By Jan Angel
Throughout its 128-year history, Washington has never had a state bank, which basically is a state-chartered financial institution that serves as a depository for public funds, including state funds and federal transportation funds.
Nor does Washington need a state bank, thanks to our strong and reliable private banking industry, as well as the existence of the Public Works Board and Public Works Assistance Account to help provide local governments with funding for critical public-works projects.
But there is interest by some to establish a state bank here, even though only one state, North Dakota, has one.
A state bank here is not only unnecessary, but a bad idea.
To start with, it would compete with private banks on a range of services, without having to pay taxes. This represents an unfair competitive advantage.
Second, it could create a conflict of interest. What guarantee would there be that state government would require the same degree of transparency and accountability from a state bank — an institution run by government officials and public employees — as it would from private banks?
Legislative attempts to create a state bank in Washington date to at least 1975. Every effort has failed.
State Treasurer Duane Davidson, a Republican, and his three Democratic predecessors — all have voiced opposition to a state bank.
So why is this issue rearing its head now? There is a movement, started on the East Coast, to establish a state bank in each state. Washington should not be used as a banking guinea pig just to satisfy some radical political movement.
A bill introduced during this year’s legislative session in Olympia, Senate Bill 6375 calls for the state Department of Commerce to contract with an entity with public banking expertise to develop a business plan to establish a Washington state bank. Fortunately, this proposal, like previous ones related to it, appears to have failed.
However, $700,000 in funding for a state bank governance structure and business plan was included in the Senate version of this year’s state supplemental operating budget that recently was passed by the Senate. This would be a waste of time and taxpayer money, considering the Legislature already asked bankers and other stakeholders to review the idea of creating a state bank. That was through a task force that met during 2017 and was given $75,000 in state funding to operate. Most of its members recommended scrapping the idea without investing any more money on this issue. The Legislature should heed that advice.
Meanwhile, consultants from the Public Banking Institute suggested starting a state bank by using $1 billion from the state treasurer’s local government investment pool, which belongs to more than 500 local governments in Washington, and $100 million from public pension funds. The idea of risking money meant for our local governments and our public employees’ pensions is unacceptable.
Washington hasn’t had a state bank for good reason. Now is not the time to start one.
State Sen. Jan Angel, R-Port Orchard, is ranking Republican on the Senate Financial Institutions and Insurance Committee. She serves the 26th Legislative District.