Getting a tax refund can ease some financial stress, but the bills tend to the outlast the cash. Then there’s always a surprise expense.
The city of Rochester is working on a pilot program that will help low-income families by spreading out their refund and matching some of the money they put away for a rainy day.
Rochester was one of 10 cities selected for a matched savings program geared to families who receive the Earned Income Tax Credit, which is for low- or moderate income workers who meet specific requirements.
The program will allow eligible families to receive a cash match for portions of the tax refund that they put into savings.
“The main goal is to help smooth out that tax credit over the course of the year to help them reduce their financial stress and weather those shocks that may come throughout the year so they have a nest egg they can rely on if they need to,” said Henry Fitts, director of the Mayor’s Office of Innovation.
Despite being selected in a competitive process, Rochester’s matched savings plan still is being developed. As part of the grant, the city is receiving help from a several organizations to design the specifics of the plan. The three funders are providing $150,000 for the eligible families. Fitts said the city intends to raise money to expand the program — the size depends on the success of the fundraising effort.
In a news release announcing Rochester’s selection for the initiative, Mayor Lovely Warren said, “There is no more pressing need in our community than helping families build a brighter financial future for their children.”
Economic opportunity for all residents was among the top concerns of mayors who responded to the Bloomberg Philanthropies’ 2018 American Mayors Survey.
Rochester’s matched savings plan will take a comprehensive approach to improving the financial health of low-income residents, Fitts said. That includes setting up bank accounts and providing financial counseling.
The work is part of the city’s Office of Community Wealth Building and builds on the initiatives through involvement with Cities for Financial Empowerment.
Locally, the matched savings program will partner with Consumer Credit Counseling Service of Rochester, the Empire Justice Center and the Rochester-Monroe Anti-Poverty Initiative.
“If we just gave somebody a matched savings account, it would not necessarily change a lot about their life or their behavior,” Fitts said. “So that educational component is really key. We want to show the alignment that is taking place.”
Fitts said the pilot will involve approximately 200 families. Selection criteria is being developed and families may wind up being referred from other programs, such as RMAPI’s Bridges to Success. Fitts said enrollment is expected to begin in November and be completed by February, which is when Empire Justice begins helping people with their tax returns.
The pilot will run for a year, and Fitts said the city will monitor results to see how it can advocate for more money to expand the program.
“We’ll be measuring things like increased savings, reduced debt, improved credit scores,” he said.
The other cities are Albuquerque, New Mexico; Cincinnati and Dayton, Ohio; Detroit and Lansing, Michigan; New Orleans, Louisiana; Newark, New Jersey, Racine, Wisconsin; and Tulsa, Oklahoma.