If Washington state were to establish a public bank, what type of bank might work best? One that can provide targeted products and services to local governments across the state, says a new report by University of Washington researchers from the Evans School of Public Policy & Governance.
The state’s Office of Financial Management in June contracted with UW researchers to evaluate the benefits and risks of a possible state cooperative bank. Justin Marlowe , Evans professor of public policy, is co-principal investigator for the study with William Longbrake , former chief financial officer of Washington Mutual Inc. and an Evans affiliate associate professor. UW law professor Hugh Spitzer also contributed, as did Evans School associate professor Sharon Kioko and Claire Baron, a graduate student in public policy and business.
The report sketches out possible models for a bank to serve cities, counties, public utility districts and state agencies, and explores them from the perspectives of Washington’s constitutional and statutory framework, capitalization, funding, governance and financial and credit risk.
Marlowe said the report makes no specific recommendations. Rather, it examines issues relevant to the intended purposes of such a bank and offers "the best available evidence" for what would be required for it to succeed.
The researchers write that a cooperative bank could improve jurisdictions’ access to funds for infrastructure improvements and broaden their investment opportunities.
Through a survey of Washington’s counties, cities, public utility, sewer and water districts, the team learned that many, but not all, needs are being met by private financial institutions and state programs. Of those who replied, 46 percent said they were "unsure” they would benefit from public cooperative bank membership, 32 percent indicated an interest in membership and 22 percent expressed no interest.
Alternatively, the report suggests, the state might address some unmet needs by improving and better coordinating the 80-some existing financial programs to help Washington jurisdictions, which are administered by the state treasurer and departments of commerce, ecology, and health, among others.
The team presented its report to the state on Dec. 14. The state Legislature is expected to hold hearings on the matter during its 2019 session.