What's happening
This bill creates the Empire State Public Bank to manage state funds, support infrastructure, student loans, and economic development in New York.
Why it matters
Directs state funds toward public needs. By consolidating and managing state deposits, the Empire State Public Bank could redirect significant financial resources toward infrastructure, affordable housing, and economic development projects that may not attract private investment, impacting communities statewide.
Expands low-cost lending and support. The bank is designed to provide low-interest loans for students, businesses (especially in low-income areas), start-ups, and non-profits, potentially lowering barriers to higher education and entrepreneurship, and supporting job creation or economic stability where traditional banks may be less active.
Prioritizes transparency, accountability, and public benefit. The bill establishes governance structures, ethics requirements, regular reporting, and independent audits to ensure the bank operates for public good, is insulated from political interference, and maintains high standards of financial prudence and social impact.
Potentially shifts financial power and risk. By using state assets for public lending and investment, New York could reduce its reliance on private banks, but also expose itself to new financial risks and responsibilities—decisions about capitalization, loan programs, and investment strategies will have broad fiscal and political consequences.
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Who cares
State comptroller
The bill would require the comptroller to move state moneys into the new public bank as its capacity grows, while retaining authority over funds needed for state operations.
Local governments and school districts
The bank would be authorized to finance public infrastructure, including water systems, transportation, schools and affordable housing.
Students needing low-cost loans
The bank could administer a state-guaranteed loan program to help finance higher education.
Community banks, credit unions and business borrowers
The bank could purchase or guarantee loans and participate in lending to expand access to low-cost capital for businesses, nonprofits and below-average-income individuals and areas.
Headline styles
Create State Public Bank
Plain English, a few words. Used as the page title.
Sponsors
Senator · Senate District 32
1 Co-sponsor
History
- Referred to finance
- Referred to finance
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Relates to establishing the empire state public bank
In Assembly Committee · Banks · Sponsor Phil Steck
Full text
8 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
1778
2019-2020 Regular Sessions
IN SENATE
January 16, 2019
Introduced by Sen. SEPULVEDA -- read twice and ordered printed, and when printed to be committed to the Committee on Finance
AN ACT to amend the state finance law, in relation to establishing the empire state public bank; and providing for the repeal of certain provisions upon expiration thereof
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The state finance law is amended by adding a new article 17 to read as follows:
ARTICLE 17
EMPIRE STATE PUBLIC BANK Section 254. Legislative intent.
255. Definitions.
256. Creation.
257. Commission.
258. Transition board.
259. Deposit of public funds.
260. Investment of state moneys.
261. Infrastructure loans.
262. Student loans.
263. Business, non-profit and individual loans.
264. Treasury and banking services.
265. Management.
266. Advisory board.
267. Financial regulation.
268. Reporting requirements.
269. Ethical requirements.
270. Fees and taxes.
271. Bank records.
272. Capitalization.
273. Public depositary.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD03596-01-9
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274. Application of this chapter to the president.
275. Cash and demand deposits available.
276. Permitted investments.
277. Severability.
§ 254. Legislative intent. 1. The legislature finds that there are significant public infrastructure, higher education and business development needs of the state that are unmet. The legislature further finds that there are opportunities to use the state's depository assets to generate additional benefit for the people and the economy of the state. Therefore, the legislature intends to create the empire state public bank as a legacy institution that amasses sufficient capital reserves to address opportunities now and in the future.
2. The legislature intends that the public bank may:
(a) Facilitate investment in, and financing of, public infrastructure systems that will increase public health, safety, and quality of life, improve environmental conditions, and promote community vitality and economic growth;
(b) Assist students who are in need of additional low-cost student loans in order to finance the cost of higher education;
(c) Provide businesses, communities and low income areas of our state access to low-interest capital; and
(d) Leverage New York's financial capital and resources, and work in partnership with financial institutions, community-based organizations, economic development organizations, guaranty agencies, and other similar organizations.
3. The mission of the bank is to use New York's depository assets in ways that afford most efficient use of taxpayer revenues and public resources for the benefit of the people and economy of the state. The legislature intends for the bank to apply business strategies to manage taxpayer revenues while concurrently meeting identified needs and strategic opportunities across the state. In achieving its purpose of improving public infrastructure and increasing access to higher education, the legislature intends for the bank to adhere to the following priorities:
(a) Institutional safety and soundness;
(b) Long-term viability;
(c) Social return and monetary return on investments;
(d) Prudent and best banking and business practices;
(e) Highest ethical, accountability, and transparency standards; and
(f) Insulation from political influence.
§ 255. Definitions. The definitions in this section apply throughout this article unless the context clearly requires otherwise.
1. "Board" means the advisory board of the empire state public bank.
2. "Commission" means the empire state public bank commission.
3. "Department" means the department of financial services.
4. "Director" means the director of the department of financial services.
5."Superintendent" means the superintendent of the department of financial services.
6. "Public infrastructure system" means a system of a local government or political subdivision, a special purpose district, a public school district, an institution of higher education, a federally recognized Indian tribe, or the state, including but not limited to a system involving: Wastewater treatment; storm water management; solid waste disposal; drinking water treatment; flood control levees; energy efficiency enhancements; roads, streets, and bridges; transportation infras-
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tructure, including freight and passenger rail and public transit; broadband and telecommunications infrastructure; outdoor recreation and habitat protection facilities; community, social service, or public safety facilities; schools and educational facilities; and affordable housing.
7. "State-chartered bank" means any corporation organized under the laws of this state that is engaged in banking, other than a trust company, savings association, or a mutual savings bank. It does not include the empire state public bank.
8. "State moneys" means all moneys or funds belonging to or in the custody of the state under the control of the state comptroller shall be considered as state moneys or funds.
9. "Comptroller" means the comptroller of the state of New York.
10. "Bank" means the empire state public bank.
§ 256. Creation. The empire state public bank is created.
§ 257. Commission. 1. The empire state public bank commission is created as the primary governing authority of the bank. The commission shall consist of the governor, the lieutenant governor, the chair of the assembly banking committee, the chair of senate banking committee, and the state comptroller.
2. The commission shall adopt rules regarding the:
(a) Safety and soundness standards of the bank;
(b) Criteria for evaluating, approving, and monitoring loans;
(c) Eligibility requirements and limits for borrowing;
(d) Transparency requirements for bank operations;
(e) Ethics and conflict of interest requirements for the commission, the board, and officers and employees of the bank, including rules to ensure that they perform their functions in compliance with the public officers law; and
(f) Other topics as needed for efficient administration of the bank.
3. The commission shall commence bank operations by April first, two thousand twenty.
4. The commission may delegate to the bank president such duties and powers as deemed necessary to carry on the business of the bank and enforce this article efficiently and effectively. The commission may not delegate its rule-making or policy-making authority.
5. The commission shall adopt policies and procedures for its own governance.
6. The commission may establish technical advisory committees or consult with public and private sector experts in substantive areas related to the bank's mission, objectives, and duties.
§ 258. Transition board. 1. (a) The bank transition board is established, with members as provided in this section.
(i) The temporary president of the senate shall appoint one member from each of the two largest caucuses of the senate.
(ii) The speaker of the assembly shall appoint one member from each of the two largest caucuses of the assembly.
(iii) The temporary president of the senate and the speaker of the assembly jointly shall appoint seven citizen members with a substantial background in banking or financial issues.
(b) The temporary president of the senate and the speaker of the assembly jointly shall select the chair from among the citizen membership. The chair shall convene the initial meeting of the bank transition board within forty-five days after the effective date of this section.
2. The bank transition board shall develop and recommend the following to the commission within the timeline established by the commission:
S. 1778 4
(a) A start-up business plan for the bank that includes plans and timelines for functions that are new and functions transitioning to the bank that were previously performed by another entity;
(b) Initial capital requirements of the bank;
(c) Options for capitalizing the bank; and
(d) Other items requested by the commission in order to commence bank operations by April first, two thousand twenty.
3. Legislative members of the bank transition board must be reimbursed for travel expenses in accordance with the rules of their respective houses. Non-legislative members are entitled to be reimbursed for expenses incurred in the discharge of their duties under this article.
4. The bank transition board may appoint an interim president and other necessary staff who are exempt from the provisions of this chapter, and who serve at the board's pleasure on such terms and conditions as the board determines. The department must provide technical assistance to the bank transition board. The board may also contract with additional persons who have specific technical expertise if the expertise is necessary to carry out the requirements of this section.
§ 259. Deposit of public funds. 1. (a) The bank shall serve as the depository for state moneys once the bank has built sufficient capacity to accept and manage state moneys, as determined by the commission. The commission shall establish a process and time frame for the deposit of state moneys into the bank.
(b) The comptroller shall deposit state moneys in the bank in accordance with the time frame and guidelines determined by the commission under this section.
2. All deposits in the bank are guaranteed by the state.
3. All income earned by the bank on state moneys that are deposited in or invested with the bank must be credited to and become a part of the revenues and income of the bank.
4. The bank may accept deposits of public funds, but is exempt from the requirements of section one hundred five of this chapter.
5. The bank may accept funds from any source, including federal funds or other public funds.
6. The commission shall review state accounts that contain public funds that are not state moneys, such as the state insurance fund, and make recommendations to the governor and the appropriate committees of the legislature as to which accounts should be deposited in the bank.
7. The bank shall make disbursements to the state funds as necessary for the function of state government.
§ 260. Investment of state moneys. The bank may invest state moneys deposited in the bank that are not reasonably expected to be necessary to meet the short or intermediate-term liquidity needs of the state. The state comptroller retains authority to manage and invest the amount of funds necessary to meet the operational needs of state government.
§ 261. Infrastructure loans. The bank is authorized to facilitate investment in, and financing of, construction, rehabilitation, replacement, and improvement of new and existing public infrastructure systems. Before initiating operations, the commission must present an implementation plan and any necessary legislation to the governor and appropriate legislative committees, that:
1. Identifies the public infrastructure systems that the bank plans to target initially;
2. Identifies any existing state programs that the bank recommends be transferred under its umbrella, and the steps and timelines for the transitions;
S. 1778 5
3. Describes additional financing products and services the bank plans to offer, the target markets, anticipated rates, terms, and conditions;
4. Demonstrates how bank products and services will increase access to capital for public infrastructure systems and complement those of existing public and private sources; and
5. Demonstrates how the bank plans to maximize revenues and public benefit.
§ 262. Student loans. The bank is authorized to administer a state guarantee loan program to assist students in need of low-cost student loans and related loan benefits to address educational needs as necessary to support student success. The commission shall develop an implementation plan that:
1. Identifies the needs and benefits to selected students that the program will target initially;
2. Demonstrates how the bank plans to maximize revenues and public benefit while minimizing public risk;
3. Demonstrates how the bank will coordinate with the office of student financial assistance; and
4. Identifies the ways that the program will address the following issues related to loans:
(a) Qualification criteria for students;
(b) Obligations and options for loan repayment;
(c) Requirements for loan guarantees and reserves;
(d) Fee and interest rate structure;
(e) Maximum loan amounts; and
(f) Ensuring student awareness of grants, federal loans, and other financial aid programs.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the state finance law, in relation to establishing the empire state public bank; and providing for the repeal of certain provisions upon expiration thereof
Purpose
To establish a public bank for the state of New York to provide New York State taxpayers with more efficient utilization of their tax dollars in the form of access to low-cost capital to build up our infrastructure, sustain and build affordable housing, spur economic development, to lower the total cost of education in the form of low-interest student loans, and subsidize the state general fund in the form of bank divi- dends profits.
Summary of provisions
Section 1. The state finance law is amended by adding a new article 17 to read as follows: ARTICLE 17 EMPIRE STATE PUBLIC BANK
Read the full memo (884 words)
Sections:
254. Legislative intent 255. Definitions 256. Creation 257. Commission 258. Transition board 259. Deposit of public funds 260. Investment of state moneys 261. Infrastructure loans 262. Student loans 263. Business, Non-Profit and Individual Loans 264. Treasury and banking services 265. Management 266. Advisory board 267. Financial regulation 268. Reporting requirements 269. Ethical requirements 270. Fees and taxes 271. Trust records 272. Capitalization 273. Public depositary 274. Application of this chapter to the president 275. Cash and demand deposits available 276. Permitted investments 277. Severability
Justification
Each year, the state of New York pays millions of taxpayer dollars to the financial industry in the form of banking fees, bonding fees, inter- est, commissions and other payments, simply for the privilege of utiliz- ing their banking services. Additionally, the banks use our municipal and state revenue deposits to earn money for themselves and their share- holders by speculating in the market with these deposits. With the repeal of Glass-Steagall, any state monies held in for-profit banks are co-mingled with speculative commercial investment. The Great Recession of 2008 was a direct result of our insured personal and government deposits that were co-mingled with poorly regulated commercial invest- ment products used to speculate in the market. This lost money for both individuals and governments, however, the banks still made money in the form of commissions, fees, interest and other payments. Additionally, after the banks creating this financial meltdown, they were then bailed out by the federal government with taxpayer money.
With the federal administration's threatened dismantling of the Dodd- Frank Wall Street Reform and Consumer Protection Act and the oversight agencies it created (Financial Stability Oversight Council, the Office of Financial Research, and the Bureau of Consumer Financial Protection) New York must find a safe banking alternative to invest its revenues and protect them from the actions of the federal administration. Addi- tionally, New York State has a fiduciary responsibility to its taxpayers to ensure their tax dollars are used in the most efficient manner possi- ble. There exists a banking alternative that would not allow private business to profiteer off public funds; therefore, New York State government is obligated to pursue that alternative.
The North Dakota Public Bank has been in existence for almost a century. It makes affordable loans to small businesses, farmers, community projects, local municipalities and students. Through their bonding, it saves North Dakota taxpayers up to 50% on infrastructure projects such as schools, roads and bridges, it eliminate millions in bank fees, interest, bonding and money management fees for local municipalities and the state, it supports and encourages a robust community banking sector while also allowing for financial stability in volatile markets and in recessions. In fact, because the North Dakota Public Bank utilizes the community banks for their loans, their community banking sector is significantly more robust than other states as well as expands their lending capacity. When the great recession hit in 2008, the banks of North Dakota had their public bank to turn to for collateral and credit; this allowed them to lend while every other state saw bank lending come to a halt.
A public bank for New York will ensure our tax revenues will stay in the possession of the taxpaying public, allow for significantly more trans- parency, utilize a higher percentage per dollar of these funds directly for the benefit of the residents of New York State, as well as paying the dividends/profits of those funds to the taxpayer via the general fund instead of to a publicly-traded for-profit bank, its shareholders and principal officers.
New York taxpayer funds should be put to use for sole benefit of the taxpayers for New York State in the form of economic development, infrastructure, affordable housing and education - and the dividends of these deposits and any earnings on them should be paid to the taxpayers of the state of New York.
Prior legislative history
2018: S8428 Sepulveda/A10431 Steck. Referred to Finance.
Fiscal implications
There will be a significant financial benefit for taxpayers and resi- dents of New York State.
Effective date
This act shall take effect immediately; provided, however, that section 258 of the state finance law, as added by section one of this act shall be deemed repealed on April 1, 2020. Effective immediately, the addi- tion, amendment and/or repeal of any rule or regulation necessary for the implementation of this act on its effective date are authorized to be made and completed on or before such effective date.
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