Connecticut Baby Bonds signed into law
Treasury press release:
July 7, 2021
CT Baby Bonds, a revolutionary anti-generational program against poverty, racial equity and economic growth, supported by Connecticut State Treasurer Shawn T. Wooden, has been enacted. This legislation entered into force on July 1. It is seen as model legislation for the nation to tackle long-standing wealth disparities.
“Connecticut is the zero point for wealth and income inequality. For us, being the first in the country to tackle generational poverty and advance racial equity with the enactment of CT Baby Bonds is powerful and a testament of our values and our shared belief that everyone should have the opportunity to live the American Dream, ”said Treasurer Shawn Wooden.“ I hope the federal government and other states will follow our lead. CT Baby Bonds can be a model to help narrow the racial wealth gap across the country. After the pandemic, the pandemic further exposed and exacerbated pre-existing wealth and income gaps, especially among communities of color, Connecticut is making a long-term investment that will increase the likelihood of long-term systemic change that will benefit to families, communities and our economy. “
CT Baby Bonds, a one-of-a-kind program, is a long-term investment in the state’s economy designed to address economic disparities and close the wealth gap. The program will create a trust to benefit children whose births are covered by HUSKY, Connecticut’s Medicaid program, which insures pregnant women. CT Baby Bonds will be managed and administered by the Office of the Treasurer. Participants covered by HUSKY represent individuals from all towns in the CT. While the majority of HUSKY attendees are white, there remains a disproportionate number of people of color registered, which is why this legislation will have a significant impact in helping close the racial wealth gap. When a recipient is between 18 and 30 years of age and meets a financial education requirement, funds can be used for targeted eligible purposes that are compatible with research to help close the racial wealth gap, including: education expenses, to buy a home in Connecticut, to invest in a business in Connecticut, or to contribute to retirement savings.
“As a long-term investor, I naturally think in 10 to 20 year increments and without a doubt, CT Baby Bonds is an investment in Connecticut’s future,” said Treasurer Shawn Wooden. “The economic evidence is clear: we must start now to rebuild an inclusive economy that gives everyone, no matter what zip code you are born in, a fair chance to thrive. This legislation will not only provide children born into poverty with better access to opportunities that they might not otherwise have had due to lack of wealth, but it is also a boost to our economy. Study after study shows that failure to close the wealth gap inhibits economic growth in the short and long term. CT Baby Bonds is a forward-thinking economic policy that reinvests directly into our economy. “
A 2019 A study by McKinsey shows that failure to close the racial wealth gap would cost the US economy between $ 1 trillion and $ 1.5 trillion, or 4 to 6 percent of GDP over the next decade, which would limit directly the economy of CT. Although CT is home to the highest annual per capita income in the country, it also has one of the highest rates of income inequality, as well as strong racial disparities in the wealth gap. Over the past year, the COVID-19 pandemic has exacerbated these disparities, which have disproportionately impacted communities of color. In April 2021, CT Voices of Children released research which found that more than 50 percent of households with children in CT have reported a decrease in their income since the start of the pandemic, disproportionately affecting children of color.
Additionally, while some of the program’s first grantees who were born after July 1, 2021, will not be eligible to receive the funds until 2039, research recently completed by Washington University at St. Louis found that state efforts to create savings accounts for newborns changed the behavior of account holders earlier than when they received the funds. Research indicates that recipients have experienced higher graduation rates, higher expectations of higher education, and better efforts to save for the future early in their lives.
“CT Baby Bonds is a first in national public policy that will benefit children born into poverty by reducing the racial wealth gap while simultaneously growing the economy,” said Treasurer Shawn Wooden. “The evidence is clear. We have read it, digested it and took action with CT Baby Bonds. It is time for the country to join Connecticut in tackling the long-standing racial inequalities that prevent so many people from living their dreams and to realize their full potential. “
This legislation was part of the legislative bond package and will be funded by general government bond bonds, with $ 50 million per year allowed in this bond bundle for the next 12 years, for a total of 600 millions of dollars.
This press release was produced by the office of the treasurer. The opinions expressed here are those of the author.