Backed by the full faith and credit of... us.

By Ann Kramer of Hood River, Oregon. Ann is a counselor and board chair for the Gorge Grown Food network, an organization working to building a regional food system in the Columbia Gorge.

Recent headlines indicate that the State of Oregon faces another $1 billion in deficits. The trickle-down effect of the financial crisis that started with Wall Street banks has now come to all our Main Streets across Oregon.

Ironically, while Wall Street is handing out ever- bigger bonuses, State employees will be handed pink slips. In parallel, the private sector has handed out its own round of pink slips as unemployment sits at 10.6% (and almost 20% if one counts those who are off the roles but have given up trying to find employment.). Thus many will clamor for cutting more out of the State coffers, but we must remember that State employees shop at local stores, pay mortgages, get their hair cut and otherwise are an intricate part of the dance between the public and private systems that create Oregon. There’s no way to separate them….they are interdependent. So while cutting back on State expenditures looks effective, it is far less so when you factor in how that cuts back on private businesses too.

We are not the only State in budget crisis. This is happening everywhere. The City of Los Angeles recently announced that they would need to fire 1000 City employees immediately else they would be filing for bankruptcy. But as one citizen said at a public forum on the issue, “If you lay off 1000 City employees, that’s 1000 mortgages that won’t be paid, 1000 people not stopping by our local businesses and eventually, we’re all filing for bankruptcy. When does this end? “

And that’s what we all have to stop and ask ourselves—when does this end?

The work of our State doesn’t exist because of green pieces of paper—it exists because our communities need and want these services in order to create a thriving Oregon. The State may have come up short on $1 billion green pieces of paper, but it is not short on the work that needs to be done.

Another billion in budget cuts in addition to the $2.3 billion last January results in a huge retraction of our lives. We keep acting as if there is no other option than this when in reality there’s a far better option available to us and that’s to create a State Bank of Oregon. Based on the 90 year, successful model of the Bank of North Dakota (BND), a State bank offers a way for us to recharge Oregon’s economy. The Bank of North Dakota model works: they have the lowest unemployment rate in the country (3.6%) and the only state in the country with NO DEFICIT. Right now 11 states are exploring the creation of a State bank as a way to untangle s from Wall Street and build thriving States backed by the full faith and credit of its citizens. Oregon should be the first to lead the way!

The State of Oregon collects and spends lots of money. Did you ever wonder where that money goes? Right now, much of it sits in the TBTF banks and they receive the benefits. In fact, we use the TBTF banks for lots of government services—even paying them to administer the OR SNAP program (food stamps). Instead, a State bank could provide these services, saving us millions as well as interest income returning to State coffers. The State Bank of Oregon would partner with local OR banks to make agricultural, small business, economic development and low-cost student loans to OR students. This availability of credit has all but disappeared from the TBTF banks, but with a State Bank of Oregon, small businesses and farms—which are the backbone of OR’s economy could once again get back to work!

The Bank is a profitable business but the profit belongs not to shareholders and CEOs but to the State of Oregon and its citizens. In North Dakota, it has enabled them to lower taxes and help fund more small businesses that benefit the state overall. As a bankers bank, however, it doesn’t compete with local community banks but instead helps them to compete with the TBTF bank and as a result, it ensures that Oregon’s money it put to work in Oregon and for the benefit of Oregon and her citizens.

Ultimately, this comes down to us thinking about the future of Oregon and our children. As we cut back more and more services, our children have to live in this world of limitations. The easy choice would be to simply say that we have no choice and to stay stuck in status quo and the same old way of doing things. Or we can stand up and make a new choice—one that isn’t all that difficult since the Bank of North Dakota has already proven this is a winning model. Taking this step is to tell Wall Street and the banking system that perpetrated this crisis that we will not let their actions ruin our lives but instead use it as a catalyst to create new solutions and a better Oregon.

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    Public employees are the enemy according to Dudley and the GOP. And public services and resources are expendable and to be eliminated.

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    It is not "another $1 billion." It is $373 million according to today's forecast of lottery and general fund dollars.

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    Chuck, I thought I read it was $373M this quarter and nearly a $1B by June 30... While I agree the pain of cuts will run deep, what about the services that are mandated? How are they to be provided? When you cut staff but don't change the law that mandates the services, you are not having a full discussion and setting realistic priorities. Cutting staff is only half of the picture.

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    Hi Ann! Great peice, this is so edifying for me. Will send a link to my mother et al.

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    I think what's most important in all this, is that the creation of a state bank will add a crucial barrier between us and the rest of the national credit industry. While the rest of the country is experiencing a massive credit crunch, a state heavily dependent on a local system of credit (a government owned bank) will find itself more protected from the effects of the oncoming recession. While other banks are making massive cuts, and downsizing their lending program, state mandate can insure that lending stays up, and that capital is being invested where is should be invested (a focus on small business, business that provides unionized jobs, and worker cooperatives).

    I think this is an excellent idea, especially considering the current state of the economy.

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      Yes, but keep in mind, it doesn't displace other banks. BofA and others will still be functioning.

      A State bank has a very tight mission and focus on funding businesses that benefit Oregon and its citizens. It isn't going to invest in hedge funds and derivatives and other risky ventures.

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    Would you still want a state bank if we had a republican governor or legislature?

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      Absolutely...this has nothing to do with which party is in power. This is a bank, run with bank rules, not by politicians. It is run by independent management and is subject to the same financial management rules as other banks. But because a State bank belongs to the citizens, it can direct its activities in ways that benefit small businesses and citizens.

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    I think state credit union is a more apt description.

    And one with less baggage.

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    I thought the guv and Dem leadership did a great job in heading off more cuts and reassuring the public today.

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    I hate to reveal my ignorance, but ...

    What is a TBTF bank?

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    Ann: Great work...keep writing.... I'm trying to be on the Commission to study the feasibility of a State-owned bank that was passed into law in MA On August 5, 2010. Governor Deval Patrick signed S2345.

    Will keep you updated david snieckus

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    Certainly luadable goals. However, the state has no money and has no bonding capacity. Couldn't we achieve the same goals by utilizing several of the excellent regional credit unions spread throughout Oregon?

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    A state bank of Oregon is an interesting idea, however I don't believe that is the reason why Oregon has deficit woes and North Dakota does not.

    North Dakota spends less per capita than Oregon. They also spend less as a percentage of the state GDP.

    North Dakota spends about $7,700 per citizen, while Oregon spends $8,240. This is based on 2006 expenditures and population numbers, which are the most recent population numbers I could find on a quick search.

    Some quick math shows that the expenditure difference equates to $2B annually for Oregon, twice the deficit.

    In other words, if our state spent like North Dakota we would have a $1B surplus, not a $1B deficit.

    State bank or no state bank, I think the real reason we have a budget crisis is we spend too much.

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    "A State bank has a very tight mission and focus on funding businesses that benefit Oregon and its citizens"

    Great idea! And when the politicians decide which loans are beneficial, what could go wrong?

    Maybe you could start a company that makes mortgages more available, you could call it Fannie Mae.

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      THe state bank is not run by politicians. It is run by an independent management team as a business (which it is.

      You say this as if the private banking system is serving the needs/funding businesses but we can see that they are not. Why can't we have a far broader banking system than the current one which, due to its recent loan debacle/derivative mess has essentially shut it down as an effective tool of commerce? Why does it have to be either or...why not both?

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