Baby Bonds and DC’s Racial Wealth Gap

Chairperson McDuffie and members of the Committee, thank you for the opportunity to submit written testimony. My name is Tazra Mitchell, and I am the Chief Policy and Strategy Officer at the DC Fiscal Policy Institute (DCFPI). DCFPI shapes racially-just tax, budget, and policy decisions by centering Black and brown communities in our research and analysis, community partnerships, and advocacy efforts to advance an antiracist, equitable future.

My testimony focuses on the “Child Wealth Building Act of 2021,” or the baby bonds program, which aims to reduce DC’s substantial racial wealth gap. DCFPI commends this body for championing the Act and working diligently to restore a portion of the Mayor’s deep cuts to the program in the fiscal year (FY) 2025 budget. DCFPI also commends the Office of Chief Financial Officer (OCFO) for drafting the program’s regulations and spearheading implementation efforts with other DC agencies. Yet, the OCFO has paused the administrative build out of the program due to constraints of working with Medicaid protected data.^[1] DC has neither finalized its regulations nor enrolled a single child.

My testimony also focuses on the need for the OCFO to improve reporting on fines, fees, and forfeitures revenue. The lack of detailed public reporting on such revenue collections, including those who pay them, undermines efforts to make this part of the revenue system more equitable.

The Committee on Business and Economic Development should:

• Work with the Committee on Health and Committee on Human Services to authorize data sharing and statutorily mandate coordination across the OCFO, Department of Health Care Finance (DHCF), and Department of Human Services (DHS) to facilitate implementation of the baby bonds program;
• Provide guidance on which DC agencies are responsible for conducting targeted outreach for the baby bonds program and responding to families’ inquiries about accrued contribution levels;
• Expand baby bond program’s eligibility to births subject to medical coverage provided under DC Healthcare Alliance and document the harm of scaled-back program features due to the Mayor’s budget cuts;
• Require the OCFO to publish detailed non-tax and special purpose revenue reports biennially, as done with dedicated taxes, to improve reporting of revenue sources generated through fines and fees; and,
• Require the OCFO to work with other agencies to collect, share, and publish fines and fees collections data by demographic characteristics.

Baby Bonds Could Help Close DC’s Outsized Racial Wealth Gap, But Only If DC Implements the Program and Restores Robust Design Features

The goal of the Child Wealth Building Act of 2021 is to reduce the District’s alarming racial wealth gap and help realize a future of shared abundance. As the result of a long and well-documented history of deliberately racist policies, exploitative and extractive systems, and white racial violence against Black residents, the District has one of the largest racial wealth gaps in the country. In the DC area, white households have 81 times the wealth of Black households.^[2]

To ensure the baby bonds program achieves its long-term goals, DC officials must get the program up and running. The OCFO issued a Notice of Proposed Regulations for the program in December 2022 but has not issued its final rules, which will provide a framework for program implementation. ^[3] While the OCFO has been diligently spearheading implementation efforts with other DC agencies, they had to pause the administrative build out of the program due to data constraints. Under current law, the DHCF cannot disclose a child’s Medicaid status to the OCFO because it violates the Health Insurance Portability and Accountability Act (HIPAA).^[4] Without this data, the OCFO does not know how many children are eligible and doesn’t know their names. The proposed rules would require DHS to verify eligibility and enroll the children into the program. To date, DHS has not enrolled any children in the program.

CBED should work with the Committee on Health and Committee on Human Services to authorize data sharing of Medicaid data (while adhering to HIPAA rules) and statutorily mandate coordination across the three agencies to facilitate implementation of the baby bonds program. Together, the committees should also provide guidance on which DC agencies are responsible for conducting targeted public outreach and responding to families’ inquiries. DC agencies have published limited information about the program, meaning that parents of eligible children may not know that their children qualify for the program or understand what steps they need to take to ensure their children are enrolled. Outreach could include a public media campaign, a launch event, regular and widely-publicized program updates, and an online program dashboard tracking eligibility, enrollment, and other key data points. Greater outreach is warranted in Wards 5, 7, and 8, where children who are likelier to be eligible live.

The slow implementation of the baby bonds program continues to put its success at risk, especially in the face of DC’s ongoing revenue challenges. And because enrolled children who become disabled can receive payments before they turn 18, the delayed implementation is harming them, even if they are not entitled to a large sum of funding yet due to the newness of the law. As soon as possible, the Council should pass these statutory changes and the OCFO should issue final regulations.

New Design of the Baby Bonds Program Undermines its Ability to Close the Wealth Gap

To truly move the needle on the racial wealth gap, a baby bonds account “must accumulate a balance sufficient to meaningfully expand a person’s life opportunities in young adulthood,” such as by covering the cost of a down payment on a home, research from the Urban Institute shows.^[5] This means that substantial endowments and annual contributions to baby bonds accounts are especially essential in a high cost area like the District, where the median sales price for a single-family home was $925,000 in January 2025.^[6]

Yet, the FY 2025 budget reduced the total value of disbursements available to future baby bonds beneficiaries, limiting the program’s ability to close the racial wealth gap. Now annual contributions are contingent on revenue from the newly-expanded online sports betting market, rather than the Local Fund, and annual deposits will not be indexed to inflation nor tiered by income, as under the original law.^[7] DCFPI urges the committee to restore the program to its original design and also consider expanded eligibility, such as including births subject to medical coverage provided under DC Healthcare Alliance. At minimum, the committee should document the harm of scaling back the program.

Require the OCFO to Publish Detailed Non-Tax and Special Purpose Revenue Reports Biennially and Publish Collections Data by Demographic Characteristics

The lack of detailed public reporting on fine and fee revenue collections, including those who pay them, undermines efforts to make this part of the revenue system more equitable. As DC continues to expand revenue generation from non-tax revenue sources such as fines and fees, the committee and the Council should be intentional in ensuring that these revenue sources are not disproportionately targeting those with low incomes and historically marginalized communities. Improving reporting on existing fines and fees is critical to identifying and monitoring inequities in the collection and imposition of this regressive revenue source and for advancing equitable reform, such as ability-to-pay determinations.

The OCFO annually publishes revenues collected from tax, non-tax, and other revenue sources used to fund District programs and services. Within these revenue chapters, fines and fees are reported as non-tax revenues separated into two main categories: 1) revenues that can fund any District service (general purpose) and 2) revenues that are earmarked for specific programs and services (special purpose).^[8] However, despite the OCFO reporting revenues for hundreds of general purpose and special purpose revenue sources generated from fines and fees, it does not provide detailed information, such as their rate structure, purpose, if funds are used immediately or accrue interest, and other details.

Previously, the OCFO published supplemental general purpose and special purpose revenue reports that provided this kind of detailed information.^[9],[10] However, the OCFO has not released these reports since 2015, despite numerous additions and revisions to existing fines and fees. For example, in 2015, the OCFO reported 99 unique general purpose non-tax revenue sources generated from fines and fees.^[11] By 2019, this number increased to 153—an increase of 55 percent.^[12],[13] Given that these supplemental non-tax revenue reports provide the most extensive fine and fee revenue data, the OCFO should update them every two years, similar to the OCFO’s reporting of dedicated taxes.

Also, existing fines and fees data do not include a breakdown of how fines and fees are collected across income levels, race and ethnicity, gender, disability status, or other characteristics. This makes it impossible for lawmakers and the public to understand the full impact of fines and fees on specific populations in DC. CBED should work with the OCFO, and other agencies responsible for levying and collecting fines and fees, to increase inter-agency coordination, data collection, and data sharing aimed at ensuring the OCFO is equipped to publish demographic information about the DC residents paying fines and fees.

To support the OCFO, the CBED could conduct a systemic review of agencies’ existing data collection practices and data sharing agreements to better understand what demographic information is already collected, where and how those data are shared, and where data sharing connections across agencies can be improved. Where gaps exist in collection and sharing of demographic characteristics, the committee and OCFO could work with agencies to identify common reporting metrics or to create data sharing agreements.

Thank you for the opportunity to testify, and I am happy to answer any questions you may have.