Baby Bonds Task Force Provides Recommendations
PITTSFIELD, Mass —The Baby Bonds Task Force provided its recommendations on possible legislation and subsequent programming during a webinar in late December.
"This legislation is designed to build sustainable, generational wealth for the communities who need it most through targeted uses including higher education, purchase of a home, or starting a business," Massachusetts Representative Andy Vargas said.
Although the recommendations made by the task force do not establish the terms of the program it can inform the legislation and subsequent programming which would build sustainable and generational wealth for lower-income communities
"Many young people's lives will be impacted by this program, and I again want to thank the Treasurer for putting together this superb task force and their collaboration and commitment to solving this generational problem,” Vargas said. “I look forward to partnering with Treasurer Goldberg, Senator Feeney, and the task force in getting this done."
Typically a Baby Bond program consists of trust funds set up by governments for children from low to moderate-income families with the intent to grow until the recipient reaches adulthood.
At the age of 18, eligible individuals can access these funds for asset-building purposes, including funding post-secondary education, buying a home, or starting a business.
"Think about it. The child born into poverty in Massachusetts today by the age of 18 because of the work that we're about to engage in, has accumulated enough wealth to begin college, watch their career, start a business or buy a home or even continue to let that investment mature. They start their lives with an economic safety net that does not exist today," Senator Paul Feeney said.
He said without these programs these children who grow up with little to no assets have harder time building assets.
"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," Feeney said.
"We can begin to narrow the racial wealth gap and give our most vulnerable residents a fighting shot at the middle class, the American dream. I view this task force, this report, and the journey that we are on toward passing legislation as an opportunity for all of us to dream big."
Feeney said he is looking forward to filling this legislation in the state senate this session.
"When treasurer Goldberg came to me earlier this year about creating a program with the goal of taking meaningful steps to narrow wealth inequalities with a particular focus on shrinking the racial wealth gap. I knew immediately that I was all in," Feeney said.
"She spoke with such passion about the work that we had in front of us. And I was eager to get to work on creating an impactful program that will help us tackle barriers to economic development and success for all residents in the Commonwealth."
Although these efforts are a step in the right direction the changes they are attempting to make will take a movement, he said.
"...This program and these bills will take a movement, but they say that a movement is made up of a series of moments, moments like today,” Feeney said. “Or Monday afternoon when we come together to release this report. Knowing that we have so much work ahead of us, but together we can accomplish it."
Community Development Research and Communications at the Federal Reserve Bank of Boston Assistant Vice President Beth Mattingly shared this sentiment adding that these programs make starting to build assets easier.
Mattingly noted that the views she expressed were her own not the Federal Reserve Bank of Boston, the Federal Reserve System or its Board of Governors.
This legislation and the subsequent programs would provide these families hope, opportunities, and excitement for a brighter future. It helps families begin to understand their life and prepares them for the future, YWCA Southeastern Massachusetts Advocacy Coordinator Leimary Llopiz said.
"It's something that a lot of families didn't already have in their life. They didn't have a stepping stone or something that was available for them to be successful," she said. "And this really gives them a chance to be successful. It gives them direction. It gives them a purpose. So, just having that really will change their way of thinking early on in life."
GEAR UP Massachusetts Statewide Director Robert Dais said the process of coming up with these recommendations did not come without some struggles. One of the challenges the task force faced was peering into the future so that their recommendations stay relevant.
"We had some robust conversations about what might be effective today, as far as communicating and engaging parents and students may not necessarily be the best way to do it in 2040," he said. "So that was one thing that we struggled with, in a healthy way, with making sure that the principles of engaging families and partners in the community would always be at the core of this."
All the panelists agreed that programs and legislation like this drastically impact a student's ability to maintain enrollment in higher education and their chances of success.
The Office of Economic Empowerment started looking for leaders to join the task force in March. The group started meeting in June to create recommendations that would inform the legislation and subsequent programming.
The task force was divided into four subcommittees, eligibility & funding, building financial capability and engagement, accessing and using baby bonds, and trust management, oversight, and operations.
Berkshire United Way Director of Community Impact Katherine von Haefen also sits on the task force.
A key recommendation that the eligibility & funding subcommittee noted was having children under the age of one enrolled in the Transitional Aid to Families with Dependent Children program or in the Department of Children and Families foster care system eligible for the Baby Bond program.
They also recommended that enrollment in Baby Bonds is automatic and that efforts "should be made to establish a sustainable source of funding for Baby Bonds that will ensure the program's longevity."
The building financial capability and engagement subcommittee recommended having early, consistent, and targeted engagement with Baby Bonds participants and their families.
They also recommended having a community advisory committee consisting of agencies, school systems, resource providers, community-based and grassroots organizations, among others so there is a network of support to connect resource providers to Baby Bonds participants and their families
The task force also supports an act requiring financial education in schools and recommends having targeted education for Baby Bonds participants and their families.
The accessing and using baby bonds subcommittee recommended the funds be available to the Baby Bond participant at the age of 18 and be terminated at the age of 35.
The treasurer may authorize regulations to extend it in cases where participants are unable to use the funds within the allowed time frame.
They recommended that the funds should be limited to wealth-building activities that will be determined in legislation or future legislation.
Wealth-building activities should include buying a house, assisting in post-secondary education, including technical and vocational training, starting or expanding a business, saving for retirement, or any other "investment in financial assets or human development that provides long-term gains to wages and wealth, as determined by the Treasurer."
"Allowable uses should also include expenses that support wealth-building activities, such as investing in a car to be able to attend post-secondary education," the report said.
The trust management, oversight, and operations subcommittee recommended establishing a trust that invests a single, omnibus account with appropriate risk characteristics.
They also noted that connecting and engaging individuals with their respective accounts is critical. It is important there be a relationship between Baby Bonds and the recipient.
Updating personal information should be allowed in order to make verification at the time of withdrawal easier.
Lastly, they recommended that Baby Bonds funds not be counted as taxable income to ensure it does not prevent parents, caregivers, or Baby Bonds participants from receiving state and federal benefits.
Watch the full webinar here.
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