Despite an improving national economy, 44.4% of New Mexico households are in a persistent state of financial insecurity, according to a report released today by the Corporation for Enterprise Development (CFED). The number of households who have little or no savings to cover emergencies or to start building a better life has decreased from last year’s 53.7% level. The report also found that state policies are doing little to improve the financial security of New Mexicans.
CFED’s 2014 Assets & Opportunity Scorecard defines these financially insecure residents as “liquid asset poor,” which means they lack adequate savings to cover basic expenses at the federal poverty level for even three months in the event of an emergency such as a job loss or health crisis. Included in this group are a majority of New Mexico residents who live below the official income poverty line of $23,550 for a family of four, as well as many who would consider themselves middle class. Although a family of four would need just $5,887 in savings to meet basic needs for three months, growing numbers of middle class households in our state fall short of that amount.
The Scorecard provides rankings for the 50 states and District of Columbia on both the ability of residents to achieve financial security and, for the first time, policies designed to help them get there. On both measures, New Mexico ranks below average with an outcome ranking of 42 and an overall policy ranking of 26.
“Nationally, policies at all levels of government helped stem the tide of the recession’s damage to household finances. They protected consumers from foreclosure and abusive financial practices, helped raise wages and connected families to the financial mainstream,” said Andrea Levere, President of CFED. “Without strong policies that address the challenges facing low- and moderate-income families, wealth and income inequality will continue to grow and our nation’s economy will continue to struggle.”
The Scorecard evaluates how residents are faring across 66 outcome measures in five different issue areas—Financial Assets & Income, Businesses & Jobs, Housing & Homeownership, Health Care and Education. New Mexico’s 42nd-place outcome ranking remains unchanged from last year. The state received a “D” in the area of Financial Assets & Income, a reflection of the state’s high level of income poverty and the large number of unbanked households (ranked 50th and 45th respectively). New Mexico received a “D” in the Businesses & Jobs category, driven in part by the lowest retirement plan participation rate in the country and the second to lowest rate for private loans to small businesses. It also had the lowest ranking for employer provided health care coverage. New Mexico received an “F” in the Education category, due in part to its low rate of students who achieve reading and match proficiency in the 8th grade (ranked 49th and 47th respectively). The state is ranked 36th for number of adults with a four year college degree, and has the second worst disparities in college degree attainment by race.
The Scorecard also evaluates 67 different policy measures to determine how well states are addressing the challenges facings residents. On many policy measures, New Mexico also rates poorly, underscoring the link between inadequate policies and ongoing challenges confronting the state’s low- and moderate-income families. New Mexico ranked in the bottom half in two out of the five policy categories assessed by Scorecard, including Financial Assets & Income (26th) and Housing & Homeownership (36th).
“The data from the 2014 Assets & Opportunity Scorecard illustrate that the fundamental needs of low-income New Mexicans are not being met and that 50 years after President Johnson’s groundbreaking declaration, we must continue to wage war on poverty in our state,” said Dawn Z. Hommer, CEO of the Community Action Agency of Southern New Mexico (CAASNM) and Lead Organization in the Assets & Opportunity Network.
Dr. Rodolfo Acosta, CAASNM’s Family Empowerment Director, called for more policies that encourage low-income New Mexico residents to “build assets, learn new skills and improve their overall quality of life.” These include initiatives like CAASNM’s Individual Development Account (IDA) program, which requires participants to take a series of financial literacy classes, accumulate $1,000 in savings and ultimately exit the program with a four to one savings match. “Graduates of the program have sent their children to college, purchased homes and started businesses,” said Acosta. “We need to ensure that supports of this kind are widely available so that more struggling families can lift themselves out of poverty.”
Published annually, the Assets & Opportunity Scorecard offers the most comprehensive look available at Americans’ ability to save and build wealth, fend off poverty and create a more prosperous future. It explores how well residents are faring in the 50 states and the District of Columbia and assesses policies that are helping residents build and protect assets across the five issue areas listed above.
Nationally, the Scorecard data reveal that five years into the economic recovery, millions of American families are still treading water in the deep end. While indicators such as unemployment, foreclosure rates and credit card debt show a slow but steady decline, the general picture remains one of declining economic mobility and widening wealth and income inequality. Among other key findings:
· The average college debt for students graduating increased 8% from $27,150 in 2011 to $29,400 in 2012. As student loan debt increased, so did the student loan default rate. Fifteen percent of borrowers in 2012 defaulted on their student loans within three years of starting repayment, up from 13% in 2011.
· The percent of employees participating in employer-provided retirement plans continued to decline from 47% in 2007 to 44% in 2012.
· Although the racial wealth gap narrowed slightly between 2010 and 2011, households of color still fall far behind white households. They have approximately one-tenth the median net worth of white households ($12,377 and $110,637, respectively) and are considerably less likely to own a home. The homeownership rate for households of color is 26 percentage points lower than the rate for white households (46% and 72%, respectively).
· Only eight states (Maryland, New York, Maine, New Jersey, Connecticut, Washington, Minnesota and Rhode Island) have adopted 50% or more of the 67 policies that can support family financial security. Meanwhile, seven states (Idaho, Missouri, South Dakota, Alabama, Alaska, Mississippi and Wyoming) have adopted fewer than one-quarter of the policies.