After $1 million spent studying the concept of a public bank and repeated failed efforts to advance proposals in the legislature to do so, state lawmakers appear on the cusp of finally passing legislation to create one for state, municipal, and tribal governments.
Sponsored by Sen. Patty Kuderer (D-48), ESSSB 5188 would, if passed, make Washington one of only two states in the country to have a public bank; North Dakota has had a public bank for over a century.
The bill cleared the state Senate in a 27-21 vote on March 5 and now possibly is headed to the House floor for a vote after clearing the House Appropriations Committee on March 31.
The bank would be run by an operating board composed of nine members serving four-year terms that would include five elected local or tribal officials, three governor-appointed state residents, and the state Treasurer.
The governor would also appoint the chair from among the three state residents.
Long-time advocates of a public bank argue that it would enable the state to fund public infrastructure projects at lower rates than the private sector.
Though signed in as “other,” Association of Washington Cities Government Relations Director Candice Bock told legislators at the bill’s March 30 public hearing in the House Appropriations Committee that many of its members are “very interested” in the concept.
Opposed was Community Bankers of Washington lobbyist Brad Tower, who noted that the state public works assistance account already addresses these needs. The account funds are overseen by the Public Works Program, which then offers that money to local governments in the form of low-interest rate loans for infrastructure projects such as wastewater system upgrades, fish barrier removals, and sewer main replacements. Debt payments made by local governments are then put back into the revolving account. However, the account has been repeatedly raided by the state legislature in recent years – to the tune of $1.3 billion.
Tower told the committee that the state bank would result in local governments loaning money to each other, which is “a bad idea. The private market is not going to fund these things below market rates. It seems we’re robbing Peter to pay Paul here.”
Bock added that the state bank should be “an additive program and not a replacement for those really important existing state programs,” including the public works fund. “We’re interested to see how it (the bill) progresses and learn more.”
In addition to numerous legislative proposals, the state has spent more than $1 million in recent years studying the idea of a state bank. A “study of the studies” by former State Treasurer Duane Davidson concluded with a recommendation against it and that the legislature instead focus on improving access to public works fund loans.
Washington Policy Center Small Business Director Marks Harmsworth wrote in a recent post that “the real question should be, why do we need a state bank, not how do we create one. With a competitively priced, a well-established, well-regulated banking industry it seems a waste of taxpayer dollars to create another government agency that only duplicates what already exists. The state bank will require new staffing, oversight and systems that already exist in the private sector and will have to be built from scratch.”
ESSSB 5188 is now in the House Rules Committee.