The Middletown Press (Middletown, CT)
Treasurer: Baby bonds a piece to the wealth gap puzzle
Even though Connecticut is a relatively wealthy state, there is a large wealth gap between residents of different races and zip codes.
For Treasurer Erick Russell, the recently launched Connecticut Baby Bonds Trust is a way to close that gap and help redress historic inequalities for families who don’t have generational wealth.
The idea is catching on to other state legislatures and Russell said his office is working closely with states that are looking to explore similar investments like Vermont, Rhode Island and Massachusetts.
“I think it’s an example of how the government can do big things if we do it together to really invest in people long term,” he said.
To be eligible for the trust, a baby needs to be born to parents with HUSKY, or Medicaid, on or after July 1, 2023. At birth, the baby is automatically enrolled for an initial $3,200 deposit, which is invested and is estimated to be worth $11,000 in 18 years and $24,000 in 30 years. The program is fully funded for the next 12 years and is estimated to benefit 160,000 babies.
However, Russell emphasized that the baby bonds are not the only way to address the wealth gap and said Connecticut is also focusing on investing in education, early childcare and affordable housing.
“There’s plenty more to do at the state. We continue to invest in the future of Connecticut,” he said. “Baby bonds are a piece to this puzzle, in terms of creating more economic opportunity for all of our residents, but we have to continue to do all of the other work around this program.”
Between July 1, 2023, and December 20, 2023, 7,810 babies have been automatically eligible for baby bonds, according to a press release. The babies have been born in all but four of the state’s 169 towns and cities and are concentrated in municipalities with urban centers. Bridgeport has the highest number of babies enrolled with 798, followed by Hartford with 621 and Waterbury with 615.
Trust requirements
Even though the bonds are not specifically designed to benefit
Black and Latino families, they are more likely to receive funds from baby bonds. Russell said that once the eligible babies start using their funds when they grow up, it’s also a way to reinvest in their communities and build wealth over time.
“We know that these resources are going to be reinvested back here in Connecticut, back in our communities — particularly communities that are under-resourced historically,” he said.
Black and Latino residents are about twice as likely to be enrolled in HUSKY A, which covers low-income children, parents and other caregivers and is the HUSKY Health program with the most clients. Even though the U.S. Census estimates that Black residents are about 10 percent of the population, they were 19 percent of HUSKY A clients in 2022.
Similarly, Latino residents are about 17 percent of the state’s population, but 36 percent of HUSKY A clients.
To cash in the bond, a participant needs to be a Connecticut resident age 18 to 30, submit a request to use the funds and pass a financial literacy test. Another requirement to cash in the fund is that it has to finance long-term pathways to financial security in Connecticut such as saving for retirement, buying a home, starting a business, investing in a business, enrolling in higher education or paying for job training.
Racialized inequity
Carlos Moreno works as the Senior Campaign Strategist & Systemic Equality Campaign Manager at the American Civil Liberties Union, better known by the acronym ACLU. He said the issue of wealth inequality is a part of systemic racism in the United States. Because of this, he explained that baby bonds are designed to address wealth disparity by creating a long-term response to a structural problem.
“One of the surest ways to achieve freedom and prosperity in the country is to have that financial freedom,” he said. “This is an issue that is directly tied to civil liberties and civil rights for us.”
Unlike programs designed to mitigate income disparity through shortterm assistance, he said that baby bonds were a longer term solution to historic inequality. Moreno said that economic exclusion of Black and Latino folks often prevent them from the traditional pathways to building wealth, such as enrolling in higher education or buying their home.
Even though $11,000 might be worth less in 18 years because of inflation and rising costs of living, he said that it might cover a good portion of the cost of a down payment for a home or for a semester of college — both ways to long-term financial stability.
“That startup money generally is not accessible to everyone in the country and that’s an unfair advantage people of means actually have and that Black communities, Latino communities don’t have,” Moreno said.
In Connecticut, Black and Latino households are more likely to have low and middle income and tend to earn less than their white and Asian neighbors. In 2022, the U.S. Census bureau estimated that a third of households with a Latino householder earned a middle income between $45,000 and $100,000, compared to 29 percent of white households and 28 percent of Black households. However, Black and Latino households are nearly twice as likely to have low income as 23 percent of Latino households earned below $25,000, but only 12 percent of white households did.
The ACLU released a poll last fall asking a little over a thousand voters about their support for baby bonds. Moreno said that although awareness of baby bonds is low, there was broad support for the policy after it was explained, even across partisan lines. According to the poll, 74 percent of Democrats supported the policy, compared to 48 percent of independents and 42 percent of Republicans.
“This is a smart policy. People understand it and see the value of it, they think about it in terms of pocketbook or kitchen table conversations around saving for college or savings for a better future for retirement and understand it on those terms.”
Gaining nationwide momentum
Connecticut was the first state to fully fund and implement a statewide baby bonds program, although there was a federal bill in 2019 and a statewide proposal for New Jersey in 2020. On a federal level, U.S. Senator Cory Booker, D-N.J., and Congresswoman Ayana Pressley, D-Ma., first introduced Federal Baby Bond legislation in 2019 and have since reintroduced it in 2021 and 2023.
On a state level, Connecticut, California and Washington, D.C., have passed baby bonds legislation, according to a tracker from the Institute on Race, Power, & Political Economy at the New School. However, nine additional states have proposed legislation, including Nevada, North Carolina and Wisconsin.
“There’s no doubt that the momentum of baby bonds around the country is due to Connecticut’s leadership. Certainly Connecticut’s leadership was inspired by the federal legislation but at the state level, Connecticut has been inspiring and leading the pack,” said David Radcliffe, the institute’s director of local and state policy.
Outreach and education
Now that the legislation is passed, the treasurer’s office is focusing efforts on letting parents know about the program and its requirements. As part of that outreach, the treasurer is visiting different community organizations to increase awareness of the program. For example, the Latinos for Educational Advocacy and Diversity recently hosted an event in Norwich to let the community know about the opportunities.
Vice President Maria Matos was involved in advocating for the legislation and said that being able to explain the benefits to her community was a victory.
“I call the program hope because it’s going to give hope to the families,” she said. “I’m pretty excited. And I’m going to be hosting more informational sessions because people need to learn about these. I think it’s a way to keep people in Connecticut, especially youth, to invest in Connecticut and to live here.”