New Jersey took another step toward establishing a public bank on Wednesday when Gov. Phil Murphy signed an executive order creating a board to form a state-owned public bank.
The 14-member Public Bank Implementation Board will spend the next year identifying the capitalization needs, governance and operational structure of a public bank. At its core, the public bank would hold municipal tax dollars and fee revenue as deposits and then lend that money to small businesses, student borrowers and municipalities for affordable housing and infrastructure projects.
Murphy made the public bank a key piece of his campaign platform when he ran for governor, but the issue has taken a backseat to more pressing needs, he acknowledged at an event in Newark.
“I still believe in the ability of a public bank, owned by the people of New Jersey, to be a force for good, in helping small businesses succeed, in providing student loans at affordable rates and opening lines of credit to municipalities for meeting long term infrastructure and affordable housing needs,” he said.
New Jersey is one of a number of states and municipalities in recent years to make moves toward establishing a public bank, although in most cases those efforts seldom progress beyond feasibility studies. California Gov. Gavin Newsom recently signed a bill authorizing municipalities to create their own public banks.
California had previously considered a public bank to serve its burgeoning marijuana industry, and that idea was also briefly floated in Massachusetts. Community activists in New York have also led a recent push for a public bank there.
Many public banking advocates draw inspiration from the Bank of North Dakota, which was established more than 100 years ago and is currently one of only two public banks in the United States. (The other is in American Samoa.) Murphy called the Bank of North Dakota “an interesting and relevant example,” but also said that New Jersey will need to come up with its own plan.
The 14 members of the board Murphy established on Wednesday include the state banking commissioner, state treasurer, four members of the public and other civil servants. Murphy also said the proposed public bank would work with community banks, credit unions and community development financial institutions in the state.
Still, the plan is likely to face stiff opposition from the private sector. While supporters argue that a public bank will help keep New Jersey tax and fee revenues invested in the state, commercial bankers say Murphy could accomplish that goal without creating a whole new institution.
Michael Affuso, director of government relations for the New Jersey Bankers Association, said that Murphy could sign an executive order moving those state funds out of overseas investments and back into New Jersey banks.
“We’re opposed to the creation of a state bank; we’re not opposed to his ends,” he said. “We’re opposed to the creation of yet another state bureaucracy.”