This post was written by OK Policy intern John Davis. John recently graduated from Oklahoma State University with a bachelors in political science and a minor in history. He enjoys researching and writing on a diversity of topics and looks forward to continuing his education.  

Small businesses, particularly very small businesses, are a critical component of Oklahoma’s economy.  Microenterprises represent a distinct subset of small business, those with 5 or fewer employees and start up costs of under $35,000.  They comprise the bulk of businesses nationally and locally - 88 percent of Oklahoma’s 345,630 businesses are microenterprises.  One way Oklahoma policy makers can empower and sustain this economic activity is to strengthen microenterprise development organizations, which provide access to affordable credit, often essential to starting or expanding a business. 

‘Microcredit’ refers to small commercial loans made to individuals seeking to start or expand a microenterprise.  Many microenterprise owners lack access to mainstream financial services, because their capital needs are too small, they have insufficient credit history, or their enterprise has not been in operation for a sufficient amount of time.  This post explains how expanding microcredit options can empower owners and entrepreneurs and boost economic growth in Oklahoma. Microenterprises are a significant part of our overall economy, and an important avenue for low- and moderate-income individuals to move up the economic ladder.  CFED (Corporation for Enterprise Development) President Bob Friedman, highlighted the importance of microenterprise startups:

continue reading Extending the Ladder: How microcredit expands economic opportunity

Click here for a copy of a presentation of this research to the OKDHS Practice and Policy Lecture Series on 4/25/2013

Oklahoma’s prosperity depends on the financial success and economic achievement of the people who call it home.  For a state that has always been rich in natural resources and entrepreneurial spirit, the future continues to look bright.  Yet we’ve also inherited a legacy of discrimination that historically impeded economic opportunity for people of color and created a wealth deficit that persists today.  A report released today by Oklahoma Policy Institute,  Closing the Opportunity Gap: Building Equity in Oklahoma, outlines an equity agenda for the future, one that acknowledges the racial wealth gap and income inequality as products of our collective history, culture, and public policies.  

When wealth is measured in terms of financial assets, i.e. a home or savings account, White households in the U.S. have nearly twenty times more wealth than Black households and eighteen times more wealth than Hispanic households.  These are the largest gaps in racial wealth observed since the government began publishing data a quarter century ago.  Two out of every five, or 39.1 percent, of households of color in Oklahoma are asset poor, nearly double the rate for White households. The asset poverty rate measures the percentage of households without sufficient assets to subsist at the poverty level for at least three months if their income was disrupted.  

continue reading Closing the Opportunity Gap: Building equity in Oklahoma

Last week, I attended CFED’s 2012 Assets Learning Conference, a biannual national gathering of practitioners, researchers, and advocates working to promote economic opportunity and fight poverty for low- and moderate-income Americans through savings, investment and ownership. Following the conference, I sat down with Bob Friedman, CFED’s founder, Board Chair and General Counsel, to discuss the state of the asset building field.

David Blatt: You’ve been active in this field a long time. What do you see as the biggest changes in the area of asset-building today compared to 15 or 20 years ago.

Bob Friedman: First of all, it’s so much bigger. We did our first conference 16 years ago, which was an IDA (Individual Development Account) learning conference and there were 150 people.  We just finished this conference, where we had 1,200-plus.  Today we see so many more programs, people, policies across the field.  Even the classes of assets we talk about has expanded.  It was always homes, businesses and education. Now it’s citizenship, assistive technology for people with disabilities, emergency savings as well.  Also, we now cover a larger spectrum of financial security – learn, earn, save, invest, protect. The innovation is burgeoning.

continue reading Interview with Bob Friedman: Our asset policies 'reward the rich, miss the middle, penalize the poor'

The federal ‘Food Distribution Program on Indian Reservations‘ (FDPIR) program provides food assistance to low-income Native American households living in Indian Country.  Many households participate in FDPIR as an alternative to SNAP (Supplemental Nutrition Assistance Program), formerly the food stamp program, because they do not have easy access to SNAP offices or grocery stores.  The agency that administers the tribal food program, the U.S. Department of Agriculture (USDA), recently proposed new regulations that would eliminate the program’s ‘asset test’, currently set at $2,000-$3,250.

continue reading A Rock and a Hard Place: 'Asset-tests' and Oklahoma's poor

What’s up this week at Oklahoma Policy Institute? The Weekly Wonk is dedicated to this week’s events, publications, and blog posts.

This week OK Policy and the Corporation for Enterprise Development (CFED) co-released the 2012 Assets and Opportunity Scorecard, which showed that more than one in four Oklahoma households are “asset poor,” meaning they have little or no financial cushion to rely on in an emergency.  The Tulsa World and the Oklahoman covered Oklahoma’s Scorecard results in depth.

We pointed out that if legislators make the choice to prioritize tax cuts, they cannot pretend to be blameless when funds aren’t available for crucial services.  We hosted a debate about whether or not to require a prescription for pseudoephedrine, featuring Jessica Hawkins, the Director of Prevention Services for the Oklahoma Department of Mental Health and Substance Abuse Services, and former state Senator Ed Long.

Finally this week, the Associated Press quoted us in an article on a regional trend of GOP action to axe state income taxes. The Tulsa World presented a summary of our issue brief defending the income tax. The Journal Record cited our work on worsening poverty in Oklahoma and legislative proposals that would make it even harder to be poor. The OK Policy Blog featured a short video about ‘community schools,’ a comprehensive approach to education that makes the school the hub of the community.

Numbers of the Day

• $136 – Average tax increase on elderly Oklahoma couples with $35,000 in income under a legislative proposal to eliminate a slate of broad-based tax credits and exemptions.
• 8,100 – Number of manufacturing jobs added in Oklahoma from January to December of 2011, up 8.4 percent for the year.
• 178, 020 – Number of Oklahoma children under age 6 who need daily child care during the week because their primary caregiver/s participate in the labor force, 2009
• 6,592 – Number of Oklahomans who tested for their GED in 2009; 70.1 percent received their GED, just above the average national pass rate of 69.4 percent.
• 11^th – Oklahoma’s rank among the states in percentage of households with no computer in their home, 2010

In The Know, Policy Notes

• The Foundation for Child Development finds that states with higher taxes and greater investment in public programs score highest for Child Well-Being.
• The Economic Policy Institute points out that the massive tax cuts propose by GOP presidential candidates don’t square with professed concerns about public debt.
• Demos shows that the pay premium gained by joining the federal workforce is reserved largely for less-skilled workers, and rather than disparaging public sector pay levels, we should embrace them as standards from which the private sector has shamefully deviated over the last three decades.
• The Shriver Center examines the trend of states issuing public benefits through bankcards and the implications of card fees for low-income people.
• Bloomberg Businessweek reports on falling premiums for Medicare Advantage, a private health insurance option for Medicare beneficiaries.

In Oklahoma, more than one in four households are “asset poor,” meaning they have little or no financial cushion to rely on if unemployment or another emergency leads to a loss of income, according to a report released today by the Corporation for Enterprise Development (CFED).  Asset poverty is distinct from and broader than income poverty, which measures the amount of money a household receives during the year.  According to the U.S. Census, about one in six Oklahomans were income poor in 2010.  Andrea Levere, president of CFED, highlights asset poverty as a significant barrier to long-term financial stability:

Growing numbers of Americans have almost no savings or other assets to fall back on if they lose their jobs or face a medical crisis.  Without those savings, few will be able to invest in a more economically secure future, including buying a home, saving for their children’s college educations or building a retirement nest egg.

The 2012 Assets & Opportunity Scorecard offers a comprehensive look at Oklahomans’ ability to build wealth, fend off poverty, and create a more prosperous future. The Scorecard compares states along 52 different measures of how residents fare in five issue areas: Financial Assets & Income, Businesses & Jobs, Housing & Homeownership, Health Care and Education.

continue reading Up a Creek: Scorecard shows over a quarter of Oklahomans unprepared to weather financial crisis

Assets mean economic security.  Yet impoverished families frequently lack the means to build assets.  Some are even sanctioned by public assistance programs from accumulating the wealth they need to escape poverty.  Oklahoma earned a “C” grade from the Corporation for Enterprise Development in a national report ranking states on opportunities for wealth creation and protection, particularly for low-income residents.  That same report says 23 percent of Oklahoma households are asset poor, lacking sufficient net worth to subsist at the poverty level for three months if their income was disrupted.

continue reading Upcoming Event: Benchmarking Asset Development in Fighting Poverty, January 12th

Access to credit has become a necessity for modern American living, touching virtually every aspect of our lives. You need credit to buy a house or a car, pay for medical expenses, even rent an apartment.  Obstacles to affordable credit can create obstacles to work.  Without a car and a place to live, a job is difficult to maintain.  Simply put, credit enables individuals and families to create the basic building blocks of a healthy and prosperous life.

Unfortunately, a number of factors, including insufficient income, existing debt, and a tainted or non-existent credit history affect low- to moderate-income borrowers’ ability to access affordable credit through mainstream financial institutions.  Credit access is also exacerbated by a paucity of mainstream financial outlets in low-income neighbourhoods.  When households with limited access to affordable credit face emergency situations that threaten their ability to work—like illness or car repairs—they often have no choice but to take any credit that they are offered, often at prohibitive rates of interest.

continue reading Quick Cash and Debt Traps: Predatory payday lending in Oklahoma

This post is adapted from an upcoming issue brief on savings from Oklahoma Assets, a statewide coalition committed to promoting financial security. Click here for other OK Policy blog posts on assets and financial security.

Most Americans recognize the value of savings, yet over time, American savings have declined sharply. Even before the losses incurred during the Great Recession, a large segment of the population in Oklahoma and across the nation had little or no savings with which to weather a setback or move ahead by investing in the future.  According to the 2009-10 Assets and Opportunity Scorecard, nearly one out of every four Oklahoma households (22.7 percent) lacked sufficient financial assets to subsist at the poverty level for three months. Minority households are also disproportionately prone to possess little savings – the asset poverty rate for minority households in Oklahoma exceeds 40 percent and is 2.75 times greater than for White households.

continue reading Promoting financial security: Matched savings account programs

It is widely accepted that ownership of assets – a home, savings accounts, stocks and investments, a business – is a cornerstone of family financial security. Assets provide a cushion against temporary setbacks and allow for an investment in greater opportunities and economic success in the future. Government policies have long promoted asset building through a combination of direct expenditure programs and, especially, through preferential tax treatment in the federal tax code of home mortgages, savings account contributions, capital gains income, and other items.  States, too, promote asset building, in large part by “piggybacking” on federal itemized deductions for such items as the home mortgage deduction and property taxes on state income taxes.

A new report from CFED and the Annie E. Cassey Foundation (AECF) calculates annual federal expenditures on asset-building policies to be $384 billion. Of this total budget, ninety per cent of benefits, or $348 billion, is delivered through the tax code, while just 10 percent, or $37 billion, takes the form of direct government expenditures. Most of the latter is in the area of scholarships and grants for post-secondary education. Conversely, the vast majority of the total federal budget in the areas of homeownership, savings and investment, retirement accounts and business developments takes the form of tax credits, deductions, and lower tax rates.

Here’s the thing. These policies to promote savings, investment and ownership primarily subsidize the wealthy, and offer few, if any benefits to low- and moderate-income households. Take, for example, homeownership. According to the report:

continue reading Upside Down: New report shows most asset building spending helping the wealthy