State officials say they’ve struck a deal on how to finance Connecticut’s slow-to-start "baby bonds" program.
The initiative sets aside money at birth for children born under the state’s Medicaid program, invests it over time and allows them to access the money when they are 18 years old.
State Treasurer Erick Russell announced Tuesday his office has reached an agreement with the Lamont administration.
The program has been delayed for years over concerns about how to best fund it. Gov. Ned Lamont opposed bonding to support the program saying that was unfair to taxpayers. But members of the legislature and the Black and Puerto Rican Caucus said the idea was a key measure to close the state’s wealth gap.
The new agreement won’t require any new bonding or ongoing state budget support, Russell said.
Instead, it will immediately invest $381 million in state cash reserves into the CT Baby Bonds Trust. Russell said the money was freed up after the Teachers’ Retirement Fund was restructured in 2019.
“It repurposes those cash reserves and allows us to take that money and invest it upfront over an extended period of time to fund the program,” Russell said.
The agreement restructures a law Lamont originally signed in 2021, which would have required $600 million in bonding over 12 years.
In Connecticut, the governor holds much authority over the state’s bonding decisions. After signing the legislation into law, the Lamont administration began to express opposition to bonding in support of the idea, unexpectedly delaying the start of the program last year.
The $381 million from the Teachers’ Retirement Fund was originally set aside to provide security in the event that the state failed to make a debt service payment. But credit-rating upgrades and a bigger rainy day fund allowed the state to move the money, Russell said.
Russell said CT Baby Bonds will re-invest money in under-served communities and help break cycles of generational poverty.
“Your future can be bright regardless of what zip code you are born in,” Russell said. “Regardless of what family you are born into.”
Both House Speaker Matt Ritter, D-Hartford, and Senate President Pro Tempore Martin Looney, D-New Haven, spoke in support of the measure Tuesday.
“It is an investment in young people who frequently have no one investing in them,” Looney said.
How CT Baby Bonds work
Originally rolled out in 2021, baby bonds were supposed to invest up to $3,200 on behalf of babies covered by HUSKY, the state’s Medicaid program – roughly 15,000 people a year.
The program was pushed by former State Treasurer Shawn Wooden, a Democrat, but delayed last year just weeks after Wooden announced he was not seeking re-election.
Russell said Tuesday that the initial investment was expected to grow from $11,000 to $24,000 depending on when the person accessed the funds between the ages of 18 to 30 years old.
If the agreement is approved by lawmakers, qualifying children born on or after July 1, 2023 would be eligible for enrollment.
There are some strings attached to the money, but not many.
People must be a Connecticut resident when making the claim for the funds as an adult. They must also complete a financial education course.
If they do that, the person can then use the money for qualified expenses like education, starting a business, funding a retirement, or a down payment on a house.
‘Fly in the ointment’
Despite signing the program into law, Lamont acknowledged Tuesday he was a “fly in the ointment” in terms of getting the baby bonds program up and running.
“I was asking some tough questions,” Lamont said, adding he didn’t want to saddle taxpayers with interest payments and didn’t want to tap into the state’s General Fund to support the program.
The Lamont administration said repeatedly it wanted money to be invested in "children right now" and those investments took priority over the long-term gains expected to come from the baby bonds program.
But the position was criticized by the legislature's Black and Puerto Rican Caucus, whose members called the move "political" and a short-sighted disappointment.
Its members had been pushing for months in support of the program, calling it a top legislative priority this year.
Sen. Patricia Billie Miller, D-Stamford, who chairs the Black and Puerto Rican Caucus, said Tuesday the new agreement gives kids a chance to build wealth.
“An opportunity [for] success,” she said. “An opportunity to buy a home. An opportunity to save money in retirement. An opportunity to … go to school.”
As he closed his remarks Tuesday, Lamont said Miller and others reminded him about a line he often said during months of debate over the future of baby bonds.
“I was often saying, I guess a lot, ‘I want to help people now. I don’t want to wait 18 years,’” Lamont said.
“Pat just said, ‘Give them something to hope for,’” the governor said. “This is their money – that they can invest in their future.”
This story was updated.
