On January 3, 2024

‘Baby Bonds’ legislation proposed to address intergenerational poverty

Submitted

 

State Treasurer Mike Pieciak was joined by state and national leaders Dec. 19 at a press conference in Burlington to announce legislation that would establish a baby bonds program in Vermont. Baby Bonds is an innovative policy to address intergenerational poverty, support rural economic development, and retain young people in Vermont.  

The policy would invest $3,200 for every Vermont child born on Medicaid into a trust fund managed by the State Treasurer’s Office. Children could access their baby bond between ages 18 and 30, with the initial $3,200 investment projected to grow to $11,500 by age 18 and $24,500 by age 30.

The funds would be dedicated to wealth-building activities like purchasing a home in Vermont, starting or investing in a local business, pursuing higher education or job training, and saving for retirement. 

“Despite the opportunities of our state, we know our economy does not work for everyone,” said Treasurer Pieciak. “Baby bonds would ensure that Vermont children facing the toughest circumstances can accumulate assets, build wealth, and shape their own financial future. By investing in our state’s greatest resource — our people — we can create a more resilient, fair, and productive Vermont economy for all.”  

Bill sponsors Sen. Ram Hinsdale and Rep. Noyes focused on the impact the Baby Bonds program would have on helping close the racial wealth gap and addressing rural poverty.    

“The median wealth of white households is nearly eight times that of Black households and five times that of Hispanic households and without a dedicated effort from government, racial wealth inequalities and their compounding effects will continue and worsen for generations to come,” said Hinsdale, the Senate sponsor of the bill. “Baby Bonds is designed to confront the racial wealth gap head on by supporting our most vulnerable children with capital to invest in themselves, their futures and their communities.”   

“Investing in children born into poverty in rural Vermont will allow them to see a future of hope and not a future where they never seem to get ahead.  The issues of poverty are complex and come with no easy solutions, but when we see half of the children born into poverty in three of our rural counties, we need a forward-thinking solution,” said Noyes. “We have support systems addressing Vermonters’ short-term needs, and investing in baby bonds will allow individuals to have a stake in their future by accessing education, starting a business, or owning a home.” 

Professor Hamilton, a national thought leader on Baby Bonds, spoke to the transformative impact the program would have on future generations of Vermonters.    

“By supporting wealth-building activities, baby bonds can help ensure that every child, regardless of their race, gender, or family economic position, can access the financial resources they need to build long-term economic security and generational wealth,” said Hamilton. “As opposed to simply supporting income, the long-term wealth-building focus of baby bonds aims to break the cycle of intergenerational poverty that is itself a product of policy choices that have disproportionately excluded people of color from asset-building opportunities. Baby Bonds establish a birthright to capital, providing young people with the opportunities and security that wealth offers, for their benefit and generations to come.”    

If approved by the legislature, Vermont would become the second state to adopt a baby bonds proposal. 

Connecticut recently became the first to implement a statewide baby bonds program, and momentum is building for a proposal in Massachusetts. The concept has also been introduced in Congress by Sen. Cory Booker and Rep. Ayanna Pressley.         

With about 2,000 babies born each year in Vermont on Medicaid, a $3,200 investment for each child would amount to a $6.4 million annual appropriation. To cover the program, Treasurer Pieciak suggests using the Unclaimed Property General Fund Transfer, a prescribed percentage of Unclaimed Property funds transferred annually to the state’s general fund. This funding mechanism would ensure the Vermont baby bonds proposal does not require any new fees or taxes for Vermonters.

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