In recent legislative sessions Majority Caucus Vice Chair Bob Hasegawa (D-11) has pushed for the creation of a state bank to fund public infrastructure projects with lower interest rates. His latest proposal is SB 5995, which was introduced last session based on feedback from SB 5949 after it received a public hearing in the Senate Committee on Financial Institutions, Economic Development & Trade.
Despite some changes, SB 5995 still received similar critiques at a Jan. 28 public hearing from banking industry representatives who warn it could jeopardize Washington’s high credit rating.
“We would suggest that the local government should have the ability to pick whichever financial institution best meets their needs and not be compelled to use one or the other,” Trent House with Washington Bankers Association told the committee. “It may be in their best interest to use a different institution than the state bank.”
SB 5995 would create the Washington Investment Trust account into which public transportation funds would be deposited. The trust would be managed by the lieutenant governor, the attorney general, the treasurer and the state auditor. The commission would then have the authority to invest that money into project financing. The commission would be advised by a board consisting of 11 members appointed by the governor; at least six members must have experience in finance.
Currently there is only one state bank in the country located in North Dakota, which has operated since 1919 and for the past 15 years has reported profits. However, State Treasurer Duane Davidson in 2017 released a study of state banks, noting among other things that North Dakota’s bank was examined by other states as a potential model, but none choose to move forward. The study also claimed a state bank would put taxpayers at risk if it failed, an outcome House described as “catastrophic” to the state’s credit rating.
Hasegawa argued that the model would save the state money in the long-term by taking out debt for public projects at a lower interest rate and reducing the total amount paid. He added that the state’s debt ceiling would make a state bank “inevitable to meet our current and future demands or our infrastructure is going to continue to crumble. Our debt limit has hampered our ability to maintain our infrastructure. We can’t afford to build the schools we need to build if we’re going to cut class size. We just don’t have the capacity to put enough money to maintaining our current infrastructure, let alone try and think about what kind of infrastructure will we need for the future.”
However, stakeholders such as Brad Tower with the Community Bankers of Washington argued that “the private sector is clearly a more efficient means of performing this particular work.”
House also expressed concern that the bank’s decisions may become politically influenced rather than guided by good financing decisions. He added the proposed commission is “exactly that sort of statewide elected official board that we worry may actually bring the political component to the banking process which causes us pause.”
Davidson signed in as opposed, but did not testify.
No further action is yet scheduled for SB 5995.