October 8, 2015
Colleen Quint, President & CEO, Alfond Scholarship Foundation / Harold Alfond College Challenge
Below is a full transcript of this video presentation. It has not been edited or reviewed for accuracy or readability.
Colleen Quint: Hey, everybody. I'm Colleen Quint. I'm with the Alfond Program up in Maine, which is a fine place to be from. And I want to start by thanking Ray and the St. Louis Fed and obviously Michael and Margaret and all their great work at CSD. And, Ray, let me just say this is a fantastic facility and building, and I'd be happy to have all of my meetings right here. And I also want to thank my colleagues on the panel, and I'll say that the folks here with me today started as colleagues and now I consider them as friends. And their long-standing work and commitment in the field has really been an inspiration to me as I've gotten started here and there's so much evident from all of you and from folks here in the room, so it's a real pleasure to be here with all of you. And then finally just to thank everybody here in the room who made the time to be here. Everybody's busy. You make a choice every day about how you're going to spend your time, and I'm glad you're here with us today. As I think everybody who has been here today has an appreciation of, this is a really exciting moment to be working in this field. There's a lot of stuff that's happening. It's developing really rapidly and it's an incredibly collaborative field, and people really share information and resources and learning really readily and that's exciting. I hope for everybody here the biggest takeaway, though, is that we're all sort of trying to get to the same place and we're getting there in slightly different ways and that's totally okay. In fact, there's a lot of ways in which I think that's a good think. So there are multiple pathways to get there.
So let me start, though, by telling you a little bit about Maine's model for those of you who might not be familiar with it. We hit a pretty important milestone a couple of months ago, which is that we've now invested $25 million on behalf of 50,000 Maine kids since the inception of the program. Now, Maine only has 2.2, maybe 2.3 million people in the entire state, so that's a pretty good outcome in a state of our size. The way that we do that is we invest $500 at birth. And as Theresa mentioned, we now do that automatically and we do it statewide and we do use a 529 platform for our work.
When we set up the program back in 2008, 2009, we really were trying to work at two different levels simultaneously. So at the individual level, we realized and recognized based on work that Margaret and Michael and Willie have done that the potential impact at the individual level of having these accounts and what that means in terms of a kid's trajectory and their opportunities. We also understood that collectively there was an opportunity here in a state like Maine, like many others in the room, facing a change in economy, that needs a more educated workforce. So we were excited about the opportunity to try to move the needle individual and collectively at the same time.
Now, how we did this was by working with our partners at FAM, the Finance Authority of Maine, which manages Maine's 529 program, and in turn with Merrill Lynch, who's the program manager for NextGen, which is the name of our program. And we went that route for a couple of reasons, but the one I'll touch on right now is it had already been built. So we didn’t want to have to reinvent the wheel. Now, as I'm sure it's no surprise to all of you in the room, it wasn't quite as easy as simply taking off the shelf what they already had and sending it back out again. We had to do quite a bit of lift as did FAM and Merrill to be able to make it all work. But we did have the fundamental core platform already in place, and that was really helpful to get us started.
How we funded it is perhaps a little unusual, although frankly, less unusual than it was even a year ago. When I went to the first CFED meeting on this in April of 2014, I was on the job two-and-a-half months at that point. We had just announced the move to automatic enrollment, and I'm pretty sure at that time we were the only one in the room who was funded by private philanthropy, by a family foundation. Now there are more and more philanthropic foundations coming to the field and being involved in starting seeding the money, providing matching grants, being involved in multiple different ways and that's really, really exciting.
But the vision for our program came from a gentleman named Harold Alfond and Mr. Alfond was a guy who founded a shoe company in Maine, an industry that had been successful in Maine for a long, long time and he built a good shoe company, Dexter Shoe. It was a successful business. He actually made all his money when he sold it for Berkshire Hathaway stock. So I guess in the end, we kind of have Warren Buffett to thank for the position that we're in today, And I'd like to thank Mr. Buffett. He wouldn't be too upset about that, although he was not happy about the deal because he didn't get the better end of it. But we do fund it from the private philanthropy, from the Harold Alfond Foundation which is what I affectionately call the big foundation. I'm the little foundation that they give the money to, and I send it off to the kids.
Male: We're still pretty big.
Colleen Quint: Yeah. Well, you know, we're doing okay. But I don't hold on to it for very long. It goes out the door as soon as I get it.
But we also fund it with partnerships, and I'm going to talk about that in more detail in a minute. People--other presenters have talked about that earlier today, and that's a really important part of our model. How we grew it--we were statewide from the inception of the program after a very small pilot in the very first year in 2008, but we were statewide. We were an opt-in model for the first five years or so where families were required to open a NextGen account before the child's first birthday. We had about a 40 percent take rate, ten times the national average, a pretty good outcome by a lot of measures, but we were missing 60 percent of the kids. So we figured out how to do it automatically. And, again, when I say automatically, that's a little bit of a euphemism. It's automatic for the family. It's not so automatic for us or for FAM or for Merrill Lynch. But we figured out a way to make that work using the Custodial Omnibus Account, and so that's how we grew it. And I'm not going to go into a whole lot of detail on that. In the last panel, you heard about in the 529 platform. We do. We have that custodial account. We opened it on behalf of beneficiaries to be named later. So we have all the money invested every month based on the number of babies who have been born in a particular month, and then we have the roster of babies that we can match in when the time comes for distribution.
Parents are required to open their own account. Well, not required but if they want to make a contribution, then they need to open an account. And we can work with Merrill and FAM to cross-hatch them together so that our money's in our account and we control our money and their money is in their account and they control their money, which is arguably a pretty good thing for everybody concerned. But on the statement, we can combine them. And so they can see on a single--and we do a single one sheet of paper that tells them all the money. It's very simple. It's a little streamlined little chart right in the middle that says "Your $500 is now--well, hopefully more than $500. Maybe the last quarter maybe not so much and then what the total is, so it's easy to see.
And then, finally, how we frame it or talk about it. The name of our program is the Harold Alfond College Challenge, and the challenge part was really important to Mr. Alfond. He wanted everyone to have some skin in the game. The whole idea is that everybody has a role to play. So just like our foundation is stepping forward and setting up this program as grants, then there are other foundations and business partners we work with. There's a role for kids. There's a role for parents, for educators, for community members and that's why we call it the College Challenge.
Let me talk for just a minute about partnerships and how we use those to both broaden and deepen the impact of the program. The first one--this is an area that our board's been really interested in and it's been a fantastic way to engage our board members, many of whom are leading business folks in the communities across the state. We now have 20 of Maine's biggest businesses and leading businesses that represent over 50,000 Maine employees have signed on to be College Challenge Champions, and that means that they're making payroll deduction available directly into a NextGen account for their employees.
The great thing with that is that it's something they can do for all their employees. They could have employees who are grandparents putting money into the grandchildren's account. There's lots of really great things. It's a pretty easy sell. There's no cost for the employer. The structure is usually already in place. And this morning I got an e-mail from L.L. Bean. We met with them literally ten days ago and they e-mailed me this morning bright and early to say, "We talked about it internally. It was a pretty quick conversation. We want to be part of this." So that's a really exciting thing.
The philanthropic partnerships--we work with other foundations around the state to do outreach. So just like we're a universal program. But as we talked about earlier, there are things that we want to do to make sure that we target and reach families, particularly in the case of Maine Rural and LMI, Low Moderate Income families. So we work with Headstarts in four different counties. Maine has a Washington County as well. It is I've been told the poorest county east of the Mississippi maybe or just west of the Mississippi. And then next time we're hoping to also work with libraries and different communities across the street, and even tie in the account opening to an extra bonus if kids make their summer reading goal. So that helps us with kind of some of the broader pieces. And then schools and communities are really the next frontier for us. There's a lot that we feel like we can learn from the Kindergarten to College and the Promise Indiana. They have a higher touch model than we have, and that's a place where I think there's tremendous opportunity for us to grow, particularly as our universal babies, as we like to call them, head towards kindergarten.
And then, finally, just really, really quickly, the policy opportunities around growing your programs. Initially, when you're just focused internally, you want to think about--as you're thinking about your program decisions, just recognize that these are really policy questions masking as programmatic decisions. Who is going to be eligible? What's the scope and scale? What's the platform you're going to use? All of those different kinds of things really are policy questions for you to think about, and they all tie up into what your program goals are.
At the state level, a lot of folks use funding from the state in Maine that takes the form of FAM providing matching grants that they utilize from their NextGen program, from the national monies that come into the program they use to provide matching grants in Maine. There are tax credits and things like that that states have. There's asset testing that we talked about earlier. In Maine right now, given the current political climate, we're paying attention to the asset testing, not to grow but to make sure the program doesn't shrink. We want to make sure that families who have invested in their kids' future education can hold onto those dollars. And then nationally, again, as we've touched on earlier today, removing barriers to access, and that can happen through consistency, through regulation that provides a clearer context for people to operate within we think will really take a big step in helping places that want to move forward be able to do so a little more smoothly than maybe some of us who have been at it a little bit longer. And with that, I will hand it over to Carl.
Carl: Thank you. Well done.