As Maine Goes, So Goes the Nation
At one point in American history, the phrase “as Maine goes, so goes the nation” was a common phrase in politics. The saying referred to Maine’s status as a bellwether of presidential elections at a time when Maine held its gubernatorial elections in September. The phrase has fallen out of use in more recent times and, for most Americans, Maine’s status as a largely rural state with an aging population and low median household incomes means the state is not often at the top of the ‘best of’ lists. Yet, for those familiar with children’s savings accounts (CSAs), the phrase still has cachet. With the launch of the Harold Alfond College Challenge in 2009, Maine jumped to the head of the class and remains the leading statewide CSA program. On a visit to Portland, ME, this week to meet with the combined boards of the Harold Alfond Foundation (HAF) and the Alfond Scholarship Foundation (ASF), which together fund and manage the Harold Alfond College Challenge, I had the opportunity to see Maine’s CSA success first-hand–and heard a lot about how “as Maine goes, so goes the nation.” Here are three things I learned:
- Generous philanthropic support has been central to Maine’s success, but the support of the HAF and the ASF is about more than just money. When the Harold Alfond College Challenge was announced in 2009, its $500 grant (or initial deposit) for every baby in Maine whose parent(s) opened a NextGen 529 account (by the child’s first birthday) became the gold standard for asset-building from birth in the U.S. This generous initial deposit remains the largest of any current CSA program in the country. But the support from the HAF and the ASF is about more than just money. This deep investment in the future post-secondary educational success of children in Maine has leveraged a critical partnership with the Finance Authority of Maine (FAME). FAME provides the delivery system for Maine’s 529 college savings plan (NextGen), provides a 50% match on all contributions to parent-owned NextGen accounts up to a maximum annual match of $300 (with no lifetime limit or income threshold) and provides a one-time, $100 “Automated Funding Grant” for accounts set up with automatic deposit. Further, the Harold Alfond College Challenge has leveraged connections to key stakeholders across the state, such as the state’s higher education and community college systems, the state’s hospitals, the banking community and employers, many of whom are represented on the board of the Alfond Scholarship Foundation. Finally, by making a significant investment in each Maine baby at birth, the Harold Alfond College Challenge has created a unique system that has the potential to leverage still additional supports from local communities. For example, through a partnership with the John T. Gorman and Sam L. Cohen Foundations, the ASF has worked with Head Start programs in several communities in four counties around the state (Androscoggin, Cumberland, Kennebec and York) to provide additional encouragement and support to families saving for their kids’ futures.
- New research from AEDI shows that the Harold Alfond College Challenge was already working before changes to a universal, opt-out enrollment model. In 2013, the HAF and ASF boards made the bold move to pivot from an opt-in model (in which parents had to open a NextGen account to get the $500 Alfond grant) to an opt-out model (in which all newborns receive their $500 Alfond grant automatically in an ASF-owned omnibus 529 account). This ensures that the Harold Alfond College Challenge reaches all newborns in Maine. Yet, even before this important pivot, the Harold Alfond College Challenge was achieving significant impact. New research from the Center on Assets, Education and Inclusion (AEDI) at the University of Michigan finds that, prior to 2013, when Maine households had to open a NextGen 529 account for a child in order to receive the $500 Alfond grant:
- Maine achieved greater representation in 529 ownership among relatively modest-income households than the national average. For example, more than half (57%) of all Maine households that opened a NextGen account to receive the $500 Alfond grant had household incomes below $75,000. According to Sallie Mae’s report, How America Saves for College, high-income households nationwide are twice as likely as moderate- or lower-income households to own a 529 account.
- Lower-income households in Maine demonstrated significant positive savings rates and account accumulation in 529 accounts, though they were less likely to save than higher-income households. According to AEDI’s research, one-quarter (26%) of households with incomes below $25,000 and that had opened a NextGen account 8 years earlier had made at least one contribution to their account and had accumulated an average of account value of $1,614 over eight years. In comparison, households with annual incomes of $150,000+ had accumulated on average of $10,815 and 76% had made at least one contribution over eight years.
- Next year will be a big year for Maine. In September 2018, the first “Alfond babies,” those newborns that received their $500 Alfond grant automatically, will all enter kindergarten. This will represent a watershed moment in which, for the first time in our country, virtually all children entering kindergarten in a particular state will start school already in possession of a significant college savings nest egg. This nest egg will provide all children and their families with a significant leg up on paying for future post-secondary education expenses. At the same time, it will provide an opportunity for schools and the education system to work with all children to teach important financial education lessons and reinforce a college-bound identity.
Let’s hope that our CSA advocacy efforts continue to bear fruit, so that, one day soon, it will become true for all children that “as Maine goes, so goes the nation.”