Asset Building; Omnibus Package
Establishes a self‑sufficiency standard that will determine the assistance allowance. Establishes a refundable state earned income tax credit. Provides financial education to TANF applicants and recipients. Expands the provision of individual development accounts. Appropriates funds. (SB1919 HD1)
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII
A BILL FOR AN ACT
relating to asset building.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
FINDINGS AND PURPOSE
SECTION 1. The legislature finds that economic stability does not arise solely from income. Financial assets, such as cash savings, stocks, bonds, and home and business equity, are critical components of economic security. Financial assets offer individuals a viable and hopeful future, stimulate development of human and other capital, and enhance the welfare of children.
For many Hawaii residents, the cost of a house, a post-secondary education, and starting a business is increasing. Traditional public assistance programs that concentrate on income are not successful in promoting and supporting the transition to increased economic self‑sufficiency. That is because many of the programs that are designed to assist low- and moderate‑income families focus on the importance of work and income while penalizing participants for asset building.
The legislature further finds that income‑based policies should be complemented with asset‑based policies because, while income‑based policies ensure that consumption needs, such as food, clothing, child care, and health care, are met, asset‑based policies provide the means to achieve greater independence and economic well‑being.
The December 2006, report entitled "Asset-Building Policy for Hawaii," produced by the Hawaii Alliance for Community--Based Economic Development, highlighted several key goals to help people move from "just getting by" to "getting ahead." Among the recommendations are ensuring that working families can meet their needs. A self-sufficiency standard should be established to determine the actual amount needed to afford basic needs such as food, housing, and healthcare in Hawaii. The department of human services should then apply the self-sufficiency standard in the determination of pubic assistance for all usual and absolute minimum recurring living and shelter expenses, including rent or mortgage payments and utilities.
Currently, the federal earned income tax credit provides a refundable tax credit to low-income wage earners that can result in significant refunds for people who stay in the workforce. Hawaii should join the national trend, established by twenty other states, and enact a refundable state earned income tax credit equal to at least twenty per cent of the federal earned income tax credit. The initiative will offer low-income families an opportunity to save and invest their refund.
It is not enough to offer people an opportunity to build assets, if they do not know how or why to save and invest or how to protect their assets. Therefore, it is important that a comprehensive policy include a financial education component that promotes an understanding of consumer, economic, and personal financial concepts, including the basic principles involved with earning, budgeting, spending, saving, investing, and taxation.
Another key component to a comprehensive policy is incentives for people to save. Currently, many incentives and subsidies benefit those with higher incomes and greater wealth. For instance, many low-income families have insufficient tax liability to benefit from tax credits or deductions, or lack the resources to cover a down payment or mortgage on a home.
Changes to the current individual development accounts law could help more individuals take advantage of this asset building tool. An individual development account enables a participant to receive a match for every dollar that the participant saves. Moneys in the account can then be used for qualified expenditures such as costs associated with first homeownership, post-secondary education, vocational training, and small or micro-business capitalization.
The purpose of this Act is to provide asset building opportunities for Hawaii's low- and moderate‑income families by:
(1) Establishing a self‑sufficiency standard that will determine the assistance allowance;
(2) Establishing a refundable state earned income tax credit;
(3) Providing financial education to temporary assistance for needy families applicants and recipients;
(4) Expanding the provision of individual development accounts; and
(5) Making appropriations necessary for these purposes.
SECTION 2. Section 201-3, Hawaii Revised Statutes, is amended to read as follows:
"§201-3 Specific research and promotional functions of the department. (a) Without prejudice to its general functions and duties the department of business, economic development, and tourism shall have specific functions in the following areas:
(1) Industrial development. The department shall [
through technical and economic surveys the profit potential of new or expanded
industrial undertakings; [
through research projects and other means new and improved industrial products
and processes; [
studies and surveys to determine consumer preference as to design and quality
and to determine the best methods of packaging, transporting, and marketing the
State's industrial products; [
information to assist the present industries of the State, to attract new
industries to the State, and to encourage capital investment in present and new
industries in the [
State; assist] state;
associations of producers and distributors of industrial products to introduce
such] these products to consumers; and [ make such]
(F) Make grants or contracts as may be necessary or advisable to accomplish the foregoing;
(2) Land development. The department shall [
the most productive use of all land in the [
State] state in
accordance with a general plan developed by the department; [ encourage]
the improvement of land tenure practices on leased private lands; [
an informational program directed to landowners, producers of agricultural and
industrial commodities, and the general public regarding the most efficient and
most productive use of the lands in the [
State;] state; and [ make
(D) Make grants or contracts as may be necessary or advisable to accomplish the foregoing;
(3) Credit development. The department shall [
a continuing study of agricultural and industrial credit needs; [
the development of additional private and public credit sources for
agricultural and industrial enterprises; [
an informational program to acquaint financial institutions with agricultural
and industrial credit needs and the potential for agricultural and industrial
expansion, and inform producers of agricultural and industrial products as to
the manner in which to qualify for loans; and [
(D) Make grants or contracts as may be necessary or advisable to accomplish the foregoing;
(4) Promotion. The department shall [
information developed for or by the department pertaining to economic
development to assist present industry in the [
State, attract] state;
new industry and investments to the State[
,]; and [ assist]
new and emerging industry with good growth potential or prospects in jobs,
exports, and new products. The industrial and economic promotional activities
of the department may include the use of literature, advertising,
demonstrations, displays, market testing, lectures, travel, motion picture and
slide films, and [
such] other promotional and publicity devices as may
be appropriate; [ and]
(5) Tourism research and statistics. The department shall maintain a program of research and statistics for the purpose of:
(A) Measuring and analyzing tourism trends;
(B) Providing information and research to assist in the development and implementation of state tourism policy;
(C) Encouraging and arranging for the conduct of tourism research and information development through voluntary means or through contractual services with qualified agencies, firms, or persons; and
(D) Providing tourism information to policy makers, the public, and the visitor industry. This includes:
(i) Collecting and publishing visitor-related data, including visitor arrivals, visitor characteristics, and expenditures;
(ii) Collecting and publishing hotel-related statistics, including the number of units available, occupancy rates, and room rates;
(iii) Collecting and publishing airline-related data, including seat capacity and number of flights;
(iv) Collecting information and conducting analyses of the economic, social, and physical impacts of tourism on the State;
(v) Conducting periodic studies of the impact
of ongoing marketing programs of the Hawaii tourism authority on Hawaii's
tourism industry, employment in Hawaii, state taxes, and the State's lesser
known and [
underutilized] underused destinations; and
Cooperate] Cooperating with
the Hawaii tourism authority and [ provide] providing it with the
above information in a timely manner[ .];
(6) Self-sufficiency standard. The department shall establish annually the self-sufficiency standard that shall be the absolute minimum amount required to be expended in Hawaii on the costs of housing, food, childcare, transportation, healthcare, all taxes, and other expenses such as clothing, shoes, utilities, and household items. The self-sufficiency standard shall be based on existing established models that fully incorporate the items essential to attain economic self-sufficiency. The self-sufficiency standard shall be used by the department of human services in determining the assistance allowance under section 346-53, and may otherwise be used as an economic barometer of the State's economic development and related issues.
(b) The department shall be the central
agency to coordinate film permit activities in the [
SECTION 3. Section 346-1, Hawaii Revised Statutes, is amended by amending the definition of "assistance allowance" to read as follows:
""Assistance allowance" means a
single monthly public assistance grant, including funds received from the
federal government, expressed in a dollar amount per recipient or per recipient
family to be provided a recipient or recipient family for all usual and absolute
minimum recurring living and shelter expenses, including rent or mortgage
payment and utilities[
, and excluding medical care]."
SECTION 4. Section 346-14, Hawaii Revised Statutes, is amended to read as follows:
"§346-14 Duties generally. Except as otherwise provided by law, the department of human services shall:
(1) Establish and administer programs and standards, and adopt rules as deemed necessary for all public assistance programs;
(2) Establish, extend, and strengthen services for the protection and care of abused or neglected children and children in danger of becoming delinquent to make paramount the safety and health of children who have been harmed or are in life circumstances that threaten harm;
(3) Establish and administer programs, and adopt rules as deemed necessary, for the prevention of domestic and sexual violence and the protection and treatment of victims of domestic and sexual violence;
(4) Assist in preventing family breakdown;
(5) Place, or cooperate in placing, abused or neglected children in suitable private homes or institutions and place, or cooperate in placing, children in suitable adoptive homes;
(6) Have authority to establish, maintain, and operate receiving homes for the temporary care and custody of abused or neglected children until suitable plans are made for their care; and accept from the police and other agencies, for temporary care and custody, any abused or neglected child until satisfactory plans are made for the child;
(7) Administer the medical assistance programs for eligible public welfare and other medically needy individuals by establishing standards, eligibility, and health care participation rules, payment methodologies, reimbursement allowances, systems to monitor recipient and provider compliance, and assuring compliance with federal requirements to maximize federal financial participation;
(8) Cooperate with the federal government in carrying out the purposes of the Social Security Act and in other matters of mutual concern pertaining to public welfare, public assistance, and child welfare services, including the making of reports, the adoption of methods of administration, and the making of rules as are found by the federal government, or any properly constituted authority thereunder, to be necessary or desirable for the efficient operation of the plans for public welfare, assistance, and child welfare services or as may be necessary or desirable for the receipt of financial assistance from the federal government;
(9) Carry on research and compile statistics relative
to public and private welfare activities throughout the [
including those dealing with dependence, defectiveness, delinquency, self-sufficiency
standard, and related problems;
(10) Develop plans in cooperation with other public and private agencies for the prevention and treatment of conditions giving rise to public welfare problems;
(11) Adopt rules governing the procedure in hearings, investigations, recording, registration, determination of allowances, and accounting and conduct other activities as may be necessary or proper to carry out this chapter;
(12) Supervise or administer any other activities authorized or required by this chapter, including the development of the staff of the department through in-service training and educational leave to attend schools and other appropriate measures, and any other activities placed under the jurisdiction of the department by any other law;
(13) Make, prescribe, and enforce policies and rules governing the activities provided for in section 346‑31 it deems advisable, including the allocation of moneys available for assistance to persons assigned to work projects among the several counties or to particular projects where the apportionment has not been made pursuant to other provisions of law, if any, governing expenditures of the funds;
(14) Determine the appropriate level for the Hawaii security net, by developing a tracking and monitoring system to determine what segments of the population are not able to afford the basic necessities of life, and advise the legislature annually regarding the resources required to maintain the security net at the appropriate level;
(15) Subject to the appropriation of state funds and availability of federal matching assistance, expand optional health care to low-income persons as follows:
(A) Pregnant women and infants under one year of age living in families with incomes up to one hundred eighty-five per cent of the federal poverty level and without any asset restrictions;
(B) Children under six years of age living in families with incomes up to one hundred thirty-three per cent of the federal poverty level and without any asset restrictions;
(C) Older children to the extent permitted under optional federal medicaid rules;
(D) Elder persons;
(F) The homeless; and
(G) Other handicapped and medically needy persons;
(16) Subject to the appropriation of state funds and availability of federal matching assistance, establish the income eligibility level for the medically needy program at one hundred thirty-three per cent of the assistance allowance."
SECTION 5. Section 346-53, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) This subsection [
does] shall not
apply to general assistance to households without minor dependents. The
standard of need shall equal the [ poverty level established by the federal
government in 2006,] self-sufficiency standard as established annually
by the department of business, economic development, and tourism pursuant to
section 201-3, prorated over a twelve-month period based on family size.
The assistance allowance provided shall be
based on a percentage of the standard of need. For exempt households and
households in which all caretaker relatives are minors, living independently
with minor dependents and attending school, the assistance allowance shall be
set no higher than sixty-two and one-half per cent and no lower than forty-four
per cent of the standard of need. For all other households, the assistance
allowance shall be set no higher than sixty-two and one-half per cent of the
standard of need and set no lower than thirty-four per cent of the standard of
need. The standard of need shall be determined by dividing the [
federal poverty level] self-sufficiency standard by twelve and
rounding down the quotient. The remaining quotient shall be multiplied by the
per cent as set by the director by rules pursuant to chapter 91, and the final
product shall be rounded down to determine the assistance allowance; provided
(1) The department may increase or reduce the assistance allowance as determined in this subsection for non-exempt households for the purpose of providing work incentives or services under part XI;
(2) No reduction shall be allowed that jeopardizes eligibility for or receipt of federal funds;
(3) Reductions in the assistance allowance shall be limited to no more than one per year; and
(4) No non-exempt household, which includes an adult who has received sixty cumulative months of temporary assistance to needy families with minor dependents, shall be eligible for an assistance allowance, unless authorized by federal regulations."
SECTION 6. (a) The department of business, economic development, and tourism shall establish the first annual self‑sufficiency standard pursuant to section 2 of this Act by December 1, 2007.
(b) The department of business, economic development, and tourism shall report to the legislature and the department of human services on the self-sufficiency standard no later than twenty days prior to the convening of the regular session of 2008, and annually thereafter.
SECTION 7. (a) The department of human services shall submit a budget request to the legislature identifying the amount of general and federal funds required to implement the self-sufficiency standard no later than twenty days prior to the convening of the regular session of 2009.
(b) The department of human services shall report to the legislature with information on the number of persons exiting public assistance, food stamp, and medical assistance programs for work, using the annually adjusted self-sufficiency standard, no later than twenty days prior to the convening of the regular session of 2010, and annually thereafter.
EARNED INCOME TAX CREDIT
SECTION 8. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§235- Earned income tax credit. (a) Each individual taxpayer who:
(1) Files an individual income tax return for a taxable year; and
(2) Is not claimed or is not eligible to be claimed as a dependent by another taxpayer for income tax purposes,
may claim a refundable earned income tax credit. The tax credit, for the appropriate taxable year, shall be equal to per cent of the federal earned income tax credit allowed under section 32 (with respect to earned income) of the Internal Revenue Code and reported as such on the resident individual's federal income tax return.
(b) In the case of a part-year resident, the tax credit shall equal the amount of the tax credit calculated in subsection (a) multiplied by the ratio of adjusted gross income attributed to this state to the entire adjusted gross income computed without regard to source in the State pursuant to section 235-5.
(c) For purposes of claiming the tax credit allowed by this section, a individual taxpayer shall use the same filing status (i.e., "married filing jointly", "head of household", "surviving spouse", or "single") on the taxpayer's Hawaii tax return as used on the taxpayer's federal tax return for the taxable year. In the case of a husband and wife filing separately, the credit allowed may be applied against the tax of either or divided between them, as they elect.
(d) All claims including any amended claims for tax credits under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed. Failure to comply with this subsection shall constitute a waiver of the right to claim the tax credit.
(e) The director of taxation:
(1) Shall prepare any forms that may be necessary to claim a tax credit under this section;
(2) May require proof of the claim for the tax credit;
(3) Shall alert eligible taxpayers of the tax credit using appropriate and available data;
(4) Shall prepare an annual report to be presented to the legislature and the public containing the:
(A) Number of credits granted for the prior calendar year;
(B) Total amount of the credits granted; and
(C) Average value of the credits granted to taxpayers whose earned income falls within various income ranges;
(5) May adopt rules pursuant to chapter 91 to effectuate this section."
SECTION 9. Chapter 346, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§346‑ Financial education. In addition to any mandatory programs for certain applicants for and recipients of temporary assistance for needy families required by federal law, the department shall offer financial education to applicants for and recipients of temporary assistance for needy families. For purposes of this section, "financial education" means education that promotes an understanding of consumer, economic, and personal finance concepts, including the basic principles involved with earning, budgeting, spending, saving, investing, and taxation."
SECTION 10. There is appropriated out of the general revenues of the State of Hawaii the sum of $ , or so much thereof as may be necessary for fiscal year 2007-2008, and the same sum, or so much thereof as may be necessary for fiscal year 2008-2009, for the department of human services to offer financial education to applicants for and recipients of temporary assistance for needy families.
The sums appropriated shall be expended by the department of human services for the purposes of this part.
SECTION 11. Section 257-1, Hawaii Revised Statutes, is amended by amending the definition of "qualified expenditures" to read as follows:
""Qualified expenditures" means
an expense as determined by a fiduciary organization[
, which] that
may include [ but not be limited to]:
(1) Costs associated with first homeownership;
(2) Post-secondary education;
(3) Vocational training; [
(4) Small or micro-business capitalization[
(5) One motor vehicle purchase for school or work transportation."
SECTION 12. Section 257-3, Hawaii Revised Statutes, is amended to read as follows:
Fiduciary organizations. (a) Fiduciary organizations shall serve as an
intermediary between individual development account holders and financial
institutions holding accounts. The fiduciary organization's responsibilities
(1) Marketing participation;
(2) Soliciting matching contributions;
(3) Counseling program participants; and
(4) Conducting verification and compliance activities.
(b) Locally-based organizations shall enter
into a competitive process for the right to become fiduciary organizations for
a portion of the state matching dollars [
that would be authorized initially].
Fiduciary organization proposals shall be evaluated and participation rights
awarded on the basis of [ such items as]:
(1) Their ability to market the program to potential individual development account holders and potential matching fund contributors;
(2) Their ability to provide safe and secure investments for individual development accounts;
(3) Their overall administrative capacity, including:
(A) Certifications or verifications required to assure compliance with eligibility requirements;
(B) Authorized uses of the accounts matching contributions by individuals or businesses; and
(C) Penalties for unauthorized distributions;
(4) Their capacity to provide financial counseling and other related services to potential participants; and
(5) Their links to other activities designed to increase the independence of individuals and families through high return investments, including homeownership, education and training, and small business development.
The department of human services, or an agency contracted by the department of human services, shall provide technical and administrative assistance to fiduciary organizations to meet the criteria under this subsection; provided that the State may expend appropriate federal moneys, including temporary assistance for needy families and community development block grants, for this purpose, as applicable.
(c) If the [
State] the department of
human services approves an application to fund an individual development
account project under this section, the [ State] department of human
services shall[ , not later than one month after June 28, 1999,]
authorize the applicant to conduct the project with state funds [ for five
project years] in accordance with the approved application and this
section; provided that an applicant may apply for funding during future fiscal
years [ for five project years if the State lacks the] if there are
insufficient resources to fund an individual development account project
pursuant to this subsection.
(d) For each individual development
account program approved under this section, the State shall make a grant to
the qualified entity or collaboration of entities authorized to conduct the
project on the first day of the project year in an amount not to exceed
$100,000 per year for five years. (e)] (d) From among the
individuals eligible for assistance under the Hawaii individual development
account program, each selected fiduciary organization shall select the
individuals whom the fiduciary organization deems to be best suited to receive
SECTION 13. Section 257-8, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
The State shall match an amount
of up to $100,000 per calendar year for individual development accounts.] The
department of human services may expend appropriate federal moneys, including
temporary assistance for needy families and community development block grants,
for individual development account matches, in addition to general funds."
SECTION 14. Section 257-11, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (a) to read:
"(a) The fiduciary organization running
an individual development account program shall have sole authority over the
administration of the project. The [
State] department of human
services may prescribe [ only such] regulations with respect to
demonstration projects [ under this chapter] as are necessary to ensure
compliance [ pursuant to] with this chapter."
2. By amending subsection (d) to read:
"(d) Selected fiduciary organizations may
use no more than [
ten] twenty-five per cent of state funds as
appropriated under this [ chapter[ ]] to cover [ administrative]
operating costs in any given year."
SECTION 15. There is appropriated out of the general revenues of the State of Hawaii the sum of $2,000,000, or so much thereof as may be necessary for fiscal year 2007-2008, and the same sum, or so much thereof as may be necessary for fiscal year 2008-2009, for fiduciary organizations, as defined in section 257-1, Hawaii Revised Statutes, to conduct individual development account programs, as provided in section 257-3, Hawaii Revised Statutes.
The sum appropriated shall be expended by the department of human services for the purposes of this section.
SECTION 16. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 17. This Act shall take effect on July 1, 2030; provided that, upon its approval, section 8 shall apply to taxable years beginning after December 31, ; provided further that sections 2, 3, 4, 9, 10, 11, 12, 13, 14, and 15 shall take effect on July 1, ; and provided further that section 5 shall take effect on July 1, .