BOSTON (State House News Service) — Babies who are born into low-income families or placed into foster care could be positioned for a big economic boost when they grow up through the creation of a trust fund that Treasurer Deb Goldberg championed Tuesday as a new strategy to curb the state's racial wealth gap.
Establishing the Massachusetts Baby Bonds Trust Fund would promote upward mobility for vulnerable residents, providing them the ability to afford opportunities like buying a home, accessing higher education, starting a business and saving up for retirement, Goldberg told the Joint Committee on State Administration and Regulatory Oversight. Individuals enrolled in the trust fund could be able to access thousands of dollars from the fund once they turn 18, according to forecasts of the legislation's financial impact.
"The goal is to have more equitable participation in our state's economy and to give people the opportunity to build (wealth) for themselves," Goldberg said. "Baby Bonds are an investment in our collective future. They are a way to level the playing field and give every child a chance to achieve their full potential."
Under the proposal (S 1999), filed by Sen. Paul Feeney, Goldberg and a handful of legislators for the first time this session, babies within the first 12 months of their life would be automatically enrolled in the trust fund if they're enrolled in the Transitional Aid to Families with Dependent Children program, or if they're in the care or custody of the Department of Children and Families. The accompanying House proposal from Rep. Andy Vargas (H 1157) was also discussed Tuesday during a Joint Committee on Financial Services hearing.
"We've done a great job with social safety net programs and expanding different programs like universal school meals, child cash assistance, child care programs," Vargas said. "But the reality is if we don't go upstream, we're going to be spending a lot more money over time trying to catch up and address income inequality and generational wealth gaps here in the commonwealth."
Around 9,100 babies would have been enrolled in the Baby Bonds Trust Fund last year if the proposed law had been in effect, Goldberg's office told the News Service. Trust fund participants could access their share of the money between ages 18 and 35 under the proposals.
The proposed fund would be overseen by the state treasurer and could draw funding from public and private sources. The bill limits "eligible expenditures" from the fund to "opportunities for education, housing, and entrepreneurship, in order to create opportunities for financial independence." Supporters did not have an estimate of the bill's projected costs.
Connecticut was the first state to pass Baby Bonds legislation in 2021. The initiative is designed to "address generational poverty by giving families opportunities to build wealth while encouraging young people to stay in state, and investing funds back into the community through homeownership, business creation and more," according to Treasurer Erick Russell's website.
Citing a Federal Reserve Bank study, Goldberg noted the median net worth of white households in Boston was just under $250,000 in 2015, compared to only $8 for Black households. Those numbers have not gotten better amid inflation and the aftermath of the COVID-19 pandemic, Goldberg said.
Committee co-chair Rep. Antonio Cabral told Goldberg he thought the legislation offered a "clever way" to spur equity for residents. Goldberg's office in 2019 had launched a related initiative called the BabySteps Savings Plan, which provides a $50 "seed deposit" for children born or adopted in Massachusetts to help them get a jump-start in paying for college.
The bills do not outline the funding mechanism for the trust fund, such as designating a certain share of the annual budget. Officials from Goldberg and Feeney's offices told the News Service that the Legislature has the flexibility to decide on various funding sources to support the trust fund should it become law.
The legislation, dubbed "An Act Addressing The Racial Wealth Gap," is based on recommendations from the Baby Bonds Task Force, which Goldberg convened last year and had nearly 60 members, including lawmakers, government officials, academic researchers, housing and health care providers, and advocates, among others with experience in racial wealth equity. The task force, chaired by South Hadley Town Administrator Lisa Wong, was formerly led by Shannon O'Brien, who's now suing Goldberg after being suspended as chair of the Cannabis Control Commission.
The task force recommended depositing a lump sum per child into the trust fund, ranging from $4,250 to $8,500 per individual, with an expected return rate of 5 percent. When the child turns 18, that deposit could yield about $10,230 to $20,460, according to task force projections.
Goldberg said the Baby Bonds program also provides financial education and "wraparound services" for participants, family members and communities.
"We came up with what we feel is the most reasonable and doable approach within Massachusetts, understanding competing needs and understanding all the programs that we have in our state, as compared to other states," Goldberg said.
Written By Alison Kuznitz \ SHNS