Photo by Rainforest Action Network
July 24, 2020 Climate

AB 310: A Just Recovery from COVID-19

Written by: Jon Conway, Ph. D.

Despite its rapid response to the COVID-19 crisis, California has unfortunately failed to protect residents and businesses from the worst of the economic fallout that is gripping the nation. Here, much like in the rest of the country, the brunt of this pandemic is being shouldered by women and marginalized communities; this inequitable impact is a tragically preventable disaster worsened by inadequate response from the federal level. Women, People of Color, and immigrant workers have lost disproportionately more jobs — over three times more than white men — with the low-paying industries that predominantly employ these workers accounting for 60 percent of all job losses in the State. As of July 2020, a total of 5.4 million workers were recipients of unemployment benefits out of a workforce of 19 million; a figure that doesn’t even account for those legally or functionally blocked from filing for unemployment.

Despite California being recently ranked as the world’s fifth largest economy, our cities and counties have often been excluded from this largely corporate wealth in part through a succession of corporation state tax cuts that have eliminated more than $10 billion in annual tax revenue compared to the 1980s. With a state budget crisis reaching $54 billion and the state’s cities forecasting a collective $6 billion shortfall over the next two years, it’s clear that California needs to take immediate steps to revitalize our economy in a way that creates equal opportunities for all rather than prioritizing the profits of private banks and large businesses. Enter Assembly Bill 310, the Bank on California Act. Building on the success of authors Assemblymembers Miguel Santiago and David Chiu’s regional public banking bill last year, this piece of legislation would transition California’s existing Infrastructure and Economic Development Bank (I-Bank) to a full public bank capable of providing below-market rate funding for a just and equitable pandemic recovery and strengthening our state’s ability to meet the challenges of the oncoming climate crisis. You can take a stand for a just recovery and send a letter to California legislators today asking them to support this important bill.

We already have an IBank, and it already has the purpose to help the California economy — let’s restructure it into a state bank and take 10% of the money California already holds in its checking account and let's help Main Street.

– Assemblymember Miguel Santiago (D-LA)

California’s wouldn’t be the United States’ first public bank; surprisingly, that title was claimed 101 years ago this month by the Bank of North Dakota (BND). Frustrated with grain price manipulations by large traders and banks and emboldened by populist sentiment around policy, North Dakotans elected a new progressive party to power on the promise of, among other things, a bank made in their interest. Over the past century, BND has strengthened and stabilized North Dakota’s economy compared to neighboring states by stimulating large numbers of local banks and credit unions, supporting the growth of small businesses and farms, and driving job creation. During the COVID-19 crisis, BND has helped businesses of all sizes quickly and easily access federal relief dollars, distributing nearly $90 million in state and federal funds as of early July.

Here in the Golden State, AB 857 — signed into law last year — sought to replicate the BND’s success on a regional level by authorizing cities, counties, or groups of governments to create a limited number of public banks. Cities and counties like San Francisco, Los Angeles, and even the Romero Institute’s hometown of Santa Cruz and its neighboring locales on the Central Coast are currently exploring creating their own regional institutions, with enthusiastic support from community organizations, elected leaders, and local residents. This momentum now resides in a broader national movement toward public banking, spurred in part by the desire to divest from fossil fuels, with at least 16 other states currently debating legislation to create some form of public bank system. AB 310 is California’s next step toward building an equitable economy. By funneling a modest 10 percent of the $101 billion Pooled Money Investment Account (PMIA — essentially the state's checking account) managed by the State Treasurer into the IBank and expanding the bank’s ability to fund grants and loans, this bill would immediately create a multi-billion dollar fund for emergency small business loans and provide below-market value bond funding to struggling cities and counties, and would specifically target disadvantaged communities and businesses to ensure a recovery centered on equity and longevity.

It is the intent of the Legislature to do all of the following: (a) Aid economic recovery for individuals and local governments who are facing extreme economic pressure due to the COVID-19 pandemic and subsequent economic recession by increasing lending to local agencies and increasing credit to rural, minority-owned, women-owned, indigenous-owned, and immigrant-owned businesses who have been historically marginalized due to restrictive covenants, redlining, and other restrictive practices by traditional financial institutions via credit enhancements and participation lending with local financial institutions.

– AB 310, Section 2.

In addition to helping California meet the immediate needs of a just recovery, a State public bank would place us on firm financial footing for serious climate action in the coming years and prevent further catastrophe, without competing with existing community banks or credit unions. Federal opposition has shrunk financial and technical resources for California’s cities and counties that need to address climate impacts like the ever-worsening wildfire season, rising sea levels, uncertain water supplies, invasive pests like bark beetles, and severe landslides, and with the irresponsible and deadly behaviors of private companies like PG&E it is clear that real action must come from the people of California rather than Washington D.C. or a corporate boardroom. Public banking would provide low-interest loans and bond financing to municipalities to implement infrastructure improvements like electric grid upgrades, managed retreat, and clean water facilities, provide an avenue for responsible divestment from private banks, and fund minority-owned businesses in communities that have yet to be fully included in California’s world-leading economy.

Through their ability to turn deposits into loans, banks are one of the primary ways we actually create new money — an enormous power in a society that more and more behaves as if it values money over human lives. The irresponsible use of this power, in the form of unsustainable, antisocial investments like fracking, oil pipelines, and subprime mortgages, has been a large contributor to the economic and environmental crises we have faced and continue to deal with, and is a luxury to the hyper-wealthy that we can simply no longer afford as a society. We need banking institutions that are created to benefit everyone by driving equitable, sustainable investments that prioritize those that have been systematically excluded from the current economy.

And public banks aren’t only good news for the climate. Because of the tools at our disposal in public banking, Californians can also put their money where their heart is and divest from private prisons, take action on houselessness, and help prioritize policies that center racial and gender equity. In the absence of federal leadership, California must rely on itself to meet the challenges of the present, and must use the tools that are available to responsibly generate and distribute wealth. Public banking is a commitment to a just recovery. Join us and many others around the State in support of AB 310 by writing to California legislators today!

Photo credit: Rainforest Action Network