In the fight for New Mexico’s future, we rarely hear about what works — only what’s broken. We all know the statistics: last in the nation for childhood well-being; the second highest default rate for student loans; nearly 20 percent of our citizens live below the poverty line. As legislators and community leaders, we hear statistics like these all the time. They are unacceptable, and if we’re going to move New Mexico forward, we need to re-focus our resources on solutions that work.
For more than 15 years, a little-known financial tool called Individual Development Accounts has helped break the cycle of poverty for many New Mexicans. Unfortunately, federal funding has expired, and our IDA program is caught up in a limbo that requires the state to help save it. IDAs are a simple concept — they provide savings accounts for working individuals and families for specific purposes — to buy a home, pay for school, start or expand a business, purchase a vehicle or repair a home. Participants deposit money into an IDA, and the funds are matched dollar-for-dollar by private sector entities like businesses, foundations, and trusted financial institutions. Since first implemented in 2004, IDAs have allowed New Mexicans to save more than $8 million dollars, while helping more than 300 families purchase homes, more than 500 individuals earn college degrees, and more than 600 entrepreneurs start or expand businesses. It’s a smart, public-private program that works through a transparent process with positive, measurable outcomes. In the upcoming session, the state should fully fund this program to continue these results.
Fortunately, the state has already taken an important step to save the IDA program. Last session, legislators from both parties agreed to build the infrastructure to support a state-based IDA program, but unfortunately, left out a recurring appropriation to continue it. Partners like Prosperity Works, an organization solely dedicated to providing economic equity and justice for New Mexicans, work hand-in-hand with other community advocates, educational institutions, and financial entities to help individuals and families apply for and navigate the IDA process. Prosperity Works and its partners stand ready to do the work, but without a recurring state investment, we cannot fully begin.
A key component of the IDA program is to empower New Mexicans with financial literacy coaching so they can better manage and grow their own money. Anyone approved for an IDA must go through such training, which includes information on how to budget, reduce debt, save money, or invest for the future. Importantly, the IDA funds must be used specifically for building assets — homeownership, small business development and college education — that puts each account holder on a path to long-term prosperity and helps grow our state’s economy. IDAs can offer more comprehensive education, training, and support to underserved individuals than traditional financial institutions, including young entrepreneurs, new families with young children, people with disabilities, domestic violence survivors, and Native American or refugee communities. Without tools like IDAs, these individuals often fall victim to financial risks like predatory lending and credit card debt that keep them trapped in the very cycle of poverty they are trying to escape.
Providing funding for IDAs is one way the state can invest in the future and improve our grim statistics. Let’s start by supporting what we know works. This upcoming session, we call on legislators from both sides of the aisle to support the Individual Development Account Act (Senate Bill 24). Hard-working New Mexicans have been doing their part by saving and investing in their futures through IDAs. Let’s invest in them by saving this important program.
Sen. Jacob Candelaria (D), Senate District 26; Sen. Bill Tallman (D), District 18; Rep. Deborah Armstrong (D), House District 17; Rep. Rebecca Dow (R), House District 38; Michael Barrio, CEO, Prosperity Works.