State Rep. Martin Howrylak, of Troy, today formally introduced a bipartisan package of bills that would create and maintain a state bank. The bank would be authorized to engage in limited banking activities, including the facilitation of loans to eligible groups, municipalities and those who qualify for business-related subsidies.
“This is a fiscally responsible solution for taxpayers,” said Howrylak. “As states are looking for ways to reduce spending, many are exploring the idea of a state-owned bank, similar to the Bank of North Dakota. In North Dakota, public revenue runs through the state-owned bank (Bank of North Dakota, BND). The BND provides loans significantly below market interest rates to local governments, smaller banks and businesses. Local governments and schools use these savings to pump more money into classrooms, expand access to infrastructure funding and keep tax rates low.”
North Dakota is the only state in the nation which runs its own financial institution. The Bank of North Dakota was founded in 1919 through legislative action and had an operating income of $136.2 million as of 2016. The state bank partners with community banks, overseeing loans or purchasing them to give community banks viability and an additional fund source.
A Michigan state-run bank would effectively be a co-operative, holding state and local government funds. The bank could then use those funds to provide loans to the state and its subdivisions (schools, cities, townships, villages, etc.). That model has successfully been used in North Dakota, significantly reducing the cost of capital to taxpayers and helping keep taxes low. Like the Bank of North Dakota, this bank will not have retail branches. Its operations will be focused on wholesale lending.
The legislative package would:
• Establish the Bank of Michigan and authorize it to receive state tax revenue.
• Create an advisory board for the bank composed of seven members appointed by the governor, which will include representatives from the private banking industry.
• Provide oversight by allowing an Auditor General to audit the bank and prepare an annual financial report. The Department of Insurance and Financial Services will also be responsible for reviewing the bank’s operations at least once every two years and will have authority to investigate.
• Permit the Community Bank of Michigan to lease and sell state-acquired property or partner with other banks and make loans to Michigan farmers; nonprofits using funds for rural business development; parks or recreational properties owned by the Department of Natural Resources that are in need of construction, reconstruction, renovation or maintenance; and government medical facilities for financing.
“This legislation allows the state to offer reasonable interest rates for targeted projects that benefit the public interest, while generating additional revenue for the state’s general fund,” said Howrylak. “The State Bank of Michigan would be a win-win for taxpayers, schools, local governments and local banks.”
House Bills 5431-5434, along with House Joint Resolution CC – which protects a state bank from governmental deposit limits – were referred to the House Regulatory Reform Committee for consideration.
PHOTO INFORMATION: State Rep. Martin Howrylak (seated, second from right), of Troy, introduces bipartisan legislation at the Clerk’s Office of the House of Representatives that would create a state-owned bank in Michigan. Howrylak was joined by (from left) state Reps. Henry Yanez of Sterling Heights, Abdullah Hammoud of Dearborn and Peter Lucido of Shelby Township.