$24,000 nest egg? Connecticut’s ‘Baby Bonds’ program finally launching after 2-year delay

After two years of delays, Connecticut’s “Baby Bonds” program will finally launch this summer – at a fraction of the original cost.

John Craven

May 16, 2023, 10:08 PM

Updated 337 days ago

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How does a $24,000 nest egg sound? It will soon be a reality for kids born into poverty. After two years of delays, Connecticut’s “Baby Bonds” program will finally launch this summer – at a fraction of the original cost.
“We have reached an agreement regarding funding which will ultimately save taxpayers hundreds of millions of dollars,” said Democratic State Treasurer Erick Russell on Tuesday, “and make sure that we fully fund the Baby Bond program up front.”
INVESTING IN KIDS
Under the program, every child born on HUSKY Medicaid gets a $3,200 investment account – that could grow to $24,000 over three decades. You could withdraw the money between 18 and 30 years old, but you must still live in Connecticut, complete a financial literacy course and use the money for qualifying expenses.
“It can be used for purchasing a home here in Connecticut, for starting or investing in a Connecticut business, for paying for post-secondary education or job training,” said Russell.
STUCK IN LIMBO
When state lawmakers first approved Baby Bonds in 2021, it was the first in the nation. Expectant mothers like Andrea Rhodes, of Bridgeport, were thrilled.
“I think that gives the child a good head start in life to do something positive,” she told News 12 that year. “I want him to be able to have financial stability, you know? I don't want him to be struggling and looking for handouts.”
But the program never actually launched because of funding disputes. Gov. Lamont opposed borrowing hundreds of millions of dollars to pay it.
“I did say, ‘Look, I don't want to do something that's going to saddle taxpayers with $200 million in interest,” Lamont said. “I don't think that's the way to do it.”
But on Tuesday, Russell and Lamont announced a deal to finally launch Baby Bonds on July 1 – with no borrowing and no cost to taxpayers.
Instead, the state will use a $381 million pot of money set aside to satisfy bond holders after the state restructured the Teachers’ Retirement Fund in 2019. That pool is no longer needed because of Connecticut’s record surplus and spending caps, so it will now be replaced with a low-cost insurance policy.
The move cuts Baby Bonds’ cost by $200 million, Russell said. He estimated 15,000 children could benefit.
WHAT’S NEXT?
State lawmakers will have to approve the money transfer before the legislative session ends on June 7. Top Democrats, including House Speaker Matt Ritter (D-Hartford) and Senate President Martin Looney (D-New Haven), endorsed the plan on Tuesday.
Other Democrats said Baby Bonds is a small, but important, step to level the playing field.
“When you were born in poverty, we were laughing about eating ‘government cheese,’” said state Sen. Pat Billie Miller (D-Stamford). “I've eaten ‘government cheese’ because my family couldn't afford to feed us.”
But Republican leaders said the extra millions could go to more pressing needs this year, like schools and nonprofits.
“At a time when we're talking about fiscal guardrails, the dire need for tax relief, and the importance of investing in local education, I have to question a solution that involves repurposing surplus taxpayer dollars that had been used as a contractual makeweight to refinance teacher pension debt,” said state Rep. Vin Candelora (R-North Branford), the House Minority Leader. “This seems to undermine the message of fiscal responsibility the Governor has promoted throughout the session, and the vague mechanics of how they’ll simply take $380 million for this program certainly deserves more scrutiny.”


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