The following is an Op-Ed written by District 2 Committee member Macabe Keliher, published in the Charleston Gazette on 6 July 2018:
The recent proposal by the state treasurer’s office to charter a state bank to serve the medical marijuana business is a historic opportunity for West Virginia. Not only can such an institution serve the forthcoming cannabis industry, helping diversify the economy and contribute to state revenues, but it can be further tasked with a mission to serve West Virginians by increasing access to capital and lowering state debt.
Far more than just handling marijuana payments, a state bank can help remake the West Virginian economy by empowering people financially and giving them the ability to realize their aspirations for a greater life.
State banks need not simply be depositories: They are used by national and local governments from Germany to North Dakota to encourage investment and stimulate economic development. They are financial institutions chartered by a government and mandated to serve a public mission that reflects the values and needs of citizens. They keep capital in the community and invest in local economies, returning all profits and interest payments to the people.
In the highly successful example of the Bank of North Dakota (BND), all state funds and revenues are mandated to be deposited in the bank, which are then put to use for the public good. This enables a multiplication of credit, and ensures that state money is enlisted to work for the real economy, not speculative financial markets. Partnering with local private banks, the BND initiates lending programs reflective of state needs, such as economic diversification and small business growth.
A state bank of West Virginia could do similar work to help address two of our biggest economic issues: access to capital and state debt.
West Virginia businesses are finding it increasingly hard to raise capital for investment. Nationally, each of the state’s 55 counties rank in the lowest quintile for loan access, leading the National Community Reinvestment Coalition to categorize the state as a “lending desert.”
It is thus not surprising that three-quarters of businesses report difficulty raising equity, according to a study by Pepperdine University.
This hurts our economy and costs us jobs. Small businesses account for 99 percent of all businesses in West Virginia and employ over half of the private work force. Yet we rank second to last in the U.S. in microenterprise ownership. Without funding, businesses cannot operate: startups do not start up, entrepreneurship gets curtailed, and growth is hindered.
In the case of debt, the state has taken on more debt than is fiscally healthy. Last year, Moody’s downgraded West Virginia due to a “growing structural imbalance between annual expenditures and available resources.” This adjustment is the result of nearly $8 billion in debt and declining state revenues; they also warned that the $2.6 billion in road bonds could lead to further downgrades.
This debt can be crippling. Not only does it restrict the ability of the state to spend on economic programs and invest in teachers, but it also means that taxpayers must spend more in interest and fees. The new road bonds, for example, will carry a rate of 3.5 percent or higher, and incur millions in fees from Wall Street banks. Within 20 years, we will end up paying over a billion dollars in interest alone.
A state bank of West Virginia can address these problems by democratizing capital and funding infrastructure projects.
A state bank of West Virginia could make it its mission to give small businesses and individuals greater access to capital. By partnering with local banks, it could increase local lending through measures such as guaranteeing larger loans and backing smaller, riskier loans.
State banks would enable $2.6 billion in new business-lending in Washington state, and $1.3 billion in Oregon.
By funding infrastructure projects at lower rates and refinancing existing debt, a state bank can slash debt. Rather than giving our road bonds to Wall Street, for example, we could take control of our money and follow the BND in financing infrastructure projects at 2 percent, reducing total costs by half. Moreover, the interest earned would go back to the state, either through payments to the treasury or increased capitalization, enabling more local loans. In either case, the interest rate would effectively be zero.
With coal in decline and industry turning to labor-saving technology, we cannot rely on large corporations to provide well-paying jobs. West Virginians want to take the economy and their future into their own hands. This begins with funding. A state bank with a maximalist mission can fill this role, making capital widely available and giving us a chance to not only reinvent the West Virginia economy, but also to reinvent ourselves as we reach towards greatness.