State treasurer works to reform cannabis banking, makes case for stronger state reserves
Washington’s chief finance officer listed banking reform for the cannabis industry, stronger state reserves and better awareness of available state resources among his top priorities Thursday at AWB’s Lobby Lunch.
State Treasurer Duane Davidson just returned from Washington D.C. early Thursday, where he lobbied the National Association of State Treasurers to support a resolution in favor of cannabis banking reform. The resolution did pass a key committee.
Nearly all banks won’t allow cannabis producers and retailers to make deposits because marijuana is still illegal under federal law. That means it’s mostly a cash business, where those involved can be robbed, avoid paying child support or other concerns that impact the community. Washington state government collected about $367 million in taxes and fees alone last fiscal year.
“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 approve 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 to 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 series continues next Thursday. Check out video from today’s event below.