase the age requirement for eligibility for an ABLE account, bringing potentially millions more people into the fold. ABLE accounts allow families to save up to $100,000 in tax-advantaged accounts without jeopardizing SSI and other government benefits,
Supporting Employment Stability
One of the most powerful ways that employers can help their employees cope with financial emergencies is to not create emergencies. Some state and local legislatures (including New York, San Francisco, Seattle, Philadelphia, Chicago, Oregon) have taken the lead with “fair scheduling laws” that require employers to provide hourly workers with predictable work schedules, and compensation for last-minute changes. At the national level, the proposed Schedules that Work Act (S. 3256/H.R. 5004) would extend these protections nationally.
Reducing Fines as Barriers to Employment
Somewhat below the radar, fines for minor infractions act as a pernicious barrier to employment for low and moderate income households. By taking away driving privileges for unpaid fines, workers often find themselves unable to earn any income (and certainly cannot pay the fine). A number of states and municipalities suspend driving privileges over unpaid debts such as court fees. The City of Chicago was a leader in addressing this issue in 2019, ending the practice of suspending driver’s licenses because of unpaid parking tickets. More broadly, there is a growing awareness among local governments that fines for minor infractions can have serious, unintended negative effects on the livelihoods of low and moderate income households.
Promoting Financial Literacy
Support for including personal finance in school curricula has gained traction in recent years. And while only 21 states currently mandate a personal financial management course for high school students, numerous states introduced legislation in 2019 to make personal finance a component of every student’s education. At the national level, the Consumer Financial Education and Empowerment Act (H.R. 6012) would establish a grant program to facilitate financial education in schools, as well as libraries and other non-profit organizations.
Understanding credit is a key component of financial literacy. The Comprehensive CREDIT Act of 2020 (H.R. 3621) would, among other things, require credit reporting bureaus to provide consumers with their credit score for free, alongside their free annual credit report, noting specific actions that a consumer could take to improve their score.