Massachusetts is in good company as it considers whether to establish a public bank. There has been steady growth in interest in public banking, spurred by the 2008 recession, by criticism of investment practices of some Wall Street banks, and, in some cities, by recent campaigns to divest from banks financing the Dakota Access Pipeline. In addition, cities, states, and taxpayers have concerns about the costs of bonds and borrowing, how to get the best return on banked or invested public money, and an interest in finding innovative ways to fund public spending without surrendering public control, as is often the case with public-private partnerships.
The Public Banking Institute, a national non-profit organization that supports state and local public banking initiatives through education and research, is in touch with some two-dozen citizen groups working to establish public banks at the city, regional, or state level. Some of these groups are small and focused on introducing the basics of public banking to potentially-supportive stakeholders, including community development organizations and elected officials. But others have made substantial gains in promoting public banks as a flexible, accountable and responsive way to respond to local funding and banking needs. Their proposals have won the support of state legislators and city councillors, and in some cases they have made public banking a campaign issue as well.
For instance, the DC Public Banking Center, a local citizen-led campaign, has been working since 2013 to promote a public bank for Washington DC. They introduced the concept to city government and won support from local community groups, small businesses, labor, and the public, successfully making the case for further inquiry by the city. As a result, Washington’s fiscal year 2018 budget includes $200,000 in funding for a feasibility study for a city-owned bank.
A public banking campaign in Oakland, California is moving forward with great vigor and interest. The city’s finance committee recently approved a request for $100,000 to fund a feasibility study, which will now go to the City Council for a full vote. Nearby, Richmond, California is also considering a public bank, and other grassroots efforts in California are looking at what can be done under existing county charters to pursue public bank initiatives.
The city of Santa Fe, New Mexico, has established a task force to consider a public bank for that city. A feasibility study completed in 2016 found that a public bank could have a $24 million positive impact on the city in its first seven years. Philadelphia is holding city council hearings on public banking, and advocates there are working with the city treasurer to identify city funds that could be used to capitalize it.
Advocates in Portland, Oregon, were able to raise the profile of a public bank as part of a strong and successful local campaign to divest from Wells Fargo, in protest of its financial involvement in the Dakota Access Pipeline. Several candidates for city council came out in favor of the public banking concept, and the local Portland Public Banking Alliance continues to work on building more stakeholder support.
Most notably, the Democratic candidate for Governor of New Jersey, Phil Murphy, a former investment manager and senior director of Goldman Sachs, has made public banking a centerpiece of his proposed economic program, citing in particular the need for lower cost student loan and small business funding.
Surrounding states have established agencies that draw on some of the capabilites of a public bank. The Rhode Island Infrastructure Bank has been described in testimony by Tom Sgouros. Connecticut’s Green Bank is a widely praised program, and a public bank campaign in Vermont fell short of establishing a true public bank but led to the establishment of a loan program, funded through state reserves, for energy investments, weatherization, and other local projects. Clearly all these initiatives have demonstrated a need for funding that has not been adquately met through existing channels.
Massachusetts’s 2010-2011 public banking study commission determined that there was insufficient unmet financial need to establish a public bank in Massachusetts. This is a conclusion with which we disagree, and testimony today has, in fact, identified areas where existing state programs and available bank financing fall short. A growing number of states and cities recognize the advantages of public banking. Passage of H3543 would make Massachusetts a leader in a new model of public finance which flexible, accountable, and economical.
Barbara Clancy is national campaigns coordinator for Alliance for Democracy, which is the fiscal sponsor of Hub Public Banking and the DC Public Banking Center. These statements were made as a volunteer member of the Hub Public Banking working group.