Many states are in trouble, but not all. North Dakota has consistently boasted large surpluses, aided by a state-owned bank that is showing landmark profits. On April 20, the Bank of North Dakota (BND) reported profits for 2010 of $62 million, setting a record for the seventh straight year. The BND’s profits belong to the citizens and are produced without taxation.
Inspired by North Dakota’s example, twelve states have now introduced bills to form state-owned banks or to study their feasibility. Eight of these bills have been introduced just since January, including in Oregon, Washington State, Massachusetts, Arizona, Maryland, New Mexico, Maine and California. Illinois, Virginia, Hawaii and Louisiana introduced similar bills in 2010. For links, dates and text, see here.
The Center for State Innovation, based in Madison, Wisconsin, was commissioned to do detailed analyses for Washington and Oregon. Their conclusion was that a state-owned bank on the model of the Bank of North Dakota would have a substantial positive impact on employment, new lending, and government revenue in those states.
The BND partners with local banks in providing much-needed credit for local businesses and homeowners. It also helps with local government funding needs. When North Dakota went over-budget a few years ago, according to the bank’s president Eric Hardmeyer, the BND acted as a rainy day fund for the state; and when a North Dakota town suffered a massive flood, the BND provided emergency credit lines to the city. Having a cheap and readily available credit line with the state’s own bank reduces the need for massive rainy-day funds that are a waste of capital and are largely invested in out-of-state banks at very modest interest.
