California Launches State Public Bank Effort to Keep Taxpayer Dollars out of Wall Street Banks

Lawmakers say the proposal, AB 2243, would help make public dollars work harder for communities instead of flowing to out-of-state Wall Street banks

• Annie Keys
• [email protected]

SACRAMENTO, CA - California legislators are pushing a new effort to make the state's money work harder for Californians instead of out-of-state Wall Street banks. AB 2243 by Assemblymember Matt Haney (D- San Francisco) and Assemblymember Ash Kalra (D- San Jose) would create a State Bank Commission to evaluate how California can use a state bank as an additional financial tool to lower borrowing costs, strengthen local lending partnerships and help finance urgent public needs like affordable housing, infrastructure, climate resilience and small business growth.

Every year, California taxpayers pay about $4 billion in interest to private lenders to finance public projects. That is money that does not go toward building homes, repairing roads, or opening schools. Instead, it is the price the state pays to borrow from outside financial institutions.

"California is the fourth largest economy in the world, but we still send billions of taxpayer dollars in interest out the door to Wall Street just to finance the things our state needs," Haney said. "That is money that should be helping us build housing, upgrade infrastructure, support small businesses and invest in the future of this state."

AB 2243 would begin a deliberate public process to examine whether a state bank could help California keep more of that money in-state and put it to work for public benefit. Supporters say a state bank could become an additional financial tool to reduce borrowing costs, keep investment dollars circulating in California and return earnings back to the public instead of private.

"Now more than ever, California must do all that we can to strategically and thoughtfully address the financing gaps for crucial housing, infrastructure, climate resilience, and local economic development," said Assemblymember Kalra. "I'm proud to be a joint-author of AB 2243, a critical step in illustrating how State Banks can provide the financial support our state needs, instead of being reliant on the federal government or private banks, which continue to profit off the backs of hard-working taxpayers."

Backers of the bill say this conversation comes at a critical moment. California is facing growing affordability pressures as housing construction costs rise, infrastructure needs mount and local governments struggle to maintain essential services. They argue that the cost of financing public projects is consuming billions of dollars that could otherwise go directly into communities.

"This isn't theoretical. California already has the resources. The issue is how they're being routed. Too much of our public money leaves our communities through the cost of financing," said Trinity Tran, Executive Director, California Public Banking Alliance. "AB 2243 is a practical step to lower those costs and keep more of our money working locally."

Supporters also point to the limits of California's existing public financing tools. California already operates the Infrastructure and Economic Development Bank, known as IBank, which helps finance infrastructure and economic development projects. But supporters say IBank is not a full public bank and cannot accept public deposits or expand lending like a traditional bank. While state law also allows cities and regions to establish local public banks, California still does not have a statewide public.

"For too long, communities like the one I grew up in have been told that capital is scarce - while billions of the state's public dollars flow through Wall Street banks that were never designed to serve us," said Michael Tubbs, Founder, End Poverty in California. "AB 2243 asks a simple question: What if California's money worked for California's people? A state public bank would direct resources toward affordable housing, small businesses, and climate resilience in the communities that have been denied investment in their infrastructure for generations. End Poverty in California is proud to support this legislation because ending poverty requires changing the systems that perpetuate poverty."

Advocates say the bill is also about who benefits from public investment and whether California can build a financing model that better serves communities that have historically been locked out of opportunity.

"California faces overlapping climate and affordability crises, and how we invest public dollars will determine whether we meet them equitably," Max Vargas, President & CEO, The Greenlining Institute "AB 2243 keeps billions working in California to expand opportunity in communities of color long excluded by redlining and economic instability."

AB 2243 would establish a State Bank Commission made up of designees from the Governor, State Treasurer, State Controller and Legislature to guide the process and determine whether a state bank would provide long-term value to taxpayers.

The bill will be heard in Assembly Banking & Finance tomorrow, April 23.

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