SB295 passed through the Senate before the state Legislature took a break to work on redistricting, but the challenge now lies squarely on the shoulders of the House to pass what has come to be known as “the IDA bill.”
IDA stands for Individual Development Account. The bill, requiring no funding from the state’s thin 2012 budgets, will enable qualifying Alabamians to take advantage of federal matching funds to buy assets that will help them emerge from poverty.
Here’s how it works: A federal law called the Assets for Independence Act was passed in 1998, allowing the feds to put matching funds into the IDA savings account of a low-income saver. The match gets triggered if the saver pairs up with a local non-profit that’s also willing to do a dollar-for-dollar match.
That means that a low-income person can save up to $2,000 and have it matched not once, but twice, resulting in up to $6,000 in the special savings account.
And here’s the clincher: The tripled savings can’t go toward a home entertainment system or a trip to the casino.
Rather, those who save the nest egg must undergo a financial literacy course, improving their understanding of money and how wealth is built. Then, the money saved can be used for only three purposes: buying a first-time home, starting a business, or going back to school.
What’s more, we have proof that IDA programs work in Alabama.
The United Way of Central Alabama has been administering such accounts for years. The agency’s success stories describe folks who have moved from paying rent into home ownership, people who’ve gone back to school to gain wage-enhancing skills and credentials, people who have turned entrepreneurial ideas into productive businesses. Those are the stories of the American dream coming true. When people use assets to emerge from poverty, everyone benefits.
The IDA bill passed the Alabama House 97-0 in 2009, before being pocket vetoed by then-Gov. Bob Riley. While there’s no controversy about the bill this session, either, the narrow window of time left before the Legislature adjourns means that the IDA bill is far from home free. Public pressure on the House to pass the bill could seal the deal.
One senator aptly described the IDA bill during committee hearings as “a hand up, not a handout.” That’s correct. SB295 is a bill that helps people help themselves by encouraging low-income people to improve their financial literacy and save up for an asset that will help them emerge from poverty.
SB295 is scheduled to be in committee at 9 a.m. today before the House Committee on Children and Senior Advocacy.
Stephen Stetson is a policy analyst at Arise Citizens’ Policy Project, a coalition of 150 organizations and congregations promoting public policies that improve the lives of low-income Alabamians.