2020 News

Missouri coalition sets sights on Child Development Accounts for all state newborns

Panelists discuss the Missouri Child Development Account Coalition's proposal to create a statewide CDA policy, December 19, 2019.

As Missouri’s 2020 legislative session begins, an expanding partnership seeks to boost the finances and health of the state’s residents. If the Missouri Child Development Account Coalition succeeds, every baby born in the state will automatically be the beneficiary of a Child Development Account, or CDA, to help pay for trade school, community college or university.

The coalition has been working with Missouri State Treasurer Scott Fitzpatrick and his staff on the specifics of a CDA policy proposal. The group organized an assembly on December 19 to inform supporters on developments and preview legislative efforts.

The proposal draws upon research on the CDA policy modeled in SEED for Oklahoma Kids (SEED OK), a randomized, statewide CDA experiment conducted by the Center for Social Development (CSD) since 2007. The findings have shaped state policies elsewhere.

“Seven states have adopted automatic statewide CDA policies,” said Margaret Clancy, a member of the leadership committee and CSD’s policy director. Clancy advised policymakers on the development of all statewide CDAs and this policy proposal in Missouri. Nebraska, Illinois and California enacted CDA legislation in 2019, and Pennsylvania did so in 2018.

Ray Boshara, Jason Purnell, and Margaret Clancy.

“The level of commitment that we’ve seen across this region has really been quite remarkable,” said Jason Purnell, co-chair of the coalition’s leadership committee, associate professor in the Brown School at Washington University in St. Louis, director of Health Equity Works and faculty director with CSD.

“We all share a commitment to the brightest possible futures for our children,” Purnell added. “This is just an approach that makes sense for investing in the future of our children, in the future of our state, and our families and communities.”

“We want every baby born in Missouri to have this,” Purnell said.

“A big key to our success so far was turning interest from State Treasurer Fitzpatrick into a full-on commitment to support and to champion this,” said Kaycee Nail, director of client and legislative affairs with the Penman Group. “It was really helpful for him to see the fact that Nebraska passed this legislation unanimously.”

Child Development Accounts

A CDA is a long-term investment account opened with a seed deposit when a child is born. That seed grows with market appreciation and supplemental deposits until he or she is ready to use the assets for higher education. The policy is designed to be universal and automatic, and assets may be used only for postsecondary education. The effects of the accounts extend beyond the assets they hold.

Margaret Clancy.

“The concept is that, by providing assets very early, CDAs can lead to financial planning for college and greater financial capability, a college-bound identity, educational preparation and later, college success,” said Clancy.

The benefits of CDAs are widely documented in publications from SEED OK. Findings show that the accounts expand assets for children’s education but that they also shape family behavior, boosting children’s social-emotional development, parents’ educational expectations for their children, and positive parenting practices while reducing depressive symptoms among mothers.

Clancy added, “These findings matter because other studies have shown that these positive outcomes, particularly the higher education expectations, affect later educational success.”

Some of the benefits are greater for disadvantaged families. “Financially vulnerable families face numerous challenges that can negatively affect children’s development,” Clancy said. “For maternal depressive symptoms and positive parenting practices, the CDA effects were greater for families who participated in TANF and Head Start than for families who did not.”

Ray Boshara.

Ray Boshara, a member of the coalition’s leadership committee and director of the Center for Household Financial Stability with the Federal Reserve Bank of St. Louis, noted the potential effects of a CDA policy on the gap between the wealth of Black and White households. Citing estimates from a 2016 study, he said that a universal CDA program established in 1979 could have eliminated 23% of the gap between black and white households for young adults.

Leadership committee member David Dwight added, “CDAs are a powerful starting point for chipping away at those disparities.” Dwight is the executive director and lead strategy catalyst of Forward Through Ferguson.

A proposal for Missouri

The legislation proposing CDAs for Missouri would create a statewide program managed by the state treasurer through MOST, Missouri’s 529 Education Plan. Clancy noted that all existing statewide CDA polices use their state 529 plan as the financial platform. Boshara added that the state’s plan offers “the best platform for inclusive asset building and wealth building.”

Scott Penman, founder and managing partner of the Penman Group, said that Rep. Jonathan Patterson of Lee’s Summit has agreed to carry the bill in Missouri’s House of Representatives. Another sponsor has committed to lead the bill in the Senate when the House version has been filed.

David Dwight.

Looking ahead, Forward Through Ferguson’s Dwight is optimistic: “This is where we can start: universal at-birth investment in Missouri’s children and families for their opportunity, their health, and their well-being for the future.” He added, “When Missouri babies grow up and take their first steps into the state, what future will they find? And what future will we leave them?”

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Credit: Photos by Mary Sue Gee.