The state legislature has spent $650,000 in the past three years studying the concept of a state bank. If signed by Governor Jay Inslee, the 2020 supplemental budget will spend an additional $250,000 on another study – even though a previous one examining the issue is not yet complete. However, State Treasurer Duane Davidson is asking Inslee to veto that provision in the budget, saying the issue has been examined enough.
“This is getting to be the definition of insanity to keep doing the same thing over and over again,” Davidson said.
The state legislature in 2017 created the Infrastructure & Public Depository Task Force. Its final report concluded that while “many Washington governments need access to low cost financing for infrastructure projects…if the Legislature does want to further consider the issues surrounding the establishment of a state depository institution, much more work needs to be done.”
Aside from the practicality of a public bank, a proposal would likely require a constitutional amendment due to the state constitution’s proscription regarding lending to private groups.
Also in 2017, Davidson released a “study of studies” other states had done looking at public banks, concluding that the idea is fraught with financial risk to taxpayers.
In the 2019-21 supplemental operating budget, lawmakers allocated $100,000 for the Evans School of Public Affairs to conduct a business plan for a public bank. According to Davidson, that report was due last June, but has yet to be completed.
“We’re doing another study when this hasn’t even been completed – which angers me,” he said.
In a March 13 letter to Inslee, Davidson wrote: “It would be imprudent to appropriate an additional $250,000 to do further study of the state bank concept while we await the current outstanding report.”
The city of Seattle two years ago looked at the idea of a public bank. A study by HR&A Advisors, Inc. in collaboration with Pacifica Law Group said they were “optimistic about the idea of a public bank,” despite the fact that were the city to do so it would lead to “higher overhead costs and therefore have a likely need for ongoing subsidy.”
Within the legislature, Majority Caucus Vice Chair Bob Hasegawa (D-11) has repeatedly introduced legislation creating a state bank, which he argues can offer lower interest rates to fund public infrastructure projects. This session he introduced SB 5995, which failed to clear the Senate Financial Institutions, Economic Development & Trade Committee after a public hearing. Last year, he sponsored SB 5949, which also failed to get a committee vote after a public hearing.
The only state with a public bank is North Dakota, which opened in 1919 and has been studied by other states as a possible model. However, Davidson’s 2017 report noted that no state has moved forward with the idea.
A 2018 evaluation of a state bank by the Daniel J. Evans School of Public Policy and Governance at the University of Washington noted that many of the primary financial services a public bank could provide to local governments “are currently offered through a plethora of Washington state programs, and by private banks and credit unions.”
“I don’t know why we keep talking about this, but we do,” Davidson said.
Inslee is not yet scheduled to sign the operating budget.