Pet Project Alert: LA’s $2.7 Million Savings Account Program for Kids

LA WATCHDOG

LA WATCHDOG--Our cash strapped City is “exploring the implementation” of a Child Savings Account program for each public school kindergarten student who lives in the City of Los Angeles.  This program would cost $2.7 million a year as $50 will allocated to each of the 44,000 (charter and non-charter) kindergarten students in the Los Angeles Unified School District.  This amount includes matching funds for the 25% of the families who make an additional contributions, but does not include the 11,000 LAUSD students who do not live in the City. 

 

This program is designed to “incentivize college or technical/trade school completion rates” as college graduates earn over 60% more than high school graduates.  

While this idea is well intentioned, the City Administrative Officer questioned the wisdom of this program given the City’s precarious finances.  This current year’s budget is $55 million in the hole even after raiding the Reserve Fund for $36 million.  The upcoming “balanced” budget is held together by bubble gum and relies on many keep-your-fingers-crossed assumptions and other budget gymnastics.  The future Structural Deficit is anticipated to be almost $300 million over the next four years.  And this cumulative deficit does not take into consideration new union contracts for the police, firefighters, and civilian workers or adequate funding for our streets and the City’s massively underfunded pension plans. 

The CAO also stressed that “the City has existing significant funding needs for critical infrastructure, such as streets, storm drains, City facilities and technology” that the City has not been able to fund. The Child Saving Account program would add to this burden.  

The City appears to be clueless on how to implement and administer a Child Savings Account program.  This is why the Health, Mental Health, and Education Committee has requested the Housing and Community Investment Department (why this department?) to prepare a Request for Proposals for a consultant who will develop a “comprehensive analysis of the benefits, structure, financing, management, and recommendations for implementing a pilot Child Savings program.” 

But the preparation of the RFP is expected to take up to six months (seems ridiculously long) which would be followed by the selection of the consultant, the preparation of consultant’s analysis and report, the approval of the City Council, and the implementation of the program.  

But this may take two years, especially if our not so efficient City has to work with the dysfunctional and financially challenged LAUSD bureaucracy. 

The administration of the Child Savings Account program will be a nightmare.  Over a 13 year period, there will be almost 600,000 accounts. But the $35 million in assets that will be allocated to this program will not generate sufficient fee revenue to support the proper management of this program.  This will require the City to foot the bill to administer these accounts at a cost estimated to be in the range of $1 million a year.  

While it is hard to argue that is not a worthwhile endeavor, our cash strapped City does not have the money to fund and administer this program or the bandwidth to properly manage this savings plan, especially when you consider the City’s fiduciary duties to the account holders.  

The City cannot be all things to all people.  It is time to deep six David Ryu’s feel good pet project, the Child Savings Account program, and for the City to focus on Back to Basic priority issues such as our infrastructure, affordable housing, the homeless, public safety, and living with its financial means. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  He can be reached at:  lajack@gmail.com.)

-cw

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