Gov. Phil Murphy sought to boost a deceptively controversial budget proposal already seeing pushback from some Democratic leaders Wednesday.
The governor’s baby bond proposal would mandate a $1,000 state-funded deposit into an interest-bearing account for children born to New Jersey families making less than roughly $131,000. Those funds would be locked away until the children reach their 18th birthday and could then be used for school expenses, entrepreneurial ventures or other wealth-generating activities.
“While COVID-19 has had an enormous financial impact on many New Jersey families, it has laid bare systemic inequities that have disproportionately denied families of color an equal chance to achieve upward mobility,” Murphy said. “To emerge from this crisis as a stronger, fairer, and more resilient state, we need to lay the foundation for the next generation of New Jerseyans to secure their spot in the middle class and break the cycle of economic inequality.”
The proposal mirrors one proposed by U.S. Sen. Cory Booker (D-Newark) at the federal level, though it’s not clear whether the proposal would actually succeed at creating a nest egg for New Jersey’s children.
The $1,000 deposits would be invested to generate returns that are at least equal to 30-year bonds issued by the U.S. Treasury. Assuming an interest rate of 1.43%, Wednesday’s rate for 30-year bonds, the accounts would hold about $1,291 after 18 years.
By contrast, Booker’s proposal, which calls for additional annual deposits, would see fund values ranging between $46,215 and $1,681, depending on income level.
Still, the measure has won support from members of the Legislative Black and Latino Caucuses.
“With so many New Jerseyans in communities of color struggling to stay afloat right now, saving money for a child’s future is not an option,” said State Sen. Ronald Rice, chair of the Legislative Black Caucus. “Baby bonds are simply an investment in the next generation of our state. Generational poverty holds back far too many people, and the Governor’s proposal is a creative way to support working class families at a time of great need.”
But Senate Budget Committee Chairman Paul Sarlo (D-Woodridge) on Tuesday told Politico New Jersey “now is not the time” for baby bonds.
Republican lawmakers have issued similar warnings, cautioning that the baby bonds program was an irresponsible use of money at a time when COVID-19 has left a $5 billion dollar hole in the state’s budget that New Jersey is planning to fill with borrowed money.