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A bill that would provide approximately 1,300 New Haveners born each year with a $5,000 savings account is currently awaiting a vote on the floor of the Connecticut General Assembly.
The bill would set up a Connecticut Baby Bonds Trust for Connecticut children born into families enrolled in HUSKY, the state’s Medicaid program. Under the Baby Bonds Trust, the state would set up a $5,000 savings account for each child. The account would then be controlled by the Office of the State Treasurer. When the child turns 18, the money would be unfrozen and usable for education, housing, retirement or investment purposes. According to State Treasurer Shawn Wooden, the $5,000 is anticipated to grow to $16,618 by the time each youth can collect the funds, assuming a 6.9 percent rate of return.
At a New Haven round table discussion last Friday, New Haven Mayor Justin Elicker stressed the impact that the bill would have on Elm City residents, many of whom fall under HUSKY eligibility.
“Every year, 1,300 newborns [in New Haven] are born into poverty,” Elicker said at the discussion. “So every year, you add that many more people and think about their opportunity to succeed, because at the end of 18 years, they may have the ability to make a down payment on a home or to afford to go to a university, or to afford to start a new business. That work brings about generational change.”
If the annual 1,300 HUSKY eligibility numbers stay constant, it could mean a $6.5 million annual investment for New Haven, which would be projected to turn into over $21 million over the course of 18 years.
Each member of the Appropriations Committee representing New Haven — representatives Patricia Dillon, Toni Edmonds Walker, Robyn Porter and Juan Candelaria as well as Sen. Gary Holder-Winfield — voted to approve the trust.
Wooden, who introduced the bill on the floor of the state legislature, noted in a press release that research backs up the assertion that baby bonds legislation helps to eliminate racial wealth gaps. In a press release, his office cited a 2018 Columbia University Center on Poverty and Social Policy Study conducted by Naomi Zewde.
“I find that without the Baby Bond program, median wealth among young Caucasians is
approximately sixteen times that of the young African Americans ($46,000 vs. $2,900),” the study reads. “The baby bond program raises median wealth for both groups and reduces the disparity to a factor of 1.4, where Caucasian young adults hold $79,159 and African Americans $57,845 at the median.”
At the roundtable discussion, Wooden noted that to receive the funds, youth will have to complete a financial literacy training program, making the Baby Bonds initiative “holistic,” as it ensures that “people have the resources and the know-how to enter a level playing field.”
Wooden, who expressed enthusiasm that the bill had passed through the Appropriations Committee two days before the New Haven roundtable, said the legislation recognizes that many people cannot fend for themselves in a society defined by income inequality.
“There’s a lot of talk about ‘pull yourself up by your own bootstraps,’” he said. “And I recognized pretty early on that most of the people in my neighborhood didn’t have bootstraps to pull on, and so part of what this is about is actually creating bootstraps [for people] to pull on for themselves.”
Melissa Mason, executive director of employment agency New Haven Works said that she often comes across job seekers who are not qualified for positions because “they have not gotten that degree because they owe some [educational] fees.”
She said the funds provided by the baby bonds program could help change that.
“Providing youth with baby bonds is not only a direct way to grow the middle class in our cities, but it would really make programs like New Haven Works more effective,” Mason said. “Fast forward 20 years, what would it look like to have a program like this in effect — to have a cohort of 18-30 years walking through our doors having had this benefit?”
Baby bonds legislation is not a new concept. Sen. Cory Booker, D-N.J., made a $1,000 savings account for every child a core policy of his 2020 presidential campaign, a promise similar to a bill he had first proposed in 2017. In February, the junior senator from New Jersey reintroduced a bill to promote the legislation on a federal level.
In a press release, Sen. Richard Blumenthal, D-Conn., noted that he plans to continue fighting for such federal legislation as Wooden’s bill moves through Hartford.
“I am proud to support the efforts underway to address income inequality through the issuance of Baby Bonds,” Blumenthal wrote in the press release. “If we are going to reduce our nation’s wealth gap, we must start at birth providing future generations with the solid financial footing to achieve their educational, business, or homeownership goals. I look forward to fighting for this groundbreaking proposal at the federal level.”
At the roundtable last week, Blumenthal said the bill is “an idea that meets this moment of racial reckoning.”
“It creates, in a sense, a new American birthright, a new American financial birthright,” he said. “It is a great tradition of our American democracy that we invest in our people and we give them the means to mobility in our society.”
Though no baby bonds-like program exists in the United States, similar programs currently exist in Hungary and the United Kingdom.
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