(Bloomberg) -- Massachusetts should invest in baby bonds to help narrow the racial wealth gap, according to a task force convened by the state treasurer to consider such a program.
Baby bonds are government-issued trust accounts given to newborn children to generate wealth over the course of their childhood. On Monday, the task force, which includes state lawmakers and bankers, released a report advising Treasurer Deb Goldberg to move forward with such a program and modeled seed funding of $6,500 per child. The report clears a path for state legislators to begin drafting legislation.
“Solving a problem like inequality when it comes to economics is not a simple solution,” said Julie Beckham, assistant vice president at Massachusetts-based Rockland Trust Bank, who helped prepare the report. “The work we did solidified the need for a bold program that would help diminish the racial wealth gap.
Massachusetts would be among the first states in the country to initiate such a program. Connecticut and the District of Columbia have established them, and a handful of other states, including New Jersey and Washington state, have considered related proposals.
The program’s cost hinges on enrollment, which would fluctuate with the number of children eligible for certain state economic assistance programs.
The task force recommended that Massachusetts pay for the program with American Rescue Plan funds, and allow the trust to accept private donations, Beckham said. The state could also issue bonds to fund the trust, or tap general appropriations, which would be subject to annual approvals.
The task force’s report will serve as a blueprint for the program. It recommends that children under age 1 who are enrolled in the state’s Transitional Aid to Families with Dependent Children program, an income-based economic assistance program, should be eligible for the baby bonds program, as well as children under 1-year-old in foster care.
Funds would be disbursed beginning at age 18 and terminate at age 35. They could be spent on wealth building activities like buying a home or pursuing post-secondary education.