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MN2020 - Asset Limits Keep the Poor, Poor
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Asset Limits Keep the Poor, Poor

April 07, 2009 By Mikael Carlson, Guest Column
The State of Minnesota offers a critical social service safety net (some of which are federal programs run through the state) to assist people and families in times of need. Unfortunately, one basic requirement of many of these programs--the asset limit--makes it very difficult for those looking for or receiving temporary services from the state to move off assistance and stay out of poverty. However, increasing the asset limits of our social service programs could ultimately remove some unintended barriers that keep impoverished families poor.

I have spent the last six years working to find systemic solutions to poverty. In that time, I have come across a wide array of solutions that lift individuals and families out of poverty. Perhaps the most effective of these are the programs that facilitate the accrual of assets. The theory is that to build an individual's or family's assets, provides a path to build wealth and eventually get out of poverty for the long term. A great example of an asset accrual program is the Individual Development Account. An IDA is a savings account wherein any savings a participant puts away is matched at a 2 to 1 rate or greater by an employer, local social service agency, or government institution. An IDA can jumpstart an individual's or family's accrual of assets, which in turn allows them to create wealth, an obvious and proven way to climb out of poverty.

In order to receive a service from the State of Minnesota, an individual or family must meet the income limit and asset limit for the specific program that they are applying for. It is understandable that there be an income limit; this makes sure those most in need are able to receive the services they require. However, the asset limit requirement is where it stops making sense where the long term is concerned. Asset limits vary based on the program and the status of the individual or family applying. The one thing that they all have in common is that they force the customer to either spend down their savings (including retirement savings and other investments) if they have any, or to go on without being able to acquire these assets.

For example, in the case of Temporary Assistance for Needy Families, a federal program with additional state level exemptions and regulations, an individual in Minnesota must have assets no greater than $3000 in order to receive "temporary" cash assistance. Imagine having to spend down your retirement savings to reach the $3000 level in order to receive short-term assistance. It goes against all that we are taught about reaching financial security, and financial security is what prevents people from turning to the state for help in the first place. Our lawmakers have not considered the long-term effects our policies have on the overall financial well-being of their constituents. Minnesota's current requirements, in programs such as Minnesota Food Assistance Program, MinnesotaCare, Medical Assistance, and Supplemental Security Income, set up a cycle in which an individual or family must become or remain asset-poor in order to receive a service.

The current asset limit requirement is also short-sighted where state financing is concerned. If families were allowed to build or maintain assets, even as they were receiving aid from the state, they could eventually obtain the stability that assets and wealth can provide, reducing the likelihood of their need for future services. This would ultimately save the state money as it would potentially reduce the number of social services that would need to be provided. At a time when state budgets are in the red, this policy change makes fiscal sense, without even considering the overall benefit to Minnesota families.

Minnesota must take a hard look at its asset limit policies. There needs to be a concerted effort on the part of our state policymakers to ensure our safety net is more flexible and efficient. An adjustment of the asset limit requirement would save the state money in the long run, and at the same time, not become another factor in the cause of long-term poverty.

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