Trust funds urged in fight against poverty in Massachusetts

By Sam Drysdale

DEC. 12, 2022…..Massachusetts lawmakers should advance an at-birth publicly funded trust fund program for lower-income Massachusetts residents, according to new report from the state Treasury.

The Baby Bonds Task Force organized by Treasurer Deborah Goldberg and the Office of Economic Empowerment is recommending the Legislature pass a law to create baby bonds in Massachusetts. The government-sponsored trust funds would be opened for eligible children at birth and accessible after children reach adulthood for asset-building investments, like attending post-secondary education, buying a home or starting a business.

“Today’s report is the culmination of the tremendous research, organization and determination of the entire task force, our Treasury staff and our interns,” Goldberg said at a webinar on the report Monday afternoon. “Their work has provided Massachusetts with the foundation to enact a fiscally sound, baby bonds program that could provide life-changing assets for future generations of Massachusetts residents.”

The task force’s recommendations focus on supporting children affected by generational poverty.

The report recommends partnering with the Department of Transitional Assistance and the Department of Children and Families by automatically enrolling any child in the Transitional Aid to Families with Dependent Children program and the state’s foster care system to receive baby bonds.

“[Automatic enrollment] is key, because when you are struggling economically, trying to survive in your family, it is very difficult to be a go getter and find the programs that are there to help you,” said Julie Beckham, financial education officer at Rockland Trust Bank and a member of the task force.

Connecticut became the first state in the U.S. to create a Baby Bonds program in 2021, followed by Washington, DC. Baby Bonds legislation has been introduced in California, Delaware, Iowa, New Jersey, New York, Washington and Wisconsin, according to nonprofit research organization The Urban Institute.

The recommendations also include promoting financial literacy for children and families, “so that with these funds, not only they know they have them, but they know how to use them when they get them,” Beckham said.

The report urges lawmakers to pass a Goldberg bill requiring financial education in schools, as well as targeted financial education for baby bonds participants and their families.

Webinar panelists discussed how they believe baby bonds will help close the racial wealth gap.

“By automatically investing from day one of a child’s life, we can provide a jumpstart to individuals who are otherwise, today, at a disadvantage,” said Sen. Paul Feeney, who chaired the task force’s subcommittee on eligibility and funding. “We can begin to narrow the racial wealth gap and give our most vulnerable residents a fighting shot at the middle class and the American Dream.”

A study conducted by the Boston Fed in 2015 found that the median net worth of Black households in the greater Boston area was just $8, compared to over $247,000 for white households.

Sen. Feeney said he will file a bill in the Senate next session to create a baby bonds program in the state.

State Rep. Andy Vargas, who Feeney said is leading the effort in the House, said the report aimed to come up with “concrete, tangible and real actionable policy that we can move forward.”

The document models the cost of the program and earnings for Baby Bonds recipients, predicting that with a 5 percent rate of return, an initial lump sum deposit of $4,250, $6,500 or $8,500, would return roughly $10,000, $15,000 or $20,000 to recipients when they turn 18.

Recipients would have the option to choose to leave the money in bonds until they are 35, if the report’s recommendations were adopted in legislation. The 30-year estimated value for each of the modeled initial deposits would be approximately $18,000, $28,000 and $37,000, respectively.

The task force recommends that at a minimum, lawmakers adopt the “medium” option, or the $6,500 initial investment, in any legislation, which has the potential to bring the total endowment at 18 to almost $15,000 or $10,000 in today’s value.

“An endowment that is lower than this will not be enough to truly support wealth-building activities and thus would not justify the program,” the report says.

Recipients will need to show they still have ties to Massachusetts to cash in once they reach adulthood, either by living, working, paying taxes, or intending to spend the funds in the state.

“Life is long, and we can do something at the very beginning of life to create hope and opportunity so that others can enjoy all the things that the state of Massachusetts has to offer,” Beckham said. “The idea of hope and opportunity, how can you go wrong when it comes to that?”

Officials on Monday did not attach an estimated cost to the program.