Public banks are lending and depository institutions owned by a local agency, such as a city or county, that serve a public, non-profit purpose and are governed by a mandate focused on local needs. They use their deposit base and lending capacity to support affordable housing, small business loans, public infrastructure projects, and other community priorities. Unlike commercial financial institutions, public banks prioritize the needs of the communities they serve rather than maximizing profits for private shareholders.
California public banks will provide municipal governments with cost-effective depository services and cash management while also generating funding that supplements government spending. This will free up money for essential services and reduce the billions of dollars in interest payments that local governments currently pay to private banks, which continue to profit even during crises like the COVID-19 pandemic. By accepting deposits and providing banking services for local governments and agencies, California public banks will allow public funds to be moved out of private megabanks that finance harmful activities such as fossil fuel projects, which many cities and counties have already voted to divest from. The result will be more tailored service at a lower cost, keeping public dollars in local communities and aligned with public values.
BENEFITS OF PUBLIC BANKS
- Keeps public money invested locally.
- Returns profit and interest to local communities.
- Reduces cost of banking to participating agencies, which increases available revenue to spend on other priorities.
- Reflects community values and invests in community-identified priorities.
- Brings democracy and transparency to banking and investment of public funds.
- Uses a bankâs ability to leverage money to benefit the public instead of private shareholders.
- Cuts infrastructure construction costs significantly by providing low-interest loans.
- Strengthens local banks and credit unions by backing their loans and letters of credit.
- Creates a multi-generational source of capital that invests long term to benefit residents and local businesses.
WHY PUBLIC BANKS
Divesting from Wall Street and reinvesting in communities means public banks give state and local treasuries the ability to move money out of fossil fuel and pipeline investments and reinvest using socially responsible standards that prioritize social justice, racial and economic equity, and environmental protection.
Cutting infrastructure costs and building affordable housing is possible when public banks can finance public infrastructure and affordable housing for low-income and unhoused residents at low interest rates. They enable better planning and coordination of local investments to meet community needs.
Public banks are safer than private megabanks because they avoid speculative, profit-driven investment strategies that put communities at risk. The Bank of North Dakota survived both the Great Depression and the 2008 financial crisis by adopting humane policies, such as limiting farm foreclosures, that prioritized community welfare while preserving the stateâs prosperity.
Spurring economic growth and creating good jobs in local communities is what public banks do by investing in local economies even during downturns, while corporate banks often pull back to protect profits. This countercyclical lending helps stabilize communities and rebuild economies during hard times.
Saving money for cities and generating revenue for public needs is a built-in feature of public banks. They operate with very low overhead, which means no branches, advertising, excessive salaries, or shareholder demands. Community banks serve as their front offices, and profits from loans can be returned to the General Fund, expanding municipal revenue without raising taxes.
HOW PUBLIC BANKS WORK
The California Public Banking Act allows municipalities to deposit their funds into public banks, thus removing those dollars from private banks. Government departments, such as the treasurerâs office, can deposit taxes, fees, fines and funds from state and federal programs that they receive into the public bank.
Public banks lend for needed community improvements such as affordable housing, climate-resilient infrastructure, and small business support at low interest rates due to their lower overhead, with the added advantage that profits earned can be returned to the municipalityâs general fund.Â
Public banks will act as a âmini-Fedâ for their region, assisting local banks and guaranteeing loans. They will be established as âbankerâs banksâ meaning that they will offer loans in concert with community banks and credit unions. When there are public banks, local banks will have greater lending ability and solvency. Â
Due to the partnership with small banks, credit unions, and CDFIs, public banks will enable funding of local projects at lower cost. The self-funding and self-sustaining nature of public banks means they will not imperil state funds or tax dollars.
Public banks will have experienced bank managers and boards of directors independent from political control to assure that they are not captured by special interests.
Public banks will establish citizen advisories to monitor investments and ensure community concerns are represented.
RESOURCES
Check out our California Public Banking Movement Resources section on our website. It serves as a central library of materials supporting public banking efforts in California. It’s a helpful resource for policymakers, advocates, and community members working to build public banks and expand access to fair financial services.
It features:
Legislative summaries, fact sheets, and bill texts for the California Public Banking Act (AB 857), the Public Banking Option Act/CalAccount (AB 1177), the CalAccount Program (AB 1365), and the State Public Bank proposal (AB 310).
CPBA resources include our resource booklet, technical brief, policy briefs, explainer video, and one-page guides.
Materials showing how public banks can fund affordable housing, small businesses, clean energy, labor priorities, and local governments.
CalAccount studies, feasibility reports, and related research.
National and academic reports highlighting CPBAâs work.
Local campaign resources from the Central Coast, East Bay, Fresno, Los Angeles, Sacramento, San Francisco, and other regions, including business plans, financial models, reports, and organizing tools.