RELATING TO PUBLIC BANKING.

HB721

HOUSE OF REPRESENTATIVES

H.B. NO.

721

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

relating
to public banking
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION
1.
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The legislature finds that while the
Bank of North Dakota remains the nation's only state-owned and state-operated
financial institution, the concept of leveraging public funds for economic
development is not unique.
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Across the
United States and globally, similar institutions, such as state green banks and
sovereign wealth funds, demonstrate the potential for public financial systems
to promote economic stability, community well-being, and long-term growth.

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State
green banks, operating in Connecticut, New York, and Hawaii, successfully
leverage public and private capital to finance renewable energy and
climate-resilient infrastructure.
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These
banks act as public financial tools to catalyze investment in projects that
support the public good, while offering below-market rate financing to expand
access for creditworthy initiatives.

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Furthermore,
sovereign wealth funds, established in jurisdictions worldwide, play a similar
role by investing public revenues into diverse, sustainable programs, including
infrastructure, affordable housing, small business development, and education.
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For example, Alaska's Permanent Fund serves as
a critical financial instrument to benefit the state's residents while
preserving and growing public wealth over time.

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The
legislature further finds that a state-owned financial institution in Hawaii
would similarly address the pressing needs of the State by providing access to
affordable capital for public infrastructure, small businesses, housing, and
higher education.
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These institutions
demonstrate that public financial systems can operate alongside private banks
to foster economic development without displacing existing financial
institutions.
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The Bank of North Dakota,
for instance, partners with over one hundred local financial institutions to
increase lending capacity and expand services to underserved communities.

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Hawaii's
economic challenges, including its widening income gap, lack of affordable
housing, and barriers to small business growth, necessitate forward-thinking
solutions.
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A state-owned bank would
offer the State a mechanism to stabilize and strengthen its economy, reduce the
outflow of public funds to private financial markets, and ensure that public
capital is reinvested for the benefit of Hawaii's residents.

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The
purpose of this Act is to establish a state-owned bank implementation board to
explore the feasibility, costs, and benefits of creating a public financial
institution.
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By examining models like
state green banks, sovereign wealth funds, and the Bank of North Dakota, the
State can identify pathways to leverage public capital for the common good,
promote economic resilience, and ensure that the resources of the State serve
the public interest.

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SECTION
2.
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(a)
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There is established, within the department of commerce and consumer
affairs for administrative purposes, a state-owned bank implementation board to
determine the need for, potential costs and benefits of, and prerequisites to
establishing a state-owned bank.

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(b)
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The implementation board shall consist of the
following members:

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(1)
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A representative from the department of
commerce and consumer affairs, division of financial institutions, who shall
serve as chair of the implementation board;

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(2)
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A representative from the department of
agriculture, agricultural loan division;

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(3)
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A representative from the department of budget
and finance, financial administration division;

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(4)
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A representative from the department of
business, economic development, and tourism, research and economic analysis
division;

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(5)
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A representative from the university of Hawaii
economic research organization;

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(6)
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A representative from the Shidler college of
business at the university of Hawaii at Manoa, finance department;

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(7)
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A representative from the Hawaii strategic
development corporation;

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(8)
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The executive director of the Hawaii housing
finance and development corporation, or the executive director's designee;

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(9)
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A member of the native Hawaiian community with
a background in community economic development, to be appointed by the office
of Hawaiian affairs; and

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(10)
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One representative from each of the following,
to serve at the invitation of the chair:

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(A)
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Legal Aid Society of Hawaii;

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(B)
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Faith Action for Community Equity;

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(C)
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Hawaii Appleseed Center for Law and Economic
Justice;

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(D)
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Neighbor island Economic Development Board of
the Economic Development Alliance of Hawaii; and

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(E)
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Hawaii Consumer Council.

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(c)
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Members of the implementation board shall
serve without compensation but shall be reimbursed for reasonable expenses
necessary for the performance of their duties, including travel expenses.

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(d)
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The implementation board shall review and
evaluate the following:

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(1)
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The Bank of North Dakota and its enabling
statutes, governing structure, and programs;

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(2)
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The findings from Massachusetts studies in
creating a state-owned bank, including the 2011
Report of the Commission to Study the Feasibility of Establishing a Bank
Owned by the Commonwealth
;

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(3)
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Any relevant models used in other states and
banking institutions;

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(4)
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The effectiveness and usefulness of an
existing state-owned bank, specifically the economic impact of having a
state-owned bank;

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(5)
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Any effects a state-owned bank will have on
existing banks and financial institutions;

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(6)
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The long-term broad economic impact and
long-term job creation and state revenue effects of having a state-owned bank;

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(7)
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The capital requirements of a state-owned
bank;

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(8)
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Initial capitalization options for a
state-owned bank;

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(9)
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The cash management and banking needs of the
State;

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(10)
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An estimate of the short-term operating costs
and projected revenues of a state-owned bank; and

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(11)
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The laws, statutes, rules, and regulations
applicable to establishing a state-owned bank.

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(e)
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For the purposes of subsection (c), the
implementation board may:

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(1)
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Establish investigative committees; and

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(2)
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Invite experts in relevant fields, including
but not limited to banking, finance, economics, and community development, to
provide information and assistance to the implementation board.

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(f)
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The implementation board may request and
shall receive from every department, division, board, bureau, commission, or
other agency of the State cooperation and assistance in the performance of its
duties under this Act.

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(g)
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The implementation board shall be exempt from
part I of chapter 92, Hawaii Revised Statutes; provided that the department of
commerce and consumer affairs shall make available to the public the minutes of
the implementation board on the department of commerce and consumer affair's
website.
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The implementation board shall
be purely advisory in nature.

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(h)
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The implementation board shall submit a
report of its findings and recommendations, including any proposed legislation,
to the legislature no later than twenty days prior to the convening of the regular
session of 2027.

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(i)
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The implementation board shall cease to exist
on June 30, 2027.

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SECTION
3.
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The legislative reference bureau
shall assist the implementation board in preparing its findings,
recommendations, and proposed legislation; provided that the implementation
board shall submit a draft of its findings, recommendations, and proposed
legislation to the legislative reference bureau no later than December 1, 2027.

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SECTION
4.
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This Act shall take effect on July 1,
2025.

INTRODUCED BY:

_____________________________

Report Title:

State-owned
Bank Implementation Board; Financial Institutions

Description:

Establishes
a state-owned bank implementation board within the Department of Commerce and
Consumer Affairs to
determine the need for, potential costs and benefits
of, and prerequisites to establishing a state-owned bank
.
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Requires a report to
the legislature.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.