Colorado is looking at how to make an economic recovery from COVID.  Budgets are always an issue, but  North Dakota’s State Bank offers a model where a state can efficiently leverage public funds to serve a public mission and public needs.  Public banks can also create money in the form of bank credit and lend at low interest rates instead of focusing on maximizing profit as a private bank would.  A public bank has no shareholders to pay, and so can pass the low rates on to borrowers such as public agencies, local businesses, residents, and students. Public banks can also partner with local banks by lending jointly and/or guaranteeing their loans, to fund projects that might otherwise go unfunded. In this way they function as partners of local private banks rather than as competitors.


  • Colorado initially projected a $350 million surplus this year, but now a $250 million deficit is anticipated with the slowdown.  A public bank has the ability to act counter-cyclically.  In the 2008 Great Recession, the Bank of North Dakota, as the partner of local community banks, increased lending slightly to offset the recession.  By doing so they not only prevented a recession, but enabled the state to achieve growth each year.  This stood in contrast to Wall Street banks, all of which cut lending, creating a deep recession. A careful examination finds that Montana and Alaska had as much oil as North Dakota, but experienced budget deficits and high unemployment.  North Dakota’s income from fracking didn’t come in until 2010.  Public banks are working elsewhere too.  Germany’s KfW publicly owned development bank is keeping their economy afloat in the COVID slowdown by lending large sums to businesses through its many city-owned savings banks.  Colorado can do the same by establishing its own bank.  Instead of depositing our tax revenues in Wall Street Banks, we should deposit them in our own public bank to ensure local investment to benefit our own citizens and communities.  A public bank will also facilitate the transition from fossil fuels, petrochemicals, and other environmentally harmful products to environmentally safe and health-sustaining alternatives.

The time is now!  Colorado’s Office of Legislative Legal Services recently issued its Legal Opinion (attached) concluding that public banks are probably legal under Colorado’s constitution.  

Assumptions to create a State Bank for Colorado (2015) CAFR:

  1. Colorado has over $6.6 billion of unrestricted assets of which $550 million can provide the State Bank’s Start-up capital. (2015 CAFR, pp. 48, 54, 62, 64)  
  2. $8 billion in cash & fixed income investments held by the state are redirected into deposits. For comparison, the successful public bank of Alberta Canada, population 4.4 million, has $52 billion in assets. 
  3. Leverage allows new loans to be generated worth $6.75 billion for small business, infrastructure (saving 50% of the cost), affordable housing, clean energy, student loans, health care, and other priorities.  This compares to very little lending by Wells Fargo and Chase for small business. 
  4. We project the Bank will average $150 million in new income each year over its first 5 years, to meet Colorado’s unmet needs and to prevent and reverse recession, without raising taxes.

Governance and Oversight

The proposed Bank would have as its board of directors the Governor, the Attorney General, and the state Treasurer, analogous to the board of the Bank of North Dakota.  The Board would choose the president of the bank, and together they would selection the top officers of the Bank.  By-laws would be drafted and would insulate the Bank from political and corporate influence.  An advisory board would be appointed by the Governor to represent stakeholders in the community to review operations and advise the board annually. Financial records would be reported online.  The Bank could be up and running within months with concerted action. We propose that the legislation authorize the use of up to 10% of PERA investments ($49 billion, 2018 PERA CAFR, p. 67) as capital for the Bank, which would produce a more stable and higher return than PERA’s present speculative investments.  We also propose the legislation authorize the use of investment pools to provide deposits or capital for the Bank. Legislators have a fiduciary duty to use state funds for optimum advantage and security, which this proposal would accomplish.