Human Behavior

There is definitely no logic to human behavior.

Finally, a new idea

One of the less interesting aspects of covering Georgia’s legislature is that you find yourself writing the same stories about the same issues, year after year.

There is a group of stale old ideas that are endlessly recycled as “solutions” that will magically solve all our civic problems: a balanced budget constitutional amendment, zero-based budgeting, a flat tax, health savings accounts, a sunset law for state commissions.

The only thing that changes about these issues is that they get a new bill number every two years when a new term starts. Otherwise, they are fill-in-the-blank issues that reporters could almost write about in their sleep.

We do see new ideas from time to time, but not all of them are necessarily useful.

A few years ago, a Gwinnett County legislator sponsored a bill that would make it illegal to clone man-animal hybrids. It was certainly an innovative concept, but most rational people would agree that man-animal hybrids are not exactly a pressing problem in this state.

Similarly, there was a session when a couple of legislators introduced bills that would have made it a crime to implant a microchip in a person without their consent.

This was another new idea, but neither lawmaker could identify a single instance where a Georgian had ever been microchipped against their will. Neither bill made it into law.

With all that in mind, let me mention a bill in this year’s session that not only represents a new idea, but might actually accomplish a social goal.

Sen. David Shafer (R-Duluth), the president pro tem of the state Senate, introduced a bill that would allow banks and credit unions to offer what are called “prize-linked savings accounts.”

These accounts don’t pay interest, but they do enable the depositor to be eligible for periodic cash prize drawings held by the financial institution. The more money you deposit and keep in your account, the more chances you have to win one of these raffles.

“For some time I’ve been concerned about the low rate of savings in this country,” Shafer said.  “There’s a large percentage of people who could not pay an unexpected $400 expense without selling an asset or borrowing money.”

Shafer said he got idea for a prize-linked savings account when he visited the website of the United Kingdom’s National Savings and Investments agency.

For more than 50 years, National Savings and Investment has offered British consumers the opportunity to buy “Premium Bonds.”  The more bonds you buy and keep on deposit, the more chances you have of winning a regularly scheduled drawing where cash prizes range from 25 pounds ($31) to one million pounds ($1.25 million).

“I thought that was an interesting way to encourage people to save,” he said.

Several states have amended their banking laws to allow these kinds of accounts, including Michigan, Nebraska, North Carolina, Washington, Maryland, and Rhode Island.

Ben Iverson, an assistant professor of finance at Northwestern University, has done research into these types of accounts and says that they “offer an attractive alternative to a particularly financially vulnerable population — those with no savings who are one large medical bill or car wreck away from fiscal disaster — while decreasing overall spending on lotteries, where the vast majority of people reap no benefit.”

Shafer said he and some of his colleagues brainstormed several ideas for legislation that would encourage more people to save money and presented them to representatives of the state’s banks and credit unions. Prize-linked savings accounts “was one they embraced,” particularly the credit unions, he said.

Shafer said these prize-linked accounts might have some appeal for working-class people who would normally be tempted to spend some of their disposable dollars on lottery tickets.

“Most people would lose the drawing, just like they lose the lottery, but when they lose the drawing they would still have their savings,” he said.

Shafer’s legislation, SB 134, was passed by the Senate and received a favorable recommendation from the House Banks and Banking Committee.

There’s no way of knowing if it will pass the House before the General Assembly adjourns for this year. It may turn out that lawmakers don’t want to mess with the Georgia Lottery’s customer base by authorizing these kinds of savings accounts.

It’s still an intriguing idea and might be worth trying to see if it actually entices more people to save money.  At least it offers something new for legislators to think about.

© 2017 by The Georgia Report



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