Article from The Hill. Written by Eric Heath
To ensure the long-term environmental health of the planet, we will have to spend. This spending cannot be wasteful, but must embody a pragmatic investment in our future. Estimates predict that we will have to invest $5.7 trillion worldwide annually to fund green infrastructure and conservation efforts. As a Center for Strategic and International Studies brief notes, this investment gap is concentrated in developed countries.
In recognition of America’s responsibility for swift and consequential action, legislators have introduced the Green New Deal—a policy proposal for addressing climate change and environmental deterioration. Yet, even the lower end of estimates put the plan’s sticker price in the multi-trillions of dollars.
Investments in infrastructure, or other massive policy initiatives of the kind that environmental crises require, have historically been shared between the federal government and the states. While the national body would provide some funding and expertise through grants and federal agencies, states would identify the most profitable investment opportunities and the areas of the most need. But, with a decade since the last major federal infrastructure bill, the federal government has become an unreliable source of green investment funding. And it’s no surprise why. The federal debt is above $22 trillion, the annual deficit projected near $1 trillion and politicians have prioritized other issues.
Adequate conservation spending is also lacking at the federal level. As a recent study funded by the Walton Family Foundation and conducted by my colleagues at the Northeast-Midwest Institute shows, current conservation spending is not sufficient to preserve the health of our nation’s water. Even with the billions of federal dollars allocated towards conservation, the impact of these efforts will be undercut by the changing climate and shifting land use.
This has put states in a compromising position. On the one hand, they need to invest in sustainability and conservation to protect their citizens, their environments and their economies from ecological disaster. On the other hand, they face their own pressing budget issues and an increasingly reluctant partner in the federal government. Through the establishment of state public banks, state governments can escape this dilemma and deliver affordable, green investment to their communities.
This is how it works: A state grants a charter to a bank of its own creation. The conditions of the charter give the bank a “public purpose” that ensures that the bank and its officials maximize community benefits and not profit. The state, once the bank has been established, moves most of its existing funds into the bank as deposits. These deposits allow the bank to create loans and other financial instruments with the goal of reinvesting state money back into the state economy.
There are two ways in which a state bank can fund state investment for a greener future. First, the bank can provide loans, bonds and other forms of financing for investments to the state government and private organizations on better terms than those available in regular markets.
As a part of the bank’s orders to serve the public interest, it can prioritize societally-beneficial investments over profit-making. As a result, it can afford to provide credit at lower interest rates or with lower fees, or both, than most profit-seeking banks can afford.
Consequently, this public interest-orientation can allow a state bank to extend financing to projects that other banks would not consider. This is not because green investments are unprofitable, but because their profits slowly accumulate and are widely shared across a community. Furthermore, because members of the community affected by these investments will be the ones governing the bank, there will be a greater impetus to address the pressing environmental concerns of the community.
Second, a public bank will improve a state’s fiscal health. By holding state deposits as assets, the bank’s profits can be returned to state coffers to fund direct state investment. Additionally, the activity of the state bank – which will prioritize investing state assets and extending credit within the state for the benefit of the state – will improve the state economy. Exploratory analyses in New Jersey, Washington and Maryland have all estimated the creation of thousands of new jobs and millions of dollars in economic growth from the establishment of a public bank. These economic gains will flow back to the state through increased revenues, which can then be reinvested into essential environmental projects.
These effects are not only speculative. The Bank of North Dakota, the only state public bank in the nation, has for a century brought these benefits to North Dakotans. As a result, North Dakota has enjoyed higher loan amounts per capita, greater economic growth and more stable budget surpluses than other states.
In short, a state bank will free the financial resources needed to fund vital investments in the planet’s future.