Given New Mexico’s struggles attracting and retaining investment dollars, legislators are considering an unorthodox solution: establishing a statewide public bank.
A local nonprofit, Alliance for Local Economic Prosperity, has developed a business plan that outlines the structure and approach for a state public bank, an entity the state could use to deposit assets and support state investment programs.
While legislation has not yet been introduced, several legislators, including Rep. Patricia Roybal Caballero, D-Albuquerque, and Sen. Jeff Steinborn, D-Las Cruces, have expressed support for the proposal.
“It’s just an idea that just seems to fundamentally make sense to people, and people are excited for it,” Steinborn told the Journal.
Elected officials in Albuquerque, Santa Fe and Las Cruces have also expressed support for a public bank.
Advocates believe a public bank would reduce reliance on out-of-state banks and free up funds for economic development and infrastructure projects. Opponents within the community banking industry, however, see a public bank as unnecessary and hostile to their operations.
“It’s just simply not good public policy for the state of New Mexico,” said Jerry Walker, president and CEO of the Independent Community Bankers Association of New Mexico.
The idea of a statewide public bank isn’t new. North Dakota created a state-owned bank in 1919, where the state and other municipalities deposit funds.
In New Mexico, the city of Santa Fe looked into setting up a municipal public bank, but a task force ultimately determined startup costs and regulatory barriers would make it difficult to pursue locally.
Angela Merkert, executive director for the Alliance for Local Economic Prosperity, said the group’s business plan proposes that a statewide public bank would only offer services to state agencies, and wouldn’t compete with banks and credit unions for retail banking customers.
Under the proposal, Merkert said the state would allocate $50 million from the Severance Tax Permanent Fund to provide an initial influx of capital for the bank. She said the state would also transfer $50 million from accounts with private banks to use for deposits. The bank’s assets would then be overseen by a 12-member board of directors and a CEO.
Dan Mayfield, vice president of government affairs for the Credit Union Association of New Mexico, said the proposal offers a few advantages over the existing format. Under the current setup, Mayfield said the state relies on international banks to deposit assets, which results in a lot of funds exiting the state, leaving New Mexico with less money to fund infrastructure, economic development and other needs.
“We should be keeping that money here, and saving that money here and investing that money here,” Mayfield said.
He added that the public bank would partner with local lenders on loan programs designed to target local economic development, adding he’d like to see New Mexico adapt several programs from the Bank of North Dakota, such as a program that guarantees loans for North Dakota high school graduates seeking business startup expenses.
“These are really clever ideas that we haven’t been able to explore in New Mexico on a large level, mainly because we don’t have the capital,” Mayfield said.
Still, Walker said New Mexico’s community banks are already well-positioned to help small businesses and aren’t looking for government changes. He said he’s concerned that losing out on deposits from local governments will ultimately make it more difficult for community banks to lend in the first place.
“This idea that it’s going to increase lending for community banks, and it’s going to be this wonderful thing – that’s just not true,” Walker said.
Steinborn didn’t provide a timetable for when the bill might be introduced, saying he and other leaders are working with financial experts to ensure it safeguards public money effectively.
“It needs to be incredibly precise, and follow the rules of good public governance,” he said.