How Baby Bonds will strengthen Vermont’s economy

January 16, 2024  |  By Mike Pieciak and Erick Russell

Government exists to solve problems, and as state treasurers, our offices are committed to supporting economic well-being for all. 

Despite the opportunities in our states, we know our economies do not work for everyone. According to 2019 American Community Survey data from the U.S. Census Bureau, the top 20% of Vermont households had an average income of $200,816, while the bottom 20% averaged $15,054. These disparities are even more stark in Connecticut, one of the wealthiest states in the nation that also features one of the most significant wealth gaps.  

Currently in the United States, the top 10% of households hold about 69% of the nation’s wealth, while the bottom 50% own only about 2.5%. 

Wealth not only affords choices and freedom, it provides economic security and a cushion against loss. Wealth also provides opportunities to build more wealth. Without access to capital, wealth-building opportunities like purchasing a home, earning a higher education degree or job training, or starting a business, are out of reach for the most vulnerable Americans, leaving many with little hope for their future. 

We recently proposed an idea in Vermont to address these challenges – baby bonds – an innovative policy to address intergenerational poverty, foster rural economic development, and retain young people in Vermont. 

With baby bonds, babies born into the most impoverished families in Vermont would have $3,200 set aside for them and invested by the State Treasurer’s Office. These children could access their baby bond between ages 18 and 30, with the initial $3,200 investment projected to grow to $11,500 by age 18 and $24,500 by age 30. The funds could be used for four wealth-building activities: purchasing a home in Vermont, starting or investing in a business in Vermont, pursuing higher education or job training, and/or saving for retirement.

Last year, Connecticut became the first state in the nation to implement a baby bonds program, highlighting the importance of investing directly in people. Over the long-term, the policy will unlock economic opportunity for a generation of young adults and spark investment in local communities. Since the Connecticut Baby Bonds program saw its first eligible babies born on July 1, 2023, we’ve also seen how baby bonds can serve as a powerful message of state government's commitment to building a more equitable, prosperous future – one that includes economic participation for everyone.

Similar legislation has been proposed at the federal level by Sen. Cory Booker, D-NJ, and Rep. Ayanna Pressley, D-Mass., and baby bonds proposals are currently moving forward in Massachusetts and Rhode Island.

This session in the Vermont legislature, baby bonds legislation is being led by Sen. Kesha Ram Hinsdale, D-Chittenden-Southeast, and Rep. Dan Noyes, D-Wolcott, with over 80 co-sponsors, representing a broad coalition of support among republicans, progressives, democrats, and independents. It’s similar to the broad coalition that helped pass baby bonds in Connecticut that also included nonprofits, business groups, and local leaders. 

A Vermont baby bonds program would ensure that Vermont children facing the toughest circumstances can build wealth and shape their own financial future. Enrollment in the program would be automatic for all Vermont children born on Medicaid. With a higher percentage of Vermont births on Medicaid, the policy would disproportionately benefit Vermont’s rural communities. Individuals would also have to be Vermont residents in order to access the funds, supporting the state’s efforts to retain young Vermonters.

Baby bonds would support Vermonters’ economic resilience for generations to come and relieve pressure on our state budget over time. By investing in our state’s greatest resource – our children – we can support the health of our communities and create a more resilient, fair, and productive Vermont economy for all.

Mike Pieciak (left) is Vermont’s state treasurer and Erick Russell (right) is state treasurer in Connecticut.