Working Toward Child Development Accounts for all Missouri Newborns

On Wednesday, January 22, 2020, Missouri became the newest state to take up legislation for a statewide Child Development Account (CDA) policy.  

Filed by Rep. Jonathan Patterson, the bill creating the Missouri Children’s Savings Account Program would automatically open a Show-Me Child Savings Account with a $100 seed deposit for every resident born on or after January 1, 2021.

Patterson’s filing represents the culmination of considerable work, much of it done by State Treasurer Scott Fitzpatrick and Margaret Clancy, policy director with the Center for Social Development (CSD) in the Brown School at Washington University, along with the Missouri Child Development Account Coalition, which includes Brown School Associate Professor Jason Purnell.

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 Brown School’s 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 coalition’s 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.

“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, as well as 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.

“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, 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.

The Proposal for Missouri

When a child is born in Missouri, the state’s Department of Health and Senior Services collects vital records information. The bill directs the department to transmit some of that (names, address, and date of birth) to the state treasurer’s office, which would contact the child’s family about the program and automatically enroll the infant unless parents opt out. The treasurer’s office also would communicate how families can access account balances and details online.

Enrolled children would receive a Show-Me Child Savings Account with a $100 “scholarship.” With additional deposits and market appreciation, assets would grow in these long-term investment accounts until accessed for trade school, community college or university. Like all statewide policies, the Missouri program would manage its CDAs through the state 529 college savings plan. Boshara added that the state’s plan offers “the best platform for inclusive asset building and wealth building.”

Additional details:

• Children adopted by Missouri residents also would be eligible for accounts.
• Funds in the accounts would be exempt from the tests used to determine eligibility for public assistance.
• When a beneficiary reaches age 30, any unused assets in the account would go back to the program fund.
• The Missouri CDA Coalition estimates that approximately 75,000 Missouri newborns would receive accounts each year.

As the legislature began its work on the bill, Clancy expressed optimism. “This bill has the support of legislators from both sides of the aisle.”

Forward Through Ferguson’s Dwight shared his hopes for the bill : 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?”

To learn more about the Center for Social Development’s work with Child Development Accounts, please visit their website.