Maryland comptroller releases report on economic impact of statewide "Baby Bonds" program

Maryland Comptroller Brooke Lierman released a report on the feasibility and potential impacts of implementing a statewide "Baby Bonds" program.

"Baby Bonds" are a government policy providing a set amount of money at birth for children of lower-income families. In theory, that money would grow as they age.

For example, $7,000 state investment for each eligible child would grow to over $22,000 by the age of 18.

However, this would require an initial investment of hundreds of millions of dollars from the state.

What did the report review?

The Maryland General Assembly called for the report, which shows how publicly funded trust accounts for children born into low-wealth families would help close the racial wealth gap, promote economic mobility, and strengthen the state's long-term economic performance.

This report looked at the big aspect of baby bonds programs that have been used or proposed in other states, outside of Maryland.

The comptroller's office said it estimated the program costs and potential funding sources for Maryland and considered entities that could be responsible for implementation.

"Too many Marylanders are locked out of wealth-building opportunities simply because of the circumstances they're born into," Comptroller Lierman said. "Baby Bonds offer a powerful tool to help Marylanders gain their financial footing and reach their full potential."

A breakdown of the report

Lierman's office said that an estimated 40% of Marylanders do not earn enough to afford basic expenses like utilities, food, and prescriptions, which deters them from saving or raising enough money for their children. 

The Comptroller's Office's report shows that baby bonds can help people in poverty build wealth. 

The Comptroller's Office detailed several factors for a Baby Bonds program, including:

The persistent racial wealth gap in Maryland

• According to research, white households have nearly four times the wealth of Black households in Maryland, and the median net worth of white households is $408,832, compared to $109,898 for Black households.
• Nearly 80% of Maryland's white households are homeowners, but only about half of Black households in Maryland own a home.

 The landscape of Baby Bonds programs across the United States

• In 2023, Connecticut became the first state to fund and implement a baby bonds program.
• Washington, D.C., Rhode Island, and Vermont have also approved baby bonds programs.
• Maryland is among more than a dozen states to have proposed baby bonds legislation.
• Maryland is one of nine states that have a baby bond pilot program in place on a smaller scale.

The Maryland Comptroller's Office says that long-term economic benefits include increased tax revenue and reduced reliance on public assistance.

Estimated costs for Maryland

• The report determined that a program that provides a $7,000 seed investment for all babies born on Medicaid (approx. 30,000 annually) over five years could require a $567 million seed investment by the state.
• And, over time, the state could yield an estimated $1.86 billion in investment earnings, allowing the state to distribute over $2.4 billion to about 80,000 beneficiaries between the ages of 18 and 30 (depending on when they access their funds).

Administration responsibility

• The report found that in most states considering the Baby Bonds program, state treasurers' offices or other state financial agencies with the capacity to manage trusts and administer claims and distribution are responsible for implementation.
• The Comptroller's Office said the eligibility of those granted the bonds could be determined by Medicaid, ENOUGH Act Zip Codes, or Supplemental Nutrition Assistance Program (SNAP) data.