It”™s not easy to get a state treasurer to crow about good fiscal news.
Case in point: Connecticut”™s Shawn Wooden, who ”” facing an ever-increasing rainy day fund, practically unheard-of credit rating upgrades, and the fact that his long-vaunted “baby bonds” program is becoming a reality ”” deadpanned to the Business Journal: “The state is doing really well, relative to other states in the region and the country.”
Even so, Wooden exudes a quiet sense of pride as he ticks off all that he and his department have achieved during his roughly 2½ years in office.
At the time of this writing, the state was looking at a $470 million budget surplus, $6 billion-plus in federal aid and a projected $4.5 billion in its rainy day fund, a historic high.
“We have a strong cash pool and have remained liquid through the pandemic and the economic downturn,” Wooden said.
Those accomplishments in turn led to three credit upgrades in May ”” S&P Global from “A” to “A+”; Fitch from “A+” to “AA-”; and Kroll Bond Rating from “AA-” to “AA.” In March, Moody”™s upgraded the state”™s general obligation bonds credit rating from “A1” to “Aa3,” which was the state”™s first upgrade in over 20 years.
“As recently as 2017 we were still being downgraded,” the treasurer noted. “Now we”™re being independently validated across the board, which we have never experienced.”
Wooden also has high hopes for his baby bonds program. Modeled after a concept that U.S. Sen. Cory Booker (D-New Jersey) first introduced to Congress as the American Opportunity Accounts Act during his presidential run in 2019 ”” and which he reintroduced in February ”” Connecticut House Bill 6659, now awaiting the governor”™s signature, will create a savings account for every child born into poverty.
As of July 1, 2021, any child whose birth is covered by HUSKY Health Medicare would receive a $3,200 savings account held by the state. Over 18 years, the funds would be managed and invested by the treasurer”™s office; once the participant reaches 18, they can use the funds solely towards the purchase of a home in Connecticut, to invest in a business in Connecticut, for educational purposes, or to contribute towards a retirement savings program.
The “in Connecticut” mandate is designed to encourage reinvestment in the state and its communities, Wooden said.
Under the plan, which assumes the same 6.9% rate of return that the state uses for investment of pension funds, the beneficiary is projected to have an account worth nearly $11,000 when the funds are claimed. Participants will have up until their 30th birthday to apply to claim the funds.
“It”™s a phenomenal idea,” Wooden said, “because it”™s aimed at a real recognition of the growing income inequality, and the very significant racial inequality, that we experience here in Connecticut.”
Addressing generational poverty
By addressing what he calls “growing cycles of generational poverty,” the treasurer believes that the state”™s GDP will increase significantly. He cited a 2019 McKinsey study positing that, if nothing is done, nearly 70% of Black children “are likely to fall out of the middle class as adults.”
The impact of the growing racial wealth gap on consumption and investment, McKinsey said, is estimated to cost the U.S. economy between $1 trillion and $1.5 trillion between 2019 and 2028 ”” between 4% and 6% of the nation”™s projected GDP in 2028.
And, Wooden said, poverty is an issue in all 169 of Connecticut”™s municipalities.
“There are people in Greenwich, in Darien,” he said. “And not only that, but 64% of the families on Medicaid in our state are white. Not a lot of people realize that.”
Even so, the treasurer said that with the current, generally national trend toward offering more financial and racial equity, the time is ripe for baby bonds to become a reality, “irrespective of race or ZIP code.”
Although HB 6659”™s six co-sponsors are all Democrats ”” including state Reps. Antonio Felipe of Bridgeport and Travis Simms of Norwalk ”” Wooden said he was “very, very encouraged” by the possibility of its passage this year. “It”™s one of the few bills that the Appropriations Committee voted out of committee after a public hearing” this year, he said.
Meetings with various leaders have also been encouraging, he said, with House Speaker Matt Ritter (D) and the Black and Puerto Rican Caucus speaking in support of the legislation. On the federal level, U.S. Sen. Richard Blumenthal (D-Connecticut) and U.S. Rep. Rosa DeLauro (D-3rd, which includes Stratford) have expressed their support of both the state and federal baby bonds legislation, though Wooden declined to lay odds on whether D.C. would pass the Booker version.
“Washington is a very polarized place,” he said. “They”™re having a hard time right now passing an infrastructure bill, which is something all Republicans and Democrats see the need for.”
Wooden also noted that the ratings agencies are starting to evaluate such inequality issues as a factor going forward.
Meanwhile, he is expecting that Connecticut will make another multimillion-dollar payment to pay down its pension obligations this year, following last year”™s historic $61.6 million to the state”™s employee retirement plan. The next payment will go either to that fund or to the teachers’ pension fund.
Under state law, any amount in the rainy day fund over 15% of Connecticut”™s general fund appropriation automatically must be used to pay down one of those pension obligations.
“We were headed off a cliff” financially, Wooden said, as those obligations “were eating up a higher and higher percentage of our budget.”
The treasurer is also encouraged by the progress being made by the Corporate Call to Action: Coalition for Equity & Opportunity (CEO), a working group launched by his office and the Ford Foundation in September. The purpose of CEO, which represents $27 trillion in assets, is to address race-based economic disparities and their impact on the nation”™s economy.
CEO ”” whose members include Westport”™s Bridgewater Associates, The Hartford, Bank of America, Citigroup, and Goldman Sachs ”” is aiming to produce up to $30 billion in economic impact for communities and business owners of color during the next five years.
“It”™s about bringing financial and intellectual capital to bear” on the issues, Wooden said. “And the CEOs involved are rolling up their sleeves and creating a vision to make it work.”
Last month the group ”” which in addition to the aforementioned is committed to creating more than 10,000 internships and work development opportunities for emerging Black and Latino talent, and to publicly report measurable improvements in pay equity, workplace inclusion and industry representation among all levels of the financial services workforce, including senior leadership ”” announced four new commitments to achieve its goals:
- Across financial services, commit an aggregate of $10 billion in investments to increase spend with businesses owned by people of color, particularly Black-owned businesses, and support the financial well-being of more than 30,000 people of color working in service sectors.
- Launch or scale programs that both partner with and invest in historically underserved and undercapitalized communities of color to unlock economic opportunities, improve equity, create generational wealth and support community economic security.
- Provide mid-career professionals with the skills needed to launch a high-growth career in financial services. Support career development for more than 10,000 Black and Latino students every year through internships, micro-internships and other types of work development programs.
- Increase diversity data transparency, reach racial parity in the workplace and generate equitable job and salary opportunities in the financial services industry.
Wooden confirmed that he is in conversations with “many other” investment firms to join the coalition.
With so many good things happening, is it time for a victory lap?
“We”™re definitely headed in the right direction,” was all he would say.
