The recently passed Inflation Reduction Act, IRA, has $27Billion in it to contribute to state Green Banks.
Would and could Washington State request funds for such a bank?
Here is a response below from the State Treasurer’s Chief of Staff.
- Is it legal within the state’s constitution to operate a bank?
The answer to this question is complicated by the state’s constitutional prohibition on lending of credit to “…any individual, association, company or corporation…” (Article VIII, Section 5), except for certain narrow exceptions. As such, the complete answer to this question is nuanced, and depends on the structure of such a bank, its source of funding, its banking members, as well as its specific role and activities.
- Is it possible to use allowance auction proceeds to fund the bank?
If the strategy was found to be eligible under the state’s constitution, such an allocation of funds would be a legislative decision.
- Does SB 5126 have the latitude to direct funds to a green bank?
Our understanding is that SB 5126 would need to be amended by the legislature in order to allow allowance auction proceeds to be directed to a green bank. SB 5126 specifies that auction proceeds must be deposited to specific accounts established by the bill, and changing the proceeds distribution would be a legislative decision. Spending from these accounts and/or their respective subaccounts is subject to appropriation, and is further specified by the bill to be used for projects related to clean energy. Establishing a bank is not a clearly identified purpose, and may need to be addressed by the legislature.
- How much money does the state contribute to the current Clean Energy Fund?
The legislature appropriates funding for the Clean Energy Fund via the capital budget each biennium. For the 2021-23 biennium, the legislature appropriated $56,298,000, which can be found in SHB 1080, section 1064. The amount appropriated has varied since the inception of the fund in 2013.
- Is it legal for the state to link a Green Bank with another state’s Green Bank to limit operating costs?
If the arrangement was found to be legal under the state’s constitution, such an action would be a legislative decision.
- Could the state raise additional funds for a Green Bank through new bonding?
The answer to this question is also complicated by the state’s constitutional prohibition on lending of credit. In this case, the complete answer would depend on the structure, specific role, and activities of such a bank, as well as the structure and type of bonds to be issued.
The Washington State Legislature has considered various public banking proposals over the last several years, including appropriating funds for studies to be conducted and potential business plans. A “green bank” would have many of the same constitutional and funding questions. It may be helpful to review the most recent study directed by the legislature and conducted by the UW Evans School of Public Policy & Governance. Phase 1 of the study can be found here and Phase 2, the business plan, is attached.
Our office has been recently been focusing on promoting public banking efforts regarding local and municipal financing of equipment and building projects through our LOCAL program.
Again, I apologize for the delayed response to your thoughtful questions. I hope you are having a wonderful summer. Thank you again for your interest in public banking and for reaching out to our office, and please let me know if I can be of further assistance.
Anna Borris | Chief of Staff
360-902-9030 | m: 360-819-0256