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Will decreasing our national poverty rate actually improve lives?

Author: Molly M. Scott

| Posted: July 31st, 2014

Thanks to the release of Paul Ryan’s poverty plan, poverty’s back on the agenda again. Overall, that’s great news, but it’s important to think about what the long-term goal of this or any other anti-poverty plan might be.

What does “living in poverty” actually mean? All of our national poverty statistics reflect economic poverty. As such, they measure households’ total income, including earned income and transfer payments (such as SSI, disability, unemployment insurance, etc.) and benchmark these numbers against fixed income thresholds by household size.

When politicians talk about reducing poverty, they’re often talking about how get people to work more in order to minimize transfer payments and expenditures on safety net programs (i.e. SNAP, Housing Choice Voucher, etc.) that help the poor make ends meet. While this strategy may indeed reduce public spending on poor households, it may do little to make a difference in their lives.

The problem is that the arbitrary poverty line is a bad indicator of material poverty, the amount of hardship people experience meeting their basic needs. Families both above and below the poverty line have serious difficulty making it through each month and often have to make trade-offs among essentials like food, housing, health, and transportation.  Often, the only differences between “poor” and “non-poor” families lie in the mix of resources they use and the costs associated with work.

Take one hypothetical example: Let’s say Family A and Family B-- both with a single mother and two elementary school-age children-- live next to each other in identical apartments in Washington, DC.  Both mothers have less than a high school education and earn only the minimum wage of $9.50 an hour.

These two seemingly identical families cobble together roughly the same amount of resources to get them through the month. Family A pieces things together with 20 hours of employment, SNAP benefits, and a Housing Choice Voucher that covers most of the rent. Family B pays the bills by working 60 hours a week and receiving a more modest SNAP benefit.

In terms of economic poverty, Family B is much better off, registering an annual income nearly $20,000 greater than Family A, and about $10,000 above the federal poverty line of $19,790. Family A, in contrast, lives at less than 50 percent below the federal poverty line. However, at the end of the month, Family B is struggling just as much, if not more, than Family A. How can that be?


The biggest differences lie in monthly expenses. While the cost of rent and food is exactly the same, the mother in Family B can’t work just during school hours and has to pay for child care for her two children. In addition, she has to pay a lot more for transportation just to get to and from work every day. In all practicality, that means the mom in Family B would be immediately facing some hard decisions. She’d have to consider moving to smaller or lower quality housing, leaving her children home alone some of the time while she works, and/or frequenting her local food pantry.

True, Family B is not economically “poor” and costs the federal government less money. But is that what we should be aiming for?

If we really want to address poverty, we need to make sure our policies and programs do more than swap out subsidies for low-income wages that won’t change people’s quality of life. Struggling families-- both “poor” and “non-poor”--  need real ladders of opportunity and supports along the way.

Filed under: Adolescents and Youth, Child care, Child support, Child welfare, Children, Economic Growth and Productivity, Economic well-being, Economic well-being, Economic well-being, Employment and income data, Families, Family and household data, Finance, Income and Wealth, Job Market and Labor Force, Labor force, Low-income working families, Low-wage workers, Mobility, Parenting, Poverty, Poverty, Vulnerability, and the Safety Net, Single-family finance, Social Security, Supplemental Nutrition Assistance Program (SNAP), Supplemental Nutrition–Women, Infants, and Children (WIC), Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), Unemployment insurance, Wages and nonwage compensation, Wages and nonwage compensation, Welfare and safety net programs, Work-family balance |Tags: , , , , , ,
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To protect domestic abuse victims from gun violence, we need better data

Author: Sam Bieler and Darakshan Raja

| Posted: July 30th, 2014



0729blogGun (1)

Today, members of the Senate Judiciary Committee will meet to discuss how the Violence Against Women Act (VAWA) can protect victims of domestic abuse from gun violence. Developing and funding research on effective interventions and policies is essential to moving this conversation beyond rhetoric and into effective action.

What we know about domestic violence and homicide in the United States

Women are much more likely than men to be the victims of domestic violence homicide. Forty percent of female homicide victims were killed by a current or former intimate partner in 2005, compared with just 2 percent of male homicide victims. Nationally, domestic homicides take the lives of approximately three women each day.

The presence of firearms elevates the risk. Firearms are used in two-thirds of all domestic homicides, and female victims of domestic violence are five times more likely to be killed by their abuser if that abuser has access to a gun.

What makes domestic homicides even more tragic is that they are often preventable. One study in North Carolina found that at least 67 percent of domestic homicides were preceded by domestic violence, and in 2011, 61 percent of serious domestic violence incidents were reported to the police.

What can we do to stop the violence?

Clearly, police are encountering a number of incidents that may later escalate into homicide. Equipping law enforcement with tools like the Danger Assessment, which has a strong track record of identifying potential domestic homicide victims, offers an opportunity to intervene before abuse becomes homicide. How we intervene, however, is a more challenging question.

We have limited evidence on what laws and policies prevent domestic gun violence. States have experimented with a wide array of policies and programs to prevent domestic homicides, but we still don’t know what works. That’s where research needs to come in.

Eighteen states have laws authorizing police to remove firearms from a home if they respond to a domestic violence incident. Twenty states have laws authorizing courts to remove firearms from a home as part of a restraining order. But these laws vary significantly across states in the authority they give courts and law enforcement to restrict abusers’ access to weapons. A closer look at what policies and practices are most effective could provide insights that we could apply nationwide, but no one is doing that research.

Why research matters

Sometimes, what feels like an obvious solution just doesn’t work in practice. Domestic abuse in particular is an area in which both conventional wisdom and status quo have proven glaringly inadequate. For instance, most domestic batterer programs have been found to have no effect on offenders’ behavior, and mandatory arrest policies for abusers, once thought to be a sound strategy for protecting victims, have been found to actually increase the risk of domestic homicide.

Initial work has found that while laws restricting firearms from individuals under court order reduce homicide, laws that require the confiscation of firearms by police responding to a domestic abuse incident have no effect. But what we don’t know is how these laws are executed—whether or how often police actually enforce these laws. Without this basic data, we can’t tell if the laws are ineffective or whether they are just being implemented poorly, a crucial insight for devising new strategies to protect victims.

If research finds that these policies, when well implemented, can prevent domestic gun homicides, more states should adopt these strategies and VAWA should be modified to encourage them to do so. Strengthening enforcement of protection orders for domestic violence cases and empowering victims to hold law enforcement accountable if agencies don’t adequately respond could be another avenue if research shows such tactics are effective.

Today’s hearing on the VAWA and the role of guns in domestic homicides presents a perfect opportunity for policymakers to support more efforts to document what works to protect victims from gun violence and to translate that knowledge into action.

Photo: Domestic violence advocate Kimberly Brusk, left, speaks with Beth Stubbings during a gun control rally as part of the "No More Names: National Drive to Reduce Gun Violence," a 25-state national bus tour, at the Georgia State Capitol, Monday, June 24, 2013, in Atlanta. Families of gun violence victims, gun owners, elected officials, faith leaders and advocates voiced their support for comprehensive background checks. (AP Photo/Jaime Henry-White)

Filed under: Crime and Justice, Crime and justice statistics, Families, Family structure, Family violence, Justice Policy Center, Policing and crime prevention, Policy Centers, Victims of crime |Tags: , , , , , ,
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Detroit's retirees aren't the only ones taking a haircut

Author: Richard Johnson

| Posted: July 28th, 2014



Detroit’s municipal employees and retirees made headlines last week when they accepted a pension cut to help reduce the city’s debt. Is this agreement a game-changer, as some contend? Now that some retirees have agreed to forgo already earned pension benefits—once considered sacrosanct—will unions across the country follow suit? Don’t count on it.

Many state and local employees and retirees have already shouldered significant pension cuts, and it’s unrealistic to expect them to absorb any more. Rather than relying on givebacks from public servants, policymakers must commit themselves to paying the benefits they promised.

Like most public-sector employees, city workers in Detroit who spent their entire careers on the city’s payroll receive generous pensions. Benefits equal a fraction of employees’ final average salaries multiplied by years of service. Before the city’s finances collapsed, that fraction rose over employees’ careers, reaching 2.2 percent of salary after 25 years on the job. Employees with 30 years of service could retire as early as age 55. Once retired, their benefits automatically rose 2.25 percent a year.

Over a lifetime, these benefits add up. Consider a Detroit municipal employee making $50,000 a year. Under the old rules, after 30 years on the job, he could retire at the age of 55 with an initial pension of $27,500, worth more than half a million dollars over his lifetime (assuming a 2 percent real interest rate and 3 percent inflation).

As the city prepares to enter bankruptcy, however, that pension has been slashed. First, the city cut the benefit-formula multiplier for years worked after 2011 to just 1.5 percent. That change trimmed lifetime benefits for newly hired city workers by about a fifth. Last week’s agreement further reduces annual benefits by 4.5 percent and eliminates the automatic benefit escalator in retirement, reducing lifetime benefits for new retirees by another quarter. New hires who eventually retire at age 55 after 30 years of service will receive pensions worth 40 percent less, in inflation-adjusted dollars, than their counterparts who retired in 2011.

New Jersey employees have already taken on the burden of benefit cuts

These cuts may help get Detroit back on its feet, but don’t expect similar retiree givebacks elsewhere to solve the nation’s public pension problem. Many state and local retirement plans have already substantially cut benefits. Most of the benefit formula changes apply only to new hires, but current workers and retirees have not been spared.

As the Center for Retirement Research points out, between 2010 and 2013, 12 states reduced or eliminated cost-of-living adjustments for current retirees as well as current employees and new hires. (Another five states reduced COLAs but shielded current retirees). Many jurisdictions have also raised the amount employees must contribute to their plans.

New Jersey, with some of the worst-funded plans in the nation, is a good example. In 2011, lawmakers eliminated COLAs for state retirees, whose benefits had increased each year by 60 percent of the change in the consumer price index. That cut shaved 25 percent off the lifetime pension of a newly retired state employee with 35 years of service. The state also increased mandatory employee contributions from 5.5 to 7.5 percent of pay, reducing what retirees get from the state by another eighth. Additionally, the 2011 reforms boosted the retirement age and reduced the plan multiplier.

All told, New Jersey state retirees will receive pensions only two-fifths as large as what they would have been paid under the rules in effect before 2008. Yet, New Jersey’s pension plan is in worse financial shape today than it was in 2007. Because of these benefit cuts, state employees hired at age 25 must now work 28 years before their future payments are worth more than the value of their required plan contributions. Those who leave state employment earlier end up financing their entire pensions themselves, without any state contributions. In fact, they would be better off if they could opt out of the state retirement plan and invest their required contributions elsewhere.

States should fully fund their retirement promises

Most troubled public pensions are financially distressed because states and localities have not contributed as much as their actuaries say they must in order to pay the future benefits they’ve promised, not because their benefits are too generous. Our recent comprehensive analysis of state plans graded many plans poorly because they failed to provide employees with adequate retirement security, especially those who spent less than a full career in public service. If policymakers want to fix the public pension mess, they must dedicate themselves to fully funding the retirement promises they’ve already made.

Shirley Lightsey, president, Detroit Retired City Employees Association, stands front of part of Diego Rivera's Detroit Industry mural after a news conference at the Detroit Institute of Arts in Detroit, Monday, June 9, 2014. (AP Photo/Paul Sancya)

Filed under: Aging, Detroit, Economic well-being, Geographies, Income and Benefits Policy Center, Income and Wealth, Labor force, Metro, NJ, Retirement, Retirement/pensions, Social Security |Tags: , , , , ,
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Dodd-Frank: Can we really calculate the cost?

Author: Ellen Seidman

| Posted: July 25th, 2014



Barney Frank

American Banker recently called for a data-driven analysis of the economic impacts of the Dodd-Frank Act and related regulations. We welcome the call for an empirical assessment of regulatory impact. At the same time, we caution against the belief that a single number or set of numbers can quantify the impact of a complicated law on a complex system.

Since the Housing Finance Policy Center’s inception last October, we’ve made it our primary focus to dive deeply into the data to better understand the interplay of market forces, regulations, laws and other factors. To note a few recent examples:

This work has reminded us that assessing impact is extremely difficult, turning on a mix of factors that is often hard, indeed occasionally impossible, to disentangle.

Take all those missing loans, for example. Our work indicates that they are the result of a mix of factors that are difficult to isolate, including the overcorrection of institutions understandably nervous about risk coming out of the crisis and a similar overcorrection by agencies trying to recover the losses they suffered from bad underwriting and to protect against similar practices going forward. How much of it is one, how much the other, how much something else entirely? It’s literally impossible to say.

Interestingly, though, the two factors most commonly blamed, Dodd-Frank and Basel III, cannot be responsible for the 2012 results, which predate implementation of both.

And what about QM, where the impact of Dodd-Frank should be clear? So far, we have not found any impact at all. Part of this may be limited access to data (at least until the 2014 Home Mortgage Disclosure Act data comes out in late 2015) about loans made by smaller lenders and held in portfolio. And of course, it’s always hard to prove why something isn’t happening.

But we suspect that the real reason we can’t see QM impact may be that the current credit box is already extremely tight. So tight that the QM rules are not making it any tighter.  A major challenge in figuring out the ultimate impact of QM will be to make some judgment about what the credit box “should” have looked like in January 2014, before the rules took effect.  We’ll try, but we’re sure our answer will only be one of many.

The positive impact of some regulations shouldn’t be overlooked either. Last week, we published our analysis of FHA and VA lending, demonstrating that additional regulation applicable to VA loans—the residual income test— was the most likely cause of VA lending consistently performing better than FHA lending, notwithstanding VA loans’ higher LTVs and lower credit scores.

So how does one measure the positive impact of rules like those in Dodd-Frank against whatever costs are found, particularly where the positive impacts are likely years out and potentially even more difficult to quantify than the costs? Indeed, how do you assess the positive impact that Dodd-Frank rules will have on increased financial stability and consumer safety in a system whose collapse recently cost the world’s economy trillions of dollars?

While we applaud the call for more and better analysis, we recommend humility in the face of complexity and perhaps a healthy dose of skepticism, especially about results in the form “the regulations cost consumers—or businesses—‘X’ dollars a year.” As the problems these rules are intended to address don’t lend themselves to simple solutions, the rules’ impact on our complex economy is not likely to be easy to discern.

Sign up here to receive the Housing Finance Policy Center’s monthly newsletter, Housing Finance At a Glance, which contains the monthly chartbook, as well our blog posts, commentaries, events, and other news.

Photo: Chris Dodd and Barney Frank during the Dodd-Frank during the Dodd-Frank Wall Street Reform and Consumer Protection signing ceremony. (AP Photo/Charles Dharapak, File)

Filed under: Federal programs and policies, GSE reform, Housing and Housing Finance, Housing and the economy, Housing Finance Policy Center |Tags: , , , , ,
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Settling debts with other people's money: Use of investor funds in lender settlements

Author: Laurie Goodman and Ellen Seidman and Jim Parrott

| Posted: July 24th, 2014




As part of their $25 billion settlement in 2012 of lending abuse claims, five of the nation’s largest banks agreed to modify mortgages for borrowers struggling to make their original monthly payments. To the consternation of many investors, the settling banks were given credit not only for modifying loans that they held in their own portfolios, but also for modifying loans that they serviced but that were actually owned by investors.

In June 2014, the Association of Mortgage Investors (AMI) appealed to Attorney General Eric Holder to eliminate investor’s loans from future settlements.

While there is considerable merit to investors’ concerns, AMI’s solution goes too far.

How much of the settlement was paid with “other people’s money”?

That depends on the bank. Earlier this year, in our commentary about the $25 billion national mortgage settlement, we found that while none of Wells Fargo’s or Citi’s credits came from investor-owned loans, Bank of America and JP Morgan Chase used a significant number of investor-owned loans.  The settlement does not disclose, however, exactly how many loans were modified, and to what extent.

In this national settlement and more recent settlements between JP Morgan Chase and the Justice Department and Citi and the Justice Department, banks received about half the credit for modifying with investor-owned loans than the loans in their own portfolio.

Why do investors care?

In theory, investors should be pleased if their loans are modified. Each settlement agreement provides that the expected value of the modified loan should be greater than the expected value of the current, unmodified loan—or net present value (NPV) positive. But in reality, investors are deeply suspicious about the accuracy of the NPV models used in these settlements, and question whether the modified loans are actually more valuable than they would have been if left alone.

A modified loan that is worth more than the original may seem counter-intuitive, but the increase in value comes from the borrower’s increased likelihood of paying off the loan once modified—supposedly a win-win-win, with benefits to the investors, the settling servicers, and the borrowers.

Investors argue, however, that the banks should be doing NPV positive modifications as a best practice regardless and shouldn’t get settlement credit. A similar argument applies to portfolio loans, but the settlements strongly suggest that the business imperative isn’t powerful enough.

Eliminating investor loans in settlements is too far.

While we sympathize with AMI’s concerns, legitimate NPV positive modifications accrue significant benefits to all of the involved parties and help ease the debt overhang that still troubles the recovery. Rather than abandoning the opportunity to modify the large number of troubled loans that happened to fall into MBS pools, it would be more sensible to provide safeguards to ensure that the NPV calculations are legitimate and place limitations on the amount of investor funds that can be used.

Greater clarity and transparency is better.

Settlements should continue to include investor loans, but should adopt three conditions:

  1. Clarify limits. The settlement should stipulate up front the maximum percentage of consumer relief that can be granted with investor funds.  The percent should be made public prior to finalizing the settlement, so investor objections can be considered.
  2. Clarify method. Similarly, the method used to calculate the NPV and the re-default rates should be made public prior to finalizing the settlement, so that investor objections can be considered.
  3. Require disclosure. Servicers should be required to disclose to settlement monitors the individual loan NPV calculations in their reports, and settlement monitors should be required to disclose those calculations to the public, to the maximum extent possible consistent with privacy concerns. This can certainly be done by aggregating small groups of loans in a specific private label security.

While investors are right to be concerned about both how much of their assets are being written down in these settlements and the way in which they are being written down, the best solution isn’t to ban modifications of their loans.  Rather, the Justice Department, state attorneys general and other settling parties should set limits on the use of these loans and ensure that the NPV tests are transparent and public.

Photo: Attorney General Eric Holder on July 14, 2014 announces a $7 billion settlement with Citigroup related to risky subprime mortgages. (AP Photo/Pablo Martinez Monsivais)

Filed under: Federal programs and policies, GSE reform, Housing and Housing Finance, Housing and the economy, Housing finance, Housing Finance Policy Center |Tags: , , , , ,
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The Washington DC area needs more affordable rental housing

Author: Leah Hendey

| Posted: July 24th, 2014

Last Tuesday saw the release of Housing Security in the Washington Region, a study I wrote with my colleagues at the Urban Institute with assistance from the Metropolitan Washington Council of Governments.

The study is unique for its breadth, spanning Washington, DC and 11 surrounding jurisdictions in Maryland and Virginia. It’s also thematically expansive, examining the full continuum of housing needs, from emergency shelter to affordable homeownership, highlighting how supply, demand, funding streams, and policies impact homeowners, renters, and the unhoused at every income level.

In a study of this size, it’s easy to lose sight of what all these numbers mean for real people. Let’s unpack a small portion of the study.

Rental housing affordability is a big problem in the area. Nearly half of all renters (regardless of income level) in the Washington region were cost burdened in 2009-11. That means almost 315,000 households were paying more than 30 percent of their monthly income on rent and utilities. To give you a sense of the magnitude of the problem, there were about 300,000 households total in Prince George’s County, Maryland.

Of course, households at the bottom of the income scale were most likely to be cost burdened. In fact, 86 percent of extremely low income households—those earning less than $32,000 annually—were cost burdened in 2009-11. Keep in mind that many of the services that get you through your week are performed by workers who would fall into the “extremely low income” category—maids, drycleaning workers, pharmacy aides, fast food cooks, coffee shop cashiers, and nursing aides and orderlies, to name a few.

Screen Shot 2014-07-29 at 8.00.27 AM

Take, for example, a nursing aide (who may just be caring for a loved one right now). On average, an aide in the DC metro area earns $28,700. Imagine that the nursing aide has two children and needs a two-bedroom apartment. If we think that she could afford to pay 30 percent of her income in rent, then she could afford a utilities-included apartment that rents for $720. (By the way, that only leaves her with $20,000 to pay for food for a family of three; clothing, including her scrubs for work; transportation to get to work; health insurance; emergencies; etc.)

As you can see in the chart above, it’s no surprise that our nursing aide might be cost burdened—there is not one jurisdiction in the area that she could afford to live in if she paid the DC metro area’s median rent of $1,320. At that level, our nursing aide would have to work the equivalent of 1.83 jobs to afford to rent such an apartment and not be cost burdened. In Virginia’s Arlington and Fairfax Counties, she would have to work more than two full-time jobs.

Our study concludes that every jurisdiction in the Washington region needs more units to meet the needs of renters like our nursing aide—94,200 units in total. Policymakers, local agency staff, and philanthropists can use this data on gaps in the housing supply to inform their work and make strategic investments to aid those struggling with high rents.

This study was commissioned by The Community Foundation for the National Capital Region, with generous support from The Morris and Gwendolyn Cafritz Foundation.

Filed under: Affordability, Affordable housing, Economic Growth and Productivity, Geographies, Housing and Housing Finance, Housing and the economy, Income and Wealth, Job Market and Labor Force, Labor force, Low-wage workers, Metro, Metropolitan Housing and Communities Policy Center, Multifamily housing, Neighborhoods, Cities, and Metros, Wages and nonwage compensation, Wages and nonwage compensation, Washington DC, Washington, D.C |Tags: , , , , , , ,
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A flourishing performance management landscape

Author: Mary Winkler

| Posted: July 23rd, 2014




In summer 2013, John Bridgeland and Peter Orszag’s “Can Government Play Moneyball?” challenged the government and nonprofit sectors to make greater investments in understanding what works and to pursue a more rigorous approach to evidence and impact.

Today, the spirit of the “moneyball” movement is blossoming. At its core, it’s about organizations improving their performance by continuously tracking whether their programs and services are leading to desired results. Although performance measurement and management is hardly new to the public and nonprofit sectors, it is much more utilized than arguably it has ever been due to demands for greater accountability and growing expectations that organizations do more with less.

Demand for performance management techniques is high

In 2012, the Urban Institute, in partnership with Child Trends and Social Solutions, launched a new tool to help nonprofits measure and manage performance: PerformWell. This resource was designed to fill an information void, help nonprofits identify outcomes and performance indicators, and provide surveys and assessment tools to assist with tracking and reporting.

Since its launch in March 2012, the PerformWell site has had nearly 300,000 visitors and more than 12,500 have signed up for webinars, signaling a genuine need and appetite to engage in this work.

The performance management landscape

PerformWell is only one recent addition to an increasingly vibrant landscape of performance measurement and evaluation resources. In October 2012, the Bill and Melinda Gates Foundation, Hewlett Foundation, and Liquidnet launched Markets for Good, a forum for sharing innovative ideas, best practices, and diverse points of view for helping the social sector make better decisions and support a “dynamic culture of continuous learning and development.”

America Achieves, through the Results for America Initiative, developed an agenda that calls for a federal evidence and evaluation framework, an increase in the use of evidence in all federal formula and competitive programs, the creation of a federal “what works” clearinghouse, and more accessible, user-friendly, publicly available data.

In December 2013, Leap of Reason and PerformWell partnered to host After the Leap, the first-ever national conference on performance management. Themes from this conference have been repeated in many circles, including the recent Social Impact Exchange (SIE) conference which included a panel on how funders can support the capacity of nonprofits. Although this annual conference  is generally geared toward nonprofits and funders interested in scaling social impact, many participants acknowledge that performance and evaluation strategies and practice evolve along a continuum of practice – a message echoed by Nancy Roob at the ATL conference and more recently in her blog post in the Stanford Social Innovation Review series on the “Value of Strategic Planning and Evaluation”.

And not to be left out, foundations are now likely to face increasing scrutiny around investment choices, thanks to a recent entrant to the field – Philamplify – designed by the National Committee for Responsive Philanthropy. Just launched in May, the new site is described by the Washington Post as “Yelp for the philanthropy sector.” What distinguishes Philamplify from other efforts to hold foundations accountable is that reviews are conducted independently and with or without the consent of foundations. The goal is to grow the number of foundation assessments from 3 to 100 of the largest foundations in the United States.

A bright future for performance management

As my colleague Jeremy Koulish pointed out last year, “getting to measures that can be applied uniformly across the whole sector is a challenging endeavor.” Yet these resources and initiatives are indicative of growing attention and a sense of urgency around issues of measurement and evaluation for the nonprofit, government, and philanthropic sectors, neither of which are likely to diminish anytime soon.

Photo: AP Photo/J. Scott Applewhite. 

Follow Mary Winkler on Twitter @MaryKWinkler.

A version of this piece was originally published in the PerformWell newsletter (July 2014).

Filed under: Center on Nonprofits and Philanthropy, Cross-Center Initiatives, National Center for Charitable Statistics, Nonprofit data and statistics, Nonprofits and government policy, Nonprofits and Philanthropy, Performance Management and Measurement, Performance measurement and management, PerformWell, Public and private investment, Tracking the economy |Tags: , , , , ,
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Four ways to help low- and moderate-income families build wealth

Author: Caleb Quakenbush

| Posted: July 22nd, 2014

You may have read about the worrying trends concerning wealth and mobility in America. Americans were hit hard by the Great Recession, and household balance sheets have been slow to recover.

Worse, young families and families of color have been falling behind on wealth-building for some time. The good news is that there are opportunities to move the dial, if even a little, to counteract these trends.

Policies that enable families to save early, often, and automatically are key. Last fall, a group of the nation’s leading wealth experts convened here at the Urban Institute to identify possible policies to help families onto a wealth-building path. Last week, the conversation continued at an Urban Institute-sponsored briefing on Capitol Hill.

Addressing attendees, Representative Thomas Petri recalled the famous quip attributed to Einstein that compound interest is the most powerful force in the universe. Being on the wrong side of that force, Petri noted—having inadequate savings, high levels of debt, and little training or education—can crush vulnerable families. Being on the right side, however, can open up opportunities for upward mobility and self-sufficiency.

So what policies can help?

  1. Children’s savings accounts (CSAs) can be valuable tools for building savings and teaching financial capability. CSAs get families and communities involved and hopeful about their children’s financial futures. Even having small amount of savings for college by high school graduation has been shown to increase college enrollment, possibly by creating a college-bound identity for children. CSAs can do double duty if seed funds and matches on contributions are tied to achieving other outcomes, such as graduating from high school.
  2. Make savings automatic. Having a safe place to deposit money and earn a decent return is the first step toward building savings. Access is crucial. Policies that expand access to retirement accounts at work and automatically enroll workers are a good place to start, and some efforts are already underway at the state level.
  3. Paying down a mortgage and building equity in a home, month by month, can be a powerful, automatic way to build assets to draw on later in life. Unfortunately, conversations about homeownership often encourage low-income families to buy when prices are high, and discourage homeownership for the same families when prices are low. Further, current tax incentives for homeownership (and other forms of saving) are “upside down”—going mainly to high-income households that are likely to own anyway, and promoting larger and more expensive homes in the process. Replacing the mortgage interest deduction with more targeted incentives could help more low- and moderate-income families into homes.
  4. Remove barriers to building assets and help families build emergency savings. Asset limits in safety net programs such as TANF and SSI can punish families for having savings or even owning a car. Tax time is a strategic moment for encouraging saving and connecting families to financial services. Families receiving refundable tax credits could be encouraged to save a portion of their refund with an additional match into a savings account, building a foundation for vital emergency savings.

No single policy will be a panacea for alleviating the inequalities and limited upward mobility facing the United States today. But taken together, policies that reform savings incentives in the tax code, retool and expand access to existing wealth-building vehicles, and support automatic long-term saving can put more families on the pathway to building stronger balance sheets.

Filed under: Asset and debts, Earned income tax credits, Financial products and services, Housing subsidies, Income and Wealth, Job Market and Labor Force, Poverty, Poverty, Vulnerability, and the Safety Net, Race, Ethnicity, and Gender, Racial and ethnic disparities, Wages and nonwage compensation |Tags: , , , , ,
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Reflections on instability in children's lives: Why it matters and what we can do

Author: Gina Adams

| Posted: July 22nd, 2014

In the past decade, I have become fascinated by the problem of instability in children’s lives. The first time I really thought about it, I was caring for my almost-three-year-old daughter while watching the horrifying footage of moms trying to keep their children quiet in the Louisiana Superdome during Hurricane Katrina. I watched, wondering how the children would be affected, both in the short- and long-term, and how on earth the parents were going to help their families feel safe in a world that had fallen apart around them.

These questions kept resurfacing in my professional and personal life. In my job, I studied ways to stabilize parents’ access to child care assistance during major life changes. At home, I watched my own child’s reactions to destabilizing events in our family, realizing the repercussions for her and how hard it was to stay calm and be a good parent, even with the resources that I had to support us both.

The questions started to build in recent years when I broadened my research focus to think about child care stability overall, beyond only child care assistance. Given that stability in child care arrangements is often dependent on stability in other realms of families’ lives, I did a quick review of instability in different domains: parental employment, housing, income, health, schools, and so forth. It revealed that many children were facing instability in many aspects of their lives, and that often instability in one realm—say, a parent losing a job—would lead to a cascade of instability in other domains (loss of income, food insecurity, parents’ separation, residential move, change in schools, etc.). So what does all of this mean for children and what we could do about it?

As a researcher, I felt that we needed to start by looking at the problem of childhood instability in a more comprehensive way. So I reached out to other researchers at the Urban Institute with similar interests. First, my colleague Heather Sandstrom looked across different domains of families’ lives to pull together what the research said about the impact of instability on children’s development. This work made it clear that instability leads to problems for kid’s development, but that there was very little work done to look at these issues in a holistic way. We now had a clear sense that there was a problem. The next step was figuring out how to start to tackle it.

With funding from the Foundation for Child Development, we have started to take this on. A small group of Urban Institute colleagues (Lisa Dubay, Julia Isaacs, Heather Sandstrom, and Margaret Simms) and I brought together a set of thoughtful experts—researchers, policymakers, practitioners, thought leaders, and funders—from different perspectives and areas of expertise to talk about instability and child well-being for a day-long meeting in November. Our conversation focused on three questions: What do we know? What do we need to learn? And what do we need to do?

It was a fascinating day… while in some ways, the conversations we had were enormously complicated, in other ways, they were incredibly simple. On a basic human level, kids who experience a lot of instability don’t feel safe. And when they don’t feel safe, it is hard for them to learn, grow, and develop to their full potential. Parents can help, but often have a hard time helping their kids feel safe when they themselves are experiencing instability and stress.

We wrote up the main ideas from the conference in a report released today, along with a volume of short essays written by some of our participants. The report lays out a lot of interesting questions, such as: What is instability? What aspects of instability seem most problematic? Where does it show up in kid’s lives and how does it affect children’s well-being? What are the characteristics of the child or the parents, or the contextual factors that may either buffer or facilitate the impact of instability on children’s development? What do we need to learn or study to better inform policy? And what does all of this mean for policy and practice?

While in some ways these questions are daunting because there is much we don’t know, I was heartened to see how much we do know and how many good ideas are out there when we put our heads together. It is clear, for example, that parents play a critical role in buffering the impacts of instability on their children, but sometimes need help to stabilize their own lives. It is also clear that “anchor institutions”—for example, child care facilities, schools, and pediatricians—can play an important role in providing children with a stable environment and stable relationships with adults. It is also clear how critical it is to make sure our safety net functions to stabilize families and provide children (and their parents) some security in their basic needs of food, health care, and a home. It is clear that we can learn from systems like the military that have been figuring out how to support children and families who face enormous amounts of instability and stress. It is clear that each of our public systems needs to start paying attention to the warning signs of instability in children’s lives and work across silos to help interrupt the cascade of instability hurting our kids.

So while this is a complicated issue that we need to learn more about, on some level it is also very basic. The message is clear: we need work together, across all of our systems and perspectives, to help stabilize families so their children can have a safe and trusting foundation from which to learn and grow.

Filed under: Adolescents and Youth, Child care, Child support, Child welfare, Children, Children's health and development, Economic well-being, Economic well-being, Economic well-being, Families, Family structure, Foster care, Foster care, Housing subsidies, Hunger and food assistance, Income and Wealth, Job Market and Labor Force, Kids in Context, Low-income working families, Low-income working families, Low-Income Working Families, Parenting, Poverty, Poverty, Vulnerability, and the Safety Net, Social Security, Supplemental Nutrition Assistance Program (SNAP), Supplemental Nutrition–Women, Infants, and Children (WIC), Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), Unemployment, Volatility |Tags: , , , , , ,
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