Miss. treasurer touts proposed state savings plan for newborns

Published 4:43 pm Wednesday, November 14, 2007

Miss. treasurer touts proposed state savings plan for newborns

JACKSON (AP) — Children born in the nation’s poorest state would start their lives with a bank account under a proposal designed to strengthen Mississippi’s economy while building individual finances for education and other investments.

If approved by lawmakers, the “Child Accounts” project could help improve the quality of life for hundreds of thousands of children living in Mississippi by giving them a potential net worth that would exceed that of most families in the state.

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State Treasurer Tate Reeves, who discussed the proposal during a forum here Tuesday, said a bill could be presented during the 2008 Legislature that convenes in January.

Under the preliminary plan, the state provides a $500 endowment to every child born over the next five years. Up to $2,000 could be contributed yearly to each child’s account by friends or families. Private financial institutions would manage the money until the child turns 18 and could access the funds for education, homeownership or other investments.

The program is modeled after one started in the United Kingdom in 2005.

Reeves said Mississippi, like much of the nation, has a negative savings rate.

“It’s a catalyst for a change in behavior,” Reeves said. “Convincing more people to save more is a way to build wealth. Building our wealth and having more capital available for investment would help improve our long-term outlook.”

Reeves said if the state was to bear the cost alone for the endowments, it could cost upward of $20 million a year. However, he said the private sector would be courted for the project.

“It’s vitally important that we have a significant buy-in by the private sector. Government alone cannot efficiently provide the services,” he said.

Bill Bynum, CEO of the Enterprise Corporation of the Delta, said the total cost of the program would be $100 million over five years. Bynum said the ECD would help raise $25 million in private funding.

Bynum said the $75 million in state funding would generate $1 billion over 18 years and “that money would be reinvested in the state economy in a variety of ways.”

State Rep. George Flaggs Jr., D-Vicksburg, a member of the Joint Legislative Budget Committee, said the program deserves “serious consideration” by lawmakers next session.

Flaggs said the proposal is similar to what Democratic presidential hopeful Hillary Clinton has proposed nationally. Clinton wants the government to give $5,000 to every child born in the U.S. for future college or home purchase costs.

“I can agree with a private-public funding partnership in helping the children with their future,” Flaggs said. “I don’t want to commit to dollars and cents until we release our (legislative) budget in December.”

The Aspen Institute Initiative on Financial Security and the ECD also participated in Tuesday’s forum. The Aspen Institute is a think tank that has worked on the program with other financial organizations.

The ECD, a nonprofit that works to build assets and businesses in low-wealth communities, released a report on Tuesday that said the accounts could be worth up to $56,000 with a maximum yearly contribution. The report said the program would benefit over 210,000 children estimated to be born over the next five years.

The ECD report calculated the median net worth of Mississippi households as $22,495, ranking the state 49th in the nation. Almost 1 in 5 households has zero or negative net worth.

Moving the state forward economically would require improving educational attainment — something the accounts could do, said Bynum.

“For so long the state has been recognized for leading the nation in all the wrong things,” Bynum said.

On the Net:

Enterprise Corporation of the Delta: http://www.ecd.org