Why ‘baby bonds’ didn’t make it into the NJ budget, and what happens now – NorthJersey.com

New Jersey made national headlines last year when Gov. Phil Murphy proposed putting aside a state-funded nest egg for babies born into all but the wealthiest families.

It was a progressive pitch that Murphy said would “break the cycle of economic inequality” and was necessary amid the COVID pandemic that “laid bare systemic inequities that have disproportionately denied families of color an equal chance to achieve upward mobility.”

Ultimately, lawmakers stripped the proposal to fund so-called baby bonds from last year’s budget, citing the uncertainty of how COVID would impact state revenues.

Yet eight months later, and with the state’s bank accounts overflowing with cash, the top-down push for baby bonds has disappeared.

Murphy didn’t include the investment in his February budget proposal, nor did lawmakers fund it when crafting the state spending plan for the fiscal year starting July 1.

Advocates say leaving out baby bonds is a missed opportunity to help close the racial wealth gap, and that such programs are even more crucial after the pandemic brought racial disparities in healthcare to the fore.

“The irony here is not only was it never mentioned, it also would have been the perfect avenue to reach for it again given the racial disparities laid bare by the pandemic, which was the dominating conversation,” said Sheila Reynertson, senior policy analyst for the left-leaning think tank New Jersey Policy Perspective.

Why not this year?

Assembly Speaker Craig Coughlin, D-Middlesex, touted the 2022 state budget for its tax credit programs and aid to low- and middle-class families.

Spokespeople for Murphy and Assembly Speaker Craig Coughlin didn’t explain why the proposal wasn’t part of the state’s latest $46.4 billion spending plan. 

A spokesperson for Senate President Stephen Sweeney, D-Gloucester, declined to comment on why baby bonds were left out. Murphy, Sweeney and Coughlin are the architects behind the state’s spending plan.

“Governor Murphy believes that programs aimed at addressing societal inequities, such as baby bonds, must continue to be part of ongoing discussions as we work to ensure a brighter future for all of New Jersey’s children,” Murphy spokesperson Alyana Alfaro Post said in an email.

“The governor hopes to work with the Legislature to advance programs with that aim.”

Meanwhile spokespeople for Murphy and Coughlin touted the budget’s other programs that help families with lower incomes, including a $500 tax rebate for about 760,000 families, increasing property tax assistance and a program that matches up to $750 saved for higher education. 

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“This budget funds critical programs and fulfills shared priorities in supporting working families, seniors and children,” Coughlin’s spokesperson Cecilia Williams said in an email.

“Though tax revenue was bigger than expected this year, it was also not bottomless.”

While baby bonds are not forthcoming in New Jersey, nearby states have taken action.

Earlier this month, lawmakers in Connecticut created the nation’s first baby bond program, setting aside $50 million in funding for a dozen years. The state will deposit $3,200 into accounts for each of the about 16,000 Connecticut children whose families are enrolled in Medicaid each year. 

“As a result of the COVID-19 pandemic, economic disparities have been exacerbated, disproportionately impacting communities of color,” Connecticut Treasurer Shawn Wooden, who supported the program, said earlier this month.

“Members of the General Assembly made it clear that Connecticut is ready to lead by improving racial equity and helping families in every town throughout the state break the cycle of poverty.”

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The push for baby bonds

U.S. Senator Cory Booker is one of the country's leading advocates for baby bonds, having introduced legislation several times to create a federal investment program on behalf of low-income children.

Murphy last year wanted to invest $1,000 for every baby in households that earn less than 500% of the Federal Poverty Level, or $131,000 for a family of four.

The idea was the money would grow over time, and when eligible children turned 18, they could use the savings account to help buy a home, pay for college or start a business.

The program was expected to cost the state about $80 million to help an estimated 72,000 children.

It was inspired by U.S. Senator Cory Booker, a Democrat from Newark and a chief cheerleader of baby bonds as a method to decrease wealth disparities between white families and families of color.

White workers in the Garden State have an average income roughly double that of Black and Hispanic workers, according to U.S. Census Bureau estimates. A 2019 nationwide survey by the Federal Reserve found that white families’ wealth was eight times that of Black families, and five times that of Hispanic families.

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Booker has repeatedly introduced federal legislation creating a baby bond program that he has said would give young adults a chance to move up the economic ladder.

Murphy’s state-level proposal came after months of demands for racial equality that were amplified by the pandemic and protests across the nation after the murder of George Floyd in Minneapolis.

Yet it was derailed after Republican and some Democratic lawmakers questioned making a funding commitment during the uncertainty of the pandemic. At the same time, Murphy and legislative leaders were signing off on borrowing $4 billion, roughly equal to 10% of the state’s spending.

Advocates for economic equality say Murphy’s proposal started a discussion about closing the wealth gap, and they urged lawmakers not to abandon the baby bonds proposal.

“We’ve been talking over the course of the last year about what we can do to address racial inequality and we need to continue,” said Laura Sullivan, director of the economic justice program at the New Jersey Institute for Social Justice, an advocacy group. 

“Baby bonds are part of that.” 

Stacey Barchenger is a reporter in the New Jersey Statehouse. For unlimited access to her work covering New Jersey’s policymakers and political power structure, please subscribe or activate your digital account today.

Email: sbarchenger@gannettnj.com 

Twitter: @sbarchenger