Why NM Legislators Should Vote for SB 24
Summary: Sponsored by Senator Tallman, SB 24 will appropriate $1 million from the general fund to the Workforce Solutions Department for expenditure in fiscal year 2021 and subsequent fiscal years to carry out the provisions of the Individual Development Account Act.
What is an Individual Development Account? Individual Development Accounts (IDAs) were created to encourage savings, investment, and asset accumulation among hard-working families. Assets such as a home, a college education, or a business enable low-income families to move into the economic mainstream. IDA holders are required to complete a financial education program. Most IDA programs are offered through local nonprofit organizations, which also provide financial education. IDA savers learn to develop and manage a household budget, manage debt, set financial goals, and achieve them.
Why This Bill Is Important: New Mexico ranks 49th or 50th in a wide range of child and family poverty rankings, and low-income, rural, tribal and Hispanic communities are disproportionately impacted by predatory lenders due to generally low financial literacy in these communities.
Why This Bill is Good for New Mexicans: Prosperity Works has administered an IDA program since 2005. Prosperity Works reports the following important outcomes.
- 1,463 NM families have enrolled in the program, depositing over $8.75 million into new accounts in NM financial institutions and infusing $7.31M into local economies.
- Program participants have expanded or created 606 local businesses.
- 330 participants accessed safe, secure housing and now have $57 million in new mortgage holdings.
- 527 participants have achieved college degrees, made $2.6 million in college tuition payments, and can expect $5.1 million in increased income each year.
- A ten-year national study of IDA programs conducted by the Brookings Institution found that about 90 percent of treatment group members opened IDA accounts, and contributions averaged about $1,800. Prior work shows that from 1998 to 2003, home ownership rates increased more for treatment group members than for controls.
- The RAND Institute found that even small amounts of IDA savings offered an effective and important buffer against sudden family emergencies, the kind of emergencies that often push families to rely upon predatory lenders charging up to 175% interest.
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