The story of poverty in America in the wake of the Great Recession is not only about lost wages for those who find themselves out of work. Just as fundamentally, it’s a story about losing what you own. It’s a story of foreclosures, bankruptcies, predatory lending practices and vanishing savings. How can those affected by these setbacks rebuild? It starts with steady income to meet today’s expenses, but it also requires a reserve to weather unplanned costs and to finance next steps for a better future.
Achieving economic security is very much about having a platform from which to create a better life. Policymakers understand that this means creating and keeping jobs. What needs to be as firmly embraced, however, is the fact that a strong platform also demands assets, like the rainy-day funds that enable state governments to weather budget shortfalls. It takes assets like the savings accounts that help families pay for unexpected medical bills, buy a car, make a down payment for a home, and finance job training or higher education.
Since 2007, our nation has seen dramatic losses in both personal income and assets: 8 million jobs removed from payrolls, foreclosures on thousands of homes, and the evaporation of hundreds of millions of dollars in retirement and savings accounts. When middle-class workers lost these assets, they joined the millions already struggling to keep their heads above the poverty watermark.
A recent state-by-state study by the Corporation for Economic Development (CFED) found that while over 15.1 percent of people in this country lived below the poverty line in 2010 ($22,350 for a family of four), nearly 27 percent are living “asset poor.” 1 This means they would be unable to pay bills, eat regularly and pay the rent for three months should their paychecks stop today. If you factor out those assets that are not easily converted to cash – cars, homes or a business – 43 percent of households are “liquid asset poor.” They have little to no savings to deal with emergencies.
While it’s easy to understand why it’s important to set aside funds for an unexpected medical bill, car breakdown or short-term layoff, assets are critical for a family and community to thrive long term.
There are dozens of correlations that point to the difference assets can make in the lives of adults and their children.2 Households with at least $2,000 in liquid assets are less likely to skip doctor visits or miss a utility payment. Savings at age 23 results in lower unemployment between ages 23 and 33. When savings are set aside for a child’s college education, that child is four times more likely to attend college. When the savings account is in the child’s name, this likelihood increases to seven times. As importantly, people with assets tend to have higher expectations for their futures and the futures of their children.
The national picture of unemployment, scarcity, income poverty and household asset poverty is mirrored within the Northwest Area Foundation’s eight-state region. The statistics vary from state to state: The income poverty rates within the Northwest area ranged from 11 percent to 15 percent in 2010 (U.S. rate was 14 percent), and the liquid asset rates were between 27 and 44 percent (U.S. rate was 43.1 percent).3 Income and asset poverty rates were significantly higher for people of color, and particularly grave on Native American reservations. Of the more than 70 reservations within our area, close to half have poverty rates above 30 percent, and eight above 50 percent.
In 2011, we made grants to organizations and coalitions addressing the asset and wealth challenge at multiple levels. We invested in programs with track records of success as well as those with promising approaches. We searched for and found solid and inspiring organizations, individuals and partnerships from within our region. We also called upon regional and national resources. Our grantmaking strategies recognized that making progress on systems change includes support to grassroots organizations, regional intermediaries and national policy efforts.
For example, grants went to on-the-ground organizations providing financial education and technical assistance to individuals and families. Our grant to Build Wealth Minnesota Inc.’s Family Stabilization Plan helped finance a two-year financial education program that teaches household budgeting and savings. Similarly, support to El Centro de la Raza in Seattle, Wash., helped those with English as a second language learn the fundamentals of banking and personal financial management, and access free tax-preparation services.
Other grants went further along the systems continuum to help build coalitions among nonprofits that advocate for improvements in public policy. A two-year grant to CFED provides data and analysis, public policy training, and organizational assistance to a network of nonprofit asset-building organizations in Idaho, Iowa, North Dakota, as well as on Native American reservations throughout the Foundation’s eight-state service region.4
Another grantmaking approach we used was to cluster grants for impact on specific systems and communities. The lack of access to capital in Indian Country is one example. Most reservations struggle with little or no on-reservation private economy that can provide jobs, circulate dollars within the community or support local civic activity. Lack of access to capital is often a major hurdle for Native American entrepreneurs who want to start and grow on-reservation businesses, with conventional lenders viewing these opportunities as too risky. Over the years, we’ve come to look to Native-led organizations to help us understand how we might apply our grant dollars to this systemic problem and do so in ways that honor the cultural values and traditions.
In 2011 we made six grants to Native American nonprofits5 which will work with the Oregon Native American Business and Entrepreneurial Network (ONABEN) to accelerate their development as community development financial institutions (CDFIs). These CDFIs will be a learning cohort focused on building strong operations able to provide Native-owned reservation businesses with access to capital based on principles of social entrepreneurship.
We are excited about what we’ll learn from this project.
The support for Native CDFIs is part of our ongoing commitment to Indian Country. In 2011 we continued a practice of directing about one-third of our grant dollars to programs and convenings benefiting Native organizations and communities. In 2012, we are targeting 40 percent of grant dollars to Native initiatives in urban, rural and reservation communities.
Because state budgets often determine how and if people can access asset-building programs, we supported state and regional efforts to examine policy actions that would impact low- and moderate-income families. We asked a national intermediary to advise a regionally focused initiative on how to promote small business development, giving special attention to policies that help small businesses succeed.
As our region continues a slow climb out of the Great Recession, we see opportunities to work with highly capable partners – nonprofits and peer funders – to help low-income people gain access to economic opportunity. At the Northwest Area Foundation, we’re committed to supporting organizations working to reshape the systems that will help people build assets. We are proud to support grantees that can put in place the practical building blocks of opportunity, and grantees that advance public policy ideas to make asset-building a reality for low-income people.
Even in the recession’s aftermath, we look around our beautiful region and see not scarcity, but abundance. We see an abundance of energy and ingenuity, diverse perspectives, and passion for the future of our communities. The Northwest Area Foundation is determined to build on these assets in the years ahead.
Kevin F. Walker
President & CEO
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Brooks, Jennifer, and Kasey Wiedrich. Assets & Opportunity Scorecard: A Portrait of Financial Insecurity and Policies to Rebuild Prosperity in America. Washington, D.C.: CFED, Jan. 2012. Web. Nov. 2012.
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Why Assets Matter: An overview of research on assets and their effect on financial stability and economic opportunity. Washington, D.C.: CFED, 2011.
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Brooks, Jennifer, and Kasey Wiedrich. Assets & Opportunity Scorecard. CFED. http://assetsandopportunity.org/scorecard/state_data
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Minnesota, Iowa, North Dakota, South Dakota, Montana, Idaho, Washington and Oregon.
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Four Bands Fund Inc., Eagle Butte, S.D.; Hunkpati Investments Inc., Fort Thompson, S.D.; Lakota Funds, Kyle, S.D.; Confederated Tribes of the Umatilla Indian Reservation-Business Service Center, Pendleton, Ore.; Northwest Native Development Fund, Nespelem, Wash.; and Taala Fund, Taholah, Wash.
