March 11, 2019
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State treasurer advocates for stronger reserves, banking reform for cannabis industry

State Treasurer Duane Davidson
, just back from a meeting of his colleagues in Washington D.C., spoke at AWB's Lobby Lunch last week.

He opened his talk with an issue that is relevant in Washington state -- banking reforms for the cannabis industry. Legal in Washington but illegal under federal law, cannabis operates largely on a cash basis. That creates a number of problems, from participants being robbed to others that avoid paying child support.

“Everybody agrees it’s a problem,” Davidson said. He said the issue needs to be decided in Congress. The National Association of State Treasurers plays an important role, he noted, as the chief financial officers of the nation.

Davidson also highlighted the overall economic success of Washington, and lack of planning for the next recession.

“We’ve got growth that’s unprecedented, in the country,” Davidson said. “...And yet we continue to tamper with transfers out of the rainy-day fund.” The Government Finance Officers Association generally recommends that state and local governments set aside 15 percent or at least three months of general fund spending in case of a downturn, he noted.

“We’re not there yet,” he said. And there will be a recession, he added, it’s just a matter of when.

“And I don’t think right now, the state is equipped, basically, to face that,” he said.

Davidson also addressed proposals to create a state bank. He and other experts recently studied the idea after the Legislature approved funding for a study.

“We think it’s a terrible idea,” he said.

It takes a lot of money to start a bank, he said. He expects the money would have to come from either the Local Government Investment Pool, where more than 500 local governments store their excess cash, or the state’s 17 pension funds which hold a combined $100 billion.

One purpose of a state bank is to make subsidized loans, he noted. Returns on those types of investments are about 2-3 percent. The state’s pension funds have averaged from 5.5-8 percent interest over the last decade.

“That’s quite a spread,” Davidson said. “Who’s going to make up that difference? The Legislature?”

Davidson also said his office is working to do a better job highlighting the many existing programs on the books now that can help state agencies and local governments fund projects. His office created the Washington Fund Directory, which went online about a month ago. The site includes dozens of available funding streams to help finance a variety of infrastructure projects, from rural broadband to community sidewalks and emergency preparedness.

“I was a county treasurer for four terms,” Davidson said. “And when I got here there were state programs offering financing -- sometimes even grants that you don’t have to pay back -- that I never heard of.”

AWB’s Lobby Lunch will continue throughout the 2019 legislative session at the AWB offices, located at 1414 Cherry Street SE in Olympia.

Sen. Steve Hobbs, D-Lake Stevens, chair of the Senate Transportation Committee will speak at this week’s Lobby Lunch.

Future speakers include Steve Lerch of the state Economic and Revenue Forecast Council.

Lobby Lunch is open to current AWB members. The cost is $25. To register for an upcoming Lobby Lunch, contact Liv Johnson via email or at 360.943.1600. Registrations are due by 9 a.m. of the Wednesday before each Thursday event.

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