Local democracy in Vermont remains untainted by modernity. In small towns all over the state, people gather in meeting halls, school cafeterias, community centers and churches to hold the annual town meetings on the first Tuesday of March. Every registered voter is welcome; outsiders are not. Except for the clothes people wear, the comfort of central heating and occasional cable TV cameras, these meetings look and sound much as they did 150 years ago.
It was in this public-spiritedness that over 20 towns considered a resolution at this year’s meeting on March 4 to direct their legislators to create a state bank for Vermont. The vote does not have legally binding effects. It is only advisory. But it offers a important indicator of public sentiment on legislation being considered. The bills pending before both houses of the Vermont state legislature would transfer 10 percent of tax dollars to a publicly held agency, VEDA, the Vermont Economic Development Authority, and would give VEDA a banking license. The proposal would completely transform the way state revenues are used to finance public services.
Right now, the state deposits its revenues in large, private banks such as Toronto-Dominion (TD) Bank and People’s United Bank. Vermont’s smaller, state-chartered banks do not have the capital or collateral to back the state’s $350 million average daily balance. As a result, Vermonters’ money is put to work outside Vermont and in ways they may not support. In TD Bank’s case, money has been invested in the Keystone XL pipeline, a project a lot of Vermonters oppose. At the same time, the state borrows the money used for economic development and infrastructure projects from Wall Street investment banks. If the proposal succeeds, Vermont will join North Dakota as the second state of the union with its own public bank. In 18 other states, including California — where Ellen Brown, president of the Public Banking Institute, is currently a candidate for treasurer — there are proposals for public banks being considered at the state or the city level. Arizona just chartered a commission to study the issue, and Reading, Pa., is in the process of establishing a city public bank.
A small, grass-roots organization I co-founded, Vermonters for a New Economy, sponsored a study by the University of Vermont’s Gund Institute for Ecological Economics and the Political and Economic Research Institute at the University of Massachusetts to determine the economic impact on Vermont of a state bank. The study demonstrated that a public bank that kept Vermont’s tax dollars in the state and used those dollars for economic development and infrastructure would create over 2,500 jobs, more than $190 million in value-added productivity and more than $340 million in gross state product. For a state of 600,000 people with $27 billion in annual GDP, these are substantial economic improvements, amounting to a 1.26 percent boost to growth.
Despite these benefits, the legislature has not yet moved forward with the proposal. Last week the Senate Government Operations Committee voted to send the bill to the Senate Finance committee with a favorable recommendation. Lobbyists for the large banks oppose the idea, and Secretary of Administration Jeb Spaulding, VEDA CEO Jo Bradley and State Treasurer Beth Pearce — all officials who work closely with the banks — have parroted the bankers’ objections, making the opposition of a few seem like a broad consensus at the highest levels of state government.
To counteract the bank lobby in Montpelier, Vermonters for a New Economy brought the question directly to the voters. Activists circulated petitions, held educational workshops and produced and distributed materials. In October during a national event called New Economy Week, towns all over the state hosted kickoff events for the town meeting campaign for a state bank.
The bankers and their lobbyists didn’t like the approach. (One of the lobbyists also happened to be the mayor of Montpelier.) But voters loved the idea. In 17 towns around the state, a vote to endorse the idea of a public bank passed overwhelmingly last week at the town meetings. In Montpelier the article on the ballot in support of public banking passed by a wide margin and got more votes than the mayor did in his bid for re-election. The vote also passed in Albany, Bakersfield, Calais, Craftsbury, East Montpelier, Enosburg, Marshfield, Montgomery, Plainfield, Randolph, Rochester, Ryegate, Tunbridge and Warren. Only Barnet, Fayston, Greensboro and Marlboro opposed it.
Waitsfield saw a long day of intense discussion on a wide variety of issues. “If a Vermont public bank is organic, grass-fed and pesticide-free, then I say we should all support it,” Charlie Hosford, a former longtime Waitsfield Select Board member, argued. Voters ended up supporting a Vermont public bank 2 to 1. People asked a few good questions: Would politicians run the bank? (No.) What could a public bank do that isn’t being done now? (Use Vermont’s tax money to make loans and infrastructure improvements to earn new revenue for the state.) “A public bank for Vermont would create jobs and allow Vermonters to take control over our financial destiny at a time when everyone agrees that Wall Street’s corporate commercial banking model is deeply flawed at best," said Rob Williams, a Waitsfield town resident and citizen advocate for the public banking effort.
The ultimate decision now rests with the statehouse. Whether legislators will take up and approve the resolution is an open question. The banking lobby and its friends in the governor’s mansion have the media and the larger megaphone. Vermonters for a New Economy continues to hope that the legislature takes the common-sense wisdom of Vermonters more seriously than the self-interest of the big out-of-state banks and their supporters. Time will tell, but whatever the result, a new chapter for public banking opened in Vermont last week, and the idea is bound to spread. There is no good reason for the people’s money to be used in ways that don’t benefit the people.