Building Community Assets with Worker Cooperatives

Regretably we didn't have the name of the author of this article when we published it. The author is DYLAN TUTTLE. Here's the article again in case you're still watching.

Asset-building is a tool for community economic development.  It was first formulatedby Michael Sherraden in his 1991 book Assets and the Poor.  He is also the director of the Center for Social Development (CSD) which is part of the George Warren Brown School of Social Work at Washington University in St. Louis.  CSD has played a leading role in the development of asset building research and policy. 

Asset building is defined by CSD as accumulated resources that are invested for social and economic development.  The investments can be in human, social, or tangible assets, most often in education, home ownership, and small business development.

The main premise of asset building policies is that most public assistance programs supplement income, maintaining a minimum level of consumption while penalizing welfare recipients who attempt to build assets, and by restricting the ability of recipients to save and acquire assets they perpetuate the cycle of poverty and dependence.  Central to the debate on asset building is the fact that the US currently spends an estimated $335 billion on federal asset policies such as personal retirement plans and home mortgage interest payments, but one-third of American taxpayers have insufficient incomes to benefit from these policies.  The policy challenge is thus to extend the asset building policies already in place to lower income communities.  Individual Development Accounts (IDA programs) are the institutional means advocated by Michael Sherraden to provide access and incentives for saving to the poor. 

The Assets for Independence Act was passed in 1998, as was the Individual Development Act Demonstration Program, but it was the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 that authorized states to create community-based IDA programs with TANF block grant funds and to disregard all money saved by the poor in IDAs in determining eligibility for all means tested government assistance.  The legislation allows only earned income to be saved in IDAs; designates nonprofit, community-based organizations as custodians of IDA accounts; and permits IDAs to be used for education, homeownership, and business capitalization. 

In 1997 the American Dream Demonstration (ADD), a four year fourteen site IDA policy demonstration, showed that even very poor families can save money if given the institutional structure and incentives to do so.  This project was administered by the Corporation for Enterprise Development (CFED) which was founded by Robert E. Friedman and continues to be central to the implementation of IDA programs.  IDA programs currently vary from state to state, but as of 2004, 34 states included IDA programs in their welfare plans and nearly all states have raised welfare related asset limits.

Collaboration between various community based organizations has played an important role in the implementation of IDA programs.  In Washington DC the Capital Area Asset Building Corp. (CAAB) was organized in 1996 to avoid competing for match funds and to apply a systematic approach that would minimize the fragmentation of efforts.  It supports its member organizations by raising match funds, providing technical assistance and data management.  This model has been adopted in other cities and states while providing different levels of support.  Examples include the Texas Asset Building Coalition and the Asset Policy Initiative of California.  These organizations may be more oriented towards policy or implementation, but both types of support are important to the managers of IDA programs.

Assets for Independence (AFI) is a Federal grant program for the implementation of IDA programs administered by the Office of Community Services (OCS) within the US Department of Health and Human Services, Administration for Children and Families.  It offers five year project grants of up to $1,000,000 which must be matched by non-Federal funds in an amount equal to or greater than the project grant.  Several categories of organizations may participate including nonprofit organizations, state, local, or tribal government agencies, Community Development Financial Institutions, and Community Development Credit Unions, but in most cases IDA programs are implemented by community based organizations in partnership with a financial institution that holds the deposits which are funded by public, private and nonprofit sources.  Large financial institutions rely on nonprofit partners to provide key aspects of program delivery, which include coupling the match incentive with financial literacy education, training to purchase assets, and case management.  One important reason why financial partners may contribute to IDA programs is to meet their Community Reinvestment Act (CRA) obligations.

Two of the most notable examples of community development corporations that are implementing IDA programs are EARN of San Francisco, CA and SEED Winnipeg Inc. of Winnipeg, Manitoba in Canada.  EARN has distinguished itself in two ways; namely working with banks to develop financial products for the poor and advocacy of asset building policies, being the main force behind the Asset Policy Initiative of California.  While Canada has its own set of asset building policies, SEED Winnipeg still serves as the leading example of the integration of micro-enterprise and asset building.  Its Community and Worker Ownership Program provides assistance to groups of three or more people who are interested in starting or expanding a cooperative business as a means to create quality jobs for primarily low income individuals.  SEED Winnipeg offers these services in conjunction with its other asset building programs.  The focus on its micro-enterprise development program provides the integral link between its asset building programs and its guidelines for community economic development.

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