Battling Poverty in the Mountain State : Finding State Policy Solutions

Battling Poverty in the Mountain State: Finding State Policy Solutions Presentation to the WVASF Assets Coalition October 29, 2010 Ted Boettner tboettner@wvpolicy.org

WV Poverty Well Above National Average Source. U.S. Census Bureau, American Community Survey

Percentage of Workers Earning Below Poverty Wage Source. EPI analysis of Current Population Survey

Change in Real Wages for West Virginia Workers by deciles 1979-2009 Source. WV Center on Budget and Policy

The Wage Deficit More than State and Local Taxes Source. WV Center on Budget and Policy

Composition of Total U.S. Debt Balance, 1999-2010 Source. New York Federal Reserve, Quarterly Report on Household and Consumer Debt

WV Income Growth Not Broadly Shared Source. WV Center on Budget and Policy

WV Employment at 17 Year Low, September 1976-2010 Source. Workforce WV

Projected Unemployment Rate for West Virginia Source. WV Executive Budget 2011

High Priority Policy Solutions • Enact a refundable state Earned Income Tax Credit (SEITC). (Already covered) • Modernize state Unemployment Insurance system to include more workers. • Expand opportunities to build assets with Voluntary Employee Retirement Accounts.

Unemployment Insurance Modernization • In 2009, UI pulled 11,000 West Virginians out of poverty • American Recovery and Reinvestment Act (ARRA) includes $33 million for West Virginia to modernize its Unemployment Insurance (UI) program. • West Virginia has drawn down one-third ($11M), but needs to make two additional changes by August 2011 or it forfeits remaining $22 million. • Four options, but we are looking at cheapest two: • Part-Time Workers • Compelling Family Reasons.

Eligibility for Part-Time Workers • 28 states allow part-time workers to qualify for Unemployment Insurance. • One in every six (128,000) West Virginia workers work part-time. Two-thirds (85,000) are women. • Policy Change will directly benefit an estimated 1,850 workers.

Compelling Family Reasons • This recognizes that the workplace has changed since 1935. Many states have approved benefits for family-related quits (see numbers in parentheses below). • It would allow people to get UI if they quit their jobs due to domestic violence (31 states & DC); • They were caring for a sick or disabled member of their immediate family (24 states); or • They were following their spouse to a job located where it is impractical to commute (22 states). • All three are required to qualify for federal funds. Nineteen states have enacted all three of these reforms.

Source. NELP

Unemployment Insurance Trust Fund Needs Money $9M Hole! Source. Workforce WV

Unemployment Insurance Trust Fund Needs Money • The UI Trust Fund is schedule to be $9 million in the red by March 2011. • $22 million would prevent the state from increasing taxes or borrowing from the federal government. • Funds will last 4-7 years and can be received within 30 days. • Reforms do not have to be enacted until 2012.

Building Assets with Retirement Security: Voluntary Employment Retirement Accounts (VERA) • Over half of West Virginia’s workforce (300,000) lacks a job-based pension. • Lack of retirement assets is one of the leading causes of poverty among the elderly. • Social Security provides a necessary stable base of income, but workers also need pensions and savings • for true security and comfort in old age. • Pensions coverage and availability of a retirement account is often based not on need, but where you work. • VERA would provide every worker in the state with access to retirement account.

Pension Coverage and Availability of Job-based Retirement Plans Source. WV Center on Budget and Policy

Low and Moderate-Income Workers Lack Assets in Retirement Median Retirement Assets Among Households, Age 55-59 Source. WV Center on Budget and Policy

How would VERA work? • Similar to the SMART 529 plan, the State Treasurer’s Office could oversee the program and contract with a private financial institution to administer it. • The plans could offer payroll deduction IRAs and SIMPLE IRAs and employees could choose their investments from a smaller menu of options. • The program would benefit from economies of scale by pooling investments, thus reducing fees and increasing retirement income. • $3 million start-up cost, but there would be no net-cost to the state, as participation would cover the costs over time.

Estimated Impact of VERA for moderate income worker ($25k) who retires at Age 67 Source. WV Center on Budget and Policy

Other Policy Solutions • Remove Assets Limits from TANF and maximize these funds. • Refrain for unnecessary budget cuts. • Index and expand the state minimum wage to cover more workers. • Enact a work-sharing program • Create a job subsidy program to boost labor demand • Create long-term investment in infrastructure.

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Battling Poverty in the Mountain State : Finding State Policy Solutions