Here’s an idea: What if the State of North Dakota deposited $5,000 into an account for every child born to North Dakota parents to be managed by the Bank of North Dakota until the kid goes to college or becomes 20 years old?
That’s what Senator Oley Larsen, a Republican from Minot, is proposing with SB2165 (see below).
Here’s what it would do:
- Each child born to a mother and father who are North Dakota citizens at the time of the birth would have $5000 deposited into an account.
- The account would be administered by the Bank of North Dakota which would be able to collect administrative fees.
- If the child chooses to go to college, the balance of the fund would be forwarded to that college.
- If the child doesn’t go to college, he or she can receive the balance of the fund when they turn 20.
- If the balance of the fund isn’t collected at 20, it remains on deposit with the Bank of North Dakota until such a time as the person it is attached to enters a nursing home at which point the balance is forwarded to that institution.
- If the person the fund is attached dies or commits a felony the money goes back into the state’s general fund.
Doing some quick math on what this might cost, North Dakota sees around 10,000 births per year, so we’re talking about a roughly $50 million per year ($100 million per biennium) obligation at current birth levels.
Calculating the interest appreciation, if the Bank of North Dakota gets a 4 percent return compounded monthly over the course of 20 years each person with an account would get a little over $11,000 each.
Though that’s obviously going to vary depending on how the Bank of ND chooses to administer the funds.
So, is this a good idea or a bad idea? I’m not sure I like the idea of the money going to higher education or a nursing home automatically. I’d rather err on the side of giving the individuals more control over their money.
And I’m not sure I like the idea of just gifting $5,000 to everybody who happens to be born to North Dakota citizens. With the state’s loose residency laws, a set of parents could move to North Dakota and live here for 30 days before the birth and get their kid a $5,000 bank account. If this went forward, some changes would have to be made in that regard.
I’m not sure the state should be playing such a paternalistic role in our lives. I’m also not sure the state should be obligating itself to these sort of entitlements. Maybe the math works now, but would it work in ten years? Twenty years? Would we have the political will to change things if the math stopped working?
The thing about these sort of entitlements is that once they’re created, they’re pretty much here to stay. Look at Social Security and Medicare at the federal level. Both programs are in serious financial jeopardy, representing hugely ugly long-term obligations to American taxpayers, but we keep pouring money into them because we lack the political will to make changes.
Do we need those headaches at the state level?
If the state has so much money sitting around they can start giving it away like this, I’d prefer that they cut taxes and give it back in that manner.