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Monday, January 29, 2018
Dear Chairman and Members of the Assembly Financial Institutions & Insurance Committee:
Regarding today’s hearing on the prospect of creating a state bank, please accept this testimony in opposition to S-885 and similar proposals being debated by the Assembly.
On behalf of the New Jersey chapter of Americans for Prosperity, and our 137,000 activists across the state, we respectfully urge you to oppose Senate Bill 885 and any similar legislation. This bill would create a state bank for New Jersey, opening the state to unprecedented risk at a time when the state needs to be focused on becoming financially sound.
Simply put, a state bank of any type is an enormous risk for the state and taxpayers. Even in the best of financial times, these banks can cause financial distress to states. New Jersey, as this committee well knows, is in dire financial straits. Even with sky-high taxes, New Jersey struggles to pay its bills and grapple with its ever-growing $248 billion pension crisis. This is not the time to be putting taxpayer dollars at risk.
Even if New Jersey were in better fiscal condition, the proposal in front of this committee is would still be reckless. In addition to allowing the state bank of New Jersey to give loans, this bill would also allow the bank itself to invest in properties and other risky ventures.
Furthermore, this bill would allow the bank to acquire real or personal property, as well as use eminent domain to construct and remodel buildings. This kind of behavior is not only unusual, but the state of New Jersey should not be in the business of obtaining and flipping properties.
But the possibilities for problems do not stop there.
The bank would also be able to fund transportation projects which are fraught with cost overruns. New Jersey already has the highest cost per mile for road construction in the country and mass transit has often proven to be a boondoggle for taxpayers. Transportation projects should be funded in the bond market as in other states and localities.
The bank would also be able to make loans to students to attend college. While New Jersey certainly wants to make college more affordable, having the taxpayers subsidize loans through a state bank is not the method to achieve that end.
Added together, these abilities by a state bank pose a massive risk to taxpayers and giant governmental overreach.
Given these inherent risks, it’s no wonder only one state, North Dakota, has a state bank. But even North Dakota’s bank, which was created almost 100 years ago, functions nothing like its New Jersey counterpart might. North Dakota’s bank is primarily in the business of providing low interest loans to oil and gas companies. There is a reason multiple states have studied the possibility of state banks and decided not to move forward, and New Jersey should learn from their example.
But simply because New Jersey shouldn’t start its own bank, doesn’t mean there is nothing to be done to help grow businesses and create jobs in the state.
This proposal states that “The lack of accessible capital, as currently experienced due to the economic downturn, is exacerbating the economic hardships being faced by working families and business.” While it’s true that businesses and working families are facing hardship, it’s not due to a national economic downturn or lack of access to capital, it’s due to a crushing regulatory and tax environment which has made New Jersey one of the worst states to do business.
While the national unemployment is at a 17-year low and other states have recovered from the recession, New Jersey remains mired in a sluggish recovery, as a result of its public policies.
With a highly educated workforce, excellent geographic location and access to global markets, New Jersey should be leading the way. Instead, we are falling behind.
New Jersey has seen that government handouts to businesses do not create economic growth. That is why Governor Murphy has wisely ordered an audit of the billions of dollars in tax incentives given out during the previous administration.
Rather than continuing that to chase economic growth through failed policies, New Jersey must embark on the road to reform.
New Jersey must work to get its fiscal house in order. That means dealing with its pension crisis, cutting its astronomical tax rates, and cutting spending. If these steps are undertaken, New Jersey can once again be an engine for economic growth. But a state bank would be another step in the wrong direction.
If you or your staff would like to set up a meeting to discuss the proposal for a state bank, please feel free to contact me at EJedynak@afphq.org or 862-229-4953. Thank you for your time and consideration.
Erica L. Jedynak
New Jersey State Director