Connecticut is just days away from welcoming the first newborns in the state to benefit from its newly launched baby bond program.
At midnight July 1, children born in the state — whose births are covered by Husky, Connecticut's Medicaid program — will see $3,200 deposited in a trust managed by the State Treasurer's office, which will be accessible to them in adulthood for use on specific investments officials believe can address a growing wealth divide.
Billed as a first-in-the-nation initiative, state lawmakers approved Connecticut's baby bond program in fiscal 2022, but failed to clear funding in the following year's budget leading to a two-year delay in implementation.
Under a renegotiated funding arrangement proposed by legislative leaders and then folded into the state's recently signed biennial budget, the program will receive an immediate infusion of $380 million from reserves set aside in 2019 during a restructuring of the Connecticut's Teachers' Retirement Fund, with costs to that fund covered by savings from a newly implemented insurance policy, according to a Treasurer's office spokesperson.
"It's thrilling that this transformative program is about to see its first participants born this weekend," State Treasurer Erick Russell
Parents and caretakers will not need to act as enrollment is automatic, and while key parts of the program are yet to be built — including a system to manage claims when they come due — there's time to spare. Newborns will only be able to access their trusts from the ages 18 to 30, and only for select activities, including paying for higher education, buying a home in the state, starting or investing in a business, and contributing toward retirement savings.
All are activities baby bond advocates say can build wealth and cut to the core of issues driving intergenerational and racial wealth divides.
"Ultimately, this will be used as a catalyst to interrupt the cycle of intergenerational poverty," Connecticut Gov. Ned Lamont said in a statement. "This is a creative way of addressing the wealth gap and promoting economic growth."
The concept of baby bond programs have grown in popularity across the country, "transforming from theory to action" over the last four years, the Urban Institute said in a report.
"Many leaders and state governments are currently considering this novel policy idea as a solution to grow wealth among residents and decrease racial wealth inequities," the report said. "Baby bonds were designed in the context of a rich body of evidence that demonstrates positive impacts on wealth of early investments for children and long-term savings accounts."
A baby bond law has been passed in Washington, D.C., with proposals pending across a slew of other states.
A bill for a national baby bond program is currently under committee consideration following the reintroduction of a proposal in February that failed to pass a year prior by New Jersey U.S. Sen. Corey Booker and Massachusetts Rep. Ayanna Pressley
"Baby Bonds are one of the most effective tools we have for closing the racial wealth gap so it is no surprise that this idea has gained traction in states across the country," Pressley said in a statement.
