First the BabySteps Savings Plan, and now the Baby Bonds program?
The latter is distinct from the former, an operational opt-in strategy providing a $50 seed deposit into a 529 college savings account for all state newborns.
As of September 2023, the most recent data available, more than 26,000 families had started saving for their children’s education and vocational training since the program’s inception in January 2020.
The two initiatives also differ in eligibility criteria. While the BabySteps plan covers every newborn, Baby Bond legislation targets the socially and economically disadvantaged.
Multiple Baby Bond bills have been introduced in the state Legislature, where they’ve remained without gaining any traction.
Several related bills have been filed, including S.1999, “An Act Addressing the Racial Wealth Gap,” and H.3429 / H.48, “An Act establishing a Massachusetts Baby Bonds program.”
Currently, “An Act establishing a Massachusetts Baby Bonds program” has been filed by House Bill H.3429 (and related H.48) and Senate Bill S.2146.
The legislation’s sponsors include state Rep. Andres Vargas, state Sen. Paul Feeney, and supported by State Treasurer Deb Goldberg.
A virtual hearing for the Senate bill before the Joint Committee on Financial Services occurred Wednesday.
In 2022, Treasurer Goldberg established a Baby Bonds Task Force, a diverse group of experts, advocates, and community leaders, to research and develop recommendations for how a baby bonds program could be most effectively structured and implemented.
The task force’s findings have served as a foundation for the treasurer’s ongoing policy discussions.
If enacted, the proposal would work as follows, based on task force recommendations and bills’ details:
Children born on or after a specific date — tentatively July 1, 2024 — whose families receive Transitional Aid to Families with Dependent Children or are in the custody of the Department of Children and Families, would automatically be enrolled in the program.
Individual, government-managed trust accounts would be created, with an initial state investment — amount to be determined — that would accrue interest over time.
Funds would become accessible to the beneficiaries when they turn 18 up until age 35, provided they still reside, work, or pay taxes in Massachusetts at the time of withdrawal.
A Baby Bonds Trust Fund Advisory Board would assist the treasurer in policy development and fraud prevention.
If beneficiaries don’t claim their funds by age 35 or die before that age, the money will return to the trust.
Funds could be used for specific wealth-building purposes, such as post-secondary education, job training, purchasing a home in Massachusetts, investing in a Massachusetts-based business, and other wealth-generating investments as defined by the legislation.
The funds in the account would not be considered an asset when determining eligibility for other government benefits.
The legislation aims to reduce economic disparities and provide long-term financial opportunities for disadvantaged children in Massachusetts.
The legislation would align Massachusetts with Connecticut and Washington, D.C., where similar bills have been passed.
Treasurer Goldberg testified last week before the Joint Committee on Financial Services in support of Baby Bonds legislation, emphasizing the positive opportunities it would provide.
“Baby Bonds will narrow the racial wealth gap and provide our youngest generation with a foundation for success,” said Goldberg. “By investing early in the lives of every child, we can help ensure that more young people enter adulthood with the resources they need to build a stable financial future.”
The concept of Baby Bonds, first developed by economist Dr. Darrick Hamilton, advances the idea as a way to address structural inequities in wealth accumulation. His work has helped shape national conversations on how publicly funded child trust accounts can promote economic mobility and reduce racial wealth disparities.
During her testimony, Goldberg highlighted the need for a fiscally responsible and equitable program that builds on her office’s ongoing economic empowerment work. She emphasized the importance of collaboration among state leaders, community organizations, and private partners to create a program that meaningfully supports children and families across Massachusetts.
Beyond the individual benefits, Goldberg stressed that Baby Bonds represent a smart investment in the overall Massachusetts economy. By helping more young adults pursue higher education, start businesses, and become homeowners, the program would stimulate economic growth and strengthen local communities.
Research indicates that reducing wealth inequality enhances productivity, innovation, and long-term economic stability, benefiting not only individual families but also the state’s workforce and competitiveness.
Goldberg invited the joint panel and her fellow policymakers to collaborate with her office to develop a model that’s both impactful and operationally feasible, ensuring accountability and strong outcomes for children and families.
While no one can argue with the altruistic intent of this legislation, as with many well-intentioned measures, they come with bedeviling details, with the funding source being the most obvious.
Will this be a line item in annual fiscal year state budgets, come from the treasury as needed, or be funded through some private endowment?
Can that initial investment — $6,500 has been mentioned — guarantee a return that will significantly improve someone’s economic prospects as they enter adulthood?
These and many other questions will need an answer before we can expect lawmakers to make an informed Baby Bonds decision.