NEW MEXICO (KRQE) – Local entrepreneurs know that getting a loan can make or break a small business. But securing those loans isn’t always easy, especially for unique businesses. Some in New Mexico are hoping a public bank could help.
Thursday, state legislators heard a presentation on the benefits of a public bank from the Alliance for Local Economic Prosperity, a New Mexico public bank advocacy group. Elaine Sullivan, the board chair of the Alliance, explained that such a bank could help unlock New Mexico’s potential.
“The state public bank is a means to accomplish local economic prosperity,” Sullivan said. “That means sustainable communities, businesses, families, meeting today’s needs in balance with the future, with consideration of environmental, social, socio-cultural, and economic factors. Our goal is about prosperity of all kinds.”
The idea isn’t to open any new banks that New Mexicans would use instead of existing banks. But rather, the public bank would act as a bank for the banks, providing funds to existing banks specifically for disadvantaged New Mexicans.
“The goal of the public bank is not to compete with existing community banks and credit unions and CDFIs [Community Development Financial Institutions], but really to enhance what they already do,” explains Harold Dixon, a retired credit union president who now works with the Alliance for Local Economic Prosperity. He explained that the state would oversee the funds and ensure that they go to people with business ideas that might otherwise be turned down for a loan.
Currently, banks require collateral for loans. Often, that’s land or a building. But some would-be business owners don’t have that.
For example, a dentist hoping to buy medical equipment and open an office might need to offer banks something in case the dentist can’t pay back their loan. But if the bank doesn’t want the medical equipment, if the dentist has nothing else to offer as collateral, they may never receive a loan.
“There’s a lot of unfunded projects today that are really good ideas that just don’t get funded because of collateral,” Dixon explains. “These are not bad loans. These are not high risk loans. These are just loans that don’t fit in the banking system today.”
In response to the presentation, some legislators voiced support and others voiced concern. And the Alliance for Local Economic Prosperity says they’ve received pushback from existing banks. But, the Alliance maintains that a public bank could help New Mexico.
If state legislators decide to move forward with the public bank idea, they’d have to get a bill through the legislative process. It’s something that’s been tried before, but was killed before becoming law.
In 2021, legislators introduced a bill that would create and fund a public bank, but it was withdrawn before making it through the necessary committees. They tried again in January of this year, but that bill died as well.
If they introduce a bill in the 2023 legislative session, and it makes it through the session and is approved by the governor for July of next year, the bank could be operational by 2024, the Alliance for Local Economic Prosperity showed in their Thursday presentation.
Currently, North Dakota is the only state with a public banking system. There, it’s been in operation for more than 100 years. But Sullivan says a handful of other states have been working on similar proposals.
“I believe it could catalyze growth in rural New Mexico and throughout the state,” said Paul Gibson, who spoke during public comments. He’s a co-founder of Retake Our Democracy, a group pushing for social, racial, environmental, and economic justice. Gibson said that a public bank could help chile farmers who don’t want to use their land as collateral get loans and start new businesses, such as cooperatives, which would in-turn lead to more economic opportunities.