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(Bloomberg) — New York City and Connecticut are gifting publicly-financed savings bonds to children through two programs aimed at stemming racial income inequality in states with the worst wealth gaps in the U.S.
Connecticut will invest $600 million in its "baby bonds" program over the next 12 years, setting aside a $3,200 bond each for about 16,000 Medicaid-eligible children annually.
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New York City will set up $100 college savings accounts for all kindergarteners attending public school beginning in September. A public housing development in Queens piloted a similar program, adding $1,000 to young residents' savings.
Connecticut's treasurer's office, which will manage and invest the bonds funded through the state's general obligation bond program, said it expects each eligible child to receive about $10,000 after turning 18. They can only use it for specific purposes like to pay for school, start or invest in a business in-state, buy a house, or save for retirement.
"The bond market is the perfect venue to seed these types of programs," said Eric Glass, a portfolio manager for fixed income impact strategies at AllianceBernstein L.P. "Kudos to Connecticut for uplifting and centering historically excluded communities and taking action to address the growing racial wealth gap."
In New York City, most public school students — who would be the recipients of the bond program — are Hispanic or Black, according to department of education data published on the city council's website. More than 72% of students experience poverty and less than 5% of schools do not have any students who reside in temporary housing.
Black and Latino children will benefit most from the Connecticut program, state Medicaid data shows. In Connecticut, where 10% of residents live in poverty, children growing up in poor, majority Black neighborhoods are much less likely to grow out of poverty than elsewhere in the state. Hartford, which is 38% Black, and New Haven, which is 33% Black, both include many of the state's least upwardly mobile blocks, according to data from Opportunity Atlas.
"It's moments like these that give me hope that I might see an equitable society in my lifetime," said Connecticut Treasurer Shawn Wooden, who was born and raised in North Hartford and is the only Black elected state treasurer in the U.S. and the only Black elected officials serving statewide in New England.
New Jersey Governor Phil Murphy last year proposed a baby bond program that would have given $1,000 each to babies born to families making less than the federal poverty standard. Lawmakers cut the proposal from the budget.
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