Gov. Ned Lamont has come around to support Connecticut’s baby bond program after some creative financial maneuvering by State Treasurer Erik Russell which saves “hundreds of millions” to support the program.
The baby bond program, passed in 2021, would essentially make a $3,200 deposit into an account for each child born into poverty for the next 12 years. The investment would then grow to an estimated $11,000 to $24,000 the child could then use to pay for higher education, access homeownership, start a business or save for retirement.
“Through months of collaboration and a lot of creativity our first-in-the-nation initiative to invest directly in Connecticut kids is closer to becoming a reality,” said Connecticut Treasurer Erik Russell. “We have reached an agreement regarding funding which will ultimately save taxpayers hundreds of millions of dollars and make sure that we fully fund the baby bond program up front.”
Although the program was hailed as a way to address generational poverty through investment, the cost of state bonding for the program left it in limbo, with Gov. Lamont wanting to remain cautious about borrowing when the state already has a large amount of debt.
However, under a current change, the state will leverage $381 million set aside to support bond payouts for Connecticut’s Teachers Retirement System (TRS) when Lamont refinanced the TRS debt in 2019. The state has paid down billions in pension debt through its fiscal guardrails and has experienced budget surpluses.
“This funding proposal, ultimately, again, fully funds the program. It does not require us to borrow or bond for any portion of the funding, does not require any monies from the budget and does not have any on-going budget support,” Russell said. “It reduces the initial cost of the program by $200 million and it saves approximately $165 million in interest costs compared to the bonded program initially offered.”
“I gotta admit I was a bit of a fly in the ointment too, I was asking some tough questions,” Lamont said, who was criticized for not supporting the program as it was initially proposed for its cost to taxpayers. “Erik, through a lot of really smart entrepreneurial thinking and innovation, came up with a way we can get $380 million set aside virtually in perpetuity to provide each of these kids $3,200 which is going to grow and be invested.”
It is estimated the payments will be made to roughly 15,000 children per year born while being covered by HUSKY Medicaid, according to a press release from the Governor’s Office. The recipients of Connecticut baby bonds will be able to access the funds between the ages of 18 and 30 after having completed a financial literacy course.
“CT Baby Bonds was created to help combat Connecticut’s wealth gap and level the playing field for children in our state that would otherwise be locked out of full economic participation,” said Sen. Patricia Miller, D-Stamford, who serves as chair for the legislature’s Black and Puerto Rican Caucus in a press release. “Passing this program into law was a top priority of the Black and Puerto Rican Caucus and helped position Connecticut as a national leader in combatting systemic poverty.”
However, Connecticut House Republican Leader Vincent Candelora, R-North Branford, said he still has questions regarding the proposed solution and that it deserves more scrutiny.
“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,” Candelora said in a press release. “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.”
Russel said that despite criticism of the governor’s pushback, that pushback ultimately enabled the state to save hundreds of millions on the program, which would have cost $600 million in bonding under its original construction.
“I think if you look at that back and forth, if you look at some of that push from the governor’s office, it ultimately allowed us to land here saving taxpayers hundreds of millions of dollars,” Russell said.
**This article was updated with comments from Rep. Candelora**