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The SEED Policy & Practice Initiative State Policy Developments
Arkansas became the eighth state to establish matching grants for 529 college savings accounts when Governor Mike Beebe signed into law Act 597 on March 28, 2007. The act authorizes the creation of the Aspiring Scholars Matching Grant Program, a pilot program that will provide a 1:1 match up to $500/year for families with Adjusted Gross Income (AGI) between $30,000 and $60,000. A 2:1 match up to $500/year is available to families with AGI of $30,000 or less. Accountholders must be Arkansas residents whose account beneficiaries are also residents. The state has appropriated $250,000 over two years, through June 2010, to fund this pilot program. Data from the Aspiring Scholars Program show success in the program's first year of operation. Ninety-nine percent of the 471 program participants made contributions to their accounts and received matches on those funds. The averge total deposit by lower-income families was $226; the average total deposit for moderate-income families was $400. This law is the first success by a SEED state policy partner (Southern Good Faith Fund) in securing passage of legislation to establish children’s savings accounts. The law also excludes 529 accounts from asset tests in key public assistance programs, including TANF, Medicaid, and SNAP. Southern Good Faith Fund will continue to advise the Section 529 Plan Review Committee on the specifics of the Aspiring Scholars Grant Program.
Universal CDA Proposal Legislation (SB 752) was introduced in California in February 2007 to establish Kids Investment and Development Savings (KIDS) Accounts for every child born in the state. The accounts would feature a $500 initial deposit by the state, beginning in 2008. Funds from the accounts would be available for withdrawal upon the child’s 18th birthday, and could be used for post-secondary education and training, first home purchase, or retirement. Soon after the bill’s introduction, conservative and anti-immigrant networks were activated to voice their opposition to the bill, and the Republican co-sponsor withdrew his support. Matched-529 Proposal Another piece of legislation (SB 643) was introduced in California in February 2007 to provide a one-time matching contribution of $50 to any qualified tuition program established for a child born in the state after January 1, 2008. In addition, the bill would authorize a tax deduction for contributions toward the 529 college savings plan, where contribution limits would apply. This bill was returned to the Secretary of the Senate for further review. Colorado offers a matching grant program as part of the state’s CollegeInvest 529 college savings plan. Families with incomes up to 200% of the federal poverty level are eligible for a 1:1 match up to $500 per year on deposits into a CollegeInvest account, up to a maximum of five years. The dependent beneficiary must not be older than 12 years of age at the time of initial application. The matching funds are administered on a first-come, first-served basis, and the matching grant program is subject to annual appropriation.
Universal 529 Proposal In 2007, the Hawaii Senate introduced a bill (SB 1936) to provide every child born in Hawaii with a $1,000 voucher to be deposited in a Hawaii 529 account, along with additional “periodic investments.” SB 1936 was included among a larger asset building package of bills. Unfortunately, none of the seven bills in the package passed. The Senate also introduced an omnibus bill on asset building that died when the Senate and the House could not come to agreement on amendments.
Task Force In 2008, the Hawaii legislature passed SCR 92 and SR 52, which established a State Asset Policy Taskforce charged with providing policy recommendations to the 2010 legislature regarding universal savings accounts for newborns, as well as financial education and asset limits. The Taskforce has been meting since Fall 2008 and is considering two potential children's savings strategies. The first would expand the state 529 college savings plan; widen participation through incentives, outreach and support; and ensure adequate savings upon maturity. The second option is to create a new, universal children's savings account platform. The Taskforce will finalize its policy recommendations in late 2009.
The Illinois Asset Building Group successfully advocated for the passage of SB 1563, an update to the Children's Savings Account Act that passed both Houses and was presented to the governor for signature in June 2009. SB 1563 reauthorizes the Children's Savings Account Task Force to review program options, make recommendations, and create a strategic implementation plan for a children's savings account program in Illinois. Then-Illinois Governor Rod Blagojevich initially signed into law the Illinois Children’s Savings Accounts Act (HB 1662) in August 2007. The legislation created a task force to review and make recommendations about children's savings account program options in Illinois. The Illinois Asset Building Group — co-chaired by the Heartland Institute and SEED community and state policy partner Sargent Shriver National Center for Poverty Law — was instrumental in crafting the bill and building support in the legislature. The task force will develop a written report to be presented to the governor and the Illinois general assembly by February 2010. The K.I.D.S. (Kansas Investments Developing Scholars) matching grant program provides a 1:1 match up to $600 per year on deposits into a Kansas Learning Quest Education Savings account. Families with incomes below 200% of the federal poverty level are eligible. The initiative began in 2006, when Kansas launched a three-year pilot matching grant program for the state's 529 college savings plan. In 2009, the Kansas state legislature made the program a permanent part of the Learning Quest Education Savings Program and appropriated funs for 2009. The program is limited to 300 participants from each of Kansas' four congressional districts; that cap of 1,200 will be reviewed each year and is subject to appropriations. The matching program is funded by tax revenues, as opposed to fees paid by other 529 investors. To open an account, families must either sign up for a payroll deduction or an automatic monthly withdrawal from their bank account of at least $25, or make a one-time contribution of at least $250. To receive matching grant funds, participants must contribute at least $100 a year.
In July 2004, Kentucky passed legislation to create the Cradle to College Commission. The purpose of the Commission was to explore approaches to making college education in Kentucky more affordable and was comprised of students, educators, community leaders, private sector stakeholders and financial service industry representatives. The commission was a joint initiative of the State Treasurer and the Secretary of State, who acknowledged the need for a structure to offer certain resources to citizens at the earliest stages of life in order to promote asset building. The Cradle to College Commission issued its final recommendations on children’s savings accounts to the general assembly in October 2006, and recommended universal, automatic enrollment in the state’s 529 plan for every child born in Kentucky, along with a matching grant program for low-income families. The Commission included a community service component in its recommendations, and saw the service requirement as innovative and integral to the Cradle to College concept. By offering responsibility along with opportunity, the program would aim to allow children to take ownership of their futures, with the goal of inspiring a cycle of mutually beneficial connectedness between the individual and the community.
The Louisiana Student Tuition Assistance & Revenue Trust (START) college savings plan is administered by the Louisiana Office of Student Financial Assistance. General revenue appropriated by the state legislature is used to match deposits made by low-income account holders. The state will annually match a percentage of the deposits made into an account during the calendar year. The match is dependent on the Adjusted Gross Income (AGI) of the accountholder. The savings match rate ranges from a high of 14 percent of contributions for those families with an AGI up to $29,999 to a low of 2 percent for incomes of $100,000 and above (all state residents are eligible for at least a 2% match). The initial investment for participation in Louisiana's START Plan is $10, and there is a $10 minimum deposit. While an ideal policy would eliminate all initial and minimum deposit requirements, Louisiana's relatively low deposit requirements make it easier for low-income residents to participate in the START program.
Maine began a matching program for the state’s 529 College Savings Plan, the NextGen College Investing Plan, in 2002. At that time, Maine residents with incomes at or below $54,500 who opened a NextGen Account with a minimum deposit of $50 could receive a one-time, $200 initial deposit from the state. These families also received a 50% match of additional contributions up to $200. After several years of operation, Maine assessed its enrollment by income and discovered that lower-income families were participating at a lower rate. The state concluded that the initial $50 deposit was a barrier to participation. In 2006, Maine began offering one-time $50 vouchers (“First Step Grants”) to all newborns in the state and launched a marketing campaign to encourage families to sign up, with low- and moderate-income (AGI less than $75,000) families eligible to receive an additional $200 Initial Matching Grant. Those low-income families are also eligible for an additional 50% match, up to $200 per year, on all additional contributions. Also in 2006, Maine launched a Lifelong Learning Account program to encourage employers to match workers deposits into NextGen accounts. In 2007, Maine added additional benefits to participating in the NextGen program by allowing a $250 state tax deduction for contributing families who have incomes at or below $100,000 single/$200,000 married. The philanthropic Harold Alfond Foundation has pledged to start a 529 college savings fund, with a $500 initial deposit for every child born in Maine. This privately funded effort is implemented by the Maine state government and that private/public partnership is discussed further in this section. Click here for additional details on Maine's Next Gen plan Alfond College Challenge
The Michigan Education Savings Plan (MESP) is administered through the Michigan Department of the Treasury. In Michigan, an annual state appropriation from a tobacco funds settlement generates funds to match deposits of low-income accountholders. The State provides a matching grant of $1 for each $3 contributed to a MESP account up to a lifetime maximum matching grant of $200 per eligible beneficiary. Matching grants are only available during the first year that the beneficiary is enrolled in MESP, and are based on the following eligibility requirements:
The Minnesota College Savings Plan is administered through the Minnesota Higher Education Services Office. General revenue appropriated by Minnesota State Legislature is used to match deposits made by low-income account holders. The program provides an annual matching grant to eligible in-state families contributing at least $200 to the plan during a calendar year. Maximum matching grants are $400 per year. Families with a federal AGI of $50,000 or less may receive a matching grant of up to 15% of their contributions during the year; families earning between $50,000 and $80,000 may receive up to 10% of their contributions.
Enterprise Corporation of the Delta (ECD) and the Aspen Institute’s Initiative on Financial Security (IFS), a national partner in the SEED Initiative, have proposed a five-year public-private demonstration project that would provide an account at birth for all children born in Mississippi. The initiative would include an initial endowment of $500 in an account for each newborn; a 1:1 match up to $1,000 per year for deposits into the accounts of children from low-income families; a state tax deduction for contributions to the account; and management of accounts by private-sector financial institutions.
Both houses of the Missouri General Assembly introduced bills in 2007 to establish the Legacy Initiative, which would provide matching grants to low- and moderate-income Missouri families that invest in MOST, Missouri’s 529 college savings plan. The proposal, which former State Treasurer Sarah Steelman championed and helped craft, called for the use of excess funds from the state’s unclaimed property funds account to fund the 529 matching grants. The Senate bill )SB 254) passed out of the Senate Education Committee; however, neither chamber passed its respective version of the bill before the close of the legislative session in May 2007.
Montana Montana legislators introduced HB 185, which would have allowed a state tax deduction for Montana residents making contributions to a 529 plan in any state, not just the Montana plan. The bill has passed in first reading and on the House floor, but later died in committee.
In 2009, the North Carolina House and Senate passed SB 1019, which establishes a North Carolina Financial Literacy Council. The passage of this legislation, and the resulting Council, builds on previous work by the private North Carolina Task Force on Children's Savings Accounts, which first met in 2008 to explore children's accounts in North Carolina; existing CDA models, including matched 529s; and opportunities to engage children, especially low-income children, in the financial mainstream. Action for Children North Carolina, our SEED state policy partner in North Carolina, was instrumental in leading the private task force and advocating for the legislation. SB 1019 was signed by the governor and became law on July 10, 2009.
Universal CDA Proposal In early 2009, legislators in North Dakota introduced HB 1508, which would have established an account at birth for every child in the state, with an initial deposit and a match on participant deposits. This bill was inspired by a similar draft bill from Montana. The North Dakota bill was voted down in committee; however, it opened the door to continued discussion on savings and asset-building for children and youth in the state.
Matched 529 Proposal College SAVE, North Dakota's 529 program, offers a one-time, $300 matching grant for certain state residents. Specifically, households with an AGI of $20,000, if single, or $40,000, if married, are eligible. The match is provided througbh the Bank of North Dakota and is only open to North Dakota residents who meet the income guidelines and who make deposits to the account within the first year that the account is opened. The Oklahoma House introduced a children’s savings account bill in 2007 and 2008. The Building Equity and Expanding Access to College for Oklahoma Newborns (BEEACON) Act (HB 1805 in 2007 and HB 2988 in 2008), introduced by Rep. Jeannie McDaniel (D-Tulsa), would provide all children born in Oklahoma with a $200 initial deposit into the state’s 529 college savings plan. Deposits into accounts of children under age six would be matched 2:1, and deposits into accounts of children between the ages of six and 18 would be matched 1:1, with a maximum annual state match of $100. The lifetime maximum state match for each child would be $500. HB 2988 was modeled on the recommendations of the Oklahoma College Savings Task Force. Then SEED state policy partner CAPTC played a critical role in advising the Task Force and generating support for CDAs among policymakers. The Task Force was created through legislation passed in 2006. In March 2008, the Oklahoma Senate passed SB 1390, which exempts Oklahoma 529 college savings plans from consideration in public benefits eligibility determinations. The bill passed with no opposition, and became effective on November 1, 2008. The Center for Social Development, a national partner in the SEED Initiative, played an instrumental role in this policy victory, as they worked closely with the Oklahoma Treasurer's office in identifying policy options and writing the bill.
SEED for Oklahoma Kids In 2007, the Oklahoma State Treasurer's Office began opening accounts for participating families in SEED for Oklahoma Kids, a large-scale randomized experiment to test universal CDAs. SEED for Oklahoma Kids is being led by the Center for Social Development, a national partner in the SEED Initiative, in partnership with the Oklahoma State Treasurer's Office. This experiment is testing a fully scalable delivery system by establishing a 529 college savings account for randomly selected newborns.
Task Force Recognizing the need to build Oklahoma's assets by increasing college attainment and savings, the Oklahoma legislature passed HCR 1075 in 2006 to create the Oklahoma College Savings Task Force. The Task Force was assigned the task to "review and make recommendations about program options to increase the number of and amount of savings in Oklahoma 529 college savings plans, especially the college savings plans for children at birth along with matching deposits for low-income families. To fulfill its goal, the Task Force submitted a report in December 2006 entitled "Building Assets, Building Opportunities: Using Public Deposits in College 529 Savings Plans to Expand Access to Higher Education."
The Rhode Island CollegeBound fund is administered by the Rhode Island Department of the Treasury and the Higher Education Assistance Authority. In Rhode Island, revenue generated from 529 plan fees are used to match deposits made by low-income account holders. The initial investment for participation in the CollegeBoundfund is $250, and there is a minimum deposit of at least $50 (based on income). A 2:1 match is offered to state-resident families with an AGI at or below the state median, with a $1,000 annual maximum. Families with an AGI that is less than $15,000 above the state median are eligible for a 1:1 match, with a $500 annual maximum. To be eligible for the match, the account must be opened before the child turns 11. Matching grants are available for a period of five consecutive years.
529 Pre-Paid Tuition Plan Texas governor Rick Perry signed a bill in June 2007 to revive and improve the state’s pre-paid tuition plan, to be called the Texas Tomorrow Fund II. The bill included language for the development of the Texas Save and Match program, which would allow for matching funds for contributions to the Texas Tomorrow Fund II by families with incomes below the state median household income. Like a 529 college savings plan, a pre-paid tuition program is a way for families to save for future post-secondary education expenses. Pre-paid plans allow accountholders to pay for future tuition costs at current prices. This innovative legislation applies the 529-match concept to another college savings vehicle. The Center for Public Policy Priorities (CPPP), a SEED state policy partner, played an instrumental role in writing the legislation and generating support for it among legislators. In June 2009, efforts to add the match for low-income savers to the state's 529 plan met an unexpected setback. SB 1760, which would have authorized the match for the Texas Save & Match Program, passed the House and Senate, but was vetoed at the eleventh hour. The Texas comptroller's office acted in 2009 to establish a 501(c)(3) foundation to receive tax-deductible donations for the program. However, a technical drafting error, discovered just days before the governor's signing deadline, would have prevented the foundation from receiving private funds and donations. This limitation would have hamstrung the Save & Match program's efforts to raise a blend of public and private funding. Although disappointed by the veto, RAISE Texas and the Center for Public Policy Prioirties, our SEED state policy partner in Texas, will work with the comptroller's office to reintroduce the bill in the next legislative session in 2011.
529 College Savings Plan In November 2007, Texas hired a new manager for the state’s 529 college savings plan—newly entitled the Texas College Savings Plan—in an attempt to breathe new life into the plan. The plan had underperformed relative to other states’ 529s in recent years. The state’s contract with OFI calls for the plan manager to create a scholarship program for plan participants after the plan reaches $500 million in total assets. The plan currently has approximately $230 million in assets. The Comptroller will establish the criteria for these scholarships, which could include matching grants for low and moderate-income participants.
Universal CDA Program San Antonio Mayor Phil Hardberger announced "Cribs 2 College" in his February 2009 State of the City address. This pilot program seeks to offer college scholarships to low-income San Antonio children, beginning at birth. It will establish college savings accounts at local financial institutions shortly after birth, reinforcing to parents and children the idea that all children can go to college, and promoting the value of savings. The initiative sets an important local precedent for children's accounts in Texas and may help make hte case for a statewide children's savings policy effort in the future.
In 2004, Utah announced a pilot matching grant program for the state’s 529 college savings plan. The 50-account pilot features a 1:1 match up to $300 per year on deposits into the Utah Educational Savings Plan, for a maximum of four years or until high school graduation. Families with incomes below 200% of the federal poverty level are eligible for the matching grant program. To qualify for the matching funds, families must commit to saving at least $25 per month in the account.
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