August 6, 2007
Smart money | An experimental state program aims to boost secondary education among working Mainers
By Kerry Elson
An accounting degree would help Tracey Perkins land a promotion at Maine Oxy, a gas manufacturer in Auburn where she works as an accountant. But Perkins says she couldn't pursue her education because tuition was too expensive.
Now, the 34-year-old plans to take classes this fall at Central Maine Community College in Auburn and hopes to finish her degree by 2009. And the additional training will pay off soon ˆ Maine Oxy executives are grooming her to be the company's chief financial officer after the current CFO retires.
Perkins' tuition problem was resolved thanks to an experimental benefit program called Lifelong Learning Accounts, or LiLAs, which are designed to help workers afford post-secondary education.
Under the plan, workers open Lifelong Learning Accounts through the Finance Authority of Maine in Augusta and invest a minimum of $25 per month. The employer matches the amount, up to a limit it sets. Employees then sign a contract promising to use the savings to pay for classes, textbooks or related fees. (A 10% withdrawal penalty is levied on purchases not related to education.) Backers of the program say LiLA increases employee retention while enhancing employees' skill sets, but so far few Maine businesses are convinced the program is worth the expense.
State leaders hope the state program, which launched in 2006, eventually will become a permanent feature in company benefit plans here and across the United States. Supporters say such a program is especially important in Maine, where 25.6% of residents have post-secondary degrees, compared to 27.2% nationally, according to the U.S. Census Bureau. As Maine's economy strays from natural resources and manufacturing, higher education is increasingly important to stay competitive.
"We've got lots of baby boomers poised to retire," says Auta Main, manager of Maine's LiLA program. The state will need to train adults already working, she says, in order to fill the oncoming workforce shortage.
Maine's LiLA pilot may soon have a national counterpart. In July, Rep. Tom Allen introduced H.R. 2901, "The Lifelong Learning Accounts Act of 2007," which would grant tax breaks to employees and employers who participate in the LiLA program (tax breaks are not currently part of the Maine program). The bill is similar to one co-sponsored by Sen. Olympia Snowe in January, which, if passed, would create a LiLA pilot program for 20,000 people nationwide. Both bills await public hearings, and Main says they could be incorporated into larger education bills in a future congressional session.
Employees who've opened LiLAs report that they appreciate the employer support. For Perkins, the LiLA is ideal. Maine Oxy matches her $9.62 per week ˆ "the cost of a large pizza," she says. Without the LiLA, she says, "I'd probably [be in] debt forever with student loans. It's perfect for me to put in a minimum amount of money and get a great education out of it."
But until companies can receive federal tax credits for participating, some may not be willing to offer a benefit like LiLA. Since last year, Main has met with 87 business owners to convince them the accounts would boost employee recruitment and retention. But since the state launched the program in 2005, only 14 companies have signed on, and only a couple dozen employees have opened accounts. Many business owners told Main that, while they like the idea, they're already struggling to pay other expenses like health care.
"More bang for the buck"
Supporters say Lifelong Learning Accounts are a worthy investment for companies and an improvement over existing programs that help finance adult education. A Coverdell Education Savings Account, for example, requires contributions be made before the beneficiary turns 18 and expires when the beneficiary turns 30. The Hope Credit, which offers a maximum $1,650 tax credit for those in a degree program, requires employees to be in school at least part-time, and the funds can only be used for tuition.
The LiLA program, by contrast, can be used by an employee of any age, and the employee doesn't have to be enrolled in a degree program. Funds can be used to pay for a range of expenses, including textbooks, application fees and supplies. In addition, the account belongs to the employee, rather than their employer, so if the employee leaves one job for another, she can use the funds in her new position.
To open a LiLA, employees at participating companies must open a NextGen College Investing Plan through the Finance Authority of Maine. The account essentially is a NextGen account, except it also requires a monthly, dollar-for-dollar match from the employer, up to a limit the employer sets. While there's no contribution limit, most employers have chosen to give under a thousand dollars annually to each of their employees' LiLAs, Main says. The accounts also can receive third-party contributions, from grant funds to union contributions.
Employees contribute to the LiLA via direct deposit, after taxes are subtracted from their paychecks.
Employer and employee contributions aren't the only way that LiLAs grow. Just like a NextGen, the accounts earn income from the portfolio in which the money is invested, and receive a $200 yearly match from FAME, as long as the employee is a state resident and gross annual income is less than $75,000.
After employees create the account, they meet with an education advisor at the Maine CareerCenters or Maine Centers for Women, Work and Community, creating a plan for how they'll use their investments. (For more on how LiLAs are put together, see "Meeting LiLA," below.)
The program was launched in Maine in 2005 as a pilot for the Council on Adult and Experiential Learning, a nonprofit group in Chicago that designed the LiLA concept in 2003. CAEL has started several regional pilot programs since then, in San Francisco, Chicago and Fort Wayne, Ind. This year, the council is launching a second round of pilots in Kansas City, Mo., and in San Francisco, to refine the model before the possible nationwide pilot proposed in Snowe's bill.
The state began planning the program in 2003, when Larinda Meade, then director of the state's Bureau of Employment Services, heard about it at an economic development conference in Boston. Meade secured more than $600,000 in grants to fund the initiative from the Ford Foundation and the U.S. Department of Labor. Those funds, which will run out in June 2008, were used to make marketing materials, hire a program administrator ˆ Auta Main, formerly director of Maine Time Banks in Portland ˆ and pay for consultants from CAEL and Maine Centers for Women, Work and Community.
So far, 14 employers ˆ mostly small businesses with fewer than 100 employees ˆ have signed on, including Coastal Enterprises Inc. in Wiscasset, Morris Yachts in Bass Harbor and Green Acres Kennel in Bangor. Main says another 15 employers in Maine are seriously considering joining.
Easing tuition payments is increasingly important, says Main, because the wage gap between those with post-secondary degrees and those without is widening. Nationally, someone with a bachelor's degree earned an average of $54,659 a year in 2005, 46% more than someone with a high school degree, according to the U.S. Census Bureau. In 2001, those with bachelor's degrees earned 43% more than those without.
State leaders have tried varied tactics to boost degree attainment here ˆ on July 2, Gov. John Baldacci signed a bill that gives tax credits to graduates of Maine colleges who stay in the state after graduation. But the LiLA program could be particularly effective at boosting the state's educational profile, says Phillip Trostel, a professor of economics at the University of Maine who specializes in education spending.
"We're spending a lot of money on people who would be going to college anyway," he says. "If you want to maximize the bang for your buck, you need to target those who are the margins of college attendance, who would go if they had a little more financial support."
A faster route
Supporters of LiLAs contend that the accounts encourage workers who hadn't considered education to do so. Participants in Maine interviewed for this story, however, were already considering pursuing a degree; the LiLA just allowed them to do so more quickly and without incurring debt.
ASK for Home Care, an assisted living facility in South Thomaston, was the first company in the state to sign onto the program, agreeing to contribute a maximum of $1,300 per year to accounts for each of its 60 nurses on staff. So far, two have set up LiLAs, including Chief Financial Officer Jodie Heal, who used $2,000 from the account to buy supplies for her online business administration courses at Berkeley College in West Patterson, N.J., and to pay her graduate school application fees.
Diane Klausky, an accountant at Morris Yachts in Bass Harbor, is contributing $50 a month to her LiLA to help pay for accounting classes at the University of Maine at Augusta. Without the account, she would have completed the degree in six years; now, she hopes to complete it in three, and earn a higher salary as a result.
For participating businesses, quantifying the benefit isn't quite as easy since the program is new. At Green Acres Dog Kennel, co-owner Don Hanson had offered tuition reimbursement on a case-by-case basis, paying as much as a "couple thousand dollars" for employees' dog training certification courses. In May, Hanson began contributing $25 a month to five employees' accounts ˆ "a significant investment" for the company. "We're starting at the bottom to see how it works," he says, adding that he hopes the program will boost employee performance and retention.
The LiLA program has helped with employee recruitment at ASK for Home Care. In June, a new hire accepted an offer there because of the LiLA program, hoping to start her nursing degree in the fall, according to Heal. "In our industry, recruitment and retention is a big problem and we have a lot of different competition with companies that are bigger than ours," Heal says.
At Maine Oxy, Human Resources Director Diane Clairmont hopes the LiLA program will train a new generation of company executives, such as Tracey Perkins. "A lot of the individuals in senior management are [baby-boomers]," she says. "We need to take initiative to have people waiting in the wings as the baby boomers retire."
The company has a history of funding employee education, spending roughly $60,000 per year on courses like safety and driver training, but Clairmont says it couldn't have afforded to pay for Perkins' associates degree alone.
And like others considering offering LiLAs, Clairmont hopes Congress passes Rep. Allen's bill, which would make offering LiLAs more affordable by giving tax breaks to companies who do so. If the bill were to pass, says Main, "it would really push LiLAs on the fast track."
Until then, LiLAs might stay on the fringe, argues Trostel at the University of Maine. "I think for it to have a big impact, there has to be some policy incentive for businesses to participate," he says. "If you just say, 'Hey, this is a great idea, why don't you guys do it?' I don't think you'll see widespread usage.'"
Now, the 34-year-old plans to take classes this fall at Central Maine Community College in Auburn and hopes to finish her degree by 2009. And the additional training will pay off soon ˆ Maine Oxy executives are grooming her to be the company's chief financial officer after the current CFO retires.
Perkins' tuition problem was resolved thanks to an experimental benefit program called Lifelong Learning Accounts, or LiLAs, which are designed to help workers afford post-secondary education.
Under the plan, workers open Lifelong Learning Accounts through the Finance Authority of Maine in Augusta and invest a minimum of $25 per month. The employer matches the amount, up to a limit it sets. Employees then sign a contract promising to use the savings to pay for classes, textbooks or related fees. (A 10% withdrawal penalty is levied on purchases not related to education.) Backers of the program say LiLA increases employee retention while enhancing employees' skill sets, but so far few Maine businesses are convinced the program is worth the expense.
State leaders hope the state program, which launched in 2006, eventually will become a permanent feature in company benefit plans here and across the United States. Supporters say such a program is especially important in Maine, where 25.6% of residents have post-secondary degrees, compared to 27.2% nationally, according to the U.S. Census Bureau. As Maine's economy strays from natural resources and manufacturing, higher education is increasingly important to stay competitive.
"We've got lots of baby boomers poised to retire," says Auta Main, manager of Maine's LiLA program. The state will need to train adults already working, she says, in order to fill the oncoming workforce shortage.
Maine's LiLA pilot may soon have a national counterpart. In July, Rep. Tom Allen introduced H.R. 2901, "The Lifelong Learning Accounts Act of 2007," which would grant tax breaks to employees and employers who participate in the LiLA program (tax breaks are not currently part of the Maine program). The bill is similar to one co-sponsored by Sen. Olympia Snowe in January, which, if passed, would create a LiLA pilot program for 20,000 people nationwide. Both bills await public hearings, and Main says they could be incorporated into larger education bills in a future congressional session.
Employees who've opened LiLAs report that they appreciate the employer support. For Perkins, the LiLA is ideal. Maine Oxy matches her $9.62 per week ˆ "the cost of a large pizza," she says. Without the LiLA, she says, "I'd probably [be in] debt forever with student loans. It's perfect for me to put in a minimum amount of money and get a great education out of it."
But until companies can receive federal tax credits for participating, some may not be willing to offer a benefit like LiLA. Since last year, Main has met with 87 business owners to convince them the accounts would boost employee recruitment and retention. But since the state launched the program in 2005, only 14 companies have signed on, and only a couple dozen employees have opened accounts. Many business owners told Main that, while they like the idea, they're already struggling to pay other expenses like health care.
"More bang for the buck"
Supporters say Lifelong Learning Accounts are a worthy investment for companies and an improvement over existing programs that help finance adult education. A Coverdell Education Savings Account, for example, requires contributions be made before the beneficiary turns 18 and expires when the beneficiary turns 30. The Hope Credit, which offers a maximum $1,650 tax credit for those in a degree program, requires employees to be in school at least part-time, and the funds can only be used for tuition.
The LiLA program, by contrast, can be used by an employee of any age, and the employee doesn't have to be enrolled in a degree program. Funds can be used to pay for a range of expenses, including textbooks, application fees and supplies. In addition, the account belongs to the employee, rather than their employer, so if the employee leaves one job for another, she can use the funds in her new position.
To open a LiLA, employees at participating companies must open a NextGen College Investing Plan through the Finance Authority of Maine. The account essentially is a NextGen account, except it also requires a monthly, dollar-for-dollar match from the employer, up to a limit the employer sets. While there's no contribution limit, most employers have chosen to give under a thousand dollars annually to each of their employees' LiLAs, Main says. The accounts also can receive third-party contributions, from grant funds to union contributions.
Employees contribute to the LiLA via direct deposit, after taxes are subtracted from their paychecks.
Employer and employee contributions aren't the only way that LiLAs grow. Just like a NextGen, the accounts earn income from the portfolio in which the money is invested, and receive a $200 yearly match from FAME, as long as the employee is a state resident and gross annual income is less than $75,000.
After employees create the account, they meet with an education advisor at the Maine CareerCenters or Maine Centers for Women, Work and Community, creating a plan for how they'll use their investments. (For more on how LiLAs are put together, see "Meeting LiLA," below.)
The program was launched in Maine in 2005 as a pilot for the Council on Adult and Experiential Learning, a nonprofit group in Chicago that designed the LiLA concept in 2003. CAEL has started several regional pilot programs since then, in San Francisco, Chicago and Fort Wayne, Ind. This year, the council is launching a second round of pilots in Kansas City, Mo., and in San Francisco, to refine the model before the possible nationwide pilot proposed in Snowe's bill.
The state began planning the program in 2003, when Larinda Meade, then director of the state's Bureau of Employment Services, heard about it at an economic development conference in Boston. Meade secured more than $600,000 in grants to fund the initiative from the Ford Foundation and the U.S. Department of Labor. Those funds, which will run out in June 2008, were used to make marketing materials, hire a program administrator ˆ Auta Main, formerly director of Maine Time Banks in Portland ˆ and pay for consultants from CAEL and Maine Centers for Women, Work and Community.
So far, 14 employers ˆ mostly small businesses with fewer than 100 employees ˆ have signed on, including Coastal Enterprises Inc. in Wiscasset, Morris Yachts in Bass Harbor and Green Acres Kennel in Bangor. Main says another 15 employers in Maine are seriously considering joining.
Easing tuition payments is increasingly important, says Main, because the wage gap between those with post-secondary degrees and those without is widening. Nationally, someone with a bachelor's degree earned an average of $54,659 a year in 2005, 46% more than someone with a high school degree, according to the U.S. Census Bureau. In 2001, those with bachelor's degrees earned 43% more than those without.
State leaders have tried varied tactics to boost degree attainment here ˆ on July 2, Gov. John Baldacci signed a bill that gives tax credits to graduates of Maine colleges who stay in the state after graduation. But the LiLA program could be particularly effective at boosting the state's educational profile, says Phillip Trostel, a professor of economics at the University of Maine who specializes in education spending.
"We're spending a lot of money on people who would be going to college anyway," he says. "If you want to maximize the bang for your buck, you need to target those who are the margins of college attendance, who would go if they had a little more financial support."
A faster route
Supporters of LiLAs contend that the accounts encourage workers who hadn't considered education to do so. Participants in Maine interviewed for this story, however, were already considering pursuing a degree; the LiLA just allowed them to do so more quickly and without incurring debt.
ASK for Home Care, an assisted living facility in South Thomaston, was the first company in the state to sign onto the program, agreeing to contribute a maximum of $1,300 per year to accounts for each of its 60 nurses on staff. So far, two have set up LiLAs, including Chief Financial Officer Jodie Heal, who used $2,000 from the account to buy supplies for her online business administration courses at Berkeley College in West Patterson, N.J., and to pay her graduate school application fees.
Diane Klausky, an accountant at Morris Yachts in Bass Harbor, is contributing $50 a month to her LiLA to help pay for accounting classes at the University of Maine at Augusta. Without the account, she would have completed the degree in six years; now, she hopes to complete it in three, and earn a higher salary as a result.
For participating businesses, quantifying the benefit isn't quite as easy since the program is new. At Green Acres Dog Kennel, co-owner Don Hanson had offered tuition reimbursement on a case-by-case basis, paying as much as a "couple thousand dollars" for employees' dog training certification courses. In May, Hanson began contributing $25 a month to five employees' accounts ˆ "a significant investment" for the company. "We're starting at the bottom to see how it works," he says, adding that he hopes the program will boost employee performance and retention.
The LiLA program has helped with employee recruitment at ASK for Home Care. In June, a new hire accepted an offer there because of the LiLA program, hoping to start her nursing degree in the fall, according to Heal. "In our industry, recruitment and retention is a big problem and we have a lot of different competition with companies that are bigger than ours," Heal says.
At Maine Oxy, Human Resources Director Diane Clairmont hopes the LiLA program will train a new generation of company executives, such as Tracey Perkins. "A lot of the individuals in senior management are [baby-boomers]," she says. "We need to take initiative to have people waiting in the wings as the baby boomers retire."
The company has a history of funding employee education, spending roughly $60,000 per year on courses like safety and driver training, but Clairmont says it couldn't have afforded to pay for Perkins' associates degree alone.
And like others considering offering LiLAs, Clairmont hopes Congress passes Rep. Allen's bill, which would make offering LiLAs more affordable by giving tax breaks to companies who do so. If the bill were to pass, says Main, "it would really push LiLAs on the fast track."
Until then, LiLAs might stay on the fringe, argues Trostel at the University of Maine. "I think for it to have a big impact, there has to be some policy incentive for businesses to participate," he says. "If you just say, 'Hey, this is a great idea, why don't you guys do it?' I don't think you'll see widespread usage.'"
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