A state-owned public bank can help our agriculture and food economy expand and thrive.
By Vicki Hagen, Alliance for Local Economic Prosperity (AFLEP)
The coronavirus pandemic has laid bare serious infrastructure shortcomings, public health issues and the need for greater food security in our state. There is significant momentum and political will to focus on soil health to improve farm profitability and nutritional value of foods, with additional environmental and health benefits for the state as a whole. Expanding food processing facilities and infrastructure is needed to market and distribute this increase in locally produced products grown under management for healthy soil. While there is currently excellent innovative thinking and planning aimed at improving our state’s agricultural and food economy, there are serious financial hurdles to getting those important goals realized.
In its Policy Recommendations paper issued June 2020 by the New Mexico Healthy Soil Working Group, one recommendation is “to maintain and expand investment in the Healthy Soil Program administered by the NM Department of Agriculture.” It is noted that “applying healthy soil principles on working lands leads to greater producer profitability, long term stability, and rural prosperity.” Further, studies have shown that “farms get more than $3 back for every $1 invested in soil health [1]. In addition, building soil results in benefits for public health, the environment, water security, and resiliency.”
Another recommendation of the Healthy Soil Working Group is to “establish local and regional food hubs and processing facilities.” According to an article by Leah Cantor in the Santa Fe Reporter titled “New Food Economy” (August 27, 2019), “researchers at New Mexico State University have identified a shortage in processing facilities and distribution as the two main obstacles to the growth of the local agriculture industry, costing the state millions if not billions of dollars a year in potential revenue.” Cantor also points out that today’s NM farmers are seeing the need for “more shared infrastructure, pack sheds, trucks, processing places where you can use tools like those $30,000 wash tables.” And, Cantor notes that at present, because of the lack of the necessary facilities, “97% of New Mexico’s agricultural products leave the state for processing.”
Of course, investing in the Healthy Soil Program, shared infrastructure and new, state-of-the-art agricultural processing plants takes money. The investments will eventually pay for themselves, but first there must be the money available to begin the process. That’s where a state-owned public bank can come to the rescue.
A public bank does not accept deposits from individuals or businesses. Rather, it is owned by all the citizens of New Mexico and functions as the depository of public monies, managed by professional bankers and guided by a public mission. State monies (taxes and fees) are held within the state and those funds are available as loans for infrastructure, for economic development, and, yes, also for investing in the Healthy Soils Program, and for building packing sheds and food processing plants. In other words, a public bank can be a key player in strengthening our state’s food economy.
A public bank is a powerful entity that can leverage its deposits and significantly grow its earnings. In addition, a public bank functions in partnership with community banks and credit unions throughout the state –local institutions that understand their community’s needs- keeping public and private monies working together locally. The economic benefits accrued to our communities are substantial in what is known as the local multiplier effect: up to 1.5 times its value for every dollar spent locally.
In New Mexico, the Alliance for Local Economic Prosperity (AFLEP) is advocating for a state public bank that will add focus, efficiency, and effectiveness to the state’s financial system. Legislation proposing the creation of a state public bank will be introduced in the 2021 legislative session.
How Would a NM Public Bank Make a Difference? A state public bank would serve as a depository for our public revenue (e.g., tax dollars). The state bank would work in partnership with community banks, credit unions and Community Development Financial Institutions (CDFI) to offer low-interest small business loans supporting community development. Rather than losing millions of dollars to out-of-state banks in fees and interest every year, loan interest would come back to the state of New Mexico to fund projects that benefit our communities.
North Dakota has had a state-owned public bank (BND) for 100 years and the state’s economy, including its agricultural sector, is thriving because of it. As is true for New Mexico, agriculture is a key part of the economy of North Dakota. For example, in just 2019 alone, the BND had earnings of $169 million, monies that are divided between supporting the state budget and increasing the bank’s capital reserve so that it has more loan funds available for local investment [2]. A public bank is truly a wise, efficient, and moral use of taxpayers’ monies. It is making the most of what we have.
To learn more about a public bank for NM, visit us at www.aflep.org. And, if you think a public bank sounds like a great idea for our state, please do let your state representative and state senator know that. Your support is vital to getting this legislation passed.
Combining the innovative thinking and enthusiasm that is part of New Mexico’s soil health movement with the exciting possibilities of a public bank will surely result in a better life for all of us New Mexicans.
References:
[1] Soil Health Case Studies, American Farmland Trust https://farmland.org/soil-health-case-studies/[2] Bank of North Dakota Annual Report 2019 https://bnd.nd.gov/bank-of-north-dakota-releases-2019-annual-report
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