HCS HB 349 -- FAMILY DEVELOPMENT ACCOUNTS (Gunn)

This substitute establishes the Family Development Account
Program within the Department of Economic Development (DED) to
encourage individuals with a household income at or below 200%
of the federal poverty level to establish savings accounts.
Funds in the account may only be used for specified purposes,
including the costs of higher education, job training, start-up
capitalization of a small business, major repairs or
improvements to a primary residence, and purchase of a primary
residence.  Individual account holders may deposit up to $2,000
per year in the account, and the total balance in an account may
not exceed a maximum of $50,000.

The DED is to solicit proposals from community development
organizations, defined as not-for-profit religious or charitable
associations, to implement the program.  Such proposals must
include the requirement that individual account holders
financially match the cash contributions made to their accounts,
a process for including economic literacy seminars in the family
development account program, and a process for regular
evaluation and review to ensure that account holders meet
program requirements.  In addition, proposals must specify what
eligible groups of individuals the organization plans to target
for participation in the program.  These organizations are also
authorized to oversee the program's reserve fund, which is used
for administrative costs and for distributing matching funds to
individual accounts.  Administrative costs may not exceed 20% of
the moneys in the reserve fund.

Moneys deposited in the account, interest accruing to the
account, and moneys withdrawn from the account are exempted from
state income tax.  Contributors to the program's reserve fund
are eligible for a credit against state income tax liability for
up to $50,000 per contributor and up to 50% of the amount
contributed.  The total amount of tax credits authorized for the
program is limited to $4 million per fiscal year.  The DED is to
submit verification of qualified tax credits to the Department
of Revenue.

The DED is to approve financial institutions wishing to
participate in the program.  These institutions are required to
allow deposits from either the account holder or community-based
organizations on behalf of the account holder; deposits from
such organizations must match the account holder's deposits, up
to a three-to-one match rate.  The financial institutions are
required to deposit at least the market rate of interest on
earnings in the accounts, and to allow withdrawals, after the
cosignature of the community development organization
administrator is obtained.  If moneys are withdrawn for
nonauthorized purposes, a penalty of 15% is assessed, all
matching moneys are forfeited, and the account is closed.  All
moneys from penalties and forfeitures on matching funds are
deposited in the program's reserve fund.

The DED is authorized, subject to appropriation, to award up to
$100,000 for an independent program evaluation.  Based on this
evaluation, the DED is to submit a report on the program to the
General Assembly by March 1 of each year, beginning in 2000.

FISCAL NOTE:  Estimated Net Loss to General Revenue Fund of
$33,000 in FY 2000, FY 2001, and FY 2002.

HCS HB 349 -- FAMILY DEVELOPMENT ACCOUNTS

SPONSOR:  Gunn

COMMITTEE ACTION:  Voted "do pass" by the Committee on Social
Services, Medicaid and the Elderly by a vote of 17 to 0.

This substitute establishes the Family Development Account
Program within the Department of Economic Development (DED) to
encourage individuals with a household income at or below 200%
of the federal poverty level to establish savings accounts.
Funds in the account may only be used for specified purposes,
including the costs of higher education, job training, start-up
capitalization of a small business, major repairs or
improvements to a primary residence, and purchase of a primary
residence.  Individual account holders may deposit up to $2,000
per year in the account, and the total balance in an account may
not exceed a maximum of $50,000.

The DED is to solicit proposals from community development
organizations, defined as not-for-profit religious or charitable
associations, to implement the program.  Such proposals must
include the requirement that individual account holders
financially match the cash contributions made to their accounts,
a process for including economic literacy seminars in the family
development account program, and a process for regular
evaluation and review to ensure that account holders meet
program requirements.  In addition, proposals must specify what
eligible groups of individuals the organization plans to target
for participation in the program.  These organizations are also
authorized to oversee the program's reserve fund, which is used
for administrative costs and for distributing matching funds to
individual accounts.  Administrative costs may not exceed 20% of
the moneys in the reserve fund.

Moneys deposited in the account, interest accruing to the
account, and moneys withdrawn from the account are exempted from
state income tax.  Contributors to the program's reserve fund
are eligible for a credit against state income tax liability for
up to $50,000 per contributor and up to 50% of the amount
contributed.  The total amount of tax credits authorized for the
program is limited to $4 million per fiscal year.  The DED is to
submit verification of qualified tax credits to the Department
of Revenue.

The DED is to approve financial institutions wishing to
participate in the program.  These institutions are required to
allow deposits from either the account holder or community-based
organizations on behalf of the account holder; deposits from
such organizations must match the account holder's deposits, up
to a three-to-one match rate.  The financial institutions are
required to deposit at least the market rate of interest on
earnings in the accounts, and to allow withdrawals, after the
cosignature of the community development organization
administrator is obtained.  If moneys are withdrawn for
nonauthorized purposes, a penalty of 15% is assessed, all
matching moneys are forfeited, and the account is closed.  All
moneys from penalties and forfeitures on matching funds are
deposited in the program's reserve fund.

The DED is authorized, subject to appropriation, to award up to
$100,000 for an independent program evaluation.  Based on this
evaluation, the DED is to submit a report on the program to the
General Assembly by March 1 of each year, beginning in 2000.

FISCAL NOTE:  Estimated Net Loss to General Revenue Fund of
$33,000 in FY 2000, FY 2001, and FY 2002.

PROPONENTS:  Supporters say that family development accounts
encourage those with limited financial resources to save for
their future needs.

Testifying for the bill were Representative Gunn; Center for
Social Development, Washington University; and Missouri
Association for Social Welfare.

OPPONENTS:  There was no opposition voiced to the committee.

Debra Cheshier, Senior Legislative Analyst

HB 349 -- Family Development Accounts

Co-Sponsors:  Gunn, Boucher

This bill establishes the Family Development Account Program
within the Department of Economic Development to encourage
individuals with a household income at or below 200% of the
federal poverty level to establish savings accounts.  Funds in
the account may only be used for specified purposes, including
the costs of higher education, job training, start-up
capitalization of a small business, major repairs or
improvements to a primary residence, major repairs to or
purchase of an automobile, and purchase of a primary residence.
Individual account holders may deposit up to $2,000 per year in
the account, and the total balance in an account may not exceed
a maximum of $50,000.

The department is to solicit proposals from community
development organizations, defined as not-for-profit religious
or charitable associations, to implement the program.  Such
proposals must include the requirement that individual account
holders financially match the cash contributions made to their
accounts, and a process for including economic literacy seminars
in the family development account program.  In addition,
proposals must specify what eligible groups of individuals the
organization plans to target for participation in the program.
These organizations are also authorized to oversee the program's
reserve fund, which is used for administrative costs and for
distributing matching funds to individual accounts.
Administrative costs may not exceed 20% of the moneys in the
reserve fund.

Moneys deposited in the account, interest accruing to the
account, and moneys withdrawn from the account are exempted from
state income tax.  Contributors to the program's reserve fund
are eligible for a credit against state income tax liability for
up to $50,000 per contributor and up to 50% of the amount
contributed.  The total amount of tax credits authorized for the
program is limited to $4 million per fiscal year.  The
department is to submit verification of qualified tax credits to
the Department of Revenue.

The department is to approve financial institutions wishing to
participate in the program.  These institutions are required to
allow deposits from either the account holder or community-based
organizations on behalf of the account holder; deposits from
such organizations must match the account holder's deposits, up
to a three-to-one match rate.  The financial institutions are
required to deposit at least the market rate of interest on
earnings in the accounts, and to allow withdrawals, after the
cosignature of the community development organization
administrator is obtained.  If moneys are withdrawn for
nonauthorized purposes, a penalty of 15% is assessed, all
matching moneys are forfeited, and the account is closed.  All
moneys from penalties and forfeitures on matching funds are
deposited in the program's reserve fund.

The department is authorized, subject to appropriation, to award
up to $100,000 for an independent program evaluation.  Based on
this evaluation, the department is to submit a report on the
program to the General Assembly by March 1 of each year,
beginning in 2000.