Washington State Senator Bob Hasegawa, a long-time advocate for public banking, has filed a bill, SB 5949, that would create a public state investment trust and a commission to oversee it. He filed a similar bill in the last session. The bill’s focus on a public-bank-style mechanism for funding infrastructure is similar to our own Massachusetts bill, filed in the House as HD426 by Rep. Mike Connolly , and in the Senate as SD861 by Sen. Jamie Eldridge.
The bill text notes that there are “significant public infrastructure and program needs…that are unmet” in the state, and that the cost of bonded debt is roughly twice as much as the amount borrowed. A public lending institution would allow those interest payments to come back to the state, producing sustainable and lower cost revenue for the state without a tax increase, and expanding financing capacity for needed projects.
The bill is bolstered by a positive report issued in December by University of Washington’s Evans School of Public Policy and Governance, which concluded that: “Improvements can be achieved by creating a state-chartered public cooperative bank.”
The Evans School is working on a business plan for the bank as well, which will be out later this year.
You can watch the bill’s hearing before the Washington state Senate Financial Institutions committee here; the testimony starts about 6 minutes in with an explanation of the trust’s structure, deposits, and oversight. Sen. Hasagawa, in his remarks, notes that the support for the bill so far ha s been driven by the need to address infrastructure, and its cooperative nature, and while the public bank concept is still new for some people, it’s a strategy used around the world. “It’s a true game changer for the state to get something like this going…If we can retain control over our own tax dollars and decide how we want to spend it for economic development purposes within our own state and make money in the process… man, I don’t really see a downside to it.”
The comments against the bill, by the Washington Bankers Association and representatives of the state community bankers association, the county treasurer’s association, and the pension fund, highlight concerns—it’s no surprise they testified against a public bank, but it’s important for pro-public bank advocates to address these concerns, as some are also concerns for taxpayers and voters:
- Will there be political influence over the bank?
- Will this bank represent a real savings for the state once start-up and operational costs are factored in?
- What about risk?
- What if state agencies do not want to deposit funds in the bank? (Note that while this is required in the Washington legislation, it is not part of the Massachusetts bill.)
Clearly we’ll be working to answer these questions in Massachusetts too. (Of course, political influence on a public bank begs the question of how much influence the banking industry has over government, via lobbying, campaign donations, and the revolving door.) We are confident that a no-executive bonuses, no-advertising for commercial business public bank can be run economically. As for risk, we’ve found that municipal bond defaults here are extremely rare.