SACRAMENTO – Every child born in California would get a $500 savings account to start building a nest egg for college or down payment for a home, under a bipartisan bill introduced Wednesday in the state Senate.
The proposal would cost taxpayers about $285 million a year.
A similar program has increased savings in Great Britain since 2002, but California would be the first state in the nation to enact it, said David Lesher, California program director for the nonprofit New America Foundation, based in Washington, D.C. A national savings program has been pending in Congress since 2005.
Under the bill, every child born in California after Jan. 1, 2008, would receive the money, regardless of their parents' income or immigration status. Recipients would repay the state's initial $500 investment once they turn 18.
The money may be used for three purposes: college or continuing education, a down payment on a home or a retirement account.
"This is the essence of equal opportunity. Every child, every person ought to get a head start," said Sen. Darrell Steinberg, D-Sacramento, who introduced the bill with Sen. Bob Dutton, R-Rancho Cucamonga.
About 566,000 children are expected to be born in California next year.
If families added $50 a month to the state's initial contribution, the savings account would grow to nearly $17,500 at 5 percent interest over 18 years. Steinberg said that would promote saving money in a culture that now is carrying record levels of debt and has the lowest savings rate since the Great Depression.
"It sounds like another give-away with other people's money — 'a chicken in every pot,"' said Jim Uhler, spokesman for The National Tax Limitation Committee in Roseville, a Sacramento suburb. "With the budget in the red again ... we have other pressing issues."
Dutton said the money would be "an investment in the child's future," said his spokesman, Larry Venus. "He looks at this as a hand up, not a hand out."
Steinberg said the state's $131 billion annual budget spends taxpayers' money on far more dubious programs.
"There's no question these are significant dollars," Steinberg said. "But look, we spend so much more on things that don't have nearly as much significant value."
The bill does not address what happens to the account if a child dies before turning 18.