States Offer Rays of Hope for Low-Income Households

With high stakes and powerful political players, much of our attention these days is focused on Washington, DC. But doing so ignores another critical part of the American legislative system—state legislatures. And as the presidential race for 2020 heats up, one key will be to step back and look at the nation as a whole to see which states are gaining momentum around the issues we care about:

  • Which states are on the leading edge of fixing the nation’s toughest issues?
  • Which states are moving backwards when it comes to wealth inequality?
  • How are states reacting to a renewed focus on consumer rights and the racial wealth divide?

You don’t have to wait for the Prosperity Now Scorecard to come out early next year to answer these questions (although that will help!). You can get an idea of where each state is right now by looking at the laws they passed and the actions they took to advance these critical issues this year.

In the past year, we saw states improving and building on important national programs. California, through a proposal introduced by Senator Scott Weiner (D-CA-11), attempted to completely eliminate savings penalties, also known as asset limits, on the state’s Temporary Assistance for Needy Families (TANF) program CalWORKs. Ultimately, through legislative negotiations, this proposal was incorporated into the state’s budget bill, amended and passed as an increase to TANF asset limits from $2,500 per individual to $10,000.

While this change falls short of the complete elimination of savings penalties, it allows thousands more Californians to take part in the program and get the resources they need to stay out of poverty. We’re still hopeful for and will work to see the full elimination of asset limits for CalWORKs in a future session.

Similarly, the Maine legislature opted to ask Health and Human Services to conduct a review of asset limits, with the potential of raising them in the future.

Other states chose to help low-income families boost incomes and build wealth by increasing their thresholds for state versions of the Earned Income Tax Credit (EITC), one of the nation’s largest and most effective anti-poverty programs. Maine moved towards revitalizing its state EITC program by increasing the amount of the credit for families with children to 30% of the federal credit, and for families without children to 100% of the federal credit. The bill would also create a working group to help streamline tax credit applications. Minnesota amended their tax code (H.F. 5) to expand the eligibility of the state EITC by increasing its threshold and allowing it to cover families with no children and families with up to three children. California also expanded its state EITC program, with Governor Gavin Newsom committing $1 billion dollars to double the credit’s reach among low-income families.

We also saw states experiment with programs that, if successful, could provide a blueprint that can be replicated on the national level, such as Children’s Savings Accounts (CSAs). These initiatives are based on the idea that helping more children succeed in higher education requires starting early and empowering families. CSAs are created on or after the birth of a child and incentivize families to save for their child’s future education costs by matching their contributions with state or private funds.

Giving every child a leg up in attaining a college degree is a crucial part of bridging the education and wealth divide, especially when these incentives are targeted toward lower-income families. Colorado came one step closer to equity by passing HB19, which requires the state to put aside $100 in a CSA for every child born after 2020.  Illinois also passed its own bill (HB 2237) requiring the state create a CSA for each child born in the state with a $50 dollar seed deposit to start it off. Nebraska passed LB610, which gives families a tax credit for putting money in a CSA but also incentivizes employers to match their employees contributions with their own.  As the idea of giving every child an account to start saving for college becomes more widespread, we can expect other state legislatures to start grappling with how to follow in the footsteps of leaders like Colorado and Illinois.

States also enacted or expanded existing paid leave programs. New Jersey passed A 3975 which raises the percentage of wages earned by employees on leave, places job protections on employees who use paid leave and expands the definition of “family” to be more inclusive of non-traditional families. Nevada, with the country’s only female-majority legislature, passed SB 312, mandating employers to provide paid leave to employees beginning in 2022. Maine mandated its employers to provide paid leave as well by passing LD 369, which also allows employees to use the leave for emergencies outside of personal illness or illness of a close relative. 

Lastly, we saw states across the country tighten consumer protections as the federal government worked to rollback and loosen regulations on predatory lending and bank reporting. Nevada instituted new rules to protect some individuals from predatory lending and increase data collection on loans made in the state to better ensure vulnerable families have the ability to repay potential loans and not fall into predatory debt traps. Nevada also passed a law requiring high schools to teach classes on financial literacy, giving students the skills to manage their finances and start building wealth. The District of Columbia passed B22-0572 which restricts the types of circumstances that warrant wage garnishment to pay off a debt. Washington State built upon previous progress by passing a bill requiring debt collectors to give adequate notice of any unpaid debts and to file any complaints in court. This comes one year after restricting courts from imposing fees on low-income defendants.  

However, even as states like Nevada and Colorado focused on tackling wealth inequality in new and innovative ways, we saw many other promising bills, such as those regarding paid leave, Children’s Savings Accounts and expanding the EITC, voted down or left on the table in other states. But if there is one takeaway from the successes of this session, it is that state governments have put a renewed focus on the wealth disparity across American communities after the 2018 election season. It’s an issue that is becoming increasingly salient and public for Americans across the country, and states have become some of the first governments to act on it. With so many achievements to uplift, and many more on the horizon, we are on the cusp of making some real progress in this country.

Join one of our campaigns to stay informed about progress made at the federal level and learn how to act through our Advocacy Center. Prosperity Now is also hosting Camp Prosperity, a webinar series aimed at helping advocates build their skills and capitalize on the momentum we have right now. By coming together and making our voices heard, we can compel the 2020 candidates, both local and national, to confront the issues and have a larger conversation about how families can achieve wealth in America today.

 

 

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