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SPONSOR: |
Lundstrom |
DATE TYPED: |
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HB |
35/aHJC/aHAFC |
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SHORT TITLE: |
Individual Development Account Act |
SB |
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ANALYST: |
Gilbert |
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APPROPRIATION
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Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
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FY03 |
FY04 |
FY03 |
FY04 |
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See
Narrative |
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(Parenthesis
( ) Indicate Expenditure Decreases)
LFC Files
Human
Services Department (HSD)
Department
of Finance and Administration (DFA)
Children,
Youth and Families Department (CYFD)
SUMMARY
Synopsis
of the HAFC Amendment
The House Appropriations and Finance Committee
amendment to House Bill 35 strikes the $250.0 appropriation from the original
bill. The Local Government Division of
DFA would have to absorb the costs of administration within their existing
budget.
Synopsis
of the HJC Amendment
The House Judiciary Committee amendment to HB 35
makes a technical correction to page 7, line 16 by replacing “account owner”
with program administrator.
Under Section 12(C), page 13, line 22, the
language “and the food stamp program” is struck from the bill, thus reflecting
that money withdrawn from individual development accounts for a purposes other
than an allowable use shall not be counted as a resource for purposes of the
food stamp program.
Synopsis
of Original Bill
House
Bill 35 establishes individual development accounts for eligible participants.
The Individual Development Account Act will allow the local government division
of the Department of Finance and Administration (DFA) to administer individual
development programs. The Act requires DFA to annually solicit requests for
proposals from nonprofit organizations and tribes interested in establishing
individual development account programs.
The Act will require participants to establish regular and reserve
accounts sufficient to meet the matching fund commitments made to account
owners by DFA.
Significant
Issues
The intent of this bill is to provide economic
stimulus and poverty reduction by helping working families to build personal
assets for starting or expanding businesses, to fund higher education expenses,
for purchasing homes and/or for making home improvements. The Local Government Division of DFA is
charged with administering this program.
An account
owner who withdraws funds from his individual development account for a use
that is not allowable under the Act, forfeits a proportionate amount of
matching funds from the reserve account, unless the entire amount of withdrawn
money is repaid to the account within twelve months after it was withdrawn.
HB35 creates
an advisory committee to provide oversight and administration of the individual
development account program. The
committee would consist of the Lieutenant Governor and eight members appointed
by the Governor.
FISCAL IMPLICATIONS
House Bill 35 appropriates $250.0 from the
general fund to DFA for expenditure in fiscal year 2004 and represents a
recurring expense to the general fund.
No more than five percent of the appropriation may be used for
administration. Any unexpended or
unencumbered balance at end of fiscal year 2004 shall revert to the general
fund.
HSD states that it is difficult to predict how
many of their current clientele would take advantage of this opportunity and
what effect it would have on the overall administration of TANF and Food Stamp
Programs.
This Act and consequent amendment to the New
Mexico Works Act (NMWA) will require HSD to promulgate regulations to implement
statutory changes. The changes would
become effective
Training would have to be initiated and
presented by regional trainers of the HSD Income Support Division to field
staff who determine eligibility for participation in TANF/NMW cash assistance
and Food Stamp Programs.
The DFA Local Government Division is charged
with administering this program and may utilize up to $12.5 of the
appropriation in this bill for such purpose.
According to the Children, Youth, and Families
Department (CYFD), the Act will require the department to establish additional
accounting mechanisms to account for the fiduciary relationship between children
in foster care who are 16 years or older and have earned income as defined in
the Act including disability income.
This would require accounting for the deposits and withdrawals of each
individual participant and would require an annual reporting to account owners
and DFA. This would also require a
mechanism to determine and apply matching funds as provided in the Act. Additional accounting requirements would take
away time from current staff and thus other accounting processes may be
affected.
Children in foster care over the age of 16
currently receiving disability payments from the Social Security Administration
(SSA) may be eligible for this program since the definition of earned income in
the Act includes disability payments.
Some children receive Supplemental Security Income. CYFD currently administers these
accounts. CYFD as representative payee
for these children adheres to SSA requirements for use of these payments. Payments are used to meet immediate and
reasonably foreseeable day-to-day needs for food and housing and personal needs
such as clothing, recreation and miscellaneous expenses. Balances in these accounts cannot exceed
$2.0, or eligibility is affected.
Conflict in managing these accounts may occur under this Act.
The Human Services
Department Office of the General Counsel lists the following concerns relating
to HB35:
The
definition of "matching funds" does not include the actual match
rate, but allows the director to adopt a formula (page 3, lines 6-10).
HB35
requires the establishment of a reserve account where matching funds will be
held to match the withdrawals by an individual for an allowable use. The
director is required to report at least quarterly to account owners the amount
of money in the reserve account for use by "the account owner" to
match withdrawals for allowable uses" (page 7, lines 11-17). See the section on Amendments in this
analysis.
A
definition of "household" is not included in HB35. The provisions in HB35 limit the establishment
of an individual development account for "a member of a household with
earned income that is no more than two hundred percent of the federal poverty
guidelines for the size of the household" (page 5, lines 5-7). The only income attributed to the income
limit for the "household size" would be the earned income of the
household member who will be the IDA owner.
The establishment of household size is left to the director and may be
changed at the discretion of the director.
HB35
requires that individual development account funds, any interest earned and
matching funds deposited in a reserve account be disregarded when eligibility
or benefit amount for the Temporary Needy Assistance for Families/New Mexico
Works (TANF/NMW) cash assistance program (page 13, lines 5-10), the Food Stamp
Program and Medicaid (page 13, lines 11-18).
In
addition, HB35 allows the money withdrawn from an individual development
account for a purpose other than an allowable use to be counted as a resource
for NMW, Food Stamps and Medicaid if the money is not re-deposited into the
individual development account within "the twelve-month allowable
period" (page 13, lines 19-23).
There is no formal definition of "the twelve-month allowable
period"; the only other reference to a "twelve month allowable period"
is described on page 9, lines 18-25 and relates only to the forfeiture of
matching funds from the reserve account.
On
The
option in the Farm Bill for resource exclusions does not allow exclusion of the
following: cash money on hand, amounts in a financial institution that are
readily available to the household (such as a checking or savings account), or
any assets that USDA finds are essential to the equitable treatment of
eligibility (which are forthcoming in the next few years).
HSD
cannot comply with the provisions found on page 13, lines 19-23, namely that
HSD must defer counting the money withdrawn from an IDA for an unallowable use
for 12 months, because the federal regulations for the Food Stamp Program
directly conflict with the mandates of this provision. Federal FSP regulations and the provisions in
the Farm Bill option described in the paragraph above do not allow the
Department to defer consideration of a withdrawal from an individual
development account as a resource for any length of time. The FSP requires that such a withdrawal is
considered a resource, subject to the appropriate resource limit, in the month
received or available, i.e., the money becomes a readily available resource.
The FS household must show that it spent down the money under the applicable
resource limit by the end of the month in which the money became
available. HSD will have to ask for a
waiver of FSP regulations if this provision remains as written in HB35. HSD has not been successful in the past in getting
approval from FNS to waive regulations based on federal statute.
There
are other concerns about administration of this provision. If HSD must defer consideration for twelve
months in order to allow the account owner to repay the individual development
account, and the owner does not do so, is the original amount that was
withdrawn compared to the resource limit for the program in the thirteenth
month? The provision as written implies
this could be the case. Or, if the
account owner repaid part of the original withdrawal, is the balance owed to
the individual development account counted as a resource and subject to the
limit for each program?
According to CYFD, the Act does not address what
is to occur when an eligible individual no longer meets the criteria for
opening an account. For example, it is
unclear what is to occur when the individual no longer meets the income
requirements or is no longer in foster care.
HSD
recommends the following amendments to HB35:
An amendment is
suggested to add a definition of "household" at Section 2,
DEFINITIONS.
An amendment is suggested to revise the language on page 7, line 16 from "account owner" to "program administrator".
An amendment to NMSA 1978, Section 27-2B-7,
financial standard of need, in the NMWA should be made to indicate that
interest earned on the account is exempt from the gross income test, the net
income test and the cash payment calculation.
RLG/prr:njw