State program pays people to save

More low-income Oregonians, including larger families in Baker County, will be able to take advantage of a program that matches every dollar they deposit in a savings account with three dollars.

Changes approved by the Oregon Senate Tuesday expand eligibility requirements for the Individual Development Accounts program.

The program encourages people to save for college, to start a small business or to buy a home by providing $3 for every dollar they deposit in a savings account.

However, House Bill 2258 opens the savings program to families who earn up to 200 percent of the federal poverty line, or 80 percent of the area median income, whichever is higher.

The changes don’t affect individuals or two-person households in Baker County. Their eligibility is still based on the 80 percent median income cap — $28,000 per year for an individual household, $32,000 for a two-person household.

However, the new 200 percent of the federal poverty line criterion means families or three or more can earn more and still qualify for the savings incentive, according to Cynthia Winter, a state program director for the Neighborhood Partnership, which administers the Individual Account Development Initiative statewide.

By using 200 percent of the federal poverty line, the income cap for a three-person household in Baker County is $36,520 (compared to $36,000 using the 80 percent criterion).

For a four-person household the cap is now $44,100 (compared to $40,000), and for a five-person family the limit is $51,580 (compared to $43,200).

(Figures for six-person and larger families are shown on a chart at right.)

“This legislation corrects an inequity for rural families,” said Senate Majority Leader Richard Devlin, D-Tualatin. “Because the median area income differs widely from urban areas to rural, using a single threshold for eligibility prevented access for many low-income families. By adding in the adjustment to the federal poverty line we can make sure that all low-income Oregonians have access to this program, regardless of what their neighbors make.”

Sara Miller of the Northeast Oregon Economic Development District office in Enterprise, which administers the savings match program for business-related savers in Baker, Union and Wallowa counties, said income caps based on local median incomes have been consistently higher in urban areas, but House Bill 2258 levels the playing field.   

“Last year when the median income in our rural areas was actually lower than 200 percent of federal poverty threshold, our residents were going to be penalized for having low incomes,” Miller said. “To address this problem, we got permission from the attorney general to temporarily use statewide median income levels for the rural areas, but he said we had to get the Legislature to approve a permanent fix.”

Now that the Legislature has approved using the federal poverty line criteria, more rural residents can qualify for the $3-to-$1 savings match without special authorization from the attorney general, Miller said.

Senate Republican Leader Ted Ferrioli, R-John Day, said on the surface the change appears to be a good thing for residents of rural counties where incomes average abut $10,000 a year less than urban counties along the I-5 corridor

However, he said while encouraging people to save is a good thing on one hand, the legislation runs counter to government efforts to ramp up spending under federal and state economic stimulus packages.

“Encouraging people to save is a really nice thing to do, but there has been an unintended consequence of the downturn in the stock market and the falling real estate market. Savings are at a record rate right now,” said Ferrioli, who represents Baker County.

“Between the downturn in the markets and lack of consumer confidence, Oregonians and citizens in general are tending to hold onto their money longer and saving it,” Ferrioli said. “That’s exactly counter to the intent of all of these stimulus packages.”

The business portion of the program is open to business operators and would-be entrepreneurs who want to save for small or large goals, ranging from paying for an advertising campaign to buying new equipment or a new building, as well people interested in starting a part-time or full-time business venture.

Rep. Cliff Bentz, R-Ontario, who represents Baker County, said he voted for House Bill 2258 in February to advance it to the Senate, which passed it Tuesday and sent it to Gov. Ted Kulongoski to sign into law.

Bentz said the bill requires participants to complete an extensive money management course and follow through with monthly deposits into approved savings accounts in order to receive the $3-to-$1 match.

“The thing I like about it is it rewards work and it rewards  people who saved,” Bentz said. “It rewards people who didn’t have the ability to save because their incomes were so low, and it teaches them money management skills.”

Participants also receive training in the basics of home buying and/or putting together a business plan, he said.

To pay for the program, the state sells tax credits to individuals and businesses that have an Oregon tax liability.

Proceeds are funneled through 501 (c)3 nonprofit organizations to aid low-income participants in building financial assets. Funds deposited in matched savings accounts may be used for qualified expenditures on education, small business startup and down payment assistance for homeownership, or to pay for home repairs.

For Baker County residents, the Entrepreneurial Development Services (541-463-4606) and the Northeast Oregon Economic Development District office in Enterprise (toll-free at 800-645-9454) offer the required training and assistance for people saving to start or expand a small business.

CASA of Oregon (503-537-0319 extension 310) runs the program for people interested in saving for other qualified purposes, such as buying a home, home repairs, saving for college and others.

“This is a win-win program for contributors and savers,” Winter said.

For contributors the program provides a 75 percent tax credit, and other than a 5 percent service fee paid to the non-profit and a 20 percent allocation for the educational training component, the balance of contributions go directly into a fund providing savers with the $3-to-$1 match, once people reach their savings goal.

For example, a typical saving goal might be $1,000. Once the saver reaches that goal, the non-profit deposits $3,000 in matching funds, boosting the savings to $4,000, Winter said.

“These tough times have proven how important it is to encourage savings,” said Sen. Laurie Monnes Anderson, D-Gresham, who carried the bill on the Senate floor Tuesday. “Expanding eligibility will give low-income Oregon families the opportunity to pull ahead, be it through savings for college, starting their own business or owning a home.”

The program is administered through the state Housing and Community Services Department.

In written testimony supporting HB 2258, Winter said nearly 800 participants have enrolled, 700 have graduated and there’s a waiting list of individuals ready to enroll this year.

“During this past year, Portland State (University) has been helping us document the impact of the IDA initiative. We are excited to report that we are seeing significant behavioral changes in participants, such as increased income, decreased debt and starting long-term savings accounts such as IRAs,” Winter testified.

Bentz said with these tough economic times, it’s important for people to be more careful with their spending and rediscover the benefits and importance of saving.

“The reason I supported (HB 2258) is because we should support these types of measures that encourage saving,” Bentz said.

More information about the Individual Development Account savings match program is available at the Web site http://ida.tnpf.org.