Could a $4K ‘baby bond’ help break the cycle of poverty in WA? Tacoma senator thinks so

Liz Moomey
Courtesy

A program to help break the cycle of poverty is being considered by the Washington state legislature.

State Sen. Yasmin Trudeau, D-Tacoma, grew up in poverty, faced housing insecurity, had to work multiple jobs to support her family and took a three-year break during college despite having a full-ride scholarship. Trudeau wants young adults to get beyond surviving and be able to thrive, she told The News Tribune. Trudeau is sponsoring Senate Bill 5125 to create the Washington Future Fund.

The fund would invest $4,000 for each child born into poverty. About 40,000 babies would qualify per year. The funds would grow over time and would be available for eligible claimants from age 18 to 35 to use for post-secondary education, purchasing a home or starting a business in Washington. The funds would range from $7,200 (at 18-years-old) to $12,700 (at 35-years-old).

The program is projected to cost about $150 million per year. Trudeau said it does not yet have a dedicated funding source.

The first cohort would become eligible at age 18 in 2042.

Trudeau said investing in children is not something new, and parents with financial means invest in their children, which changes the trajectory of their lives.

“This is the state doing it for kids that will never have that same chance,” she said.

Last year, the state took the first step in creating the Washington Future Fund, which was supported by state Treasurer Mike Pellicciotti. Pellicciotti said in a news release in March 2022 that the future fund would be an investment in kids and in communities facing persistent poverty and a lack of access to capital.

“We need to ensure that those kids growing up in rural and urban communities who choose to, can stay in those communities, buy homes, start small businesses, and thrive where they grew up,” he said in the news release. “We can give hope and a real opportunity for kids to achieve their dreams regardless of how rich their parents were.”

A committee studied generational wealth inequities in Washington and presented its findings to the Legislature and governor. The report published in December found:

  • Poverty is persistent,

  • If an individual is going to move out of poverty, they are most likely to do so in their late 20s or early 30s,

  • The uses of Washington Future Fund can help break the cycle of poverty,

  • Without an intervention, current inequities will persist and worsen.

Jesse Johnson is outreach and community engagement director for the state Treasurer’s Office. Johnson said at a Tacoma council meeting in January that potentially 700,000 children in 20 years could have a different trajectory with help from the future fund.

Babies who received medical services Apple Health or CHIP (Children’s Health Insurance Program) before their first birthday in Washington would be eligible claimants. Almost half the babies born in Washington each year are Apple Health births, and in some rural counties it is closer to 75 percent of the births. Pierce County has 32%-45 percent of its births funded by Apple Health, according to the treasurer’s office.

Tacoma Mayor Victoria Woodards proclaimed the council’s support of the Washington Future Fund at a January council meeting.

“When we think about 40,000 babies a year, if we can support them, we can eliminate poverty here in the state of Washington,” she said.

The Office of the State Treasurer would establish rules to implement the program, such as an application and application process, fund distribution to designated institutions and promotional campaigns to increase awareness of the program.

The Health Care Authority would assist with verifying that a claimant is a member of the funded cohort.

The investment could be greater with a constitutional amendment, which would allow the funds to be put into a diversified portfolio. Those who claimed the Washington Future Funds at age 18 would receive $11,300, and at age 35, they would receive $30,300. No bill has been brought forward this session to amend the constitution. The Washington Future Fund Committee has recommended a constitutional amendment.

The Washington Future Fund is based on economist Darrick Hamilton’s “baby bond” model. Connecticut and Washington, D.C. recently enacted baby bond legislation.

The Senate bill was referred to the Ways and Mean committee on Jan. 27. A companion bill, House Bill 1094, is sponsored by Rep. Monica Stonier, D-Vancouver.

If passed, the effective date would be 90 days after adjournment of session.

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