Aloha. Mahalo to Dara [Dara Duguay, Jump$tart executive director] for inviting me to speak today – a partial repayment, if you will, for the terrific job that she did in speaking at the first annual Economic and Financial Literacy Conference in Hawaii in August, which I cosponsored with the Hawaii Council on Economic Education (HCEE). In addition to information from our guest speakers and exhibitors on what has been working on the national level and in other states, I heard the true extent, at that conference, of the financial illiteracy problem in Hawaii, thanks to a statewide survey of adults commissioned by the HCEE and an academic paper presented by the Economics Department at the University of Hawaii. I was also interested to hear what transpired in breakout sessions that recommended solutions related to outreach, methods of delivery, curriculum development, and education challenges posed by the need to focus on basic subjects in the classroom. Although we certainly didn't come up with all of the answers that day, it was a positive first step.
The momentum from our conference has been as tangible as the high level of energy exhibited at the conference that day. It was this energy that launched busy months in the Senate for economic and financial literacy. In September, I offered with Senator George Allen an amendment to the Labor-HHS-Education Appropriations bill that sought $5 million for the Excellence in Economic Education (EEE) Act. As many of you are aware, the program provides resources for teacher training, evaluations, research, and other activities in K-12 education. Several of you supported the amendment, and I thank you for that. However, a very limited allocation for programs in the appropriations bill, stemming from previous decisions on tax cuts and military spending, and poor economic conditions, meant that there was limited money to go around. So, I was happy to accept $2 million that was put in the Senate-passed bill to first-fund the EEE Act. I have been working with conferees to ensure that the $2 million is retained, but the conference report is currently held up due to an important labor issue.
On October 30th, I introduced S. 1800, the College LIFE, or Literacy in Finance and Economics, Act, in preparation for next year's reauthorization of the Higher Education Act. Again, I thank Jump$tart, NCEE, FCCLA, and other organizations for providing support and input as I was constructing this bill. Reasons for it are simple. As we work on increasing access to higher education, we must give students access to the tools that they need to make sound economic and financial decisions once they are on campus. However, the lack of personal finance and economics K-12 education standards in certain states, or lack of implementation of existing standards in other states, means that many students arrive at college with little understanding of economic concepts like supply and demand or benefits vs. costs, or personal finance concepts like household money management or the importance of maintaining good credit history. Without this understanding, college students are not able to effectively evaluate credit alternatives, manage their debt, and prepare for long-term financial goals, such as saving for a home or retirement.
The College LIFE Act represents a comprehensive approach. It proposes four new grant programs to provide resources to: (1) encourage experimentation with delivery systems – innovative methods used in or out of the classroom to increase college students' financial literacy; (2) share best practices about or create personal finance courses; (3) assist efforts looking at the best ways to integrate personal finance and economic education into basic educational subjects; and (4) train teachers and high school counselors toward increasing financial and economic literacy in grades K-12. It includes a pilot program for five higher education institutions to motivate students to take a personal finance course and enter into preventive annual credit counseling, working with local entities, and measure the effectiveness of efforts in any behavioral changes that result. S. 1800 also promotes greater collaboration with and support from Federal agencies in the higher education arena. Finally, it authorizes personal finance and economic education and counseling as allowable uses in existing higher education programs, such as TRIO, GEAR UP, and Title III and Title V Serving Institutions. I introduced this bill with Senators Sarbanes and Corzine. I am also working with other colleagues such as Senator Enzi to include provisions in the Higher Education Act reauthorization. You're going to hear some of the same names over and over again, and these are real champions in the Senate for financial literacy. But, we need to gain more support for our cause. Any assistance you can provide in obtaining additional cosponsors for the College LIFE Act would be extremely helpful, and I would like to thank you in advance for your efforts.
Earlier this week, the Senate passed the Fair Credit Reporting Act (FCRA) bill, S. 1753, which includes a provision creating a federal Financial Literacy Commission. I cosponsored a version of this legislation upon first introduction by Senator Sarbanes, and worked with Senators Sarbanes, Enzi, Stabenow, and Corzine on compromise language that is being negotiated with the House. As drafted, the Commission would be housed within the Treasury Department and include representatives from every federal agency that has financial literacy programs. It would create a national strategy to provide the federal government with an important blueprint to follow, encourage agency coordination, and ensure that the effectiveness of programs is measured – again in terms of behavioral change. The FCRA bill passed the Senate on Wednesday, and differences will be resolved between the Senate and House versions of the bill.
However, our financial literacy work on the FCRA bill is not done. I filed but did not offer, in the interest of time, an amendment that speaks to the need for public awareness about the importance of financial and economic literacy. My amendment is similar to a bill introduced in the House by Representative David Dreier, and cosponsored by colleagues on both sides of the aisle, to establish a pilot national public service multimedia campaign to enhance the state of financial literacy in the U.S. It would authorize $3 million over three years for this purpose. My amendment differs from the Dreier bill in that it coordinates this campaign with the Federal Commission created by S. 1753 and the national strategy produced by the Commission. It would authorize the Commission to work in collaboration with an entity accomplished in public service campaigns that has secured private sector funds to supplement federal funding and community organizations well-qualified by virtue of their experience in the field of financial literacy and education. My amendment also requires that performance measures be developed to assess the effectiveness of such a multimedia campaign, via positive changes in behavior. It would be significant to be able to assess the effectiveness of the campaign and related financial literacy efforts so as to understand what works and doesn't work and replicate successes in the future. I will continue to work with my colleagues on the Senate Banking and House Financial Services Committees to authorize a multimedia campaign.
Finally this week, I introduced a bill to restore trust in the mutual fund industry, which has been bogged down with recent scandals that we've heard about in the news. One of the provisions in my bill requires the Securities and Exchange Commission (SEC) to conduct a study to assess financial literacy among mutual fund investors. This study would identify the most useful and relevant information that investors need prior to purchasing shares, methods to increase transparency of expenses and potential conflicts of interest in mutual fund transactions, existing efforts to educate investors, and a strategy to increase the financial literacy of investors that results in positive change in investor behavior. I included this study because any additional disclosure requirements for mutual funds will not truly work unless investors are given the tools they need to make smart investment decisions, and we must first know what education exists.
An example of a requirement in my bill is a provision that asks brokers to disclose in writing, to those who purchase mutual company shares, the amount of compensation the broker will receive due to the transaction, instead of simply providing a prospectus. My bill also requires that brokerage commissions be counted as an expense. Consumers often compare the expense ratios of funds when making investment decisions. These provisions will help provide investors with the relevant and useful information that they need to make sound financial decisions. This bill was cosponsored by Senators Fitzgerald and Lieberman; however, we would again welcome any efforts to gain additional cosponsors for this legislation.
Looking forward to next year, I am working on financial literacy with Senator Fitzgerald, Chairman of the Subcommittee on Financial Management, The Budget, and International Security. I am the Ranking Member of that Subcommittee. We are working together to hold a financial literacy hearing at the end of March or beginning of April, coordinated with the date of Jump$tart events in the first week of April. I also look forward to having another Financial Literacy for Youth Day on Capitol Hill during April next year, so that we can educate other Senate and House offices about the importance of what we are doing.
I, as well as all of you here, understand how meaningful it is that we continue our coordinated efforts to ensure that Americans are financially literate. We must continue to work together to encourage better decisionmaking by individuals, stronger families, better-functioning markets, and a more secure future for our nation through economic and financial literacy. I commend members of Jump$tart for working diligently in this area with our youth – the future hope of our country and our world.
