Starting Saturday, the state will set money aside for each child born into poverty in hopes of helping those children build wealth once they become adults.
The state’s baby bonds program, approved by the legislature in 2021, will finally launch on July 1.
“I am so proud to announce today that the first babies eligible for Connecticut baby bonds will be born this weekend,” Treasurer Erick Russell said during a press conference Wednesday at Hartford Hospital.
The baby bonds program will set aside $3,200 into a trust for each child who is eligible for Husky, the state’s Medicaid program, upon birth.
Those children can then withdraw the funds between the ages of 18 and 30 for specific uses, including to attend college or a workforce training program, start a business or buy a home. Recipients can also invest the money into a retirement account.
Beneficiaries also have to undertake financial literacy classes. Proponents of the program said the money will help children escape generational poverty.
Sen. Patricia Billie Miller, D-Stamford, talked about her own struggle trying to get into college. She said her parents could afford tuition, but she was able to attend after a friend helped her get a scholarship.
“I know when you give the resources, give a child an opportunity to succeed, that you’re giving them the opportunity to succeed,” she said.
In cases where a child is on Medicare upon birth, Russell said those kids are automatically enrolled and the families don’t have to do anything to set up the trust fund.
Some families who don’t receive Medicaid benefits wait until after a birth to enroll an eligible child, though.
Department of Social Services Andrea Barton Reeves said those families will also be enrolled as part of that process. She said the department will rely on help from hospitals to identify children who might be eligible.
Russell said his office will also start a public awareness campaign to make sure people know about the program. He estimated 15,000 eligible children are born in the state every year.
He said he expects an average annual return of 6.9% for the bonds, meaning beneficiaries could see an average return of $11,000 to $24,000 depending on when they withdraw the funds. The state is not obligated under the program to add additional funds if investments miss their expected return.
Connecticut was the first state in the country to create a baby bonds program, although Washington D.C. approved a similar program in 2021 for children born in the city.
“We want Connecticut to be the state of opportunity,” Gov. Ned Lamont said. “You learn in life talent is widely distributed and opportunity, not so much.”
Lamont also said baby bonds can complement other benefits, including free admission to community colleges and the downpayment assistance offered under Time To Own.
California followed suit last year, but its program is narrower. Only children who lost a parent or caretaker to COVID-19 or who are in the foster care system are eligible for California’s program.
According to the Urban Institute, seven other states are considering proposals, including New York, Massachusetts and New Jersey. U.S. Sen. Corey Booker, D-N.J., and Ayanna Pressley, D-Mass., have also proposed a nationwide baby bond program.
Russell said he’s had conversations with treasurers in several states, including some that have yet to see a proposal, about Connecticut’s baby bonds program.
Connecticut’s program is funded for 12 years. The program had been on hold due to disagreements on how to fund the program, but Russell found $381 million in available money that could cover the cost.
The money had been set aside in a reserve account when the state borrowed money to help fund the pension program for retired teachers. Due to the state’s improved bond rating, the reserve account is no longer needed.
Lamont had objected to borrowing money to fund the program. Russell agreed Wednesday that the new funding scheme means less cost because the state won’t have to pay interest on bonded funds.
The state has not identified how to continue the program, should lawmakers want to, after 12 years. Russell is hopeful the program will win over more support, even though current funding will expire before the first beneficiaries are old enough to withdraw.
“There is the ultimate payout 18 to 30 years out for individuals, but there’s also immediate payout,” he said. “The hope that this provides families. The opportunities that a child can see themselves having even though it may not have been in front of them in their community or their neighborhood.”
He said his office is working with other organizations to build support, including groups that will provide mandatory financial literacy and services to beneficiaries and their families.