Bill to boost savings accounts for poor gaining momentum

By Brigid Curtis Ayer

A bill to boost savings accounts for the poor is moving through the Indiana General Assembly and gaining momentum toward final passage.

House Bill 1075, which deals with individual development accounts (IDAs), passed the Indiana House by a 98-0 vote on Jan. 30, and also unanimously passed the Senate Tax and Fiscal Policy Committee on March 6. The bill is authored by Rep. John Day

(D-Indianapolis) and co-authored by Rep. Mike Murphy (R-Indianapolis).

Rep. Day said during his 31 years in the Indiana General Assembly his agenda has always been twofold: “to promote dignity, and to widen the circle of opportunity for those who are left out.” He said his agenda is based on the moral framework of the U.S. Conference of Catholic Bishops’ pastoral letter “Economic Justice for All.”

In addition to the IDA bill, Rep. Day has authored two other bills this year to help low-income families—House Bill 1027, which would increase Indiana’s minimum wage, and House Bill 1074, which would increase the earned income tax credit for working families.

Rep. Day got his idea for the individual development accounts bill more than a decade ago after meeting Michael Sherraden, author of Assets & the Poor: The New American Welfare Policy, at an Eastside Community Investments meeting in Indianapolis.

“The premise of Sherraden’s book is poor families have nothing to pass on to their children—no house, no family business,” Rep. Day said.

“The book asserts that if poor families are ever going to get out of poverty, they need to be able to build assets so they can have a stake in their community,” Rep. Day said, “and also so they will have assets to pass on to children like a home or a family business. That’s the theme of the book, and the theme of the IDAs.”

Following a successful two-year pilot program run by Eastside Community Investments using individual development accounts, Rep. Day thought, “Why not try this on the state level?”

In 1997, Rep. Day authored a bill to create a four-year pilot program statewide which was enacted the same year. In 2001, he authored a bill to make IDAs permanent. It became law.

House Bill 1075 increases the state- matched annual funds from $900 to $1,200. It creates a new category for spending the IDAs to include home improvements, and it increases the total number of IDAs which can be created each year from 800 to 1,000.

Rep. Day said the bill also creates “an accelerated savers feature” which rewards people who are able to save double the $400 annual savings goal. For example, individuals who save $800 in one year are given $2,400 in matching funds by the state that year.

“If there is an individual who works two jobs, and is industrious at saving, it will allow the individual to reach their dream of going to college, buying a home or starting a business quicker with this accelerated feature,” Rep. Day said.

“Our country has a long history of helping people get started, including the Homestead Act in the post Civil War era, to the GI bill, to modern times by helping homeowners deduct mortgage interest from their taxes,” Rep. Day said.

“But poor people can’t take advantage of the deduction of interest from their mortgage if they are not homeowners,” he said. “So the individual development accounts were created 10 years ago to help the poor save money to build assets.”

Rep. Day added, “House Bill 1075 will strengthen the foundation of a successful program that widens the circle of opportunity for modest and low-income families by allowing them to build assets for their future, and the future of their children.”

Jacqueline Troy, Individual Development Accounts Program Administrator for the Indiana Housing and Community Development Authority, said, “In 10 years, 3,700 IDAs have been established, and 1,800 to 2,000 have actually made purchases.

“Some people drop out of the IDA program [and] some may wait a couple of years or longer past the four-year state match before they make an approved purchase,” she said. “Currently, there are 1,333 IDAs where individuals are saving and eligible for the state match.”

There are 36 nonprofit organizations that are IDA administrators in Indiana, including one Catholic institution, the Providence House Corporation in Georgetown.

“The [Providence] sisters have targeted youth transitioning out of foster care and into the real world,” Troy said. “We are super excited about what the sisters are doing there.”

Twenty-five other states offer IDAs for low-income individuals or families. Indiana was one of the first states in the nation to enact IDA legislation. The Indiana Catholic Conference was instrumental in getting the original IDA program passed 10 years ago.

Sen. Luke Kenley (R-Noblesville) is the bill’s Senate sponsor. Sen. Vi Simpson (D-Bloomington) is the Senate co-sponsor.

House Bill 1075 is now eligible for second reading on the Senate floor.

(Brigid Curtis Ayer is a correspondent for The Criterion.) †