NorthJersey.com

Murphy Ordered Plans For A State Bank To Be Ready By Now. Why COVID-19 Set Progress Back

NorthJersey.com — November 16, 2020

By Dustin Racioppi
Trenton Bureau

One of the most ambitious — certainly the most unique — policy promises made by Gov. Phil Murphy seemed within grasp this time last year.

For a former Goldman Sachs executive who campaigned on his "economic know-how," starting up a state bank seemed to be a simple idea that could help build "a financially inclusive New Jersey" that invests tax dollars to the benefit of communities, students and small businesses.

But heading into the final year of his first term, a state-run bank appears no more realistic than it was when Murphy first raised the idea as a candidate.

Murphy's office and the Department of Banking and Insurance did not respond to messages the past two weeks seeking details of the work that has been done to this point. Murphy did not have specific reasons for the delay, but acknowledged Thursday that progress has been challenging.

"This is one of the few that we haven't gotten to. Our batting average, in terms of doing what we promised we would do or committed to do, is very high. This one's been hard for a number of reasons," he said.

A work in progress on a state bank

Governor Murphy announces his appointments of Dianna Houenou as Chair of the Cannabis Regulatory Commission, and Jeff Brown will serve as Executive Director of the Commission at the Trenton War Memorial on Friday, November 6th, 2020.

Public records obtained by the Trenton bureau of the USA TODAY Network showed that as of September there had been no public meetings as required by Murphy's executive order.

That order, issued last November, required the 14-member board Murphy created to publicly release an implementation plan within a year. The group plans to seek an extension of that deadline, said Joan Bartl, one of the board's public members.

The COVID-19 pandemic kept the board from holding public meetings, she said. Those meetings are to help the board "better understand how the state can reduce communities and residents' unmet capital needs, with a special emphasis on supporting low—income and minority populations," according to the executive order.

In the meantime, the implementation board has met regularly and formed subcommittees which have also been meeting, Bartl said.

The board had also planned to hire consultants to help it gather information but instead that's being done by board members and state agencies, Bartl said. She did not explain why a request for proposals was pulled back.

"We're doing a lot of the work ourselves," Bartl said. "Everybody's pitching in," she added, "but there's no substitute for the public meetings."

Doubts about need for a public bank

Murphy's idea for a state—run bank was met with skepticism when he raised it during his 2017 campaign for governor.

It was viewed as a lofty idea that just one other state — North Dakota — has seen through, though the idea has gained traction elsewhere. And the idea of running taxpayer dollars through a bank run by a state with a history of public corruption seemed to invite trouble, other skeptics said.

To Murphy, it was simple. The public bank could invest tax dollars back into the state with low-interest loans that could be used for municipalities, students and housing. But he acknowledged last year that it "turns out executing it is harder than we like."

Now that recreational marijuana has been approved by voters to become legal, tax proceeds from selling the drug could be sent to the state bank and used for "social benefit projects," according to a 2018 report by New Jersey Citizen Action, whose executive director is on the implementation board.

Murphy has said in the past that "several billion" dollars is invested in financial institutions with no obligations or incentives to invest here.

"The concept is a bank owned by us to keep those dollars in New Jersey to benefit our economy," Murphy said when he announced the implementation board last year. "Let's cut the leakage out, which is enormous."

Under Murphy's order, the board is charged with identifying how a public bank can "strengthen the capacity of local financial institutions and non-profit entities" and consult experts in the field of public banking. The board is also responsible for determining its capitalization needs, which Bartl said has been an issue.

Despite the setback, Bartl said she is "quite confident we will have a public bank in New Jersey."

One of the biggest skeptics is the New Jersey Bankers Association, and the pandemic has only shown the trade group why it believes community banks are best suited to fill the role Murphy envisions for the state bank.

They distributed $17 billion in Personal Paycheck Protection loans to more than 157,000 applicants during the pandemic, according to the Small Business Administration.

"You juxtapose what community banks have been able to do with PPP as opposed to what the state has been able to do with unemployment and motor vehicles, you can see the state was less than nimble," said executive vice president Michael Affuso, referring to massive backlogs at the Department of Labor and Motor Vehicles Commission.

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