[NFEC Update] N.D.'s anti-poverty toolbox gets new tool

[Joanna Donohoe]

>From the GrandForksHearld.com

Published April 29, 2009

 

N.D.'s anti-poverty toolbox gets new tool

 

The bottom line is that Individual Development Accounts work and operate
as a bridge to the middle class for the Americans who use them. 

 

By Andrea Olson

 

FARGO - The North Dakota Legislature recently passed SB2260, which is an
amazing victory for the people of this state. 

 

The bill provides a $125,000 appropriation for Individual Development
Accounts, which are administered through the Community Action agencies
in all 53 counties across North Dakota.

 

IDAs are long-term matched saving accounts for low- to moderate- income
people to be used for a targeted asset goal. In order to qualify for the
program, a participant must not be above 200 percent of the federal
poverty level.

 

Currently, there are about 173,000 North Dakotans who are at or below
this 200 percent mark. 

 

By no means is this a giveaway program. IDAs come with parameters and
high expectations of participants. All participants must be employed and
have good credit and a willingness to follow a slow and realistic
savings plan towards one of three approved assets: college tuition,
small business capitalization or first-time home ownership. 

 

Throughout the savings period, participants are also required to make a
monthly deposit into their IDA, and the contribution must come from
money they have earned while working. 

 

The IDA is also a custodial account managed by Community Action, and the
participant does not have card-blanche access to the funds. 

 

Further, participants are required to complete financial literacy
training - a critical component, as it teaches skills such as creating
and following a budget, owning and managing a bank account or credit
card and guidance about refundable tax credits such as the Earned Income
Tax Credit. 

 

Additionally, participants also are required to attend asset-specific
training. This training is focused on the participant's asset that they
plan to buy upon the completion of their IDA savings. For example, a
participant who is saving for a first-time home purchase is required to
attend a home buyer education class. 

 

Ultimately, the IDA lets participants acquire a lasting asset after
saving for an extended period of time. Participants are required to save
for a period of at least 10 months, although most save money over the
course of a few years. 

 

At the end of the program, every dollar deposited into the IDA by the
participant is matched by a combination of federal and nonfederal funds
at a rate of 2:1. In North Dakota participants are able to save up to
$2,000 for a match of $4,000. This means if the maximum amount is saved,
the participant gets a total of $6,000 to use for their asset purchase. 

 

Since 2002, North Dakota has celebrated many IDA successes with
participants, and more than $280,000 has been spent on asset purchases.
Two participants acquired their first home in Minot, another eight in
Fargo and six more in Grand Forks. Two small business owners in Grand
Forks and Fargo have been able to accumulate the necessary equipment to
make their businesses more viable and competitive. 

 

Also, 29 students from a variety of backgrounds pursuing a range of
degrees at UND, Dickinson State University and elsewhere have
successfully attended and/or graduated from college using their IDA
funds. 

 

The federal government supports IDAs through the Assets for Independence
Act, which was passed in 1998. Each dollar North Dakota has committed
will be matched by a federal dollar and together will match the savings
of the participant.

 

IDAs promote not only self-sufficiency but also economic development.
Participants who graduate from college will have better jobs, those who
expand their small business will generate revenue for our economy, and
first-time home owners will pay property taxes and likely will become
more active in their communities. 

 

The bottom line is that IDAs work and operate as a bridge to the middle
class for the Americans who use them. 

 

A tremendous "Thank You" to the initial sponsors of the bill: Sens. Mac
Schneider, D- Grand Forks; Robert Erbele, R-Lehr; and David Houge,
R-Minot; and Reps. Vonnie Pietsch, R-Casselton and Robert "Tork"
Kilichowski, D-Minto.

 

Also, the many legislators who supported the bill also deserve thanks.
As a result of their efforts, many hard-working North Dakotans will be
able to acquire a lasting assets through IDA accounts.

 

Olson directs the North Dakota Community Action Partnership

 

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