Vermont leads most states in financial security of residents, according to a report released today by the Corporation for Enterprise Development (CFED). The report also finds that Vermont is in the top 10 of all states for enacting policies designed to help low- and middle-income families attain financial security through asset building. However, the report does find that the Vermont could improve its residents’ financial well-being when it comes to Housing & Homeownership.
CFED’s 2015 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. The Scorecard provides rankings for the 50 states and District of Columbia on both the ability of residents to achieve financial security and policies designed to help them get there. Vermont ranks at the top of the country with an outcome ranking of 2, and an overall policy ranking of 10.
The Scorecard evaluates how residents are faring across 67 outcome measures in five different issue areas – Financial Assets & Income, Businesses & Jobs, Housing & Homeownership, Health Care and Education. Vermont received an “A” in four out of five issue areas. In Financial Assets & Income, the state’s “A” is in part due to its low rate of consumers with subprime credit scores (45.8%) and its low consumer bankruptcy rate (1.4 per 1,000 individuals), ranking 4th in the nation for both measures. Vermont’s “A” in Businesses & Jobs is partly the result of its high microenterprise ownership rate (19.3%) and its low unemployment rate (4.1%). The “A” Vermont received for Health Care is due partly to the low disparity the state observes in rates of the uninsured between the bottom 20% and the top 20% of income earners, which is the lowest in the nation. Vermont’s “A” in Education partly comes from its high rate of three- and four-year-olds enrolled in an early childhood education, which is the 2nd highest in the nation at 55%. However, the state disappoints in measures of Housing & Homeownership. The state earned a “C” in this measure, partly because of its high foreclosure rate of nearly 3% of mortgage loans; its low affordability of homes, which is 4.2 times the median household income; and the high percentages of homeowners and renters that dedicate 30% or more of their income to housing payments, which stand at 34.9% and 53.9%, respectively.
The Scorecard also evaluates 68 different policy measures to determine how well states are addressing the challenges facing residents. Vermont has enacted only 32 of the 68 policies that are aimed at decreasing poverty and creating more opportunities for low- and moderate-income families. The state does best in Housing & Homeownership policies, in which it ranks 1st among all states and the District of Columbia. It also does well in Financial Assets & Income, ranking 3rd. It also performs well in Health Care at 6th place. Vermont remains in the top 10 with Businesses & Jobs, placing 8th. The state’s poorest rank is in Education, in which it ranks 49th.
Nationally, the Scorecard data finds millions of Americans have been left out of the economic recovery with little opportunity to take charge of their financial lives or plan for a more secure future. Large percentages of these households are experiencing profound levels of exclusion from the financial mainstream as they struggle in low-wage jobs and are forced to rely on fringe, often high-cost financial services just to make ends meet. Among the key findings:
· Low-wage jobs have increased in all but two states. Thirty-six states and Washington, D.C., saw decreases in average annual pay between 2012 and 2013.
· Nationally, 56% of consumers have subprime credit scores, meaning they cannot qualify for credit or financing at prime rates and are more likely to use costly alternative financial products. One in five households regularly relies on fringe financial services, such as payday loans, to meet their needs.
· Liquid asset poverty rates – the percentage of households with less than three months of savings at the poverty level – are particularly high in states with the greatest levels of income inequality. This trend is most evident in poor states in the South and Southwest and high-cost states on the East and West coasts, all of which have large populations of color. If families can’t save, closing the wealth gap is all but impossible.
· In 34 states, the gap in homeownership rates between households of color and white households has widened. The 10 states where the gap is greatest are Rhode Island, New York, Massachusetts, Connecticut, Wisconsin, South Dakota, North Dakota, Minnesota, New Jersey and Kentucky.
· High-cost (or subprime) mortgage loans—one of the main culprits behind the housing boom and bust—are on the rise. The percentage of homeowners with high-cost mortgages is higher in 42 states than it was in 2010.
“The economic recovery experienced by some segments of our society is barely a blip in the lives of millions of Americans who continue to struggle in low-wage jobs and have little ability to save and build a better future for themselves and their children,” said Andrea Levere, president of CFED. “In far too many cases, these households are living outside the financial mainstream, relegated to using often high-cost financial services that trap them in a cycle of debt and financial insecurity.”