Gov. John Bel Edwards is to be commended for including tax increases on the new “menu” of fiscal policy options. Unfortunately, the remainder of the fiscal bill of fare feels stale and outdated: Further cuts to public programs, including a $131 million cut to higher education.
If Edwards believes that “the status quo is not sustainable” for Louisiana’s future, then perhaps he ought to consider adding a truly novel entrée to the menu: the creation of a public bank of Louisiana.
A state-owned public bank, chartered in service of Louisiana’s interests, would keep revenue in the state, capitalize state assets, and reinvest the proceeds in public programs that serve Louisianans. In sum, a state-owned bank would allow the governor to cut a more sustainable fiscal path as he follows through on his pledge to “put Louisiana first.”
When it comes to banking, Louisiana currently puts Wall Street first, as our state government deposits its revenue in accounts held by J.P. Morgan Chase. This too-big-to-fail bank then puts those deposits to work in service of the financial interests of its own private shareholders.
A state-owned Louisiana public bank, on the other hand, would keep Louisiana’s money in Louisiana, where it could be put to work in service of Louisianans. As our higher education system, public hospitals, and wetlands are revivified by the proceeds generated from keeping Louisiana revenue in a state-owned bank, so, too, would Louisiana businesses and families benefit from low-interest loans issued by local-minded and civically-engaged public bank loan officers, not representatives of Wall Street.
Most important for the new administration to consider, a state-owned bank of Louisiana could spell the end of our state’s perpetual budget crises. Such has been the case in North Dakota: According to the Public Banking Institute, over the past decade the state-owned Bank of North Dakota has “returned over $300 million to the state’s general fund, helping to ensure regular annual surpluses and eliminate the need for drastic tax increases or spending cuts for vital public services.” In other words, budget crises are the last thing that North Dakota politicians have to worry about. Instead, they get to use the funds generated by their public bank to invest in students, providing them with low-interest student loans, as well as in families, as their public bank partners with small community banks to create a secondary market for affordable home mortgages.
As it happens, the Louisiana Treasury will be soliciting bids from banks for a new contract with the state in the coming months. The time is right for Edwards to make the creation of a public bank the main attraction of his new fiscal policy menu.
assistant professor, LSU Department of Communication Studies