State Treasurer John Murante
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State of Nebraska Office of State Treasurer John Murante To the Members of the Nebraska Investment Council: I am reaching out to the Council to share key information on the Meadowlark Scholarship Program. Attached to this letter is a document outlining some of the more “Frequently Asked Questions” as well as a one-pager, which goes more in- depth about the program. Earning a postsecondary education from a college or vocational school in our current economy is more critical – but also more expensive – than ever. It is well documented that going to college results in an increase in lifetime earnings, better communications skills and more community involvement thus opening doors to countless opportunities. Research indicates even a small amount in an educational savings account will lead to increased college or vocational school enrollment and completion. To ensure that access to higher education remains affordable, many states have taken steps to encourage families to save for future college expenses in the form of “529” college savings plans. Though there are numerous tax benefits associated with 529 savings plans, they are often underutilized, especially among lower- and middle-income families. Last year I worked with a number of state senators to enact meaningful legislation intended to lead the nation promoting access to higher education through innovative college savings incentives. The goal, eventually, is to see that every child in Nebraska has the opportunity to attend a two- or four-year educational institution debt-free through smart savings and investment without relying on government assistance. I’m pleased that our efforts were successful and the Nebraska Legislature enacted the Meadowlark Act, which created the Meadowlark Scholarship Program, a financial investment in Nebraskans of all income levels and which exemplifies the state’s dedication to higher education for its citizens. The Meadowlark Program, through public/private partnerships, will promote access to post-secondary educational opportunities by providing and funding a NEST529 account for babies born on or after January 1, 2020, who are residents of Nebraska at the time of birth. Every Nebraskan with a dream of higher education deserves that opportunity, and the Meadowlark Program will help future generations overcome the financial obstacles in their path. As I stated earlier, enclosed are two documents outlining the program and addressing specific questions. I look forward to our discussion. Sincerely, John Murante Nebraska Treasurer Meadowlark Scholarship Fund Nebraska’s future depends on an educated workforce ready to meet the needs of tomorrow. Postsecondary education is an increasingly critical component of financial success, but access has long been skewed toward young people from higher income families. Lower income families are also left of out of the current incentives for educational savings built into the tax code. In recent years, educational savings accounts have emerged as a promising model for expanding access to higher education, especially for lower income children, and as a tool for expanding public policy incentives to build assets in a way the reaches all children and families. Brief facts about educational savings: Children with less than $500 in college savings are 3 times more likely to enroll in and 4 times more likely to graduate when enrolled in higher education. Mothers are 8 times more likely to continue saving for their child's college education when their child already has a college savings account set up by the state. Today more than 450,000 children nationwide are participating in 49 universal college savings programs in 31 states. Nevada, Rhode Island and Maine all have statewide programs and many cities have similar programs. College scholarships are important, but they are also an intervention that comes too late. Educational savings accounts have been found to help forge a “college-bound” identity in younger children, making them more likely to pursue steps toward higher education at a younger age and ultimately be able to benefit from scholarship programs when they become available. Although the program is a long-term investment, it also has an immediate impact on children and families who are receiving information about their educational savings account. This, even more than the amount of money in the account, has been found to be one of the primary benefits of similar programs. How it works: The Meadowlark Program was established by the legislature and the State Treasurer’s office in 2019. It is a public-private partnership modeled after the Cultural Preservation Endowment Fund. Meadowlark grants are seeded 529 college savings accounts for every Nebraskan born starting in 2020. A new cash fund will be created to receive private contributions. Once private contributions are received, they will be matched 1:1 by cash funds. These funds will be invested and starting in 2021, an equitable distribution will be made into the accounts of Nebraskan baby born in the previous year from the investment earnings in this account. The principal amount of money in the cash fund will never be spent. Up until age 30, children born in 2020 and beyond can access these funds from the state for allowable higher education expenses. If not used by age 30, the funds cede back to the endowment fund. Meadowlark Act – FAQs Why does this matter? Nebraska needs an educated future workforce to compete in a global economy. The Meadowlark Act establishes educational savings accounts for every baby born in Nebraska starting in 2020. Although the funding in the accounts will be limited, research has shown that less than $500 in an educational savings account makes a young person 3 times more likely to enroll in higher education and 4 times more likely to graduate. Additionally, parents with seeded college savings accounts are substantially more likely to continue savings for their children’s college education. Does this exist in other states? Today more than 450,000 children are participating in 49 programs in 31 states. Nevada, Rhode Island and Maine all have statewide programs and many cities have similar programs. Can these accounts be used for K-12 Education? The Tax Cuts and Jobs Act passed by the federal government in 2017 changed the federal rules on qualified deductions from 529 plans to allow up to $10,000 per student per year to be used to pay for K-12 tuition. Nebraska has not adopted these changes on a state level, so withdrawals would still be subject to state taxes. Under the Meadowlark Act, the statutory language only allows these funds to be used for qualified postsecondary expenses, not for K-12 education. Because the accounts will be held by the state until an individual applies for a qualified withdrawal, withdrawals are subject to the statutory language on allowable uses and could only be changed by a future legislature. How is it funded? The Meadowlark Act will have no General Fund impact. A new cash fund will be created to receive private contributions. Once private contributions are received, they will be matched 1:1 by cash funds. These funds will be invested and starting in 2021, an equitable distribution will be made into the accounts of Nebraskan babies born in the previous year from the investment earnings in this account. The principal amount of money in the cash fund will never be spent. .