Brief Description: Creating a pilot program to assist low-income families.

Sponsors: Representatives Darneille, Haler, Dickerson, Morrell, Pettigrew and Simpson.

Hearing Date: 1/30/06

Staff: Sonja Hallum (786-7092).

Background:

Department of Community, Trade, and Economic Development (CTED)

The Department of Community, Trade, and Economic Development (CTED) provides assistance to Washington's communities, businesses and families. CTED is organized into several different agencies, one of which is the Community Services Division. This division works to build community partnerships to provide service and advocacy for individuals and families.

The Community Services Division administers funds for anti-poverty programs including funds distributed to the Community Action Agencies. The Community Action Agency Network is a delivery system for federal and state anti-poverty programs in the state, including but not limited to the community services block grant program, the low-income energy assistance program, and the federal department of energy weatherization program. The Community Action Agency Network is comprised of local Community Action Agencies that serve low-income persons in the counties.

Asset Building Programs

According to the U.S. Department of Health and Human Services, asset building is an anti-poverty strategy that helps low-income people move toward greater self-sufficiency by accumulating savings and purchasing long-term assets. The theory behind this approach is that helping people purchase an asset, as opposed to simply increasing their income, provides stability that may allow them to escape the cycle of poverty permanently. Examples of long-term assets include a home, higher education and training, and a business.

Asset building strategies incorporate many different approaches and use a variety of methods to help achieve the goal of creating asset wealth for low-income people. Some of the most common tools for asset building include the following:

• Individual Development Accounts (IDAs) – Matched savings accounts designed to help low-income and low-wealth families accumulate savings for high return investments in long-term assets such as a house, higher education or a small business.
• Earned Income Tax Credit (EITC) – Refundable Federal income tax credit for low-income workers. EITCs enable many low-income tax filers to receive a cash payment from the government regardless of whether they pay income taxes.
• Financial Literacy - Skills and knowledge that successfully enable low and moderate income individuals to manage their finances.

Summary of Bill:

Pilot Program                        

The Department of Community, Trade, and Economic Development (CTED) must establish a pilot program to assist low-income families to accumulate assets. The pilot program will utilize Community Action Agencies to facilitate bringing together community partners to determine the asset building programs to initiate within the community.

The pilot program must consist of four sites with at least one of the pilot sites located in eastern Washington. The CTED will select the pilot sites through a request for proposal process which must begin by July 31, 2006.

Any county, or group of counties, in which a Community Action Agency is located may submit a proposal to be selected as a pilot site. The proposal must include the following:
Identification of the local agency that will be the lead agency for the pilot program;

• Identification of the community partners with whom the Community Action Agency will be collaborating and a description of how the lead agency will work with community partners to implement the pilot program activities;
• Identification of the areas of potential need based upon input from the community partners. Areas of potential need may include financial literacy, assistance with federal income tax preparation and the use of tax credits, the use of individual development accounts, and other asset-building strategies; and
• Identification of the resources within the community that might support training for the implementation of the selected best practices chosen to address the needs identified by the community.

The department must report to the legislature by December 1, 2007, on the progress of the implementation of the pilot program including the request for proposals process, the response from the counties to the request for proposal, the status of the program, and any implementation issues that arose in initiating the pilot program.

Earned Income Tax Credit

To the extent funding is appropriated, the CTED must establish a program to create an outreach campaign to increase the number of eligible families who claim the federal Earned Income Tax Credit. The CTED may work collaboratively with other state agencies, private and nonprofit agencies, local communities, and others with expertise that might assist the department in implementing the program.

Appropriation: None.

Fiscal Note: Requested on 1/26/06.

Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.