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Editorial: Fund could break inequitable cycle of poverty

State version of ‘baby bonds’ would provide capital for low-income young adults’ economic success.

By The Herald Editorial Board

Jennifer Bereskin, a member of the Snohomish Nation and Qawalangin Tribe of Unalaska, Alaska, wants state legislators to think ahead when addressing the needs of Washington’s children.

Say, seven generations ahead.

Bereskin, who dropped out of high school when she was 17 because her family was homeless and she had to find work, testified last week in support of bipartisan legislation (Senate Bill 5125) that — more than providing immediate needs of shelter, food and education — would help individuals build wealth and combat the economic hardships that can lock families into a nearly unbreakable cycle of poverty for generations.

“I have 38 years of living in poverty, and if I could have had access to a program such as this … my entire life would be completely different,” Bereskin said, Jan. 16, speaking before the Senate Human Services Committee in support of legislation that would create the Washington Future Fund.

“When we’re thinking about our community, about building strength, we have to invest in our children,” she continued. “We have to think seven generations forward. This is an investment for the lives of children who are yet to be here and the ones who will be here long after we are all gone.”

As described by state Treasurer Mike Pellicciotti with the editorial board in November, the fund — similar to an idea called “baby bonds” — would set aside $4,000 from the state’s general fund for each child born who is eligible for Apple Health, Washington state’s Medicaid health care program. Those funds would then be invested by the state’s investment board as it does for the state’s pension fund and other investments. Between the ages of 18 and 36, adults who qualify, would be allowed to draw on the accrued value of that original investment for use for college education or pre-apprenticeship training costs, seed money to start a small business or as a down payment on property.

The legislation, first requested by Pellicciotti’s office last year, has returned, this year backed by a report, requested by lawmakers. The report’s key findings:

  • Poverty in Washington state is persistent;
  • If an individual and their family is going to move out of poverty, they are most likely to do so in their late 20s to early 30s;
  • Without intervention, current inequities often worsen and persist, passed down to following generations; and
  • The resources that would be available from the Washington Future Fund can break that cycle of poverty.

The difference between financial stability and poverty, Pellicciotti said in testimony to the Senate committee, is one of access to capital, particularly as a young adult. The major milestones of young adulthood — education and training for careers, investment in a small business of one’s own or the advantage of home and property ownership — all rely on access to capital. Families with means have built on generations of wealth and can use it in support of coming generations toward those goals. Families without those means can’t offer that support.

“What this legislation does is fill that gap,” he told the committee. “It will address that capital limitation and make sure folks can benefit and participate in so many of the programs and policies that are so important” to building future wealth.

Overwhelmingly, that disparity in wealth is inescapably visible along racial lines, said Tracy Yeung, a policy analyst for the Washington State Budget and Policy Center, also speaking in favor of the legislation.

“In 2019, the median net worth of white households in Washington was $286,000, but only $13,665 for Black households, and $29,000 for Latino households,” she said.

The Washington Future Fund, Yeung said, would reduce the state’s racial wealth gap and aid Black, Indigenous and people of color and their families.

Currently, about 47 percent of the children born in Washington state — more than 37,000 each year — are eligible for Apple Health, Washington state’s Medicaid health care program; about 226,000 children under 18 years of age live below the federal poverty level.

Addressing that poverty and its racial inequities are justification enough for the program, but Pellicciotti, as treasurer is also responsible for ensuring the state’s economic health.

“If we’re already at 47 percent and moving in the wrong direction in terms of that wealth gap, if we don’t get out ahead of this issue, we’re going to have major challenges on our state treasury and the weight of different obligations on our state treasury in two to three decades,” he told the editorial board in November.

Rather than wait 20 to 30 years for the bill on those obligations to come due through a further spiral of poverty and its effects, the fund would sock away money now, invest it and then provide a nest egg to those eligible for use for education and job training, a down payment on property or the launching of a small business, providing a further catalyst to existing programs that support those goals.

Additionally, the treasurer said, the program could help support the economies of the state’s rural areas by aiding investment in small businesses and purchase of homes and other properties.

The state is and will continue to make major investments in higher education, workforce training and pre-apprenticeship programs; in home and property ownership; and in starting and building small businesses. The Washington Future Fund will increase access and participation in those programs and build on their successes. Starting now and for the next seven generations and longer.

“Poverty is not a choice,” Bereskin reminded the lawmakers. “It’s completely preventable. It’s a systemic issue and you have the power to change that for the generations going forward.”

Correction: In an earlier version of this editorial Washington Budget and Policy Center policy anaylst Tracy Yeung’s name was misspelled.

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